Introduction to MIS Chapter 6 Transactions and Enterprise Resource Planning Jerry PostTechnology Toolbox: Selecting an ERP SystemTechnology Toolbox: Designing an EISCases: Auto Industry
Outline How do you process the data from transactions and integrate the operations of the organization? How do you efficiently collect transaction data? What are the major elements and risks of a transaction? Why are transactions more difficult in an international environment? How do you track and compare the financial information of a firm? What are the transaction elements in the human resources management system? Can a company become more efficient and productive? How do businesses combine data from operations? How do you combine data across functional areas, including production, purchasing, marketing, and accounting? How do you make production more efficient? How do you keep track of all customer interactions? Who are your best customers? How can a manager handle all of the data in an ERP system? How does the CEO know that financial records are correct?
Transactions and IntegrationAdditional CEO InformationStores Strategy Bank Tactics Warehouse Inventory Management Supplier Operations EDI POS Sales Reports Cash RegistersCustomers Process Control Central Computer
Data Capture Banking and Finance Sales Workers Process ControlCollecting transaction data at the point of sale ensures accurate data,speeds transactions, and provides up-to-the-minute data to managers.
Radio Frequency Identification (RFID) Radio/microwaves RFID tag Simple security tag Capacitor: collected energy C B E antenna Transistors:RFID reader data Data: Alter the waves Scanner from: http://www.rfidinc.com
QR Codes Two-dimensional code. Can hold thousands of characters or digits. Can be read by cell phone cameras. Initially used for packages. Now, often used for marketing, even billboards, museum and art pieces, and bus schedules.http://qrcode.kaywa.com/One of several Web sites to create free QR codes.
Process Control Various Production machines: lathe, press, dryer, . ..Production data: Quantity Quality Time Control Terminal Machine status Control settings and commands
Electronic Data Interchange The price of paper ◦ $30 to $40 for each purchase order ◦ $24 to $28 for suppliers to handle EDI ◦ $12 for orders ◦ 0.32 for suppliers Proprietary EDI Commercial providers and standards
EDI: Proprietary Firms must support multiple data formats and sometimes different Order computers for each contact. Database & Accounts Supplier Queries & Orders Customer 1Production Convert Invoices & Database confirmation& Accounts Convert Customer 2
EDI Standards UN Edifact US ANSI X12 Message Segments for each area Segment Composite Data Element Detail data formats Data Element Code Lists
ANSI X12 Segments104 - Air Shipment Information Partial List of segments110 - Air Freight Details and Invoice Detailed specifications125 - Multilevel Railcar Load Details126 - Vehicle Application Advice for each segment127 - Vehicle Buying Order Data needed128 - Dealer Information129 - Vehicle Carrier Rate Update Format130 - Student Educational Record (Transcript)131 - Student Educational Record (Transcript) Acknowledgment135 - Student Loan Application139 - Student Loan Guarantee Result140 - Product Registration141 - Product Service Claim Response142 - Product Service Claim143 - Product Service Notification144 - Student Loan Transfer and Status Verification146 - Request for Student Educational Record (Transcript)147 - Response to Request for Student Ed. Record (Transcript)148 - Report of Injury or Illness
EDI On The Internet Advantages ◦ Low cost. ◦ Anyone can connect. ◦ Worldwide reach. ◦ Many tools and standards. The Internet Edifact Message
Extensible Markup Language (XML) <?xml version="1.0"?> <!DOCTYPE OrderList SYSTEM "orderlist.dtd"> <OrderList> <Order> <OrderID>1</OrderID> <OrderDate>3/6/2004</OrderDate> <ShippingCost>$33.54</ShippingCost>Example <Comment>Need immediately.</Comment> <Items> <ItemID>30</ItemID> <Description>Flea Collar-Dog-Medium</Description> <Quantity>208</Quantity> <Cost>$4.42</Cost> <ItemID>27</ItemID> <Description>Aquarium Filter & Pump</Description> <Quantity>8</Quantity> Data is sent in a <Cost>$24.65</Cost> standard format that </Items> is easy for computers </Order> to parse and read. </OrderList>
XML: eXtensible Markup Language Used as a standard means to transfer data to machines with unknown capabilities. Most hardware and software can read and understand the data. The tags describe the content. Usually a separate schema file is used to describe the tags and the document structure.
