Marketing Information System and Sales Order Process

Chapter 3
Marketing Information System

and Sales Order Process
Enterprise Resource
Enterprise Planning
Resource Planning
Concepts in Enterprise Resource Planning by Ellen F Monk, 4th Edition - Iftikhar ul Sami 1
Fitter Snacker – An Overview
Fitter Snacker manufactures and sells two types of nutritious snack
bars:
NRG-A, touts “advanced energy.”
NRG-B boasts “body building proteins.”
Each bar contains the following ingredients:
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 Vitamins and Minerals: important nutrients

 Dry Base Mixture: oats, wheat germ, protein powder, and spices
 Wet Base Mixture: honey and canola oil
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Each type of bar contains additional unique ingredients:

NRG-A contains carob chips and raisins
NRG-B contains hazelnuts and dates.
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Fitter Snacker has organized its sales force into two groups/divisions:
Wholesale Division : sells to intermediaries who distribute the bars
to small shops, vending machine operators, and health food stores.
Direct Sales Division : sells directly to large grocery stores, sporting
goods stores, and other large chain stores.
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Each division has an organizational structure that interacts with FS’s

other functional areas:
• Accounting
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• Supply Chain Management

The two divisions operate separately from one another, in effect
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breaking the M/S functional area into two pieces.

The Direct Sales Division offers customers volume discounts to encourage
larger sales orders, which are more efficient to process because each order
—regardless of size—generates costs related to the paperwork, shipping,
and handling of the order.
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The Wholesale Division charges customers a lower fixed price because the
orders are usually large.
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Both divisions send their customers invoices requesting the total balance
within in 30 days and offering a 2 percent discount if they pay within 10
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days.
Fitter Snacker Sales Process
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Problems with Fitter Snacker Sales Process
Many of Fitter Snacker’s sales orders have some sort of problem:
• incorrect pricing
• excessive calls to the customer for information
• delays in processing orders
• missed delivery dates, and so on.
These problems occur because FS has separate information systems
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throughout the company for three functional areas:

• sales order system
• warehouse system
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• accounting system
Information from each system is shared electronically through periodic file
transfers (sales order system to accounting system) and manually by paper
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printout (credit status from the Accounting department to sales clerks).
Problems with Fitter Snacker Sales Process
The high number of transactions that are handled manually creates many
opportunities for data entry errors. Further, all the information stored in
the three systems is not available in real time, resulting in incorrect prices
and credit information.
The entire sales process involves a series of steps that require coordination
between Sales, Warehouse, Accounting, and Receiving.
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Sales Quotations and Orders
For a new customer, the sales process begins with a sales call, during which
the salesperson either telephones the customer or visits in person.
At the end of the sales call, the salesperson prepares a handwritten quotation
on a form that generates three copies.
The original sheet goes to the customer
middle copy is first faxed and then mailed to the sales office
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salesperson keeps the bottom copy for his or her records

A number of problems can occur with this process:
• The salesperson might make an arithmetic error in the sales quotation
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• Salespeople fax a copy of their sales quotations to the sales office, but
sometimes the same customer calls to place an order before the fax is
transmitted
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• The fax received by the sales office is a faxed copy of a handwritten

form, and might not be legible
Sales Quotations and Orders
When customers place an order, they usually ask for a delivery date. To get a
shipping date, the in-office clerk must contact the warehouse supervisor and
ask whether the customer’s order can be shipped from inventory, or whether
shipping will be delayed until a future production run is delivered to the
warehouse.
Once the in-office sales clerk has the warehouse supervisor’s estimated
shipping date, he determines the shipping method for the order and how
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long delivery will take.

Next, the clerk checks the customer’s credit status. If the order is from an
existing customer, the clerk checks a paper report from Accounting that
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shows the customer’s current balance, credit limit, and available balance.
The sales clerk enters the customer’s order into the current order entry
system.
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Order Filling
The computer program performs four important tasks:
• stores the customer’s order data, which are used later to analyze sales
performance at the division level
• prints out a packing list and shipping labels for the warehouse to use to
pick, pack, and ship the customer’s order
• produces a data file of all current transactions for the Accounting
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department to use for preparing invoices (this file is also used for
financial, tax, and managerial accounting)
• data file is copied to a disk and entered into a PC-based accounting
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software program on Mondays, Wednesdays, and Fridays

Packing lists and shipping labels are printed twice a day—at noon and at the
end of the day. These are hand-carried to the warehouse, where they are
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hand-sorted into small orders and large orders. The Production department
produces and wraps the bars and packs them in boxes.
Order Filling
FS uses a PC database program to manage inventory levels in the warehouse.
The program adjusts inventory level figures on a daily basis, using production
records (showing what has been added to the warehouse), packing lists
(showing what has been shipped from the warehouse), and any additional
sources of data (such as shipping cases that have been opened to pull display
boxes).
Each month the warehouse staff conducts a physical inventory count to
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compare the actual inventory on hand with what the inventory records in the
PC database show.
Fitter Snacker’s monthly inventory counts show that inventory records are
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more than 95 percent accurate. Ninety-five percent accuracy doesn’t sound

too bad, but FS still has problems filling orders.
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Order Filling
Because snack bars are somewhat perishable, FS keeps inventory levels fairly
low, and inventory levels change rapidly during the day. As a result, a picker
might go to the shelves to pick an order and discover that there are not
enough of the desired type of snack bars to fill the order.
The picker then has to decide from among several courses of action:
• There might be more of that type of bar in the production area, on the
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way to the warehouse.

