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Chapter 7 Processes, Organizations, and Information Systems
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ERP
Database
Materials Production & Sales & Customer
Purchasing Management Manufacturing Distribution Relationship Financial & '42
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Module Module Module Module

Vendor
Query Update with
Purchase Bicycle Parts Finished Bicycle
Vendor Customer Demand
Name Query Parts
Query Update with
Parts Used Update
Update with
Raw Materials Order with
Cash Parts Received Sale
Production Bicycle
Schedule Update with Query
Shipped Bicycles
Raw Materials Sales
Finished Goods
Vendor Prospects
Inventory Customer
Receiving Components
Finished Bicycle Sales Pitch
Accepted Customer Order
Materials Make Bicycle Bicycles Cash
Approved Salesperson
Order
Raw Materials Shipping
Inventory Boxed Bicycles

Figure 7-12
ERP Information Systems Contrast this situation with the ERP system in Figure 7-12. Here, all activity is processed
by ERP application programs (called modules), and consolidated data are stored in a centralized
ERP database. When Sales is confronted with the opportunity to sell 1,000 bicycles, the infor-
mation it needs to confirm that the order, schedule, and terms are possible can be obtained from
the ERP system immediately. Once the order is accepted, all departments, including purchasing,
manufacturing, human resources, and accounting, are notified. Further, transactions are posted
to the ERP database as they occur; the result is that financial statements are available quickly. In
most cases, correct financial statements can be produced in real time. With such integration, ERP
systems can display the current status of critical business factors to managers and executives, as
shown in the sales dashboard in Figure 7-13.
Of course, the devil is in the details. It’s one thing to draw a rectangle on a chart, label it
“ERP Applications,” and assume that data integration takes all the problems away. It is far more
difficult to write those application programs and to design the database to store that integrated
data. Even more problematic, what procedures should employees and others use to process those
application programs? Specifically, for example, what actions should salespeople take before they
approve a large order? Here are some of the questions that need to be answered or resolved:
• How does the Sales department determine that an order is considered large? By dollars?
By volume?
• Who approves customer credit (and how)?
• Who approves production capacity (and how)?
• Who approves schedule and terms (and how)?
• What actions need to be taken if the customer modifies the order?
• How does management obtain oversight on sales activity?