The Efficient Enterprise: Increased Corporate Success with Industry-Specific Information Technology and Knowledge Management

The Efficient Enterprise Increased Corporate Success with Industry-Specific Information Technology and Knowledge Mana...

Author: Peter Schimitzek

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The Efficient Enterprise Increased Corporate Success with

Industry-Specific Information Technology and

Knowledge Management

The Efficient Enterprise Increased Corporate Success with

Industry-Specific Information Technology and

Knowledge Management

Peter Schimitzek

ST. LUCIE PRES S A CRC Press Company Boca Raton London New York Washington, D.C.

Library of Congress Cataloging-in-Publication Data Schimitzek, Peter [Effektive Unternehmen. English] The efficient enterprise : increased corporate success with industry-specific information technology and knowledge management / Peter Schimitzek p. cm. Includes bibliographical references and index. Translation of: Das effektive Unternehmen. ISBN 1-57444-337-2 (alk. paper) 1. Management information systems. 2. Information resources management. 3. Information technology—Management. I. Title. HD30.213.S365 2003 658.4'038'011—dc21 2003054818

This book contains information obtained from authentic and highly regarded sources. Reprinted material is quoted with permission, and sources are indicated. A wide variety of references are listed. Reasonable efforts have been made to publish reliable data and information, but the author and the publisher cannot assume responsibility for the validity of all materials or for the consequences of their use. Neither this book nor any part may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, microfilming, and recording, or by any information storage or retrieval system, without prior permission in writing from the publisher. The consent of CRC Press LLC does not extend to copying for general distribution, for promotion, for creating new works, or for resale. Specific permission must be obtained in writing from CRC Press LLC for such copying. Direct all inquiries to CRC Press LLC, 2000 N.W. Corporate Blvd., Boca Raton, Florida 33431. Trademark Notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation, without intent to infringe.

Visit the CRC Press Web site at www.crcpress.com © 2004 by CRC Press LLC St. Lucie Press is an imprint of CRC Press LLC No claim to original U.S. Government works International Standard Book Number 1-5744-337-2 Library of Congress Card Number 2003054818 Printed in the United States of America 1 2 3 4 5 6 7 8 9 0 Printed on acid-free paper

PREFACE — AN ENTREPRENEUR “Die Kombination der elementaren Faktoren schlechthin ist die betriebs-wirtschaftliche und volkswirtschaftliche Aufgabe der Unternehmer.” [The combining of elementary business factors is the economic responsibility of the entrepreneur.] ⎯ Erich Gutenber g

Since the beginning of specialized labor and the trade economy, productivity through permanent progress has been the focal point of all economic pursuit for individuals, companies, and concerns. Over the last few centuries of economic development, the public image of the entrepreneur and the entrepreneur’s social and political importance have changed considerably. From a historical point of view, public opinion and what is required for a positive corporate image have changed. Trade associations provide additional viewpoints, and may actually add confusion to the direction of corporate thought in everyday economic activity. In regard to the advance of our working society, the increase of available commodities and common prosperity should be a common goal for us all. From an economic viewpoint, it is an absolute necessity –– as an entrepreneur –– to make a case for entrepreneurship and to make known the essential demands that cater to the advance of the entrepreneurial spirit. Free enterprise must be promoted in the interest of all of society. Founders and young entrepreneurs willing to take on risks should receive extensive backing from influential and authoritative institutions. The targeted advance of innovation will decide the future competitiveness of our economies. Only the joint efforts of responsible political and social groups will bring about the transition from dependency to active self-sufficiency. Political and economic frameworks for the promotion of free trade have to be supplemented by adequate tools for effective corporate management.

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vi The Efficient Enterprise

The entrepreneur has ultimate responsibility for the quality and effectiveness of these tools. Productive corporate management in our information society can only be secured if existing communication and information technology is utilized for the benefit of the entire enterprise. Conditions and requirements of economic activity in our information society are subject to constant change, in turn, also affecting risk and potential success. Therefore, it should be the positive effects that direct corporate thought and activity. These include the implementation of new technology, the permanent increase of corporate efficiency, performanceoriented time evaluation, and clearly defined corporate goals. Only secure corporate growth can generate profitable innovation and permanently increased services. Market globalization inevitably results in new economies that call for faster response. Subsidizing and persisting in “outdated” structures and enterprises does not solve the problem; it just intensifies the economic situation of affected companies on a short-term basis. They are thus operating counterproductively. Only economic decisions based on sound information lead to positive results. This gives information technology a strategic edge to corporate management, whereby “integration” is the key performance factor of information systems. In order for information systems to progress further, industry-oriented standard software for corporate management that is geared to this aim is required. Integration allows “knowledge” to take on new meaning as the most important production factor in our information society. The four integration elements (addresses, items, conditions, and procedures) allow us to visualize information as the smallest components or “atomic data elements.” Around this “core of integration,” we see the development of a system of self-regulating economic processes. These processes apply to all economic entities (corporate and state) and require specific tools and integrated corporate management. The following applies to all economic processes and innovations: There is no “ideal enterprise,” but merely the “most suitable” information infrastructure for each specific enterprise, which in turn, allows the “ideal management” of integrated processes in increasingly complex production. Utilization of the entire potential of each specific enterprise, as well as entire national economies, is at the center of integrated information technology. Apart from the subsequent positive impact for the enterprise itself, an aggregate increase in wealth from innovative and progressive economies also occurs. The necessary requirements for a “visualization system,” i.e., a system that enables vision through information technology, should be formulated on the basis of knowledge acquir ed by experienced corporate management.

Preface — An Entrepreneur

vii

The following comprehensive presentation of effective corporate management from the viewpoint of an active entrepreneur is presented in three parts. Part 1, Systematic Visualization of Economy, presents a model and basis for the structure of a comprehensive visualization system of the real economy. Part 2, IT Business Organization and Control System, explains and describes effective IT tools for the construction of specialized industry-specific software for universal corporate management. Part 3, Integrated Industry-Specific Information Technology for Corporate Management, presents the practical implementation of theoretical and information technology-related knowledge from Parts 1 and 2 on the basis of batch-oriented production (food and beverage, pharmaceuticals and cosmetics, chemicals and paints) as well as associated distribution companies (retail and logistics). The demonstration of verifiable as well as quantifiable improvement potential through industry-specific software for corporate management will lead the way to the efficient enterprise.

ABOUT THE AUTHOR Dr. Peter Schimitzek holds degrees in Business Administration and Economy and earned his doctorate in Operations Research at the Aachen University of Technology, Germany. Dr. Schimitzek is the founder, Chairman, and CEO of CSB-SYSTEM AG with headquarters in Geilenkirchen, Germany. With a staff of over 500, CSB-SYSTEM AG is among the leading developers of industry-specific software. Across the globe, numerous companies from the process-industry sectors food and beverage, chemicals and paints, pharmaceuticals and cosmetics, as well as retail and logistics use the industry-specific CSBSystem ERP software to successfully run their businesses.

ix

CONTENTS

1 Systematic V isualization of Economy

............................................1

1.1 Enterprises in the Information Age ........................................................ 2 1.2 Information Technology and Economics................................................ 3 1.3 Theoretical Basis of Management ........................................................... 3 1.3.1 Factors of Performance Potential ................................................. 3 1.3.2 “Integration” as Factor Performance ............................................ 4 1.3.3 An Outline of Functional Areas ................................................... 5 1.3.3.1 Management and Controlling.......................................... 5 1.3.3.2 Performance and Time Management ............................. 5 1.3.3.3 Goods and Product Management................................... 5 1.3.3.4 Accounting and Finance.................................................. 6 1.3.4 Classification of Performance Potential ....................................... 6 1.3.5 Basic Elements of Integration....................................................... 8 1.3.5.1 Integration Element: Addresses ...................................... 9 1.3.5.2 Integration Element: Items ............................................ 10 1.3.5.3 Integration Element: Conditions ................................... 10 1.3.5.4 Integration Element: Procedures................................... 10 1.3.6 Integration Elements and Elementary Factors........................... 11 1.3.6.1 Labor ............................................................................... 12 1.3.6.2 Operating Resources...................................................... 12 1.3.6.3 Materials.......................................................................... 13 1.3.6.4 Knowledge...................................................................... 14 1.3.7 Integrated Management Control System.................................... 15 1.4 On the Theory of Economic Development ......................................... 18 1.4.1 Specialization in Business Life ................................................... 18 1.4.1.1 Developmental Inevitability .......................................... 18 1.4.1.2 The Law of Scarcity ....................................................... 22 1.4.1.3 The Law of Competition ............................................... 23 1.4.1.4 Aggregate Control System Model ................................. 24 1.4.2 Factor and Commodity Market Development........................... 29 1.4.3 Dynamic Elements and Expansive Forces................................. 33 1.4.4 Coordination of Positive Effects ................................................. 34

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xii The Efficient Enterprise

2 IT Business Or ganization and Contr ol System .......................... 37 2.1 Software Technology.............................................................................. 37 2.1.1 Objectives..................................................................................... 37 2.1.2 Independence .............................................................................. 38 2.1.2.1 Freedom of Choice ........................................................ 38 2.1.2.2 System Independence.................................................... 39 2.1.3 Protection of Investment............................................................. 42 2.1.3.1 Hardware Constellation ................................................. 42 2.1.3.2 Software Perspectives .................................................... 44 2.1.4 Resource Optimization ................................................................ 45 2.1.4.1 Software Development Tools........................................ 46 2.1.4.2 Open System Architecture............................................. 55 2.1.4.3 Infrastructure Factors ..................................................... 57 2.1.4.4 Adding and Multiplying Knowledge ............................ 58 2.2 System Integration .................................................................................. 60 2.2.1 Computer Integrated Manufacturing .......................................... 60 2.2.2 Information and Communication Technology .......................... 63 2.2.3 Communication Ware .................................................................. 67 2.2.4 Software Integration .................................................................... 72 2.2.4.1 Integration Model and Integration Core ...................... 74 2.2.4.2 Multidimensional Integration......................................... 77 2.3 Industry-Specific Software...................................................................... 80 2.3.1 Internet-Capable Industry-Specific Software.............................. 86 2.3.1.1 Software-Related Internet Requirements ...................... 86 2.3.1.2 User-Specific Internet Requirements ............................ 88 2.4 Workflow Management .......................................................................... 91

3 Integrated Industry- Specifi c Infor mation T echnology for Corporate Management

........................................................... 97

3.1 Corporate Profile .................................................................................... 98 3.1.1 Country and Language Generators ............................................ 99 3.1.2 Industry Allocations................................................................... 100 3.1.3 Business Structure...................................................................... 103 3.1.4 Knowledge and Human Resource Management .................... 106 3.1.4.1 Available Knowledge ................................................... 106 3.1.4.2 Employee Training and Education ............................. 106 3.1.4.3 Career Management ..................................................... 108 3.1.4.4 Workforce Achievement Potential .............................. 108 3.1.5 Application Controls.................................................................. 109 3.1.5.1 User Requirements....................................................... 109 3.1.5.2 Personal Workflow....................................................... 110 3.1.5.3 Workflow Navigator ..................................................... 111 3.1.5.4 User Information .......................................................... 113 3.2 Business Organization.......................................................................... 116 3.2.1 Organizational Structure............................................................ 116 3.2.2 Integration and Organization.................................................... 119 3.2.2.1 Integration Element: Addresses .................................. 120

Contents

3.3

3.4

3.5

3.6

xiii

3.2.2.2 Integration Element: Items .......................................... 122 3.2.2.3 Integration Element: Conditions ................................. 123 3.2.2.4 Integration Element: Procedures................................. 125 Quality Control System ........................................................................ 126 3.3.1 Regulation Requirements in Business...................................... 126 3.3.2 Organization and Quality Control............................................ 128 3.3.3 DIN/ISO 9000 Certification ....................................................... 129 3.3.3.1 Principles of Quality Control ...................................... 129 3.3.3.2 Basic Data in the QC System ..................................... 130 3.3.3.3 Integrated QC............................................................... 133 3.3.3.4 Special Quality Assurance ........................................... 134 Management and Controlling .............................................................. 137 3.4.1 Management Information System............................................. 138 3.4.1.1 Strategic Planning......................................................... 139 3.4.1.2 Financial Management ................................................. 139 3.4.1.3 Management Indicators ............................................... 143 3.4.1.4 Result Presentation....................................................... 146 3.4.2 Area Information System .......................................................... 150 3.4.2.1 Operative Planning ...................................................... 150 3.4.2.2 Function Controlling .................................................... 151 3.4.2.3 Price Controlling .......................................................... 152 3.4.2.4 Time Controlling .......................................................... 153 3.4.3 Communication Management ................................................... 154 3.4.3.1 Communication ............................................................ 155 3.4.3.2 Contact Control ............................................................ 159 3.4.3.3 Contact Manager .......................................................... 159 3.4.3.4 Appointments ............................................................... 160 3.4.3.5 Tasks ............................................................................. 161 3.4.3.6 Process Control ............................................................ 161 3.4.4 The Decision-Making Process .................................................. 163 3.4.4.1 Basic Data Decision-Making Process ......................... 165 3.4.4.2 Decisions ...................................................................... 166 3.4.4.3 Assessment and Evaluations ....................................... 167 Performance and Time Management.................................................. 168 3.5.1 Basic Data Time Management.................................................. 169 3.5.2 Human Resources and Labor ................................................... 171 3.5.2.1 Human Resource Planning.......................................... 172 3.5.2.2 Recruitment................................................................... 173 3.5.2.3 Work Capacities ........................................................... 174 3.5.2.4 Job Performance .......................................................... 176 3.5.3 Investments and Operating Resources .................................... 177 3.5.3.1 Investment Planning .................................................... 178 3.5.3.2 Operating Resource Procurement............................... 180 3.5.3.3 Operating Resource Capacities ................................... 182 3.5.3.4 Operating Resource Performance............................... 184 Automated Economy ............................................................................ 184 3.6.1 Factor Combination ................................................................... 185

xiv

The Efficient Enterprise 3.6.2 Knowledge as Elementary Factor............................................. 188 3.7 Commodity and Product Management ............................................... 192 3.7.1 Procurement ............................................................................... 193 3.7.1.1 Procurement Market Analysis ..................................... 195 3.7.1.2 Basic Procurement Data .............................................. 198 3.7.1.3 Procurement Organization .......................................... 199 3.7.1.4 Procurement Planning ................................................. 200 3.7.1.5 Procurement Management........................................... 201 3.7.1.6 Special Procurement .................................................... 203 3.7.1.7 Procurement Evaluations ............................................. 205 3.7.1.8 Cost Prices .................................................................... 206 3.7.1.9 Procurement Controlling ............................................. 207 3.7.2 Inventory .................................................................................... 211 3.7.2.1 Basic Inventory Data ................................................... 213 3.7.2.2 Inventory Organization................................................ 215 3.7.2.3 Inventory Management................................................ 217 3.7.2.4 Inventory Control......................................................... 217 3.7.2.5 Stocktaking ................................................................... 218 3.7.2.6 Inventory Evaluations .................................................. 219 3.7.2.7 Inventory Prices ........................................................... 220 3.7.2.8 Inventory Controlling................................................... 222 3.7.3 Production .................................................................................. 224 3.7.3.1 Basic Production Data ................................................. 226 3.7.3.2 Production Organization ............................................. 228 3.7.3.3 Production Scheduling................................................. 229 3.7.3.4 Cutting and Joint Product Production........................ 235 3.7.3.5 Batch and Process Production.................................... 241 3.7.3.6 Other Means of Manufacture ...................................... 243 3.7.3.7 Optimization Procedures ............................................. 243 3.7.3.8 Production Control....................................................... 251 3.7.3.9 Production Evaluation ................................................. 257 3.7.3.10 Cost Accounting ......................................................... 259 3.7.3.11 Production Controlling .............................................. 271 3.7.4 Sales............................................................................................ 273 3.7.4.1 Basic Sales Data ........................................................... 275 3.7.4.2 Sales Organization ....................................................... 276 3.7.4.3 Marketing ...................................................................... 277 3.7.4.4 Sales Planning .............................................................. 282 3.7.4.5 Pricing ........................................................................... 284 3.7.4.6 Sales Channels.............................................................. 288 3.7.4.7 Sales Support................................................................ 293 3.7.4.8 Sales Processing ........................................................... 299 3.7.4.9 Dispatch Control .......................................................... 304 3.7.4.10 Sales Evaluations ........................................................ 306 3.7.4.11 Gross Margins............................................................. 309 3.7.4.12 Sales Controlling ........................................................ 315

Contents

xv

3.8 Accounting and Finance ...................................................................... 319 3.8.1 Payroll......................................................................................... 322 3.8.1.1 Basic Data Payroll........................................................ 322 3.8.1.2 Accounting Data........................................................... 322 3.8.1.3 Closing Operations ...................................................... 323 3.8.1.4 Payroll Evaluations....................................................... 323 3.8.2 Asset Accounting ....................................................................... 324 3.8.2.1 Basic Data Asset Accounting ...................................... 325 3.8.2.2 Asset Processing........................................................... 325 3.8.2.3 Asset Evaluations ......................................................... 325 3.8.2.4 Year-End Closing.......................................................... 326 3.8.3 Financial Accounting ................................................................. 328 3.8.3.1 Basic Data Financial Accounting ................................ 329 3.8.3.2 General Ledger............................................................. 329 3.8.3.3 Payables and Receivables............................................ 330 3.8.3.4 Business Transactions .................................................. 332 3.8.3.5 Balances and Evaluations............................................ 333 3.8.4 Cost Center Accounting ............................................................ 338 3.8.4.1 Basic Data Cost Center Accounting ........................... 339 3.8.4.2 Cost Allocation and Distribution ................................ 340 3.8.4.3 Cost Center Overviews and Evaluations.................... 342 3.8.4.4 Cost Center Controlling ............................................... 345

Gr owth thr ough Ef fective Corporate Management Recommended Literatur

...................... 347

e.................................................................

353

Endnotes ............................................................................................

355

CSB-System Applications Menu

365

.......................................................

Index ..................................................................................................

407

1 SYSTEMATIC VISUALIZATION OF ECONOMY In today’s information society, the quality of information technology determines the effectiveness of corporate management. “Visualization,” or the accurate portrayal of an entire enterprise, is an essential requirement of information systems, as is the efficient implementation of all decisions derived from it. Industry-specific and company-specific software must be able to map business processes at individual companies with the highest possible level of integration. As specialized tools for information processing, industry-specific Enterprise Resource Planning (ERP) software systems have a common responsibility in gaining a competitive edge for enterprises. The creation of tools to program such industry-specific software systems is subject to an extraordinarily high level of innovation. In this sense, Plato’s proposition bears special meaning: “All things are in constant flux, nothing remains the same.” Chapter 2 places much emphasis on software engineering technology (exemplified by the CSB-System). An efficient method of software engineering directly helps secure competitive advantages and independence for vendors of industry-specific software systems. In this case, the following theoretical statement applies: “If a specialized model visualizes the actual processes of a company, this model must allow for conjecture with regard to an overall economic model.”

1

2 The Efficient Enterprise

A scientifically secure and holistic model of explanation of economic development must be able to clarify the economic history of the past as well as today’s information and knowledge society. With a theoretical system of visualization, the basic approach toward explication for our world economy must be derivable as a “real system.” This model should not contain any ideological sources or any boundary conditions. Business sciences should gravitate toward natural sciences, and especially toward the efforts of physicists, who seek a model for a “unified theory” as a holistic approach to account for our physical existence. Business sciences are required to far surpass their current function as practical science, and should be politically motivated to seize the task of finding an economic development model that also includes the information and knowledge of society in its theories of factor and commodity market development. Approaches for the development of an information technology theory can be inferred from the economic development theory serving as a description of our real-world system, which can be combined to form the model for a visualization system (as an integrated corporatespecific information system). The task of modeling, in this case, initially consists of finding the smallest visualization units of an information system, which can be defined as visualization elements. To establish a computerbased integration system from these elements, one must define the “integration elements” and their multifaceted linkage to information technology.

1.1 ENTERPRISES IN THE INFORMATION AGE In light of the purpose and objectives of economics, it is important that successful entrepreneurs be regarded as driving factors for any national economy. The commodities (products and services) introduced by entrepreneurs into the market generally experience higher appraisal than generic goods or, at least for a time, are not really challenged by the generic goods. Entrepreneurs, therefore, enjoy significant corporate success. In addition to positively affecting the national economy, they can also be distinguished by the fact that they create additional innovative potential throughout the company, often resulting in even more highly marketable commodities. In line with corporate objectives, the organization and market position are expanded. Organizing and implementing goal-oriented activities among organizational units (business and market participants) with the least business interruption is the ultimate task of integrated information technology for corporate management. Information technology has thus become a strategic weapon for corporate management. State-of-the-art technology in software engineering will have a crucial impact on traditional business practices as well.

Systematic Visualization of Economy

3

1.2 INFORMATION TECHNOLOGY AND ECONOMICS Modern and cutting-edge information technology significantly affects economic sciences. Traditional business studies were developed in the industrial age, when production and the coordination of production processes for the manufacture of goods were at the center of scientific research. The transition from the industrial age to the information society has moved communication and information technology to the forefront of social change. The practical application of economic activity occurs within the framework of the possibilities provided by information technology. This situation makes it necessary to develop a flexible software solution for integrated corporate management with sufficient options for customization. The question is, however, which scientific foundation, practical insights, or theoretical criteria should serve as the groundwork for industry-specific software for corporate management?

1.3 THEORETICAL BASIS OF MANAGEMENT One can generally doubt that traditional business studies provide a universal basis to develop valid schemes for all economic entities. Along the same lines, the now long tradition of specialization in business studies proves that one cannot derive cross-industry standardized software for corporate management. Thus, a generally valid and scientifically viable classification of an enterprise (via standardized industry-specific ERP software) applicable to information systems can be built only on the basis of universal factors of economics.

1.3.1

Factors of Performance Potential

The production of goods arises from the targeted combination of current demand factors in the market. According to Erich Gutenberg, corporate performance potential is divided into the following elementary factors of business:

Labor (provided by private households) Operating resources (provided by businesses) Materials (provided by business) Planning factor (organized and generated within the specific corporate economy)

The performance potential of economic entities becomes effective through the combination of these elementary factors, especially planning. Computer science significantly improves planning abilities when combining

4 The Efficient Enterprise

the elementary factors. Because it results from technological progress, Gutenberg does not identify computer science as an independent factor, but as a part of planning. The improvement of information flow and information structures now possible in the information age has had a longlasting effect on corporate performance. This effect may be referred to as the “integration factor.” Hence, the consequential positive effects on the entire enterprise must be attributed to integrated information technology. The combining of factors resulting in corporate performance occurs within corporate segments referred to as “functional areas.” These functional areas focus on the combination of factors as determined by the specific corporate industry.

1.3.2

“Integration” as Factor Performance

Integration of the functional areas and functions in an enterprise is an essential requirement for the successful organization of internal and external economic processes that support goal-oriented activity. The integration concept can be attributed to the pursuit of “unity.” In classical Eastern philosophies (such as Buddhism and Confucianism) we find the pursuit of unity and harmony in the postulate, “the unity of man and nature as well as body and soul.” An enterprise functioning as an effective unit consisting of administration and production can only be implemented with the technical aid of system integration by merging information, production, and communication technology. Only with this integration can multifaceted procedures be standardized (as repeatable cycles) via the “transmission effect” of application software and thus be truly reproducible. Through the software’s multiplying effect, integration acts as an independent dimension of process design within all functional and operative areas of a business. From this it follows that integration is an independent factor. The hardware required for the use of software is, or course, apportioned to the operating resource factor. The integration effect in information technology across all functional areas presumes that the functional areas have been defined according to generalized criteria. It is important to point out that although different industries are distinguished by various combinations of business factors, each should still be visualized in one overall functional scheme. To actually state this requirement is both possible and necessary to create an industry-independent model of standard software for corporate management. Therefore, in addition to the above elementary business factors including planning, a further factor is needed: “Integration.”

Systematic Visualization of Economy

1.3.3

5

An Outline of Functional Areas

Neither general nor specific business studies provide a conclusive classification of the functional business areas that would satisfy the organizational requirements of cross-industry standard software for corporate management. Thus, it is necessary to restructure the functional areas in the CSB-System, as follows: 1. 2. 3. 4.

Management and Controlling Performance and Time Management Goods and Product Management Accounting and Finance

1.3.3.1

Management and Controlling

The effect of planning on the combination of elementary business factors in functional areas should naturally be allocated to the area of corporate management. The term management and controlling implies the following functions for the industry-specific standard software suite of CSB-System:

Human Resource and Knowledge Management (HRKM) Management Information System (MIS) Area Information System (AIS) Quality Control System (QCS)

Management functions are distinguished by the fact that they are used in a cross-functional manner, enabling planning functions in the entire system of the company.

1.3.3.2

Performance and Time Management

The functional area of time management focuses on the economic element “time”: the standardization of software results in the following outline of functions: Human resources (labor) Operating resources (assets and aggregates)

1.3.3.3

Goods and Product Management

Here, material is at the center of this business factor. The management of this factor occurs via the following functions in the corporate management system:

6 The Efficient Enterprise

Procurement Inventory Production Sales

The term product management is synonymous with goods management, i.e., the administration of goods and services.

1.3.3.4

Accounting and Finance

Corporate success manifests itself through the performance potential of a combination of innovative factors that make the company effective in the market. These effects in single enterprises are visualized in accounting and finance. The financial and accounting transactions associated with this factor are divided into the following standard programs:

Payroll Asset Accounting Financial Accounting Cost Center Accounting

These programs are used to record the transactions that are calculated by combining the financial aspects of the elementary business factors. Corporate efficiency and economic activity therefore become visible.

