ERP Lecture: Business Functions PDF

1.2 Business Functions Learning Objectives  Explain the four main business functions of an organization served by its management information system  List the major aspects of the business functions: Marketing & Sales, Production & Materials Management, Accounting & Finance, HR...

1.2 Business Functions Learning Objectives  Explain the four main business functions of an organization served by its management information system  List the major aspects of the business functions: Marketing & Sales, Production & Materials Management, Accounting & Finance, HR 2-2 4 Main Business Functions of A Company COMPANY Sales Production & Accounting Human & Materials & Resources Marketing Management Finance  SALES & MARKETING FUNCTIONS determine customer demand communicate between customers and the company provide customers with finished products keep track of the competitors determine market trends UNITS  FINANCIAL FUNCTIONS manage the company’s money manage assets such as machinery and materials keep accounts in good order MONEY & ASSETS  HR FUNCTIONS recruitment training personnel systems Recruitment Training Personnel System  A Typical Company’s Organisation Chart Managing Director Sales & Production Finance Engineering Marketing Materials Human Management Resource Purchasing Master Production Inventory Scheduling Control Control Distribution Stockroom  ENGINEERING provide product specifications design products create bills of materials prepare engineering drawing develop manufacturing instructions maintain product information  PRODUCTION produce according to schedule update daily activities track performance take corrective actions  PURCHASING select vendors place orders follow-up  MASTER SCHEDULING plan and schedule production planning horizon of 1-3 years synchronise right parts are in the right place at the right time identify and correct problems affecting the schedule  DISTRIBUTION & STOCK ROOM receive, store and issue materials Receiving ensure inventory accuracy Stock Room manage warehouse activities plan shipments to customers Production Warehouse Shipping  Concept of Functional Area Information System  A functional area is served by an information system  Information systems capture, process, and store data to provide information for decision making  Employees working in one functional area need data from those in other functional areas  Functional Area Information System  There is a need to share information between functional areas  Functional area information systems should be integrated into common databases so that shared data are accurate and timely  ERP software allows all functional areas to use a single common database so that accurate and timely information is available Marketing and Sales Activities Marketing and Sales  Creates sales forecasts  Promotes products  Handles pre-sales:  Track customer contacts: calls, visits, mailing  Maintain Customer Data  Set product prices for inquiries & quotations  Takes customers orders  Marketing & Sales: Sales Order Processing Events  Customers communicate orders to Marketing and Sales. M&S does Order-Entry & Inventory Checking/Reservation to confirm if Order can be fulfilled.  If inventory not available, Sales orders passed to Production and Material Management for production planning & execution  Delivery of Product to customer: Picking, Packing & Shipping  Sales orders passed to Accounting & Finance for billing (upon delivery) & payment-processing  Marketing & Sales: Pricing & Costing  To determine product prices, Marketing and Sales requires an understanding of market competition and cost of manufacturing the product  Sales order data are used to analyse sales trends  Cost of manufacturing the Product requires information from Accounting and Finance, which, in turn, relies on Production and Materials Management data  Production & Material Management (Logistics) Activities Production and Materials Management  Develops manufacturing plans  Orders raw materials from suppliers  Receives raw materials  Plans production schedules  Manufactures products (tracks status)  Ships products to customers  Production & Materials Management Events 1. Production plans are based on information of product sales from Marketing and Sales 2. Raw materials are ordered by Purchasing based on production plans, expected shipment, delivery lead times & existing inventory levels (Accurate Production information can reduce need for extra inventory & manufacturing capacity)  Production & Materials Management Events (continued) 3. Production is scheduled, executed & monitored 4. Production and Materials Management supports Sales by providing information about what have been produced & shipped 5. Production & Materials Management provides data to Accounting & Finance to determine how much raw materials, labour, supplies & overheads was spent to make the finished-goods inventory  Accounting & Finance Activities Accounting and Finance  Records sales transactions  Records customers’ payments  Records suppliers’ invoices and payments to suppliers  Summarizes operational data in managerial reports  Provides information in balance sheet (account balances) & income statement (profitability)  Accounting and Finance: Information Flow  People in other functions provide information to Accounting & Finance  Marketing & Sales provides sales data to update Accounts Receivables records (about customers owing money for goods received) in the Financial Accounting System  Production & Materials Management provides production & stock movement data to update:  Inventory records in Financial Accounting system  Product cost records in Cost Controlling system  Human Resource provides payroll and benefit expense data  Accounting and Finance: Information Flow (continued)  Accuracy and timeliness of Accounting & Finance data depends on accuracy & timeliness of Marketing & Sales and Production & Material Management data  Marketing & Sales require data from Accounting and Finance to evaluate customer credit  Human Resource Activities Human Resources  Recruits employees  Trains employees  Compensates employees (payroll processing)  Oversees evaluation of employees  Human Resources: Recruitment  To properly recruits new employees, Human resources (HR) needs accurate forecasts of personnel needs  HR needs to know what skills are needed to perform a particular job and how much the company can afford to pay employees  The data comes from all functional units  Human Resources: Information Requirements  Companies must observe many governmental regulations in recruiting, training, compensating, promoting, and terminating employees  HR must ensure that employees receive training in a timely manner and get certified in key skills  Employees must be paid and be considered for raises and bonuses  HR needs timely and accurate data from other areas to do all these  Human Resources: Information Requirements (cont’d)  HR must create accurate and timely data for management use  For example:  Maintain database of skills required to do a particular job and the prevailing pay  Management can use the data to evaluate employee’s performance and compensation  This analysis can help to prevent losing valuable employees because of low pay