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Chapter 1
Chapter Summary
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• Companies that make and sell products have business processes that involve four main
functional areas: Marketing and Sales (M/S), Supply Chain Management (SCM),
Accounting and Finance (A/F), and Human Resources (HR). These areas of operation
perform the following functions:
• Marketing and Sales develops products, sets product prices, promotes products
through advertising and marketing, takes customer orders, supports customers, and
creates sales forecasts.
• Supply Chain Management develops production plans, orders raw materials from
suppliers, receives the raw material into the facility, manufactures products, maintains
facilities, and ships products to customers.
• Accounting and Finance performs financial accounting to provide summaries of
operational data in managerial reports, and also is responsible for tasks such as
controlling accounts, planning and budgeting, and cash-flow management.
• Human Resources recruits, hires, trains, and compensates employees, ensures
compliance with government regulations, and oversees the evaluation of employees.
• Each functional area is served by an information system. Information systems capture,
process, and store data to provide information needed for decision making.
• Employees working in one functional area often need data from other functional areas. Ideally,
functional area information systems are integrated, so shared data are accurate and timely.
• Today, business managers try to think in terms of business processes that integrate the
functional areas, thus promoting efficiency and competitiveness. An important aspect
of this integration is the need to share information between functional areas, and with
business partners. ERP software provides this capability by means of a single common
database.

Key Terms
Accounting and Finance (A/F) integrated information system
business function Marketing and Sales (M/S)
business process raw data
Enterprise Resource Planning (ERP) safety stock
functional areas of operation sales forecast
Human Resources (HR) stockout
information system (IS) Supply Chain Management (SCM)

Exercises

1. Distinguish between a business function and a business process. Describe how a business
process cuts across functional lines in an organization. How might a manager organize
his or her staff in terms of business processes rather than functional departments? What
benefits would there be with this type of organization? What challenges would it pose?

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