Chapter 9 | HRJOB

Process Integration

Chapter 9

1 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Learning Objectives1. Define process integration, and explain why this concept is

fundamental to modern business operations.2. Explain how the procurement, fulfillment, and IWM

processes interact when a company fills a customer order for trading goods.

3. Indentify and discuss the various integration points among the procurement, fulfillment, production, and warehouse management processes.

4. Analyze the financial and material impacts of the various steps in the integrated processes.

2Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Background

Thus far the book has covered the following key processes: Financial accounting Procurement Fulfillment Production Inventory and warehouse management Material planning

Each of these processes has triggers, data, tasks, and outcomes

Magal and Word | Integrated Business Processes with ERP Systems | © 20113

Background Chapter 1 introduced the concept of process integration

Various processes are interdependent Steps in one process frequently impact steps in other processes

This chapter approaches the same processes discussed in the previous chapters but from an integrative perspective.


Integrated Business Processes


Background Production strategies

Make-to-stock Make-to-order

Procurement strategy Procure-to-stock Procure-to-order

Fulfillment strategy Sell-from-stock


Background

Make-to-stock, procure-to-stock, and sell-from-stock strategies use inventory as a buffer between processes to de-couple them or make them less dependent on one another.

To illustrate integration among processes, the scenarios will no longer assume that there is a sufficient inventory of raw materials for production or of finished goods for fulfillment.

The discussion will focus on the make-to-order and procure-to-order strategies.


Background

Two scenarios are presented Scenario one - Filling a customer order for trading goods

Procurement, fulfillment, IWM

Scenario two – Filling a customer order for finished goods Procurement, fulfillment, production, IWM


Procurement, Fulfillment, and IWM Processes

Rocky Mountain Bikes (RMB), a GBI customer, has ordered 800 t-shirts (SHRT1000) from GBI

GBI will ship the t-shirts from its San Diego plant, which is warehouse management enabled

Assumptions The San Diego plant has 200 t-shirts in stock valued at a moving

average price of $15.43 each The Miami plant has 1,500 t-shirts in stock valued at a moving

average price of $15.25 each GBI can purchase t-shirts from Spy Gear at $14.95 each


Procurement, Fulfillment, and IWM Processes

Assumptions (continued) RMB has sent GBI a purchase order (PO) for 800 t-shirts GBI sells t-shirts for $30 each


Plant Stock Valuation – Start of the Process


Account Balance - Start of the Process


Demo 9.1 Review Financials and Inventory (Plant, Storage Location, and Bin Stock and Value)

Review financials and inventory (plant, storage location, and bin stock and value)


Demo 9.2 Create Two Customer Orders

Review creation of two customer orders


Procurement, Fulfillment, and Warehouse Management Processes


Fulfillment Process - Initial Steps The fulfillment process is triggered by a customer purchase

order. Fulfillment continues with the next step, which is sales order

processing.


Fulfillment Process – Initial Steps


Procurement Process – Initial Steps A shortage of materials creates a requirement for GBI to

purchase trading goods, which triggers the procurement process.

Two options for procurement: Internally Externally


Procurement Process – Initial Steps


Demo 9.3 Create Two Requisitions and POs to Fill Customer Orders

Review the creation of two requisitions and POs


Procurement Process – Internal Procurement

San Diego plant can procure the t-shirts from the Miami plant

STO processing has several options Select STO without delivery document

Goods issue Material impact Financial impact Valuation impact Goods receipt


Procurement Process – Internal Procurement


Material and FI Documents at GI for STO


Plant Stock Valuation at GI for STO


Account Balances at GI for STO


Material and FI Documents at GR for STO


Plant Stock Valuation at GR for STO


Demo 9.4 Internal Procurement for First PO

Review internal procurement for first PO


Procurement Process – External Procurement

GBI sends a purchase order for 1,000 t-shirts to Spy Gear. Followed by: Goods receipt Invoice receipt Payment

Impacts Material impact FI impact Plant stock valuation


Procurement Process – External Procurement


Material and FI Documents at GR for PO


Plant Stock Valuation at GR for PO


Account Balances at GR for PO


Account Balances after Procurement


Demo 9.5 External Procurement for Second PO

Review external procurement for second PO


Warehouse Management Steps Related to Procurement San Diego plant is WM enabled WM steps: TR/TO No material or FI documents


