3 – White – Sales and Distribution in ERP
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MIS2901 – An Experiement in Teaching and Learning
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Mart Doyle
The Sales and Distribution system manages the sales order process. The sales order process consists of 6 steps: Pre-sale activities, sales order processing, inventory sourcing, delivery, billing, and payment.
the pre-sale activities include customers getting pricing information about the company’s products. the sales order processing phase includes recording a sales order, determining the selling price, and recording the order quantities. Inventory sourcing is process that ensures that all requested material can be delivered to customers on time. the delivery phase includes releasing documents that warehouses use to pick, pack, and ship orders. the billing phase creates an invoice by copying the sales order data, which is then printed and mailed, faxed, or sent electronically to customers. finally the payment stage involves the customer sending, either physically or electronically, the payment in to the company.
What are the six events for any sale?
a) pre-sales activities, sales order processing, inventory sourcing, delivery, billing, payment
b) buying, selling, finding, delivering, billing, paying
c) before sale, sale, after sale, billing, paying, delivering
ERP systems use a common database. This is very beneficial, and can help to improve the sales order process. For example, ERP systems can minimize the possibility of data entry errors, and they also provide accurate information in real time (instead of batch processing) to all users. ERP systems are also capable of tracking all transactions involved in a sales order, whether they are invoices, packing lists, RMA numbers, or even payments. There are many different ERP systems. SAP’s R/3 is one type and is discussed in depth within the text, but other ERP software works similarly to that of a SAP R/3.
In an SAP R/3, any important transactions and events are identified by a number, which is used for record keeping purposes. Any electronic evidence documenting a transaction in a SAP R/3 is called a “document.” In the sales order process in SAP R/3, there are 6 events for any sale: pre-sales activities, sales order processing, inventory sourcing, delivery, billing, and payment.
Pre-sales activities would include customers obtaining price information about a company’s product and any marketing activities that the company engages in. Customers are able to get pricing information regarding the products of a particular company either through an inquiry or a price quotation. An inquiry is simply a statement of prices; there is no guarantee implied. A price quotation, however, is a binding document. By offering a customer a price quote, the seller is guaranteeing that the buyer can purchase that product at the quoted price for a certain period of time.
Sales order processing is the series of activities that are necessary in order to record a sales order, such as recording the items to be purchased, determining the selling price, and recording the quantities of the order. During this event, the SAR R/3 System verifies that the customer has enough available credit to pay for the order by checking the Accounts Receivable tables in the system’s database. If the customer has sufficient credit, the order is processed. If not, the order is either rejected or the customer is contacted to discuss payment options.
Inventory sourcing occurs when the SAP R/3 system checks the company’s inventory records and the production planning records to verify that the requested products are available for sale and can be delivered accordingly. This is known as an Available-to-Promise Check, or an ATP check.
In the Sap R/3 System, delivery refers to releasing the documents that the warehouse uses to pick, pack, and ship orders. This allows deliveries to be created so that the warehouse and shipping activities are carried out efficiently.
Billing involves creating an invoice by copying the sales order data into the invoice document. This document can then be printed and mailed, faxed, or electronically transmitted to the customer. At this point in the process, accounting records are also updated automatically. Then, when payment is received, it is processed by the SAP R/3 system (cash is debited and the customer’s count is credited).
Multiple Choice Question:
Which of the following is not a feature of an ERP system?
a. Common database
b. Batch processing
c. Capability to track all transactions involved in a sales order
d. Real time processing
That’s a great summary. I liked how you broke down pre-sales activities, sales order processing, inventory sourcing, delivery, billing, and payment so I knew exactly what was what and why they differed from each other
I also enjoyed how you broke down each section and went into explaining what each one mean. Now I get a better understanding of how we applied these things to our SAP project.
In a single sales order, there may be up to six events for a sales order, including pre-sales activities, sales order processing, inventory sourcing, delivery, billing, and payment. The first event, pre-sales activity, consists of providing customer pricing information through inquiries, or quotes. The sales order processing process usually starts by pulling data from a quote or an inquiry. During the inventory sourcing process, inventory records and production plans may be checked to determine if sufficient material will be available to deliver the customer’s order on time. The delivery process is when an electronic document is created to direct the warehouse to pack and ship the customer’s order. Billing is the process in which a system creates an invoice by copying data from the sales order; accounts receivable is debited and the sales account is credited. In the final ERP process, payment, customers either write checks or transfer funds electronically.
