Chapter 10

The Order Entry/Sales

(OE/S)
Process

Accounting Information Systems 7e

Ulric J. Gelinas and Richard Dull

Copyright © 2008 Thomson Southwestern, a part of The Thomson Corporation. Thomson, the Star logo, and
South-Western are trademarks used herein under license.

1
 Learning Objectives
• Describe the relationship between the OE/S process and its business
environment.
• Illustrate the potential of the OE/S process to assist management
decision making.
• Summarize how ERP add-ons, e-business, and other technologies
can improve the effectiveness and efficiency of the OE/S process.
• Depict the typical logical and physical characteristics of the OE/S
process.
• Prepare a control matrix for some typical OE/S processes, including
explanations of how business process control plans can accomplish
OE/S operations and information process control goals.
 Introduction
• The order entry/sales (OE/S) process includes the
first four steps in the order-to-cash process
1. pre-sales activities
2. sales order processing
3. picking and packing the goods
4. shipping
• Billing and processing the customer payment, are
described in Chapter 11, the billing/accounts
receivable/cash receipts process

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 Process Definition and Functions
• The primary function of the OE/S process is to
create information flows that support the following:
1. Repetitive work routines of the sales order department,
the credit department, and the shipping department
2. Decision needs of those who manage various sales and
marketing functions
3. Assist in the preparation of internal and external reports

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 Horizontal View OE/S
VP marketing VP finance VP logistics

Customer
2. Credit
request 1.Customer
1. Customer
3. Credit
places
order
Sales Order department
approval Credit Department
4b. Picking
ticket
order
Warehouse
4a. Acknow-
ledgement 4c. Sales
order 5. Completed
Picking ticket
4d. Sales
order
6b. Shipping
notice

B/AR/CR

Shipping department
6c. Shipping
6d. Shipping notice
notice

General ledger

6a. Shipping
notice

Carrier

5
 Horizontal View OE/S
VP marketing VP finance VP logistics

2. Credit
Customer request 2. Sales
1. Customer
order
3. Credit
order
approval Credit Department
Sales Order department 4b. Picking
ticket department
4a. Acknow-
ledgement 4c. Sales
Warehouse
requests
order 5. Completed
Picking ticket credit
4d. Sales
order approval
6b. Shipping
notice from the
B/AR/CR
credit
Shipping department

6d. Shipping
6c. Shipping
notice
department
notice

General ledger

6a. Shipping
notice

Carrier

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 Horizontal View OE/S
VP marketing VP finance VP logistics 3. Credit
department
2. Credit
Customer request
informs sales
1. Customer
order
3. Credit
order
approval Credit Department
Sales Order department 4b. Picking
ticket department
4a. Acknow-
Warehouse of
ledgement 4c. Sales
order 5. Completed
Picking ticket
disposition
4d. Sales
order
of credit
6b. Shipping
notice request
B/AR/CR

Shipping department
6c. Shipping
6d. Shipping notice
notice

General ledger

6a. Shipping
notice

Carrier

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 Horizontal View OE/S
VP marketing VP finance VP logistics

Customer
2. Credit
request
4a. Sales order
department
1. Customer
order
Sales Order department
3. Credit
approval Credit Department
4b. Picking
acknowledges
ticket
order to the
Warehouse
4a. Acknow-
ledgement 4c. Sales
customer
order 5. Completed
Picking ticket
4d. Sales
order
6b. Shipping
notice

B/AR/CR

Shipping department
6c. Shipping
6d. Shipping notice
notice

General ledger

6a. Shipping
notice

Carrier

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 Horizontal View OE/S
VP marketing VP finance VP logistics

Customer
2. Credit
request 4c. Sales
1. Customer
3. Credit
order
order
Sales Order department
approval Credit Department
4b. Picking
ticket
department
Warehouse notifies
4a. Acknow-
ledgement 4c. Sales
order 5. Completed
shipping
Picking ticket
4d. Sales department
order
6b. Shipping
notice
of sales
B/AR/CR
order
Shipping department
6c. Shipping
6d. Shipping notice
notice

General ledger

6a. Shipping
notice

Carrier

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 Horizontal View OE/S
VP marketing VP finance VP logistics

Customer
2. Credit
request 4b & d .
1. Customer
3. Credit
Sales order
order
Sales Order department
approval Credit Department
4b. Picking
ticket
department
Warehouse notifies
4a. Acknow-
ledgement 4c. Sales
order 5. Completed
warehouse
Picking ticket
4d. Sales and
order
6b. Shipping
notice
B/AR/CR
B/AR/CR
process of
Shipping department shipment
6c. Shipping
6d. Shipping notice
notice

