Essentials of Business Processes and Information Systems Magal, Word Solution Manual

Essentials of Business Processes and Information Systems By Magal

Email: Richard@qwconsultancy.com

Chapter 1: Organizations, Business Processes, and Information Systems Teaching Objectives The teaching objectives of this chapter are to: 1. Understand that work in organizations is completed in processes that consist of many steps 2. Compare and contrast the functional and process views of organizations and identify the negative consequences of the traditional functional organizational structure 3. Discuss and describe the various flows in a process – physical, data, document, and information 4. Explain how enterprise systems enable organizations to execute and manage processes

Chapter Outline and Teaching Suggestions 1. The Modern Global Business Environment a. Global Competition b. The Information Revolution c. Knowledge Worker Explain these three key concepts and why it is important for your students to understand them.

Explain the reasons for the growth in global competition and the use of information in organizations. An interesting question is which came first – did technology drive globalization or vice versa.

Explain what a knowledge worker does.

Explain the key skills expected of a knowledge worker.

2. Key Business Processes a. Generic Process b. Procurement Process c. Fulfillment Process Define and explain a business processes. Ask students to identify some other processes that they are familiar with. Identify the three key processes covered in this book and the steps in these processes – in very general terms.

3. The Functional Organizational Structure a. The Silo Effect b. Delays in Executing the Process c. Excess Inventory

d. Lack of Visibility across Processes

Discuss how companies are organized and that the functional structure is the most common one. You can use the university or business school departmental structure as an example.

Point out that processes are cross-functional. Ask the question: why is the functional structure so common?

Briefly discuss the history of the evolution of the functional structure Explain the silo effect and the negative consequences of the silo effect.

Explain each of the negative consequences in detail focusing on the example of the fulfillment process provided in the book. Ask students to perform a similar exercise for another process.

4. The importance of Information Systems a. Data and Information b. Functional Information Systems c. Enterprise Systems d. Why is This Information Important to You? Define the term information system and explain why they are important to modern organizations.

Explain the evolution of information systems from functional systems to integrated enterprise systems.

Define functional systems and their value and how they reduce some of the negative consequences of the silo effect previously discussed.

Define enterprise systems and their value and how they further reduce these negative consequences.

Explain why information systems are important to your students, regardless of their major.

5. Flows in Business Processes Explain the framework that will be used in the book. The framework consists of several flows – physical, data, document and information.

6. The Roles of Enterprise Systems in Organizations a. Execute the Process b. Capture and Store Process Data c. Monitor Process Performance Explain the key role of enterprise systems in supporting business processes. Three key roles are highlighted in this book. Point out that there are other roles as well.

7. Financial Impact of Process Steps a. Income Statement b. Balance Sheet c. Chart of Accounts Understanding the financial impact of process steps is important. Introduce students to the two key financial statements – balance sheet and income statement - in very simple terms.

Briefly explain the double entry system. Explain the idea of offsetting increases and decreases in accounts.

Review questions 1. What are the reasons for increased global competition? What are the consequences of global competition to organizations?

One reason for increased global competition is changes in national and international politics and policies. These policies have encouraged organizations to source their activities in the most advantageous locations. Since organizations are no longer geographically limited, they must ensure that their operations are properly integrated. This is more difficult when organizations are spread all around the globe.

2. What is meant by the term “information revolution?” What caused this revolution? What are the implications of the information revolution for you?

The information revolution refers to the increased use of information and communication technology to create, deliver, and use information. ICT includes such things as the Internet (e.g., e-mail, web) and computer-based business information systems (e.g., SAP ERP) that support the work of organizations. This revolution was caused because organizations were expanding rapidly and their processes were becoming widely dispersed. A key implication is that this has given rise to the knowledge worker whose skills are quite different from workers of the previous generation.

3. What are knowledge workers? What skills do they possess? Why are they important to organizations?

A knowledge worker is one who uses ICT to create, acquire, process, synthesize, disseminate, analyze and use information to be more productive. They develop the skills to find and use the information they need rather than rely on others to find it for them. They are important to organizations because they can look at something and see how it fits into the whole organization. Knowledge workers are scarce and most organizations do not have enough of them.

4. Explain the difference between the functional view and the process view of organizations. Why is the process view important today?

The functional view of an organization view the work performed in organizations in terms of loosely coupled functions. Whereas, the process view focuses on the interrelationships between functions that are needed to effectively complete the work of organizations. The process view is extremely important today because pressures of global competition are forcing organizations to find way to reduce costs, lead times, and delays.

5. What are some of the key business processes in an organization? Do all companies have the same key processes? Why or why not?

Some key business processes in an organization are procurement, fulfillment, and production.

While most companies in the same industry do have similar key processes they may execute them differently. Some companies may not execute certain processes at all. For example a retail store like Home Depot wouldn’t have the manufacturing process.

6. What is a common organizational structure? Why did this structure evolve? What are the benefits of such a structure?

The most common organizational structure is a functional structure. This structure evolved to solve the problems of managing organizations that evolved from being relatively small corporations that were centralized to large corporations that were located across the world.

The functional structure emphasizes division of labor and specialization and makes the task of managing large organizations simpler.

7. What are the typical functions or departments in an organization? What type of work is done in each of these functions?

Typical functions or departments in an organization are purchasing, operations, warehouse (inventory management), sales and marketing, research and development, finance and accounting, human resources, and information technology. Each function performs a narrowly defined (or specialized) set of activities. Specific activities are provided in Table 1.1.