Which of the following is NOT a process of the sales and distribution in ERP?
(a) sourcing
(b) payment
(c) inquiry
(d) delivery
Your summary was very good, very terse but completely understandable. I liked how you differentiated between the sales process starting with pre-sales activities, sales order processing, inventory sourcing, delivery, billing, and ending with payment. Although each process is defined, I think it is important to clarify why an ERP system is beneficial in these processes. An ERP system helps streamline all of these processes to help cut out the middle man and sell the goods to the customer much quicker. For instance, inventory sourcing instantly allows a salesperson to see if the required amount of goods is in stock or on backorder, etc. This not only helps the sales process go quicker but decreases the mistakes made, which will only lead to happier customers.
One major benefit conveyed by an ERP system is the integration of the sales and accounting departments. Before ERP systems, sales and accounting each kept their own records and updated them from time to time. However, at any given moment, the accounting data is probably not up to date. As a result, the people in accounting do not always know how much money is expected in (or, if a lot of returns are made, out). This is an annoyance at most times but can lead to serious problems. With ERP systems, accounting data is constantly updated whenever a sale or return is made so that there is no confusion.
Why is it important to integrate the sales and accounting departments?
A. If they are not integrated, the accounting department may be using data that is out-of-date.
B. If they are not integrated, the sales department may be using data that is out-of-date.
C. Both A & B above.
D. It is not important to integrate the sales and marketing departments in an organization.
ANSWER: A
The integration of functional departments through ERP systems is indeed very resourceful, efficient and time-saving. When the accounting department and the sales division segregated their records, the accountants were unable to update and process invoices in “real time”. This may fail to reflect a customer’s most recent transactions or payments. One issue that may arise is the accounting division is offering a lower credit limit to a customer, even though the customer may have made a lump payment recently and in reality has established good credit. This not only negatively impacts customer relations, but also discourages customer expenditure and future business for those who remain customers of FS.
I agree that this is one of the most useful features of an ERP system. In order to make transactions as smooth and efficient as possible, it is necessary to have accurate information. Integrating sales and accounting allows accounts to be updated in real time and enables the company to be certain that all of their numbers are correct. Also, if transactions are delayed because a customer’s credit limit has not been properly updated, the customer will likely try to find another seller that can handle their purchases efficiently.
In comparison to fitter-snacker, their processes were much more independent and their success suffered because of it. The integration of this data makes processes so much more efficient. Because the technology is so different many people are wary to switch, but we can see that it definitely is effective. It makes me wonder, how companies survived before ERP’s were used?
Yes and in taking accounting I learned that the process of accounitng itself is tedious; therefore, the avoidance of other errors that could be made could greatly imporove accounting efficiency and could greatly increase overall company efficiency.
i spelled accounting wrong in the second sentence
I agree. Having an integrated system eliminates errors, loss, and frustrations (to say the least). But, I think that choosing answer A is arguable. Why can’t it be C? The systems integrates both accounting and sales department after all. In this way, both accounting and sales department are up-to-date.
Sharing a common database not only save the resource, it also helps the company improve their ability to secure accuracy and efficiency. Instead of using batch transaction, company nowadays is able to conduct real time transcation, which is very beneficial for companies to compete with other major competitors.
I think your post gives a simple explanation of why integration is important, but I believe you could really expand on the multiple uses of integrating accounting and sales. You focused on how this integration allows everything to be updated in real time, but what about how everything is entered in manually. ERP systems will make the accounting department more accurate and efficient. Also, rather than having constant communication between sales and accounting, which can cause mistakes, either department can access the database to see what transactions or sales are pending.
After reading the topic that was presented and reading what others also have wrote I would also say I would agree with the girl up top that why couldn’t it be accounting also? I figure they both went hand and hand. This one is an hard one that could be debatable.
Document Numbers
One main driver of the SAP R/3 is the use of document numbers to keep organization in the sales process. By labeling all documents and information related to a particular transaction, everything can be easily found when necessary. When anyone calls in customer service about a specific sale, the files can be quickly found and the necessary adjustments can be made. The customer generates his/her purchase order number and each party involved has a different number to refer to the sales translation. SAP creates the sales order number and records the customer purchase order. Every document has its own number and the Document Flow tool links all document involved with a single transaction together.
