2024 Erp Bpm Ch01 Overview of Erp Bpm

EM3418E ERP and Business process management
CHAPTER 1:
INTRODUCTION TO ERP AND BUSINESS PROCESS MANAGEMENT
Dr. Tran Thi Huong

Department of Business Administration
School of Economics and Management (SEM)
Hanoi University of Science and Technology (HUST)
[email protected]
Main content
Chapter 1: Introduction to ERP and Business Process Management

▪ 1.1 Definition of Enterprise Resource Planning System
▪ 1.2 Data and Reporting in an Enterprise Resource Planning System
▪ 1.3 Definition and components of Business Process
▪ 1.4 Concepts and Importance of Business Process Management
▪ 1.5 The Origin and Development of Business Process Management
▪ 1.6 Business Process Management Cycle
EM3418E ERP and BPM 2

1.1 Definition of Enterprise Resource Planning System
ERP: Enterprise Resource Planning

▪ is a solution that facilitates company-wide integrated information systems, covering
all functional areas
▪ performs core corporate activities and increases customer service, augmenting
corporate image

ERP EVOLUTION

ERP Modules

1.1 Definition of Enterprise Resource Planning System

ERP solution of SAP
▪ SAP was one of the aforementioned start-ups during the transition from MRP systems to ERP systems.
▪ SAP is now the market leader in ERP systems

ERP solution of SAP

1.2 Data and Reporting in an Enterprise Resource Planning System

Data Types in ERP Systems
Organizational Data Master Data Transaction Data
Company Code Person Purchase Order

Plant Material Invoice
Storage Location Customer Quotation
Distribution Channel Vendor Sales Order
Purchasing Organization Work Centre Transportation Order
… … …

Fast Facts about SAP S/4HANA
Organizational Unit
Enterprise SAP Terminology:
Client
Company Subsidiary
Company Code
Plant
Plant
Sales Organization
Sales Organization Sales Organization
Division
Storage Location Department Division Business Area Storage Location

Master Data
● Stored for a long time and seldom changed
● Represent logically grouped data like:
● Customer Master
● Material Master
● Vendor Master
● General Ledger accounts

Transaction Data
● Transaction data is the system record of business event.
● Depending on the business event, different master data and

organizational data will be referenced
● For example, during a sales order business event, the

following data is stored
● Organizational level: client, company code, sales organization
● Master data: customer, material, pricing (condition)
● Situational data: date, time, person, amount

Documents
● Transactions are data sets that are generated if a business transaction was executed.
● Is a record of the business transaction
● Includes all relevant predefined information from the master data and organizational entities
● Example:
● Sales Document
● Purchasing Document
● Material Document
● Accounting Document
Document Flow
● The document flow as well as the order status
allow the setting of the status at any point in time
● SAP revises the status every time a change in a

document takes place
EM3418E ERP and BPM
SAP Analytics Cloud

Fast Facts about SAP S/4HANA Source: SAP
Digital Transformation - Why?
Changing the s
Empowered &
way of life Simulation
Informed Customer
Forecasting
Customer Research
Contact to the
New
companies by
possibilities
social media etc
Drivers of
Change
IoT
Companies
Technology Cloud
New Changing
organization customer
expections Big Mobility
units
Data
● S/4HANA is the digital core of the

company that enables digital
transformation.
Source: SAP
Sucessful case of SAP application

Why BPM

Why BPM

1.3 Definition and components of Business Process
▪ Definitions
A business process is a collection of activities/ tasks in a given sequence, inter-
related events, and decision points that involve a number of actors and objects, which
collectively lead to an outcome that is of value to at least one customer.
▪ Example processes
▪ Order-to-Cash:
▪ Quote-to-Order:
▪ Procure-to-Pay:
▪ Issue/ Fault-to-Resolution: customer feedback, complaints
▪ Application-to-Approval: apply for permit, lisence

