Chapter 1

Chapter 1

Chapter 9 Process Integration 1 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Learning Objectives 1. Define process integration, and explain

2 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 Magal and Word | Integrated Business Processes with ERP Systems | 2011 impacts of the various steps in the 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

3 Magal and Word | Integrated Business Processes with ERP Systems | 2011 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. 4

Magal and Word | Integrated Business Processes with ERP Systems | 2011 Integrated Business Processes 5 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Background Production strategies

Make-to-stock Make-to-order Procurement strategy Procure-to-stock Procure-to-order Fulfillment strategy Sell-from-stock

6 Magal and Word | Integrated Business Processes with ERP Systems | 2011 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. 7 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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 8 Magal and Word | Integrated Business Processes with ERP Systems | 2011 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 9

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 Magal and Word | Integrated Business Processes with ERP Systems | 2011 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 10 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Plant Stock Valuation Start

of the Process 11 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Account Balance - Start of the Process 12

Magal and Word | Integrated Business Processes with ERP Systems | 2011 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)

13 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Demo 9.2 Create Two Customer Orders Review creation of two customer orders 14

Magal and Word | Integrated Business Processes with ERP Systems | 2011 Warehouse Management Processes 15 Magal and Word | Integrated Business Processes with ERP Systems | 2011 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. 16 Magal and Word | Integrated Business Processes with ERP Systems | 2011

Fulfillment Process Initial Steps 17 Magal and Word | Integrated Business Processes with ERP Systems | 2011 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 18

Magal and Word | Integrated Business Processes with ERP Systems | 2011 Procurement Process Initial Steps 19 Magal and Word | Integrated Business Processes with ERP Systems | 2011

Demo 9.3 Create Two Requisitions and POs to Fill Customer Orders Review the creation of two requisitions and POs 20 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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 21 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Procurement Process Internal Procurement

22 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Material and FI Documents at GI for STO 23

Magal and Word | Integrated Business Processes with ERP Systems | 2011 Plant Stock Valuation at GI for STO 24 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Account Balances at GI for STO

25 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Material and FI Documents at GR for STO 26

Magal and Word | Integrated Business Processes with ERP Systems | 2011 Plant Stock Valuation at GR for STO 27 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Demo 9.4 Internal

Procurement for First PO Review internal procurement for first PO 28 Magal and Word | Integrated Business Processes with ERP Systems | 2011 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

29 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Procurement Process External Procurement 30

Magal and Word | Integrated Business Processes with ERP Systems | 2011 Material and FI Documents at GR for PO 31 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Plant Stock Valuation at GR

for PO 32 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Account Balances at GR for PO 33

Magal and Word | Integrated Business Processes with ERP Systems | 2011 Account Balances after Procurement 34 Magal and Word | Integrated Business Processes with ERP Systems | 2011

Demo 9.5 External Procurement for Second PO Review external procurement for second PO 35 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Warehouse Management Steps Related to Procurement

San Diego plant is WM enabled WM steps: TR/TO No material or FI documents 36 Magal and Word | Integrated Business Processes with ERP Systems | 2011 WM Steps Related to Procurement

37 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Demo 9.6 WM Steps for Goods Receipt for PO Review WM steps for goods receipt for PO 38

Magal and Word | Integrated Business Processes with ERP Systems | 2011 Fulfillment Process - Shipping Create delivery WM steps for picking Goods issue Invoice Payment 39

Magal and Word | Integrated Business Processes with ERP Systems | 2011 Fulfillment Process - Shipping 40 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Demo 9.7 Create Delivery for

PO Review create delivery for PO 41 Magal and Word | Integrated Business Processes with ERP Systems | 2011 WM Steps Related to Fulfillment

42 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Demo 9.8 WM Steps for Delivery Review WM steps for delivery 43

Magal and Word | Integrated Business Processes with ERP Systems | 2011 Fulfillment Process Concluding Steps 44 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Material and FI Documents for

Delivery 45 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Plant Stock Valuation at GI for Delivery 46

Magal and Word | Integrated Business Processes with ERP Systems | 2011 Account Balances after GI for Delivery 47 Magal and Word | Integrated Business Processes with ERP Systems | 2011

GL Account Balances after Customer Billing and Payment 48 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Demo 9.9 Complete Fulfillment Review complete fulfillment

49 Magal and Word | Integrated Business Processes with ERP Systems | 2011 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 50 assemblies that are needed to produce touring bikes. Magal and Word | Integrated Business Processes with ERP Systems | 2011 The standard price for these wheel assemblies is $110.

