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Chapter 6

Commerce 2KA3 - Chapter 6 Summary

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Chapter 6: Enterprise Resource Planning
Enterprise Resource Planning (ERP): Integrates all departments and functions
throughout an organization into a single IT system (or integrated set of IT
systems) so that employees can make decisions by viewing enterprisewide
information on all business operations
Enterprise Resource Planning
A common problem facing organizations is maintaining consistency across its
business operations
ERP systems provide organizations with consistency. An ERP system provides
a method for the effective planning and controlling of all the resources
required to take, make, ship, and account for customer orders in a
manufacturing, distribution, or service organization.
Core and Extended ERP Components
Core ERP components: are the traditional components included in most ERP
systems and they primarily focus on internal operations
Extended ERP components: the extra components that meet the
organizational needs not covered by the core components and primarily focus
on external operations
Core ERP Components
The three most common core ERP components focusing on internal
operations are: (1) Accounting and finance, (2) Production and Materials
Management, (3) Human Resources
Accounting and Finance ERP Components
Accounting and Finance ERP components: manage accounting data and
financial processes within the enterprise with functions such as general
ledger, accounts payable, accounts receivable, budgeting, and asset
ERP financial components are the backbone behind product profitability
analysis and allow companies to perform all types of advanced profitability
modelling techniques
Production and Materials Management ERP Components

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Production and Materials Management ERP components: handle the various
aspects of production planning and execution such as demand forecasting,
production scheduling, job cost accounting, and quality control
The process begins with forecasting sales in order to plan operations. A
detailed production schedule is developed if the product is produced, and a
materials requirement plan is completed if the product is purchased
Human Resources ERP Components
Human resources ERP components: track employee information including
payroll, with the legal requirements of multiple jurisdictions and tax
Human resources components even offer features that allow the organization
to perform detailed analysis on its employees to determine such things as the
identification of individuals who are likely to leave the company unless
additional compensation or benefits are provided
Extended ERP Components
Extended ERP components are the extra components that meet the
organizational needs not covered by the core components and primarily focus
on external operations
The four most common extended ERP components are: (1) Business
Intelligence, (2) CRM, (3) SCM, (4) E-business
Business Intelligence Components
Business intelligence: describes information that people use to support their
decision-making efforts
The business intelligences components of ERP systems typically collect
information used throughout the organization (including data used in many
other ERP components), organize it, and apply analytical tools to assist
managers with decisions
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