ERP and Business Processes

ERP
and
Business Processes
ILLUSTRATED WITH MICROSOFT DYNAMICS NAV 2009
AUTHOR: HANS VAN DER HOEVEN MSC
1 ST E D I T I O N
Chapter 1
2
GETTING TO KNOW BUSINESS FUNCTIONS,

BUSINESS PROCESSES,
ERP AND BUSINESS MANAGEMENT
ERP and Business Processes

Business Functions, Departments, Business Processes
3
 Business Function: organizational unit

 Also known as “department”
 Hierarchical structure CEO
 Line-staff
organizational chart Accounting Office
and IT Manager
Sales Warehouse Purchasing
Sales Reps Back Office Front Office

U-turn to Business Processes
4
 In the 1990’s
 Michael Porter’s Value Chain
 Business process is not a business function
 Trigger, ‘customer’ demand, inputs  outputs

What is a Business Process?
5
 A business process is a collection of coherent

activities that starts with a trigger and ends with the
delivery of one or several products.
 The products represent a value for the customer of
these products. The customer could be an external
customer, as well as an internal customer (a
department).
 Services are also considered as products.

BPR
6
 Business Process Redesign (Reengineering)

 Michael Hammer in the nineties of previous century
 Event driven Process Chains (EPC’s)
 Events drive logistic, finance, HR, etc.
 Processes consist of a collection of events which match with

each other (activities).
 Cycle-approach
 O2C: Order to Cash
 P2P: Purchase to Pay
 H2R: Hire to Retire

Example of a Process Chart
7

ERP and Business Management
8
 ERP: Enterprise Resource Planning

 ERP-package
 Before island automation
 One integrated information system
 One central database
 Business Management
(‘the management side of ERP’)
 Business Control

Chapter 2
9
FOCUS ON ERP

ERP in Historical Perspective
10
 MRP
 MRP II
 ERP
 ERP II (or x-ERP)

MRP (I)
11
 Materials Requirement Planning

 Deciding about material requirement for a
production process
 Using a BOM and the quantity of neede finished
products
 Material requirement leads to purchase proposals
and eventually to purchase orders
 Bike example

MRP II
12
 Manufacturing Resource Planning

 Not only raw materials
 Also resources like machines and people (capacities)
 Resources
 MRP II aims at manufacturing control

ERP
13
 Enterprise Resource Planning

 Enterprise wide
 One integrated system instead of different seperated
systems
 One central database
 A way of thinking about dealing with processes, so
process orientation
 EPC’s: Event Driven Process Chains
Chain of activities

ERP
14
 ERP as a package
 standard software package with a very integrated functionality,
which stretches out over all business processes in an
organization.
 ERP as a phenomenon
 enterprise wide integrated planning and steering concept
 Organizational structure and management;
 Products, services and business processes;
 Information technology (computers, communication
infrastructure, systems, internet, e-mail);
 People, competences and culture.

ERP II
15
 Extended ERP (x-ERP)

 Collaboration between companies to reach a better
position in the Supply Chain
 Intra-enterprise collaboration = ERP
Inter-enterprise collaboration = ERP II
 Possibilities of Internet, EDI

CRM
16
 Customer Relationship Management

 “Know your customer”
 Registering customer data, purchase behavior, data
from external sources
 Analyzing and combining data
 See chapter 4

SCM
17
 Supply Chain Management

 Chain of companies that form a chain from natural
resources to a product that is sold to a final
consumer
 Copmpanies want to defend or extend their position
in the Supply Chain
 Supply Chain Management
 See chapters 5 and6

Best-of-Breed and ERP
18
 Best-of-Breed (BOB)
 No integrated approach
 Functional approach
 Interfaces and middleware
 Specific needs, very different from ERP

Pros and Cons of ERP
19
pros cons
 Integration  Long implementation

 Process orientation periods
 Simple user interface  Complexity
 Openness  No made to measure
 One vendor
solution
 State-of-the-art
 International aspects

