Concepts in Enterprise Resource Planning, Fourth Edition 3-1

Chapter 3:
Marketing Information Systems and the Sales Order Process

Another Look

CRM and Social Media

Responses will vary. Social media challenges include:

 Accurately measuring return on investment generated by marketing campaigns
 Allocation of sufficient resources
 Finding knowledgeable staff to successfully implement social media initiatives
 Using social media as a continuous brand building medium instead of a one-time
marketing exercise

Exercises

1. Assume you are Fitter Snacker’s new marketing manager, hired to clean up
some of the company’s problems, as outlined in the beginning of this chapter.
You just started this job, and you are getting to know your sales team and the
company’s processes. Describe all the problems you observe about the way
Fitter’s sales force currently takes and fills an order. Now convince upper
management of the need to improve the existing system and put an ERP system
in place.

Fitter Snacker Problems

Sales quotes and orders

Quotes and orders are first recorded by hand, on paper. Data entry errors are possible,
as well as calculation errors (pricing, discounts, credit) especially since this is your
new job and you are nervous. Quotes and orders are sometimes conveyed by fax –
again, paper-based. Faxes can be misinterpreted or illegible.

Data is communicated within Fitter by fax, by phone, and by word of mouth. Usually
this means that those in Sales, Accounting, and the Warehouse do not have up–to-
date and complete information. This leads to (for example):
 Inability to forecast delivery dates and promising infeasible delivery dates
 Inability to handle customer inquiries properly, which leads to customer
frustration
 Errors in calculating proper discounts – too much or too little can be given
 Errors in credit checks – credit can be denied to worthy customers
Concepts in Enterprise Resource Planning, Fourth Edition 3-2

ERP system treatment

 Quotes and orders are handled electronically
 Data is stored in one central database
 Calculations are programmed, to reduce errors
 Use of ERP reduces delays and errors and therefore reduces customer
frustration

In addition to just taking the order, there are other phases involved in the process:

Inventory sourcing
There is no coordination between Production and Marketing. Customers usually ask if
a certain number of cases of a product will be available for shipping on the desired
date. In Fitter, the Marketing representative cannot say one way or another for sure.
To answer the question, the Warehouse personnel must be consulted, and will render
a best guess, based on current volume on hand and assumed production levels.
Ideally, the production forecast and the delivery schedule would be available to
answer the customer's question, but Fitter does not have software that can do that.
Thus, it is possible to run out of product at Fitter – or to have an excess on hand.

ERP system treatment

The ERP system has the production schedule and the schedule of deliveries in the
database. Inventory sourcing is automatically done. If available, the customer is
informed. If not available the production scheduled can be adjusted.

Invoicing problems
Data about sales is sent to Accounting three times a week. Accounting keys in the
data as quickly as they can get to it, and prints out the customer bills (invoices) at that
time as well. Thus, a billing can lag a shipment, and in fact is sent separately by
Fitter. If there are amendments to the order after it is first placed, Accounting may or
may not hear about them in time to prepare a correct invoice. Thus, incorrect invoices
may be sent out.

ERP system treatment

The ERP system creates the invoice, which is included with the shipment. Errors are
reduced in this way. Accounting uses the data entered by Marketing, for the sale, and
so the accounting records are up to date and accurate.

Recording payments
Customers are supposed to send a paper copy of their invoice in with their payment.
If they do that, Fitter accounting clerks know which orders have been paid and which
remain open. Often customers do not do that, however. Recording the payment
properly thus becomes a time consuming research project for the Fitter accounting
clerk.
Concepts in Enterprise Resource Planning, Fourth Edition 3-3

ERP system treatment

Customers can be queried for the invoice number(s), if not provided with the
payment.

2. If Fitter installs an ERP system, how could they reorganize their sales division to
be more efficient? Be specific about how you would rearrange divisions, or
consolidate them.

Responses will vary. An ERP system can improve a company’s sales order process in
several ways. Because an ERP system uses a common database, it can minimize data
entry errors and provide accurate information in real time to all users. An ERP system
can also track all transaction data (such as invoices, packing lists, RMA numbers, and
payments) involved in the sales order process. Therefore, some students may consider
consolidating Fitter’s Wholesale and Direct Sales divisions.

3. Fitter’s current sales order accounting processes involves recording sales in each
division and then periodically sending certain sales data to Accounting for
invoicing and financial reporting. Complete sales order data are retained in each
sales division for business analysis purposes.

Assume that different divisions of the Yummy Foods Company buy NRG-A and
NRG-B bars from each of Fitter’s sales divisions. To complicate matters, some
divisions of Yummy buy store-brand bars from Fitter. (Yummy owns
convenience store outlets.) Fitter management has asked for an analysis of the
Yummy Foods account. They want to determine if there are opportunities to
expand the company’s relationship with Yummy; however, they want to assess
the profitability of the relationship before proceeding. The management team
wants to see what products each division sells to Yummy, how much is sold, and
on what terms. Assume that in Fitter’s current system, all the required data are
available only at the sales division level. What steps will be needed to pull this
companywide analysis together? (Review how each division sells its products.)
Do you think a sales division manager will be enthusiastic about sharing all data
with his or her counterpart in the other division? Do you think there might be
some reluctance? Why?