General ledger

6a. Shipping
notice

Carrier

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 Horizontal View OE/S
VP marketing VP finance VP logistics

Customer
2. Credit
request 5. Warehouse
1. Customer
3. Credit
sends
order
Sales Order department
approval Credit Department
4b. Picking
ticket
completed
Warehouse picking ticket
4a. Acknow-
ledgement 4c. Sales
order 5. Completed
to shipping
Picking ticket
4d. Sales
order
6b. Shipping
notice

B/AR/CR

Shipping department
6c. Shipping
6d. Shipping notice
notice

General ledger

6a. Shipping
notice

Carrier

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 Horizontal View OE/S
VP marketing VP finance VP logistics

Customer
2. Credit
request 6a, b, c.
1. Customer
3. Credit
Shipping
order
Sales Order department
approval Credit Department
4b. Picking
ticket
department
Warehouse informs
4a. Acknow-
ledgement 4c. Sales
order 5. Completed
carrier,
Picking ticket
4d. Sales B/AR/CR
order
6b. Shipping
notice
process,
B/AR/CR
and
Shipping department general
6c. Shipping
6d. Shipping
notice
notice
ledger
General ledger
process of
shipment
6a. Shipping
notice

Carrier

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 Horizontal View OE/S
VP marketing VP finance VP logistics

Customer
2. Credit
request 6d. Shipping
1. Customer
3. Credit
department
order
Sales Order department
approval Credit Department
4b. Picking
ticket
informs sales
Warehouse order
4a. Acknow-
ledgement 4c. Sales
order 5. Completed
department
Picking ticket
4d. Sales of shipment
order
6b. Shipping
notice

B/AR/CR

Shipping department
6c. Shipping
6d. Shipping notice
notice

General ledger

6a. Shipping
notice

Carrier

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Vertical Perspective of the
OE/S System

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 The OE/S Process –
Context Diagram

Custome r
Custome r orde r

Ge ne ral le dge r
inv e ntory
sale s update Ge ne ral
le dge r
Custome r OE/S proce ss
acknowle dge me nt proce ss
Comple te d
packing slip
Sale s orde r
notification

Shipping's
Bill of
billing
lading
notification
Billing/
accounts Carrie r
re ce iv able /
cash re ce ipts
(B/AR/CR)
proce ss
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OE/S
Level
Zero
DFD

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 OE/S
Level 1
DFD:
Validate
Sales
Order

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 Level 1 DFD: Validate Sales Order
• 1.1 - Verify inventory available
– Triggered by a customer order
– Inquiry of inventory master file to check inventory availability
– “Available to promise (ATP)” can be complicated
– Facilitated by an enterprise system that can look worldwide within the
organization and up and down the supply chain to determine when goods
can be delivered
– If a sufficient level of inventory is on hand to satisfy the request, the
order is forwarded for further processing, as depicted by the data flow
“Inventory available order”
– If a customer orders goods that are not in stock, process 1.1 runs a
special back order routine
– Record demographic and other info in marketing data store

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 Level 1 DFD: Validate Sales Order
• 1.2 - Check credit
– Process 1.2 establishes the customer’s existence and then approves
credit
– With an enterprise system one record should exist for each customer,
wherever he or she is located and from whatever parts of the
organization he or she makes purchases
– This allows an organization to readily determine the amount of credit
available to that customer worldwide
– Without this central database a customer could incur multiple receivable
balances that in total exceed an amount the selling organization
considers desirable

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 Level 1 DFD: Validate Sales Order
• 1.3 Complete sales order
– process 1.3 receives an accepted order from process 1.2.
– It then completes the order by adding price information, from
the inventory master data
– As noted earlier, this could be a complicated calculation based
on who and where the customer is and if the item is to be
discounted
– Then, process 1.3 performs the following activities
simultaneously:
• Updates the inventory master data to allocate the quantity ordered to
the sales order
• Updates the sales order master data to indicate that a completed sales
order has been created
• Disseminates the sales order
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 Level 1 DFD-Dissemination data flows:
Validate Sales Order
• A picking ticket authorizes the warehouse to “pick” the
goods from the shelf and send them to shipping
– The picking ticket identifies the goods to be picked and usually
indicates the warehouse location
• A customer acknowledgment is sent to the customer to
notify him or her of the order’s acceptance and the
expected shipment date
• A sales order notification is sent to the billing
department to notify them of a pending shipment
– this could take many forms including a message received on a
computer screen or a report of pending shipments

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 Questions that need answers
• Where is sales volume (quantity and dollars)
concentrated?
• Who are the specific major customers (by sales and
by profitability), both present and potential?
• What opportunities exist to sell after-sales services?
• What types of advertising and promotions have the
greatest influence on customers?

