Integrated Business Processes with ERP Systems

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INTEGRATED BUSINESS

PROCESSES

with ERP SYSTEMS

SIMHA R. MAGAL JEFFREY WORD

J O H N W I L E Y & S O N S, I N C.

Grand Valley State University SAP AG

Manchester Business School

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Vice President & Executive Publisher Don Fowley

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This book was set in 10/12pt Times Ten by MPS Limited, a Macmillan Company, Chennai, India

and printed and bound by RRD/Jefferson City. The cover was printed by RRD/Jefferson City.

Copyright © 2012 Simha R. Magal and Jeffrey Word. All rights reserved. No part of this

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To Kajal, Anushka, and Vandana

—SRM

To Chelsi, Benton, Davis and Maggie

—JBW

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1 Introduction to Business Processes 1

The Functional Organizational Structure 2

Business Processes 4

Global Bike Incorporated (GBI) 15

How to use This Book 16

2 Introduction to Enterprise Systems 23

Enterprise Systems 23

Data in an Enterprise System 29

Reporting 37

3 Introduction to Accounting 49

Organizational Data 51

Master Data 52

Key Concepts 58

Processes 61

Reporting 72

4 The Procurement Process 83

Organizational Data 84

Master Data 89

Key Concepts 95

Process 102

Reporting 119

5 The Fulfillment Process 127

Organizational Data 128

Master Data 139

Process 145

Credit Management Process 167

Reporting 170

6 The Production Process 179

Master Data 182

Process 196

Reporting 215

vii

Contents

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7 Inventory and Warehouse Management Processes 221

Inventory Management 222

Organizational Data in Warehouse Management 234

Master Data in Warehouse Management 239

Processes in Warehouse Management 242

Reporting 257

8 The Material Planning Process 269

Master Data 271

Process 285

Reporting 304

9 Process Integration 315

Procurement, Fulfi llment, and IWM Processes 318

Procurement, Fulfi llment, Production, and IWM Processes 332

Index 349

viii Contents

*Additional Chapters available on WileyPlus

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ix

Preface

As more and more businesses around the world adopt enterprise systems, it

becomes increasingly important for students to develop a more process-centric

perspective that refl ects the realities of the modern business environment in

which they will work. Because business operations and enterprise systems are

so tightly integrated, we have designed Integrated Business Processes with ERP

Systems to refl ect the ways in which real-world business processes are man￾aged and executed in the world’s leading enterprise resource planning (ERP)

system, SAP® ERP. Students, regardless of their functional discipline, will be

able to apply the real-world concepts discussed in this text immediately upon

entering the workforce and will be better prepared to succeed in their careers.

Integrated Business Processes with ERP Systems covers the key processes

supported by modern ERP systems. This textbook is designed for use as both

a reference guide and a conceptual resource for students taking ERP-focused

courses at schools that are members of SAP University Alliances program

(http://uac.sap.com). It examines in depth the core concepts applicable to all

ERP environments, and it explains how those concepts can be utilized to execute

business processes in SAP systems.

KEY FEATURES

INTEGRATED PROCESS APPROACH

Integrated Business Processes with ERP Systems approaches ERP topics using

an integrated process perspective of the fi rm. Each process is discussed within

the context of its execution across functional areas in the company, with special

emphasis on the role of data in managing the coordination between activities

and groups. Students will gain a deep appreciation for the role of enterprise sys￾tems in effi ciently managing processes from multiple functional perspectives.

ACTIVE LEARNING

Consistent with the focus on the process perspective of business operations,

this book and the accompanying online supplements are designed to actively

engage students through multiple learning activities. Students will be required

to apply the concepts covered in the text to real-world situations and to the

running case study used in their hands-on exercises. In this way, students can

experience what the each employee in a process must do, what data they need,

and how their actions impact other people in the company.

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x Preface

RUNNING CASE STUDY

Many key examples, demonstrations, and assignments incorporated through￾out the book are based on a fi ctional company, Global Bike, Incorporated

(GBI). GBI exists virtually in the GBI ERP system, which is used to provide

students with hands-on experience with executing the various processes in

SAP ERP. Students will become intimately familiar with GBI’s operations and

will develop a deep appreciation for the real-world importance of the process

concepts in the course.

REAL-WORLD EXAMPLES

In addition to the integrated approach and the GBI case study, Integrated

Business Processes with ERP Systems includes multiple scenarios from compa￾nies in diverse industries that demonstrate how businesses actually utilize ERP

capabilities. Real-world experiences associated with enterprise systems—both

positive and negative—are integrated throughout the chapters to illustrate the

key concepts.