1.3.4

Classification of Performance Potential

The elementary factors of labor, operating resources, and materials can lead to dynamic and economic progress only if new knowledge or additional productivity is created. Implicit individual knowledge reflects the specific subjective perception of reality used by the researcher or entrepreneur to visualize future market perspectives. Complex implicit (or tacit) knowledge existent in the national economy can only become a real motor of progress if valid and accessible explicit knowledge is generated. In this sense, highly integrated information technology is indispensable. Integration, defined as direct access to all external as well as internal information, becomes a necessary prerequisite for the availability of the fourth elementary business factor “knowledge.” Knowledge should no longer be regarded as a mere “appendix” to the labor and operating resource factors. State-of-the-art information technology and worldwide communication channels

Systematic Visualization of Economy

7

(Internet, intranet, EDI, CTI, etc.) make it possible to generate explicit knowledge from existing and available implicit knowledge. The dynamic factor “knowledge,” which significantly contributes to corporate development, is molded from explicit knowledge by goal-oriented knowledge management. Adding the prerequisite sixth factor, “integration,” which affects all functional areas, leads to the following structure of performance potential in economic entities: Factors of Performance Potential Elementary Factors:

Management Factors:

1. 2. 3. 4. 5. 6.

Labor Operating resources (capital) Materials (land) Knowledge Planning Integration

Access to acquired and new knowledge is significantly determined by a company’s innovative capabilities. The performance of human resources in research, service, and production results from existing knowledge. The integration of information systems and constant access to archived (collected and cataloged) knowledge forms the basis of increasing specialization in a competitive enterprise. The existing knowledge of an effective and dynamic enterprise, therefore, becomes “expansive knowledge.” Knowledge is being revalued as the fourth elementary factor of production in advanced economies. Innovative information technology is also able to amplify the significance of the knowledge factor (also see Section 3.6.2, “Knowledge as Elementary Factor”). How well these factors work together in companies depends on the planning factor as well as the degree of integration of functional areas. The degree of integration achieved in a company has permanent influence on information transparency and information security, as well as on information transfer speed. The transformation of explicit knowledge from procured knowledge makes every company involved in information processing a future-oriented, competitive corporate organism. The purposeful definition of specific elements for businesses enforces the transition from information society to knowledge society.

8 The Efficient Enterprise

1.3.5

Basic Elements of Integration

Within any function area, the integration factor takes effect via the basic business elements. Among the basic elements of integration one finds small and common data, facts, and procedures from which, in turn, any desired “whole” accrues. The structure of the basic elements is geared toward the requirement that all matters and procedures of economic activity must be able to be reduced to the smallest building blocks, which at the same time are “combinable elements.” A systematic analysis of the smallest elements of economic processes forms the basis of the concept of “integration elements,” and the search for the regulating force of economic activity. Once economic structure has been reduced to data and facts that cannot be reduced any further, any combination of these can be visualized to any possible unit of economic processes, information, or organization structures. The smallest possible elements (atomic data elements) of economic data (facts, etc.) are thus also elements of the business factor “integration”: Basic Elements of Integration Addresses Items Conditions Procedures The four elements or forces of integration can be regarded with respect to the four elementary forces of physics.1 Modern physics seeks a “unified theory” in which all forces are combined and from which a universal theory (an all-embracing description of the universe) can be derived. Transferring this concept to economics would necessitate further research regarding to what extent the forces (or elements of integration and consequently all facts and situations having an economic effect) can be portrayed within a universally applicable description of economics. However, these elements of economic activity, properly assigned and organized, can be used to describe separate “islands of order” within economic life, in the same way as modern physics seeks the unified theory. The mathematically and econometrically oriented schools of thought in economic sciences busy themselves with their partial theories and approaches, becoming more or less a “reconstructive

Systematic Visualization of Economy

9

science,” instead of pursuing a holistic approach toward visualizing our complex economic activities. An economically active human is the sole decision-making criterion within the cycle of integrated economics. Processes in the human brain (thoughts, considerations, decisions, etc.) are genetically influenced as well as determined by environmental factors (according to neurological research as electrical impulses). To which degree human economic intervention is subject to a superior “system pattern” remains of significant relevance for the analysis of system-immanent dependencies and effects in the real “whole” system. Apart from the island of order created by economic rules, natural chaos as a driving and changing force affects dynamic economic development, especially in research and development, initiating the foundation for further specialization. The requirement of comprehensively and scientifically defining and visualizing all economic relations has become possible with the integration elements. Information and communication technology that intends to regulate economic processes must be capable of visualizing and processing these complex human business relations. Effective information technology is bound to cause sustainable and quicker progress in corporate development.

1.3.5.1

Integration Element: Addresses

The “address” integration element provides a universal way of defining all market participants. Each specific data field belonging to an address leads to a unique piece of information and is referred to here as an “atomic data element.” Defining of all persons and legal corporate bodies in the computer system enables allocation of all economic procedures. Specific facts belonging to an address are entered as information through selection lists and freely definable fields. In addition, the factor “labor” is also directly captured via the address. The integration element address identifies all market participants (vendors, customers, etc.), corporate segments, departments, and the individual employee. Thus, all information regarding companies, departments, or persons can be maintained centrally at one location as data, written language, and images, which can be processed, stored, and viewed.

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1.3.5.2

Integration Element: Items

Goods (products and services) are the object of any economic activity. Goods (also public goods) must be clearly defined in a computer system. This process is referred to as item identification. The term item is used to identify all: Operating resources (including land and capital) Materials (including raw, intermediate, finished, and by-products) As with the address fields, data fields used to define an item are also called atomic data elements, except in this case these data fields aid in defining the integration element item. Items are all things involved in the production or sales process (this also applies to semi-manufactured and auxiliary products and services). Even labor pertaining to services rendered is defined and processed as an item. In addition, the time period to be calculated and the overhead to be apportioned are also defined and processed as items. All performance factors including planning are defined as items, and consequently can be processed by the computer system.

1.3.5.3

Integration Element: Conditions

Factors influencing an item are termed here as “conditions.” Every condition is described via its atomic data elements. The definition of condition encompasses quantities in various units and how the quantities influence an item. These influences are assigned to the items as required, in the form of formulas for which parameters can be set (as mathematically reproducible facts). The result is that physical and value-related effects on items can be calculated and may be processed with a computer system. “Address conditions,” resulting from the combination of items and addresses, are also defined via the condition element and taken into consideration for all processes relating to the combination. The same pertains to terms that are applicable to specific processes, as well as for links (from address → item → procedure) and for “special conditions” in particular. The elements of integration thus enable the visualization of any desired situation arising from a whole range of theoretically conceivable combinations, and can thus be easily handled in standard softwar e programs.

1.3.5.4

Integration Element: Procedures

Combinations of factors are defined via the integration element “procedures.” Every economic activity takes place via a specifically defined

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method or protocol, and every “procedure” is identified by its specific atomic data element. The integration element procedure visualizes all mandatory regulations (state and public) concerning goods movements or handling, such as laws and regulations for active or passive corporate (internal) or market (external) behavior. The term external procedures encompasses all rules (laws, guidelines) and regulations (freely definable agreements) referring to the economy and its participants. External procedures also apply to voluntarily defined, contractually binding, or generally accepted standards (e.g., EDIFACT, SEDAS, CCG Norm) in information and commodities exchange. Internally acquired know-how (such as patents, trademarks, and copyrights) as well as the rights and patents utilized by exter nal market participants are also integrated into the company through the element procedures, releasing available knowledge in the process. Combinations of business factors occurring within the enterprise, as well as managerial planning tasks, are termed internal procedures. Control of these internal procedures in companies requires implementation of systems such as Automated Data Capture (ADC), Computer Integrated Manufacturing (CIM), as well as Advanced Production Planning and Control. The required organizational descriptions as well as the technical integration of numerous production devices into information technology (via interfaces) are also defined and physically implemented through the integration element internal procedures. Thus, all procedures and regulations between market participants and the functional areas, or functions, in an enterprise are captured through the integration element procedures. The higher the degree of visualization, the lower the friction between market participants and corporate areas.

1.3.6

Integration Elements and Elementary Factors

How significant are the basic elements of integration for the elementary factors2 in an economy shaped by information systems? Combining the performance factors in economic entities takes place by means of functional areas ⎯ divided into single functions ⎯ as a process of goods manufacture. Economically, the relationship between the basic integration elements (address, item, condition, and procedure) and the elementary business factors (labor, operating resources, material, and knowledge) is one that captures the factors by means of integration into standard software for corporate management. That is to say, the individual relationship of elementary business factors of corporate performance potential can be appropriately visualized through the basic elements of integration by means of information technology.

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1.3.6.1

Labor

An important factor in production is the labor provided to the market by private households. Economic entities implement manpower as a performance factor in the creation of goods (products and services). Manpower, as a productive and planning force, is employed by the economic entities in functional areas and functions of all forms (for various tasks). To visualize target-oriented task management with management software, each labor task must be specifically defined and quantified using the basic integration elements: Address: The identification of current and planned labor entities takes place via the integration element address. Item: Job function is differentiated for production as well as in planning by means of the item integration element. Condition: Quantifiable duties (as work flow, tasks, and planning instructions) become computable via the integration element condition in cost and performance analysis. Procedure: Corporate protocol is transparently defined by job descriptions, quality assurance tasks, production process descriptions, etc. via the integration element procedure.

1.3.6.2

Operating Resources

The operating resource factor in production supports and enables the productive utilization of human labor for the production of goods. All the technical, logistical, and operational investment goods (including real estate), which form part of production, are covered by the single term operating resources (according to Gutenberg). The specific constitution and design of operating resources with reference to the production of goods depends on the degree of technical knowledge and the internal or external innovative ability of the individual company. Labor productivity is decisively influenced by the degree of technology reflected in the combination of operating resources. Hence, computer systems (hardware) employed in the individual company can also be regarded as an element of operating resources that decisively influences corporate productivity. Achieving the optimum combination of operating resources for goods production is a management task in single enterprises. The implementation of this task is specific to each production area and function. If this process is to be supported by standardized software for corporate management, then the elements of integration must be used to document, identify, and assess the costs and operating resources for each production area and function:

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Address: Vendors, corporate areas, departments, etc. are identified via the address. Item: Actual operating resources themselves are identified and combined by the item number. Condition: Conditions define the aspects that influence the cost of operating resources, as well as the effectiveness. Procedure: The use and employment of operating resources for each specific function (limited by technology and existing infrastructure) for the purpose of production is described or specified via the integration element procedure.

1.3.6.3

Materials

Materials required for the production of goods are usually considered economically “scarce,” or of finite supply. Procurement of these materials in a free and structured economy takes place in accordance with the law of competition. The finite quantity of existing and manageable goods on earth directly affects the supply of materials (as raw, auxiliary, and operating materials) and pricing. Pricing takes place according to the law of scarcity. Prerequisites are the free market and legal conditions of competition. The term material applies to all products flowing into the production of goods as variable inputs. Material used in the manufacture of goods is handled by standardized software via the integration elements address, item, condition, and procedure in a similar way as the other two elementary business factors (labor and operating resources): Address: The integration element address records vendors as possible supply sources. Item: Materials are identified as items and are digitally accessible via a unique item number. Condition: The term condition applies to any possible provision directly or indirectly influencing the procurement price of materials. Software applies these conditions to the individual materials via mathematical functions (e.g., as freely definable algorithms). Procedure: Special procedures related to the procurement process are described with the integration element procedure. Shipping requirements as well as quality inspection procedures (e.g., in goods receiving) can be used as predefined “regulations” in an information technology system. Each material can be allocated to numerous procedures at all production levels –– from production start to the final sales product.

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1.3.6.4

Knowledge

In our information society, knowledge is collected through integrative information and learning processes. The entire economy is dependent on existing knowledge. The same applies to economic entities (such as enterprises, universities, public authorities, etc.). National economies are increasingly being evaluated in accordance with existing “knowledge bases.” Successful dissemination of knowledge to the working community directly influences the quality rating of a national economy. From this it follows that active and useful knowledge must be managed as a “scarce” elementary business factor. Defining knowledge as a business factor is the logical consequence of the change in our society from industrial-based to technology-based. Access to internal and external knowledge has progressed significantly due to information technology. In turn, for knowledge to remain transparent and useful for the economy, it must be made manageable for information technology: Address: Where does knowledge exist? The knowledge source is maintained via a database of uniquely defined addresses. Item: Which type of knowledge is relevant for a task? For a defined task or a unique product relevance, the specified knowledge can be retrieved as an item from the knowledge database using a selectable key description or item identification. Conditions: What are the conditions of obtainable knowledge? Freely available knowledge (e.g., educational material) requires different access and cost conditions than “knowledge products,” which have copyright protection. The element condition enables a cost analysis of the access to knowledge. Procedures: How do users access knowledge? The development of usable knowledge calls for strictly defined rules concerning access procedures. Knowledge is portrayed here as: Structured knowledge Classified knowledge Associated knowledge Visualized knowledge The aid of information technology standardizes knowledge-access processes for the user, thus elevating this factor to the most significant economic instrument. Knowledge is not restricted only to usage in target-oriented goods production. The claim “that any idea is true, as long as its functionality has been proven and that any idea which cannot be applied to actual actions

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and is not relevant to everyday life is useless” arises from the school of thought known as Pragmatism (referred to as Cartesian rationalism). Knowledge concerning economic activity must be derived from the entirety of the existing “real-world” system. Only this premise enables a complete explanation and analysis of economic rules and relationships.

1.3.7

Integrated Management Control System

The starting point of the following theoretical analysis is the traditional classification and consideration of an economy in the area of production and consumption. Production and consumption are organized by controlled and workable monetary economics. Production, i.e., the manufacture of products and services, occurs within the economic entities (enterprises, public corporate bodies). Consumption, i.e., the utilization of products and services, occurs in the private household. The exchange of products and services among private households and the remaining economic entities occurs in the factor and commodity market. The evaluation of goods occurs on the basis of supply and demand, whereby special market forms must be taken into consideration. This aspect, however, will not be dealt with here. Private households in the factor market supply the most elementary factor –– human labor –– and, in turn, demand goods and services from the commodity market. Single businesses require production factors from the factor markets and supply products and services to the goods market. The main focus or initial point of “doing business in an integrated control system” is geared toward a target-oriented factor combination (Figure 1.1). Information technology operates as a “transmission mechanism” for interfacing between the production and consumption area. In this interface, the elements of integration act as identification and definition criteria at all levels of economic processes between production and consumption. Industry-specific software visualizes corporate goods production in the information system. The degree of visualizing production and the combining of performance factors play decisively significant roles in determining the efficiency of the information system. The achieved degree of integration via function areas, functions, and work flows in software determines corporate productivity by minimizing coordination activities, reducing obstacles, and eliminating redundant tasks. Securing positive effects in an enterprise is an executive function and requires rapid response in information processing. Information relevant to the coordination process in businesses is short-lived, which necessitates “real-time and on-line data processing.”3

Figure 1.1

Assets

Doing business in the integrated control system.

Assets

PRODUCTION PERFORMANCE

enuity

public)

Consumption of products Consumption of services

Income and Expenses

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However, using current information as a decision-making basis presumes that the data available is reliable. Corporate decisions on the basis of secure information will most probably lead to positive corporate effects, in contrast to decisions made merely on the basis of insufficient knowledge of the facts. Only those entrepreneurs who act as a “driving force” are capable of achieving noticeable impact on the national economy. This can only succeed on the basis of available knowledge. New goods and production procedures result from new knowledge. This requires continual improvement in the interface between the market participants and corporate units, all the way down to basic production activity. The human labor provided by domestic households is subject in terms of its technical abilities, and so the potential performance level is subject to dissemination of specific knowledge. New knowledge results in the necessity for specialization in a dynamic economy. The global and individual economic control coordination processes between supply and demand of individual work capacities becomes increasingly more difficult as production of high-quality, high-tech, or innovative goods becomes more specialized. Implementation of efficient information and communication technology has become imperative in order to optimize coordination. Especially in this respect, and despite the current level of technology, we are still at the first stage of our potential. Periodic comparison of production improvements with initial expectations gives us positive, neutral, or negative results in the production performances achieved. One must take into consideration that the results of this comparison have both qualitative as well as quantitative characteristics. In any business, the assessment or monetary consideration of all economic activity is reflected in the general ledger and sub-ledgers, as well as in the profit/loss statements. The real supply situation, as well as the change in the financial asset situation, is defined as the budget result as seen from an overall economic viewpoint. The results of any business or household economic system have monetary effects on the external economy, which, depending on the public or corporate viewpoint, are regarded as positive, neutral, or negative and can be verified in the account ledgers. From this viewpoint, one can infer that only entrepreneurs and households operating dynamically and positively can create positive effects for both themselves and the economy. The goods and monetary effects created by individual businesses and households have a direct influence on the performance potential factors of the economy.

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Positive forces are consolidated within the economic system insofar as they are not absorbed by the negative (contradictory) effects of other market participants in the system. All economic activity taking place outside the self-regulating economic system, in other words, activity that cannot take place within the islands of order, is predestined to chaos and thus not subject to any fixed rules. However, this condition forms the necessary basis for research and development and is an essential factor in the positive innovative capability of R&D employees within companies and individual businesses.

1.4 ON THE THEORY OF ECONOMIC DEVELOPMENT The construction of an information technology “visualization” system requires that all connections in real economic life be comprehensibly formulated by means of a theoretical model. Although controversial and outdated, one of the first attempts to describe a dynamic economic model was by Karl Marx (1818–1883). In The Critique of Political Economy (1859) and Capital (1867), vols. 1 and 2, Marx developed an ideologically founded socialist economic theory describing the inevitable economic evolution of society over time: feudalism → capitalism → socialism → communism. A theory for economic development must be able to explain the laws of economic life (the law of scarcity and competition) including their consequences in the commodity and factor market. Universal ef fects should be extracted from the development of elementary factors and transferred to a balanced economic development model.

1.4.1 1.4.1.1

Specialization in Business Life Developmental Inevitability

Innovative and progressive economies depend on dynamic, new, and specialized companies. The multiple effects arising from dynamic enterprises are even more enhanced by national economies that support an increasing number of “young” entrepreneurs. When looking at entrepreneurs who are just starting out, we note that, even before they founded their companies, these diligent people, on the one hand, have already contributed their labor to the factor market. On the other hand, due to their specialized and recognized job performance (by means of specialized education), they enjoy superior prospects or possibilities concerning the establishment of a successful business. What

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motivates these people to go into business for themselves? Is there a superior behavior pattern behind these actions? It is an empirical and biological fact that economically active humans are merely a dwindling particle in this vast universe; nevertheless, they are self-sufficient and specialized microunits with independent economic functions. We infer our being from the physical existence of a “real system” or environment. Actions are based on “system models” and behavior patterns, which in turn are subject to superior laws as well as biological imponderability; justifying human free will (as deterministic chaos). However, rules and system-immanent dependencies are still inferable. Economic theory fails to derive noticeable “forces of progress” from an economy originating within an all-comprehensive system. Humans first must integrate themselves into the system in order to perceive their own effects in a multifaceted economy. The real system must be outlined and classified for us to position our physical and economic existence. This is the only way that a theoretical visualization system can become an existential real system. The aim of this process is to pinpoint the developmental inevitability that continuously forces economically active humans to specialize. This pattern of development is a genetically embedded human disposition (from the initial cell division of one “universal cell” to the specialized cells within the “developed” human body). The traditional view of economics, that “new needs” of people (or society) trigger new goods, is oversimplistic. The illusive optical impressions of the beholder are confused by the underlying influences of expansive economics. Essential “progressive forces” for the entire economy can only be found through analysis of the real system. The organization of the real system comprises the clear definition of subsystems and the establishment of the relation between the individual components and the whole. The relationship between real subsystems and the respective visualization subsystems must allow for reasonable inference for developmental laws. Relationships (of the subsystems) within the visualization system corresponding to the real system therefore have to be defined as “valid effects.” At the same time, however, the rules set forth in the visualization system have to be interrelated. Only with this scientific requirement is the relation (via the subsystems of the visualization system) to the real world consistent.

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Figure 1.2 presents the mechanism of intrinsic system dependencies, influencing the subsystems of both the real system and the visualization system. The maxim “from the general to the specific” allows the division of the real system into the following: Universe → Earth → Total Economy → Economic Entity. The visualization system possesses a correspondent relation to the real system within the area of interdependencies divided into the following: Universal Law → Law of Nature → Law of Scarcity → Law of Competition. Economic research also has the obligation to remain objective!4 The classical national economy (founded by Adam Smith, 1723− 1790) places economically active humans within the following hierarchy: God → Man → Earth. Based on the Christian worldview, this relationship establishes an ethical bond among humans. However, this approach is no “explanation” but rather a biblical belief based on the directive: “and replenish the earth and subdue it.” Modern physics is at pains trying to find an all-encompassing description of the universe (described here as “universal law”). The attempt to portray earth on the basis of natural laws (from gravity to quantum mechanics) is self-evident, especially in view of the latest insights from chaos research and quantum theory. The entire economy is influenced to some extent by the “law of scarcity.” All goods in the economic world are scarce, or exist in a finite amount. This natural fact results in the struggle for the distribution of goods (and all theoretical approaches thereof). For a free society to exist requires the enforcement of trade laws worldwide, a stable education system, dependable access to knowledge and all necessary infrastructure systems (currency, transportation, social services, administration, etc.) for all people in order to enable a free and competitive market. When it comes to survival, enterprises and consumers alike are subject to the law of competition. From a historical point of view, competition has fueled progress to the modern information age at all levels of development (from the individual household to highly specialized manufacturing).

Figure 1.2

a “unified theory”

The real system and the visualization system in the integrated circuit of system-immanent dependencies.

FROM THE GENERAL TO THE SPECIFIC

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1.4.1.2

The Law of Scarcity

The law of scarcity, which states that all goods on this earth are finite, is a universal constant of nature. The struggle for survival is the dominating force leading to the emergence of human society. The insight that all goods have a limited availability justifies the fight for the distribution of goods as part of the struggle for survival. Over time, the methods of distribution of goods have undergone extreme changes for all social groups (individuals, households, partnerships, companies, and organizations). Historically, the struggle for human existence has caused the evolution from irregular to organized distribution of scarce goods. An organized global economy can be built only on secure rules. A truly functional globalized economy can only be realized once the following four prerequisites have been fulfilled: 1. The creation of extensive personal and economic freedom. Freedom of choice within a governing body must be supported worldwide. 2. National and worldwide security of economic transactions of economic entities and public corporate bodies. This also applies to security systems, which make transactions reliable. 3. Innovative education and training systems form the initial requirement for economic survival of economies within the global economy. 4. Necessary infrastructure systems (currency, regulations, information technology, technical and legal infrastructure, etc.) must be competitively available for all economic participants. The law of finite supply forces people in communities to organize the entire process of the distribution of goods. This motivates economic politics to seek the best possible and most effective economic systems. Before the so-called best economic system can be pursued, however, it is necessary to define economic and political objectives. “Social economics” assumes that politics, using all its power and economic means available, should attempt to maximize the total utility of all members of society. Aiming the rules of distribution to achieve overall utility maximization displays welfare-oriented social thinking (Pareto-Optimum); however, scientifically, it lacks theoretical relevance (as it is not objective). Utility maximization assumes we can determine the “marginal utility.” Marginal utility is defined as the least amount required for the satisfaction of needs. This marginal utility, however, corresponds to the subjective

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and individual assessments of each specific consumer. The theory of marginal utility was historically inferred from the theory of market forms. The theory of market forms offers a platform to propagate various politically motivated economic systems. Models trying to solve the problem concerning the distribution of scarce goods in as “fair” as possible a way or in an “ideological” way are subject to the opportunism of politicians, thus lacking scientific objectivity.

1.4.1.3

The Law of Competition

Distribution processes of scarce goods and the real value of goods and factor markets become active on the basis of actual supply and demand. In the free market, suppliers and consumers from various “power positions” meet to satisfy their individual needs and interests. They are in direct competition, trying to direct scarce resources to their own specific advantage. It is quite obvious that a certain position of power, acting in self-interest, can lead to a monopoly. The monopoly theory describes the consequences of the elimination of competition in business life. One strategy derived from this theory is the monopoly price theory, which states the logical consequence of unlimited corporate supply to the commodity market results in an economy that cannot be analyzed further. The preservation of competition in the goods and services market is, therefore, the most important political task of a legitimate government. Which national or international organizations should monitor and regulate competition is of lesser importance. It should be emphasized that totally free development of “absolute competition” is not a required outcome of the law of competition. Competition is a positive force in increasing total economic efficiency. It acts through organized and regulated economies, and through “antitrust laws” in democratic market-oriented economies. With regulated competition (defined as the law of competition) price functions for enterprises active in the market have a dual purpose with reference to the supply of goods: (1) creating new markets and (2) assuring revenue. At the same time, market prices of goods show suppliers and especially new suppliers the amount of supply and thus the amount of real demand. Companies offering goods below cost on a long-term basis (beyond opening up a new market) forfeit the competitiveness of their

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profitable goods. Enterprises that do this subsidize their goods at the cost of their own company and to some degree the entire economy. Competition regulates the redeployment of profits in a positive manner, moving them from noncompetitive enterprises to competitive enterprises. The law of competition, therefore, regulates the change in distribution between market participants in a global market. Enterprises Enterprises New business founders State National economy

↔ ↔ ↔ ↔ ↔

Enterprises Households Established enterprises Private sector World economy

The most efficient economic tool is open competition. An increase of total prosperity is only efficient if government intervention is limited to the most necessary sociopolitical measures, i.e., concerns of individual citizens, thus indirectly protecting labor as well. The same requirement applies to public operating resources, i.e., a competitive infrastructure, governmentally guaranteed freedom, and security for all involved parties.