8. What are the drawbacks of a functional organizational structure? What negative consequences do they lead to?

The major drawback of a functional organizational structure is the silo effect where persons in a function are very focused on the work performed in their functions and lose sight of the bigger process that they support.

9. What are functional information systems? What is their value to organizations? What are their main drawbacks?

Functional information systems are information systems that only support by one functional area of the organization. They are valuable in that they can help the functional area be more efficient, but they lack the ability to communicate with other functional areas to help complete a process more efficiently.

10. What are enterprise systems? How do they differ from functional information systems? What is the value of enterprise systems to organizations?

Enterprise systems support processes across the entire organization rather than just parts of the process. They differ from the functional information systems because they integrate all the functional areas together and enhance effectiveness and speed of the process. Enterprise systems are critical to organizations as they provide better visibility, reduce delays, and inventories.

11. What is a business process? Explain the various “flows” associated with a business process.

A business process is the series of steps that are necessary to create value in an organization.

The flows associated with a process include physical, data, document and information. Physical flows refer the physical steps executed in the process. Data is what is created and accumulated as the process steps are executed. Data is captured in documents. Information is organized data that is meaningful. Information is associated with each instance of the process as well as at the aggregate process level, that is, across multiple instances or executions of a process.

12. Describe two key financial documents.

The two key financial statements are the income statement and balance sheet. The income statement represents the state of an organization over a given period of time, such as one year.

A balance sheet represents the state of an organization at a point in time. A variety of accounts from the chart of accounts are included in these statements.

13. What is a chart of accounts? How is this related to the two key financial documents?

The chart of accounts is the list of accounts that are in the General Ledger. The financial impact of transactions are recorded in these accounts.

14. Explain how processes impact the two key financial documents. Under what circumstances does a process step have an impact on a company’s finances?

Processes impact key financial documents by increasing or decreasing accounts in the chart of accounts. Typically, there has to be an exchange in value between the company and an external entity for there to be a financial impact.

Assignments 1. Research some jobs (online or by talking to people in companies) that require knowledge workers. Describe these jobs and explain how and why knowledge workers are needed to fill these jobs.

The answer to this question will vary.

2. In this chapter we introduced three key processes – procurement, fulfillment and production.

There are a number of other processes in an organization, such as those related to product development, managing people. Identify one additional process that is typical in organizations.

You may consider an organization you have worked in or the educational institution you are attending. For the process provide the following: a. A brief description of the process

b. The purpose or desired outcome c. Steps in the process and the person and functional area responsible for completing the step d. Data, document and information flows associate with the process e. The types of inefficiencies (delays, etc.) associated with the manual execution of this process f. The role of enterprise systems in supporting this process The answer to this question will vary.

3. We have identified one specific enterprise system – SAP. Identify other enterprise systems that are available to organizations, and highlight the relative advantages and disadvantages of each one.

The answer to this question will vary.

Test Questions Three types of test questions are provided – True/False, Multiple Choice (one right answer), and multiple answer (at least two right answers). These are provided in MS word format as well as in a format that can be imported as a test in blackboard.

The files are: Chapter01 Test Questions True False.docx Chapter01 Test Questions Multiple Choice.docx Chapter01 Test Questions Multiple Answer.docx Blackboard versions of these files are also provided. These versions end with the word Blackboard. Remember that these are zipped files that should be uploaded to blackboard as they are, without unzipping. Your blackboard administrator can help with problems uploading these to your course on blackboard.

If you include all three types of questions, the following grading suggestion is offered.

T/F questions 1 point each Multiple Choice questions 2 points each Multiple Answer questions 3 (or 4) points each.

Partial credit is recommended. Grading is typically as follows: All correct answers selected; no incorrect answers selected: full points X of Y correct answers selected; no incorrect answers selected: x/y * points Each incorrect answer selected negates a correct answer selected

Chapter 2: Enterprise Systems Teaching Objectives The teaching objectives of this chapter are to: • • • • •

Describe the different types of enterprise systems and their roles in managing business processes Identify the different vendors that supply ES and analyze their market positions Explain the architecture of a typical ES Compare and contrast the different types of master data in an ES Portray the hypothetical company Super Skateboard Builders (SSB) in terms of its history and growth, products, customers, suppliers, and the types of information systems it uses

Chapter Outline and Teaching Suggestions 1. Enterprise Systems a. Stage 1: Stand-Alone Mainframe Systems b. Stage 2: Client-Server Architecture c. Stage 3: Service-Oriented Architecture Briefly explain the evolution of enterprise system through the three stages. Highlight the technological innovations that spurred the next stage. d. Types of Enterprise Systems i. Classification based on capabilities 1. ERP 2. SCM 3. SRM 4. CRM 5. PLM ii. Best of breed vs. niche applications iii. Classification based on company size iv. Classification based on delivery mechanism Discuss the different types of enterprise systems in terms of their role in intra and intercompany processes.

Highlight the various capabilities of each type of enterprise system and where they are appropriate.

Discuss the concept of an application suite.

2. Types of data in ES a. Transaction Data b. Master Data c. Organizational Data A good understanding of the various types of data is essential to understanding the explanations of the three key processes later in the book. Explain the three types of data and how they are related.

3. Super Skateboard Builders (SSB), Inc. a. Product Line b. Customers c. Vendors (Suppliers) d. Employees e. Information Systems The SSB case is used throughout the book to illustrate the various processes. Students should be very familiar with the products, customers, vendors and employees in the company. This knowledge is assumed in later chapters.

The discussion of information systems serves to recap the role of IS in organizations discussed in chapter 1 and to illustrate the inefficiencies of non-integrated systems. Make a point about this.

