609 Assignment 3 & Discussion 3

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Concepts in Enterprise Resource Planning
Fourth Edition

Chapter Three

Marketing Information Systems and the Sales Order Process

Concepts in Enterprise Resource Planning, Fourth Edition

Objectives

After completing this chapter, you will be able to:

Describe the unintegrated sales processes of the fictitious Fitter Snacker company
Explain why unintegrated Marketing and Sales information systems lead to company-wide inefficiency, higher costs, lost profits, and customer dissatisfaction
Discuss sales and distribution in the SAP ERP system, and explain how integrated data sharing increases company-wide efficiency

Concepts in Enterprise Resource Planning, Fourth Edition

Objectives (cont’d.)

Describe how SAP ERP processes a standard sales order
Describe the benefits of customer relationship management (CRM) software

Concepts in Enterprise Resource Planning, Fourth Edition

Introduction

Fitter Snacker (FS)
Fictitious company that makes healthy snack bars
Does not have an integrated information system
Marketing and Sales (M/S) is the focal point of many of FS’s activities
FS’s M/S information systems are not well integrated with company’s other information systems
Company-wide use of transaction data is inefficient

Concepts in Enterprise Resource Planning, Fourth Edition

Overview of Fitter Snacker

Manufactures and sells two types of nutritious snack bars:
NRG-A: “advanced energy”
NRG-B: “body building proteins”
Has organized its sales force into two groups, known as divisions:
Wholesale Division
Direct Sales Division

Concepts in Enterprise Resource Planning, Fourth Edition

Overview of Fitter Snacker (cont’d.)

The two sales divisions differ in terms of quantities of orders and pricing terms
Sells snack bars under the Fitter Snacker brand name
Packages the bars in store-brand wrappers for some chain stores

Concepts in Enterprise Resource Planning, Fourth Edition

Problems with Fitter Snacker’s Sales Process

Many of Fitter Snacker’s sales orders have problems, such as:
Incorrect pricing
Excessive calls to the customer for information
Delays in processing orders
Missed delivery dates

Concepts in Enterprise Resource Planning, Fourth Edition

Problems with Fitter Snacker’s Sales Process (cont’d.)

Reasons for problems:
FS has separate information systems throughout the company for three functional areas:
Sales order system
Warehouse system
Accounting system
High number of transactions that are handled manually
Information stored in the three systems is not available in real time

Concepts in Enterprise Resource Planning, Fourth Edition

Figure 3-1 The sales process

Problems with Fitter Snacker’s Sales Process (cont’d.)

Concepts in Enterprise Resource Planning, Fourth Edition

Sales Quotations and Orders

Giving a customer a price quotation and then taking the customer’s order at FS
Sales call: salesperson either telephones the customer or visits in person
At the end of sales call, salesperson prepares a handwritten quotation on a form that generates two copies
Original sheet goes to the customer
Middle copy is first faxed and then mailed to the sales office
Salesperson keeps the bottom copy for his or her records

Concepts in Enterprise Resource Planning, Fourth Edition

Sales Quotations and Orders (cont’d.)

Giving a customer a price quotation and then taking the customer’s order at FS (cont’d.)
Quotation form has an 800 number that the customer can call to place an order
Problems can occur with this process
Inefficiencies in the rest of the ordering process
Determining the delivery date
Checking customer’s credit status
Entering customer’s order into the current order entry system

Concepts in Enterprise Resource Planning, Fourth Edition

Order Filling

Packing lists and shipping labels
Printed twice a day
Hand-carried to the warehouse
At warehouse, hand-sorted into small orders and large orders
Warehouse
Small-order packing area
Large-order packing area
FS uses a PC database program to manage inventory levels in the warehouse

Concepts in Enterprise Resource Planning, Fourth Edition

Order Filling (cont’d.)

FS keeps inventory levels fairly low, and inventory levels change rapidly during the day
Picker might go to the shelves to pick an order and discover that there are not enough of the desired type of snack bars to fill the order
To determine what to do in this situation, order picker might have conversations with warehouse supervisor, production supervisor, and sales clerks

Concepts in Enterprise Resource Planning, Fourth Edition

Accounting and Invoicing

Invoicing the customer is problematic
Sales clerks send the Accounting department the sales order data for customer invoices
Accounting department loads the data into PC-based accounting program
Clerks manually make adjustments for partial shipments and any other changes
Sometimes, order corrections are delayed and don’t catch up to the invoicing process
Results in late or inaccurate invoices

Concepts in Enterprise Resource Planning, Fourth Edition

Payment and Returns

Problems with procedure for processing payments
If any errors have occurred in the sales process, customer will receive an incorrect invoice
Many customers don’t return a copy of the invoice with their payment; errors can result

Concepts in Enterprise Resource Planning, Fourth Edition

Payment and Returns (cont’d.)