1.4.1.4

Aggregate Control System Model

The dynamics of progress in business life result from competition among efficient enterprises for market shares of established goods and market opportunities for new and innovative goods (products and services). This ideal model of competition assumes that all market participants have access to complete market information and that all behave in an economic fashion. It is therefore of lesser importance to be able to reduce entrepreneurs’ behavior to mathematically reproducible theories (such as price, interest, and marginal utility theory, as well as growth and economic activity theory). Market form theories also bring no new insights, besides the statement that competition should be politically protected to maintain market function and the continuous force of progress. A company’s position in the market can only be justifiable through unrestricted competition. Competition is therefore the overriding and ruling law in economic life. In addition to enterprises, households and public institutions affect the service and commodity markets in a self-sustaining system. With increasing globalization of commodity and service markets, as well as the growing

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influence of capital and national economics systems, mutual independence in the self-sustaining system is reinforced. The factor market view is limited to labor in Figure 1.3. The complex web of relations between action, counteraction, and counteraction reinforcement within the macroeconomic control system is illustrated in Figure 1.3. An attempt to transfer this functional relationship to a mathematical model would not add any further insights. In reality, the force behind the flow of goods and money is the satisfaction of individual needs and the business plans of the market participant. Behavioral theory attempts to recognize the forces of economic activity to add credibility to economic policy. The economic tools based on post-Keynesian behavioral hypotheses, especially in developed economies, have proved to be counterproductive tools for overcoming economic slumps and underemployment on a medium- and long-term basis. They can, therefore, be considered unsuitable tools for economic policy. Determining to what extent the national economic policy of a highly developed economy is able to politically influence consistent growth potential requires detailed analysis of the governing body relationship. We can, however, establish that the economic policy is still required to ensure smooth order and infrastructure. Only these circumstances allow progress and competition for all market participants. The starting point of all economic activity is for individuals to meet, identify new needs, and develop economic plans that take these needs into consideration. Positive expectations activate economic development; negative expectations inhibit economic development. If “business players” display a positive expectancy toward economic development, economic plans are geared toward growth and expansion. If these expectations are subsequently not fulfilled, growth projections are reduced, which leads to setbacks in economic growth as well as in employment (stagnation or recession). This situation calls for governmental restraint and long-term stabilizing infrastructures. Government institutions should become active to stabilize and protect a free-market economy. The interactions illustrated in the macroeconomic control system model (Figure 1.3) are divided into monetary relations as well as factor and commodity market relations. Monetary effects as well as factor and commodity effects are realized as a result of the behavior of the state, households, and enterprises. The globalization of national economies

Figure 1.3

The macroeconomic control system.

Federal

Results at Federal Level

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results in external market influences. Globalized capital markets lead to external monetary influences in any free and independent economy. Governmental, corporate, and household results cause predictable monetary effects only in well-organized economies. Their results depend on monetary balances (inflow minus outflow) and are positive, neutral, or negative. All market participants with a monetary relationship (state, enterprises, households) create monetary effects with their individual monetary results. But, the net effect on a macroeconomic scale remains limited to the net total of all positive effects (i.e., less the overall negative effects). Subsidies for obsolete industries remain irrevocably negative in terms of monetary net effects. These subsidies drive direct capital into industries, from which the capital will neither flow back (i.e., a giveaway) nor will it earn any interest. All subsidies prevent economic and superior alternative utilization of capital. Any possible positive effects are thwarted, thus inflicting losses on the entire economy. The most substantial requirement for a flexible and lasting economy can be found in ensuring competition. This is the preeminent duty of government. The roots of economic growth and employment increase lie in the advancement of competition. To secure their existence, companies participating in a hard-fought market strive for increased productivity via smart investments. On the other hand, market investments may arouse new requirements for the same goods. As a result of the productivity increase and an overly competitive pricing policy, mass production exerts pricing pressure on the commodity market (excess supply). At the same time, there is an increased tendency for companies to boost demand by lowering prices. Keeping a product on the market despite the fact that the market price does not cover its cost amounts to subsidizing a product with other revenue. This demands the same verdict as subsidies initiated by government; only in this case, the destruction of market capital is a temporary private “thrill” for the entrepreneur. To avoid overly competitive pricing policies, progressive and innovative companies specialize in new goods with higher profits. These investments form the expansive forces of economic development of an economy.

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The need to specialize is a direct result of securing a corporate competitive edge. This not only applies to the manufacture of goods, but also to the provision of all factors, especially the labor factor. Under secure competitive conditions in a free economy, companies produce their goods for the international market and contribute to the prosperity of the market participants. Imports and exports ther efore directly influence corporate production within a national economy. The supply of goods is bound to the expected demand (i.e., consumer needs). The net demand by consumers on proffered goods from the commodity market provokes product and service effects (both in terms of quantity and quality), which may have positive, neutral, or negative impact. The national demand for business factors (e.g., for labor) is directly dependent on the volume of demand for goods (including the export and import balance for these goods). The expected demand for specialized labor leads to specialized education. It is also a prerequisite for specialized goods manufacture. Even labor is subject to international competition in the market, actually influencing domestic demand. The monetary inflow to the economy for labor compensation, especially because of the increase of specialized labor, directly affects the demand for goods and therefore indirectly affects goods in a positive way. If we are not able to utilize available manpower productively (in the manufacture of goods), then we are destroying the most productive resource of our entire economy. This leads to the necessity to stimulate self-employment among specialists. The macroeconomic interaction created by the enterprises themselves (or enabled through the creation of positive infrastructure conditions), through new technology, creates positive effects on the goods and services market. These positive effects must be understood and supported to sustain a successful economic policy. It is, however, presumptuous and naive to assume that increased knowledge by politicians alone would directly lead to a more effective economic policy from which all citizens could prosper. For politicians, measures to stay in office always come before attempts to grow the economy, at least for as long as re-election is an option, even when they are well supported by their political party.

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The individual economic measures and their expected results and reinforcements can be inferred from the macroeconomic control system illustrated in Figure 1.3. The figure shows whether the individual measure has positive, neutral, or negative effects on the commodity and service market and which results apply to state, household, and corporate instances. The conclusion remains the same: Positive effects should be stimulated (from all market participants) and will lead to self-operative growth forces within the self-regulating system of an effective economy.

1.4.2

Factor and Commodity Market Development

An objective economic model should not have ideological or historical origins. For overall development of the international economy, the gap between developing countries and highly technological industrial countries must be eliminated. The perspective taken (microanalysis or macroanalysis) cannot affect the result of the approach. If the theoretical consequences of the micro- and macroanalyses differ, the approach is no longer valid. The following model for service and commodity market development is an economic model to illustrate specific rules of economic development. This model should enable the assessment of certain economic measures with the specific expected results. This economic development model presupposes that the law of finite supply acts in the same way in the conversion of business factors into commodities, as it does in the commodity market. The economic value of the elementary business factors is as follows: Labor ↔ wages, capital ↔ interest, land (materials) ↔ prices, and knowledge ↔ progress are at the center of this model analysis. The relative scarcity of factors and commodities indirectly determines the exchange rate between labor and goods. Pricing mechanisms in factor and commodity markets are subject to the effect of finite supply through the relation of supply and demand, and are influenced via dynamic competitive reactions. The extent to which price and market theories allow additional insight into the effects of finite supply and competitive distribution

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will not be dealt with here. Prices are not the main source of change to business factors, but they are the result of actual changes to supply and demand in a competitive economy. In Figure 1.4, economic change occurs in four phases via business factor development and the corresponding four levels of commodity market development. However, the individual factor and commodity market development phases are subject to the effects of finite supply and competition. According to this model, finite supply and competition have equal effects on each elementary factor. An economic development model thus emerges that includes the four factors “Labor–Land–Capital–Knowledge” as a result of expounding on the basis of “dynamic elements” and “expansive forces.” The commodity market perspective illustrates the development from natural economics to the current information economy. The definition of job value, commodity value, monetary value, and information value are closely connected to the development of the factors in the four-level scheme model.

Level 1: Natural Economics ↔ Barter The elementary factor “labor,” through effective skills, is the starting point in a natural economy. Natural products and job execution are each subject to their specific value and exchange rate. The law of finite supply determines the conversion rate between natural product and job execution. This elementary economic exchange primarily takes place due to the security need of humans (survival mechanism). The valuation of the labor factor is heavily influenced by the supply of vital goods in any specific region. All other elementary factors can be attributed to the labor factor. Humans, with their ability to think, are the primary source of economic development. The transition from level to level in economic development cannot be defined as quick jumps, but rather as a smooth and constant change mechanism, resulting from the “dynamic elements” and growth forces of economic society.

Level 2: Cultural Economics ↔ Exchange of Goods Securing right of ownership of the factor “land” is a necessary requirement for performance in business. In this case public authority, or government, acts as the regulative authority. The exchange of goods and materials created by the combination of business factors labor and land is affected by regional conditions. The situation of a region in regard to essential

Figure 1.4

and effects at each stage

Model of the theory of factor and commodity market development.

31 The Efficient Enterprise

and effects at each stage

32 The Efficient Enterprise

goods (supply) is paramount in business location and realizing the value of goods. The law of competition and the law of finite supply regulate the use of elementary business factors with an invisible hand at all levels of economic development, creating the most efficient form of commodity production and supply.

Level 3: Mechanized Economics ↔ Monetary Economy In an economy subject to the division of labor, the development and construction of mechanized production processes are essentially dependent on available capital. The business factor “capital” presumes a functional economy. Internal and external infrastructure is a significant requirement for capital to function. From this it follows that commodities (products and operating resources) can be handled more effectively via an operating monetary economy in a free market. The planning factor enacted by management is directly responsible for the efficient management of capital in the business. However, the responsibility for the macroeconomic provision of necessary capital (i.e., prime lending rate) remains with the political institutions and is thus a politically formulated aim. The transition from industrial society to information and communication society has confronted business sciences with essentially new tasks in the scientific research of micro- and macroeconomic effects in a globalized economy. Answers to today’s pressing economic questions can no longer be given with traditional economic methods, theories, and approaches.

Level 4: Automated Economy ↔ Information Economy The change from the industrial age to the information age has been predicated on the factor “knowledge.” The positioning of knowledge as a separate elementary business factor reflects the new dimensions in the formation of factor-combination processes. Information and communication technologies are the result of the use of knowledge. At the same time, these technologies create the requirement for the management of knowledge as an important factor of performance. The integration enabled by information technology between automated and technical systems of our daily economic activity creates the need for knowledge to be considered an independent dimension. The visualization of all economic processes and facts can thus be performed virtually in a visualization system (information technology), via the integration elements

Systematic Visualization of Economy

33

(addresses, items, conditions, and procedures). (This is also discussed in Sections 1.3.5 and 1.3.6.) Information technology transforms information or existing knowledge into explicit or useful knowledge. The degree of integration attained among information, communication, and production systems will determine the growth of positive effects within the economic system, thus increasing the significance of the knowledge factor. The above economic development model shows that level 4 requires detailed and comprehensive analysis of microeconomic and macroeconomic coherence. The economic approaches of post-Keynesians, fiscalists, or neoclassicists do not contribute to our “future economy” in an individualized knowledge society.

1.4.3

Dynamic Elements and Expansive Forces

In the economic development model, dynamic elements and growth forces operate as initiators to development. This process of development is flanked by influences of the law of finite supply and competition. Dynamic elements can be characterized as “internal initiators.” They are integrated into the economic model through economically active humans. The four dynamic elements that act as essential initiators are:

Human cognitive abilities Innovation in business life Expectations of progress by business players Pioneering spirit of new and established entrepreneurs

These initiators are then integrated into the economic development model. The rare talent of the human mind, the ability to combine fantasy with logic, results in innovative progress. Through the factor labor, these dynamic elements enter the economic development model as endogenous initiators. Growth forces are the exogenous initiators in the development model. They amplify factor combinations and move them dynamically beyond their original level and throughout all development processes. Growth forces in the development model are:

Population increase in the specific economic region Specialization in business life Globalization of the world economy More effective coordination of economic processes and behavior

34 The Efficient Enterprise

These expansive forces act progressively as external initiators in factor and commodity market development. They can thus be determined at all levels of the economic development model and explain forces working within the model. The dynamic elements and expansive forces interactively influence each other via additive and multiplicative effects. Assessment of the positive effects of the initiators determines the probable progress within the economic development model. To formulate tangible knowledge for economic policy, consideration of the aforesaid model for economic development is required with reference to the positive effects and the negative effects in the economic control system. (Refer to Figure 1.3.) Dynamic elements and expansive forces operate in level 4 of the model using the technology of the information society. The possible progressrelated effects in business life essentially depend on the intensity and efficiency of the utilization of available information. With an increasing degree of integration of all market participants into one worldwide communication and information net, the tendency to customize business terminology between buyers and vendors is also increasing. In this process, the integration elements (addresses, items, conditions, procedures) form the core of a comprehensively formulated theory that supports customization. The constant improvement and optimization of information technology will be significantly responsible for progress achieved. The integration activities between information, communication, and production technologies required for this purpose will prove to be the technical foundation for a new dimension of the information age.

1.4.4

Coordination of Positive Effects

In the future economy of a knowledge-based society, the ability to effectively coordinate all economic processes will be determined by the positive effects in business life. Corporate competitiveness and national economic health will be determined by the efficient coordination of these positive effects. In a highly organized world economy, states and countries will become highly competitive in order to become the preferred location for companies in terms of production and research. Government-run

Systematic Visualization of Economy

35

infrastructure systems (education, social benefits, tax structures, etc.) enable the assessment of regional advantages as well as disadvantages for internationally operating enterprises. This results in the government-level competition for future-oriented technology, and intensifies conflicts in recruiting new entrepreneurs with pioneering skills and the power to achieve innovation. Regions, states, or countries are organized economically and are subject to competition via social and business services and tax systems. If this regional competition is supported politically, and is premised on the rule “prosperity based on efficiency,” the infrastructure required for positive economic development will emerge by itself. The distribution of wealth in a global economy will be regulated by competition-oriented policy for new business and new technologies. Here, the laws of scarcity and competition will develop the same effects as they have already done for economic entities, as long as they are not overridden by the collective will of public voters. The positive effects for the factor and commodity market can be seen in Figure 1.3. If all expectations concerning economic plans are met, an additional growth dynamic emerges. Therefore, all macroeconomic measures directed at increasing the positive effects on the market should be promoted and approved by public vote. The possible external effects on the specific national economy, as well as the internal effects on the service and commodity markets, have to be tested for possible consequences (positive, negative, neutral) for each planned governmental measure. Should governmental activities have negative effects, the responsible institutions must initiate corrective measures immediately, as further persistence would, without fail, endanger the competitive attitude of public voters. In our information society, global companies respond immediately to changes in the regional infrastructure (security, legal systems, taxes, education, technical and social order, etc.) by implementing expansion or investment plans. This results in multiplicative effects to entire economic sectors, as well as to the advantages and disadvantages of competitors. Information technology allows companies to widely individualize their businesses and activities, which enables new paths and new initiatives to be developed. The virtual visualization of global legal transactions in the near future will provide more security and thus less destruction of private and public wealth.

36 The Efficient Enterprise

It is well known that bankruptcies and insolvency account for a significant amount of economic damage. Insolvent enterprises are a direct result of negative effects. Indirectly (via vendor relations and failure of payment resulting from bankruptcy), a chain of consequential losses occurs, which also includes uninvolved companies that had, to that point, been able to operate competitively. Information technology and with it the global integration of relationships between vendor and customer, as well as the possibility to securely settle these relations with automated payment functions, has revealed previously unknown benefits for the entire economy. This secure method of payment will be managed by a new field of service providers (e.g., clearing banks). The newest and most necessary trends of the Internet in e-business and e-banking will involve links to notarized payment security. This service offering will dramatically change the world of banking as we know it and create essential and notable positive effects for all involved businesses, corporate bodies, and, as a result, for the economies supporting them.

2 IT BUSINESS ORGANIZATION AND CONTROL SYSTEM The principal tool for information technology (IT) supported business organization is software for corporate management. In its specialized form, this “visualization” system is industry-specific software for corporate management. The requirements to visualize all company-specific processes and access the entire production management include industry-sector specialization, company orientation, and user support via industry-specific software with a high level of integration. The development of such software requires a theoretical basis of doing business, which was discussed in detail in the preceding chapter, “Systematic Visualization of Economy.” To keep up with today’s communication and information society, it has become necessary to transfer data from the real-world system to the visualization system in real time.

2.1 SOFTWARE TECHNOLOGY 2.1.1

Objectives

The development of standard software for corporate management always occurs in the realm of what is currently possible with today’s technology. Software enterprises must define “leading-edge” development strategies based on the knowledge that all basic information technology systems are subject to continuous innovation. The development of industry-specific software as a specialized system for corporate management requires, in addition to technical development skills, comprehensive knowledge of the special requirements of the specific industry. Industry-specific software, therefore, always relies on the collective expertise of all developers involved. 37

38 The Efficient Enterprise

2.1.2 2.1.2.1

Independence Freedom of Choice

The pursuit of maximum independence can be observed in everyday economic life. Its achievement, however, is only partially attainable. Relationships among market participants are influenced by personal interests and preferences, as well as by the quest to fulfill these interests. Finally, every successful economic act is performed on the basis of voluntary consent between the trading partners. Independence does not necessarily mean freedom of choice. Freedom of choice does not necessarily mean independence. There are decisionmaking situations that, despite the certain degr ee of independence achieved, are predefined by inherent necessities. “Real-world” forces or powers often determine developmental and economic behavior. Creativity and innovation, however, can only be attained by progressive businesses if the freedom of choice is widely maintained throughout research and development. And, the entrepreneur generally bears the cost risk for this innovative product development. Exceptions to the rule can be found in subsidized development of would-be future projects funded by public institutions. Subsidies without noticeable contribution toward the production of innovative goods are “blank checks” and potentially bad investments whose consequences must be borne by the whole of the national economy. Most entrepreneurs, however, will not utilize development resources without justified prospects for the success of the new goods. For software development enterprises, independence from hardware, operating systems, or databases is crucial to long-lasting marketable innovation. Only standardized user software with a maximum coverage (i.e., user acceptance) will prove successful on the market. At the same time, the special interests initiated by hardware manufacturers or other interest groups influence the development decisions of software companies. In virtually every sector of any regulated economy, the monopolistic aims of an individual company have minimal prospects for success and are often short lived. This statement is backed by a whole range of examples as well as by the fact that in the software industry there seems to be a special kind of “repressive competition.” This is usually the result of the inherently low manufacturing costs in the sales of standard software.

IT Business Organization and Control System

2.1.2.2

39

System Independence

In computer sciences, the term system is used for various technological and software solutions. However, the degree of integration is not really taken into consideration in this term. System therefore may denote anything from a text-processing system to a complex product management system with on-line connections and peripheral interfaces. The demand for “system independence” in this sense refers to the basic platform components or systems required for the development of standard software as a “basic system.” The basic systems for software development are: Hardware Operating system Databases The basic systems are subject to constant technological innovation. The ever-increasing performance of hardware, as well as the decisively improved capabilities of operating systems and databases, underscores this statement, which will remain valid in the years to come. As long as the continuing developments of “basic systems” are implemented along the lines of upward compatibility, there are no limits concerning the employment of user software coordinated toward these systems. However, if innovation results in noncompatible basic systems, then system-dependent software will reach the end of its development cycle. Consequentially, this gives rise to the need for the software companies to produce system-independent application programs. Programming languages used by respective software producers must thus be examined to support effortless portability (from one basic system to another). The use of a system-dependent programming language in development inevitably leads to the reprogramming of any application program developed with this programming language. Only those software companies that are able to expand and multiply acquired knowledge, to “visualize” this knowledge in industry-specific solutions, and to make these software packages portable from hardware system to hardware system will be capable of retaining their competitive edge in the long run. Thus, software developers should adhere to the following development principles: Operating system independence Database independence Hardware neutrality

40 The Efficient Enterprise

The specific application system is therefore independent of any operating system platform. All operating system-dependent program components are carefully encapsulated in their own special modules, which are either ported to other operating systems as required or further developed. Operating independence also includes the free choice of a workstation operating system (client) in a logical or physical network. The prevailing front-end operating systems such as

Windows CE Windows 9x Windows NT/2000/XP OS/2 Java Linux

are simultaneously supported in one network. Database independence requires that the data be stored separately from the application tier. This separation enables support of any desired operating system without having to change applications. Figure 2.1 shows how these structures are defined in our software application. This architecture enables applications for various operating systems and databases to be generated from a single, cross-platform source code. The benefits of a single source are obvious: No division of development resources (multiplication of resources, not division) Availability of all software upgrades for all operating systems and databases (addition of products, not subtraction) The multitier (or layer) model supports the separation of process logic of single programs from the operating system-specific components and technical details of data storage. The layer structure is portrayed at three levels: 1. The Presentation Layer is responsible for user-to-application interaction and for all corporate-specific queries. The application programs no longer execute these tasks independently; rather, they transfer the query to the module in the presentation layer. 2. The Database Layer regulates access to all external data within the CSB-System. Access to data (read, write, delete) does not take place via the applications; it takes place at the database level. The applications merely send a message to the database layer

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41

MS Windows 9x / Me / NT / 2000 / XP / Linux UDE

Figure 2.1

Multitier architecture of the CSB-System.

requesting the desired data. The database then determines the data and transfers it to the application layer. Access to the data via the respective database in use (Oracle, Sybase, Informix, Pervasive.SQL, CSB-Native II) is transparent for the application programs, so access is independent of any specific form of data storage. 3. The Application Layer contains all application programs of the CSB-System from which all corporate functions and processes are administered. By separating the business management from the data access components in the application programs, new and upwardly compatible applications can be developed irrespective of current (marketable) operating systems and/or databases. The programming cost of an application module represents approximately 99% of total programming costs. The simple exchange between the presentation layer and database layer (in each case consisting of just a few modules, approximately 1%) enables quick and cost-effective adjustments to the application software when utilizing other operating systems or databases.

42 The Efficient Enterprise

These three aspects secure the comprehensive competitiveness of the software company. The most innovative trends in development are found in PC technology. Workstations that enable networks (LAN, WAN) and the Internet, however, will be the dominant hardware platform in the years to come. Operating systems failing to offer optimum tools for this platform will therefore achieve no real market significance. System independence, however, does not just mean that the combination of basic systems (hardware, operating systems, and databases) demanded by the respective end user can be freely selectable (as with “in-house” developed solutions). Decisions regarding which hardware platform, which operating system, and which database is the “right one” are more likely to result from a “question of faith” in the decision-making process than they are to result from rational deliberations.

2.1.3 2.1.3.1

Protection of Investment Hardware Constellation

Every investment decision is the result of economic considerations. Progressive business is characterized by the dynamics of productivity-enhancing investment. Investments with streamlining effects have a positive effect on the economy and on the company itself. Although some replacement investments that do not have streamlining effects are quite necessary for production, additional and positive effects for the company’s productivity will not be attained. However, replacement investments that have possible adverse side effects to other investments must be avoided from the “protection of investment” view. The installation of a corporate management system is basically carried out while the company exists and is operating. It is thus necessary to integrate the entire hardware system (from goods receiving to warehouse, from production to shipping) into the information system. Ensuring investment protection for a customer’s current hardware situation is therefore an important prerequisite for the market success of an efficient standard software system. The required hardware neutrality for the existing IT system is secured on the basis of database independence. Databases such as Oracle, Sybase, Pervasive.SQL, Informix, and MS SQLServer support various hardware platforms. Figure 2.2 and Figure 2.3 illustrate two sample configurations for the hardware neutrality described above. In addition to the mini-computer database servers, the application servers of the market leaders in IT manufacturing can be used for the CSB-System under alternative network operating systems such as the following:

IT Business Organization and Control System

Figure 2.2

Hardware neutrality: shared application and database server.

UNIX/Linux Server Novell NetWare Server Windows NT Server OS/2 Warp Server SUN Server (Solaris) AS/400 DB Server

43

44 The Efficient Enterprise

Figure 2.3

2.1.3.2

Hardware neutrality: separate application and database server.

Software Perspectives

Every standard software package offered on the market must first demonstrate that the latest state-of-the-art technology will be maintained for the subsequent years of its use. However, conclusions concerning further potential developments can be inferred from the manufacturer’s past

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“version policy.” Incompatibility from version “A” to version “B” clearly demonstrates a lack of forethought, i.e., the necessary protection for investment for the application software. No company can afford the additional time and cost outlay involved in a program replacement or version upgrade that is not upward compatible. Software companies are thus called on to ensure their products safeguard the knowledge, training, and operational processes set up on existing systems. From an investment protection point of view, the development principle of the prospective software product must be included in the decisionmaking process.