4. SAP Overview Review the growth of SAP over the years highlighting the evolution of SAP products.

5. SAP Software (simulation) Note that there are two options for adopting this text. One includes the simulations and one does not. Each option has a different ISBN number. This section is applicable if you choose the package with the simulated SAP exercises.

Explain the goal of the simulation and how it works.

Demonstrate one of the simulation exercises included in this chapter.

Explain your expectations with regard to how the students complete these simulations. How will they be considered in grading? What do students need to submit? The simulations are designed in three parts: a. Part one is a demonstration of how the task is completed b. In part two students are required to complete the exercise on their own. The task will be very similar to the one demonstrated. Students should pay close attention to the information in this part as the short quiz in part three will refer to this.

c. Part three is a short quiz to test students knowledge about the task completed. The quiz is available via WileyPlus and student performance data is automatically captured and stored in WileyPlus.

Review questions 1. Describe the differences among the three generations of enterprise systems – mainframe architecture, client-server architecture, and service-oriented architecture.

Mainframe architecture is a large, expensive, and isolated system. They main problem with mainframe architecture is that it cannot be scaled up very easy. Scaling refers to increasing the number of users and volume of operation.

Client-server architecture is separated into the presentation, application, and data layers.

Separating the application into distinct layers allows for easier scaling.

Service-oriented architecture is the latest generation in the evolution. In this architecture, capabilities of the system are delivered via services that can be consumed by any application.

This makes scaling and the development of new composite capabilities very easy.

2. Explain the functions of the different systems in an application suite. How are they related?

The different systems in an application suite include ERP, SCM, SRM, CRM, and PLM systems.

ERP systems are internally focused while the other are externally focused. ERP systems focus on executing the various processes within a company. SCM and SRM systems link a company’s ERP system to those of its supplier. CRM systems connect a company’s ERP system with those of its customers. PLM helps an organization manage its product development life cycle.

3. What are the roles of organizational data, master data, and transaction data in an ES? Organizational data identifies the organizational structure of the company. It identifies such things are divisions, departments, production and storage facilities, etc. Organizational data rarely changes.

Master data describes the key entities associated to the organization. Examples include customers, materials, and vendors. Master data changes infrequently.

Transaction data is data associated with the execution of specific a activity or task. Typical transaction data is who did what, when, and where, as well as specialized data that relate to the specific task, such as quantities.

4. What functional areas are included in SSB’s organizational structure? Is this a common organizational structure? Draw the organizational structure of a small or medium-sized company that you are familiar with.

SSB’s organizational structure includes the following areas: Accounting, Sales, Operations (plant), Purchasing, and warehouse. This is fairly typical. However variations are definitely possible. Students will provide several different structures for the last part of the question.

5. Describe the key problems SSB faced with its use of technology to manage its operations before it implemented an enterprise system. How can the ES improve SSB’s operations?

Some of the key problems that SSB faced with its systems before they implemented SAP was that all of the different functions had their own systems and they had to use floppy disks to update each of the systems. There was no consistency of data between the various systems.

One example of a negative consequence of this is that they ordered too many helmets because the purchasing department did not have the correct inventory amount as they used an old version of a data file. SSB also had problems with their accounting system; it is never synced correctly with the other databases. The enterprise system keeps all the data in one common database and helps provide easy access to this data to all that need it. This reduces, if not eliminates the problems faced by SSB.

Assignments 1. Provide two examples of organizational data, master data, and transaction data within the context of your university or another organization you are familiar with.

Students will provide a variety of answers. It is important that they correctly distinguish between the three types of data.

2. Service-oriented architecture is touted as a technology that will drastically change the way organizations utilize enterprise systems. Research the use of SOA in organizations, and argue whether SOA will be the next major technological development.

Students will provide a variety of answers.

3. In this chapter we provided you with examples of vendors that provide suite, best-of-breed, and niche applications. Conduct your own research, and develop a list of vendors and the types of applications they develop.

Student responses will vary.

Test Questions Three types of test questions are provided – True/False, Multiple Choice (one right answer), and multiple answer (at least two right answers). These are provided in MS word format as well as in a format that can be imported as a test in blackboard.

The files are: Chapter02 Test Questions True False.docx Chapter02 Test Questions Multiple Choice.docx Chapter02 Test Questions Multiple Answer.docx

Blackboard versions of these files are also provided. These versions end with the word Blackboard. Remember that these are zipped files that should be uploaded to blackboard as they are, without unzipping. Your blackboard administrator can help with problems uploading these to your course on blackboard.

If you include all three types of questions, the following grading suggestion is offered.

T/F questions 1 point each Multiple Choice questions 2 points each Multiple Answer questions 3 (or 4) points each.

Partial credit is recommended. Grading is typically as follows: All correct answers selected; no incorrect answers selected: full points X of Y correct answers selected; no incorrect answers selected: x/y * points Each incorrect answer selected negates a correct answer selected

Chapter 3: Procurement Process Teaching Objectives The teaching objectives of this chapter are to: • • • • •

Describe the steps in the procurement process.

Explain the role of different functional areas in efficiently and effectively completing the procurement process Identify the key steps in the procurement process and the data, document, and information flows associated with the process.

Explain the financial impact of the steps in the procurement process Explain the role of enterprise systems in supporting the procurement process

Chapter Outline and Teaching Suggestions 1. Key Concepts and Assumptions a. Procurement - Requisition to pay b. Business to consumer c. Business to business Explain what procurement means and differentiate between B2B and B2C procurement.