WM Steps Related to Procurement


Demo 9.6 WM Steps for Goods Receipt for PO

Review WM steps for goods receipt for PO


Fulfillment Process - Shipping

Create delivery WM steps for picking Goods issue Invoice Payment


Fulfillment Process - Shipping


Demo 9.7 Create Delivery for PO

Review create delivery for PO


WM Steps Related to Fulfillment


Demo 9.8 WM Steps for Delivery Review WM steps for delivery


Fulfillment Process – Concluding Steps


Material and FI Documents for Delivery


Plant Stock Valuation at GI for Delivery


Account Balances after GI for Delivery


GL Account Balances after Customer Billing and Payment


Demo 9.9 Complete Fulfillment Review complete fulfillment


Procurement, Fulfillment, Production, and IWM Processes

Rocky Mountain Bikes (RMB) has ordered 40 Red Deluxe Touring Bikes (DXTR3000) from GBI.

Assumptions The San Diego plant has 10 Red Deluxe Touring Bikes valued at a

standard price of $1,400 each. The Dallas plant currently does not have any touring bikes in inventory.

When it does have these bikes, the standard price is also $1,400.

The Dallas plant has 200 aluminum wheel assemblies that are needed to produce touring bikes. The standard price for these wheel assemblies is $110.


Procurement, Fulfillment, Production, and IWM Processes

Assumptions (continued) GBI’s vendor -- Space Bike Composites -- is able to supply all of the

raw materials needed to make touring bikes. GBI purchases raw materials in lot sizes of 200. It produces bikes in lot

sizes of 50. RMB has sent GBI a purchase order for 40 Red Deluxe Touring Bikes. GBI sells these bikes for $2,800 each. Bikes are produced in Dallas and shipped to San Diego via STO


BOM for Touring Bikes


Raw Material Cost per Bike


Plant Stock Valuation at Start of Process


Account Balances – Start of Process


Procurement, Fulfillment, Production, and Warehouse Management Processes


Demo 9.10 Review Financials and Inventory (Plant, Storage Location, and Bin Stock and Value)

Review financials and inventory (plant, storage location, and bin stock and value)



This following scenario for the fulfillment process is very similar to the one that was previously discussed.

RMB’s purchase order triggers the integrated process and prompts GBI to create a sales order.

The ERP system performs an availability check.


Demo 9.11 Create a Sales Order Review create a sales order


Inventory Management (STO) Initial Steps

Availability check results in a deficit. Bikes are produced in Dallas and must be transferred to San

Diego (via STO)


Inventory Management – Initial Step


Demo 9.12 Create an STO

Review how to create an STO


Production Process – Initial Steps Insufficient inventory of bikes in Dallas to meet the

requirements in the STO Execute the production process

Insufficient raw materials to produce the bikes


Production Process – Initial Steps


Demo 9.13 Create a Planned Order and a Production Order Review how to create a planned order and a production

order


Procurement Process (External) The requirement for raw materials triggers the procurement

process to acquire these materials.


Procurement Process (External)


Plant Stock Valuation after External Procurement


Account Balances after External Procurement


Demo 9.14 Execute the Procurement Process

Review how to execute the procurement process


Production Process - Continued GBI has received the raw materials The production process continues


Production Process - Continued


Plant Stock Valuation after Production


Account Balances after Production


Demo 9.15 Complete Production Review complete production


Inventory Management - Continued Bikes are received into the Dallas plant inventory. GI for STO in Dallas GR for STO in San Diego


Inventory Management - Continued


Plant Stock Valuation at GI for STO


Account Balances after a Goods Issue against an STO


Plant Stock Valuation at GR for STO


Demo 9.16 Complete the GI and GR for STO

Review complete GI and GR for STO


Warehouse Management Process Related to STO Bikes arrive in the San Diego plant, which is WM enabled Complete WM steps related to GR


Warehouse Management Steps


Demo 9.17 Complete WM Steps Related to STO

Review complete WM steps related to STO


Fulfillment Process - Continued

The bikes are now in stock in the San Diego plant. The fulfillment process, which had been interrupted, can

continue.


Fulfillment Process - Continued


Demo 9.18 Create a Delivery for a Sales Order

Review how to create a delivery for a sales order


Warehouse Management Process


Demo 9.19 Complete the WM Steps Related to the Sales Order

Review how to complete the WM steps related to the sales order


Fulfillment Process – Concluding Steps


Plant Stock Valuation at GI for SO


Account Balances after Fulfillment


Demo 9.20 Complete Fulfillment Steps

Review how to complete the fulfillment steps


Chapter 9 | HRJOB

Documents

Transcript of Chapter 9 | HRJOB