2.1.4

Resource Optimization

Successful companies employ resources available within the company for the production of goods, and so benefit their own earning power as well as the entire economy. Decision-making processes that are open to optimization often result in quantifiable actions, which are able to improve the overall situation of the enterprise. Nonquantifiable resource optimization is of equal importance to strategic corporate planning and also significantly affects the performance quality of a company. The optimization of corporate resources (quantifiable) must go hand in hand with the quality control of work procedures (nonquantifiable) within production processes. A comprehensive quality management system in software development is an absolute necessity in gaining permanently satisfied users. Regulations on product liability force developers lacking insight to run the necessary quality tests. A motivated and conscientious development team is the best prerequisite for maintaining and implementing internal quality standards. Developers involved in the creation of application sources should always strive to achieve the “zero defect” standard. Job instructions, internal standards, tools, as well as the creative elements in software development must be based on a comprehensive quality management system. To achieve quality certification for the entire software company is the logical and economic consequence. In the future, no organizational manager or IT department head will buy software from companies that have not achieved ISO 9001 certification. Regulations concerning quality assurance and the pressure on software developers exerted by the market will considerably sharpen the predatory pricing policy, which is already taking place today. To simply perish or to grow with viable, high-quality, and industryspecific software ⎯ these are the only alternatives for software houses. Survival strategies are manifold: mass products, niche solutions, as well

46 The Efficient Enterprise

as industry-specific programs can be found among software providers. A combination of the various product emphases, along with greater synergy effects, will have a crucial and positive effect on the ability of software corporations to survive. Internationalization of software products is an additional requirement for securing a competitive edge. Only those software manufacturers able to support their clients in doing business beyond national borders with standardized (multilingual, multicurrency) software will in the future have access to the process of software selection. The world market, with its increasing integration of production, services, and trading companies, and the ever-increasing international pool of labor, leads to this reduced selection of software vendors.

2.1.4.1

Software Development Tools

Software engineering generally occurs within the framework of a fixed system environment. The use of programming languages must be harmonized with the required solutions. Selection of a programming language should be done with the following aspects in mind: the highest possible productivity, its availability (i.e., languages taught in public educational facilities), a language’s documenting capabilities, as well as portability. The resulting “language diversity” is economically justifiable. A software company’s productivity and efficiency are not dependent only on strategic development standards and their consequent implementation. Developmental requirements primarily must cater to customer requirements. Keeping an eye on developing strategies and tools within the worldwide IT market is equally important. System environments currently offered on the market are accompanied by respective development tools. In regard to development tools, there are generally two alternative procedures when creating software: 1. Implementation of existing common development tools 2. Creation of software with in-house software tools Third-Party Development Tools If a software house resorts to the development tools furnished by the system provider, further development is closely intertwined with the existing system environment. The system

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47

provider (for operating systems, databases, etc.) usually supplies optimized development tools for the system components offered. The user is thus utterly dependent on the system environment and its tools. Porting software created with these third-party tools to alternative platforms is only possible with tremendous effort. This “tactically achieved relation” between user and system environment is intentional and part of the system provider’s customer retention strategy. In-House Development Tools The aim of system-neutral software development can only be securely attained by using software tools developed in-house. The design of homegrown software development tools is necessary to achieve optimum orientation of these tools toward the developing software product. It stands to reason that tools for technical and scientific problem solving clearly differ from tools for economic software development. The optimal orientation of software tools is always attuned to optimized product manufacture. The requirements placed on software development tools do not differ from those of other production processes. Below is a list of the essential software tools used to develop the CSBSystem: SMI PMI CCM IO-SYS StM DAM

Screen Management Interface Print Management Interface Control and Configuration Manager IO-SYS WIN 32 (IO Servers) State Machine Data Access Machine

In the following paragraphs, some of the most essential features of these software-development tools are discussed. SMI ⎯ Screen Management Interface The development of a dialog-based application is fueled by an increasing demand for user-friendly on-screen guidance. Therefore, application programs (functionality) must be separated from the user interface. Application programs are thus independent from the operating system and the programming language. The Screen Management Interface consists of three main components:

48 The Efficient Enterprise

Figure 2.4

SMI Editor as used by developers in Germany.

1. The SMI Editor (Figure 2.4) 2. The SMI Run-Time system 3. SMI Utilities It should, however, be pointed out that SMI supports freely configurable screen design and handles Internet communication for all enterprise resource programs though an “on-line dialog” using XML and HTML. PMI ⎯ Print Management Interface for Windows The Print Management Interface is a tool that enables the design of all printouts and on-screen lists in the CSB-System (Figure 2.5 through Figure 2.7). The user selects the required variables from a catalog of variables and inserts them into the layout of the printout or on-screen list. Predefined (yet still modifiable) layouts are available in a print layout library for all standard printouts. Windows PMI contains the following imperative functions: 1. Initiation of the PMI editor from any menu or program position 2. Import of predefined PMI layouts from the layout archive (arranged by industry) 3. Transfer of layout (user-specific) to the application area of the protected company version (write-protected) 4. Field catalog with a selection of formulas from variable tables

IT Business Organization and Control System

Figure 2.5

WMPI Editor: layout list.

Figure 2.6

WMPI Editor: catalog of variables.

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5. “Drag & Drop” and “Paste & Copy” functions on the graphic user interface 6. The implemented formula interpreter, which enables any evaluation model desired (sales analysis, controlling functions, etc.) 7. Screen-guided layouts and layout options ⎯ output via printer, spool, e-mail, as well as fax

50 The Efficient Enterprise

Figure 2.7

WMPI Editor: layout editor.

8. Comprehensive portrayal of table print formats with numerous print zones per table 9. Variable page, line, field, matrix, and zone options are freely definable for all PMI layouts 10. Graphic depiction of all evaluation results and consideration of edited formulas Various barcode types (EAN 13, EAN 8, Code 25 IL, etc.) can be shown within the PMI layout via a barcode dialog box. The update and upgrade capability of PMI and all available print layouts as well as formula catalogs is configured with the aid of an automated conversion program. CCM ⎯ Control and Configuration Manager The aim of developing a graphical programming system is to configure simple and complex processes with the use of on-screen graphical symbols. CCM is a toolbox containing tools needed to resolve certain tasks. The individual objects are programmed in C++. The entire CCM System is object oriented, which leads to the following benefits:

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51

Rapid implementation Creation of new functions in the shortest possible time Error-free configuration of new processes with existing objects Significant reduction of programming outlay Remote control via modem or Internet

CCM is an indispensable tool in terms of preparing and processing individual projects when integrating complex production, control, and transport systems into a company’s product management. A typical procedure during CIM project implementation with the CCM tools consists of:

Creation of a target concept “on site” Analysis of the individual function points (CCM objects) Creation of a new plan of procedures based on the target concept Transfer of process points into the procedure system Adjustment of procedure-specific parameters per process point Extensive tests of created procedure controls and real-time transfer

CCM enables an overall view of hardware (IT, conveyor systems, scales, scanners, dosing systems, etc.) and software (control software and industry-specific software) of a complex product management system. Objectoriented modularization and visual programming of processes within CIM projects create considerable streamlining effects in software engineering. The software architecture of CCM is divided into three levels: 1. Visualization level ⎯ As a user interface with which components are configured on screen 2. Control interface ⎯ As interface between the IO-SYS server and the visualization level 3. IO-SYS Server ⎯ Extracts relevant data from the connected peripheral devices and transfers the data to an abstract, hardware-independent language IO-SYS WIN 32 The integration of hardware components such as scanners, scales, batch units, conveyor and hybrid systems, etc. within a CIM concept requires standardized integration of an overall product management solution (Figure 2.8). IO-SYS keeps implementation costs on site to an absolute minimum. IO-SYS provides a standardized “driver software” for any hardware periphery. Business functions in ERP software achieve on-line communication with hardware components via CCM and IO-SYS. Standardized hardware-specific drivers via “IO-SYS WIN 32” signifi cantly shorten

52 The Efficient Enterprise

Figure 2.8

Interface programming via IO-SYS in CIM projects.

implementation times. The Trace Manager integrated into the IO-SYS enables on-line problem analysis of any possible disturbances. The Trace Manager is an optimized tool for remote diagnostics and also serves as a remote maintenance system during running operations. Ensuring a system is free of downtime is at the center of the efforts to establish maximum customer satisfaction. StM ⎯ State Machine Computer telephony integration (CTI server technology) poses special problems for hardware integration in corporate management software. The ability to integrate all commercially available telephone systems into enterprise resource communication is another task resulting from the “principle of investment protection” arising from proprietary PBX vendors. The State Machine was developed to keep programming outlay for various telephone systems (PBX systems) to a minimum (Figure 2.9). The State Machine is characterized by a certain number of statuses and a fixed number of transitions. Transitions are located between two statuses. Graphically, a status is displayed as a circle and a transition as a line between circles. The task of the State Machine is to create a standardized event flow (sequences specifying the occurrence of each event) by combining two or more State Machines. The State Machine provides significant streamlining potential because coding input for the State Machine’s complex design does not apply here. The dynamic part of a telephone call (status change) is visualized via the Phonemaster application. For further specifications on CTI solutions, refer

IT Business Organization and Control System

Figure 2.9

53

State machine interfaces to telephony systems.

to Section 2.2.2, “Information and Communication Technology,” as well as Section 2.2.3, “Communication Ware.” DAM ⎯ Data Access Machine Realizing “neutral” access to various data maintenance systems is enabled via the Data Access Machine, such that changing data maintenance systems does not affect the CSB-System industry-specific software suite. The problem of database manufacturers using proprietary functions and options for a query language is solved or neutralized. This way, the Data Access Machine allows for exchanging the “back-end” database without too much effort (Figure 2.10). The fundamental strategy of the Data Access Machine is very efficient. For performance reasons, both navigational and relational operations must be supported. The Data Access Machine provides an access module (driver) for record access and quantity (block-oriented) operations. Connecting a new database consequently requires only development of an additional driver. The necessary means are provided by “CSB-QL” (CSB-Query Language). The language syntax of CSB-QL is based on the SQL language; however, it allows additional navigational access to data management systems (from various vendors) (Figure 2.11). The benefits of the Data Access Machine are obvious: Comprehensive database independence High performance with navigational applications High performance with relational applications

54 The Efficient Enterprise

Entry Screen

Figure 2.10

Database independence realized with Data Access Machine.

CSB Statistic Modules

Figure 2.11 sive.SQL.

Evaluation Queries

CSB Data Entry Modules

CSB List Modules

CSB Print Modules

A configuration example involving Oracle, Informix, and Perva-

The extensive server performance of the CSB-System is obtained by combining the Data Access Machine and IO-SYS WIN 32. This also results in the ability to allow local operations as well as server queries. The underlying database does not play a role here. If the Data Access Machine is used as a server, additional database-specific installation work is unnecessary. The Data Access Machine supports the uniformity of the local application (client server solution) as well as the Internet capability of all application and client queries and entries (also refer to Section 2.3.1, “Internet-Capable Industry-Specific Software.”

IT Business Organization and Control System

CSB Application Program

Figure 2.12

55

CSB Application Program

Internet communication in the CSB-System.

Client−server connectivity is supported using a communication bus. This communication bus, which conforms to the CORBA (Common Object Request Broker Architecture) standard, enables the CSB-System to distribute any software module across the computer network. As a result, language independence and Internet capability of the industry-specific ERP solution are secured (Figure 2.12).

2.1.4.2

Open System Architecture

Standardized software development of industry-specific solutions calls for open system architecture. The principles of system independence must be supported in this respect (from an investment protection point of view). Furthermore, complete access to all data must be a given. To support these directives, the user is given comprehensive access to the following tools: PMI SMI DAM SSM AMSQL

Print Management Interface Screen Management Interface Data Access Machine Sort & Selection Manager SQL-Based List generator

These tools are illustrated in the next chapter as well as in the development tools for “Management and Controlling” (Section 3.4). Figure 2.13 shows the structure of the industry-specific CSB-System. The scope of services of an open system architecture also includes the standardized transfer of the following:

Software Components

56 The Efficient Enterprise

Component 1

Component 2 Component 3

Figure 2.13

CSB-System architecture.

Master data (e.g., from older systems) Transaction data from statistic files EDI communication Interface programs that support commonly available software

For example, item data can be automatically transferred from an old system to the CSB-System with the tool WUWA (Windows Utility Write All). Such automated transfer occurs in four steps: Step 1: The existing item data is printed to a text file. (For example, by using the printer driver “universal/text only” in Windows).

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Step 2: The text file is prepared with the text converter in the CSBSystem and transferred to a database containing all relevant item data. Step 3: As an option, the data can also be adjusted to further conditions with the database tool (e.g., selection of a partial quantity, or adjustment of the date). Step 4: The macro generator records the specific human−machine process for item data entry (keystrokes and mouse “clicks”). This includes full consideration of all required screen entries of the new program to receive the imported data. Finally, the macro automatically fills the entry fields with the available data, record by record. The demands by users continuously develop along with increases in technical possibilities. Figure 2.13 illustrates how we plan to accommodate anticipated demands in the future. Successful software development must be able to anticipate new trends and must effectively implement internal and external infrastructure factors.

2.1.4.3

Infrastructure Factors

Economic development and the ability to change depend on the quality of the special infrastructure required for the individual commercial area. Public services provided by the state, e.g., in the form of infrastructure investments, are indispensable to economic activity and the production of all commercial goods. Individual companies have only a limited ability to independently develop and finance any deficiency in public infrastructure. For software companies, particular emphasis should be placed on special vocational and university training as a source of infrastructure services provided by the state. A sufficient amount of qualified staff is required to produce economic growth in the software industry and to generate the necessary research and development potential. Structural change in national economies can only be completed “on time,” i.e., performed competitively, provided the human resources required for the “new industries” are available. This requires that uncompetitive sectors ⎯ as well as the staff employed there with the ability to learn new qualifications ⎯ should remain unprotected from market forces. Subsidies that serve to maintain existing structures (“dead industries”) will jeopardize the medium- to long-term competitiveness of an entire national economy as a result of misdirected economic policy. One specific example of public investment in education can be seen by the programming languages taught at colleges as tools for softwar e

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development. The training costs for programming languages are comparable with the training costs required for commonly used foreign languages. As far as software companies are concerned, the choice of programming languages for standard programs is vitally important.5 Only those programming languages that continue to be developed in the future as a public service at colleges and training institutions will be able to safeguard software companies’ own investments in development tools. Although rare, this limitation also results in the phenomenon whereby software companies develop their own programming language to produce software. The introduction of proven and advanced programming tools such as “CAS Tools” and the use of “object-oriented methods,” including the use of the “4 GL” in the production of modern application programs, are indispensable to any future-oriented software company. The development strategy requires comprehensive planning of the transition from traditional methods to more productive and modern procedures used in software production by R&D management. How software companies will now be able to achieve the vital leap forward into the “new era” depends on the relevant status of the dependencies (operating systems, databases, and hardware systems). The significance of independence may now become clear. This independence therefore guarantees the freedom to execute a risk-free, step-by-step transition into the “new world” of innovative software development, not only for farsighted enterprises but for all manufacturers and users as well. These thoughts on securing the future of standard software products are based on the objectives of further development and maintenance in as cost-effective a way as possible while remaining successful and competitive in the market.

2.1.4.4

Adding and Multiplying Knowledge

The ability to add and multiply acquired knowledge has always been a characteristic of economically active humans. In earlier times, this was simply done verbally with practical instruction; more advanced cultures performed this transfer of knowledge by written language. Advanced cultural and economic development was only possible from this vantage point. The first known “theory of knowledge” was conceived by Plato. According to him, a priori knowledge (from purely logical thought) is required to achieve knowledge of “absolute truth” and this is the prerequisite for the attainment of new and reliable knowledge (expansive knowledge!).

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History shows us that we not only acquire knowledge from logical thinking but also from “material objects” through sensory perception. This observable fact was postulated long ago by Aristotle (Plato’s pupil), who reasoned that the existence of an idea was inseparable from the material object and was thus bound to sensory perception. From the experience and constant new demands of an economic society, we receive impulses for new ideas and new, fruitful knowledge. These prerequisites are necessary to support knowledge optimization in the development of standard software. Marketable industry-specific software solutions are feasible only by constantly adding all customer requirements to the package, and subsequently upgrading applications via upward-compatible versions. Solutions that are not upward compatible are unjustifiable for the software house as well as for the final users. Such systems can only survive in a market lacking competition and dominated by monopolies. Software products for corporate management with a broad scope of implementation (in various corporate branches) have the ability to achieve a higher degree of knowledge multiplication. This situation grants a significant competitive edge for the software manufacturer once the disadvantages have been eliminated. Software systems for corporate management that attempt to be “universal” are very complex and require considerable industry-specific customization. When implementing such systems, it is generally not possible to calculate the costs for company-specific adaptations as well as training, corporate reorganization, and the associated parallel maintenance of two systems (old system still running, new solution cannot yet be deployed). It is quite common to find the costs for such a software package license amounting to but a fraction (10 to 15%) of the overall costs. The overall costs of an IT project for the implementation of a corporate management system consist, in addition to the software, of hardware, organizational consulting, company-specific custom programming, training, parallel operation, and the associated negative effects on the current day-to-day business. The positive effects (those that increase competitiveness) that are achieved by the increased multiplying effect of the universal software system are completely lost in the considerably more costly process of installation. If the time factor involved in the activation of the IT solution is taken into account as a key competitive factor, then all that remain are the benefits for an “industry-oriented” standard software solution. The considerably higher license fees generally found in industry-oriented software systems are compensated for by the significantly lower implementation costs (in

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custom programming, consultation, training, and the time required for implementation); consequently, the return on investment for the respective project is attained in a considerably shorter time period. The true usefulness of a product must always be assessed by taking all the factors into account (in particular those of a negative natur e). Positive effects must be set against negative effects, and assessment of the various solution opportunities must be drawn only from observing the total project costs as a whole.

2.2 SYSTEM INTEGRATION The integration of all resources employed in goods production within an enterprise is the task of IT. In modern information processing, there are three main points of emphasis: First, the integration of the production process into the entire corporate management system; second, the integration of communication and information technology; and third, the integration of the user software itself as well as any required electronic data interchange (EDI) into the system for corporate management. The approach and volume of tasks resulting from these requirements vary from industry to industry. The greater the penetration level desired of system integration, the more industry specific the software package must be.

2.2.1

Computer Integrated Manufacturing

Productivity-enhancing investment within the company is no longer generally sufficient on its own to enable the company to survive. The production processes, which have become even more innovative and complex, must on the one hand be made more manageable, while on the other hand must be improved for a long-term basis. Only this way can investment in terms of permanent productivity gains be justified economically. The introduction of information technology into production activates a tool that can be used to advance corporate coordination processes considerably. The task of management is to minimize friction between the various corporate units and areas. This demand can only be effectively met by completely integrating “administration” and “production.” Computer Integrated Manufacturing (CIM) is the established technical term for corporate control highly facilitated by IT. In the literature, the terms CIM (Computer Integrated Manufacturing), APS (Advanced Production Scheduling), and ADC (Automated Data Capture) are used to convey a multitude of meanings, and each author interprets these “special terms”

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(which can be expanded as required) in very differing ways and with widely differing contents. It is therefore necessary to clearly define the terms. Employment of IT throughout the company only serves a purpose once the entire production scheduling and production control processes (APS) become transparent, and once bottlenecks can be identified rapidly (or more rapidly than before). It is only under this condition that actions or counteractions can be taken promptly, and therefore be of commercial value to a company. The most important prerequisite required for this purpose is data capture. It is only when the data is recorded in real time and on-line at its place of origin that it is accessible to employees and management for subsequent use. ADC must always be organized in terms of individual company specifics, although standardized work processes can also be implemented using standard software modules. A trading company has different logistical control needs than an industrial food manufacturer, or a services company. Software manufacturers must meet these varying needs by programming industry-oriented solutions within the CIM concept. Production-related data capture processes vary from one sector to another. It is therefore imperative for the software manufacturer to offer specific specialized programs, geared toward the respective industry, as industry-specific standard programs. As shown in Figure 2.14, the High Level Application Interface (HLAPI) simplifies the process of integrating all production equipment into the CIM concept for all control tasks via the logistics server. The HLAPI is used as an interface between application and operating resources for comprehensive, technical integration of all production equipment. The devices used in the production process, such as transport systems, scales, scanners, production machines, etc. are controlled via these operating-resource-specific interfaces. Figure 2.15 shows the interaction and integration productivity factors: humans, IT, and production technology in the CSB-System; the software for comprehensive corporate management. Humans (as executing manpower) control and monitor productionprocess procedures via the presentation and integration level. Where deviations are not tolerated, all the necessary information is sent real time and on-line to the authorized recipients via Control Message Management (CMM). A CIM concept based on packaged programs can only be achieved using industry-specific software. An enterprise involved in foodstuffs will

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Figure 2.14

Software layers in the CSB-System.

have entirely different tasks in terms of APS than, for example, a construction company. ADC is dependent on a company’s production process. The integration of production devices (e.g., equipment used for transport, filling, monitoring, and labeling) can be realized by using corresponding IT interfaces. The task of the industry-specific software manufacturer is to incorporate all process data within the corporate-wide information system as cost effectively as possible. This means that the necessary interfaces6 .for every device or machine in an application should not have to be reprogrammed by the software provider every time, as these costs exceed the resources of small- and medium-sized businesses. The implementation of IT within a CIM concept should not price out these businesses. The increase in work productivity attainable with an all-embracing IT system must be achievable for companies of all sizes. It is the task of industry-orientated software development to ensure that this is the case by having a reasonable library of CIM drivers on hand. This postulate ensures that innovative competition in the commodity market (between

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Equipment

Equipment

Figure 2.15

Human−machine communication in the CIM concept.

small and large enterprises) remains unharmed, that it is not selectively influenced by the costs of IT.

2.2.2

Information and Communication Technology

The primary area of IT-aided communication is to automate all telephone functionality by use of screen-driven user−interface control within the LAN. Routing and efficiently processing high-transaction phone communication in and beyond the enterprise without IT integration is no longer a conceivable option. The linking of applications between telephone and IT systems is a complex technical process characterized by industryspecific conditions and includes organizational processes within complex corporate structures.

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This insight calls for a solution that connects both worlds. 7 In their search for a suitable solution, IT companies have taken numerous paths. But only one path leads to an integrative solution that offers comprehensive investment protection in terms of hardware (IT systems and telephony systems) as well as software and also offers users highperformance IT telephone systems without any size r estrictions (Figure 2.16). This integrated solution is called the CSB-Phonemaster. The unlimited size capability within the IT and telecommunications world is the only way to maintain development potential (particularly in telephony) and to remain effective in the future as a competitive factor (between the PBX manufacturers). The development of the CSB-Phonemaster was influenced by a wide variety of technological phenomenon. We currently move within an extremely heterogeneous data environment with various types of operating systems, Windows 9x/NT/2000/XP, UNIX, Linux, OS/2, and OS/400. Applications communicate via various network protocols such as TCP/IP, IPX/SPX, and NetBios. If one observes the various telecommunication systems of the many manufacturers, who all more or less have their own proprietary protocols on diverse physical interfaces (So, V. 24, LAN, etc.), it becomes evident that this has led to a “Gordian knot” that can only be untangled by highly efficient programming tools. This gave rise to the State Machine, a visual programming tool in the CSB-Phonemaster (Figure 2.17). Programming work concerning the integration of new telecommunication systems to the CSB-Phonemaster is reduced to a few simple adjustments. What benefits does the CSB-Phonemaster hold in contrast to Microsoft’s TAPI? The most obvious aspect is the operating system independence of the Phonemaster API, unlike the TAPI, which runs only under Windows 9x and Windows 2000/NT/XP, and not other hardware/software platforms. Implementation of the CSB-Phonemaster is advisable for applications under Windows 9x or Windows NT, as only this module is able to scale event flow dynamics, which specify the incoming order of events within a TC system. This standardization enables the application to navigate securely through the various activities of a telephone call. After all, TAPI is a complicated construct consisting of 128 functions with 696 flags in 49 structures, which irredeemably swamps any application programmer. Even the endeavors of telecommunication system manufacturers to create an application-friendly interface with CSTA (Computer-Supported Telecommunications Applications) have led to a dead end. Although CSTA provides flexible interfaces to many TC systems, its construction has become increasingly ever-changing through the numerous compromises made by TC system manufacturers, to the point that it requires a drastically complex control system (ECMA-179, ECMA-218, etc.).

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Figure 2.16

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Integrating telephony and IT in the network with CSB-Phonemaster.

CSTA is not an API in its actual sense; it simply describes the protocols exchanged via a physical connection (LAN, V. 24, etc.). Finally, the CT connect concept based on CSTA, which attempts to design an applicationfriendlier CSTA interface, should also be mentioned. However, it fails to offer a consistent programming interface because different programming variations and parameters must be taken into consideration for certain TC systems.

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Transfer

Figure 2.17

Layer model of CSB-Phonemaster.

A number of operating system manufacturers are attempting to participate in the expanding telecommunication market on a profitable basis (with only limited services) using their own APIs for telephony. Furthermore, it should be pointed out that links to the telephony APIs will have to be created so the respective application software can communicate with the telephone systems. This solution offers users no protection for their investment in their existing software components (licenses as well as operating system software and application software). These will have to be replaced or considerably expanded for use with this type of computer-aided telephony. By contrast, comprehensive investment protection for all application programs running under Windows 9x/NT/2000/XP, Linux, and other platforms is extensively guaranteed by the CSB-Phonemaster. The software interface for any application is managed by the communication control module of the CSB-Phonemaster, and is based on all known operating systems. The extent of technical telephone functions within an IT system is exclusively determined by the effectiveness of the telephone system itself:

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IT-aided connection setup with switching and conference function Monitoring and control functions with call redirect, call protect, autoanswer Telephone data services (e.g., message transfer to phone display) Call charge transfer Telephone manufacturers are therefore in the position to advertise using their in-house standards and to market the superior performance of their telephone systems more successfully. Thus, it appears only logical and consistent for telephone manufacturers themselves to utilize a telephony interface that reflects their system’s capability and offers customers significant additional benefits. This requires competent partners on the application programming side, but not the involvement of operating system and hardware manufacturers because these worlds in particular remain unaffected by the use of the CSB-Phonemaster. Increased corporate performance is attained by the user by consistently making full use of additional opportunities found through the use of telephony in the software (and by greater productivity) in day-to-day competition. This is the only way that the integration of telephone and IT worlds makes commercial sense.