Example of a business process
Negative outcomes (value-reducing): Positive outcomes (value-adding):
• Fault not repaired in a timely manner • Fault repaired immediately with minor intervention
• Fault repaired but customer pays • Fault repaired, covered by warranty
more than expected
“My washing machine

doesn’t work…”
Insurance
Call Centre Company
Technician
Customer Customer
Parts
Service Store
Dispatch
Centre
VALUE
fault-to-resolution process
EM3418E ERP and BPM

Resources
According to APICS, “A set
of logically related tasks or
Process
activities performed to achieve
a defined business outcome.”
Suppliers Inputs Outputs Customers
EM3418E ERP and BPM

deals with retailers in order to sell goods

Check &
PO Package Load Notify Issue Match Payment
confirm
received products truck shipment invoice payment made
PO
Obtain Issue
PO Schedule Unload Check Schedule Goods
PO delivery
issued delivery truck invoice payment arrived
confirm. receipt
buy from the supplier
EM3300 Quản trị quy

28 trình kinh doanh
Customer Greet & Take Bring Serve Present Issue Customer

arrived seat order menu meal bill invoice paid
Load Clean Unload

Kitchen Brush Collect Sweep Kitchen
dish- kitchen dish-
is dirty grills laundry & mop is clean
washer surfaces washer
EM3418E ERP and BPM

Example of business processes in a company
Source: SAP

Example of business processes in a company
Source: SAP

Reference: Business processes Rummler’s framework
Assets & Organisation

Partners Function A Function B Function C
Financial
Human
Business Process
Customers
Resources
Business Process
Technology
Business Process
Materials

Reference: Business processes Rummler’s framework

Components of Business Process
A business process encompasses a number of events and activities
A typical process includes decision points
A process also involves:
▪ Actors, including human actors, organizations, or software systems acting on behalf of human
actors or organizations. Actors can be internal (participants) or external
▪ Physical objects, such as equipment, materials, products, paper documents.
▪ Informational objects, such as electronic documents and electronic records
The execution of a process leads to one or several outcomes (negative/ positive)
▪ Who are the actors in this process?

▪ Which actors can be considered as customers in this process?
▪ What value does the process deliver to its customers?
▪ What are the possible outcomes of this process?

Components of Business Process

Your turn
▪ Think of an organization and a process in that organization:

▪ Is it order-to-cash, procure-to-pay, fault-to-resolution…
▪ Who is/are the customer(s)?
▪ What value does this process deliver to its customer?
▪ Who are the key actors of the process?
▪ List at least 3 outcomes of the process.
36 EM3300 Quản trị quy trình kinh doanh

EM3418E ERP and BPM
Example 1.1 (page 3)
1. BuildIT is a construction company specialized in public works, such as roads, bridges, pipelines, tunnels and
railroads. Within BuildIT, it often happens that engineers working at a construction site (called site engineers)
need a piece of equipment, such as a truck, an excavator, a bulldozer, a water pump, etc. BuildIT owns very little
equipment and instead it rents most of its equipment from specialized suppliers.
2. The existing business process for renting equipment goes as follows. When site engineers need to rent a piece of
equipment, they fill in a form called “Equipment Rental Request” and send this request by email to one of the
clerks at the company’s depot. The clerk at the depot receives the request and, after consulting the catalogs of
the equipment suppliers, selects the most cost-effective equipment that complies with the request. Next, the clerk
checks the availability of the selected equipment with the supplier via phone or email. Sometimes the selected
option is not available. In these cases, the clerk has to select an alternative piece of equipment and check its
availability with the corresponding supplier.
3. After finding a suitable and available piece of equipment, the clerk adds the details of the selected equipment to
the rental request. Each rental request has to be approved by a works engineer, who also works at the depot. In
some cases, the works engineer rejects the equipment rental request. Some rejections lead to the cancelation of
the request, i.e., no equipment is rented at all. Other rejections are resolved by replacing the selected equipment
with another equipment—such as a cheaper piece of equipment or a more appropriate piece of equipment for the
job. In this latter case, the clerk needs to lodge another availability request.
4. When a works engineer approves a rental request, the clerk sends a confirmation to the supplier. This
confirmation includes a Purchase Order (PO) for renting the equipment. The PO is produced by BuildIT’s financial
information system using information entered by the clerk. The clerk also records the equipment rental in a
spreadsheet that is used to monitor all ongoing equipment rentals.
5. In the meantime, the site engineer may decide that the equipment is no longer needed. In this case, the engineer
asks the clerk to cancel the request for renting the equipment.
In due time, the supplier delivers the rented equipment to the construction site. The site engineer then inspects
the equipment. If everything is in order, the site engineer accepts the engagement and the equipment is put into
use. In some cases, the equipment is sent back because it does not comply with the requirements of the site
engineer. In this case, the site engineer has to start the rental process all over again.
6. When the rental period expires, the supplier comes to pick up the equipment. Sometimes, the site engineer asks
for an extension of the rental period by contacting the supplier via email or phone 1 to 2 days before pick-up. The
supplier may accept or reject this request. A few days after the equipment is picked up, the equipment’s supplier
sends an invoice to the clerk by email. At this point, the clerk asks the site engineer to confirm that the equipment
was indeed rented for the period indicated in the invoice. The clerk also checks if the rental prices indicated in the
invoice are in accordance with those in the PO. After these checks, the clerk forwards the invoice to the financial
department. The financial department eventually pays the invoice.
Summary infos of the process