Question:
What files does a Document Flow link?
A.)All documents associated with a specific customer.
B.)All documents associated with a specific seller.
C.)All documents associated with a specific transaction.
D.)Documents are only ordered by number and not linked.
Answer: C.
Very good question…it points out the distinction between the customer’s information flow and the document.
I agree, that is a good question. It makes you really think about the documents are a flow of. You explained the concept well. Document numbers, I feel, are one of the driving forces in the integration. Only with a SAP R/3 system, or similar ERP, are document numbers relevant. They are helpful throughout the whole process, and cut down on tons of paperwork. Customers are happy because information is found quickly, instead of an employee having to shift through everything to find the specific transaction.
Is this how companies actually do transactions now though? I feel that most transactions are put under an account number and that is how companies link documents pertaining to the same customer/order. Would that not be easier than having separate numbers for the customer’s portion and the company’s portion of the transaction?
The one great thing about SAP is that it helps company to keep all the files, documents, and transaction in order, so whenever all those information needed, a staff coulf pull it right off. It not just spped up the customer service, but also serves as a great way to contain the business into right direction.
I agree as well. This description of the SAP R/3 is excellent. Someone reading this description with no prior knowledge of the SAP R/3 system gains vital informartion after reading it and this is what makes this post so effective.
Great question and also I learn something new. A first I really didn’t see the point of Document Flow link. But now me as a cutomer I think it would be great for someone to gain access to the information quickly than looking and searching for vital information.
As stated above, one important part of a sales order process is the inventory sourcing. This is when the company will look within it’s inventory to check that it has the requested product in stock.
An important tool that SAP enables in inventory sourcing is Available-to-Promise, or ATP. This is when the company will check if a product is available in its inventory for a customer, and then make a promise to this customer to deliver the available product.
If the company doesn’t have the full quantity of product, they have a range of options to fulfill the customer’s request. The company can make a partial delivery on the requested date, deliver fully on a later date, or make two partial deliveries one on time and the other later.
This helps a company to better monitor their inventory and also to keep in touch with a customer and create better relations with them. If a customer is kept in the loop with ATP then they will probably return to that company and increase its sales since they know they will be taken care of.
Question: What does ATP stand for?
A) Availabe-to-Promise
B) Available-to-Purchase
C) Automatic-Technical-Purchase
D) Automatic-Trial-Product
Answer: A
I can attest to the importance of inventory sourcing. I once dealt with an online store that claimed to have a certain set of speakers in stock. Two weeks after I originally purchased them, they informed me via email that the speakers were sold out and that they were unable to process the order. If something similar to an inventory sourcing system were in place, I would not have had to deal with that whole ordeal.
ATP gives the company the very ability to pay close attention to their inventory, so whenever there is an order, they would know exactly how many products they can sale to the customers. If the company cannot fulfill the customer’s request, the company can make a partial delivery on the requested date, deliver fully on a later date, or make two partial deliveries one on time and the other later. This feature gives the company great flexibilty and help them determine the production level in ahead.
This is a great point to bring up. Before an ERP system, FS didnt know what they had in inventory for certain. They were breaking into boxes to complete orders as well as having to call customers to let them know of problems that have come up and were missing shipping dates. By having ATP, the sales people as well as everyone else knows what is available and can better serve the customers which in return will lead to an increase in sales.
This is a great description of an ATP. You thoroughly decribed its purpose and how companies use it;however, I thought the question you gave afterwards could have asked what an ATP is or what it is used for rather than what it stands for.
Sales order processing is the second event in a sales order. Once all of the pre-sales activity has taken place (which consists of providing customers pricing information via quotes and inquiries), sales order processing begins by pulling data from these inquiries and quotes obtained in the first event, which serves to minimize errors. Included in this process would be things such as the retrieval of customer contact data, the recording of items that need to be bought, the determination of price, and an automatic credit/background check. The final determination of price takes into account many things, including discounts. It is important to note that these things are done automatically by the system based on the configuration settings.
I believe that the sales order processing step is integral in the sales order process as a whole. This step is where the sale starts to become catered to an individual customer as opposed to the general public. Thus, the customer feels more “catered to,” enhancing the relationship between consumer and company.
Which of the following is a consideration when determining pricing?