The vendors of ERP systems
20
 SAP
SAP Business Suite, All-in-One, Business One
 Oracle
Oracle Financials, Peoplesoft, JD Edwards, Fusion
 Infor
Mapics, Baan, SSA Global
 Microsoft Dynamics
Dynamics NAV, Dynamics AX, Dynamics CRM
 Industry Solutions

Chapter 3
21
MICROSOFT DYNAMICS NAV 2009

Microsoft Dynamics
22
 Dynamics NAV
 Dynamics AX
 Dynamics GP
 Dynamics CRM

Dynamics NAV 2009
23

Role Tailored Client (RTC)
24
 Personas
 Role centers, list places, departments page

Modules / Departments
25
 Financial Management
 Sales & Marketing
 Purchase
 Warehouse
 Manufacturing
 Jobs
 Resource Planning
 Service
 Human Resources
 Administration

Departments in the RTC
26

Classic Client (CC)
27

Some Principles
28
 Adapting business processes to the ERP system

Adapting ERP system to the processes
 Customizing
 Selection and implementation process
 Architecture of Dynamics NAV
 Client tier (presentation layer)
 Service tier or Middle tier (business logic layer)
 Database tier (data layer)

Add-ons and Industry Solutions
29
 Dynamics NAV consists of:

Dynamics NAV core
by Microsoft global development
Country localisation
by Microsoft country development
Industry solution
by partner
Made to measure component

by partner
 Add-on: piece of standard software which can

communicate and interact with a standard ERP
system
 Product configurator
 Foodbranche
 HRM

Customer Model
30

Customer Model
31

Training and Education
32
 Conceptual level (this book)

 Details of how the software operates
 Functional training
 The buttons
 Manners
 Through training partner
 Through e-training
(Customer Source)

Chapter 4
33
MARKETING & SALES PROCESS:

O2C CYCLE

Customer
34
 Master data
 Contact data
 Transaction data
 Customer Card
 Customer posting
groups

Payment Terms and Delivery Terms
35
 Creditability
 Creditability as an amount
 Creditability as a period of time
 Payment terms:
 Cash on delivery
 7 days
 1 month (8 days)
 Delivery/shipment terms

Customer
36
 Customer (discount) groups

 Characteristics in common
 Discounts
 Per customer
 Per item
 Per order
 E-commerce
 Web shop
 Electronic payment
 B2B and B2C

The Sales Process (O2C)
37
Contacting Issuing Delivering

Sales Order Collecting
the Sales and Billing
processing money
customer Quotation Shipping
More:
• Blanket orders
• Return orders and credit memos

Contacting the Customer
38
 Customer seeks contact

 Company seeks contact
 Sales promotion
 CRM

Issuing Sales Quotation
39
 Request for Quotation (RFQ)

 Not always necessary
 Register customer data and quotation data

 Fast tabs
 Item lines
 Creating Quotation
 Send to customer
 Obligation to deliver
 Reaction period
 Management information

Sales Order Processing
40
 Does the customer agree? Quotation is converted

into a sales order.
Or a direct sales order (without quotation)
 Creditability check
 Availability check (AtP, CtP)
 Integration with Office
 Release order for delivery

Delivery and Shipping
41
 Warehouse gets assignments (sales orders with

today’s delivery date)
 Picking and packing, then shipping
 Create shipping documents
 Postings in the ERP system
 Logistic
 Financial

Billing
42
 Creating and sending Sales Invoice

 Invoice is usually made from data sales order
 Separation of goods and money streams
 Prepayment

Billing (2)
43
 Event driven action:

 Logistical
 Financial
 Matching principle
 Actions
 Update obligations administration
 Update customer open debt-claim
 Update general ledger (financial mutation)
 Update stock (logstic mutation)
 Update VAT registration
 Update analyses en reports

