ERP Systems Overview

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Questions and Answers

What motivated many companies to move to ERP systems in the late 1990s?

Emergence of cloud computing solutions

Integration of customer relations and business operations

Increased competition from smaller firms

Year 2000 problem (Y2K) (correct)

Which company was Oracle's biggest competitor in the ERP market by 2000?

PeopleSoft

SAP AG (correct)

IBM

Microsoft Dynamics

What was the original name of Oracle when it began in 1977?

Integrated Systems Technologies

Data Management Solutions

Software Development Laboratories (SDL) (correct)

Oracle Software Corporation

Which of the following is NOT a module in the current SAP ERP system SAP ECC 6.0?

Corporate Strategy (CS) Signup and view all the answers

The purpose of the Controlling (CO) module in SAP ERP is primarily for what?

Management reporting and internal controls Signup and view all the answers

What is a function of the Quality Management (QM) module?

Conducting product inspections Signup and view all the answers

What significant advantage do the latest versions of ERP systems provide?

Access to real-time data across all business areas Signup and view all the answers

Who founded PeopleSoft?

David Duffield Signup and view all the answers

What is the function of the Project System (PS) module in SAP ERP?

Facilitating planning and control for projects Signup and view all the answers

What was a primary reason for Oracle taking over PeopleSoft in 2004?

To eliminate competition in ERP systems Signup and view all the answers

What is the primary role of Enterprise Resource Planning (ERP) systems in a company?

To integrate and coordinate information across various business areas Signup and view all the answers

Which of the following is NOT one of the four main functional areas of operation in most companies?

Research and Development Signup and view all the answers

What best describes a business process?

A collection of activities that transforms inputs into outputs of value Signup and view all the answers

How are the functional areas within a company best characterized?

They are interdependent and require data from one another. Signup and view all the answers

Who can be referred to as a customer in the context of a business process?

Both internal colleagues and external buyers Signup and view all the answers

In the example of a customer purchasing a smartphone, what is a primary expectation of the customer?

Fast delivery of the correct model and ongoing customer support Signup and view all the answers

What is the main benefit of integrating ERP software across various business functions?

To improve coordination between customers and suppliers Signup and view all the answers

Which of the following statements is true regarding the expectations of customers purchasing a smartphone?

Customers prioritize price, ease of purchase, and prompt delivery. Signup and view all the answers

What does the distribution channel in an SAP ERP system enable users to define?

Different methods for selling and distributing materials Signup and view all the answers

What happens when a sales order is saved in the SAP ERP system?

A document number is assigned to the sales order Signup and view all the answers

How does the SAP ERP system help maintain oversight of discount pricing?

By enforcing limits on the size of discounts offered Signup and view all the answers

What is the purpose of the document flow in the SAP ERP system?

To link the document numbers related to an order Signup and view all the answers

What kind of discounts can be configured in the SAP ERP pricing strategy?

Discounts can be based on item number or order value Signup and view all the answers

What are the two types of snack bars manufactured by Fitter Snacker?

NRG-A and NRG-B Signup and view all the answers

What are the key ingredients found in the NRG-A snack bar?

Carob chips and raisins Signup and view all the answers

Which sales divisions has Fitter Snacker organized its sales force into?

Wholesale Division and Direct Sales Division Signup and view all the answers

What is a key problem in Fitter Snacker's sales process?

Incorrect pricing on sales orders Signup and view all the answers

What contributes to the high number of errors in Fitter Snacker’s sales process?

Manual handling of a large number of transactions Signup and view all the answers

How often are packing lists and shipping labels printed at Fitter Snacker?

Twice a day Signup and view all the answers

What issue arises due to Fitter Snacker’s returns processing?

Missing Return Material Authorization (RMA) numbers Signup and view all the answers

What feature of ERP systems is beneficial for reducing errors in sales processes?

Real-time information sharing among users Signup and view all the answers

What does the sales order process in an ERP system encompass?

Pre-sales activities, sales order processing, and billing Signup and view all the answers

What problem occurs during the invoicing process at Fitter Snacker?

Late or inaccurate invoices due to delays in order corrections Signup and view all the answers

What is important in managing inventory levels at Fitter Snacker?