Extensible Business ReportingLanguage: XBRL http://media.ifrs.org/ixbrl_example1_2011-03-25.xhtml
XBRL Sample tag: Revenue <ix:nonFraction Attributes contextRef="y2012“ format="ixt:numcommadot" name="ifrs:Revenue" unitRef="EUR" decimals="0" scale="0" id="XWAND00000326">6,863,545 </ix:nonFraction> Data The Securities and Exchange Commission is requiring XBRL filings as of June 2011. The goal is to standardize reporting data and make it accessible to automated systems.
Transaction RisksCredit card Vendorcompanyaccepts risks 1. Receive payment.for a fee. 2. Legitimate payment. 3. Customer not repudiate sale. 4. Government not invalidate sale. Government 1. Transaction record.Customer 2. Tax records.1. Receive product. 3. Identify fraud.2. Charged only as agreed. 4. Track money for other3. Seller not repudiate sale. cases (drugs).4. Legal transaction.
Security and Trust Security Trust ◦ Each transmission is ◦ Is the vendor legitimate? encrypted. Consider: Internet gambling. Prevent interception. What if offshore vendor Keys generated by refuses to pay off a bet? certificate authority (e.g., As long as Internet gambling Verisign). is illegal (in the U.S.) ◦ Security on individual consumer has no recourse. servers is the responsibility Otherwise, use credit cards of vendor. and rely on banks. There have been some Secure certificates. thefts of data (e.g., credit- ◦ Is the customer legitimate? card numbers.) Rely on credit card data. Vendor is motivated to Some vendors will ship only secure the server. to billing address. Commercial software exists Certificate authority. to provide secure sites.
International Transaction Issues Shipping Currencies Languages Customs and tariffs Jurisdiction for disputes Different laws and systems Verify seller and purchaser Payment methods http://worldwind.arc.nasa.gov
Accounting Financial data and reports What do things really cost? The accounting cycle Inventory Checks and balances ◦ Double-entry ◦ Separation of duties ◦ Audit trails
Accounting Software General Ledger Accounts payable ◦ Sample chart of accounts ◦ Check reconciliation ◦ Automatic posting ◦ Automatic recurring entries ◦ Automatic entry of vendors ◦ Monitor payment discounts ◦ Fiscal years ◦ Select bills from screen ◦ Keep past data books open ◦ Pay by item, not just total bill ◦ Post to prior years General Features ◦ Allocate department expenses ◦ Printer support Accounts Receivable ◦ Use of preprinted forms ◦ Automatic early discounts ◦ Custom reports ◦ Interest on late payments ◦ Custom queries ◦ Multiple shipping addresses ◦ Security controls ◦ Sales tax ◦ Technical support costs ◦ Automatic reminder notices ◦ Automatic monthly fees ◦ Keep monthly details
The Role of Accounting Transaction Data ◦ Journal entries—double entry: money and categories ◦ General ledger—summary data by categories ◦ Information is defined by the chart of accounts Purchases, Sales, Loans, and Investments Inventory Control Process and Controls ◦ Double-Entry Systems ◦ Separation of Duties ◦ Audit Trails ◦ Exception reports
Human Resources Management Management Compile Merit Management Managers Evaluations Reports & Salary Merit Changes Produce Evaluations Management Government Employee Produce Reports Merit & Government Salary Reports Government Salary Employee Reports Summaries EEO Process Data Employee Payroll Employee Data Data Benefits Files Screen Vacation Jobs & Job & ApplicationsEmployee Applicant ApplicantData Data Sales Data & Data Commission Employees Job Customers Applicants
Production Management Suppliers Receiving Bill of Materials Crank UL6500 Quality Pedals LK3500Purchase Stem UL6600Orders Saddle Selle Production … and Assembly Quality Production Information Customers System Quality Shipping Customer Order
Production Management Issuesfactories Multiple factories produce many items that need to be distributed to multiple stores. Ask Gitano Jeans in the 1980s How do you schedule Customers efficient production? or stores How do you ensure the right products go to the right locations?