FS’s returns processing is flawed
Many customers do not call for the RMA number, or fail to include it with their returned material
Makes it more difficult for Accounting department to credit the appropriate account
Poor penmanship on the returned material sheet can create problems for Accounting
If a customer’s account has not been properly credited, customer may receive a dunning letter in error

Concepts in Enterprise Resource Planning, Fourth Edition

Sales and Distribution in ERP

ERP systems can minimize data entry errors and provide accurate information in real time to all users
ERP systems can track all transactions (such as invoices, packing lists, RMA numbers, and payments) involved in the sales order

Concepts in Enterprise Resource Planning, Fourth Edition

Sales and Distribution in ERP (cont’d.)

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

Concepts in Enterprise Resource Planning, Fourth Edition

Pre-Sales Activities

Customers can get pricing information about the company’s products:
Through an inquiry or a price quotation
Marketing activities such as tracking customer contacts, including sales calls, visits, and mailings
Company can maintain data about customers and generate mailing lists based on specific customer characteristics

Concepts in Enterprise Resource Planning, Fourth Edition

Sales Order Processing

Sales order processing: series of activities that must take place to record a sales order
Sales order can start from a quotation or inquiry generated in the pre-sales step
Information collected from the customer to support the quotation is immediately included in sales order
Critical steps in sales order processing:
Recording the items to be purchased
Determining the selling price
Recording the order quantities

Concepts in Enterprise Resource Planning, Fourth Edition

Sales Order Processing (cont’d.)

Users can define various pricing alternatives in the SAP ERP system
SAP ERP system checks the Accounts Receivable tables in the SAP ERP database to confirm the customer’s available credit
If customer has sufficient credit available
Order is completed
If customer does not have sufficient credit available
SAP ERP system prompts sales personnel to take one of the possible appropriate actions

Concepts in Enterprise Resource Planning, Fourth Edition

Inventory Sourcing

Available-to-Promise (ATP) check
SAP ERP system checks company’s inventory records and production planning records to see whether:
Requested material is available
Requested material can be delivered on the date the customer desires
Includes expected shipping time
System can recommend an increase in planned production if a shortfall is expected

Concepts in Enterprise Resource Planning, Fourth Edition

Delivery

Delivery in SAP ERP system
Releasing the documents that the warehouse uses to pick, pack, and ship orders
Delivery process allows deliveries to be created so that the warehouse and shipping activities are carried out efficiently
Once the system has created documents for picking, packing, and shipping, documents are transferred to Materials Management module

Concepts in Enterprise Resource Planning, Fourth Edition

Billing

SAP ERP system creates an invoice by copying sales order data into the invoice document
Accounting can print this document and mail it, fax it, or transmit it electronically to the customer
Accounting records are updated at this point

Concepts in Enterprise Resource Planning, Fourth Edition

Payment

When the customer sends in a payment, it is automatically processed by the SAP ERP system
Debits cash and credits (reduces) customer’s account
Timely recording of this transaction has an effect on the timeliness and accuracy of any subsequent credit checks for the customer

Concepts in Enterprise Resource Planning, Fourth Edition

A Standard Order in SAP ERP

How Fitter Snacker’s sales order process would work with an SAP ERP system in place
How the ERP system would make FS’s sales order process more accurate and efficient
ERP allows business processes to cut across functional area lines

Concepts in Enterprise Resource Planning, Fourth Edition

Taking an Order in SAP ERP

Order entry screen in SAP ERP’s 4.7 Enterprise system
A unique number is assigned by the company to each customer in the database
For most data entry fields, SAP ERP system determines whether an entry is valid
Search screen for customers

Concepts in Enterprise Resource Planning, Fourth Edition

Taking an Order in SAP ERP (cont’d.)

Figure 3-2 SAP ERP order entry screen

Concepts in Enterprise Resource Planning, Fourth Edition

Taking an Order in SAP ERP (cont’d.)

Figure 3-3 Data entry fields in the order entry screen

Concepts in Enterprise Resource Planning, Fourth Edition

Taking an Order in SAP ERP (cont’d.)

Concepts in Enterprise Resource Planning, Fourth Edition

Figure 3-4 Some of the sales order document types predefined in SAP ERP

Concepts in Enterprise Resource Planning, Fourth Edition

Taking an Order in SAP ERP (cont’d.)

Figure 3-5 Search screen for customers

Concepts in Enterprise Resource Planning, Fourth Edition

Taking an Order in SAP ERP (cont’d.)

Concepts in Enterprise Resource Planning, Fourth Edition

Figure 3-6 Result of customer search

Concepts in Enterprise Resource Planning, Fourth Edition

Taking an Order in SAP ERP (cont’d.)

Concepts in Enterprise Resource Planning, Fourth Edition

Figure 3-7 Order screen with complete date

Concepts in Enterprise Resource Planning, Fourth Edition

Taking an Order in SAP ERP (cont’d.)

Concepts in Enterprise Resource Planning, Fourth Edition

Figure 3-8 Order proposals

Concepts in Enterprise Resource Planning, Fourth Edition

Taking an Order in SAP ERP (cont’d.)

Customer master data
Master data: data that remain fairly stable
Maintained in the central database and available to all SAP ERP modules
Material master data
Organizational structures
SAP ERP system allows the user to define various ways to group customers and salespeople
Distribution Channel

Concepts in Enterprise Resource Planning, Fourth Edition

Taking an Order in SAP ERP (cont’d.)