GLOBAL APPROACH

The textbook content, GBI running case study, and real-world examples have

all been designed from a global perspective. Differences between U.S. and

European business practices are highlighted within the context of process

execution to illustrate the global capabilities of ERP systems. In addition, the

real-world stories are based on familiar global companies.

SAP® ERP SOFTWARE

This textbook and its associated demos and exercises were prepared using the

most current version of the software, at the time of printing: SAP ERP 6.0,

Enhancement Pack 4. The key concepts contained in this textbook are unlikely

to change in any signifi cant way. Nevertheless, as SAP continues to innovate

and update the core SAP ERP solution, it may become necessary to adjust

classroom content in minor ways to better refl ect the capabilities of the lat￾est version of the software. Please speak with your SAP University Alliances

contact to obtain additional information on utilizing SAP ERP software in

your classroom.

PEDAGOGICAL STRUCTURE

Consistent with this textbook’s focus on the integration of business processes

with ERP systems, we have divided the book into two key areas. The fi rst area,

which consists of Chapters 1–3, focuses on the integrated nature of business

processes and the enterprise systems that businesses use to manage them.

Chapters 1–2 introduce the foundational concepts, which are subsequently

developed in the process chapters in the remainder of the book. Chapter 3

examines the basic concepts in fi nancial and management accounting, which

are integrated into the subsequent chapters.

The second part of the book contains the process chapters, which are

structured based on a standard template that is comprised of two main parts.

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Preface xi

The fi rst part of each chapter discusses the organizational and master data

associated with the process, and the second part examines each step of the

process in detail. Each chapter concludes with a discussion of the reporting

capabilities needed to manage the process effi ciently.

Links to online demonstrations and additional online learning materials

are embedded throughout each chapter to reinforce and expand on the most

important concepts.

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xii

WileyPLUS

WileyPLUS is a research-based, online environment for effective teaching

and learning. WileyPLUS is an integral part of the learning experience for this

textbook. For this reason we have made it available to students 24/7 from any￾where they connect to the Internet. WileyPLUS contains a wealth of supple￾mental learning materials designed to enhance students’ understanding of the

concepts introduced in the course. Plus, instructors can use these materials to

customize the course to meet their particular objectives. Students will complete

and submit their hands-on assignments and quizzes through the WileyPLUS

environment. In addition, the authors have taken full advantage of the rich

multimedia learning environment in WileyPLUS to provide demonstrations of

each process step discussed in the text. We have also embedded videos of real￾world examples that highlight the key concepts in each chapter.

WileyPLUS can complement the printed textbook. Alternatively, stu￾dents can purchase the full textbook and additional materials digitally through

WileyPLUS.

Hands-on Exercises Hands-on assignments are provided to students

online. Students will access the assignments via WileyPLUS and complete

them in a live SAP system (GBI 2.0). They will then submit the exercises digi￾tally to the instructor for easy grading.

Demonstrations: Recorded demonstrations of each key process activ￾ity in every chapter are available on WileyPLUS for both instructors and stu￾dents. Instructors can use the demonstrations in class discussions to illustrate

key aspects of the content. Students can also access the demonstrations on

WileyPLUS either while they are reading the chapters, to enhance their com￾prehension of the material, or when they are completing the hands-on exer￾cises, to refresh their memory of the activity.

INSTRUCTOR’S SUPPLEMENTS

This text is supported by many valuable tools to help instructors prepare and

deliver engaging lectures and robust testing for conceptual understanding.

Instructor supplements are accessible via WileyPLUS and via the Instructor’s

Companion Site at www.wiley.com/college/magal. Supplements include the

following:

Instructor’s Manual: The Instructor’s Manual is the distillation of more

than a decade of classroom experience in teaching an integrated process

approach to ERP systems. It contains in–depth pedagogical materials designed

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WileyPLUS xiii

to help instructors prepare their courses and deliver an engaging, multi-modal

learning experience.

Classroom Presentation Slides: Each chapter includes detailed class￾room presentation slides with key concepts, lecture notes, textbook graphics,

and discussion questions.

Test Bank: A detailed test bank for each chapter is provided on the

Instructor’s Companion Site. Each chapter contains multiple-choice, fi ll-in￾the-blank, and true/false questions with multiple levels of diffi culty for each

question type.

FEEDBACK

The authors and publisher invite students and instructors to ask questions,

provide comments, and communicate directly with the textbook team on the

following Web site: www.extrabandwidth.com/forum

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