Distribution CenterFactories Split the mass production shipments into smaller units and distribute to stores immediately—without holding inventory. Customer or stores Need to match orders exactly, and carefully schedule arrival time of shipments.
Integrated Report Example ProductionPlant Quantity Quality Costs Prior MonthBoise 260,721 9.6 $41,222,697 219,961Decatur 171,371 8.75 $31,094,809 188,862Yaounde 314,856 9.4 $29,119,967 406,859 746,948 9.25 $101,437,473 815,682 Wtd. Avg. 135.80 SalesRegion Quantity Avg.Price Sales Prior Sales Wtd. Cost NetUS East 225,091 $289.17 $65,965,373 $53,533,640 30,567,941 $35,397,432US West 204,725 $273.20 $56,217,470 $42,018,759 27,802,185 $28,415,285Canada 65,763 $192.00 $12,561,225 $12,327,456 8,930,786 $3,630,439South America 67,495 $133.50 $9,013,737 $11,281,515 9,165,996 ($152,259)Other 47,313 $169.00 $7,991,533 Sales $8,120,900 6,425,228 $1,566,305 610,387 $211.37 $151,749,338 $127,282,270 82,892,136 $68,857,202 $70,000,000 $40,000,000 $60,000,000 $35,000,000 $30,000,000 $50,000,000 $25,000,000 $40,000,000 Sales $20,000,000 Prior Sales $30,000,000 $15,000,000 Net $20,000,000 $10,000,000 $10,000,000 $5,000,000 $0 $0 US East US West Canada South America Other
Changes Sales 1970sTerminals Management Central 3 reports sales (printed) Manager: weekly reports data computer: Integrate, graph Sales create reports analyzeTerminals Secretary: type & revise Sales 1980s ManagementTerminals Central 3 reports sales (printed) Manager: weekly reports data computer: Integrate, graph Sales create reports analyzeTerminals personal computer Sales 1990s Management Terminals query Personal Computer sales DBMS: Weekly reports & data Sales On-line data ad hoc queries Terminals data (applications)
Integration in 2000s Management SalesTerminals query Executive Information sales System data DBMS Personal Computer Sales Or PDATerminals data Or BrowserSuppliers Production/ Enterprise Resource Service Planning Banks
ERP Integration Headquarters (England) Subsidiary (Spain) Database Use inventory item. DatabaseFinancial data Deduct quantity. ManufacturingGeneral ledger Update inventory value. Product detailsPayroll Check for reorder point. Inventory… Order new item through EDI. … Update Accounts payable.Weekly financial status. Project cost report.Cash flow. Daily production report.Budget versus actual cost.
ERP Primary Functions Accounting ◦ All transaction data and all financial statements in any currency Finance ◦ Portfolio management and financial projections Human Resources Management ◦ Employee tracking from application to release Production Management ◦ Product design and manufacturing lifecycle Logistics/Supply Chain Management ◦ Purchasing, quality control, tracking Customer Relationship Management ◦ Contacts, orders, shipments
Enterprise Resource Planning Integrated systems International environment Examples ◦ Multiple currencies ◦ Multiple languages ◦ SAP ◦ Procedures and practices ◦ PeopleSoft ◦ Follows local (national) rules ◦ Oracle Financials ◦ Follows consolidation rules Basic features included ◦ Example ◦ Accounting U.S. firm with European subsidiaries. ◦ Purchasing Data is entered once ◦ HRM European reports are generated for subsidiaries ◦ Investment management following local rules Results are converted and consolidated to U.S. firm following international and U.S. rules
SAP Based in Germany, now Financials worldwide Logistics Support for international Human resource transactions and management multinational firms Runs on multiple database and hardware platforms Can handle large and small companies Expensive, but price is relative.