Collecting money
44
Billing Repayment time Due Past due date

date
(not due) date
(overdue)

Blanket Orders
45
 Long term relationship with customer

 Usually special price or discount (or afterwards:
revenue bonus)
 Sell a large quantity, deliver/ship (and bill) in parts

Return Orders
46
 Items are damages on arrival at customer site

 Shipping wrong items
 Customer has ordered too much
 RMA procedure
 Destination of returned items

 Credit memo (sales)

Discounts and Credit Memos
47
 Discounts because of RMA, revenue bonus,

correction of mistakes
 Sales decides upon contents credit memo
 Credit memo lowers the debt-claim on the customer
 Detailed checks are necessary

Marketing
48
 "Marketing is an organizational function and a set of

processes for creating, communicating and delivering value
to customers and for managing customer relationships in
ways that benefit the organization and its stakeholders."
(source: American Marketing Association (AMA) )
 Macroeconomic functions:
 Information exchange between manufacturers, wholesalers
and consumers;
 Stabilization function/distribution function.
 Product development, strategies

 Segmentation of the market
 Marketing mix
CRM
49
 Customer Relationship Management

 Relation a company maintains with its customers
 Register and analyze customer behaviour
 Enlarge profitability and customer satisfaction
 Customer pyramid
 Pros CRM
 Lower costs by operational efficiency
 Higher revenue by better segmented market
 Improved strategy and better measure effects on actions

CRM (II)
50

Analyses
51
 Dimensions
 Business Intelligence (BI)
 Standard analysis possibilities
 Sales budgets
 Sales analyses reports (revenue by region, or by sales rep)
 Statistical screens
 Self designed reports

 In Dynamics NAV
 In (e.g.) Excel
 Examples

Chapter 5
52
SUPPLY CHAIN,
PURCHASING PROCESS
& WAREHOUSE PROCESS:
P2P CYCLE

Vendor
53
 Master data, contact data, transaction data

 Vendor posting groups

Trading Item
54
 Master data
 Item number, -name and short description
 Base unit of measurement
 Sizes and weight
 Replenishment method
 Safety stock level
 Costing method
 Price data (purchase price, COGS, sales price)
 Product posting group
 Item vendor
 Item tracking (serial nrs/lot nrs/expiry date)

E-procurement
55
 Electronic purchasing process

 Digital catalogue, order via Internet
 E-procurement versus E-commerce
 B2B and B2C

The Purchasing Process (P2P)
56
Request for
Creation
Purchase quotation Vendor Vendor
puchase Goods receipt
initiative and vendor invoice check payment
order
selection
Also:
• Working with blanket orders
• Return shipments and credit memos

Purchase Initiative
57
 Coming from sales: sales orientated

 Based on sales forecasts
 Mind inventory
 Sometimes customer specific purchasing

RFQ and Vendor Selection
58
 Request for Quotation (RFQ)

 Compare conditions
 Which vendors make their data available to their customers?
 Purchasing decision: one quotation becomes a

purchase order
Quotation
2
Quotation Quotation
1 3
Order

Create Purchase Order
59
 Coming from quotation?

 Purchase order number
 Order confirmation
 Planning for the warehouse

Goods Receipt
60
 Warehouse workers
 Determine goods receipt
 Determine storage location
Receiving
Dock
Warehouse

Vendor Invoice Check
61
 3-way matching
 Order
 Goods receipt
 Invoice
 Approved vendor invoice  Accounts Payable (A/P)

 Contact with vendor if no consensus
 Electronic invoicing
 Self-billing
 Registration of obligations

Vendor Payment
62
 Only approved vendor invoices

 Selection on base of due date
 Liquidity position
 Authorization
 Reconciliation
 EDI / Electronic Banking

Blanket Orders
63
 Purchase order for a large quantity

 Several shipping moments
 Fully delivered?