2. A Basic Procurement Process a. The framework i. Physical flow ii. Data and document flow iii. Information flow Review the framework introduced in chapter 1 b. Physical Flow i. Create requisition ii. Create and send purchase order iii. Receive shipment iv. Receive invoice v. Send payment Explain each step in terms of purpose. Discuss how communication between process steps is accomplished.

3. Document and Data Flow

a. b. c. d. e.

Purchase Requisition Purchase Order Packing List Goods Receipt Document Goods Receipt Document

For each document, explain its role in the process and the key data in the document.

For the data in the documents, explain the purpose of the data and how it is used in the various process steps and how the data may change during the process.

Discuss alternative values for the data such as delivery location and payment terms.

Discuss the role of the different functions/persons in completing these documents.

Refer to the appendix for a detailed explanation of each field in the documents.

4. Information Flow a. Instance-Level Information b. Process-Level Information Review the definitions of instance and process level information Provide examples of instance and process level information in the procurement process.

Discuss how this information is obtained in a manual environment (with difficulty, if at all possible!).

Note that information flow will be revisited in the context of a procurement process supported by an enterprise system, later in the chapter.

5. Financial Impact Explain the financial impact of the procurement process. Only certain steps have a financial impact. Illustrate this with an example. An alternative to the figures in the book is to use the traditional T accounts to explicitly show debits and credits. The use of T accounts depends on students’ background in accounting.

6. Role of enterprise systems in the procurement process Review the roles of enterprise systems in the procurement process introduced in chapter 1. a. Execute the Process i. Create Purchase Requisition ii. Create Purchase Order iii. Receive Shipment iv. Receive Invoice and Send Payment

Explain the role of an enterprise system in supporting process execution. Emphasize the benefits of a common database: data is entered only once, is accessible to people executing other steps. Emphasize the ease of communication and collaboration between process steps.

7. Capture and Store Process Data The role of an ES in capturing and storing process data should be evident from the discussion of the role of an ES in executing process steps.

8. Monitor the Process a. Instance-Level Information Flow b. Process-Level Information Flow Review the examples of instance and process level information introduced earlier in this chapter. Explain how and why it is easy (or easier than in a manual environment) to obtain this information when using an ES. 9. Exercise Using Simulated SAP The simulations are designed to illustrate the procurement process in a non-threatening manner (knowledge of SAP is not necessary). Ensure that students complete the simulations.

A short quiz at the end of the simulation is provided. Refer to Wiley Plus for the quiz.

Review questions 1. In what ways are business-to-consumer purchasing different from business-to-business purchasing?

Business-to-consumer purchasing generally has less documents and is less formal than a business-to-business purchasing. A business-to-business purchasing process generally has at least a purchase order, good receipt, invoice, and payment. Also in B2B purchasing there is more emphasis on relationships between consumer and supplier.

2. Explain the key steps in a basic procurement process?

The basic procurement process starts with the warehouse realizing that they need more materials and then they create a purchase requisition and send it to purchasing. Purchasing approves the purchase requisition and creates a purchase order and ships it to the supplier. The supplier then sends the goods to the warehouse, which receives the packing list and creates the good receipt document upon receipt of the goods. The warehouse sends the good receipt document to accounting. The accounting department shortly thereafter receives the invoice and matches it with the goods receipt and purchase order. If the invoice matches up correctly the accounting department sends the payment to the supplier.

3. Briefly describe the key documents in the procurement process in terms of their role in the process.

The first key document that starts the procurement process is the purchase requisition. After purchasing reviews the requisition from the warehouse and approves it they create a purchase order and send it out to the vendor. When the goods are received the warehouse also receives a packing list and then creates a good receipt document. Shortly after that the invoice will be received for the order where the accounting department will do a 3-way match to ensure that the invoice data matches up with what the goods receipt and purchase order says. If everything is correct the payment is sent to the vendor.

4. Describe the 3-way match in a manual system. Explain how it differs from the automated 3-way match in an enterprise system.

In a manual system a 3-way match is when the person who receives the invoice for an order checks to make sure the total on the invoice is accurate with the information on the purchase order and good receipt. In an automated 3-way match in an enterprise system the system checks to make sure the invoice has the same terms and price per unit as the purchase order and checks to see if the quantity of products that were invoiced match up with the quantity received on the goods receipt.

5. Define the following terms: a. Free-on-board - is the point at which ownership of the material in the shipment legally transfers from one company to the other. b. Payment terms - define how the company is to pay the vendor. In most cases payment is due either the date the company receives the invoice or the date it receives the shipment, whichever is later. c. Quantity discount - price reductions that suppliers offer when customers purchase large quantities of materials. d. Backordered quantity – quantity of the order that has not been shipped with that packing list. These goods will be shipped at a later date. e. Three-way match – When you match up the data from the invoice to the goods receipt and purchase order.

Assignments 1. The procurement process described in this chapter is deliberately very simple. Based on your experiences or by talking to someone in a local company, define and describe a more complex procurement process in terms of the physical, document and data flows. What functions of the organizations will be involved in this process?

The answer to this question will vary.

2. This chapter provides some examples of instance-level and process-level information. Identify two more examples of each type of information and explain what data will be needed to generate this information. What is the source of these data?

Instance-level information What was length of time from purchase order creation to goods receipt?

What was the total of the invoice?

Process-level information What is the average length of time from purchase order creation to goods receipt for all orders for the vendor Black Widow Skateboards in the last 6 months?

Who is the supplier that we purchase the most ENSB3000’s from?

The source of the data would be either the paper documents in a paper-based system or the transaction data in an ERP system.

3. Identify some of the key problems associated with the manual, or paper-based, procurement process. How does an enterprise system eliminate or reduce the impact of these problems.

