chapter 15-1 prepared by coby harmon university of california, santa barbara westmont college...

Chapter 15-1

Prepared by Coby Harmon University of California, Santa BarbaraWestmont College

Prepared by Coby Harmon University of California, Santa Barbara

Westmont College

SECOND EDITION

Chapter 15-2

IT Infrastructure for E-Business

Chapter 15-3

1. The overview of an ERP system

2. The history of ERP systems

3. Current ERP system characteristics

4. The modules of an ERP system

5. The market segments of ERP software systems

6. Implementation issues of ERP systems

7. The benefits and risks of ERP systems

8. ERP systems and the Sarbanes–Oxley Act

Study ObjectivesStudy ObjectivesStudy ObjectivesStudy Objectives

Chapter 15-4

Real WorldReal WorldReal WorldReal World Agri-Beef Co. is a privately held, Idaho firm with

annual sales in excess of $500 million. Believing

that its old accounting systems were antiquated, the management at

Agri-Beef recently switched to an ERP system. They experienced a very

successful implementation that took only six weeks and they began

experiencing benefits immediately. The treasurer of the company, while

describing the benefits with regard to the preparation and handling of

intracompany transactions, said the following:

“With the old method, we had to walk each transaction through. Now we

can post transactions straight through to another division’s general

ledger account.”

The improved efficiency resulted in two check runs instead of 22 runs,

and a 200 man hour savings per month.

Chapter 15-5 SO 1 The overview of an ERP system

Overview of ERP SystemsOverview of ERP SystemsOverview of ERP SystemsOverview of ERP Systems

Enterprise Resource Planning (ERP) system integrates all

business processes and functions into a single software

system, using a single database.

ERP system components:

1. Financials

2. Human resources

3. Procurement and logistics

4. Product development and manufacturing

5. Sales and services

6. Analytics

Data in a(n)

1. Operational database

2. Data warehouse

Chapter 15-6 SO 1 The overview of an ERP system


Exhibit 15-1 An ERP System

Chapter 15-7

Manufacturing companies implement ERP systems for the

primary purpose of

a. increasing productivity.

b. reducing inventory quantities.

c. sharing information.

d. reducing investments.

SO 1 The overview of an ERP system


Concept Check

Chapter 15-8 SO 2 The history of ERP systems

History of ERP SystemsHistory of ERP SystemsHistory of ERP SystemsHistory of ERP Systems

ERP systems:

► Developed during the 1960s and 1970s.

► First generation was materials requirements planning

(MRP) software.

► MRP evolved into manufacturing resource planning

(MRP II).

► ERP software did not become popular with large

corporations until the 1990s.

Chapter 15-9 SO 2 The history of ERP systems

History of ERP SystemsHistory of ERP SystemsHistory of ERP SystemsHistory of ERP Systems

Concept Check

In the late 1990s, the Y2K compatability issue was concerned

primarily with computer systems’

a. file retrieval capability.

b. data storage.

c. human resource comparisons.

d. capital budgeting.

Chapter 15-10 SO 3 Current ERP system characteristics

Current ERP System CharacteristicsCurrent ERP System CharacteristicsCurrent ERP System CharacteristicsCurrent ERP System Characteristics

EDI, Internet EDI, or extranets are used to connect a company’s ERP system to the IT systems of its suppliers and customers.

Exhibit 15-2 An ERP II System



In the years since 2004, spending on ERP systems increased or decreased based on several factors.

1.Companies cannot allow their ERP systems to become outdated.

2.Need to improve customer service through standardizing and combining business processes.

3.Global companies may have separate ERP systems in different countries.

4.Aging ERP systems need replacement.

5.Bigger IT budgets as economic conditions improve.

6.Many companies needed upgraded systems to comply with Sarbanes–Oxley Act.

7.Many companies wanted to take advantage of new technologies such as cloud-based ERP systems.

Chapter 15-12

Real WorldReal WorldReal WorldReal World Viper Motorcycle Company, a

Minneapolis-based manufacturer and seller of luxury motorcycles,

began business in 2002. Within one year, Viper was looking for an

accounting software system that would tie together the company’s

accounting with manufacturing, order processing, and other

business functions, while complying with Sarbanes–Oxley. Viper

first selected SAP Business One® as its ERP software system,

and later adopted SAP Business By-Design.® These IT Solutions

have helped Viper realize benefits in terms of operating

efficiencies, financial transparency, and setting internal controls.

Chapter 15-13


SO 3 Current ERP system characteristics

Concept Check

Which of the following is not one of the reasons for increased

spending on ERP systems in recent years?

a. The need for Sarbanes-Oxley compliance

b. Globalization and increased competitive pressures

c. The need for earnings management

d. The need for customer service enhancements


ERP ModulesERP ModulesERP ModulesERP Modules

The top-selling ERP system for large corporations and organizations is SAP.

Exhibit 15-4SAP® View of ERP Modules

Chapter 15-15


Illustration: Match the ERP modules

with their purpose of the related

processes.

a. Taking customer orders and

preparing for the impending

revenue and cash collection.


Chapter 15-16


b. Maintenance of the general

ledger and supporting journals

and subledgers.




processes.

Chapter 15-17


c. Keeping track of purchasing and

movement of goods and

materials.




processes.

Chapter 15-18


d. Accounting for personnel and

payroll activities.




processes.

