chapter 9 process integration partial adoption from magal and word | integrated business processes...
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Chapter 9Process Integration
Partial adoption from Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Timothy L. Baker, CPA, CITP, CMA
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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.
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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
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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.
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Integrated Business Processes
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Background
• Production strategies– Make-to-stock– Make-to-order
• Procurement strategy– Procure-to-stock– Procure-to-order
• Fulfillment strategy– Sell-from-stock
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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.
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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
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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
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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
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Plant Stock Valuation – Start of the Process
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Account Balance - Start of the Process
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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)
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Demo 9.2 Create Two Customer Orders
• Review creation of two customer orders
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Procurement, Fulfillment, and Warehouse Management Processes
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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.
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Fulfillment Process – Initial Steps
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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
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Procurement Process – Initial Steps
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Demo 9.3 Create Two Requisitions and POs to Fill Customer Orders• Review the creation of two requisitions and
POs
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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
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Procurement Process – Internal Procurement
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Material and FI Documents at GI for STO
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Plant Stock Valuation at GI for STO
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Account Balances at GI for STO
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Material and FI Documents at GR for STO
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Plant Stock Valuation at GR for STO
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Demo 9.4 Internal Procurement for First PO
• Review internal procurement for first PO
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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
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Procurement Process – External Procurement
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Material and FI Documents at GR for PO
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Plant Stock Valuation at GR for PO
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Account Balances at GR for PO
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Account Balances after Procurement
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Demo 9.5 External Procurement for Second PO
• Review external procurement for second PO
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Warehouse Management Steps Related to Procurement
• San Diego plant is WM enabled• WM steps: TR/TO• No material or FI documents
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WM Steps Related to Procurement
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Demo 9.6 WM Steps for Goods Receipt for PO
• Review WM steps for goods receipt for PO
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Fulfillment Process - Shipping
• Create delivery• WM steps for picking• Goods issue• Invoice• Payment
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Fulfillment Process - Shipping
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Demo 9.7 Create Delivery for PO
• Review create delivery for PO
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WM Steps Related to Fulfillment
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Demo 9.8 WM Steps for Delivery
• Review WM steps for delivery
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Fulfillment Process – Concluding Steps
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Material and FI Documents for Delivery
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Plant Stock Valuation at GI for Delivery
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Account Balances after GI for Delivery
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GL Account Balances after Customer Billing and Payment
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Demo 9.9 Complete Fulfillment
• Review complete fulfillment
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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.
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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
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BOM for Touring Bikes
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Raw Material Cost per Bike
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Plant Stock Valuation at Start of Process
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Account Balances – Start of Process
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Procurement, Fulfillment, Production, and Warehouse Management
Processes
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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)
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Fulfillment Process – Initial Steps
• 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.
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Fulfillment Process – Initial Steps
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Demo 9.11 Create a Sales Order
• Review create a sales order
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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)
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Inventory Management – Initial Step
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Demo 9.12 Create an STO
• Review how to create an STO
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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
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Production Process – Initial Steps
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Demo 9.13 Create a Planned Order and a Production Order
• Review how to create a planned order and a production order
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Procurement Process (External)
• The requirement for raw materials triggers the procurement process to acquire these materials.
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Procurement Process (External)
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Plant Stock Valuation after External Procurement
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Account Balances after External Procurement
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Demo 9.14 Execute the Procurement Process
• Review how to execute the procurement process
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Production Process - Continued
• GBI has received the raw materials• The production process continues
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Production Process - Continued
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Plant Stock Valuation after Production
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Account Balances after Production
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Demo 9.15 Complete Production
• Review complete production
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Inventory Management - Continued
• Bikes are received into the Dallas plant inventory.
• GI for STO in Dallas• GR for STO in San Diego
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Inventory Management - Continued
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Plant Stock Valuation at GI for STO
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Account Balances after a Goods Issue against an STO
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Plant Stock Valuation at GR for STO
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Demo 9.16 Complete the GI and GR for STO
• Review complete GI and GR for STO
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Warehouse Management Process Related to STO
• Bikes arrive in the San Diego plant, which is WM enabled
• Complete WM steps related to GR
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Warehouse Management Steps
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Demo 9.17 Complete WM Steps Related to STO
• Review complete WM steps related to STO
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Fulfillment Process - Continued
• The bikes are now in stock in the San Diego plant.
• The fulfillment process, which had been interrupted, can continue.
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Fulfillment Process - Continued
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Demo 9.18 Create a Delivery for a Sales Order
• Review how to create a delivery for a sales order
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Warehouse Management Process
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Demo 9.19 Complete the WM Steps Related to the Sales Order
• Review how to complete the WM steps related to the sales order
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Fulfillment Process – Concluding Steps
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Plant Stock Valuation at GI for SO
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Account Balances after Fulfillment
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Demo 9.20 Complete Fulfillment Steps
• Review how to complete the fulfillment steps