Chapter 2 enterprise system is an essential or shall we
(Enterprise Systems) say a vital part of a value chain.
 Describe the key features of an enterprise
system
1. Enterprise systems make possible the
coordinated operation of the organization’s
functional areas and provide a central
information resource for the organization.
2. Enterprise systems can reduce the risk that
unauthorized purchases will be made.
3. Organizations install enterprise systems to
differentiate themselves from their
competitors. (e.g. Conduct business in a
timelier and less costly manner)
 Describe the key features of an ERP system
1. ERP systems are software packages that can
be used for the core systems necessary to
support the enterprise systems.
2. If enterprise systems are the general
phenomenon then ERP systems are the
specific instance of the phenomenon.
3. ERP products are designed to offer
integration of virtually all of an organization’s
major business functions.
 What is a value chain?
 Value Chain – a chain of activities performed
by the organization to transform inputs into
outputs valued by the customer. Value is
created by performing the activities at lower
costs and by enhancing differentiation of its
products or services. Differentiation is
created through production of superior
quality, with innovative products and
services, and by responsiveness to customer
requirements for such features as product
design and customization, and quality of
service during and after the completion of a
sale.
 What is the relationship of the organizational
value chain and an enterprise system?
 As previously discussed, one of the value
provided by an enterprise system is the
coordination of value activities in the value
chain. The system performs this coordination
by sharing data across business processes.
From that said, we can conclude that an
 Describe the problems caused by lack of
information’s system integration.
 If a company would have disaggregated
information processes if would have to take
an employee, let’s say for example a customer
sales representative to compile up
information from various sources (such as
contacting warehouse, availability of the item,
or if it’s not available, when would it be
manufactured, the price of the item, the credit
limit of the customer and etc.) while actually
still talking to the phone on the customer. Of
course it would take hours to come up with
all the information needed because it is not
compiled up into one source. It surely would
not be a good customer service to keep the
customer waiting on the phone.
 Describe the four ways that an enterprise
system supports the functioning of an
organizations process.
1. It facilitates the functioning of the
organizations operations as business
events occur by, for example,
providing data as required to
complete the event, applying business
rules to ensure that the event is
handled properly, and comuunicating
the need for action to various
business units.
2. The information system retains
records about business events that
have occurred.
3. The information system stores data
that is useful for decision making.
4. An enterprise system provides
coordination of the organizations
processes through sharing of data
across the business process.
 Explain why it is important to capture the
who, what, where, and when in describing
business events.
 It is important because once the details of the
4 W’s are collected and recorded, the data can
be aggregated and summarized in any
manner that a given user chooses.
Aggregations and summarizations are
temporary and for the users application only,
 but the event data remain available to other  Describe the 6 steps in the order-to-cash
users in their original form. For routine process.
applications such as the generation of
accounting reports, programmed procedures
can be developed to generate such reports
automatically.

 Describe the four modules of the SAP R/3

system.

1. Sales and Distribution – contains the

functions related to the sale of goods to
customers and includes recording a customer
order, shipping goods to the customers, and
billing the customer. The three major steps in
the SD process are order entry, shipment, and
billing.
a. Order entry – might start with the receiving
and recording an inquiry from a customer
and preparing and recording a sales
acquisition. So and so on.
b. Shipment – includes scheduling the shipment,
picking the goods for shipment, and recording
the shipment.
c. Billing – creates invoices for all shipments
that are ready to be billed. The billing process
may be automatically triggered by each
shipment or may be executed periodically by
an action taken by a billing clerk.  Describe the 6 process in the purchase-to-pay
2. Materials Management – contains the process
functions related to the acquisition of goods
from vendors and management of the goods
while they are in stock. The module includes
preparing and recording a purchase order,
receiving the goods from the vendor, and
recording the vendors invoice.
3. Financial Accounting – plays a central role in
the SAP R/3 system. Business events from
other module, such as SD and <<, are
incorporated by the FI module into the
general ledger accounts and included in the
external account statements, the balance
sheet, profit and loss statement, and
statement of cash flows.
4. Controlling and Profitability Analysis –
handles the accounting, including cost center
accounting, profitability analysis for sales,
activity-based accounting, and budgeting. For
example, the CO module can produce internal
profit and loss statements for portions of an
organizations business.
5. Human Resources – includes functions
related to the recruitment, management, and
administration or personnel, payroll
processing, and personnel training and travel.
 List the advantages and disadvantages of an
enterprise system.