Return orders and Credit Memos
64
 Items are damaged on arrival or wrong items

 Ordered too many
 Return shipment (RMA vendor)
 Credit memo

Procurement of Services and Fixed Assets
65
 Parallel with purchase of goods

 Purchasing initiative
 Specific expertise
 Budgets and budget holders

 Approval instead of goods receipt

Warehouse Process
66
 Sales process and Purchasing process

 Movements (logistic transportations)
 Regular checks
 Stock-taking
 Separate Goods Receipt Dock

 Separate Shipping Dock
 Several warehouses / plants

SCM
67
 Supply Chain Management

 Collaboration: competitors  partners
 Demand Chain versus Supply Chain
 Technology
 EDI
 RFID

Analyses
68
 Vendors
 Reliability of delivery times and quality
 Price comparison
 Top 10
 More
 Discounts, status blanket orders, achievements per purchasing
agent, return shipments
 Out comings stock-taking
 Item tracking and tracing

Chapter 6
69
SUPPLY CHAIN MANAGEMENT

AND
MANUFACTURING PROCESS

Item: Raw Material and Finished Product
70
 Production: convert raw materials into finished

products
 Finished products are not purchased, have no purchase price
and no vendor data
 Selling finished products leads to a replenishment of raw
materials
 Semi-finished products

BOM
71

Routing
72

Proper Sequence
73
 Create item records for raw materials and finished

products
 Create BOM and routing for the finished product
 Link the BOM and the routing to the finished item
(in item record finished product)

Customer Order Decoupling Point (CODP)
74
Manufacturing semi Manufacturing
Raw materials finished items Semi finished items finished items Finished items
Custom
Vendor
er
CODP 1
Make-to-stock
CODP 2
Assemble-to-Order
CODP 3
Make-to-Order
CODP 4
Engineer-to-Order Service companies

use CCPD

MTS
75
 Make-to-Stock (COPD1)
 Produce entirely on stock
 Customer sales orders do not directly influence the
manufacturing process
 Manufacturing process is based on MPS, which is
built on sales forecast from the market
 Examples:
 Deep freezers
 Off-the-peg clothes
 Sanitary fittings

ATO
76
 Assemble-to-Order (COPD2)
 Manufacture components/semi-finished items
according to MTS
 Op base of customer sales orders final assembly:
no MTS!
 Finished items are not manufactured on stock
 Customer has influence on the production process
 Example:
 Furniture with different levels of finishing touch (upholstery of
cloth or leather in a number of colors and qualities)

MTO
77
 Make-to-Order (COPD3)
 Customer sales order stretches out deep into the
production process
 No stock production
 Standard materials and standard designs
 Longer delivery period
 Example:
 Computers with limited standard configuration possibilities

ETO
78
 Engineer-to-Order (COPD4)
 Product specifications are not known beforehand
 First design, than customer specific purchasing, after
that manufacturing
 Sometimes modular design possibilities (‘lego bricks’)
 Costing calculation per order necessary
 Examples:
 Luxurious yachts
 Made to measure clothing

Manufacturing process classification
79
 Dynamics NAV: batch oriented manufacturing

 Flexibility in setup and use
 E.g. posting flushing raw materials:
 Manually: post the real consumption of raw material in
the output journal for a specific manufacturing order;
 Automatic forward flushing: automatically post estimated
quantity of raw material when the manufacturing order
has been released;
 Automatic backward flushing: automatically post
quantity of raw material as consumed when the
manufacturing order is completed.
Product versus Job (Project)
80
 A job is an entity on which you can register labor

hours, machinery hours and raw material
consumption, it is a unique task, outlined in time
and resources and is completed with a job result.
 Plan and register resources and materials
 Stages
 Job journal
 Integration between manufacturing, logistics, sales
and finance

Manufacturing Process: Preparation
81
 Master data
 Materials, BOMs, routings
 Available capacities of resources and materials

 Work shifts
 Shop calendars
 Activity centers: work center group, work center, machine center
 Production order status