When a sales order is saved, SAP ERP system assigns a document number to the sales order transaction
SAP ERP system keeps track of the document numbers for the sales order
Employees can track status of an order while it is in process or research it after shipping
Document flow in SAP ERP: linked set of document numbers related to an order

Concepts in Enterprise Resource Planning, Fourth Edition

Taking an Order in SAP ERP (cont’d.)

Figure 3-9 The Document Flow tool, which links sales order documents

Concepts in Enterprise Resource Planning, Fourth Edition

Discount Pricing in SAP ERP

When a company installs an ERP system, it can configure it for a number of pricing strategies
Various kinds of discounts can be allowed
As a safeguard, system can enforce limits on the size of discounts
Condition technique
Control mechanism developed by SAP to accommodate various ways that companies offer price discounts

Concepts in Enterprise Resource Planning, Fourth Edition

Discount Pricing in SAP ERP (cont’d.)

Figure 3-10 Pricing conditions for sales order

Concepts in Enterprise Resource Planning, Fourth Edition

Integration of Sales and Accounting (cont’d.)

Figure 3-11 West Hills Athletic Club price Discount

Concepts in Enterprise Resource Planning, Fourth Edition

Integration of Sales and Accounting

ERP systems integrate Accounting with all business processes
When a sales order is recorded, related accounting data are updated automatically

Concepts in Enterprise Resource Planning, Fourth Edition

Integration of Sales and Accounting (cont’d.)

Figure 3-12 Accounting detail for the West Hills sales order

Concepts in Enterprise Resource Planning, Fourth Edition

Customer Relationship Management

Companies without a good connection between their workers and their customers run the risk of losing business
Customer relationship management (CRM) software can help companies streamline their interactions with customers
On-demand CRM: software and computer equipment reside with CRM provider

Concepts in Enterprise Resource Planning, Fourth Edition

Core CRM Activities

One-to-one marketing
Sales force automation (SFA)
Sales campaign management
Marketing encyclopedias
Call center automation

Concepts in Enterprise Resource Planning, Fourth Edition

SAP’s CRM Software

Examples of tools that provide CRM functionality within the SAP ERP system
Contact management tool
To make sure that information about sales contacts is available throughout the organization
Sales activity manager
Supports a strategic and organized approach to sales activity planning and can help make sure that follow-up activities are accomplished
Employing a separate CRM system that communicates with the ERP system

Concepts in Enterprise Resource Planning, Fourth Edition

SAP’s CRM Software

Concepts in Enterprise Resource Planning, Fourth Edition

Figure 3-13 SAP ERP contact manager

Concepts in Enterprise Resource Planning, Fourth Edition

SAP’s CRM Software

Concepts in Enterprise Resource Planning, Fourth Edition

Figure 3-14 SAP ERP sales activity manager

Concepts in Enterprise Resource Planning, Fourth Edition

SAP’s CRM Software (cont’d.)

SAP ERP system processes business transactions and provides much of the raw data for CRM
SAP’s Business Warehouse: system for reporting and analysis of transactional data
Advanced Planner and Optimizer (APO): system that supports efficient planning of the supply chain
SAP’s view of CRM is to provide a set of tools to manage the three basic task areas, or jobs:
Marketing, sales, and service

Concepts in Enterprise Resource Planning, Fourth Edition

Figure 3-15 SAP CRM system landscape

SAP’s CRM Software (cont’d.)

Concepts in Enterprise Resource Planning, Fourth Edition

SAP’s CRM Software (cont’d.)

Four phases of the cultivation of customer relationship:
Prospecting
Acquiring
Servicing
Retaining
Contact Channels
Marketing and Campaign Management
Campaign Execution Activity Management
Campaign Analysis tool

Concepts in Enterprise Resource Planning, Fourth Edition

SAP’s CRM Software (cont’d.)

Figure 3-16 Marketing and campaign planning

Concepts in Enterprise Resource Planning, Fourth Edition

The Benefits of CRM

Lower costs
Higher revenue
Improved strategy and performance measurement

Concepts in Enterprise Resource Planning, Fourth Edition

Summary

Fitter Snacker’s unintegrated information systems are at the root of an inefficient and costly sales order process
An ERP system such as SAP ERP treats a sale as a sequence of related functions
Including: taking orders, setting prices, checking product availability, checking the customer’s credit line, arranging for delivery, billing the customer, and collecting payment
In SAP ERP, all these transactions, or documents, are electronically linked

Concepts in Enterprise Resource Planning, Fourth Edition

Summary (cont’d.)

Installing an ERP system means making various configuration decisions
Configuration decisions reflect management’s view of how transactions should be recorded and later used for decision making
ERP system’s central database contains:
Tables of master data: relatively permanent data about customers, suppliers, material, and inventory
Transaction data tables: store relatively temporary data such as sales orders and invoices

Concepts in Enterprise Resource Planning, Fourth Edition

Summary (cont’d.)

Customer relationship management (CRM) systems
Build on the organizational value that ERP provides
Specifically increase the flexibility of the company’s common database regarding customer service
Various kinds of CRM software are available
Can be installed in-house or on-demand

Concepts in Enterprise Resource Planning, Fourth Edition