Using a PC database program to manage inventory levels Signup and view all the answers

How do salespersons provide price quotations to customers?

By preparing handwritten quotations after sales calls Signup and view all the answers

What step is involved in sales order processing?

Recording items to be purchased and order quantities Signup and view all the answers

Which of the following describes the impact of using separate information systems at Fitter Snacker?

Creates inefficiency in transaction data usage Signup and view all the answers

What action does the SAP ERP system take if a customer does not have sufficient credit available?

Sales personnel are prompted to take appropriate actions. Signup and view all the answers

What is the purpose of the Available-to-Promise (ATP) check in the SAP ERP system?

To determine if requested material can be delivered on time. Signup and view all the answers

What does the SAP ERP system do after creating documents for picking, packing, and shipping?

Documents are transferred to the Materials Management module. Signup and view all the answers

How does the SAP ERP system handle payments when a customer sends a check?

A clerk must manually enter the payment information. Signup and view all the answers

What is the purpose of customer master data within the SAP ERP system?

To maintain stable data like customer name and address. Signup and view all the answers

What functionality does the SAP ERP system provide when a shortfall in inventory is expected?

It automatically increases planned production. Signup and view all the answers

What happens to the accounting records when an invoice is created in the SAP ERP system?

Accounts Receivable is debited and sales are credited. Signup and view all the answers

How does the SAP ERP system ensure that products for a particular order are not sold to another customer?

By keeping a record of all open orders. Signup and view all the answers

What is the significance of the order entry screen in the SAP ERP system?

It validates entries for accuracy. Signup and view all the answers

How does ERP facilitate the sales order process in a company?

By allowing processes to cut across functional area lines. Signup and view all the answers

Study Notes

ERP Systems

Enterprise Resource Planning (ERP) systems are core software programs used by companies to integrate and coordinate business information using a common database and management reporting tools.
A business process is a series of activities that creates an output for a customer.
ERP systems integrate tasks related to sales, marketing, manufacturing, logistics, accounting, and staffing across the entire business.

ERP Benefits

ERP systems help coordinate customers and suppliers and improve internal and external business processes.

Functional Areas of Operation

Most companies have four main functional areas of operation:
- Marketing and Sales (M/S)
- Supply Chain Management (SCM)
- Accounting and Finance (A/F)
- Human Resources (HR)
Each functional area is comprised of numerous business functions that are specific to that area.
These functional areas are interdependent, each requiring data from the others.
The customer for a business can be internal (another department) or a traditional external customer (person who buys the finished product).
For example, what is sold through Marketing and Sales is linked to what is procured and produced by Supply Chain Management and also with Accounting.

Fitter Snacker Company Example

Fitter Snacker, a snack bar manufacturer, struggles with inefficient communication and data sharing across its sales, warehouse, and accounting information systems.
The company has two sales divisions: Wholesale and Direct Sales, which differ in order quantities and pricing terms.
Sales orders are prone to errors due to the company’s reliance on manual processes.
The company’s information systems are unable to provide real-time data, resulting in incorrect pricing and credit information.
Problems with Fitter Snacker’s sales process:
- Incorrect pricing
- Excessive calls to customers for information
- Delays in processing orders
- Missed delivery dates

Sales Order Process at Fitter Snacker

Salespeople prepare handwritten quotations (in triplicate).
The original goes to the customer.
The middle copy is faxed and then mailed to the sales office.
The salesperson keeps the bottom copy.
Problems associated with Fitter Snacker’s sales order process:
- Inaccuracies during the order processing
- Difficulty in determining delivery dates
- Challenges with credit checks
- Errors in order entry

Order Filling at Fitter Snacker

Packing lists and shipping labels are printed twice daily and hand-carried to the warehouse for manual sorting.
The warehouse uses a PC database program to manage inventory, but inventory levels fluctuate significantly throughout the day.
This can lead to a situation where an order picker may not have enough snack bars to fulfill an order.
In order to determine a course of action, the order picker might have to consult with the warehouse supervisor, production supervisor, and sales clerks.

Accounting and Invoicing at Fitter Snacker

Invoicing is problematic as well
Sales clerks send sales order data to accounting, who manually load it into a PC-based accounting program.
Clerks make manual adjustments for partial shipments and other changes, which can result in delays and inaccurate invoices.

