Organizational Structure, Functional Information System, ERP System, And Business Process View

Evolution of Organizational Structure

The most common organisational structure widely used by the companies over industries is the functional structure, which divides the organisation according to the role of the employees within. The departments are divided according to the specialised functions they are assigned with. Organisations following the functional structure are divided into departments like marketing, accounting, customer service, manufacturing etc. (Cosh, Fu and Hughes 2012) 

Functional organisational structure has evolved due to the increased need of high specialisation, high control framework of manufacturing within the organisations. Increased growth of the organisation facilitated the need of the specialisation for increasing the performance.

Benefits

• Helps to formulate a specialised workforce in particular departments, in turn increasing the efficiency.
• Increased specialisation leads to increased efficiency and productivity of the company due to the specialised expertise
• Creates opportunity for appropriate training to inspectors and supervisors that ultimately brings high level of flexibility within the organisation (Becker, Kugeler and Rosemann 2013).

• Increased specialisation leads to lack of cooperation with the other units of hte organisation. Hence, this reduces cooperation over the departments within the organisation.
• Decentralisation of the decision-making is another issue that is present in this type of structure. The expansion of the organisation leads to lesser control of the top management of the companies over the departments.
• Increases the clerical cost due to the increased overhead expenses. This structure is considered uneconomical (Becker, Kugeler and Rosemann 2013).

Functional Information System – This is a system that provides information related to specific activity in the organisation. It also offers summary of the information for the management control of such activities (Kuperman, Gardner and Pryor 2013).

Value

This particular system proposes value to the organisation by enabling it to easily store and acquire the data on need (Rainer et al 2013). This also adds value by assisting the management to formulate strategic plans and taking decision for the company’s longevity and prosperity.

Benefits

• Provides accessibility and in-depth knowledge to the data that increases the efficiency
• Provides accurate and up-to-date data to the  users

Pitfalls

• Vulnerability of the data related to security is increased in this system
• Rate of system breakdown of functional information system is high

Enterprise Resource Planning – This system, better known as EPR is the process that helps the organisation in integrating and managing different parts within organisation. This incorporate various departments like sales, marketing, planning, finance, HR and inventory without disrupting its autonomous operations (Rainer et al 2013).

Value of ERP is in providing functionality to the organisation. It helps in coordinating resources, information and activities, as well as reduces the costs by improving business process and healthier risk management (Rainer et al 2013).

Benefits

• Integration of information under single database enabling the company with easier access to the required data.
• Helps increasing the accuracy, consistency and security of the stored data through the use of built-in resources and firewalls.

Pitfalls

• Cost of implementing ERP system in the organisation is considerably high
• ERP systems are hard to use in case of data migration due to the complexity.

Business process as defined by Van Der Aalst (2013) focuses on the objective and directs the activities towards the attainment of the same. Business function on the other hand focuses on the end-result, where the function remains constant with the ever-changing purpose (Kemp and Owen 2013).

Business process dictates the flow of interrelated activities, which work together for the achievement of one single objective. Business function on the other hand implies discrete action, which produces results.

Organisations incorporating business process integrates various functions. Units of the functionally oriented organisations on the other hand focus on the particular function.

Coordination in functionally oriented organisation is significantly low compared to process oriented business.

Organisations can explore a number of benefits orienting their business form the process view. The primary benefit of it is the objective oriented viewpoint of this particular type as it identifies the attainment of objective as of primary importance (Van Der Aalst 2013). It further helps in increasing the business agility, revenue efficiency and safety of the business.

Benefits and drawbacks of Organizational Structure

Silo Effect – The term is used for addressing the issue of lack in communication within a business organisation and the cross-departmental support. The large companies using functional division structure often face this issue in their operation due to the lack of communication and information sharing. The departments involved often focus on the specific tasks they are assigned with minimising their cooperation wit the other departments related (Tett 2015). Example USB in their policymaking is on e of the best examples of the silo effect in an organisation where the inadequate policy due to the lack of information lead the company to receive a shock of $30bn on mortgage-backed securities between 2007-09.

The cross-functional association is the only possible way of eliminating the silo effect in the organisation that requires technological integration for linking the departments within the organisation. The ERP system helps the managers integrating the departments, process and data throughout the organisation. This requires updating the data into the ERP system through which it is communicated throughout the organisation and every single employee in the organisation has the access to explore the data uploaded in the ERP system (Shaul and Tauber 2013). For example, the marketing department of an organisation can gain access to the sales an operational data to analyse and modify the existing strategies in customer satisfaction.

Organisations prefer to use SAP for verifying the invoice they receive for payment. The SAP confirms the accuracy of the invoice sent by the vendor. However, SAP requires prior update on the purchase made by the company against the invoice (Štolfa et al 2014).

