1 of 30

BUSINESS FUNCTIONS AND�SUPPLY CHAINS

Chapter 3

Prepared by:

Dr. Sara Sweidan

2 of 30

Effectiveness and Efficiency

3 of 30

productivity

The term “productivity” is commonly used as a synonym for efficiency.
Productivity specifically refers to the efficiency of human resources. Productivity improves when fewer workers are required to produce the same amount of output, or, alternatively, when the same number of workers produces a greater amount of output.

4 of 30

enterprise resource planning

Serving customers better and faster and learning more about their experiences and preferences is facilitated by customer relationship management (CRM) systems.
When customers place orders, the orders are executed in the supply chain (SCM). Often, information about the customer is collected as orders are taken.
Customer relationship management continues after delivery of the ordered goods in the forms of customer service and more marketing. When an organization enjoys the support of CRM and supply chain management (SCM) systems, it can plan its resources well. Combined, these systems are often referred to as enterprise resource planning (ERP) systems.

5 of 30

enterprise resource planning

7 of 30

Information systems indifferent business�functions are interdependent

The next figure, shows some of the most common business activities and their interdependence.
For example, cost accounting systems are linked to payroll, benefits, and purchasing systems to accumulate the cost of products manufactured by a company; and information from purchasing systems flows to both cost accounting and financial reporting systems.

9 of 30

Accounting

accounting ISs receive records of routine business transactions—such as the purchase of raw materials or services, or the sale of manufactured goods—from transaction processing systems (TPSs), which include point-of-sale (POS) machines. Such a system automatically routes every purchase of raw materials or services to the accounts payable system, which uses it to produce checks or transfer funds to a vendor’s bank account. Whenever a sale is recorded, the transaction is routed to the accounts receivable system (which generates invoices) and other destinations. Totals of accounts receivable and accounts payable can be automatically transferred to a balance sheet. Data from the general ledger can be automatically compiled to generate a cash-flow report or a profit-and-loss report for the past month, quarter, or year. Accounting ISs can generate any of these reports on demand, as well as at scheduled times.

11 of 30

Accounting

When a company develops and manufactures a new product that has never been available on the market, how can it determine a price that covers costs and generates a decent profit? It must maintain a system that tracks the costs of labor, materials, consulting fees, and every other expense related to the product’s development and manufacture. Cost-accounting systems, used to accumulate data about costs involved in producing specific products, make excellent use of IT to compile pricing data. ISs also help allocate costs to specific work orders.

12 of 30

Finance

The goal of financial managers, including controllers and treasurers, is to manage an organization’s money as efficiently as possible. They achieve this goal by
(1) collecting payables as soon as possible,
(2) making payments at the latest time allowed by contract or law,
(3) ensuring that sufficient funds are available for day-to-day operations, and
(4) taking advantage of opportunities to accrue the highest yield on funds not used for current activities. These goals can be best met by careful cash management and investment analysis.

14 of 30

Cash management

Financial information systems help managers track a company’s finances. These systems record every payment and cash receipt to reflect cash movement, employ budgeting software to track plans for company finances, and include capital investment systems to manage investments, thus balancing the need to accrue interest on idle money against the need to have cash available.
Systems that deal specifically with cash are often called cash management systems (CMSs).

15 of 30

Cash management

Systems that deal specifically with cash are often called cash management systems (CMSs).
One common use for a CMS is to execute cash transactions in which financial institutions transfer huge amounts of money using electronic funds transfer (EFT). EFT is the electronic transfer of cash from an account in one bank to an account in another bank.
More than 80 percent of all payments of the U.S. government are made using EFT systems.

16 of 30

Investment Analysis and Service

Financial managers need to consider many factors before they invest in a security. Some of the most important factors to consider are
(1) risk, measured as the variability (degree of change) of the security’s past yield; (2) expected return; and
(3) liquidity, a measure of how fast an investment can be turned into cash.
Special programs help calculate these factors and present the results either in tables or graphs to allow timely decision making.

17 of 30

Engineering

The time between generating an idea for a product and completing a prototype that can be mass-manufactured is known as engineering lead time, or time to market.
Brainstorming: the process of a group of colleagues meeting and working collaboratively to generate creative solutions and new ideas.
IT’s greatest contribution to engineering is in the area of computer-aided design (CAD) and rapid prototyping (creating one-of-a-kind products to test design in three dimensions).

18 of 30

Supply Chain Management

a supply chain consists of three major phases: procuring raw materials, processing the materials into intermediate and finished goods, and delivering the goods to customers. Processing raw materials into goods is manufacturing.
Supply chain management (SCM) consists of monitoring, controlling, and facilitating supply chains. Supply chain management (SCM) systems are information technologies that support SCM.

19 of 30

Supply Chain Management

In retail, the manufacturing phase does not exist, so the term “supply chain” refers only to the purchasing of finished goods and the delivery to customers of those goods.
Material requirements planning MRP systems help reduce inventory costs while ensuring availability of product to fulfill customer demand.
important input to MRP applications includes a list of all raw materials and subcomponent demands (called the bill of materials, or BOM)
The economic order quantity (EOQ) of a specific raw material is the optimal quantity that allows a business to minimize overstocking and save cost, without risking understocking and missing production deadlines.

20 of 30

Supply Chain Management

Manufacturing resource planning (MRP II) combines material requirements planning (MRP) with other manufacturing-related activities to plan the entire manufacturing process, not just inventory.
The most important input of MRP II systems is the master production schedule (MPS), which specifies how production capacity is to be used to meet customer demands and maintain inventories.
Successful MRP II systems have made a significant contribution to just-in-time (JIT) manufacturing, where suppliers ship parts directly to assembly lines, saving the cost of warehousing raw materials, parts, and subassemblies.

21 of 30

Supply Chain Management

When the process of manufacturing products is complete, the next link in the supply chain is shipping. Shipping is performed either by the manufacturer or by a hired shipping company.
Today’s trucks are equipped with computers, global positioning systems (GPS), and satellite communication devices. You might have seen small antennas on trucks.
Supply chain management software in transportation helps load trucks, ships, and airplanes in an optimal manner both in terms of space utilization and sequence of unloading.

22 of 30