The main problem with manual or paper-based procurement processes is that there are many delays between the different departments. The paper work can sit on someone’s desk for days; the documents could be in the mail when they could be electronically transferred either internally or externally, etc. An ERP system reduces delays, reduces paper clutter, and minimizes errors. An ERP system minimizes errors by making it so that master data is only entered in once and after that you just reference for instance the vendor number and then that provides you with the shipping address, phone number, etc.

4. SSB has a need to purchase for the following materials from its supplier, Black Widow Skateboards. Create all the documents necessary to document the process used procure these materials. You can search the internet for examples of the documents included in this chapter or you can create them using a word processor.

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100 Entry-level skateboards 300 T shirts 100 First aid kits

An alternative assignment – Procurement Process Group Assignment - is provided that is more detailed. A solution to this is also provided.

Assignment File: Chapter 03 Procurement Process Assignment.docx Solution File: Chapter 03 Solution To Procurement Process Assignment.docx

5. For the process in Question 4, explain the financial impact of the process steps on SSB. Draw a diagram similar to the figure used in this chapter to explain the financial impact.

See the solution to the alternative procurement process group assignment

Test Questions Three types of test questions are provided – True/False, Multiple Choice (one right answer), and multiple answer (at least two right answers). These are provided in MS word format as well as in a format that can be imported as a test in blackboard.

The files are: Chapter03 Test Questions True False.docx Chapter03 Test Questions Multiple Choice.docx Chapter03 Test Questions Multiple Answer.docx Blackboard versions of these files are also provided. These versions end with the word Blackboard.

Remember that these are zipped files that should be uploaded to blackboard as they are, without unzipping. Your blackboard administrator can help with problems uploading these to your course on blackboard.

If you include all three types of questions, the following grading suggestion is offered.

T/F questions 1 point each Multiple Choice questions 2 points each Multiple Answer questions 3 (or 4) points each.

Partial credit is recommended. Grading is typically as follows: All correct answers selected; no incorrect answers selected: full points X of Y correct answers selected; no incorrect answers selected: x/y * points Each incorrect answer selected negates a correct answer selected

Chapter 4: Fulfillment Process Teaching Objectives The teaching objectives of this chapter are to: • • • • •

Describe the steps in the fulfillment process.

Explain the role of different functional areas in efficiently and effectively completing the fulfillment process Identify the key steps in the fulfillment process and the data, document, and information flows associated with it.

Explain the financial impact of the steps in the fulfillment process Explain the role of enterprise systems in supporting the fulfillment process

Chapter Outline and Teaching Suggestions 1. Key Concepts and Assumptions a. Fulfillment process – inquiry to cash, quote to cash, order to cash b. Sell from stock c. Configure to order Explain what procurement means and differentiate between B2B and B2C procurement.

2. A Basic Fulfillment Process a. The Framework i. Physical Flow ii. Document and Data Flow iii. Information Flow Review the framework introduced in chapter 1 b. Physical Flow i. Receive customer inquiry ii. Create and send quotation iii. Receive customer purchase order iv. Create sales order v. Send shipment vi. Send invoice vii. Receive payment

Explain each step in terms of purpose. Discuss how communication between process steps is accomplished. c. Document and Data Flow i. Customer inquiry ii. Quotation iii. Customer purchase order iv. Sales order v. Picking document vi. Packing list vii. Customer invoice viii. Customer payment For each document, explain its role in the process and the key data in the document.

For the data in the documents, explain the purpose of the data and how it is used in the various process steps and how the data may change during the process.

Discuss alternative values for the data such as delivery location and payment terms.

Discuss the role of the different functions/persons in completing these documents.

Refer to the appendix for a detailed explanation of each field in the documents. d. Information Flow i. Instance-Level Information ii. Process-Level Information Review the definitions of instance and process level information Provide examples of instance and process level information in the procurement process.

Discuss how this information is obtained in a manual environment (with difficulty, if at all possible!).

Note that information flow will be revisited in the context of a procurement process supported by an enterprise system, later in the chapter.

3. Financial Impact Explain the financial impact of the procurement process. Only certain steps have a financial impact. Illustrate this with an example. An alternative to the figures in the book is to use the traditional T accounts to explicitly show debits and credits. The use of T accounts depends on students’ background in accounting.

4. Role of enterprise systems in the procurement process Review the roles of enterprise systems in the fulfillment process introduced in chapter 1. a. Execute the Process i. Create quotation ii. Create sales order iii. Prepare shipment iv. Send shipment v. Create and send invoice Explain the role of an enterprise system in supporting process execution. Emphasize the benefits of a common database: data is entered only once, is accessible to people executing other steps. Emphasize the ease of communication and collaboration between process steps. b. Capture and Store Process Data The role of an ES in capturing and storing process data should be evident from the discussion of the role of an ES in executing process steps. c. Monitor the Process i. Instance-Level Information Flow ii. Process-Level Information Flow Review the examples of instance and process level information introduced earlier in this chapter. Explain how and why it is easy (or easier than in a manual environment) to obtain this information when using an ES. 5. Exercise Using Simulated SAP The simulations are designed to illustrate the procurement process in a non-threatening manner (knowledge of SAP is not necessary). Ensure that students complete the simulations.

A short quiz at the end of the simulation is provided. Refer to Wiley Plus for the quiz.

Review questions 1. Explain the difference between sell-from-stock and configure-to-order strategies

Sell-from-stock is when a company sells products directly from their finished goods or inventory to their customers. Configure-to-order is when the supplying company has a base product and the customer can customize that product, to some extent, to fit their needs. Configure-to-order is generally in high cost low volume industries like office furniture, construction equipment, etc.