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23
Level 1 DFD: Complete Picking Ticket

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Level 1 DFD: Execute Shipping Notice

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 Level 1 DFD-Dissemination of Data Flows:
Execute Shipping Notice
• Shipping’s billing notification (to notify billing to begin the billing process)
• Bill of lading, a contract between the shipper and the carrier in which the
carrier agrees to transport the goods to the shipper’s customer
– The carrier’s signature on the bill of lading, and/or the customer’s signature on
some other form of receipt, substantiates the shipment
• A packing slip is attached to the outside of a package and identifies the
customer and the contents of the package
• General ledger inventory sales update to notify the general ledger process
that inventory has been sold and the cost of goods sold has increased

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 OE/S Data Stores
• Marketing data
• Customer master data
• Sales order master data
• AR master data
• Inventory master data

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Entity-
Relationship
Diagram for
OE/S Process

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The OE/S Process Flowchart

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 The OE/S Process Flowchart
• Figure 10.11 presents a systems flowchart of the model
• Take some time now to examine the flowchart
• We start with customer calls received in the customer
service center
• Customer service representatives may perform a
number of services for a customer including:
– Checking the availability of inventory
– Determining the status of open orders
– Initiating sales
– Confirming orders

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 The OE/S Process Flowchart
• Let’s assume that the customer sales representative
enters a sales order and sees a screen much like the
SAP screen in Figure 10.6
• First, the system prompts the CSR to enter the customer
number
• If the CSR enters a customer number for which the
system has no record, the system rejects the order, and
the recording of the event is terminated

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 The OE/S Process Flowchart
• Assuming the CSR enters a valid customer number, the
system automatically retrieves certain standing data
from the customer master data such as:
– customer name
– address
– credit terms, from the
• Next, the CSR enters the other data in the sales order,
guided by the cursor moving to each new position in
the preformatted screen

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 The OE/S Process Flowchart
• When the CSR enters data for each item ordered, the system
automatically displays the description and price
• Finally, the CSR enters the quantity ordered
– If the total amount of the current order, any open orders, and the
outstanding receivable balance exceeds the customer’s credit limit, the
operator is warned of this fact, the order is suspended, and credit
rejection procedures are initiated
– If the total amount falls within the customer’s credit range, the processing
continues
• Should the balance shown on the inventory data be less than the
quantity ordered, back order procedures are initiated

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 The OE/S Process Flowchart
• Once the customer service representative has
finished entering the order data, the computer
updates the sales order and inventory master
data, and gives the CSR a sales order number
that is then relayed to the customer
• Simultaneously, a picking ticket, containing a bar
code of the sales order number, is printed in the
warehouse

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 The OE/S Process Flowchart
• As each item is picked, warehouse personnel
insert the picked quantities on the picking ticket
• When all the goods have been picked, they
compare the goods to the picking ticket, initial
the ticket, and then move the goods and the
completed picking ticket to the shipping
department

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 The OE/S Process Flowchart
• Shipping personnel scan the bar code on the picking ticket to
bring the sales order up on their computer screen
• After they confirm that this is the correct order and that the
quantities are correct, they select the option to record the
shipment
• This action causes the computer to update the sales order,
inventory, and general ledger master data to reflect the shipment
and to print a packing slip and bill of lading
• The goods are packed, with the packing slip inside, the shipping
label (bill of lading) is attached to the box, and the box is given to
the carrier for delivery
• The completed picking ticket is discarded

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 The OE/S Process Flowchart
• Error routines would be initiated if:
– the customer record did not exist
– the customer’s credit limit was not sufficient
– the goods were not available in the correct quantity
– or the goods to be shipped did not match the picking
ticket and the sales order

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 Control Matrix for OE/S
Control Goals of the OE/S Business Process

Control Goals of the Operations Process Control Goals of the Information Process

Ensure effectiveness of Ensure Ensure For sales order inputs For sales For shipping notice For sales
operations: efficient security of (i.e., customer orders), order and inputs (i.e., shipment order and
employmen resources ensure: inventory data), ensure: inventory
t of (inventory, master data, master
resources customer ensure: data,
(people, master data) ensure:
computers)