Exercise 1.1: University Admission Process
WU Vienna‘s New Campus opened in 2013. Source: Wikimedia Commons

Exercise 1.1 (page 5)
1. In order to apply for admission, students first fill in an online form. Online applications are recorded in an information
system to which all staff members involved in the admissions process have access. After a student has submitted the
online form, a PDF document is generated and the student is requested to download it, sign it, and send it by post
together with the required documents, which include:
▪ certified copies of previous degree and academic transcripts,
▪ results of English language test,
▪ curriculum vitae,
▪ two reference letters.
2. When these documents are received by the admissions office, an officer checks the completeness of the documents. If
any document is missing, an email is sent to the student. The student has to send the missing documents by post.
Assuming the application is complete, the admissions office sends the certified copies of the degrees to an academic
recognition agency, which checks the degrees and gives an assessment of their validity and equivalence in terms of local
education standards. This agency requires that all documents be sent to it by post, and that all documents be certified
copies of the originals. The agency sends back its assessment to the university by post. Assuming the degree verification
is successful, the English language test results are then checked online by an officer at the admissions office. If the
validity of the English language test results cannot be verified, the application is rejected (such notifications of rejection
are sent by email).

3. Once all documents of a given student have been validated, the admissions office
forwards these documents by internal mail to the corresponding academic committee
responsible for deciding whether to offer admission or not. The committee makes its
decision based on the academic degrees and transcripts, the CV, and the reference
letters. The committee meets once every three months to examine all applications that
are ready for academic assessment at the time of the meeting.
4. At the end of the committee meeting, the chair of the committee notifies the admissions
office of the selection outcomes. This notification includes a list of admitted and rejected
candidates. A few days later, the admissions office notifies the outcome to each
candidate via email. Additionally, successful candidates are sent a confirmation letter by
post.

Questions:
▪ Who are the actors in this process?
▪ Which actors can be considered as customers in this process?
▪ What value does the process deliver to its customers?
▪ What (activities/ tasks) does each actor have to carry out?
▪ What are the possible outcomes of this process?

1.4 Concepts and Importance of Business Process Management
BPM as a body of methods, techniques, and tools to identify, discover, analyze,

redesign, execute, and monitor business processes in order to optimize their
performance. BPM:
▪ introduces a process-oriented view of the flows of materials, information and
services through and across organizations.
▪ includes concepts, methods, and techniques to support the design, administration,
configuration, enactment, and analysis of business processes.
▪ more than workflows and process modelling, it is the comprehensive practice that
aims to achieve an organization's goals by understanding, improving and optimizing
business processes

Reference: MBO and MBP

Related Disciplines
▪ Total Quality Management (TQM)

▪ Focus on continuously improving and sustaining the quality of products and services.
▪ TQM puts emphasis on products and services themselves, while BPM focuses on improvement of
processes.
▪ Applications of TQM are primarily in manufacturing while BPM more in service organizations.
▪ Operations Management
▪ Concerned with managing physical and technical functions of organization, particularly those relating to
production and manufacturing.
▪ Using probability theory, queuing theory, decision analysis, mathematical modeling, and simulation for
optimizing efficiency of operations.
▪ Such techniques are also useful in.
▪ Often concerned with controlling an existing process, while BPM making changes to an existing
process in order to improve it.