Payment and Returns at Fitter Snacker

Problems exist in the payment processing due to potential errors in the sales process, leading to incorrect invoices.
Customers often do not return a copy of the invoice with their payment, which can lead to errors in accounts receivable.
Returns processing is flawed, as customers may neglect to acquire or include the Return Material Authorization (RMA) number, making it difficult to credit the correct account.
Poor handwriting on the returned material sheets can also create problems.
Incorrect or late credits may lead to incorrect dunning letters (a letter sent for overdue payments).

Sales and Distribution in ERP Systems

ERP systems can minimize data entry errors and provide real-time data to all users.
ERP systems can track all transactions related to the sales order process, including invoices, packing lists, RMAs, and payments.

SAP ERP Sales and Distribution Module

The SAP ERP Sales and Distribution module treats the sales order process as a cycle of events:
- Pre-sales activities
- Sales order processing
- Inventory sourcing
- Delivery
- Billing
- Payment

Pre-Sales Activities in SAP ERP

Customers can obtain pricing information through inquiries and price quotations.
The system tracks customer contacts and generates mailing lists based on customer characteristics.

Sales Order Processing in SAP ERP

The system records the items to be purchased, determines the selling price, and records order quantities.
The system offers various pricing options, including product-specific pricing and customer-specific discounts.
The system checks customer credit limits based on accounts receivable information.
If sufficient credit is available, the order is completed.
If insufficient credit is available, the system prompts sales personnel to take appropriate action.

Inventory Sourcing in SAP ERP

The system performs an Available-to-Promise (ATP) check to confirm whether the requested materials are available and can be delivered on the desired date.
The system considers expected shipping times and recommends increased production if a shortfall is expected.

Delivery in SAP ERP

The system releases documents that the warehouse uses for picking, packing, and shipping orders.
This allows for efficient grouping of similar or destination-based orders for picking and shipping.
Once documents are created, they are transferred to the Materials Management module.

Billing in SAP ERP

The system creates a customer invoice by copying sales order data.
Accounting can print, fax, or transmit this document electronically.
Accounting records are updated with debits to accounts receivable and credits to sales.

Payment in SAP ERP

The system automatically processes customer payments.
For checks, a clerk manually enters the payment information, which then triggers a system update of all relevant information.
Timely recording of payments contributes to the accuracy of future credit checks for the customer.

A Standard Order in SAP ERP

This section illustrates how Fitter Snacker’s sales order process would function using SAP ERP.
It highlights the increased efficiency and accuracy provided by an ERP system.
The system allows for business processes to extend across functional area boundaries.

Taking an Order in SAP ERP: An Example

This section focuses on the order entry screen in SAP ERP’s 4.7 Enterprise system.
Each customer in the system has a unique identification number assigned to them.
The system validates data entries to reduce errors.
It provides search functionality for customers and includes customer master data (stable data like name and address) shared across modules.
The system also includes material master data, used by Materials Management, Production Planning, and Sales and Distribution modules.

Organizational Structures

SAP ERP system allows users to define how customers and salespeople are grouped.
Distribution Channel allows the user to define different ways for materials to be sold and distributed to customers.

Taking an Order in SAP ERP

SAP ERP system assigns a document number to the sales order transaction when saved.
A delivery document is created when the sales order is ready for warehouse processing.
An invoice number is created when the bill (invoice) is prepared for the customer.
SAP ERP system keeps track of the document numbers for the sales order.
Employees can track the status of an order while it's in process or research it after shipping.
Document Flow: A linked set of document numbers relating to an order.

Discount Pricing in SAP ERP

Companies can configure SAP ERP systems for various pricing strategies.
Different types of discounts can be allowed, based on item number, total order value, etc.
The system can enforce limits on discounts to prevent unprofitable or unapproved discounts.

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Description

This quiz explores the fundamentals of Enterprise Resource Planning (ERP) systems and their vital role in integrating business information. It covers the benefits of ERP systems and the main functional areas of operation, highlighting their interdependence. Test your knowledge on how ERP systems enhance internal and external business processes.