Procurement, Fulfillment, Production, and IWM Processes Assumptions (continued) GBIs 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 51 Magal and Word | Integrated Business Processes with ERP Systems | 2011 BOM for Touring Bikes

52 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Raw Material Cost per Bike 53 Magal and Word | Integrated Business Processes with ERP Systems | 2011

Plant Stock Valuation at Start of Process 54 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Account Balances Start of Process

55 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Procurement, Fulfillment, Production, and Warehouse Management Processes 56

Magal and Word | Integrated Business Processes with ERP Systems | 2011 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)

57 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Fulfillment Process Initial Steps This following scenario for the fulfillment process is very similar to the one that was previously discussed.

RMBs purchase order triggers the integrated process and prompts GBI to create a sales order. The ERP system performs an availability check. 58 Magal and Word | Integrated Business Processes with ERP Systems | 2011

Fulfillment Process Initial Steps 59 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Demo 9.11 Create a Sales Order Review create a sales order

60 Magal and Word | Integrated Business Processes with ERP Systems | 2011 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) 61 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Inventory Management Initial Step 62

Magal and Word | Integrated Business Processes with ERP Systems | 2011 Demo 9.12 Create an STO Review how to create an STO 63 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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

64 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Production Process Initial Steps 65 Magal and Word | Integrated Business Processes with ERP Systems | 2011

Demo 9.13 Create a Planned Order and a Production Order Review how to create a planned order and a production order 66 Magal and Word | Integrated Business Processes with ERP Systems | 2011

Procurement Process (External) The requirement for raw materials triggers the procurement process to acquire these materials. 67

Magal and Word | Integrated Business Processes with ERP Systems | 2011 Procurement Process (External) 68 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Plant Stock Valuation after

External Procurement 69 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Account Balances after External Procurement 70

Magal and Word | Integrated Business Processes with ERP Systems | 2011 Demo 9.14 Execute the Procurement Process Review how to execute the procurement process 71

Magal and Word | Integrated Business Processes with ERP Systems | 2011 Production Process Continued GBI has received the raw materials The production process continues 72 Magal and Word | Integrated Business Processes with ERP Systems | 2011

Production Process Continued 73 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Plant Stock Valuation after Production

74 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Account Balances after Production 75 Magal and Word | Integrated Business Processes with ERP Systems | 2011

Demo 9.15 Complete Production Review complete production 76 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Inventory Management Continued

Bikes are received into the Dallas plant inventory. GI for STO in Dallas GR for STO in San Diego 77 Magal and Word | Integrated Business Processes with ERP Systems | 2011

Inventory Management Continued 78 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Plant Stock Valuation at GI for STO 79

Magal and Word | Integrated Business Processes with ERP Systems | 2011 Account Balances after a Goods Issue against an STO 80 Magal and Word | Integrated Business Processes with ERP Systems | 2011

Plant Stock Valuation at GR for STO 81 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Demo 9.16 Complete the GI and GR for STO Review complete GI and GR for STO

82 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Warehouse Management Process Related to STO Bikes arrive in the San Diego plant, which is WM enabled

Complete WM steps related to GR 83 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Warehouse Management Steps 84

Magal and Word | Integrated Business Processes with ERP Systems | 2011 Demo 9.17 Complete WM Steps Related to STO Review complete WM steps related to STO 85 Magal and Word | Integrated Business Processes with ERP Systems | 2011

Fulfillment Process Continued The bikes are now in stock in the San Diego plant. The fulfillment process, which had been interrupted, can continue. 86 Magal and Word | Integrated Business Processes with ERP Systems | 2011

Fulfillment Process - Continued 87 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Demo 9.18 Create a Delivery for a Sales Order Review how to create a delivery for a sales

order 88 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Warehouse Management Process 89

Magal and Word | Integrated Business Processes with ERP Systems | 2011 Demo 9.19 Complete the WM Steps Related to the Sales Order Review how to complete the WM steps related to the sales order 90

Magal and Word | Integrated Business Processes with ERP Systems | 2011 Fulfillment Process Concluding Steps 91 Magal and Word | Integrated Business Processes with ERP Systems | 2011

Plant Stock Valuation at GI for SO 92 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Account Balances after Fulfillment

93 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Demo 9.20 Complete Fulfillment Steps Review how to complete the fulfillment steps

94 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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