Chapter 15-19


e. Data mining and other

processes for obtaining

feedback and supporting

managerial decision making.




processes.

Chapter 15-20


f. Planning and scheduling of

conversion activities.




processes.

Chapter 15-21 SO 5 The market segments of ERP software systems

Market Segments of ERP SystemsMarket Segments of ERP SystemsMarket Segments of ERP SystemsMarket Segments of ERP Systems

Tier One Software

► Usually implemented in very large organizations.

► Minimum cost to purchase is approximately $350,000. Often, the cost exceeds $1 million.

► Three most popular ERP systems in tier one are SAP, Oracle, and Peoplesoft.



Cloud Based ERP

All ERP vendors have developed ERP products for cloud computing. For example,

►SAP offers a cloud-based ERP system for small to medium-sized entities (SMEs) called SAP Business ByDesign.

►Customers who use cloud-based software need only a small IT system.

►ERP system can be used through a computer with Internet access and a Web browser.

Chapter 15-23

Real WorldReal WorldReal WorldReal World SkullCandy, founded in 2003, is a

manufacturer and seller of headphones exclusively tailored for

snowboarders, skateboarders, and other action-sports

enthusiasts. It has experienced tremendous growth over the past

decade. During one period, it grew 300 percent over four years.

The growth became explosive when its products were accepted

by Best Buy, Circuit City, and Target. In response to this growth,

SkullCandy sought a business software system that would meet

its accounting and reporting needs but could also easily scale to

match the company’s growth. The company chose SAP Business

ByDesign, a cloud-based system, as its ERP system.

Chapter 15-24

Real WorldReal WorldReal WorldReal World On leap day, February 29, 2012,

Microsoft’s Azure cloud experienced outages that, in

some cases, lasted up to 16 hours. The outages occurred in cloud

data centers in Chicago, San Antonio, and Dublin, Ireland. After

investigation, Microsoft determined the outage was triggered by a

security system bug related to leap day itself. The system sets

expiration dates for security certificates in the virtual machines

that run software for customers. Those security certificates, by

default, expire one year later. The system tried to set the security

date to February 29, 2013, a nonexistent date (since 2013 is not a

leap year). This was the initial cause of the crash that Microsoft

had to quickly fix.



Concept Check

The type of ERP system used by large, multinational

corporations is known as

a. big bang implementation.

b. modular implementation.

c. Tier one software.

d. Tier two software.

Chapter 15-26 SO 6 Implementation issues of ERP systems

Implementation of ERP SystemsImplementation of ERP SystemsImplementation of ERP SystemsImplementation of ERP Systems

Important factors and issues to considers when implementing

an ERP system.

1. Hiring a consulting firm

2. The best fit ERP system

3. Which modules to implement

4. Best of breed, verses ERP

modules

5. Business process

reengineering

6. Customization of ERP system

7. Costs of hardware and software

8. Testing the ERP system

9. Data conversion

10. Training of employees

11. Method of conversion, or “go

live” Big Bang Location-Wise Modular

Chapter 15-27 SO 6 Implementation issues of ERP systems

Implementation of ERP SystemsImplementation of ERP SystemsImplementation of ERP SystemsImplementation of ERP Systems

Concept Check

Which of the following ERP approaches accomplishes the ERP

implementation beginning with one department?

a. the pilot method

b. the modular implementation approach

c. the big bang approach

d. the location-wise implementation method

Chapter 15-28

Benefits and Risks of ERP SystemsBenefits and Risks of ERP SystemsBenefits and Risks of ERP SystemsBenefits and Risks of ERP Systems

Benefits of ERP Systems

1.Interactive nature of the modules.

2.Real-time nature of processing.

3.“Best Practices” nature of the processes.

4.Single database enhances sharing of information.

5.Capability to analyze large amounts of data.

6.Capability to enhance e-commerce and e-business

7.Capability to interact in real-time.

8.ERP systems are scalable.

SO 7 The benefits and risks of ERP systems

Chapter 15-29

Benefits and Risks of ERP SystemsBenefits and Risks of ERP SystemsBenefits and Risks of ERP SystemsBenefits and Risks of ERP Systems

Risks of ERP Systems

1.Implementation Risks

2.Operation Risks

a. Security

b. Availability

c. Processing integrity

d. Online privacy

e. Confidentiality

SO 7 The benefits and risks of ERP systems

Chapter 15-30

ERP Systems and the Sarbanes-Oxley ActERP Systems and the Sarbanes-Oxley ActERP Systems and the Sarbanes-Oxley ActERP Systems and the Sarbanes-Oxley Act

SO 8 ERP systems and the Sarbanes–Oxley Act

ERP systems

Provide feedback information to management regarding internal control. Steps the company must accomplish:

►Establish and maintain a list of incompatible duties.

►Tracking each employee’s ID and password.

►Used to properly segregate duties.

►Can incorporate a matrix of tasks that are incompatible.

►Allows real-time monitoring and reporting of exceptions.

Chapter 15-31

ERP Systems and the Sarbanes-Oxley ActERP Systems and the Sarbanes-Oxley ActERP Systems and the Sarbanes-Oxley ActERP Systems and the Sarbanes-Oxley Act

SO 8 ERP systems and the Sarbanes–Oxley Act

Exhibit 15-5Examples of Accounts Payable Internal Control Reports

Chapter 15-32

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chapter 15-1 prepared by coby harmon university of california, santa barbara westmont college...

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