SAP Financials Financial Accounting Treasury ◦ General ledger ◦ Cash management ◦ Accounts receivable/payable ◦ Treasury management ◦ Special ledgers ◦ Market risk management ◦ Fixed assets ◦ Funds management ◦ Legal consolidation Enterprise Control Investment Management ◦ Executive information system ◦ Investment ◦ Business planning and planning/budgeting/control budgeting ◦ Depreciation ◦ Profit center accounting forecast/simulation/calculate ◦ Consolidation Controls ◦ Overhead cost ◦ Activity based costing ◦ Product cost ◦ Profitability analysis
SAP Logistics Purchasing Product data management Materials management ◦ Master data management Manufacturing ◦ Design and change process Warehousing ◦ Product structure ◦ Development projects Quality management Plant maintenance Sales and distribution ◦ Sales activities Service management ◦ Sales order management Sales ◦ Shipping and transportation Distribution ◦ Billing ◦ Sales information system
SAP Logistics Production planning and Project system control ◦ Work breakdown structures ◦ Production planning ◦ Network planning ◦ Material requirements techniques, milestones planning ◦ Cost, revenue, financial, ◦ Production control and schedule, and resource capacity planning management ◦ Costing ◦ Earned value calculation ◦ Order information system ◦ Project information system ◦ Shop floor information system
SAP Logistics Materials management Plant maintenance ◦ Purchasing ◦ Structuring technical systems ◦ Inventory management ◦ Maintenance resource ◦ Warehouse management planning ◦ Invoice verification ◦ Maintenance planning ◦ Inventory controlling ◦ System for technical and cost accounting data ◦ Purchasing information system ◦ Maintenance information system Quality management ◦ Quality planning ◦ Quality inspections ◦ Quality control ◦ Quality notifications and certificates ◦ Quality management information system
SAP Logistics Service management Integration ◦ Customer installed base ◦ When the clerk enters a administration sale, bills are generated ◦ Service contract automatically (mail, fax, or management EDI). ◦ Call management ◦ Sales and revenue are instantly updated in ◦ Billing financial and control ◦ Service information system modules. ◦ The sales information system and EIS provide various up-to-date views and reports.
SAP HRM Personnel management Payroll accounting ◦ HR master data ◦ Gross/net accounting ◦ Personnel administration ◦ History function ◦ Information systems ◦ Dialog capability ◦ Recruitment ◦ Multi-currency capability ◦ Travel management ◦ International solutions ◦ Benefits administration ◦ Salary administration Time management Organizational ◦ Shift planning management ◦ Work schedules ◦ Organization structure ◦ Time recording ◦ Staffing schedules ◦ Absence determination ◦ Job descriptions ◦ Error handling ◦ Planning scenarios ◦ Personnel cost planning
SAP HRM Personnel development Other features ◦ Career and succession ◦ SAP Business workflow planning ◦ Internet scenarios ◦ Profile comparisons ◦ Employee self-service ◦ Qualifications assessments ◦ Additional training determination ◦ Training and event management
SAP Integration Financial general ledger Simple example holds all base totals. ◦ Manufacturing uses an item Sub-ledgers are defined for from inventory important accounts ◦ The quantity on hand is ◦ Accounts payable updated ◦ Manufacturing ◦ The inventory value is automatically changed ◦ User-defined On any sub-ledgers ◦ etc. On the general ledger All transactions ◦ Reports are generated in automatically flow through any currency ◦ Including currency ◦ New orders and payments conversions can be generated through ◦ Special rules can be EFT. defined
Supply Chain ManagementDesign feasibility Design & Engineering Designs and Quality& production costs Marketing product planning Quality control & Custom orders planning & monitoring Manufacturing planning Vendors & monitoring Customers Purchasing Demand-pull Mass Distribution Customization Quick Just-in-Time Response partnerships partnerships Administration & Management & joint & joint development HRM Accounting Finance MIS development
Purchasing/Logistics Buyer SuppliersIdentify product features Provide product detailsRequest for ProposalEvaluate suppliersNegotiate contract Negotiate contractsIdentify exact items and costs Verify orders and timesCorrect errors Correct errors Schedule deliveryReceive products Monitor shipmentsMatch receipts against orderReturn items Handle returnsPay supplier Monitor payments
The Role of XMLBuyer Supplier Messages and data <xml>ERP: Oracle <order> ERP: SAP … </order> </xml>
Customer RelationshipManagement Multiple Contact Points ◦ The goal is to provide a single, integrated view of all customer activity, available to all employees who interact with the customer. Feedback, Individual Needs, and Cross Selling ◦ Having better information enables workers to provide better service, meet the individual needs of each customer.