• Enter Invoice Data – This process involves multiple steps
  • Enter invoice Date
  • Verification of the date displayed
  • Enter invoice number
  • Enter amount from the invoice
  • Enter VAT amount from the invoice
  • Tax calculation
  • PO Number
• Checking vendor payee information – input of the above data reflects the vendor details against the invoice.
• Verification of the Invoice – The software provides the actual amount of the invoice against the purchase. Dissimilarity in any case identifies the invoice as faulty than needs to be revised.
• Stimulation of the invoice –This final verification identifies the alignment of the product price and tax collected against the products.
• Post invoice for Payment –Completion of the above steps allows the accountant for proceeding for payment with the invoice (Štolfa et al 2014).

Bill of Materials – Bill of materials is the list of materials or parts that are required to build particular product. This bill only communicates the products that will be used in building or assembling a product. Complex form of bill of material can hold information of the products that needs to be assembled before attaining its utility in the final product. These materials have their own bill of material (Kiepert 2013). For example, a bill of material can take form of a spreadsheet that holds the necessary information. However, the security level provided by spreadsheet is minimum.

Product Routing – Product routing on the other hand holds the information about the steps involved in the process of manufacturing a particular product. Both Bill of material and product routing hold the information on manufacturing products (Mjirda et al 2013). The main difference lies within these two is that the one holds the information about the product, whereas, the other holds the information about the steps incorporated.

Functional Information System and its value

Conversion of planned order into production order refers to the process of sending the raw materials for manufacturing the desired products. The manufacturer can take a number of process for converting planned order into production order. However, some consideration needs to be made before initiating the conversion. The master data accuracy needs to be verified along with the maintenance of needed status of the production order (Help.sap.com. 2018). Furthermore, it needs to be verified that the material requirements planning, routing and bills of material components have been implemented in the creation of planned order.

Products that are specifically made on the request of the customers are referred as “made to order”. This strategy involves the manufacturing of the products to a certain stage of development. The rest of the stages are remained untapped to keep the opportunity alive for customisation according to the customers’ desire (Tseng and Hu 2014). This strategy is extensively implemented in fast-food industry and to some extent in the garments industry.

Benefits

• Provides opportunity to the customers to customise the products according ot their personal taste.

Disadvantages

• The process is both expensive and time consuming, which in turn reduce the sale limiting it to a certain number.

This strategy involves the manufacturing of the products based on the prior investigation of the customers’ Need. The product manufacturing organisation following this traditional strategy completely manufacture the products according to need of the target population leaving no scope of customisation or modification (Tseng and Hu 2014). The products are then stored in the inventory according to the consumer demand forecast.

Benefits

• Provides fast service to the customers as it provides ready to use products to the customers.
• Products manufactured using this strategy are cost effective

Disadvantages

• Leaves no opportunity of modification
• Accurate forecast of the customers demand is necessary for avoiding wastage.

IKEA is a furniture manufacturing company established in 1943 in Sweden. Globalisation brought positive benefits on the company as it provided opportunity to grow in the international market. Currently, the company has around 313 stores in over 38 countries around the world. IKEA is now known as world’s leading furniture manufacturing company in the international market (Sjögren 2015). The company had a positive respond towards globalisation. The notable changes in the organisation are the expansion of the company into the Chinese, Japanese and Australian market that provided great deal of support in the business growth.

The One can assume that perceived strategy accompanied IKEA in its globalisation venture is that one design suits all. The company is currently selling over 1200 types of products to its customers around the world (Sjögren 2015). Instead of focusing on the specialised market, the company held its originality in every market. Henceforth, they refused to adopt the specific cultural aspects of the international market and promoted Swedish culture in their international market. Moreover, they focused on environmental friendly cost effective products that can be both manufactured and sold in the market itself, which in turn contributing into reducing the distribution cost. The increased globalisation led the company to shift from centralised control to a more decentralised one that helped them in making quick decision depending on the changing environment (Sjögren 2015). Moreover, their IT support helped them in maintaining information flow within the organisation that resulted into the fast growth in the international market.

Advantages and disadvantages of Functional Information System

Several views of a product is SAP refers to the verification process of the details of the product from the single source of information that is stored in the master data. The placement of a product initiates the verification process on the availability of the product from different dimensions. The availability is first verified by the procurement process, which verifies the availability in the master data. Secondly, the data is verified by the production process from the same source to check with the vendor, which is lastly verified at the fulfilment process to make sure about the product history. This process views the product history several times before confirming the information.