2.2.3

Communication Ware

The legitimate necessity for management to be able to access “on-line information” has opened a new dimension in terms of valuating integrated communication. Modern data processing has resulted in a virtual information flood within companies. This information must be channeled and prepared for each type of user. These tasks are performed by standard software, industry-specific software, and data warehouse functionality. The multidimensional integration of standard software, industry-specific software, and data warehouse and the fulfillment of internal and external communication requirements are accomplished with Communication Ware (Figure 2.18). Assured corporate communication is an integral part of business operations in any competitive enterprise. For this purpose, all available communication channels must be utilized in the entire business process. Secure and documented communication can lead to an increased competitive edge only after communication technology and IT have been integrated. Communication Ware enables standardized communication between enterprises and market partners (external communication) and within the enterprise among departments and staff (internal communication) at all function levels. Every corporate process is simultaneously linked to its respective communication process.

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Customer Loyalty Canvassing New Customers Customer Service Customer Reactivation

Figure 2.18

Communication Ware ⎯ bridging communication and information.

The Contact Manager combines, registers, and archives order management activities with the respective communication processes. Based on all activities (e.g., offers, orders, reports, cancellations, etc.) the Contact Manager (Figure 2.19) can access all procedures and activities involved. If this information (documents or records) is required on-screen during a phone call (as additional information) it can be requested directly from the corporate databases on the basis of the telephone number. The user can access all data directly. The Contact Manager is a program module of Communication Management (see Section 3.4.3.3). Communication Ware integrates all market-oriented functions such as

Communication Management Database Management Call Center Management Marketing Management

with the order management functions

Procurement Warehousing and Logistics Production Sales

as well as all time management functions (personnel, machinery).

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Figure 2.19

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CSB-System Contact Manager.

All communication channels such as

CTI Internet Intranet Video Fax EDI

are integrated into the entire corporate system as information channels, serving as a technical infrastructure for increased competitiveness in the market. A major priority task in every company is to streamline mass production work. The mass of production data, which is created each day and which must be processed in all the function areas of the company, must therefore be subject to critical review for streamlining potential. The data, which must be exchanged between supplier and customer, is part of this massproduction data complex that must be streamlined. As Figure 2.20 illustrates, there has been a true revolution in the development of data processing to the present day. The cycle of a typical

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Figure 2.20

The development of data exchange.

application in the interchange of data between vendor and customer is shown in Figure 2.21. This shows how the technical data process is structured through EDI from order intake by the vendor to shipment to the customer. Streamlining effects achieved in this respect are substantial, although the reduction in the flow time from order intake to shipping is even more important. A “just in time” organization, as is required by the complex coordination requirements in the manufacturing industry (for warehouse optimization) or by the fresh foods industry (to reduce lead times), is no longer conceivable without the use of EDI. The economic benefits are obvious:

More secure and quicker data exchange Automated shipment coordination and control Reduced stock on hand through the “just in time” principle Total elimination of verbal and paper communication Automated clearance procedures between customers and suppliers Comprehensive statistical data exchange for optimized planning procedures

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Order Data Distribution Warehouse

Picking and Shipping

Distribution with Automatically Generated Route Plans

Figure 2.21

Delivery at Customer Site

Data interchange between customers and vendors.

In contrast to other streamlining approaches, EDI cannot be realized unilaterally. The implementation of EDI requires considerable coordination processes on the part of independent partners. However, it should be pointed out that the co-competitor situation in suppliers to the retail trade may be altered by the EDI requirement.

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Suppliers to the retail trade will in the future be prompted by their major customers to implement EDI; otherwise they run the risk of being excluded from the list of approved vendors. The term EDI covers a wide range of standard interfaces, such as SEDAS, EDIFACT, and EANCOM. Apart from these standardized interfaces there is also a whole range of unique and special solutions for data interchange. Similarly, the standard interfaces have undergone modifications. This situation is not a satisfactory one for rational EDI processing, since these situations are associated with considerable and perhaps unnecessary infrastructure costs for the economy as a whole. From an economic point of view, all partners in the economy agreeing to one or a few standard interfaces for the interchange of data is something that should happen very soon. Until then, software manufacturers must offer standardized interface programs for the whole range of EDI procedures currently in use. Here, again, the requirements of the standard interfaces must be industry oriented. In other words, those software manufacturers who have specialized in providing solutions for industry-specific requirements are more quickly able to meet the demands of their customers due to the prevailing data structure and the associated specialist knowledge.

2.2.4

Software Integration

The production of integrated software solutions is still the exception in today’s software industry. The knowledge required for this purpose (in the necessary depth and specialty) can hardly be found in only one software house. Consequently, the market is dominated by products for special solutions such as text processing, spreadsheet calculations, financial accounting, asset accounting, and payroll accounting. Although many tasks can be performed with these island solutions, there is a lack of industryspecific application programs for procurement, production, warehousing, and sales. This situation has led to the establishment of numerous software providers, who correspondingly offer their custom programming services. In the course of time, however, software companies that were willing to invest have developed integrated software packages covering all areas of corporate management. The following conclusion particularly applies in software development: that the software product itself can never be better than the level of knowledge applied to development by all the participating developers. Adding experience, knowledge, and the will to perform determines the quality and the growth of the application software. This results in earnings potential of the software product for the manufacturer.

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Software houses pursue two different development approaches. One group focuses on cross-industry software; the other group opts for industry-specific software solutions. However, what both groups have in common is the comprehensive integration of all software modules required by the user. The benefits gained by integration are obvious: All the master data are stored only once in the system (redundancyfree and “exactly the same for everyone”). Duplicate and triplicate data entries and their error sources are eliminated. Uncontrollable island solutions are a thing of the past. Processing data in real-time and on-line using the resultant operational data of the CIM concept is only of benefit provided there is comprehensive integration. The coordination processes within the company throughout all function areas and departments are carried out with much greater relevance and much less friction. The “basic elements of integration” enable a “degree of integration” to be achieved throughout all function areas and functions (from product management to time management via accounting to management) to an extent that was not previously possible in software development. Management tasks and planning activities become more efficient. Decisions that must be made on short notice are based on knowledge that is the most reliable and informative as the technology allows. The market for integrated software systems will continue to develop and grow at a tremendous rate to the disadvantage of island or “best of breed” software modules. In this respect one observes that cross-industry companies operating in all sectors prefer to use cross-industry software, while SMEs have a preference for industry-specific software. Shorter implementation times, lower adaptation costs, as well as a quicker learning curve are significant aspects in favor of opting for the industry-specific software. Specialization within certain sectors is to be expected among software manufacturers in the development of industry-specific software. Specialist support provided through sound industry-specific software is being demanded more than ever before as a result of our ever-increasingly complex world of specialization and division of labor.

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2.2.4.1

Integration Model and Integration Core

The effects of competition on everyday life, as has been empirically documented, lead to progressive specialization and increased streamlining resulting in constantly growing productivity in effective enterprises. Our information society, characterized by corporate specialization and the rapid advancement of innovative technologies and procedures, is closely connected to IT. The ability of a progressive and innovative enterprise to offer high-demand goods with short development cycles must also be supported by specialized IT. IT, as a visualization system of independent firms (companies and public institutions), is subject to the conditions of competition, which also apply to all other areas of economic business life. Although still a young area of business, it is expected that the software industry and its evolution in terms of specialization will proceed much more rapidly than has been the case in traditional industrial areas. Theoretical approaches concerning the control of economic entities can be inferred from the Visualization System (Figure 2.22). The path of specialization continually crosses that of the “law of competition.” This continuous progress also increases the demands on management. IT is therefore a developmental result of economic and technological progress, allowing management to improve planning skills considerably by combining the elementary business factors (labor, operating resources, materials, and knowledge) via currently available software/hardware systems. True integration in terms of information processing, on the other hand, becomes effective via the basic integration elements. How do the integration elements (addresses, items, conditions, procedures) operate within the information system and how do they interact? The combination of integrated factors constitutes the business operation of an economic entity. The basic integration elements enable IT to support these combinations of factors, and hence the portrayal of economic processes via industry-specific software for corporate management. The objective of the CSB-System is to visualize economic elements and processes in individual companies via software without losing any essential information. The control system for economic integration elements was created on the basis of this approach. Based on the control system for economic integration, the basic elements of integration form the “integration core” of the CSB-System (Figure 2.23).

Figure 2.22

From the whole to the component.

Assets

FROM THE WHOLE TO THE COMPONENT

From self-sufficient households to

D

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Figure 2.23

The integration core as linkage kernel to the integration elements.

The elements:

Addresses Items Conditions Procedures

become effective throughout all application programs via the integration core. The multifunctional connection of the integration elements is shown graphically in the portrayal of the integration core (Figure 2.23). This relationship allows the formulation of any conceivable connection among corporate processes, enabling a true mirror-image type of visualization of these company processes using industry-specific software. Figure 2.24 shows the IT system structure for corporate management. Based on the central point of this illustration, the integration core is rendered as a comprehensive integration component of the entire integrated system. For all business areas, the integration elements all interact with the real corporate processes of the enterprise, in a redundant-free and collisionfree manner (in the integration cor e) to yield a multidimensional

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visualization system. This statement applies to the visualization of elementary business and management factors, as well as the exact portrayal of any unique combination of factors for any enterprise. The management module for Management and Controlling includes:

Management Information System Area Information System Quality Control System Communication Management

The functional areas of the industry-specific software for corporate management are divided into the following:

Business Organization Integration Elements Time Management Product Management Accounting and Finance

The processing of real-time data (from production equipment) has been enabled by CIM technology. Therefore, all real-time data can be processed directly on-line via automated data capture workstations (ADC systems). The technical integration of all equipment used for production is embedded into the comprehensive corporate management information system via special interface programs. IT-guided communication (internal and external) is managed by the integration of data processing systems with telephone systems via the Phonemaster API. In addition, the structure that supports integrating production and communication technology for true “comprehensive integration” has been built into the industry-specific software solution, CSB-System.

2.2.4.2

Multidimensional Integration

IT has enabled progressive companies to organize planning and other important business processes considerably more rapidly and with more security. In fact, most innovative enterprises agree that the path toward specialization is no longer conceivable without the proper use of industryspecific IT. The opposite is also the case. Corporate Management Software that is not specialized will influence productivity and viability of a progressive enterprise negatively, constricting its competitiveness in the long term.

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Panel

Equipment

Voice

,

Figure 2.24

,

Information structure in the CSB-System.

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The IT integration model within an enterprise must be oriented toward true market realities. The following are of considerable significance:

Company-specific market positioning Product-related requirements Communication capability to the market partners Potential for innovative goods Access to existing knowledge

The extent to which an enterprise is capable of making inferences to develop strategic corporate development concepts from its companyspecific market position is subject to the accessibility of market data. The fact that modern production technology must be used ceaselessly in order to promote competitiveness is undisputed and expected. This requires no further explanation. The available innovation potential, internal as well as external, can give rise to new commodities that can improve the companies’ competitive position. Today, a company’s effectiveness is judged by seamless and fast communication with its market partners (customers, vendors, etc.). In many companies, the existing IT infrastructure still does not regulate the information flow of a company unerringly. Specific benefits can only be attained if management furnishes a comprehensive, “multidimensional” integration system for all relevant information. Figure 2.25 illustrates the components contained in a corporate-wide integration system. Benefits resulting from the optimal use of information and communication technology are extremely valuable for active enterprises. Joining quantitative external and internal data, as well as qualitative “filters” that assess the information, improves the possibility to use additional and newly gained knowledge. The demand for more transparency has resulted from the endless flood of data and clouded corporate processes and procedures. Obsolete structures as well as the sheer volume of well-integrated information threaten the active planning function of management. The reduction of clear thinking due to expanding knowledge and information is an uncontrollable fact of life. Here, the calls for methods and tools for conceptual knowledge processing become heard. Supporting management in rational thought, assessment, and activity is the objective of “conceptual knowledge processing.” Acquiring new and additional insights from existing and accessible knowledge can be achieved with the tool “Term Analysis.” Extracting relevant knowledge for management from data and facts is a task of the functional area Management and Controlling (this is discussed in more detail in Section 3.4.1.4, “Result Presentation.”). Multidimensional integration

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Time Attendance

Phone & IT Integration

Figure 2.25

Multidimensional integration.

opens new horizons for corporate IT in terms of overall and industryspecialized corporate management.

2.3 INDUSTRY-SPECIFIC SOFTWARE IT departments in most companies have led an existence separated from each other for many years. The individual programs produced under their own direction have been ported from one hardware generation to another, and consequently these programs live on with barely any external influence. It is, however, common knowledge that competitive companies must adapt to changes in the market and meet the resulting challenges. By necessity, this process is also reflected in new requirements for software development within the company itself. However, additional staff required for this expansion is often not available since IT departments have also initiated cost-reduction measures.

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Software modifications or upgrades that are urgently required for companies in this position (of limited development capacities) can only be realized over a longer period of time. These delays in urgently needed IT projects lead to considerable competitive disadvantages. Even increasing development potential will not enable companies to avoid delays that are needed for producing the necessary software. The costs and availability of self-produced software compared with an industry-specific software package cause such considerable commercial disadvantages that, as a result of this situation, an increasing number of companies are ceasing their own software development efforts altogether, as soon as they find an appropriate industry-specific or similar software product. This also explains the enormous growth among companies specialized in industryspecific software. This growth will definitely intensify in the years to come. Every entrepreneur anticipates considerable streamlining effects when implementing an industry-specific software package. Most corporate management software packages are industry independent and attempt to cater to the financial and enterprise resource management needs of any business, from the power plant to the baker, from the automobile and pharmaceuticals manufacturer to the financial services company to the aerospace industry, with just one single complex software solution. It is therefore absolutely necessary to extract the required functions for each individual enterprise (with its unique industry requirements) from the unfathomable number (10,000 and more) of functions in standardized tables. The visualization of the specialized corporate-specific workflow in one such software package is becoming less and less possible with the increase in functionality (from version to version). This explains why many resort to such modeling tools as the Aris Toolset or Meta Software. There are currently hundreds of solution integrators praising these tools that navigate through the inscrutable standard function of the aptly termed “table jungle.” The main task of workflow systems, however, cannot be ignored. These systems should support process queries, status controls, and procedure synchronization. The performance lies in the successful orchestration of various specialized applications within one logical system in order to achieve complete visualization of corporate-specific procedures throughout all company-wide processes. Corporate management executing a transition from in-house software to packaged corporate management softwar e rightly expects an

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improvement of operational processes in the entire enterprise (from administration to production), with the goal to gain a competitive edge. What are the requirements the software developer must fulfill to meet the legitimate expectations of the potential user of industry-specifi c software? The successful and truly streamlining introduction of software for corporate management requires two essential factors: 1. Specialized industry knowledge on the part of the application consultant. 2. Industry-specific software with built-in flexibility to be able to implement industry-specific features in a timely manner. This is the essential benefit gained from a successfully implemented EDP project. The more knowledge and experience a software manufacturer has acquired from comparative enterprises, the more specific and detailed such projects can be. From this insight it logically follows that “industry-specific software” can offer each individual customer the highest degree of its specific “wealth of knowledge.” Organizational benefits to a corporation that originate from industry-specific software depend largely on the structure of the industry-specific software itself and the experience it offers. On the basis of these prerequisites only, acquired knowledge can be “added” to the industry-specific software and hence multiplied as the total number of applications grows. The terms “general” or “specific” are usually subject to the interpretation of the beholder. Information and communication systems utilized in the individual enterprise must be capable of providing solutions for general processes as well as for industryspecific and even company-specific procedures. Figure 2.26 and Figure 2.27 exemplify the relation between information and communication procedures, as is the case between real corporate processes and their reflective portrayal (in information and communication systems). The fact is that there are generally valid business factors and procedures common to all companies, which can be covered with a standard business software package (refer to Figure 2.26). However, it is undeniable that specialized corporate processes cannot be portrayed with common “standard software systems.” Industry-specific and corporatespecific processes in product management, quality assurance and production processes (within a CIM concept) can only be visualized with a specialized industry-specific software solution (Figure 2.27).

Figure 2.26

From standard ERP software to industry-specific ERP software.

-

EDP, Phone System, Connectivity Communication Channels

Elementary Factors: Materials, Operating Resources, Labor, Knowledge

from standard business software to industry-specific software

FROM THE WHOLE TO THE COMPONENT

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Figure 2.27

Visualization of company-specific business processes with industry-specific software.

FROM THE WHOLE TO THE COMPONENT

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IT Business Organization and Control System

85

Standard business software has its origins in the accounting sector; i.e., the main ledger is thus the central integration element here. Industry-specific software must be able to adopt real corporate processes and reflect these in the elementary factors and in the combinations of corporate-specific factors. The objective for this functionality is the optimal visualization of goods manufacture based on IT. Competition among innovative enterprises has forced these companies to implement optimized tools for corporate management. Only the prerequisites of economic necessity cause specialization, which in turn is followed by increased streamlining, which in turn results in higher productivity in competitive enterprises. The successful implementation of industry-specific software in companies belonging to a certain industrial sector requires the application software to cover all requirements of the specific industry, and to have the tools to visualize specific corporate requirements. The implementation consultant is expected to possess comprehensive knowledge of the specific industry sector when managing the implementation of industry-specific software. The aim of this mandate is to enable corporate-specific aid from the industry-specific software management tool, while still implementing the software in the shortest possible time and with the maximum streamlining effect. Training of staff within an industry-specific software company must be industry oriented. Specialists talk best to similar specialists, eliminating the need for “interpreters” who strongly complicate decision making and hence increase project costs in the process. When industry-oriented implementers are used, the time needed to successfully implement industryspecific software is mainly determined by the costs arising from system conversion. Implementation time should be reduced to an absolute minimum and can only be achieved by comprehensive organizational support by the software developer. The “software technological possibilities” via development and implementation tools such as “code generators,” configurable parameters, and process navigators have by far not yet been fully exhausted. The job of the software developer, especially the tool developer, will noticeably expand in the years to come (for further information, see Section 3.1, “Corporate Profile”). In the future, the productivity of an enterprise’s IT system will significantly determine its financial strength. The constantly increasing need to adjust to changing economic processes (which is in part caused by IT itself) demands an ever-increasing degree of flexibility from the enterprise, and quicker reactions from the producers of industry-specific software. Industry-specific software is thus the logical evolution of application software (in terms of specialization within the software industry). This

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process (from standard software to industry-specific software) is found in macroeconomic system patterns and their inherent dynamics. Only dynamically progressive software houses specialized in industry-specific applications (and thus in their customers) can remain in the “productivity race” to provide information systems to efficient enterprises.

2.3.1

Internet-Capable Industry-Specific Software

The strategic challenge is to use worldwide communication via the Internet as a corporate instrument. This is a task all software manufacturers must face. The providers of industry-specific software are constantly confronted with industry-specific user issues that must be solved quickly. Comprehensive and integrated Internet capability of application programs is the logical consequence of these user requirements. Internet-capable software must be created to support these tasks. Two focal points should be taken into consideration: 1. Software-related Internet requirements 2. User-specific Internet requirements

2.3.1.1

Software-Related Internet Requirements

What type of software-related aspects should be taken into account to support distributed and scalable systems with Internet integration?

Programming Languages Programming languages used for the Internet client are C, C++, Visual Basic, Smalltalk, and Java. According to experts, Java and C++ will become the dominating programming languages for applications of Internet clients.

Data Exchange Formats Basic technology in Internet communication demands a generalized markup language: the eXtensible Markup Language (XML). It can store both the structure and the meaning of the data. The ultimate application of the data is not defined. HTML (Hyper-Text Markup Language) constitutes a special kind of markup language. This basic technology is the result of a simple idea: all data should be transferred only once into the XML format, after which all XML-enabled applications, databases, or Web browsers can use this data without any further conversion procedures. XML is also used to create Web sites and integrate ERP applications into new e-business solutions. It is not advisable to exchange great masses of data via XML; for this purpose it is wiser to continue using the traditional EDI standards.

IT Business Organization and Control System

Figure 2.28

87

Software components for Internet client control.

In the CSB-System CSB-on-line.com, all WPMI data can be transferred in XML format and are thus available to any Internet client at any time. For this purpose, the system generates special XML layouts via the print engine. Via this data output (printouts) the required field information is made available in a special XML file (without any conversion). This enables unlimited use of data exported by the CSB-System via Internet clients. Generated XML objects are embedded in HTML pages using XSL (eXtensible Stylesheet Language). The data transferred to the CSB-System by Internet clients are imported using controllable integrated interfaces. Exchange between centralized and decentralized systems takes place via e-mail or FTP (File Transfer Protocol).

Internet Client Requirements Only the programs that are absolutely necessary run on the Internet client; these include user-interface screens, communication with the central server, data queries, as well as communication with external hardware (Figure 2.28). Therefore, all tasks are performed via the central server, such as the availability of corporate functionality or responding to database queries, etc. The following requirements apply to all systems with Internet integration in terms of separation of business applications:

Separation of dialogs and screens Data maintenance separation Separate print management Separate peripheral devices (scanners, scales, CTI solutions, IO servers)

Connection of the Internet Client to the Central ERP System To fulfill this requirement, a clear separation between economic functions and programming tools has been achieved. The programming of business

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CSB Business Economics Area

Communication Protocols

Figure 2.29

CSB-System architecture for CSB-on-line.com.

applications (known as industry-specific software) is primarily oriented toward the required functions. These function layers are laid down in an object-describing language and, as a result, can be utilized flexibly by every Internet client. The order in which the fields are viewed on the screen or the form in which data are stored in a database is of less importance. Significant, however, is the query to the database on an abstract level, as it is solved with CSB-QL. The underlying Internet concept is illustrated in Figure 2.29.

2.3.1.2

User-Specific Internet Requirements

The Internet provides enormous benefits for globally active enterprises. Total Internet utilization can take place gradually, from basic Web sites to total integration of all external facilities, sales representatives, customers, and vendors.

Step 1: Internet Presentation The simplest method for a company to use the Internet is by running its own Web site. Solutions specially created for the Internet can be implemented for this purpose. Special tools help cr eate and design

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representative pages for marketing purposes. These pages can be viewed with a browser. The data exchange with business programs, for example, is performed by import and export mechanisms performed over periodic intervals in the background.

Step 2: Corporate Integration via the Internet The integration of all branch offices, subsidiaries, and field staff provides management direct access to all relevant data. Central and uniform data maintenance enables the efficient use of information. Internationally active companies should ensure that their ERP system is not just available in various languages, but that it is really multilingual. In a truly multilingual system, every user works in his or her mother tongue, and all data are visible in the central EDP system in the language of the central company (concern). The worldwide use of data is supported by the implementation of jobspecific groups of users and user-specific workflows. This enables the permanent availability of user-specific Internet applications. Updates, upgrades, as well as multiple data backups are no longer necessary. Decentralized locations integrated via the Internet can therefore access a uniform data structure. Double entries as well as editing conflicts are eliminated. In this manner, all relevant data and information are available worldwide at the click of a mouse button. The worldwide settlement of corporate business and communication processes is accelerated considerably, and channels are available so any user can conform user rights.

Step 3: E-Business The communication channels between supplier and customer are manifold. The need to improve supplier−customer relations as a fundamental economic necessity gave rise to the creation of various CRM systems. In the CSB-System, the product-suite “CSB-on-line.com” contains the Communication Ware module, organizing and routing all communications between suppliers and customers, as well as between locations and employees (Figure 2.30). Of course, it is presumptuous to assume that previous communication channels will be replaced by e-commerce. Mass data transfer of order data (from customer to supplier) through EDI procedures (Sedas, Edifact, etc.) can and will continue to be the most commercially viable method of exchanging such data.

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Dedicated Line

File Server Terminal Server NT NetWare or Winframe/ Linux Metaframe/ X-Windows CSB Application

File Server NT NetWare or Linux

Web Server

Internet Access Provider

File Server NT Netware or Linux

Figure 2.30

Connecting remote locations via the Internet.

It is therefore crucial to soundly integrate all business communication channels via Communication Ware and link it to the respective business data. Education within the company has evolved into a major success factor. The education and continuing education of employees is a main event of quality management. Quality and qualification of employees are crucial criteria of business. This makes the efficiency of education equally crucial. The quality of education is a main task and regarded as a prerequisite for a client’s business success. Clients clearly profit from the educational measures, continuously improving the degree of acquired knowledge of their staff. Although the necessity for systematic education and re-education is recognized, it is still clear that budgets are tight and that time remains a costly factor. New and innovative learning concepts must be used to support employees in their educational processes. With specialized learning units, users are trained quickly and comprehensively via a CBT/WBT solution (computer-based training, Web-based training). The benefits of this interactive solution are obvious (Figure 2.31). The availability of industry-specific software on the Internet stems from the need for location-independent corporate management. This also calls for increasingly user-specific workflows, which will be possible only with industry-specific software that is constantly advancing. The expected specialization in industry-specific software development will most probably progress more quickly than the world expects it to. The Internet will enable more efficient communication between vendor and customer. This new situation will also grant the software provider a new dimension in customer training and support. Multimedia learning

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absence

Figure 2.31

Advantages of multimedia learning.

units via the Internet will help achieve rapid success in industry-specific training. In the future, new and innovative learning concepts will become increasingly significant. This media will enable much more effective and shorter implementation periods of industry-specific software solutions, which increases the productivity of the software manufacturer as well as the customer. The multimedia learning system is an optimum and competitive CRM system for all innovative software manufacturers.