Related Disciplines
▪ Lean
▪ Originates from manufacturing, in particular Toyota Production System.
▪ Eliminates waste, i.e., activities that do not add value to the customer.
▪ BPM puts more emphasis on use of information technology as a tool to improve
business processes and to make them more consistent and repeatable.
▪ Six Sigma
▪ Originates from manufacturing, in particular from production practices at Motorola.
▪ Focuses on minimization of defects (errors).
▪ Strong emphasis on measuring output of processes, especially in terms of quality.
▪ Popular approach to blend Lean with Six Sigma, leading to Lean Six Sigma.

BPM can help:
▪ Reduce operation cost
▪ Maintain stability of business
▪ Good system/ processes result in good products and services
▪ Information transparency
▪ Reduce defects/ failures
▪ Track and trace

If you had to choose between two services, you would typically choose
the one that is:
Faster
▪ F…
Cheaper
▪ C…
Better
▪ B…
BPM support companies to achieve
that competitive advantages


In other words…
Information Yields
Technology Business
Value
Enables
Yields
Process
Change
Index Group (1982)

1.5 The Origin and Development of BPM
▪ 1.5.1 The Functional Organization

▪ 1.5.2 The Birth of Process Thinking
▪ 1.5.3 The Rise and Fall of BPR
@Paul Harmon

1.5.1 The Functional Organization

How process
moved out of
focus through ages

How process moved out of focus through ages
mối quan tâm toàn bộ quy trình cho tất toàn bộ quy trình cho một phần của một quy trình
của công nhân cả sản phẩm một sản phẩm đơn lẻ cho một sản phẩm đơn lẻ
năng lực hoàn toàn không chuyên môn hoá chuyên môn hoá
của công nhân chuyên môn hoá trung cấp hoàn toàn
người đa năng
thời thời thời thời

tiền sử cổ đại trung đại công nghiệp
Adam Smith: Processes and Division of Labour

“To take an example, the trade of a pin-maker: But in the way in which this
business is now carried on, it is divided into a number of branches:
One man draws out the wire; another straights it; a third cuts it; a fourth points it;
a fifth grinds it at the top for receiving the head; to make the head requires three
operations; to put it on is a peculiar business; to whiten the pins is another;
to put them into the paper;
and the important business of making a pin is, in this manner,
divided into about eighteen distinct operations.” Source: Smith 1776

Picture:
http://www.library.hbs.edu/hc/
collections/kress/kress_img/ada
m_smith2.htm

Frederick W. Taylor: Scientific Management
▪ Meticulously studying labor activities
▪ Work instructions for workers
▪ Managers oversee the productivity of groups of workers
▪ Units and their managers were structured hierarchically
▪ Functional organization remains dominant until the end of 1980s.

1.5.2 Birth of Process Thinking: Business Process Reengineering (BPR)

Purchasing process at Ford at the initial stage
Slide
Purchasing process at Ford after redesign
Slide
Exercise: Purchasing process at Ford
Consider the purchasing process at Ford.
1. Who are the actors in this process?
2. Which actors can be considered as customers in this process?
3. What value does the process deliver to its customers?
4. What are the possible outcomes of this process?
Slide
1.5.1 The Rise and Fall of BPR
▪ From 1980s to 1990s: emergence of books, white papers, and BPR teams in companies around the world.
▪ By the late of 1990s: many companies stopped BPR project. The reasons can be as follows:
1. Concept misuse:
▪ Projects were labeled BPR, even when business processes were not the core.
▪ Many corporations initiated reductions of workforce, often packaged as process redesign projects,
which triggered resentment.
2. Over-radicalism:
▪ Hammer’s early papers states: “Don’t Automate, Obliterate”.
▪ Many situations require a much more gradual (incremental) approach.
3. Support immaturity:
▪ Necessary tools and technologies were not yet available or insufficient.
▪ Much process logic had to be hard-coded in IT applications of the time.
▪ People grew frustrated when they noted that their efforts on redesigning a process were thwarted by a
rigid infrastructure.
▪ Reshaping Process Thinking