2. Explain the key steps in a basic fulfillment process?

The fulfillment process normally starts with a customer sending an inquiry to the supplier. The supplier then follows that up by sending a quotation to the customer and if the customer wants to commit to purchase they send back a purchase order. Then the sales department at the supplier creates a sales order and distributes that internally through the company. The warehouse takes the sales order and creates a shipment and sends it out to the customer. The accounting department is notified about the shipment and sends out an invoice. Finally, the customer (hopefully) sends a check and the accounting department processes it and the sale is complete.

3. Briefly describe the key documents in the fulfillment process in terms of their role in the process.

Customer Inquiry – Sent by the customer to the sales department asking about the price of a certain product Quotation – Sent by the sales department to the customer with a price/unit, valid to date, and terms Purchase Order – Sent by the customer to the sales department. This is a commitment by the customer to purchase the listed materials at the listed price.

Sales Order – This is an internal document for the supplier. This is created by the sales department and is sent to accounting, warehouse, and maybe purchasing.

Picking Document – Created by the warehouse when they receive the sales order.

Packing List – a list of the materials that are included in the shipment sent to the customer created by the warehouse Invoice – Sent by the accounting department to the customer listing the materials sent and prices.

Payment – Sent by the customer to the accounting department to complete the transaction 4. Explain the difference between a backorder and a stock-out.

A stock out is when the company does not have sufficient products in order to meet the customer’s requested delivery date. A backorder is generally when a company cannot fulfill the

entire order at this time, possibly due to a stock out, and has the remaining amount of products on backorder and will ship when they are available.

5. Define the following terms: a. Mode of shipment – the preferred way of shipment b. Storage location - In a small warehouse, a storage location can be something as simple as “finished goods area,” whereas in larger warehouses it can include more specific information such as aisle number, shelf number, or bin number. c. Open quantity – the quantity that still needs to be delivered d. Delivered quantity – the quantity that was delivered with that packing list

Assignments 1. The fulfillment process described in this chapter is deliberately very simple. Based on your experiences or by talking to someone in a local company, define and describe a more complex fulfillment process in terms of the physical, document and data flows. What functions of the organizations will be involved in this process?

The answer to this question will vary.

2. This chapter provides some examples of instance level and process level information. Identify two more examples of each type of information and explain what data will be needed to generate this information. What is the source of these data?

Instance-level information What was length of time from purchase order receipt to payment?

What was the total of the invoice?

Process-level information What is the average length of time from purchase order receipt to payment for all orders for the vendor Black Widow Skateboards in the last 6 months?

Who is the customer that purchased the most ENSB3000’s from us?

The source of the data would be either the paper documents in a paper-based system or the transaction data in an ERP system.

3. Identify some of the key problems associated with the manual, or paper-based, fulfillment process. How does an enterprise system eliminate or reduce the impact of these problems.

The main problem with manual or paper-based procurement processes is that there are many delays between the different departments. The paper work can sit on someone’s desk for days; the documents could be in the mail when they could be electronically transferred either internally or externally, etc. An ERP system reduces delays, reduces paper clutter, and minimizes errors. An ERP system minimizes errors by making it so that master data is only

entered in once and after that you just reference for instance the vendor number and then that provides you with the shipping address, phone number, etc.

4. SSB receives a purchase order for the following materials from World Wide Skateboard Distributors. Create all the documents necessary to document the process used to fill this order.

You can search the internet for examples of the documents included in this chapter or you can create them using a word processor.

- 60 Entry level skateboards - 30 T-shirts - 10 First aid kits An alternative assignment – Fulfillment Process Group Assignment - is provided that is more detailed. A solution to this is also provided.

Assignment File: Chapter 04 Fulfillment Process Assignment.docx Solution File: Chapter 04 Solution To Fulfillment Process Assignment.docx

Test Questions Three types of test questions are provided – True/False, Multiple Choice (one right answer), and multiple answer (at least two right answers). These are provided in MS word format as well as in a format that can be imported as a test in blackboard.

The files are: Chapter04 Test Questions True False.docx Chapter04 Test Questions Multiple Choice.docx Chapter04 Test Questions Multiple Answer.docx Blackboard versions of these files are also provided. These versions end with the word Blackboard. Remember that these are zipped files that should be uploaded to blackboard as they are, without unzipping. Your blackboard administrator can help with problems uploading these to your course on blackboard.

If you include all three types of questions, the following grading suggestion is offered.

T/F questions 1 point each Multiple Choice questions 2 points each Multiple Answer questions 3 (or 4) points each.

Partial credit is recommended. Grading is typically as follows: All correct answers selected; no incorrect answers selected: full points X of Y correct answers selected; no incorrect answers selected: x/y * points Each incorrect answer selected negates a correct answer selected

Chapter 5: Production Process Teaching Objectives The teaching objectives of this chapter are to: • • • • •

Describe the steps in the production process Explain the role of different functional areas in efficiently and effectively completing the process Identify the key data, document, and information flows associated with the production process Analyze the financial impact of the steps in the process Explain the role of enterprise systems in supporting the process

Chapter Outline and Teaching Suggestions 1. Key Concepts and Assumptions a. Production Processes and Strategies i. Assembling vs. manufacturing ii. Make to order vs. make to stock A variety of processes and strategies are possible. Explain the differences between the ones included in the book. Note that SSB will use the make to stock strategy and the standard skateboard is an assembled product. In the next chapter, integrated processes, the strategy will change to make to order. b. Master Data in the Production Process i. Bill of Material ii. Work Centers iii. Product Routing The concept of master data was introduced in chapter 2 where data related to customers, vendors and materials were discussed. These master data are used in the discussion of procurement and fulfillment. In production three additional master data are necessary – bill of material, work center, and product routing. Explain these three and their role in the production process. As always, keep things simple.