 Planned
 Fixed planned
 Released
 Finished

MTS and MRP
82
 Sales forecasts
 Production plan
 Sales and Operations Plan (SOP) more details
 Detailed planning (production schedule)
 MRP run
 Example MRP run with spreadsheet calculation

 Manufacturer of liquorices

Starting position in Excel
83

MRP: the example
84
 Gross need only of sugar

 Capacities are used in basic setting
 In daily practice it is much more complex
 Grasp stock

Manufacturing Orders MTO
85
 First the sales order has to be received

 1 sales order is 1 manufacturing order
 Combine sales orders of one given item and periodically

generate a manufacturing order
 Materials
 Stock materials
 Specials
 ETO: usually generate released production order

immediately after creating the sales order

R&D and PLM
86
 Research & Development

 R&D budget  job card
 Product design (engineering) not only in ERP
 Product configurations
 Engineering systems, an overview
 CAD systems (computer aided design)
 EDM systems (electronic document management)
 PDM systems (product data management)
 PLM systems (product lifecycle management)

Product Configurator
87
 Add-on
 Flexibel assemble products
 Built in intelligence and use of wizards
 Dynamically determine BOM and routing
 Sometimes offer to consumers via the web
 Integratie with ERP is crucial

Service Management
88
 After Sales Service

 Warrantly issues
 Controlling repair and maintenance at customer sites
 Service contracts
 Spare parts management

Analyses
89
 Product design
 Where are components used, comparison BOMs
 Capacities
 Work per work center/machine center, Gantt diagram
 Planning
 Availability of materials
 Execution
 Material shortage list
 Valuation
 Production order statistics, cost calculation

Chapter 7
90
FINANCIAL MANAGEMENT PROCESS

Financial Management
91
 Event driven approach (EPC’s)

 General Ledger (G/L)
 Balance sheet and Profit and Loss Statement (P&L)
 Posting groups
 Business posting group
 Product posting group
 VAT Business posting group
 Number series

Posting Groups
92
General posting groups Steering of G/L accounts Listed on
PRODUCT-P-GRP Revenue and Cost of Sales Item Card, Vendor Card |
BUSINESS-P-GRP Customer Card, Resource Card
VAT posting groups Steering of G/L accounts Listed on

VAT-PRODUCT-P-GRP Purchase VAT and Sales VAT Item Card, Vendor Card |
VAT-BUSINESS-P-GRP Customer Card, Resource Card
Specific posting groups Steering of G/L accounts Listed on

CUSTOMER-P-GRP Accounts Receivable accounts Customer Card
VENDOR-P-GRP Accounts Payable accounts Vendor Card
FIXED ASSET-P-GRP Fixed Assets accounts Fixed Asset Card
BANK ACCOUNT-P-GRP Bank accounts Bank Account Card
INVENTORY-P-GRP Inventory accounts Item Card
with location code
Registrations from other Processes
93
 Integration
 EPC’s
 Also direct postings
 General journal
 Recurring journal

Money Transfers
94
 Elektronic banking (form of EDI)

 Payment process integrated in Financial management
 Generate payment proposition
 Payment order(EFT)
 Autorisation
 Reconciliation
 Liquidity position
 Overview
 Budget

Corporate Governance and External Reporting
95
 Corporate Governance = good enterprise

management
 Strong, legal claims
 External reporting
 Also strong, legal claims, international standards
(IFRS)
 More and more digitally published (XBRL)
 Use the latest version of the software!