The view mentioned here refers to the process or action of verification in the business operation. Information related to various operation is stored under the master data, which is later used for verification. For example, the procurement process is considered as view. Procurement process is the incorporates the purchasing of different materials and obtaining services from different vendors. The information related to this process is stored under master data. The view here is the verification of this data depending on the need. These views can be used on various purposes. Some of them are:

• This is used for resurrecting the missing fact without disturbing other quarries
• For avoiding repetition of the orders.

Organisational data under SAP environment are those that holds specific information of the organisation depending on the type of the organisation. It is important to customise the SAP software accordingly for serving the particular needs of the specific organisation. The data stored in the process are referred as organisational data in the SAP environmental term. Example of this kind of data can be the organisation specific information that varies over different types of organisation such as manufacturing organisation or dealership organisation or a combination of both.

Master data on the other hand are comparatively static data that remains constant over long period and considered as highly classified. Example of this data are customer, supplier, department, employee or accounts masters (Weissenberger et al 2013). Details stored under this data can be customer information, employee salary information and other classified information.

Transactional data on the other hand is considered as the hyper active data as the activity under this is relatively high when compared to the other types of data. Unlike the other data in SAP environment, this is used on the daily basis for operations like addition, modification or deletion act, which makes it dynamic, compared to the other types (Weissenberger et al 2013). Example of this data can be consumer order, stock, purchase order, invoice, payables etc.

ERP System and its value

The four most common types of material in an ERP system are raw material, semi-finished material, finished goods and trading goods (Shaul and Tauber 2013). The materials purchased from the external sources are referred as the raw materials. For example, raw materials in a car manufacturing company will be the frames, wheels, tires and tubes. The semi-finished materials on the other hand are the primary products made out of the raw materials. Wheels manufactured using the tires and tubes are considered as semi-finished materials. The final products manufactured using the raw materials and semi-finished materials are termed as finished materials. The sellable car can be considered as the finished materials. Lastly, the trading materials are considered as the products that are purchased and sold to the customers without any modification made on the materials.

References

Becker, J., Kugeler, M. and Rosemann, M. eds., 2013. Process management: a guide for the design of business processes. Springer Science & Business Media.

Cosh, A., Fu, X. and Hughes, A., 2012. Organisation structure and innovation performance in different environments. Small Business Economics, 39(2), pp.301-317.

Help.sap.com. 2018. SAP Library – Production Orders. [online] Available at: https://help.sap.com/saphelp_erp60_sp/helpdata/en/97/01b753128eb44ce10000000a174cb4/frameset.htm [Accessed 13 Jan. 2018].

Kemp, D. and Owen, J.R., 2013. Community relations and mining: core to business but not “core business”. Resources Policy, 38(4), pp.523-531.

Kiepert, J., 2013. Creating a raspberry pi-based beowulf cluster. Boise State University, pp.1-17.

Kuperman, G.J., Gardner, R.M. and Pryor, T.A., 2013. HELP: a dynamic hospital information system. Springer Science & Business Media.

Mjirda, A., Jarboui, B., Macedo, R., Hanafi, S. and Mladenovi?, N., 2014. A two phase variable neighborhood search for the multi-product inventory routing problem. Computers & Operations Research, 52, pp.291-299.

Rainer, R.K., Cegielski, C.G., Splettstoesser-Hogeterp, I. and Sanchez-Rodriguez, C., 2013. Introduction to information systems. John Wiley & Sons.

Shaul, L. and Tauber, D., 2013. Critical success factors in enterprise resource planning systems: Review of the last decade. ACM Computing Surveys (CSUR), 45(4), p.55.

Sjögren, H., 2015. Design by IKEA: A Cultural History. BySaraKristoffersson. London: Bloomsbury Academic, 2014. viii+ 148 pp. Illustrations, figures, references, notes, index. Cloth, $29.95. ISBN: 978-0-8578-5814-6. Business History Review, 89(2), pp.364-367.

Štolfa, J., Kopka, M., Štolfa, S., Kob?rský, O. and Snášel, V., 2014. An application of process mining to invoice verification process in SAP. In Innovations in Bio-inspired Computing and Applications (pp. 61-74). Springer, Cham.

Tett, G., 2015. The Silo Effect: Why putting everything in its place isn’t such a bright idea. Hachette UK.

Tseng, M.M. and Hu, S.J., 2014. Mass customization. In CIRP Encyclopedia of Production Engineering (pp. 836-843). Springer Berlin Heidelberg.

Van Der Aalst, W.M., 2013. Business process management: a comprehensive survey. ISRN Software Engineering, 2013.

Weissenberger, C., Lehner, C., Raman, G. and Nieswand, W., Sap Ag, 2013. Persistence of master data in a multi-tenant software delivery architecture. U.S. Patent 8,412,673.