concepts in enterprise resource planning 2 nd edition chapter 3 marketing information systems and...

Concepts in Enterprise ResourcePlanning2nd Edition

Chapter 3Marketing Information Systems and the Sales Order Process

Fitter Snacker’s• Fictitious case study• Easy to play Monday morning quarterback but many,

many, many companies have had similar experiences• Many, many companies have made similar transitions

after enough pain, suffering, and costs• Many, many companies need to make this type of

transition – Opportunity!• Keep in mind the scale of this company – 2 products• More products=more complexity, it only gets worse!

Chapter Objectives• Describe the chaos associated with an un-integrated sales process

• Could this keep a small company from becoming a mid-sized company?

• Could this keep a mid-sized company from becoming a large company?

• Could this make the difference between making money and losing money?

• Discuss how integrated data sharing increases company-wide efficiency

• Describe the benefits of CRM, a useful extension of ERP

Transactional Data• What is “transactional data”? Examples?

• Is integration of transactional data across functional areas important?

Overview of Fitter Snacker• What does Fitter Snacker make?

• What are the names of the products?

• How many sales divisions does Fitter Snacker have?

• What are these sales divisions and who do they each sell to?

Overview of Fitter Snacker• Both divisions offer terms of 2-10, net 30. What does

this term mean?

• Fitter Snacker also sells bars in store-brand wrappers for some chains. What kind of challenges does this present?

Problems with Fitter Snacker’s Sales Process

• How many different information systems does Fitter Snacker operate and what do they each do?

• What information flows do we need between these systems to conduct business?

Problems with Fitter Snacker’s Sales Process

• How does accounting get information regarding sales transactions?

• How does sales get information from accounting regarding credit?

• What happens with manual transactions and this type of information flows?

Sales Process

Quotations

• What kind of problems does Fitter Snacker have with their quotation process?

Sales Order• Customers want delivery information when placing an

order. How do they estimate delivery time?

• How do sales clerks get information regarding credit?

• Does this information reflect recent purchases, payments, or returns?

• How do integrated information systems solve this problem?

Sales - Order Entry

• Stores customer order data for sales analysis

• Prints out packing labels for warehouse (twice a

day!)

• Produces the data to create invoices

• Provides data file for accounting department for

financial, tax and managerial accounting purposes

Order Filling

Whoops! Out of Stock• What can they do when they accept an order and find out

that they are out of stock for part of the order?

• How difficult is it to decide on the best option?

• How many people needed to make the decision?


Important Customers• Custom wrappers, custom display boxes

• What if I have enough product but it is not in the right wrappers or not in the right display boxes?


Invoicing

Invoicing• How often does Accounting prepare invoices?• What information do they need to do this?• Does the customer receive the invoice with the

shipment?


Payment• What kinds of problems occur when processing

payments?


Receiving Process

Returns• What kind of challenges does Fitter Snacker have to

deal with when products are returned?

• What happens when the customer forgets to include the RMA number?


Payment and Returns• What kind of problems are encountered if return credits

are not properly credited in a timely basis?

The Integrated Sales Process

Sales and Distribution in ERP• There may be up to six events for a sales order

• Pre-sales activity• Sales order processing• Inventory Sourcing• Delivery• Billing• Payment

OneIntegratedDatabase

R/3Client / Server

CO

AM

PS

WF

ISHR

SD

PP

QM

FI

PM

MM

Pre-Sales Activity• What kind of pricing information is provided to customers?

• What checks the validity of discounts?

• How do the order entry clerks know the terms and conditions of a particular quote?

Sales Order Processing• With an integrated system, where does the data come

from when creating an order?

• What steps make up this process?

Inventory Sourcing• With an integrated system, how do we know if we have

what we need to fill the order?

• In addition to what we have in stock today, what else do we know with an integrated system?

• If a big order comes in, what can we trigger with an integrated system?

Delivery• What does “Delivery” mean in an SAP system?

Billing• With an integrated system, where does the information

for the invoice come from?

• With an integrated system, what happens automatically in accounts receivable?

Payment• When a payment is received, how quickly is this

reflected in the customer’s credit for order entry?

Taking an order in SAP’s R/3• To enter a sales order in SAP’s R/3, the sales order clerk

must identify the customer and material ordered to the system• SAP identifies customers and materials via a unique

number• Search functions allow the sales order clerk to find a

customer or material number easily

Taking an order in SAP’s R/3

Sold-to party: Where the customer’s identification number is entered

P.O. Number: The number assigned by the customer to this sales orderReq. deliv. date: The date when the customer would like to receive the order

Material and Order quantity: What thecustomer is ordering

Figure 3-2 SAP R/3 order entry screen

Customer SearchClicking on Sold-to party field produces a search icon. Clicking on the search icon calls up a search window with numerous search options

Figure 3-5 Search screen for customers

Customer Search Results

Figure 3-6 Results of customer search

Sales Order Data• What is “Master Data” and what parts of the order are

comprised of “Master Data”?

• What does the “Organizational Structure” allow us to do?

• What are our “Distribution Channels”?

• Does pricing vary based on any of this?

Complete Order Screen

Figure 3-7 Order screen with complete data

Inventory Sourcing• What is “Inventory Sourcing”?

• Do I really care what is in the warehouse now or do I need to know what will be in the warehouse on the shipping date?

• What will make inventory go up or down between now and then?

• What does ATP let me do?

Order Proposals

Three options proposed by SAP R/3

Figure 3-8 Order proposals

Document Numbers• Assume each of your orders is assigned a unique order number

• What is a customer’s “Purchase Order Number” and why do I care to keep track of this?

Audit Trail &Document Numbers• From the initial price quote to the processing of the check by accounts

receivable, how do we keep track of who has done what in each step of the process?