A. Quantity discounts
B. Customer-specific discounts
C. Both A and B (correct answer)
D. None of the above
I like the way you emphasized the importance of the customer. Sometimes “discounts” are not necessarily discounts.
Most of the companies uses alot of specific ideas to create and design different discounts, because they want to make sure that they can also get an good profit as well for their sales company.
An ERP system is responsible for tracking all aspects of a sales order. The most common ERP system used today is the SAP ERP System. SAP includes six events for every sale.
1. Pre-Sales Activities – the customer receives info on the price of the product being offered by the supplier
2. Sales Order Processing – the actions that take place when an order is placed including determining the selling price, recording the order, and checking the customers credit
3. Inventory Sourcing – a check of inventory to see if their are sufficient goods to fulfill an order. If not the system will recommend an increase in production.
4. Delivery – the release of the documents that are needed to pick, pack, and ship orders
5. Billing – an invoice is made based on the info in the sales order document and sent to the customer by the accounting department
6 Payment – When Payment is received the appropriate accounts are debited and credited to adjust the balance in the customers account to the appropriate number.
Which is not one of the 6 step of the SAP ERP system
A. Billing
B. Inventory Sourcing
C. Marketing
D. Sales Order Processing
Answer: C
This is a very good post and question. I like how you list each of the six steps then describe each briefly. This method is simple but effect. The question is also effective in that requires the individual to have an understanding of all six steps, not just one in particular.
Loved the way you seperated this and define each one one-by-one this is really helpful for the SAP project and also I believe a simular question was posted I don’t remembe. Great details
Loved the way you seperated this and define each one one-by-one this is really helpful for the SAP project and also I believe a simular question was posted I don’t remembe. Great details…….I place this in the wrong place sorry.
An ERP allows for a much more efficient billing process. First, the invoice is automatically created by copying information from the sales order data. This helps to avoid a lot of the errors that can be caused by manually entering information into the system and ensures that all the information is consistent. Once the invoice is created it can be sent electronically to the customer. Although this is probably the most efficient method, the seller also has the ability to fax the invoice or print it out and mail it. Also, after the invoice is created, the accounting records are automatically updated. As noted in other posts, this ensures that the company always has accurate information and makes it easier to manage accounts receivable, revenue, and other accounts.
Which of the following is not part of the billing process?
A. Recording payment
B. Creation of invoice
C. Delivering invoice
D. Updating accounting records
Answer: A
Everything from order to invoice is automatically generated right after the customers placed their orders. It keeps all the information up to date, and greatly reduced the possibility of having mistakes or delay during the entire process. On the other hand, the company would benefit greatly from the efficiency.
The accounting processes performed by the SAP R/3 system may be a small feature, but proves to be valuable. The automation of certain accounting processes such as increasing the Accounts Receivable in the Billing process and recording payments makes the books more accurate, creates less work, and makes the entire sales and distribution process run quicker and smoother. It avoids the process of taking an order to the Accounting department and having them enter the entry.
Which one is not a benefit that the SAP R/3 system brings to the accounting department?
a. Books are more accurate
b. Automatically records Billing and Payment entries
c. Does tax returns
d. Makes the recording process quicker
Answer is C
The discount pricing in the R/3 system is an important feature. It allows the company to impose different kinkdds of discounts on its products. But more importantly, it keeps track of and limits the amount that the salespeople are able to discount. This ensures that salespeople do not give a discount so high that the sale is no longer profitable. This procedure is a good way to make sure that the company is not losing money.
What was the control mechanism developed by SAP for R/3?
Condition technique
In sales and distribution, an ERP system works by keeping track of all transactions and coalescing the information into one common database. An ERP system is useful during the processing of the order by allowing its users to store information within the system. The kind of information that is stored within an ERP system are discounts, pricing alternatives, and credit availability. An ERP also processes payment once it is received from the customer. An ERP can do this automatically which cuts down on potential recording errors.
In a sales and distribution ERP, delivery means:
a) ordering fast food
b) releasing documents the warehouse uses to generate orders
c) transferring goods
d) all of the above
Ordering fast food! That’s a good one! Would I dare put a question with this type of an answer on an exam?
What does delivery mean in an ERP? Is it just the transferring of info or is it the goods as well?
This was kind of vague I still dont understand the answer to this question. What does delivery mean in an ERP?
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