● Process Orientation is productive ● ERP Systems penetrate the market

▪ Reshaping Process Thinking: Job Functions of Process Owner

1.6 Business Process Management Cycle
Process
identification Chapter 2
Process
Process architecture
architecture
Conformance
Conformance and
and Process As-is
As-is process
process
performance
performance insights
insights discovery model
model
Process Chapter 3
monitoring and Process
analysis
controlling Chapter
4,5
Executable
Executable Chapter 5 Insights
Insights on
on
process
process weaknesses
weaknesses and
and
model
model their
their impact
impact
Process Process
implementation To-be
To-be process
process redesign
model
model

1.6.1 Process Identification
I. Designation step
Process
▪ Enumerate main processes Architecture
▪ Determine process scope
II. Prioritization step (aka Process selection)

Prioritize processes based on: Prioritized
Process
▪ Importance Portfolio
▪ Health
▪ Feasibility

1.6.2 Process discovery, design, modelling
• What we need to do and when – Control flow

• What we need to work on – Artifacts (physical & electronic)
• Who does the work – Resources (human & systems)
Finance ERP Invoice Report Invoice

Department
Enter Check
no
Invoice Invoice Post Invoice
mismatches
Invoice Details Mismatches
Invoice
received posted
Invoice DB Invoice
Senior Finance Officer
mismatch Block
exists Invoice
Invoice
blocked

1.6.3 Process analysis
Qualitative process analysis Quantitative process analysis
Root-cause analysis example Process simulation example

1.6.4 Process redesign
AS-IS process model TO-BE process model
Cost
Time
Flexibility
Quality
1.6.5 Process implementation
Process Process change

automation management
Executable
Job redesign
process design
IT development
Training
& configuration
Performance
Testing management
plan
... ….

1.6.6 Process monitoring and controlling
Dashboards, alerts & reports
Event DB logs
stream
Model-based analytics

Roles in BPM cycle during digital transformation project
Process
identification
BPM group
Process
Process architecture
architecture
Conformance
Conformance and
and Process As-is
As-is process
process
performance
performance insights
insights discovery model
model
System
admin/operations
team Process Process
monitoring and Process
owner Analyst
controlling analysis
Executable
Executable Process Insights
Insights on
on
process
process participants weaknesses
weaknesses and
and
model
model their
their impact
impact
Process Process
Developer
implementation To-be
To-be process
process redesign
model
model

Quiz: Componets of business process
Question 1: Which of the following is NOT a task?

A. Check insurance policy details
B. Insurance policy does not cover the damage (Your Answer)
C. Calculate settlement amount
D. Determine if customer is liable for damage
▪ Answer
▪ "Insurance policy does not cover the damage" is not a task. It is a condition
that may hold true or false and is likely to be part of a decision point in an
insurance claims handling process.

Quiz: Componets of business process
Question 2: Which of the following is NOT an event?

A. Purchase order received
B. Claim withdrawn by customer
C. Notify settlement decision to customer
D. Payment delay expired
Answer
▪ "Notify settlement decision to customer" is a task. One can see this because
the label starts with a verb in active form ("to notify"). Someone has to
contact the customer to notify the customer.