2.4 WORKFLOW MANAGEMENT Increased specialization also gives rise to more-detailed user requirements. Industry-oriented software generally fulfills these requirements by allowing greater complexity in terms of user interface, access, and security. In order not to affect user friendliness, an easy-to-use navigational support tool has been created, simplifying the use of industry-specific software even more. By creating optimal “user guidance” or customized help screens, the user can benefit from previously acquired knowledge to the fullest extent. However, it is possible to take creative, new paths in software development. The aim is to increase learning, usability, and therefore also productivity of industry-specific software in the enterprise. The Workflow Manager in the CSB-System helps reach the following goals: Process-oriented user guidance throughout any business processes within the enterprise Intuitive as well as consistent operation of industry and companyspecific applications for all authorized users (especially less experienced users or substitutes)

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Comprehensive organizational support in the procedural and technological infrastructure throughout all software functions Recording and storage of all common processes prepared by the implementation consultant for the company-specific workflow Addition of all cognitive knowledge concerning the particular procedure as well as the entire process structure Multiplication of all collected user knowledge within the enterprise Graphical visualization enabling a comprehensive and transparent overview of all process structures The Workflow Manager makes sure that predefined corporate processes are transferred to a company-specific optimized process. The structure of industry and corporate-specific processes is based on the process element definition. Process elements are as follows (Figure 2.32): 1. 2. 3. 4. 5. 6.

Actions Branch points (forks) Alternatives Processes Link element Contexts

Point 1: Actions. An action is defined as a process step that cannot be broken down further. Each action is characterized by a short designation and a precise action description. An identification key specifies the following step. Point 2: Branch Points. All branch points require decisions by the user. They are represented by questions, and not limited to simple “yes” or “no” questions. Point 3: Alternatives. All valid answers to the questions in the branch points are defined in tables as “alternatives.” Point 4: Processes. Every process is uniquely defined. It bears a reference to its anchor element, which can be an action, a branch point, or another process. Point 5: Link Element. All action, branch point, and process tables can be summarized in the table of link elements. Grid-like process trees are built from tables of “link elements” and “alternatives,” which are defined from the knowledge base of industry and company-specific information. Point 6: Context. To allow the user context-related access to this knowledge base, the necessary combination of programs and processes must be created via a special context table.

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Alternative C

Alternative A Alternative B

Loop

Figure 2.32

Elements of the Workflow Manager.

The characteristics of the process elements needed to visualize corporate processes are: Predefined, process-specific branches with clear descriptive texts References for each of the branch points (corresponding to the defined alternatives) Linking of the process steps (parent and child) with the CSB-System application Company-specific knowledge is integrated for each entry field of the CSB-System. Work processes prepared and allocated specifically for each user (either company-specific or industry-specific) can be displayed at the

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Figure 2.33

Graphical workflow designer.

touch of a button. The navigation program that is simultaneously loaded allows for step-by-step processing of the selected workflow. Each action is displayed as a task and calls the corresponding CSB-System application program in the background. Every time an action is completed, the program exits and the next required action is shown. At each fork, the user sees a question in the navigation window and selects fr om the possible alternative answers. This is exemplified in Section 3.1.5, “Application Controls.” To enable optimal user support, it is possible for a user to enter the process “grid” at any point. This is enabled through fieldrelated or context-sensitive links. As a result, the user can navigate throughout the entire range of business-level processes. Which fields a user should enter are defined via a predefined guidance system (according to the needs of the business process). Procedure instructions are clearly accessible within the process trees. The process navigator enables CSB-System to be implemented and utilized in a truly industry- and company-specific way (Figure 2.33). The creation of a legal transaction process, e.g., a sales contract between supplier and customer, occurs on the basis of four integrated systems (Figure 2.34): System 1: Integration Elements. The connection of the integration elements (addresses, items, conditions, and procedures) takes place within the integration core in order to visualize business agreements among customers and suppliers.

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Figure 2.34 Architecture of visualization to support the multidimensional integration structure in the CSB-System.

System 2: Atomic Data Elements. Atomic data elements are the smallest elements used to identify and describe the integration elements. System 3: Program Objects. All corporate functions are made available by linking atomic data elements to a unique object within the visualization system.

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System 4. Workflow Management. The connection of program objects via Workflow Management enables user-specific configuration of the workflows, and is thus a truly viable system. Workflow Management provides for the “multidimensional integration” of all business processes, making it an effective industry-specific tool for activity at all corporate levels.

3 INTEGRATED INDUSTRY-SPECIFIC INFORMATION TECHNOLOGY FOR CORPORATE MANAGEMENT Commercial software for corporate management only makes sense when its theoretical and economic foundation is adequately explained and these insights can be logically derived from its software architecture. An accurately functioning “visualization system” coined here as “industry-specific software for corporate management” is thus derived from “real-world realities,” illustrating common business events, which, in turn, can be used to structure new theoretical concepts. This chapter, Integrated Industry-Specific Information Technology, reaffirms that the theories in the preceding two chapters truly represent relations in corporate life. The structure of the CSB-System clearly reflects the insight into commercial activities attained though theoretical analysis. This standardized, industry-specific software for corporate management is based on the aims of progressive information technology (IT). Preceded by the industrial age, the emergence of the information society has caused a change in the interpretation of the value of reliable information and data. The ability for management to rapidly respond to corporate needs is attainable only by comprehensive, integrated and realtime data processing. The intention of this chapter is to explain in detail how the task of corporate management in the information age is to be solved with the 97

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help of a practice-based industry-specific software system. In this context, I first explain how corporate structures are “visualized,” or accurately depicted, in industry-specific and company-specific software. The introduction of an industry-specific software system requires, by all means, a practice-proven software product. The product introduced in this context, “CSB-System,” was designed and theoretically conceived by the author. The organizational foundation of the system to be created or improved is established using the basic elements of integration. Cross-area management and controlling of all corporate processes is then implemented. Finally, innovative, integrated, and industry-specific corporate management is structured with special emphasis on human resource management, goods and product management, as well as financial accounting.

3.1 CORPORATE PROFILE On “visualizing” a company within a corporate management system, the structures of the associated organizational methods must be kept simple and yet, at the same time, be as effective as possible. Reorganization using industry-specific methods should lead to streamlining effects and other needed measures. The resulting competitive edge should be attained within the shortest possible time. Comprehensive commitment among staff members within the project team concerning the measures to be implemented is an absolute must. Only a convinced and motivated team can achieve the specific project aims. Conviction by team members is obtained by illustrating the benefits gained (in terms of improved processes with the software) within the company through the reorganization project. To achieve this, the actual corporate situation must be compr ehensively analyzed, revealing all critical points. The resulting enhancement proposals should be introduced in detail to the project team. Staff should also be prompted to contribute constructive suggestions. Only the adherence to these steps will ensure that the project team is able to assume responsibility for the work at hand and be capable of overcoming any internal corporate obstacles. The quality of project work is directly dependent on the motivation and confidence of project management. All of this, in turn, depends on comprehensive industry knowledge as well as insight into innovative possibilities within a project. In this sense, the “visualization” of an enterprise means the application of streamlined processes and the required reorganization measures via industry-specific software for corporate management.

Integrated Technology for Corporate Management 99

The structure of an enterprise is visualized within the CSB-System at four different levels:

Country level Industry level Corporate level User level

These visualization levels enable the accurate depiction of various enterprise structures. This therefore ensures that standardization (to common regulations or practices) and specialization (to industry-specific advantages) do not rule each other out, but instead, complement the aim of detailed corporate visualization.

3.1.1

Country and Language Generators

Every successful business software product must be geared to the requirements of international markets. The CSB-System uses special generators to minimize any needed adjustments concerning the language spoken in a specific country. Country specifics that apply to local and cultural aspects such as currency, tax rates, customs regulations, national languages, etc. are maintained effortlessly within the system itself. The special requirements are specified in the basic elements via parameter settings, and can be administered specifically to each country. Regulations and guidelines of multinational businesses receive treatment specific to their situation. Monetary effects are also calculated on an address-related basis, or an address- and item-related basis. The fundamental formulas are specified in the conditions (address and item conditions) and are, therefore, automatically calculated for cost accounting and pricing at all software function areas. The multilingual capability of application software is not merely the number of languages supported. Rather, polylingualism, or simultaneous support of multiple languages, is called for. Every system user works in his or her desired language on the same data and application core, which is administered independently of user-interface language. Each individual user is free to select his or her specific language. All on-line help and user-guidance support functions are displayed in the selected language. Special development tools were created so that each new program version does not need to be translated anew. These consist of: Language Dictionary Database Screens (SMI) Print Layouts (PMI)

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To enable multilingual capability with the least outlay of labor, CSB-System has created the “translation tool.” This tool extracts, translates, and imports all language-relevant data available in: Print layout libraries Mask libraries Parameter files (system dictionary) The entire management of language dictionaries takes place in the Sytrans tool suite. In addition, translation of system data (such as screens, print layouts, messages) in all languages is managed with this tool. Translation in Sytrans is based on a previously set-up (human-translated) dictionary of translation equivalents. CSB-System software developers use restricted terminology from a standardized terminology base. This guarantees maximum leverage, as reusability in translating the standard terms to the desired language is guaranteed, reducing translation overhead to a minimum. As a result, the systems multilingual capabilities and international support can be efficiently maintained. The costs and time required for end-user language support can be kept to a minimum, even as the text content of the software grows. This allows us to consistently reach the objective of “28 languages, one release date” (Figure 3.1A to C).

3.1.2

Industry Allocations

The classification of companies or other economic entities into industries takes place through various degrees of differentiation. The aim here is to accurately categorize the enterprise of an industry-specific software suite. The greater the differentiation in the structure of the categorization criteria, the greater the number of companies categorized into specific sectors and consequently the greater the number of individual industry-specific software solutions. The industry-specific solutions for corporate management software become disproportionately more difficult to structure for software engineers as the degree of differentiation increases. Account is taken of this knowledge in the tree structure developed in the CSB-System, for the purpose of categorization of individual businesses into sectors, as shown in Figure 3.2. The degree of specialization or grouping of the industry-specific software is carried out on four specification levels:

Integrated Technology for Corporate Management 101

(A)

Figure 3.1

(A to C) The multilingual CSB-System.

Industry groups Industry types Industry enterprises Individual companies

Corporations are classified by industry groups, industry types, and finally by industry enterprises. This industry-specific classification of the enterprise enables configuration of the software to be company-specific. Industry parameters in the CSB-System are managed in the same way as the language generator software tools. Definable parameters are used by the software to support industry-specific criteria. The system assigns these parameters as industry-specific terminology for each area and program. The need to define parameters is incurred once only for each new industry-specific operation. This method can be duplicated by each parameterized industry as shown below. The benefits gained are obvious:

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(B) Figure 3.1 (continued)

An industry-specific standard set of parameters for the application software is created from universally applicable industry standards. The one-time cost of defining these parameters is divided between all the subsequent applications, resulting in a reduction of costs for the individual user. Experience is gained from each new industry-specific customer without omitting any positive effects of the previous solutions. The cost of implementing these industry-specific solutions is reduced to a minimum and the profitability of these solutions is increased significantly. The risks associated with changing over to the new system are reduced and can therefore be estimated in a cost−benefit analysis. This list of the beneficial aspects is not complete and is intended purely to demonstrate that only industry-specific solutions are able to create a calculable advantage for the user.

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(C) Figure 3.1 (continued)

3.1.3

Business Structure

Industry development and innovation lead to continuous improvement of the supply of goods throughout the economy. And it is the companies inserting acquired knowledge into their production or corporate control processes that help achieve this. Thus, competing companies may operate under quite different production and organizational conditions. Differences exist not only from company to company, but within a single company as it changes over the course of time. Company-specific industry software for corporate management must adapt to this dynamic development. However, it is not possible for all new requirements arising from the company-specific production and organizational structures to be portrayed in the software by using parameters alone. Corresponding additions to programs must also be undertaken for specific processes (particularly within the production area) in line with technological progress. To enable this process of company-specific software expansion to take place within the shortest amount of time and at the absolute minimum cost, efficient software development tools must be

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Industry Segment Production

& Ingredients

Automotive

Industry Segment Trade

- C&C Stores - Distribution Warehouse - Mail Order Business

- Consumer Markets - Store Chains - Mom & Pop Shops

Industry Segment Service

-Consulting -Maintenance

Figure 3.2

- Banks - Insurance Companies

- Public Services - Corporate Management

Industry structure in the CSB-System.

applied. The following applies to software development in particular: “learn new things, and spread the word to all.” It follows from this requirement that tools, build procedures, and source control for all

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programmers must be made available in one “module.” The respective software developer therefore no longer need be concerned with the build process or source control for the individual programs, but can instead assemble the modules required on the basis of the modular design principle. Only the particular routines required for the supplementary modules (or new standard software products) need to be programmed. This development process organization within the CSB-System creates the following advantages: Significant time and cost savings in software development result. All programs have the same structure. This results in easier maintenance and programmer training in terms of “foreign” (third-party) programs. The standardized structures make it easier to create a more comprehensive “cross-platform development.” This process of standardization (e.g., the same structures for programs) enables creating a standard for different event-driven user interfaces. The dialog interface is created on an operating system-independent, event-driven basis via the Screen Management Interface (SMI). The user-interface status is translated via SMI by way of the runtime system, depending on the individual operating system, into: Java and Linux WIN, GUI, Windows 95/98 Windows NT/XP, GUI UNIX/Linux as server operating system SMI is transparent (i.e., invisible) to the application, and so it is irrelevant as to which user-interface is being utilized. With the program “Individual Additional Data,” company-specific field specifications can be created that are not normally covered by the industry-specific software. The Sort and Selection Manager (SSM) helps create user-specific reports. This tool also uses any “individual additional data” fields. The Area Information System (AIS) enables analysis throughout all departmental areas of the company. Additional tools are available: Various import and export programs SQL list generator (Figure 3.3) CSB-QL (CSB Query Language) This list of tools and modules is by no means complete, and is only intended to help explain that efficient software development forms the basis for the profitable production of company-specific and industry-specific software.

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Figure 3.3

SQL list generator.

The degree of visualization achieved in all business processes of a company via software determines the potential productivity and consequently the competitiveness of the company in the market.

3.1.4 3.1.4.1

Knowledge and Human Resource Management Available Knowledge

The aim of knowledge management is to harness available knowledge and to make it accessible to the entire enterprise. In any enterprise, knowledge exists within the minds of the employees. This heterogeneous and unstructured knowledge must be documented, channeled, and structured by knowledge management. A significant function of successful knowledge management is the utilization of methods to find and catalog the knowledge that is within the mind of any company employee. In the information age, the quantity of available knowledge is growing exponentially with technological progress. At the same time, technological progress is directly dependent on the quantity of available knowledge for any given time and location. However, this assumes that the transformation of implicit knowledge to explicit knowledge (raw to usable) can be organized precisely and occurs worldwide. The currently available infrastructures in the transfer of knowledge are subject to constant change. The development of communication technology is a decisive factor to available knowledge within an economy. Organizing access to available knowledge is therefore of utmost importance to the market competitiveness of all active enterprises on the market (Figure 3.4). Only organizations with the ability to learn will be able to compete in a global economy.

3.1.4.2

Employee Training and Education

The impact that “life-long learning” has had on our society can be seen everywhere. However, it remains a goal of corporations to organize and transfer knowledge to all staff members.

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Term Analysis

Figure 3.4

The structure of knowledge management.

Figure 3.5

Employee qualification management in the CSB-System.

Corporate-specific training incentives form the backbone for success in a competitive market. Well-trained and intelligent staff is a necessity for innovative progress in any enterprise. The focused development of staff education in line with corporate-level requirements is consequently a prominent managerial task (Figure 3.5). Apart from theoretical and practical training solutions, new and innovative teaching and learning methods have emerged because of modern communication technology. Internet-based on-line education provides specialized areas of study. Multimedia learning units on special topics are

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offered worldwide and can be accessed without delay. New knowledge is most valuable when it provides the person possessing the knowledge a “sole ownership” feature. New knowledge therefore has a “sell-by date” and should be implemented as quickly as possible and transformed into new products. Successful companies tackle this, provide unique new products, and gain the resulting competitive edge on their worldwide competition. From an information point of view, the method of transferring knowledge should be organized toward each specific company. Professional training and development, however, should be oriented toward the latest available technologies in professional education. Content and methods (technology, methods, etc.) should be coordinated in order to secure efficient knowledge transfer within an enterprise.

3.1.4.3

Career Management

Staff-specific training and education measures usually coincide with concrete career planning measures. Human resource management has the responsibility to make sure that the “right” employee is at the “right” place. Thus, the filling of jobs within an enterprise is of the utmost importance. The most capable and “best-trained” members of staff should be assigned the appropriate range of responsibilities and tasks for the benefit of the entire company. The success of any company active on the market largely depends on the right combination of its members. Performing needed tasks require the dynamic involvement of management and team leaders within the enterprise. Managing the change in task requirements along with career planning should therefore be coordinated directly with each individual staff member. Successful employees are satisfied and fulfilled “co-entrepreneurs.” They are an inevitable aspect of a constantly changing business world. The innovative force of any enterprise depends on the combination of useful knowledge, and this knowledge is created and made available by exactly those employees.

3.1.4.4

Workforce Achievement Potential

The achievement potential within a company is defined by the current earning power and the expected sustainability of products. Keeping this achievement potential at a competitive level is an essential task of management. Two paths can be taken to attain the development of the specific knowledge required to manage new tasks: 1. External labor 2. Internal labor

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External Labor: In an economy that offers diverse labor, all participants have the ability to manage new tasks or increase productivity while still providing goods (products or services). The improvement of a company’s specific competitive position can only be attained by merging new knowledge and technology into the corporate production process. In regard to external labor, the attainment of unique selling points and a competitive edge is achieved by using third-party services to implement productivityenhancing measures. Internal Labor: The production of new products with new technology presupposes the availability of appropriate “tools.” In innovative and competitive companies, these “tool” requirements lead to the establishment of respective research and development (R&D) departments. Knowledge acquired in these research facilities usually tends to be patented and to provide the company with a patented edge in contrast to their competitors. Establishment of an in-house R&D department naturally depends on respective target markets and the commodities demanded. Independence from requiring external knowledge services is, of course, limited to the unique kernel competences. Existing knowledge in the market must be available within the company, and combined with newly acquired specific achievements from R&D activities to develop new and sustainable goods. As can be inferred from the aforesaid internal and external labor, new products can be created only in a progressive and innovative environment. Only companies that achieve their objectives for new products in a purposeful manner can increase their competitive edge. The buildup, maintenance, and expansion of company-specific performance potentials are absolutely vital, especially to new companies. To sustain the achievement potential in established enterprises, and to expand it in accordance with requirements, is a permanent task of management. The structure and style of management define the necessary organizational layout to secure a productive workforce. The smooth collaborative effort of the entire workforce throughout all departments ultimately plays a decisive role in striving to remain competitive in the marketplace. Therefore, all employees within a company must make any necessary information available. Management must provide the necessary technologies for this purpose. An effective industry-specific software system therefore should provide integrated tools to manage user knowledge, tasks, and workflow.

3.1.5 3.1.5.1

Application Controls User Requirements

Streamlining measures can prove successful only if they are implemented without any “friction losses” and within the shortest possible time. The

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user must carry out the tasks laid down in the organization as specified according to government, industry, and company requirements. The integration created through the industry-specific software package can be utilized to fully exploit streamlining and efficiency, increasing potential. This potential is further supported in the CSB-System by userspecific parameters and special analysis and reporting tools. The acceptance of the software by the user depends to a crucial extent on the flexibility of operation, and the implementation of all industry-specific and operational-specific requirements down to the user level. User requirements differ depending on each specific user as well as each specific position. The individual tasks defined by the organization are determined on the one hand by user groups (users with similar duties), and on the other hand by the employee. A person can remain focused on the core aspects of a job only if the software system undergoes constant development (from one version to the next) in line with industry progress. The user cannot be forced to retrain every time a new version is implemented. Only continuous advancement of the software will protect the investments made in staff training. User-specific information (lists, evaluations, statistics, analyses) must be version independent, and should be oriented toward the specifi c requirements of each and every member of staff. Comprehensive knowledge within organized corporate workflows must be transparently accessible to management. These requirements guarantee personnel substitution possibilities, and prevent the development of “knowledge monopolies.”

3.1.5.2

Personal Workflow

The Personal Workflow converts user-specific knowledge transparently into corporate processes (Figure 3.6). Organizing corporate-specific procedures and making them comprehensible is a necessary task of knowledge management. Knowledge monopolies must be prevented and explicit knowledge must be compiled. An effective program for personnel substitution (such as cross-training) can only be organized if all essential corporate procedures are documented and repeatable. The management of personnel qualifications may be organized via personal workflows. The knowledge of all corporate processes is reflected in the workflows. All user knowledge is entered into the workflows together with job descriptions and the respective performance requirements. Personal Workflows are an important element of Workflow Management (see Section 2.4) and therefore embedded within comprehensive knowledge documentation. As processes within the company shift, procedures may change, which implies changes to how they are defined in

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Figure 3.6

Personal workflow: the user’s window to the CSB-System.

the software. These changes must be documented (validated) more effectively and productively. For example, quality assurance measures related to process modifications are mandatory in the pharmaceutical and foodstuff industry. Only transparent, well-defined personal workflows allow each user to fulfill his or her duties in the correct fashion and within the allotted time.

3.1.5.3

Workflow Navigator

Every user within a company is involved with the processing of some sort of corporate operation. Corporate processes as a whole are a technological element of the entire system for corporate management, oriented toward optimizing the processes of areas such as accounting, procurement, production, and sales. The value-added activity of a consultant during the introduction of industry-specific software should not be limited to application knowledge, but should also include streamlining initiatives. This also applies to creating documentation for optimal user guidance. Quick learning curves for the new system as well as the secure reproducibility of industry-specific and corporate-specific workflows are specific tasks of the workflow navigator (Figure 3.7).

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Figure 3.7

Workflow navigation.

Corporate processes in companies tend to display isomorphic structures. Industry-specific software supports this conformity between various company or industry processes. The visualization of business procedures by a well-designed software system is therefore characterized by processes that maintain consistency. When recurring processes are supported with a tool such as the Workflow Navigator, the implementation of a software system can be optimized. The Workflow Navigator is used to describe and invoke user-specific functions as links of a work process chain. If necessary, the user can even be allowed to navigate throughout the entire functionality of the industryspecific software via the customized Workflow menu. During actual software implementation, user-specific processes are created and stored. After starting their specific work process chain, every authorized user can invoke the individual links of the process chain sequentially. The automatically linked program applications are executed, and the follow-up processes are displayed on-screen. The Workflow Navigator encompasses: Definition of work process chains (specification definition) Storing individual processes of a process chain (according to userspecific requirements) Adding/changing individual processes of a process chain The process chain may be invoked by an authorized user within the defined function scope

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Automatic processing of each individual process as defined in the process chain Menu-driven navigation to invoke any of the process chains (Workflow Navigator) Visualized overview of the selected process chain and all associated individual processes View of the current step and status of any process within the chain Documentation of the process chain procedures (quality assurance ISO 9000 and validation) Archiving of application-specific workflows to safeguard future compatibility The Workflow Navigator enables the simple administration of complex workflows, ensuring the secure operation of work processing. The Workflows are a necessary instrument for transparent industry- and companyspecific work processes. This Workflow Navigator tool has made it possible to develop increasingly complex work functions, retain future compatibility, and make it as simple as possible for the user.

3.1.5.4

User Information

The diversely specialized tasks within a competitive enterprise must be analyzed by the industry-specific software system. The constantly changing requirements of an application must be independently re-evaluated and implemented without reverting to “specialized programming.” The user therefore has a need for a simple evaluation and report tool. Such a userfriendly evaluation tool is the easy-to-use Print Management Interface (PMI)8 in the CSB-System. In this context, the key performance features of the PMI should be emphasized: The PMI uses an operating system-independent dialog interface. In the applications the PMI is transparent, i.e., the user does not need to see which report format is being used. PMI can also output variable decimal places for numerical fields. The PMI principle can be described as follows: A list of variables and a list of specific print zones are prepared for each program. These zones are listed or printed in a fixed sequence. Random text can be entered in the PMI editor, variables inserted from the above specified “list,” and sections assigned to the individual print zones. The variables inserted in the layout during runtime are then replaced by the current value of each variable, and printed in the individual, predefined zones.

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The PMI is used for: All on-screen and hard-copy printouts of evaluation reports Variable on-screen lists Scroll areas Sort and select control for each program is performed via a SSM (Sort and Selection Manager) screen. User-specific data fields can also be prepared for the PMI editor in the program “Individual Additional Data.” Every user therefore has the ability to create various layouts and combine variables for a variety of printouts, on-screen lists, and scroll areas. Layouts created by the user have a higher priority than standard layouts, and will not be overwritten during updates or upgrades (Figure 3.8). The SSM screen was created with the optimum support of users involved in executive tasks in mind. This tool allows the generation of all workstationspecific evaluation reports without any prior knowledge required. The list of all SSM sort and selection criteria is pr econfigured by program parameters based on industry-specific requirements. A user then selects the desired sort and selection criteria using a screen dialog. The option of screen or print output is predefined via PMI. Columns, lines, and formula-interpreters for the evaluation reports are also selected in the SSM screen. This SSM tool is used to prepare the sorting and selection criteria universally applicable throughout the particular program. All column and line values are calculated using the formula interpreter and issued via the report generator (PMI).

Figure 3.8

Access to user-specific data in PMI.