• customer may want a partial shipment consisting of whatever is on
hand, with the rest shipped when it becomes available, which is known
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as a backorder.
• the customer might prefer to take the goods on hand, cancel the
balance of the order, and place a new order later.
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To determine what to do in this situation, the order picker might have

conversations with the warehouse, production supervisors, and sales clerks.
Order Filling
Whatever the final decision, the warehouse supervisor has to contact the
sales clerk so he can notify the customer (which doesn’t always happen,
when things are busy) and the Accounting department so they can change
the invoice.
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Accounting and Invoicing
Three times a week, sales clerks send the Accounting department the disk
containing the sales order data for customer invoices.
The Accounting department loads the data into the PC-based accounting
program; then, clerks manually make adjustments for partial shipments and
any other changes that have occurred during the order process.
Sometimes, order corrections are delayed and don’t catch up to the invoicing
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process, resulting in late or inaccurate invoices.

If the completed invoice is waiting to be mailed when the warehouse notifies
Accounting of a partial shipment, then a new invoice must be prepared.
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An invoice is eventually sent to the customer, separate from the shipment.

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Payment and returns
Almost all customers pay the invoice within 10 days to receive the 2 percent
discount.
Even though FS provides customers with two invoice copies, many customers
don’t return a copy of the invoice with their payment, as instructed.
Errors result if the correct customer’s account isn’t credited.
Because FS’s snack bars contain no preservatives, they have a relatively short
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shelf life. Thus, FS has a policy of crediting customer accounts for returned
snack bars that have exceeded their “sell by” date.
FS also gives credit for damaged or defective cases.
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Customers are supposed to call FS to get a returned material authorization

(RMA) number to simplify the crediting process.
When cases are returned to FS, the Receiving department completes a
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handwritten returned material sheet, listing the returning company’s name,

the materials returned, and the RMA number.
Payment and returns
When an account becomes past due, FS sends a dunning letter, notifying the
customer that the account is past due and requesting payment if payment
hasn’t already been sent.
As the account gets more delinquent, the dunning letters usually get more
direct and threatening.
If a customer’s account has not been properly credited, however, the
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customer may receive a dunning letter in error, or may receive a call about
exceeding their credit limit after placing a new order.
Such situations damage goodwill with both new and repeat customers.
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Sales and Distribution in ERP
An ERP system can improve the sales order process in several ways:
• ERP systems use a common database, they can minimize data entry
errors and provide accurate information in real time to all users.
• ERP system can also track all transactions (such as invoices, packing
lists, RMA numbers, and payments) involved in the sales order.
SAP’s ERP and its Sales and Distribution module, manages the sales order
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process. Other ERP software handles the process in a similar fashion.

In SAP ERP, important transactions and events are assigned a number for
recordkeeping purposes. The electronic evidence of a transaction in SAP ERP
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is called a “document.”
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Sales and Distribution in ERP
The SAP ERP Sales and Distribution module treats the sales order process as a
cycle of events. SAP ERP defines up to six events for any sale:
• Pre-sales activities
• Sales order processing
• Inventory sourcing
• Delivery
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• Billing
• Payment
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Pre-Sales Activities
At this phase, customers can get pricing information about the company’s
products, either through an inquiry or a price quotation. The difference
between an inquiry and a quotation is that a quotation is a written, binding
document; the seller guarantees the buyer that, for some specified period of
time, he can buy the product at the quoted price. The inquiry is simply a
statement of prices, with no guarantee implied.
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Pre-sales activities also include marketing activities such as tracking customer

contacts, including sales calls, visits, and mailings.
The company can maintain data about customers and generate mailing lists
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based on specific customer characteristics, which enhances targeted

marketing efforts.
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Sales Order Processing
Sales order processing is the series of activities that must take place to record
a sales order.
The sales order can start from a quotation or inquiry generated in the pre-
sales step.
Any information that was collected from the customer to support the
quotation (contact name, address, phone number) is immediately included in
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the sales order.