Report Preparation

Assume the format of the report is:

Div/product Date Quantity Full price Discount % Net Price

Wholesale
NRG-A

NRG-B
Concepts in Enterprise Resource Planning, Fourth Edition 3-4

Store

Div Total

Direct

NRG-A

NRG-B

Store

Div Total

Total FS
NRG-A

NRG-B

Store

Grand
Total

The analyst (from Accounting or from one of the sales divisions) will probably not be
able to get all the information in one place. Accounting will probably not have it all –
recall that the sales divisions keep some data to themselves for business analysis
purposes. Therefore, the analyst will probably need to go to the divisional records.

The sales divisions would give Accounting a data file that would allow them to produce
invoices. This file would probably have quantities and amounts due. It would probably
not have the full price values prevailing at the date of sale and the allowed discount(s)
data (recall that a customer might be granted more than one discount in a transaction).
Concepts in Enterprise Resource Planning, Fourth Edition 3-5

Using the invoice data files, the analyst can compute much of the needed data for the
report. The completeness will depend on how complete the transaction data is and how
far back these data files go in time. The format of the data files submitted to Accounting
may or may not be the same. The analyst would have to work around any differences in
format. The analyst will probably have to do some number-crunching with a hand
calculator to get the full values. This could be automated in a computer program, of
course, but might not be worth the trouble of writing the program, testing it, and entering
the data for it to run with.

If quantities – or other data -- are not included in the invoice data file, the analyst will
need to go to divisional records themselves. This would mean accessing other computer
files or (worse yet) accessing paper records, which may or may not be easy to get at in
the file cabinets.

In short, preparing this report cannot be done in an automated manner. It must be

assembled using a combination of data files and (probably) paper files. And it must be
done using records that are in more than one place: Accounting and the sales divisions.

Willingness to cooperate with analyst

The analyst should not be surprised if he or she gets some resistance from divisional
personnel. Sales people are usually rewarded for making sales – i.e., not on making sales
at a profitable price. If sales people have been granting excessive or improper discounts,
divisional management would want to hide that fact, if possible.

The customer may be playing one division off against the other in seeking better
discounts. In theory, the two divisions service different sectors, but in practice, a sales rep
is not going to turn down orders if the size is anywhere near what it is supposed to be for
the division. Division management would probably have a sense that this is happening to
them, but would have little incentive to stop the practice, if evaluated on a sales basis.
The kind of report being developed would obviously be evidence that the customer is
playing games – a fact sales management might not want to publicize.

4. Continuing the Yummy Foods example, now assume that Fitter has an SAP ERP
system installed. Each sales division records sales in the same way. Sales records
exist in real time and are kept in the company’s common database. What steps
will be needed to pull this company-wide analysis together? Do you expect that
the divisions will meet the new system with enthusiasm or reluctance?

Each sales division records their sales in the same way in the common ERP database.
The data needed for the report can be extracted using routine query techniques. If the
analyst does not know how to use queries (unlikely), sales orders can be accessed
electronically – see the examples of SAP sales orders in the chapter. Any questions
can be resolved using the built-in audit trail.
Concepts in Enterprise Resource Planning, Fourth Edition 3-6

If the divisions are asked to pull together company-wide reports on a regular basis,
then they should embrace the new ERP system because their jobs have become much
easier.

5. Assume you are a new summer intern at Fitter Snacker, working directly under
the CIO. Your first job is to write a memo describing the poor information flow
between three functional areas in the company: Marketing and Sales,
Accounting and Finance, and Supply Chain Management. Focus on the lack of
information flow to and from Marketing and Sales, in particular.

Responses will vary. The following scenario is typical at Fitter Snacker and serves to
demonstrate the lack of information flow between the departments:

Say a salesperson calls on a good customer, Health Express. The salesperson offers
Health Express deep discounts for buying a certain number of NRG bars. At the same
time, the Marketing Department is running a sale on NRG bars. Marketing sends
Health Express a flyer advertising the discounted price, which is less than what the
salesperson just offered in person. Meanwhile, the vice president of Fitter plays golf
with the CEO of Health Express and offers yet another discount. The connection or
relationship with the customer is confused because the customer is receiving
inconsistent information. The departments need to streamline their interactions with
customers to ensure a consistent message.

6. How does an ERP system like SAP simplify looking up customer numbers,
setting a delivery date, and charging a unique price to a given customer? Include
a discussion of master data.