Recommended control plans A B C IV IC IA UC UA IV IC IA U UA

C

P-1: Enter customer order close to P-1 P-1 P-1 P-1 P-1
where the order is received

P-2: Customer credit check P-2 P-2 P-2

P-3: Populate input screens with master P-3 P-3 P-3 P-3 P-3 P-3
data

P-4: Programmed edit checks P-4 P-4 P-4 P-4

P-5: Compare input with master data P-5 P-5 P-5 P-5 P-5

P-6: Preformatted screens P-6 P-6 P-6 P-6

P-7: Online prompting P-7 P-7 P-7 P-7

P-8: Procedures for rejected inputs P-8 P-8 P-8 P-8 P-8 P-8

P-9: Confirm input acceptance P-9 P-9

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 OE/S Control Matrix, Cont’d. Control Goals of the OE/S Business Process

Control Goals of the Operations Process Control Goals of the Information Process

Ensure effectiveness of Ensure Ensure For sales order For sales For shipping notice inputs (i.e., For sales
operations: efficient security of inputs (i.e., order and shipment data), ensure: order and
employm resources customer orders), inventory inventory
ent of (inventory, ensure: master data, master data,
resource customer ensure: ensure:
s master
(people, data)
computer
s)

Recommended control plans A B C IV IC IA UC UA IV IC IA UC UA

P-10: One-for-one checking of P-10 P-10 P-10 P-10 P-10

picking ticket with the goods

P-11: Enter shipment data in P-11 P-11 P-11 P-11

shipping

P-12: Turnaround document P-12 P-12 P-12 P-12

P-13: Automated data entry P-13 P-13 P-13

P-14: Independent shipping P-14 P-14

authorization

P-15: One-for-one checking of P-15 P-15 P-15

goods, picking ticket, sales order

M-1: Independent customer master M-1 M-1 M-1

data maintenance

M-2: Review open sales orders M-2 M-2

(tickler file)

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 Using Data Mining to Support
Marketing

• Intended to allow the use of sophisticated

statistical and other analytical software to help
an organization’s members develop insights
about customers, processes, and markets
– Data warehousing and data mining have become
common application to increase the effectiveness of
pricing and promotions

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 Global e-Business
• E-Business systems are broken into two categories: buy-
side and sell-side
– Buy Side
• Buy-side systems use the Internet to automate and manage corporate
vendors and purchases.
• The predominant technology in this area is electronic data interchange
(EDI)
– Sell Side
• Sell-side systems are designed to allow a company to market, sell,
deliver, and service goods and services to customers throughout the
world via the Internet
• Sell-side applications can handle both B2B and B2C business
transactions
• One facet of sell-side systems is known as customer relationship
management (CRM) applications

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 CRM Systems
• Better customer service means happier customers and
yields greater sales—particularly repeat sales
• CRM systems are designed to manage all the data
related to customers, such as marketing, field service,
and contact management data
• At the same time, the software supports the organizing
and retrieving of information on historical sales
activities and promotions planning
– This facilitates the matching of sales promotions with
customers’ buying trends
– The buzzword in CRM is “segmentation,” the grouping of
customers into categories based on key characteristics
• Customer/Sales data is being stored in terabyte-sized
databases and analyzed
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 Automated Data Entry
• Bar code readers are devices that use light reflection
to read differences in bar code patterns in order to
identify a labeled item
• Optical character recognition is similar to bar code
readers work, but recognize a pattern of handwritten
or printed characters
• Scanners are input devices that capture printed
images or documents and convert them into
electronic digital signals that can be stored on
computer media

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 Digital Image Processing
• Digital image processing systems are computer-based systems for
capture, storage, retrieval, and presentation of images of real or
simulated objects
• The following briefly describes the major steps in a typical digital
image processing system
– In the input stage, scanners are generally used to capture images or documents
– A clerk uses a PC or workstation to retrieve the image of a source document
• In addition to screen output, images also may be printed
– After a document has been input, additional processing may take place.
• Additional data related to the document might be added, or someone
might act on data contained in, or associated with, the document
• Retrieval and processing capabilities may be incorporated into existing
applications
• Linking these images in an enterprise system makes accessibility greater
and easier and information can readily be distributed throughout the
organization to where it is needed

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 Summary
• This chapter was “product-centric”
• Examples of services:
– Higher education
– Plumbers
– Consulting
• Orders can be on paper, over the phone, via
the web, via EDI, via private network

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