ERP: Summarizing Data An ERP database can be gigantic. It would take time to evaluate every single transaction. Managers, particularly executives, need to begin with a summary of some basic conditions. ◦ The summary is usually graphical. ◦ Managers can then drill down and look at the detail.
Digital Dashboard Example Charts Gauges Icons Tickers Exceptions Drill-down links http://www.corda.com/exa mples/go/ddash/front.cfm
Digital Dashboard Exampleshttp://www.dundas.com/dashboard/start/samples/?Campaign=GoogleDashboardExamples&gclid=CKme4q6du6cCFQE2gwodCAz8Bg Active, Silverlight examples from Dundas
Executive IS: Drill-Down Sales Production Costs Production Costs Distribution Costs South Executives Fixed Costs North Overseas 5000 4500 4000 3500 3000 South 2500 North 2000 Overseas 1500 1000Central Management 500 0 1993 1994 1995 1996 Production: North Data Item# 1995 1994 Data 1234 542.1 442.3 2938 631.3 153.5Sales Data 7319 753.1 623.8 Production Distribution Data
Audits and Sarbanes-Oxley Financial Statements Cash Inventory Sales Inventory Some financial numbers are tied to the outside world. Validate these to anchor the statements.Bank Customer
Cloud Computing and ERP Several companies provide online services ◦ NetSuite.com ◦ Lawson, Oracle, and SAP provide some hosting options ◦ Many others Few companies use accounting systems in the cloud. ◦ Security, privacy, and reliability concerns ◦ Customization is needed in both cases and it can be expensive ◦ Variable costs can be expensive over time ◦ Browser-based approach is relatively new and mobile networking has been expensive and slow CRM is popular online ◦ Largely Salesforce.com ◦ But if it is not integrated with the ERP it is largely contact management.
Technology Toolbox: Selecting an ERPSystem Planning Stage Goals and OutputsInitiation Estimate costs, establish objectives, select teamInitial Planning Initial vendor list and basic features (hardware platform, fees, internationalization, vendor size and stability, industry-specific support and so on.)Requirements Identify business requirements. Detailed list ofGathering specifications, unit goals, and critical features. Evaluation criteria.Demos and Product demonstrations, ratings, and site visits.SelectionImplementation Customize applications, convert data, restructure company operations, define new processes and train employees.
Quick Quiz: Selecting an ERP System1. Assume you work for a mid-size construction firm that does about 30 percent of its work internationally. Find at least three ERP vendors and outline the features they provide.2. Assume you work for a large retail clothing firm with stores in most U.S. states. Identify the specific accounting and financial features you would want in an ERP system.3. Assume you work for a regional manufacturer that makes parts for cars. Explain how you would select and evaluate an ERP system. Find an example of a system that would work.
Quick Quiz: Designing an EIS1. Assume you have been hired to help a regional law firm. What key elements might go on the main EIS screen?2. Assume you have bee hired to help an airplane manufacturer, design the main EIS screen.3. To help design an EIS for a retail video store chain, briefly describe the screens and steps needed to identify stores that are performing below par and find possible causes of the problems.
Cases: Autos Annual Revenue 350 300 250 General Motors Billion $ 200 Ford 150 DaimlerChrysler 100 Toyota 50 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Net Income / Revenue 0.20 0.15 0.10 0.05 General Motors 0.00Ratio Ford -0.05 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 DaimlerChrysler -0.10 Toyota -0.15 -0.20 -0.25 -0.30