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To enable the user to utilize the PMI functions as quickly as possible, “industry standard layouts” for reports and lists are provided by the CSBSystem in all functional areas and functions. These industry-standard layouts for print outputs, screen lists, and scroll areas can be imported by the user into his or her “personal applications” or modified as required to provide optimum user customization and support. The focus of all the endeavors both during and after the introduction of an industry-specific corporate management system should be on user acceptance. It follows from this that user requirements that extend beyond the capabilities of the PMI must also be covered. Two paths can be taken for this purpose: Use of SQL tools (Power Transformer) Programming extensions To accomplish this there is no need to focus on the underlying database. As far as the applications are concerned, when using ODBC9 for database access it is irrelevant which particular database is being used. Incorporating SQL database queries in the application creates this opportunity to carry out freely definable queries without regard to database internals. The standard version of industry-specific software usually covers all essential corporate processes. Company-specific requirements that surpass the standard data fields are managed as individual additional data fields in the CSB-System. In this manner, master or transaction data that would normally not be handled can be individually captured and administered. In fact, 90% of all custom programming requirements can be managed via the individual additional data module. Company-specific extensions can be performed on site by the implementation consultant, preventing any unnecessary delays. System-wide flexibility is realized by combining the IAD tool (individual additional data) with SSM. The following aspects further enhance the CSBSystem flexibility:

Variable manager Relative date Analysis settings Value “limit” definitions

These enable the significantly faster implementation of customer-specific requirements, and are thus a large part of our reduction of project implementation times (up to 50 to 80% of previous implementation times can be achieved).

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Any custom programming is submitted back into the CSB-System development center, and is automatically administered along with the standard software version. These measures ensure that company-specific knowledge and custom programming are retained, updated, and remain upward compatible.

3.2 BUSINESS ORGANIZATION To visualize the enterprise using industry-specific CSB-System software, the existing organizational structure must be adopted as well. The necessity to carry out the required restructuring and reorganization measures at the same time a new corporate management software system is being introduced has been previously discussed. It follows from this that in the information age corporate organization is in part determined by IT. According to Gutenberg, organization is a means to an end and not an end in itself.10 The essence of organization consists of structuring a productive unit from a variety of different elements.11 As far as organization is concerned, it follows from these tasks that software for corporate management is itself an organizational instrument.

3.2.1

Organizational Structure

The industry-specific CSB-System is used to define the existing organizational structures within the company; it simultaneously incorporates the rules governing the commercial relationships. The procedures to be repeatedly carried out within the company in each “island of order” are fully documented using IT and processed as procedures on a standardized basis. Management structures can normally be taken from the specific corporate organizational chart. We differentiate the following management systems:

One-line systems (one superior) Multiline systems (multiple superiors) Staff-line system (specialists in staff positions) Team leader systems (teams managing teams)

Traditionally, corporate organization is structured according to management hierarchies. Figure 3.9 depicts a classic pyramid organization, as is often found in the industrial production sector. The increasing significance of the “knowledge” factor has also caused a change in organizational structures. Knowledge required within an enterprise exists in the minds of the organizational members. The structure of an organization is always oriented according to the corporate goal. A

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Officers Vice Presidents

Figure 3.9

Organization hierarchy in pyramid structure.

company involved in high technology calls for a different organizational structure than a company involved with industrial mass production. Highly innovative enterprises dependent on the quick utilization of “new knowledge” in goods production must possess the organizational structures required for this purpose. Swift responses to market changes require the radical elimination of rigidity and the reduction of hierarchies, and at the same time, shifting responsibilities to the operative levels of the enterprise. Adding knowledge and being able to infer the right decisions from it requires team-related decision-making preparation. All organizational structures concerned should be committed to this aim. Only a teamoriented organization is able to introduce more operational knowledge into the decision-making processes of an innovative enterprise. Figure 3.10 shows the structure of a team-oriented organization. Team organization also means that a basis must be created to allow for the implementation of special teams for special tasks. Consideration of time as well as process aspects is essential for the team-oriented organization approach. Dynamics and constant change are not only tasks involving task-related team structures, but are integrally inherent in the entire corporate culture.

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Supervisory Team

Figure 3.10

Supervisory Team

Supervisory Team

Team-oriented organization with flat-management hierarchy.

In regard to work processes, by far the most difficult task for corporate management is structuring unpredictable and innovative procedures within the company in a flexible yet target-orientated way. Providing software technology support in the structuring of individual work processes under “chaotic general conditions,” of the type found, e.g., in R&D, can only be achieved by giving the freedom for “R&D decision makers” to make their decisions. The narrower and more restricted the stipulated work procedures, the more limited the creativity or innovation in the particular area. The manner in which organizational relations are governed within the company can be controlled via four basic rules of organization: Responsibility, Process Planning, Execution, and Control. This applies to both the hierarchical and the functional organization structure. The four basic rules of organization are interlinked and subject to reciprocal influences. These four control areas must be clearly defined within each company organization and specified in detail in terms of their relationship between the functional areas and functions. Corporate planning relations within a company are built on the basis of the aforesaid four organizational rules.12. The performance factors of an individual business are derived from the objective of optimum goods production processes. Organizational activities applied in this context become effective via a set of rules governing relationships within the company. However, the responsibility for economic activity is not solely placed on management. As far as work

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Figure 3.11

Relationships and organization of the basic rules of organization.

habits and methods are concerned, economic behavior is expected throughout operations as well as in commercial activities, or “self-reliance” is left to the teams and employees at the individual organization levels. This approach to the delegation of responsibility makes particular sense if the application programs being used ensure that an integrated, screendriven method of working is applied to all functional areas and functions (Figure 3.11).

3.2.2

Integration and Organization

Industry-specific software for corporate management is the instrument of organization for the progressive company in the information age. The effectiveness of the corporate controls is therefore closely connected to the efficiency of the industry-specific software. Crucial for the assessment of industry-specific software, in addition to the visualization of the company in line with industry requirements, is the degree of integration that can be achieved between all work procedures for all functions and throughout all business areas (Figure 3.12). Structuring the operational processes with the use of the elementary factors (labor, materials, and operating resources) productively is achieved through the management factors of “organization” and “integration.” Integration, as an independent factor, has a sustained influence on the flow of information. And as the degree of integration increases, the reliability of information increases accordingly. The integration of data processing into the business areas and functions takes place within the company via the basic elements of integration. The

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Figure 3.12

Basic integration element.

integration elements in the CSB-System are the four basic forces of integration:

Addresses Items Conditions Procedures

These elements form the “integration core” in the control of the commercial links within the enterprise across all the organizational levels (Figure 3.13). The structuring and definition of these integration elements is of prominent importance to visualizing the company in a way that meets industry requirements and is operationally specific.

3.2.2.1

Integration Element: Addresses

The “address” is a criterion necessary to organize outside contacts for economic activity. The address integration element is the unique identifier for communication and information technology in the world of business. In the CSB-System the address element is also used throughout all business function areas (Figure 3.14).13 Categorizing and arranging addresses in accordance with operational requirements is an implementation task performed during the process of structuring a corporate management system. The basic data in the address structure must be organized from communication and information viewpoints.14 As can be seen from the

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Integration Elements Addresses

Items

Conditions

Procedures

Management & Controlling Performance & Time Management

Product & Materials Management

Accounting & Finance

Figure 3.13

Integrated circuit of integration elements and function areas.

structure of the address data in the program documentation, all address fields are divided into four integration areas: Communication basis for the integration of telecommunication and information technology15 Allocation to enterprise resource planning Integration of financial accounting Linkage to the remaining basic elements (items, conditions, and procedures) Additional information for each address is administered by freely definable groups and parameters accessible on a user-specific basis. Address links, as can be found in commercial groups and particularly in “owned subsidiaries,” are also defined in the basic element address for enterprise resource planning as well as for finance and accounting. The link in regard to business controls, as exists between the basic element address and the other basic elements of integration (items, conditions, procedures), is shown in the areas of time management and enterprise resource planning as well as in finance and accounting, described later.

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Figure 3.14

3.2.2.2

Integration element: address.

Integration Element: Items

In economic life, all factors, products, and services must be uniquely identifiable for IT. Every economic activity is geared toward covering market demand and to improving one’s own position as an active participant. This market condition is the cause for competition on the factor and commodity markets. In regard to enterprise resource planning (ERP), all goods must be assessed and assigned value objectively (Figure 3.15). This requirement gives rise to the need for the comprehensive identification and definition of all commercial goods. This necessary and elementary information is defined in the CSB-System by describing, classifying, and evaluating the integration element “item.”16 Item data are structured to support integration throughout all business functions. The information is divided into the following areas:

Basic data for the creation of item characteristics Allocation to enterprise resource planning Integration of financial accounting Linkage to the remaining basic elements (addresses, conditions, and procedures)

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Figure 3.15

Assigning value to items.

All areas and functions in the CSB-System can access item master data. Item management organization along operation-specific lines is controlled by freely definable item groups and parameters.17 The integration of item management with all business areas ensures real-time cost information throughout the company with every goods movement. Not only is the physical recording and evaluation of all item characteristics ensured by integrated management of the links between all basic elements, costs are also calculated on a permanent basis and made available for access by the management in a user-friendly manner.

3.2.2.3

Integration Element: Conditions

The exchange of goods between market participants takes place in accordance with certain accepted conditions.18 Market participants are defined by their associated addresses, the goods via their associated items. Terms or conditions of commercial activity are agreed upon between the market participants, and incorporated into the contractual agreement as an integral part of each and every goods or services transaction. The basic element “conditions” in the CSB-System defines these terms and conditions, and ensures that every conceivable influence on commercial

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Figure 3.16

Integration element: conditions.

goods (products and services) can be taken into account and affects ERP transparently (Figure 3.16).19 In addition to negotiated terms, general terms also affect the “calculable” value of each and every item. The task of enabling every potential valid combination between addresses and items to be calculated and, therefore, to provide comparison between them is the responsibility of software in ERP. In addition, it forms an information basis for corporate management to have a specific influence on all functions of the company.20 The organization of conditions should be performed by means of industryspecific application consulting. The operational conditions for each industry must be separately defined and assigned parameters in ERP for each individual business function (procurement, warehousing, production, and sales). Condition data are structured to support integration throughout all business functions, and are divided into four areas: Basic data for the creation of a condition Allocation to the individual functions of enterprise r esource planning Integration of financial accounting

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Linkage to the remaining basic elements (addresses, items, procedures) As an integration element, conditions affect all business areas and functions of the company through their connection with the other basic elements. Currently valid conditions are applicable throughout the corporate management system, and can be identified, understood, and analyzed by any program via complex computing rules for which a set of parameters has been previously defined.

3.2.2.4

Integration Element: Procedures

The description of stipulated or predefined procedures or regulations for all commercial processes is covered by the term “procedures” in the CSBSystem (Figure 3.17). An agreed process for the exchange of products and services must be adhered to for each legal transaction or each agreement in the business world. In this context, statutory guidelines are regarded as “external” process instructions. Voluntary agreements between contract partners, i.e., agreements going beyond statutory regulations, are also defined as procedures. Procedures defined for internal processes used to combine factors for the production of goods are defined as “processes” on the same basis. These “internal” processes describe and control all procedures from automated data capture to Computer Integrated Manufacturing (CIM) throughout the entire company.21 The organization, as well as the definition of all procedures and rules, is portrayed within the integration element procedures, reflecting the precise situation and “quality” of the actual process controls within each company. Organizational implementation must ensure that the procedures to be defined in all functions and between the individual business areas reflect the actual situation within the company. Programs for process data capture are divided into four integration areas: Visualization of corporate structure data Capture of all procedures in the business areas and functions, up to the executive level Integration and control of the data flow to external market participants Linkage to the remaining basic elements (addresses, items, and conditions) The basic element procedures have an integrative effect throughout the company. Based on the current corporate structure, the entire “integrated”

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Figure 3.17

Integration element: procedures.

economic unit22 can be visualized by defining cost centers, departments, processes, and their relations. Individual processes may be declared as binding process descriptions for all business areas and functions. All processes are clearly defined including the description of information output flow. This also includes control and data interchange processes as they occur in the widest variety of combinations in every company. The foundation for “error-free” and “repeatable” actions is formed by a high level of detail in defining all processes applicable to the production and trading of goods.

3.3 QUALITY CONTROL SYSTEM 3.3.1

Regulation Requirements in Business

The creation of standards for objects of commercial activity is indispensable to a regulated economic system. As society, with its division of labor,

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grew increasingly complex, it consequently became exceedingly important to establish units of measurement and standards which were reliable, i.e., equally applicable to everyone. During the course of economic development, a wide range of standards has been incorporated on a statutory basis as a result of the need to provide comparability and to protect the rights of the consumer. In the time of Napoleon, the non-norm foot and ell were deprecated with the introduction of the metric system and the deposition of the platinum standard meter as the normed measurement for length. Under the German Chancellor Otto von Bismarck, this unit of measurements was adopted for the German Empire through the Metre Convention of 1875. The quality of exchangeable goods, however, was not captured. The purpose of creating a binding description of the required properties of goods was, first, to create the necessary reliability for quality standards. One of the oldest “quality regulations” was laid down as a binding requirement through the “purity law” for beer23 and still applies in Germany today. Compliance with these quality standards for marketable goods depends on the unambiguous description of the standards and the real ability of the standards body to apply penalties for breaches of these standards. Only under these conditions can secure competition with comprehensive consumer protection be organized among market participants. Statutory standards were created from this need for business controls. Over the years, mandatory control developed a far-reaching life of its own, degenerating in the process into self-preservation mechanisms. Regulations created in this context extended far beyond the necessary requirement for laws and standards as needed to ensure an orderly economy.24 The efficiency of the economy is supported by self-regulatory conditions, which do not transcend the level for which regulations are required. It follows from this that all regulatory tasks must be subject to the ongoing examination of system conformity. In a highly integrated economy, the quality of the execution of necessary regulation also has an indirect effect on the quality of corporate management. Over the course of time, however, standards, guidelines, and laws have not only been laid down as binding via legislation, but companies have also created their own standards within those areas of the economy where there was a need for regulation. Corresponding standards and agreements for standardized products were voluntarily defined and observed for industrial production processes involving the specialization of labor.

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The “DIN norm” is one voluntarily determined standard from which any manufacturer can direct the production of its products. The best-known DIN standards are those concerning paper formats. “DIN” stands for Deutsche Industrie Norm and is a patented association mark. It was against this background that the quality assurance system was issued in 1987 by the International Organization for Standardization (ISO) as a guideline, described in the publication as the ISO 9000 series of standards. Any company can obtain certification under DIN ISO 9000 and consequently demonstrate to the market participants (customers and suppliers) that this company operates in line with a stipulated quality control system.

3.3.2

Organization and Quality Control

Quality control (QC) is an essential component of corporate organization (Figure 3.18). The motivation for the emergence of a “Quality Control System” can be ascribed to the ISO. It is, however, imperative that no QC system should have its “own” organizational structure. Management is responsible for the structure and the seamless implementation of organizational requirements within the enterprise. ISO 9000 is the English standard for QA systems. QA stands for “Quality Assurance” and is applied to all quality-relevant processes within an enterprise. By adhering to QA standards (ISO certification), quality-relevant tasks receive special status. To secure compliance with predetermined organizational guidelines (job descriptions, process, and task instructions), respective control measures must be performed. It is quite evident that a quality-oriented organization can be established with a comprehensive QC system, resulting in fusion of process controls and quality assurance upon completion of the certification process. From this it follows that the positive effects of corporate-wide QC cause smoother production flow at interfaces between the business areas and functions. The systematic audit of all processes specified in the ISO guidelines enables the constant reduction of error and deviation costs. Even process changes intended to improve quality in individual departments can have positive effects within a QC system. This positive result is achieved by not “personalizing” errors and shortcomings but by “systematizing” them and eliminating them according to predetermined guidelines.

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Figure 3.18

Quality control in the CSB-System.

A QC system therefore has positive effects on corporate controlling in its entirety, with significant benefits in the economic sector as well as in human resources. This leads to increased motivation of staff from all corporate areas.

3.3.3 3.3.3.1

DIN/ISO 9000 Certification Principles of Quality Control

The implementation of a QC system should be supported by management without restriction. The necessity to implement comprehensive reorganization measures to improve quality and operations management is common knowledge. One can actually say that management regards ISO certification as a welcome reason to implement long-overdue reorganization measures.

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When implementing and realizing a QC system according to DIN/ISO 9000 standards, a few principles must be kept in mind: The QC manual should be entirely integrated into the information system to allow departments and individuals on-line and real-time access to quality-relevant information. The execution of QC functions should not require the employment of additional staff. Quality-oriented operations are not additional activities, but should be regarded as the best method of operations available for all members of staff. The two aforesaid statements show that a QC system must be integrated into the entire information system. Every activity at the user level should be accompanied by the associated on-screen data and instructions, with results user-entered in “mandatory fields.” The seamless documentation of all quality-relevant operations (in accordance with the specific HACCP concept25 of the company; Figure 3.19) must be based on the paperless office principle, as every “paper-based” entry subsequently leads to an insurmountable data flood (paper flood). In our information age, economically sound and “quality-oriented” evaluations can only be performed on the basis of integrated data processing. When implementing the aforesaid four essential principles of a QC system, a comprehensive, quality-oriented method of corporate controlling emerges from the previous method of controlling.

3.3.3.2

Basic Data in the QC System

Any company seeking to implement QC with the aim of obtaining ISO 9000 certification must establish the necessary basic QC data (specifications and instructions) in the form of a documented QC manual.26 It is from this basic QC data that quality-relevant results are recorded in detail and in line with the organizational requirements. In this QC context, the Computer Integrated Manufacturing (CIM) concept is utilized throughout production from receiving to shipping of goods. All information required for a practice-oriented QC system is kept in the central basic QC data center for QC. The system-wide integration of all functions and business areas within the CSB-System supports QC data administration at one central location. The following master data must be created in order to perform required QC (Figure 3.20):

Figure 3.19

HACCP concept within a meat-processing company.

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Figure 3.20

Defining QC instructions.

Measurement procedures Assessments Measures Item specifications

Apart from the master data required for the processing of production items, the following location-related information also must be added:

Cost center audits External audits

The basic data of the QC system have an integrated link to the following business areas and functions: QC information required for the basic elements (address, items, conditions, and processes) is captured and made available. Basic data from the QC-system are accessible in Product Management. Management has constant access to quality-related data and can analyze these according to any desired criterion.

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The QC process itself allows on-line and real-time access to all basic data including company-specific quality information. The integration of all QC basic data in the entire corporate management system guarantees that all quality-related instructions and specifications are prepared for each workstation and can be accessed selectively.27 For the industry-specific creation of QC data, this means comprehensive parameterization and entry of basic data variables: Measurement procedures can be defined with precise specifications, and each procedure can receive any number of definable instruction steps. The assessment master contains all status, process, and productrelated inspections and can be analyzed according to companyspecific standards. The measurement master encompasses a catalog of company-specific, “action-item” guidelines, which can be adapted permanently. Item specifications may pertain to any type of item (products, semifinished products, etc.) with specific process instructions, as well as predefined QCs in compliance with HACCP. Cost center audits contain all measurements and assessments necessary to examine quality features specified in the QC manual. All quality-relevant features are specified in external audits to comply with audits at the supplier or customer “on site.” Basic QC data represent the framework of QC actions to be taken, thus defining the scope of all quality-relevant audit procedures, i.e., measurements and assessments in correspondence with the aforesaid QC master data. From this it follows that basic QC data must enable manual QC processing, and be executed by company staff in an economical way.

3.3.3.3

Integrated QC

The implementation of an integrated QC system requires seamless on-line and real-time data entry. Through the integration of a corporate information system, quality assurance procedures constructed in compliance with HACCP become a fundamental element of corporate controlling. This situation demonstrates the necessity of combining the QC system, management, and controlling into a comprehensive corporate control structure. Documentation and process instructions required by ISO 9000 should be executed in accordance with the company-specific HACCP concept. Quality-related actions at CCPs should be integrated into the entire workflow

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so that no additional, i.e., exclusively QC-oriented tasks, arise. The economic utilization of data capture and labor functions is a requirement of quality-oriented controlling. To implement the quality manual, the 20 ISO 9000 elements that concern the adherence to quality-relevant tasks should be incorporated into the corporate management system: Construction of a “random sampling system” for all product, time management, and management processes Establishment of assessment criteria required for company-wide “cost center assessment” Execution of comprehensive “vendor assessment” Documentation and evaluation of all quality-relevant data within company-wide “laboratory and measured-data statistics” For example, the measurement points required by the HACCP concept can be arranged at the following process workstations:

Goods receiving Production process Batch processing Production exit Shipping exit

The number of points can be increased or reduced as required by corporate-specific QC requirements (Figure 3.21). All process-relevant QC actions in all business areas can be performed by using an integrated QC system. All essential components of an ISO 9000−oriented QC system can be integrated on-line and in real time within the CSB-System. This solution reduces work by compiling the QC manual down to an absolute minimum. The consequent integration enables considerable cost savings in terms of QC organization, which in turn achieves a sustainable reduction of costs related to errors. Competitive companies of the future will not be able to exist without QC management integrated into the corporate management system.

3.3.3.4

Special Quality Assurance

In addition to integrated quality assurance, specific quality inspection and laboratory research procedures call for specialized software modules in Quality Management. Bullet points from the application of quality assurance and laboratory information systems (QLS) include:

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Figure 3.21

Preparing HACCP evaluation.

QLS/LIMS (Laboratory Information and Management System) QLS/MED (Medical Laboratory Data System) QLS/CAQ (Computer-Aided QC) QLS/HACCP (Hazard Analysis of Critical Control Points)

These support the pharmaceuticals, chemicals, paints, health care, environment, food, and discrete manufacturing areas. Corporate structures in any of these areas differ significantly. Companyspecific requirements may be precisely covered by flexible QLS application tools that reach far beyond the range of standard QLS functions. These flexible QLS application tools are industry specific and enable the seamless organization of company- and product-specific quality assurance processes. Safety requirements apply especially to the pharmaceutical industry:

GLP (Good Laboratory Practice) GMP (Good Manufacturing Practice) GAP (Good Analytical Practice) FDA (Food and Drug Administration) DIN EN ISO 9000ff

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The following apply especially to the food industry: GHP (Good Health Practice) HACCP (Hazard Analysis of Critical Control Points) Self-checking All requirements, not just those from the pharmaceutical industry, can be covered with the special quality assurance tools (QLS/LIMS). This enables precise solutions for:

Test planning and audit planning Test equipment management Research and development Project and document management Goods receiving Test dynamization, critical inspection, and sampling Vendor assessment Production control and automated sampling Releases and authorization decisions Final control and goods issue control Certification and reporting Stability issues Batch traceability and recall management Statistic and control charts Error feedback for production and testing optimization Sample processing in laboratories, measured value processing, and calculation Appointment monitoring and follow-up Barcode and other identification systems on-line integration of measuring devices Interfaces to external data systems Archiving

Apart from the total support of batch-oriented requirements, with the aid of extreme modularity and flexibility, the CSB-QLS also supports other cross-area systems that provide for special quality assurance functions, from LIMS to CAQ. When implementing QLS systems, a high degree of efficiency is attained through the use of preconfigured standard modules. In addition, the utilization of the application generator secures the utmost coverage of all requirements, as it enables adjustments down to the most minute atomic data element. The result is a software system oriented on actual corporate processes that still complies with all service and release standards. With the QLS application tools and technology that support forward compatibility, the system can be constantly upgraded with new functions.

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Figure 3.22

QLS/LIMS (Laboratory Information and Management System).

This enables an extensive “living system” that meets all evolving QC requirements and needs (Figure 3.22).

3.4 MANAGEMENT AND CONTROLLING The execution of planning activities in the information age calls for the optimum exploitation of current and innovative IT at the management level. Progressive corporate management can be organized by using accessible, comprehensive, and accurate information. The flow of information emanating from any company in a more or less structured manner must be filtered to allow management a firm basis for decision making. The classification of planning tasks depends on the specific organization, and takes place in accordance with the responsible areas: Management Information System (MIS) Area Information System (AIS) Communication Management

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These three areas are unified by a common goal: to enable informed decisions. In the following we analyze the above-mentioned information systems according to their ability to support decision making, and the effect this potential has on corporate management.28 Global, cross-area, and consolidated data are the basis for the creation and control of corporate strategy, as well as long-term financial management (investment and financial planning). Decision makers require detailed information concerning the individual business areas themselves, as well as all data from the combined factors of other corporate areas. Enabling paperless cross-area corporate communication is the task of communication management at all corporate levels. Ad hoc, cross-area evaluations available in real time aid in implementing integrated and corporate-wide controlling.

3.4.1

Management Information System

Successfully motivating managers to work with the “information technology” tool will only happen if the software is designed in a user-friendly manner. Important management information is made available by selecting and consolidating operative data. The actual work involved in this process must be kept at a necessary minimum. Intuitive screen guidance virtually eliminates training expenses, and any inhibitions management may have will disappear in no time. These are the requirements placed on an MIS. The classification of management functions is freely definable in the CSBSystem and is organized as follows:

Strategic planning Financial management Management figures Results presentation

An important decision factor is that evaluation and results produced within the CSB-System MIS can be traced to a redundancy-free database. Island solutions or systems based on multiple interfaces should not be considered for data security reasons, duplicate data administration, and lack of response (i.e., no real-time information). Integration does not stop at the management level; it also requires comprehensive integration of continuously available and reliable data.