Quiz: Core process
Question 3: Which of the following statements refer to a critical (core) process of a company?
A. Human resource management
B. Accounts payable
C. Order-to-cash
D. Customer relationship management
Answer
▪ Order-to-cash is a process that is found in virtually every private organization. Human resource management and
Customer relationship management are "function" that an organization needs to have. In any reasonably large
company, there will be managers and workers specialized in these functions. These managers are workers will be
involved in several processes, like for example recruitment processes, complaint-to-resolution processes, etc.
Accounts payable is also a function (typically performed by a dedicated team or a department) which consists
mainly in producing invoices and collecting payments. The accounts payable department is typically for the final part
of the order-to-cash process.
▪ Note: some exception, recruitment is core process of headhunter company, accounting is core process of company
which offer accounting service; training process is support process of a company but core of universities

Quiz: Core process
Question 4: A water utility company provides drinking water to residents and businesses in a city of
one million inhabitants, as well wastewater treatment services to the city council. Which processes
are likely to be core processes of this company?
A. Bill-to-cash
B. Procure-to-pay
C. Issue-to-resolution
D. Infrastructure inspection
E. Debt collection
Answer
A+C+D. The bill-to-cash process is likely to be a core process in a water utility company because it is the process that ultimately
assures the cash flow of the company. Issue-to-resolution is also critical (core) since issues with water supply are very critical for
the company's customers - not handling them in a timely and effective manner is likely to generate bad reputation for the
company and possibly also formal complaints and court cases that may be costly to the company. Infrastructure inspection is
critical to a water company since infrastructure is the core asset of the organization, and poorly maintained infrastructure results
in customer issues and complaints. Procure-to-pay is clearly not core. Debt collection is to some extent important, especially if a
large number of customers are defaulting with their payment. But debt collection can in some cases be outsourced to a debt
collection agency, or isolated from the rest of the company in such a way that it does not interfere with the core processes.

Quiz: Performance measures
Question 5: The measurement-to-cash process of an electricity company is the process that starts
when the electricity meter of a customer is read at the end of a month and ends (successfully) when
the customer pays the electricity bill for that month. In this process, which of the following
performance measures are directly related to costs?
A. Average electricity consumption per customer
B. Cycle time
C. Percentage of under-billing errors
D. Percentage of over-billing errors
E. Price per kilowatt-hour (KWh)
Answer
B+C+D. Cycle time leads to costs since if cash is not collected promptly the company loses in interest rates
payment. Billing errors cause costs, obviously in the case of under-billing errors, but also in the case of
over-billing errors since these latter would typically entail customer complaints which then entail costs to be
resolved

Quiz: BPM roles
Question 5: In a process-oriented organization, who is directly accountable for poor performance of a process?
A. The process participants
B. The executive management team
C. The process owner
D. The process analyst
E. The BPM group
Answer
C. First of all, that all of the above actors are concerned by poor performance of a process (in the case of process participants at
least for those processes they participate in).
However, the process participants are not directly accountable for poor process performance. They share responsibility for the
process, but are not ultimately answerable for poor performance of the whole process.
The executive management team is responsible for overseeing the entire organization, including all its processes, but not directly
accountable for poor performance of a process.
This accountability is delegated to a manager as close as possible to the process, which is the process owner.
Process analysts and the BPM group support the process owner(s) in their work, but are not directly accountable for poor
process performance.

Exercise 1.6 and 1.7
1. What type of process is the above one: order-to-cash, procure-to-pay, application-to-approval, or issue-
to-resolution?
2. Who are the actors in this process?
3. Who are the customers?
4. What are the tasks of this process?
5. What value does the process deliver to its customers?
What are the possible outcomes of this process?
7. Taking the perspective of the customer, what performance measures can be attached to this process?
8. What potential issues do you foresee this process might have? What information would you need to
collect in order to analyze these issues?
9. What possible changes do you think could be made to this process in order to address the above issues?

Exercise 1.6 (1)
Consider the following process at a pharmacy.
Customers drop off their prescriptions either in the drive-through counter or in
the front counter of the pharmacy. Customers can request that their prescription
be filled immediately. In this case, they have to wait between 15 min and 1 hour
depending on the current workload. However, most customers are not willing to
wait that long, so they opt to nominate a pickup time at a later point during the
day.
Generally, customers drop their prescriptions in the morning before going to
work (or at lunchtime) and they come back to pick up the drugs after work,
typically between 5 p.m. and 6 p.m. When a prescription is dropped off, a
technician asks the customer for the pick-up time and puts the prescription in a
box labeled with the hour preceding the pick-up time. For example, if the
customer asks to have the prescription be ready at 5 p.m., the technician will
drop it in the box with the label 4 p.m. (there is one box for each hour of the day).