2. A Basic Production Process a. The framework i. Physical flow ii. Data and document flow iii. Information flow Review the framework introduced in chapter 1

b. Physical Flow i. Request production ii. Authorize production iii. Issue materials iv. Create products v. Move finished goods into storage Explain each step in terms of purpose. Discuss how communication between process steps is accomplished. c. Document and Data Flow i. Planned Order ii. Production Order iii. Material Withdrawal Slip iv. Goods Receipt Document For each document, explain its role in the process and the key data in the document.

For the data in the documents, explain the purpose of the data and how it is used in the various process steps and how the data may change during the process.

Discuss alternative values for the data such as delivery location and payment terms.

Discuss the role of the different functions/persons in completing these documents.

Refer to the appendix for a detailed explanation of each field in the documents. d. Information Flow i. Instance-Level Information ii. Process-Level Information Review the definitions of instance and process level information Provide examples of instance and process level information in the procurement process.

Discuss how this information is obtained in a manual environment (with difficulty, if at all possible!).

Note that information flow will be revisited in the context of a procurement process supported by an enterprise system, later in the chapter.

3. Financial Impact The financial impact of the steps in the production process is not discussed. Concepts related to cost of goods sold (materials, labor, machine, and overhead costs) are beyond the scope of

this book. A prior course in accounting is necessary to understand the financial impact of the production process.

4. Role of enterprise systems in the procurement process Review the roles of enterprise systems in the procurement process introduced in chapter 1. a. Execute the Process i. Request Production ii. Authorize Production iii. Issue Raw Materials to Production Order iv. Create (Assemble) Products v. Receive Finished Goods into Storage Explain the role of an enterprise system in supporting process execution. Emphasize the benefits of a common database: data is entered only once, is accessible to people executing other steps. Emphasize the ease of communication and collaboration between process steps. b. Capture and Store Process Data The role of an ES in capturing and storing process data should be evident from the discussion of the role of an ES in executing process steps. c. Monitor the Process i. Instance-Level Information Flow ii. Process-Level Information Flow Review the examples of instance and process level information introduced earlier in this chapter. Explain how and why it is easy (or easier than in a manual environment) to obtain this information when using an ES. 5. Exercise Using Simulated SAP The simulations are designed to illustrate the procurement process in a non-threatening manner (knowledge of SAP is not necessary). Ensure that students complete the simulations.

A short quiz at the end of the simulation is provided. Refer to Wiley Plus for the quiz.

Review questions 1. Explain the difference between make-to-order and make-to-stock strategies In a make to order strategy, the company makes the finished product in response to a specific customer order. That is, the production process is triggered by a customer order. In a make to stock strategy, a company makes the finished product in order to increase inventory. That is, production is triggered by inventory dropping to some pre-determined level.

2. Explain the key steps in a basic production process?

Students should identify and explain the five steps described in the “physical flow” section of the book and illustrated in Figure 5.5. They should explain these steps in terms of what triggers them, what the outcome of each step is, why the step is necessary, and who and where in the organization the step is executed.

3. Briefly describe the key documents in the production process in terms of their role in the process.

Students should identify and explain the four documents identified in the “data and document flow” section and illustrated in Figure 5.5. The explanation should include: the purpose of the document, which step(s) the document is associated with, what the key data are and how they change across the process, and who creates and modifies the documents.

Assignments 1. The production process described in this chapter is deliberately very simple. Based on your experiences or by talking to someone in a local company, define and describe a more complex production process in terms of the physical, document and data flows. What functions of the organizations will be involved in this process?

Students’ answers will wary. It is important that they accurately identify the steps in the process (physical flow), the key documents and the steps these documents are associated with, and the key data in these documents and how these data change across the process.

2. This chapter provides some examples of instance level and process level information. Identify two more examples of each type of information and explain what data will be needed to generate this information. What is the source of these data?

A variety of answers are possible. It is not uncommon for students to confuse instance and process level information.

3. Identify some of the key problems associated with the manual, or paper-based, production process. How does an enterprise system eliminate or reduce the impact of these problems.

A manual process depends on paper documents to facilitate the communication and collaboration between process steps. Common problems are those related to delays, excess inventory and the lack of visibility. These lead to reduced customer service and increased costs.

Students should be able to explain why these delays exist and how they lead to lower service levels and higher costs.

4. SSB has a need to produce 100 standard skateboards to replenish inventory. Create all the documents necessary to document the process used produce these materials. You can search the Internet for examples of the documents included in this chapter or you can create them using a word processor.

Students will typically use the documents in the book as a reference and create documents that look very similar. They should ensure that the data reflects the question in terms of quantities, and times.

Chapter 6: The Integrated Process Teaching Objectives The teaching objectives of this chapter are to: • • • •

Define end-to-end processes that integrate the fulfillment, procurement, and production processes Describe the steps in a fully integrated end-to-end integrated process Explain how enterprise systems support end-to-end integrated processes Describe variations to key business processes and additional business processes that occur between companies

Chapter Outline and Teaching Suggestions 1. Key Concepts and Assumptions a. Intra-organizational processes b. Inter-organizational processes Discuss the differences between inter- and intra-organizations processes. While most of the book focuses on key intra-organizational systems, students should be provided with basic knowledge of inter-organizational systems. Chapter 2 provided a brief introduction to the systems that support these processes.