SAP's ERP simplifies looking up a customer number by allowing users to search for
customer numbers on a variety of parameters such as distribution channel.

The delivery date is calculated within SAP ERP. Taking into accounting what is in
stock, what is slated for production, what raw materials are on hand or when new
ones can be acquired, and existing orders are all factors in SAP ERP deciding if the
delivery date can be met. The system also will take into account weekends and
holidays if the factory is shut down.

Prices are consistent with SAP ERP because each customer is configured with
specific pricing and discounts, if applicable. No errors are allowed to be made by the
sales clerk because the prices are set when the order is saved in SAP ERP.

Master data in SAP ERP is data that stays fairly stable, such as data about customers
and materials. It is important to keep this data so it can be called upon during the
sales order process. For example, when typing in a customer number and saving a
sales order, the company name, billing address, shipping address, payment
information, and pricing details are all pulled from master data. This allows the clerk
Concepts in Enterprise Resource Planning, Fourth Edition 3-7

filling in the order to just type in the customer number, and SAP does the rest. The
result is a very consistent and accurate ordering system.

7. What is document flow? Why is it important for auditors of a company?

Document flow is SAP ERP's way of keeping track of all activities or transactions in
the system. When an order is placed, as it moves through the system, each step is
assigned a unique number, called a document. All these numbers or documents are
related to that one sales order. If we call up the document flow on the SAP ERP
screen, we can click on any number and see what the details are of that phase. For
example, if we click on the Accounting document related to a particular sales order,
we can check to see if the bill has been paid. This is a very significant benefit of the
SAP ERP system. It is an auditor's dream come true.

8. A CIO of a major pharmaceutical company once stated that the reason the
corporation used ERP systems could be summed up in one word: control. How
does an ERP system give management control?

ERP systems must be "configured" before their use. When that happens,
management's expectations about standard operating procedures are recorded as part
of the ERP program's operating code. Transactions are then processed by the ERP
program, following management's expectations.

At first, the observer might think: "The program is controlling operations, not the
humans. This risks loss of control.” But "Control" is not necessarily enhanced by
virtue of a manager personally checking transactions or by looking over employees'
shoulders. Such approaches to supervision can actually backfire – employees do not
necessarily make fewer mistakes and the manager can become a bottleneck that
reduces productivity and stifles initiative. In fact, management control is improved to
the extent supervision of repeating events is systematized and made as automatic as
possible; managers can then turn their attention to non-repeating or novel events.

One very good example from Chapter 3 is the handling of price discounts. Fitter's
current system – on-paper "supervised" by humans – actually allows sales people to
give such high discounts (or multiple ones) that all the profit is taken out of the
transaction. Their discount-granting process is clearly out of control. If Fitter had
SAP ERP, the appropriate level of discounts (by customer, by type of customer, by
employee, or whatever) could be pre-coded, according to the way management wants
to control the situation. Transactions are then automatically recorded properly – in
effect, SAP ERP supervises the discount granting aspect of the transaction.

Another good example is the ability to manage inventory sourcing with ERP. In
Fitter’s current situation, stock outs are possible, as are overages. With ERP,
Marketing and Production interactions would be handled by software in as routine a
way as possible, and this would let management avoid stock outs (or overages).
Concepts in Enterprise Resource Planning, Fourth Edition 3-8

Un-integrated information systems, by their nature, require data to (eventually) be

passed between functional areas. This is often done in an inaccurate or tardy way.
Even if done accurately and on time, there is often a need to re-key data from one
program into another, and this usually leads to data-entry errors. When data is
inaccurate or out of date, management control is hampered. ERP systems, by their
nature, prevent these problems and thus increase control.

9. How can a business better serve its customers using the APO tool in SAP ERP?

The APO tool stands for Advanced Planner and Optimizer. This helps the supply
chain become more efficient through excellent planning. In terms of customer
service, using APO allows a material or product to be found amongst a number of
plants. So if a customer is requesting an item that is out of stock in their normal
supplying plant, the APO tool will search all the other facilities to find that item.
Without APO, each plant and/or site must be searched individually for that desired
item.

10. Assume you are the marketing manager for a large pet food company, such as
Iams. You need to launch a new marketing campaign. What social media
channels would you use for this campaign? How can CRM help your new
strategy?

Social media channels worth considering include blogs, Facebook, Google, Twitter,
and YouTube.

Marketing campaigns can be extremely expensive. If the marketing department can

plan, execute, and evaluate the campaign well, then the CRM component will add
great value to the organization.

Note that in order to launch a new campaign, one needs to schedule the tasks of the
campaign, allocate the resources, and make sure the budget can cover all the
expenses. SAP ERP can get involved in providing data on customers so as to improve
direct marketing.

Using the Campaign Execution Activity Management in SAP CRM, the entire
execution of the marketing campaign can be managed and monitored. Assessment of
the campaign can also be recorded for future campaign success.