Exercise 1.6 (2)
Every hour, one of the pharmacy technicians picks up the prescriptions due to be
filled in the current hour. The technician then enters the details of each
prescription (e.g., doctor details, patient details and medication details) into the
pharmacy system. As soon as the details of a prescription are entered, the
pharmacy system performs an automated check Called Drug Utilization Review
(DUR). This check is meant to determine if the prescription contains any drugs
that may be incompatible with other drugs that had been dispensed to the same
customer in the past, or drugs that may be inappropriate for the customer taking
into account the customer data maintained in the system (e.g., age).
Any alarms raised during the automated DUR are reviewed by a pharmacist who
performs a more thorough check. In some cases, the pharmacist even has to call
the doctor who issued the prescription in order to confirm it.

Exercise 1.6 (3)
After the DUR, the system performs an insurance check in order to determine
whether the customer’s insurance policy will pay for part or for the whole cost of
the drugs. In most cases, the output of this check is that the insurance company
will only pay for a certain percentage of the costs, while the customer has to pay
for the remaining part (also called the co-payment). The rules for determining
how much the insurance company will pay and how much the customer has to
pay are very complicated. Every insurance company has different rules. In some
cases, the insurance policy does not cover one or several drugs in a prescription,
but the drug in question can be replaced by another drug that is covered by the
insurance policy. When such cases are detected, the pharmacist generally calls
the doctor and potentially also the patient to determine if it is possible to perform
the drug replacement. Once the prescription passes the insurance check, it is
assigned to a technician who collects the drugs from the shelves and puts them
in a bag with the prescription stapled to it.

Exercise 1.6 (4)
After the technician has filled a given prescription, the bag is passed to the
pharmacist who double-checks that the prescription has been filled correctly.
After this quality check, the pharmacist seals the bag and puts it in the pick-up
area. When a customer arrives to pick up a prescription, a technician retrieves
the prescription and asks the customer for payment in case the drugs in the
prescription are not fully covered by the customer’s insurance.

Exercise 1.7 -1
Consider the following process at a company of 800 employees in the
early 1990s.
Almost any employee at the company can initiate a purchase request by filling in
a form. The purchase request includes information about the goods to be
purchased, the quantity, the desired delivery date, and the approximate cost. The
employee can nominate a specific vendor. Employees often request quotes from
vendors in order to get the required information. Completing the entire form can
take a few days as the employee often does not have the required data. The quote
is attached to the purchase request. This completed request is signed by two
supervisors. One supervisor has to provide a financial approval, while the other
supervisor has to approve the necessity of the purchase and its conformance
with the company’s policy (e.g., if purchasing a software tool, is it compatible
with the company’s standard IT operating environment?).

Exercise 1.7 -2
… Collecting the signatures from the two supervisors takes on average 5

days. If it is urgent, the employee can hand-deliver the form, otherwise it is
circulated via internal mail. A rejected purchase request is returned to the
employee.
Sometimes, the employee makes minor modifications and resubmits the
purchase request.
Once a purchase request is approved, it is returned to the initiator of the
request. The employee forwards the form to the purchasing department.
Employees often make a copy of the form for their own record, in case the
form gets lost. The purchasing department checks the completeness of
the purchase request and returns it to the employee if it is incomplete.

Exercise 1.7 -3
… The purchasing department then enters the approved request into the
company’s enterprise system. If the employee has not nominated any vendors, a
clerk at the Purchasing Department selects one based on the quotes attached to
the purchase requisition, or based on the list of vendors (also called master
vendor list) available in the company’s enterprise system.
Sometimes, the quote attached to the request has expired in the meantime. In
this case, an updated quote is requested from the corresponding vendor. Other
times, the vendor who submitted the quote is not recorded in the company’s
enterprise system. In this case, the purchasing department should give
preference to other vendors who are registered in the enterprise system. If no
such vendors are available or if the registered vendors offer higher prices than
the one in the submitted quote, the purchasing department can add the new
vendor into the enterprise system.