Internal Reporting and BI
96
 Internal reporting aims at enterprise management

 Steering
 Accountability
 Reports
 Lists and documents
 Account schedules
 BI
 Not only from strategic point of view
 Easy export from Dynamics NAV to Excel (wizards)

BBSC
97
 Business Balanced Score Card

 CSFs
 PIs
 BIW

Controller and ERP
98
 Controller is financial specialist

 Setup and use of processes, procedures
 Thinking in processes
 Information delivery
(budget versus realisation)
 Important decision maker in an
ERP implementation

Dimensions
99
 Characteristics (properties) which can be attached to

certain postings
 Offer availability of sorting and analysis
 In journals, documents and budgets
 Cost center, cost unit, region, etc.
 Reports in Dynamics NAV
 Dimensions-totals report
 Dimensions-detail report
 Enterprise specific dimensions-detail report

Participations and Intercompany Transactions
100
 Related enterprises, where one company owns (a

large part of) one or more other companies
 Consolidation
 Elimination postings
 Invoices which have to be charged to other group
companies
 A/R intercompany

Segregation of Duties, Roles and Authorization
101
 Assign roles in a business process on basis of

antipoles of interest
 Example: warehouse versus sales
 Login accounts – roles – authorization – permissions
 Predefined roles (profiles) in Dynamics NAV

Fixed Assets
102
 Durable production resources

 Real estate, computer systems, cars, machines, shop
inventory and so on
 Depreciation
 Write ups (revaluations)
 Insurance, maintenance, cost budgeting, salvage

Chapter 8
103
HUMAN RESOURCE MANAGEMENT

The HRM Process
104
Recruitment and Commencement Compention

Assessment Resignation Payroll
selection of employment management

Master Data HRM
105
 Name, address, bank account, date of birth, social

security number, employment/resignation date, type
of albor contract
 Employee card

Recruitment, Selection
and Commence of Employment
106
 Standard Dynamics NAV and add-on

 From vacancy to recruitment, selection to commence
of employment: process support
 Personnel is important element for every company
 Recruitment costs
 Training

Competence Management and Assessment
107
 Qualifications and competences

 Training and development
 Job evaluation conversation
 Assessment interview
 Competence management
 Not in standard Dynamics NAV

Absence Registration
108
 Register absences in Dynamics NAV

 Cause
 Description
 Add-on: more possibilities

Payroll
109
 Specialistic task
 Often outsourced
 Functionalities payroll:
 All data regarding payroll tax;
 Pension regulations;
 Minimum wages, contractual savings;
 Holiday pay;
 Salary components;
 Payroll calculations of very diverse matter;
 Pay slips, annual reports for employees and IRS;
 Interface to MS Office;
 Salary payments via electronic banking;
 G/L postings of salaries.

Workflow Management
110
 Workflow, work process

 Documents (elektronically)
 Manage the workflow
 Examples
 Insurance company
 Request for leave, handling expense sheets

Relations with other Processes, Analyses
111
 HRM and resources

 Jobs (projects) and production
 Integration of processes and data
 Reporting for HRM

 Dimensions
 BI

Chapter 9
112
IMPLEMENTATION
AND CHANGE MANAGEMENT

Implementation
113
 Configuration, setup
 Before start of use of ERP system
 Colaboration with consultants
 Key-users
 Implementation plan
 Methodologies: RIM Toolkit and SureStep
 Process modeling
 Cost and time frame

Master Data Management
114
 Streamline use of master data for the entire

conglomerate of companies
 All companies have to confirm to the standard
 Example coffee cups

Change Management
115
 Principles Change Management:

 Management has clear vision of the future;
 Management has to support the change fully;
 There are advocates, but also opponents we have to deal

with;
 Correct communication will encourage the transition to a
new situation.
 Cultural and structural side in balance
 Sounding board, support
 Committees and groups

Version Management, Upgrades and Updates
116
 Keeping up to date
 Hot fix, update and upgrade
 Made to measure software and upgrading
 Develop – test – go live
 License costs

Service Oriented Architecture (SOA)
117
 No wall-to-wall system
 Components communicating with each other, with
components of other brands
 Web services (portals)
 Mobile

ERP and Business Processes

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ERP and Business Processes

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ERP

AUTHOR: HANS VAN DER HOEVEN MSC

GETTING TO KNOW BUSINESS FUNCTIONS,