2. The Integrated Process a. The framework When discussing the procurement, fulfillment, and production processes, we used a framework consisting of the various flows. We first discussed paper-based (manual) processes and then explained how an ES supports these processes. In this chapter, we do not discuss the manual processes.

Students are expected to recall the steps in the previous processes and are frequently referred back to previous chapters.

This chapter focuses on the integration of the three processes into one end-to-end process. b. New assumptions Explain that the key assumptions regarding availability of materials (raw materials in production and finished products in fulfillment) are removed.

Explain that this results in additional steps to check the status of inventory. This is in the form of a decision point that leads to one of two possible paths in the process.

Highlight these decision points.

c. Physical Flow i. The fulfillment process: initial steps ii. Review inventory of finished goods iii. The production process: initial steps iv. Review inventory of raw materials v. The procurement process vi. The production process: resumed vii. The fulfillment process: resumed The physical flow includes all the steps in the three processes previously discussed, but integrates them with two additional steps – check inventory of finished goods and raw materials.

Discuss the flow with the assumption that sufficient quantities of needed materials are not available. Follow the path as described in the book (Figure 6.1).

A new report from SAP is introduced – the stock requirements list. This list shows the status of a material and displays all activities that impact the quantity of that material – quantity on hand, customer orders, planned orders, production orders, order reservations, and deliveries. Highlight the changes in the stock requirements list as the various process steps are executed.

3. Additional intra-company processes a. Human capital management b. Asset management Two additional intra-company processes are included. Discuss the key activities in these processes.

4. Extended inter-company processes a. Supply chain management (SCM) b. Supplier relationship management (SRM) c. Product life cycle management (PLM) d. Customer relationship management (CRM) Four key inter-company processes are included. Discuss the key activities in these processes.

Refer to chapter 2 for systems that support these processes.

5. Exercise Using Simulated SAP

The simulations are designed to illustrate the integrated process in a non-threatening manner (knowledge of SAP is not necessary). Ensure that students complete the simulations. A short quiz at the end of the simulation is provided. Refer to Wiley Plus for the quiz.

Review questions 1. Identify and explain the key steps that integrate the procurement, fulfillment, and production processes.

The key steps that integrate the procurement, fulfillment, and production processes are the steps to check inventory of needed materials. Inventory is checked after the following steps: create sales order, authorize production, receive shipment from vendor, and receive finished goods from production.

2. The integrated process requires a company to suspend one process and branch out to another process, and then return to the previous process. How do the people involved in these processes know when to resume a process that was suspended?

The process is resumed when the needed materials are now available. Several options are available, depending on the degree of automation. The affected persons may periodically check inventory to see if the necessary materials are available. Alternatively, the system may automatically notify the affected persons when the needed materials are available.

3. Describe the objectives and key steps in the following processes a. Human capital management - involves all of the activities related to the recruitment of new employees, the management of those employee’s careers while they are working at the company, and the eventual loss of those employees from the workforce due to either retirement or termination (voluntary or forced). b. Asset management - includes activities related to procuring assets, maintaining and repairing assets, replacing assets, accounting for the depreciation of assets, and eventually disposing of, replacing, or retiring assets.

4. Explain the role of the following ES and how they “extend” the capabilities of the core processes that they support. a. Supply chain management - uses demand forecasts from the marketing and sales departments to create a demand plan for a specified period of time. b. Supplier relationship management - focuses on the entire relationship between a company and its suppliers. c. Product lifecycle management - helps companies create a funnel of ideas that they can assess to determine the most viable end products for development. d. Customer relationship management - the standard fulfillment process to incorporate a great deal of the activities that are involved with the demand-to-order processes

Assignments

1. Select one ES from those discussed in this book (ERP, SCM, SRM, CRM, PLM), and provide examples of how companies are using these systems to improve their operations. Be specific about the benefits of using these systems.

Students’ answers will vary as companies use these systems in different ways and derive different benefits. http://www.sap.com/ and http://www.cio.com/ have sections that contain many examples and case studies of well-known companies who use these systems and the benefits they have gained.

2. Business network transformation (BNT) is an emerging concept whereby organizations depend on a network of partner organizations to transform their practices. Research this concept, and provide some examples of BNT achieved by organizations. Identify the various organizations that are part of the network. Explain how the work of these organizations has changed and how these changes have benefited the organization.

BNT is an emerging concept and good examples not common. http://www.sap.com/about/vision contains several case-studies and company examples of BNT in action. Students may find examples of organizations that are attempting to build integrated business networks to perform tasks that were traditionally performed in-house.

Test Questions Three types of test questions are provided – True/False, Multiple Choice (one right answer), and multiple answer (at least two right answers). These are provided in MS word format as well as in a format that can be imported as a test in blackboard.

The files are: Chapter06 Test Questions True False.docx Chapter06 Test Questions Multiple Choice.docx Chapter06 Test Questions Multiple Answer.docx Blackboard versions of these files are also provided. These versions end with the word Blackboard. Remember that these are zipped files that should be uploaded to blackboard as they are, without unzipping. Your blackboard administrator can help with problems uploading these to your course on blackboard.

If you include all three types of questions, the following grading suggestion is offered.

T/F questions 1 point each Multiple Choice questions 2 points each Multiple Answer questions 3 (or 4) points each.

Partial credit is recommended. Grading is typically as follows: All correct answers selected; no incorrect answers selected: full points X of Y correct answers selected; no incorrect answers selected: x/y * points Each incorrect answer selected negates a correct answer selected