Exercise 1.7 -4
… When a vendor is selected, the enterprise system automatically generates a purchase
order. The purchase order is sent to the vendor by fax. A copy of the purchase order is
sent to the accounts payable office. This office, part of the financial department, uses an
accounting system that is not integrated with the enterprise system, where purchase
orders are stored. The goods are always delivered to the goods receipt department. When
goods are received, a clerk at this department selects the corresponding purchase order
in the enterprise system.
The clerk checks the quantity and quality, and generates a document called goods receipt
form from the purchase order stored in the enterprise system. The goods are forwarded
to the employee who initiated the purchase requisition.
A print-out of the goods receipt form is sent to the accounts payable office. If there are
any issues with the goods, they are returned to the vendor and a note is sent to the
purchasing department and to the accounts payable office for archival.

Exercise 1.7 - 5
… The vendor eventually sends the invoice directly to the accounts payable office. A clerk
at this office compares the purchase order, the goods receipt and the invoice. This latter
task is called three-way matching. Three-way matching is time-consuming because the
clerk needs to carefully investigate each discrepancy. The payment process takes so long
that the company often misses the deadline for invoice payment and has to pay a penalty.
At the end, the clerk triggers the bank transfer and sends a payment notice to the vendor.
Some vendors explicitly indicate in their invoice the bank account number to which the
transfer should be made. It happens that the bank account number and name indicated in
the invoice differ from the one recorded in the vendor database.
Sometimes payments bounce back, in which case the vendor is contacted by phone,
email or postal mail. If new bank details are given, the transfer is attempted again. If the
issue is still not resolved, the accounts payable office has to contact again the vendor in
order to trace the cause of the bounced payment.

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EM3418E ERP and Business process management

Dr. Tran Thi Huong

Chapter 1: Introduction to ERP and Business Process Management

EM3418E ERP and BPM 2

ERP: Enterprise Resource Planning

EM3418E ERP and BPM 3

EM3418E ERP and BPM 4

EM3418E ERP and BPM 5

EM3418E ERP and BPM 6

EM3418E ERP and BPM 7

EM3418E ERP and BPM 8

EM3418E ERP and BPM 9

Organizational Data Master Data Transaction Data

Company Code Person Purchase Order

Purchasing Organization Work Centre Transportation Order

EM3418E ERP and BPM 10

Enterprise SAP Terminology:

Storage Location Department Division Business Area Storage Location

● Stored for a long time and seldom changed

● Represent logically grouped data like:

● General Ledger accounts

● Transaction data is the system record of business event.

● Depending on the business event, different master data and

● For example, during a sales order business event, the

● Organizational level: client, company code, sales organization

● Master data: customer, material, pricing (condition)

● Situational data: date, time, person, amount

● SAP revises the status every time a change in a

EM3418E ERP and BPM 17

Digital Transformation - Why?

● S/4HANA is the digital core of the

EM3418E ERP and BPM 20

EM3418E ERP and BPM 23

EM3418E ERP and BPM 24

EM3418E ERP and BPM 25

“My washing machine

EM3418E ERP and BPM

EM3418E ERP and BPM

deals with retailers in order to sell goods

buy from the supplier

EM3300 Quản trị quy

Customer Greet & Take Bring Serve Present Issue Customer

Load Clean Unload

EM3418E ERP and BPM

EM3418E ERP and BPM 30

EM3418E ERP and BPM 31

Assets & Organisation

EM3418E ERP and BPM 32

EM3418E ERP and BPM 33

▪ Who are the actors in this process?

EM3418E ERP and BPM 34

EM3418E ERP and BPM 35

▪ Think of an organization and a process in that organization:

36 EM3300 Quản trị quy trình kinh doanh

Summary infos of the process

EM3418E ERP and BPM 39

WU Vienna‘s New Campus opened in 2013. Source: Wikimedia Commons

EM3418E ERP and BPM 41

EM3418E ERP and BPM 42

EM3418E ERP and BPM 43