• What are “documents”?

• What is “document flow”?

Document Flow

Accounting Document 90000002 is linked to sales order 5

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

Pricing• Do I offer identical pricing regardless of items ordered,

size of order, or customer placing the order?

• What is “condition technique”?

Pricing

Net price for order, including discounts

Base price is $240/case

Discount is 10 percent

The production cost of the 10 cases is $1,992

Figure 3-10 Pricing conditions for sales order

Price Discounts

If a line in the order is over $1000, the discount is 5 percent

If a line in the order is over $1500, the discount is 10 percent

Figure 3-11 West Hills Athletic Club price discount

Integration of Sales and Accounting• With an integrated system, do we need to:

• Notify accounting of sales via FTP?• Notify the warehouse of sales via printed shipping

documents?• Let accounting know about partial shipments before

they create invoices?• Worry about sales over extending credit or not

accepting a sale due to old credit information?

Accounting Detail

Accounting document 90000002, accessible from the document flow screen

Accounts affected by the sales order

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

Customer Relationship Management• CRM helps a company streamline interactions with customers

and make them consistent

• Goal is to provide a “single face to the customer”• Any employee in contact with a customer should have access to

all information on past interactions• Information about a customer should reside in the CRM system,

not with the employee

• CRM also provides a company with tools to analyze the vast quantities of sales data available from the ERP system

Core CRM Activities• What is “One-to-One Marketing”?

• What is “Sales Force Automation (SFA)”?

• What is “Sales Campaign Management”?

Core CRM Activities• What are “Marketing Encyclopedias”?

• What is “Call Center Automation”?

SAP’s CRM Software• SAP R/3 contains some primative CRM functionality:

• Contact management tool: • Database of customer contact information

• Sales activity manager: • Supports a strategic and organized approach to

sales activity planning• Helps ensure follow-up activities are accomplished

Contact Manager

Figure 3-13 SAP R/3 contact manager

Sales Activity Manager

Figure 3-14 SAP R/3 sales activity manager

mySAP CRM• A separate CRM system has the advantage of not interfering with the

performance of the ERP system

• The SAP R/3 system provides the raw data for CRM

• R/3 and CRM can also interact with:• Business Warehouse (BW):

• Flexible system for reporting and analysis of data• Advanced Planner and Optimizer (APO):

• System to support flexible planning of the supply chain• Provides improved customer service with Global ATP

SAP R/3 ERP

System

BWBusiness

Warehousemodule

APOAdvancedPlanner & Optimizermodule

mySAPCRM

System

Figure 3-15 SAP CRM system landscape

mySAP CRM• SAP’s CRM manages three basic task areas:

• Marketing• Sales• Service

Cultivating a Customer Relationship

• Prospecting

• Acquiring

• Servicing

• Retention

Marketing and Campaign Planning• Companies spend significant sums on marketing campaigns

• Successful planning, execution and evaluation are necessary to achieve the maximum benefit

• mySAP CRM supports:• Marketing and Campaign Planning• Target Group Selection• Campaign Execution Activity Management• Campaign Analysis

Marketing and Campaign PlanningTarget Group Selection

•Modeling•Segment creation•Selection

BW

Campaign Analysis

• Success Measurement

• 3rd Party Data• Profiles

Phone Web Mobile e-mail

Campaign ExecutionActivity Management

Marketing and CampaignPlanning

•Planning•Budgeting•Monitoring

Target Group Selection

•Modeling•Segment creation•Selection

BW

Campaign Analysis

• Success Measurement

• 3rd Party Data• Profiles

Phone Web Mobile e-mail

Campaign ExecutionActivity Management

Marketing and CampaignPlanning

•Planning•Budgeting•Monitoring

Figure 3-15 Marketing and campaign planning

Planning Execution

Benefits of CRM• Lower costs:

• Higher revenue:

• Improved strategy and performance measurement:

Top Line Versus Bottom Line

Where do CRM Systems add value?

Another Look: CRM Success and Failure

• CRM is often incorrectly viewed as a technology implementation driven by the IT department

• CRM should be viewed as a business strategy

• CRM tools can help identify the most profitable customers

Give Me 3 Examples• Fitter Snacker’s un-integrated information systems are

at the root of an inefficient and costly sales order process. Because information is not shared in real-time, customers are asked to repeat initial sales order information. As an order is processed, errors in pricing, credit checks, and invoicing also occur, presenting a poor company image to customers. Integrated ERP software would let FS avoid errors because all customer data are stored in a central database that is shared in real-time by all company employees.

Give Me 3 Examples• An ERP system such as SAP’s R/3 sees a sale as a

cycle 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 R/3 all these transactions, or documents, are electronically linked, so tracking an order’s status (partial shipments, returns, partial payments, and so forth) is easily accomplished.

Give Me 3 Examples• When an ERP system is installed, various configuration

decisions are made. These decisions reflect management’s desires of how transactions should be recorded and later used for decision-making. For example, the system can be configured to limit selling price discounts, thus avoiding unprofitable pricing.

• An ERP system’s central database has master data tables for customers, suppliers, and inventory. The tables hold relatively permanent information about each subject.

Give Me 3 Examples• Customer Relationship Management (CRM) systems

build on the organizational value ERP provides; it specifically increases the flexibility of the company’s common database in regards to customer service. Various kinds of CRM software are available, some from ERP vendors (including SAP) and some from third-party software companies. CRM software can lead to operational savings, but most companies buy it because they feel that having better customer relationships will result in higher revenues. Uses of CRM have evolved since the software was initially launched, beginning as a customer contact repository to extending its capabilities to sophisticated business intelligence.

concepts in enterprise resource planning 2 nd edition chapter 3 marketing information systems and...

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