Some of the more critical steps in sales order processing are recording the
items to be purchased, determining the selling price, and recording the order
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quantities.
Users can define various pricing alternatives in the SAP ERP system. For
example, a company can use product-specific pricing, such as quantity
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discounts, or it can define discounts that depend on both the product and a
particular customer.
Sales Order Processing
During sales order processing, the SAP ERP system checks the Accounts
Receivable tables in the SAP ERP database to confirm the customer’s
available credit.
SAP ERP adds the value of the order to the credit balance, and then compares
the result to the customer’s credit limit (also available in the database).
If the customer has sufficient credit available, the order is completed.
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If not, the SAP ERP system prompts sales personnel to either reject the order,
call the customer to check on recent payments, or contact Accounting to
discuss any extenuating circumstances.
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Inventory Sourcing
When recording an order, the SAP ERP system checks the company’s
inventory records and the production planning records to see whether the
requested material is available and can be delivered on the date the
customer desires.
This Available-to-Promise (ATP) check includes the expected shipping time,
taking into account weekends and holidays.
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SAP also keeps a record of all open orders, so even if the ordered product is
still in the warehouse, the system will reserve it on the shelf, making it
unavailable to other customers.
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Delivery
In the SAP ERP system, the word delivery means releasing the documents
that the warehouse uses to pick, pack, and ship orders, rather than the
traditional definition of transferring goods.
The delivery process allows deliveries to be created so that the warehouse
and shipping activities are carried out efficiently.
Once the system has created the documents for picking, packing, and
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shipping, the documents are transferred to the Materials Management

module, where the warehouse activities of picking, packing, and shipping are
carried out.
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Billing
SAP ERP system creates an invoice by copying the sales order data into the
invoice document.
Accounting can print this document and mail it, fax it, or transmit it
electronically to the customer. . Accounting records are also updated at this
point.
To record the sale, SAP ERP debits (increases) Accounts Receivable and
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credits Sales, thus updating the accounting records automatically.

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Payment
When the customer sends in a payment (physically or electronically), it is
automatically processed by the SAP ERP system, which debits cash and
credits (reduces) the customer’s account.
Notice that the timely recording of this transaction has an effect on the
timeliness and accuracy of any subsequent credit checks for the customer.
Fitter Snacker has had a problem with getting accurate credit checks,
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frequently blocking orders for companies that are within their credit limit,
while granting credit to other companies beyond what is advisable.
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Enterprise
Customer Relationship
Management
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CRM Working Diagram
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Salesforce CRM Marketing
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Customer Relationship Management
Companies without a good connection between their workers and their
customers run the risk of losing business.
customer relationship management (CRM) software can help companies
streamline their interactions with customers.
Companies with an ERP system have an added benefit beyond systems
integration:
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vast and complete quantities of data available for analysis

Basic principle behind CRM is that any employee in contact with the
customer should have access to all information about past interactions with
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the customer.
The latest method of delivering this software is on-demand. With on-demand
CRM, the software and computer equipment reside with the CRM provider; it
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is not installed in-house. Salesforce.com is an example.
CRM Core Activities
One-to-one marketing: Once a customer is categorized, the company can
tailor products, promotions, and pricing accordingly.
Sales force automation (SFA): SFA software can automatically route
customers who contact the company to a sales representative. Sometimes
this software is called “lead management software” because a transaction
can be tracked from the initial lead to post-sale follow-up.
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Sales campaign management: Lets a company organize a marketing

campaign and compile its results automatically.
Marketing encyclopedias: This software serves as a database of promotional
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literature about products. The material can be routed to sales representatives

or customers as needed.
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Benefits of CRM
Lower costs: CRM can lead to operational efficiencies, such as better
response times in call center operations and better use of sales force time,
which lower costs.
Higher revenue: Segmenting customers leads to better selling opportunities
and revenue increases.
Improved strategy and performance measurement: With CRM in place,
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management can think about different performance measures:

• should salespeople be rewarded for exceeding sales quotas
• marketing people rewarded for finding new customers
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• should both receive rewards that are based on some measure of

customer satisfaction?
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Salaries in CRM Profession
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Chapter 3

Marketing Information System

 Vitamins and Minerals: important nutrients

Each type of bar contains additional unique ingredients:

Each division has an organizational structure that interacts with FS’s

• Supply Chain Management

breaking the M/S functional area into two pieces.

throughout the company for three functional areas:

printout (credit status from the Accounting department to sales clerks).

salesperson keeps the bottom copy for his or her records

• The fax received by the sales office is a faxed copy of a handwritten

long delivery will take.

software program on Mondays, Wednesdays, and Fridays

more than 95 percent accurate. Ninety-five percent accuracy doesn’t sound

way to the warehouse.

To determine what to do in this situation, the order picker might have

process, resulting in late or inaccurate invoices.

An invoice is eventually sent to the customer, separate from the shipment.

Customers are supposed to call FS to get a returned material authorization

handwritten returned material sheet, listing the returning company’s name,

process. Other ERP software handles the process in a similar fashion.

Pre-sales activities also include marketing activities such as tracking customer

based on specific customer characteristics, which enhances targeted

the sales order.

shipping, the documents are transferred to the Materials Management

credits Sales, thus updating the accounting records automatically.

vast and complete quantities of data available for analysis

is not installed in-house. Salesforce.com is an example.

Sales campaign management: Lets a company organize a marketing

literature about products. The material can be routed to sales representatives

management can think about different performance measures:

• should both receive rewards that are based on some measure of

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