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3.4.1.1

Strategic Planning

Defining and implementing long-term corporate goals can be effectively realized with the “tools” of innovative IT. Every strategic planning process must include a set of timelines. The resulting activities are subsequently transferred to operations planning for all functions and business areas. In this process, two data areas are distinguished: Descriptive target formulation Quantified target values In descriptive target formulation, fixed strategic commands are divided into individual objectives at all organizational and decision-making levels, and made accessible to all involved in the decision-making process. All fixed grid schedules for all assigned tasks are described and documented in the Task Management application,29 which operates in a position-related as well as a user-related fashion. Adherence to the individual tasks resulting from strategic planning should be monitored at all functional areas, including actual task execution by the staff member. The more complex and diversified the tasks, the greater is the need for their rational and timely execution. As a result of continuous technological development, the coordination of target-oriented activity always requires more sophisticated instruments, and thus an integrated information system for efficient decision making as well. Determining quantified target values for strategic planning is a management task for each business area. This requires comprehensive function budgeting. Quantified budget values should be created and have fixed time periods. They therefore become independent objectives for each department leader. Every target budget value is to be subject to periodic comparison with the actual values achieved. Corrective actions are derived from this analysis and assessment, and passed on to the operatives as new or modified instructions.

3.4.1.2

Financial Management

Financial management should receive special emphasis within the area of corporate planning. Apart from strategic planning and executing operative plans to gain a competitive edge (and thus an increase in corporate productivity), the provision of sufficient financial resources also must be planned and secured. Here, we differentiate between two financial areas: Investment finance Current asset financing

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Corporate financing is planned and agreed upon with the potential lenders on the basis of an existing investment plan and the prior ROI (return on investment) assessment30 of the individual investment projects. Potential sources of funds are derived from “equity capital” in the form of self-financing, or capital borrowing in the form of outside financing, as well as self-financing on the basis of selfacquired financial resources. The demand for working capital is calculated on the basis of various formulae.31 The capital balance is calculated based on a combination of factors including payment terms and goods in stock. The “corporate financial plan” is generated on the basis of the planned investments and current assets for a defined period. Budgeting should be divided into four period categories:

Permanent budget status Short-term budget Mid-term budget Long-term budget

Short-term budgeting should correspond to the fiscal year (1 year), the mid-term plan should consist of two or three short-term plans, and the long-term plan should encompass two or three mid-term plans. Therefore, financial plans associated with a certain period should be interconnected, thus forming integrated planning processes. The structure of the corporate financial plan should provide management with a quick overview of the specific financial situation. The current financial status should be accessible at any time from the financial plan overview.32 In this context, a periodic plan vs. actual comparison is simultaneously displayed (Figure 3.23).33 The integration of all functional areas and the visualization of all corporate activities within financial accounting ensure that the activities planned and executed within the individual functions of enterprise resource management can be accessed at any time, and subject to a plan vs. actual analysis. In this respect, financially relevant data, including overall target vs. actual values, are summarized for the financial plan overview. An increase or a reduction in the available financial resources is derived from the balance of a and b (see Figure 3.23) and from the comparison between the target and actual values. The purpose of the above distinction between operating income and expenses and other income and expenses is to separate the income and

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Expected

Actual vs. Expected

Available Cash Petty Cash Banks

a) Income a 1) Operative Income a 1) Other Income

Expected Expected

Figure 3.23

−actual comparison. Periodic finance plan with expected−

expenses derived from trading activity from “financial” income and expenses. The aim of corporate financial planning is to maintain liquidity. Management must therefore have access at all times to current information on liquidity movements within the company. Liquidity is the difference between the available liquid assets and outstanding liabilities. The liquidity status represents the calculation of the liquidity position at a given point in time. Where the liquid assets exceed the outstanding liabilities there is excess liquidity, and in the reverse case a shortage of liquid funds. The degree of liquidity is ascertained by dividing the assets by the liabilities (Liquid assets − Available funds / Liabilities). By calculating the ratio between the liquid assets and the liabilities using a different “liquidity factor,” we obtain a differing pattern of degree of liquidity.34

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Gross Income Available Cash Petty Cash Banks

Income Income

- Operat. Expenses - Extraordinary Expenses (without credit repayment) Cash resulting

increase – Liquidity + Available credit (with banks) Total Cash Available

Figure 3.24

Cash flow statement.

Firm financial controls set by management far exceed the importance of financial planning and examination of liquidity. Financial movements within the company must be subject to periodic controls. For this purpose, the financial flow account developed by Neubert is used, which is expanded into a “cash flow account” within the CSB-System.35 The cash flow statement shown in Figure 3.24 is based on the knowledge that all revenues and expenditures (insofar as the changes in inventories are recorded in each case) must correspond to income and expenses. The cash flow statement thus provides relevant facts and figures on the company’s earnings capacity or its degree of self-financing. The cash flow statement can be used to plan the short-term liquidity forecast. In a further depiction36 of cash flow on the basis of the periodic actual figures (e.g., at the end of each month), information on the movement of liquid assets can be prepared for company management, to fulfill the task of portraying the real liquidity status of the company.

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3.4.1.3

Management Indicators

Assessing management indicators and using these as a basis for making necessary decisions is a paramount management responsibility. Corporate success can be demonstrated by way of four dif ferent categories of indicators:

Global corporate values Industry comparative figures Market indicators Corporate results

Global indicators in the world of business are universally applicable and used for the purpose of evaluating and assessing enterprises. Industryspecific indicators enable statements to be made in terms of a company’s relation to the competition, and its comparative success in the market. The market indicators provide for a comparison between the current economic situation, and the planned budgeted results, by using current and past indicators. This “internal operational comparison” enables important conclusions to be drawn for the measures to be taken by management. The business function indicators reflect the commercial activities in relation to the factor combinations of each and every company. Corporate success can be traced to the individual results and values in the business functions. It is only by means of constant review of all activities and the subsequent, necessary improvements within individual processes that the function results can be optimized, and the friction losses between the functions and the business areas minimized. The corporate value is a global indicator used for corporate assessment. The “earnings value” and the “net asset value” are used as auxiliary values for the purpose of evaluating a company as part of the overall assessment statement.37 For the assessment of the earnings value, the anticipated net yield as well as the capitalization interest rate must be determined.38 Both values can only be regarded as estimated figures; the risks inherent with such estimates need no further explanation. It follows from the uncertainty of earnings value that the net asset value is incorporated as an additional assessment factor for the purpose of corporate evaluation. The net asset value is calculated by considering the investments at their replacement value (less depreciation over the effective life). This method reveals the hidden reserves in the assets. The intangible value of the company is calculated on the basis of the difference between earnings value and net asset value.39 From an outside perspective, the earnings value can be seen as an acceptable indicator for assessing the performance of management. However, the value of the

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company for a buyer cannot be deduced from past values alone. The opportunities for management to permanently improve the competitive edge of the company are derived from the demand for the product on the market, and the anticipated innovative capability of the company, as well as its abilities to respond quickly to current product demands. Only management with a positive edge is able to develop a future-oriented strategy and, as a result, achieve a consolidated position in the market for the company. Comparison figures within each industry enable the success of a company to be reflected in relation to its competitors. In this context, the accessibility and objectivity of the data determine the possibilities of providing a relevant comparison with the rest of the industry. Industryspecific associations offer their members the possibility of participating in relevant comparative analyses.40 Recording these data and these indicators and comparing with a company’s own operating data to ascertain the differences require the ability to capture and analyze a wide range of indicators. In the CSB-System, the types of indicators shown in Figure 3.25 can be analyzed and compared with the average industry values.

Figure 3.25

Industry-specific management indicators.

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A breakdown of the types of indicators shown in the figure reveals an opportunity for the indicators to be examined on a differentiated basis and for greater relevance in periodic comparison. 41 A comparison of financial structure, cost and profit, as well as productivity can also be produced on the basis of these indicators. Information to be used as market indicators should especially reflect current trends in the procurement market as well as the current goods offered by the company, and should be subject to periodic comparison. Preliminary information from the market concerning the commodities and factor market are absolutely vital for enterprise development planning and should, as a result, be subject to detailed analysis. The procurement market situation should be subject to permanent quality and cost analysis for all elementary factors (human labor, operating resources, materials, and knowledge). The following information in regard to procurement must be collected from the factor market: Alternative sources for all elementary factors Permanent monitoring of price trend for key procurement items Coordinated inventory control (with consideration of price and demand trends) on the procurement side Periodic target−actual comparison with budget control throughout all performance factors with top-down analysis The sales market situation for the revenue-generating commodities marketed by the company (products and services) should be perpetually analyzed. The derivable necessary indicators encompass: Reflection of activities and the evaluation of subsequent market reactions for “ABC goods” Development trends of the quoted offers for “ABC items” Results determination for the quoted offers Periodic comparison and development tendency of incoming orders for ABC goods, with planned−actual comparison The development of the factor and commodities market, as well as the consequences of the factor combination for goods manufacturing within the company can be derived from the company results. Periodic analysis of corporate performance is among the main tasks of management. Specifically, the following corporate indicators can be determined with the CSB-System:

Yield status Productivity Gross margins Growth potential

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These indicators provide for detailed statements concerning company results.

3.4.1.4

Result Presentation

Essential information must be properly prepared for management to use it comprehensively. It is on this basis that an MIS is accepted by executive management and deployed as a useful decision-making tool. The use of all available data within the enterprise and the transformation of data into “executive information” are summarized with the term “business intelligence.” The task of presenting results from all corporate function areas in a meaningful way is reserved for the “Results Presentation” program in the CSB-System. One essential prerequisite for positive corporate management is the continuous monitoring of planning and organizational activities across all corporate levels. The method of presenting results varies from company to company. It is therefore absolutely necessary for the user to be able to freely define the appearance of his or her results and evaluations.42 The MIS is based on the Data Warehouse concept in which all decisionmaking-relevant data originating from the information system are stored in a separate database. All information is consolidated in this database and is made available to management as a uniform and corporate-wide decision-making basis. This multidimensional database management is set forth under the term “Knowledge Discovery Database” (KDD) in Figure 3.26. The objective for the Knowledge Discovery Base is to accommodate navigation, association, visualization, and analysis of knowledge data. The Data Warehouse supports all decision makers in acquiring information intuitively. The main task of the tools available is to efficiently supply data and to provide automatic evaluations and analyses. Corporate management is able to achieve unparalleled independence in gaining information. On the basis of the Data Warehouse, managers are now able to analyze corporate processes and markets and to make decisions based on sound information. A Data Warehouse consists of four components: 1. 2. 3. 4.

Data Warehouse data basis (source data) Transformation Programs (Power Transformer) Meta-database (Power Database) End-user tools (Power Control and Power Minder)

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Figure 3.26

Multidimensional database management.

Figure 3.27

Building a data warehouse in the CSB-System.

As can be seen in Figure 3.27, the construction of a data warehouse concept requires a relational database and evaluation server. The Data Warehouse Manager (Power Transformer) extracts the data from the information system. In this process, only data that has changed

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are transferred. Access to the data takes place via the open database interface, the Data Access Machine, so that the Data Warehouse Manager can read and write any data sources required. Separating the data in the MIS from the operative data of the CSBSystem leads to the following benefits: Detailed data from corporate processes can be filtered and reorganized during updating. The high speed of the evaluations within MIS is due to the data update taking place in another data model (the so-called Star Scheme). This data model has been conceived especially for the creation of reports and analyses. Corporate processes within the operative system are not impaired by the elaborate evaluations within the MIS. Once the required data have been updated by the Data Warehouse Manager, these data are available to the evaluation server in a consistent and optimized form. Which user tools are required? Management must have secure access to the data evaluation and processing. There are four types of end-user tools for MIS in the CSB-System: 1. 2. 3. 4.

MIS MIS MIS MIS

Reporting (PMI) Analysis (Power Control) Data Mining (Power Minder) User Interface (PlayIt and TouchIt)

MIS Reporting (PMI) MIS Reporting directly retrieves dedicated data from the evaluation server using Print Management Interface (PMI). Standardized corporate reports can be created with the MIS Reporting tool. Data access takes place via meta-data that is superior to the system data and contains information on origin, meaning, and structure of the data. They are the interface between the database and the user and enable an economical view of corporate data. With this meta-data, the user can graphically compile special queries on the basis of known terminology.

MIS Analysis (Power Control) MIS Analysis (Power Control) enables the presentation of multidimensional data, which can be viewed dynamically on the basis of various economical perspectives. MIS analysis therefore operates on a multidimensional database (Power Database), which already contains consolidated data. Data

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located on the evaluation server are consolidated and made available in the multidimensional database. This consolidated data can be viewed dynamically on the basis of various economic perspectives. Special user functions are available to navigate through consolidated data and to change the perspective of the specific data. These data receive even more detailed forms with “drill-down functions.” “Rankings” enable the sorting of data by any desired standards. “Slice and Dice” enables fast toggling between business objects, and “exception reporting” allows for highlighting out-of-the-ordinary values. MIS Report Writer enables permanent access to detailed data. Executive summaries are easily made, as data can be compressed to meet management requirements. The Report Writer’s system architecture enables fast and reliable data retrieval without high runtime and CPU requirements.

MIS Data Mining (Power Minder) MIS Data Mining (Power Minder) is a tool that searches for connections within a certain data stock. Relations between data are pinpointed here that are accessible to the user only after compilation. Data Mining therefore enables the user to infer unapparent knowledge, trends, and resultant secure prognoses. User hypotheses can thus also be verified with Data Mining. The user is therefore able to make hypotheses and subsequently verify them.

MIS User Interface (TouchIt and PlayIt) The MIS User Interface offers users a presentation system, which provides for fast information access. Management usually does not have sufficient time to delve into tedious training sessions for application software. The success of an MIS therefore essentially lies in the easy-to-learn components and their logical structure. This is emphasized in “big-button applications” (point and click) with TouchIt and PlayIt.

Summary The discussions of the above items with remarks concerning on-screen user guidance should provide some insight into the possibilities of an effective MIS. Industry and corporate-specific management can achieve significant economic benefits and a reliable foundation for decision making. Every MIS should be attuned to the special requirements of management and should be constructed with the respective evaluation tools.

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3.4.2

Area Information System

Managers of the individual areas of a company have the same kinds of needs for information as top-level management. On the basis of this opening statement, the results of the functions in each business area must be subject to an ongoing system of performance monitoring. Accordingly, all technical requirements placed on the MIS above also apply to the Area Information System (AIS).43 The corporate objectives set out in strategic planning are broken down into quantifiable terms for each area budget. The operational planning for each individual business area is translated as well into area budget values while taking the strategic objectives into account. This makes each area manager personally responsible for “creating” his or her own “management area.” The way in which the corporate areas are divided can be structured as required and set out in the corporate organizational diagram. The individual functions are combined into business areas in accordance with the organizational plan so that the area managers have direct access to the individual function results.

3.4.2.1

Operative Planning

Planning operational activities across all functions of the company represents the basis for effective corporate management. In this context, the target values are to be laid down as budget items on a “top-down” basis. The corresponding budget amounts are specified by the functional area managers, under their personal responsibility, for all ERP functions (procurement, warehousing, production, and sales) as well as time management and accounting. The determination and methods used to assess budget values vary from function to function in this respect. Budget planning must be structured with varying levels of detail for each individual function to reflect the goals that have been set, and the variances due to market situations (including future planning). In this respect, global planning for all functions must be developed taking into account the integrated combination of all the budget values, structured to meet the requirements of each specific company. The process of setting parameters for this purpose and the tools to be applied have already been adequately explained. For any planning period, and in any detail desired, budget values can be continuously compared with actual values achieved in the AIS (as explained below). Section 3.7.3.3 depicts the entire detailed process of production planning.

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Function and department managers require detailed information concerning the operational “daily business.” Fast response and action are only possible with real-time access of the latest data. These data must be subject to constant evaluation and be available when required. The automatic function evaluation enables the generation of freely definable reports and is made available as “function results.”44 Once an “analysis model” has been created it is available to any authorized function manager on a consistently updated basis. Predefined analyses can be derived from the function results and displayed on-screen as numerical values with subtotals or final totals as well as prepared graphics. Any authorized user has immediate access to any deviation from the target, or to the comparative values of previous periods.

3.4.2.2

Function Controlling

Every organization unit, as well as all living organisms, requires control of certain functions and self-preservation mechanisms to survive. The implementation of a comprehensive control system in the company can be based on and developed according to a very wide range of perspectives. This statement applies just as much to the human organism as it does to the business organization. In practice, we find centrally organized controlling departments (area management) as well as control procedures responsible for specific areas, the individual functions of which are part of predefined process organization. However, all controlling processes use random-sample procedures for measurement. Although better than nothing, this gives rise to the risk of rapidly growing units suffering from a general loss of effectiveness on the part of the control mechanisms installed. The task of solving the problems described above is the responsibility of the integrated and seamless controlling system. An integrated and seamless system of measurement and controls for all production planning and production processes (using all elementary factors within the company) is created via the CIM concept in the CSB-System. In this context, the situations to be measured or controlled are reduced to their individual values to be inspected or compared and collated into freely defined lists. Critical deviations discovered are identified and can be analyzed directly on-screen by top-down result access.

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Under the CIM concept, the elementary factors of production planning and production processing are combined with the information created in the office (administration) and made available to all users in real time. In conventional systems, results are shown only on a periodic basis. But for the first time ever, immediate repercussions from the economic control system are enabled with the Control Message Management (CMM) of CSBSystem. In this manner, on-line and real-time access to the control system is a reality. CMM constantly checks for over/under limits of all the processes of each individual application. The response actions triggered by these events are also defined in CMM, and are relayed immediately to a previously defined assignee. Of course, CMM requires that automated corporate-wide controlling procedures are comprehensively defined. This results in the determination of function blocks for all individual cases:

Definition of possible reactions for any conceivable situation Determination of the test conditions, individual values, and limits Allocation (who) of reactions to all process situations Constant control, reaction triggering, message transfer, and logging of the entire process in CCM

The direct control of CIM operating resources enables the use of the High Level Application Interface (HLAI), which through automated real-time commands allows for comprehensive monitoring of all process units and complete control via device messaging. The influence of error sources is therefore prevented in real time and within each occurrence. Measurement and control reports are freely definable and can be created per functional area or cross-functional area in any desired format via PMI. These evaluations may also encompass the results from QC, integrating functional controlling and quality inspection in a comprehensive corporate control system.

3.4.2.3

Price Controlling

In a larger company many employees in various functions are involved in costs calculation. In this respect, it is common knowledge that despite the same conditions, different costs are calculated for identical items. A comprehensive system of cost controlling is therefore imperative. However, even consistent cost controls cannot guarantee correct costing. Costing reliability is only achieved by implementing an integrated costing structure throughout the entire enterprise. Integrated and real-time

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calculation of costs implies the process of structuring costs throughout all areas and functions on the basis of redundancy-free data. Consequently, the CSB-System ensures that starting with procurement, via warehouse management, all production processes and right through to sales, a properly integrated costing structure is performed on the basis of budget and actual costs. The aforementioned duplication of effort is therefore rendered unnecessary and, at the same time, the existing costing uncertainty is replaced by complete costing reliability.45 A successful costcontrolling system acts as an advance indicator of current market developments for management, especially for those with function responsibilities. In a market, which basically exhibits no preferences, any change in the supply-and-demand situation produces a change in the price of goods, as well as their substitution.46 Prompt action can only be ensured when there is a comprehensively organized system of cost controls within the company. Specifically, cost reviews are to be carried out in the key application areas mentioned below by way of the following:

Procurement sources Inventory management Production processes Sales channels

Sales channel costs affecting sales should be assessed in detail. Key information imperative to management decision making based on “farreaching reliability” can be derived from periodic target−actual cost analyses.

3.4.2.4

Time Controlling

The time taken for the production of goods must be subject to ongoing examination in every company. Corporate performance capacity is the sum of all available and productive labor time and assets (also know as aggregates). Time is therefore to be treated as a scarce commodity within the production process. Productivity increases can only be attained if more goods are produced with the same or less capital or costs per unit, or within the same or a shorter period of time. Only if labor and capital productivity increases can positive effects emerge for the entire enterprise and thus also for the entire economy. Time controlling calls for the amount of time consumed over all functional areas and functions to be examined and monitored. It follows that control procedures, which must be coordinated with the special

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combination of performance factors, must be established for every company.47 Every increase in performance and productivity must be planned in detail; their realization should be constantly subject to comparison with the actual values determined. Planned increases in time productivity can only be achieved by way of a continuous target−actual comparison of time throughout all work processes up to the final product.

3.4.3

Communication Management

With the onset of the industrial age, the traditional division of the workforce into white collar and blue collar workers simultaneously brought about the split in the company between office and shop floor, or between administration and production, a schism that still exists today. However, companies in the information age will only be able to flexibly respond to market changes on short notice and meet the requirements of each situation when all production factor processes are organized at a highly integrated level. This knowledge forms the basis for the aims of CIM. Improving an enterprise’s communication abilities is another ongoing management task. To secure and elucidate internal and external communication processes, all actions associated with communication must be made available to all participants. Communication always takes place between addressees (staff, customers, suppliers, etc.) and always involves or initiates actions. Moder n communication management therefore must link all actions belonging to a certain action. This requirement ensures that all “need-to-know” material is available in real time for every contact. It is therefore absolutely necessary to link all associated actions to an address and its initiators to all communication levels (Figure 3.28). The analysis of developments in administrative work (in both public as well as private sector companies) clearly shows that, despite extensive technological aids, the productivity of the employees in the “office world” comes nowhere near to reaching the increases in productivity achieved by those in production companies. This knowledge gives justification to the efforts directed at a comprehensive “restructuring” of all planning and organizational activities. The approach to work by many office employees, that their personal “knowledge is power,” often runs contrary to the company approach of “strength through mutual knowledge.” To influence working attitudes of administrative employees in a positive way to share information, the technical infrastructure must be made available within the company. IT in the 1990s was shaped by personal computer (PC) technology. PCs (as single-station systems) were promptly introduced into wide areas

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Figure 3.28

Action linkage in communication management.

of administration. As workstation-related aids, prior manual activities were increasingly processed with the help of IT technology. However, the gaps between users were passed on, and the problem of duplicate or even triplicate data maintenance and recording was simply not solved by the use of single-station PCs. It was not until the PC was linked to companywide or group-wide networks that the technical prerequisites for the comprehensive integration of all organizational activities were created. Communication management enables a considerable potential for streamlining effects throughout the administrative area, and consequently throughout all planning and organizational activities. The term communication management depicts all managerial functions of communication. Specifically, these are organizational activities to be carried out at all functional areas. The essential features of communication management are described below.48

3.4.3.1

Communication

Communicative behavior in companies as well as single economies is divided into two areas: Written communication Verbal communication

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Verbal communication can then be divided further into personal and telephone-related information exchange. Studies on communicative behavior in concerns and individual companies have shown that more than 40% of information exchange takes place via telephones. With the Phonemaster patent, a comprehensive and platform-independent Computer Telephony Integration (CTI) solution has made efficient control of telephone communication possible. Fast and secure access to telephone communication functions, such as the CSB-ETB (Electronic Telephone Book), is at the center of focus in technological development. Problems concerning the documentation and accurate information transfer in verbal communication are a well-known fact. The vast flow of information confronting a company should be constantly evaluated in regard to efficient decision making. However, selective access to information is possible, and requires the ability to store significant verbal and written information in a central database, which can be recalled (according to predetermined order criteria) at any desired time. Reliable and widely spread “knowledge” has only become possible with the human ability to store written language. Earlier and contemporary cultures could not and cannot survive without a secure form of information transmission. In communication management, written, digital, and verbal communications form an integrated information system throughout various media types: letter, computer, and telephone. By integrating the telephone into the IT world, total internal and external verbal communication becomes transparent and applicable for all decision-making processes.49 The paperless office within comprehensive communication processing takes place in the central database of the CSB-System. Verbal information from personal or telephonic conversations is visibly stored on-screen for the specific address, which can then be processed and transferred to the respective user in charge. No information is lost, forgotten, or unprocessed. This is taken care of by the “resubmission procedure” (follow-up tasks) in communication management. Verbal communication in all businesses can be efficiently organized, and should be a significant concern of management. Personal valuations, various senses of responsibility, and other unpredictable influences lead to varying degrees of quality in communicative behavior of employees at all corporate levels. Uniform, disciplined, structured, and finally controllable communication of internal and especially external partners is only possible with IT-aided and integrated communication management. Internal and external corporate communication is focused on marketoriented goals. Extending and securing market share is at the forefront of

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Relationship Management

Figure 3.29

Communication Ware. The tool for optimal corporate communication.

all activity. The higher-level significance of integrated corporate communication is emphasized by the creation of a new communication tool “Communication Ware.” As illustrated in Figure 3.29, Communication Ware is an integral component of multidimensional integration and is geared toward the significant improvement through all communication channels of market-oriented communication:

Communication Management Database Management Call Center Management Marketing Management

The above communication-oriented program suite is integrated into the software system, connecting enterprise resource management with corporate

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communication. All information and data from the system including Communication Ware can be analyzed on-line with the Data Warehouse. For further specifications please refer to MIS (Section 3.4.1) as well as Contact Management (Section 3.4.3.2) and Contact Manager (Section 3.4.3.3). The significance of this highly integrated corporate communication for market-oriented enterprises is illustrated in detail here. Written information from external partners (letter or fax) is entered into the CSB-System.50 These incoming messages are displayed on screen and are electronically transferred to the respective member of staff. The same procedure also applies to outbound mail (letter or fax). In the near future, “electronic mail” will be the standard medium, whereas physical mail will become the exception. Automated systems of resubmission (follow-up tasks) and information distribution via communication management make sure that all members of staff interested or involved in a process are always able to receive information concerning the status of a certain process. After completing the individual processes, this information is automatically stored in the electronic archive. Document administration within a company is of special importance. Basic business relation foundations are initiated through various contracts, agreements, and customary activity. Patents and trademarks also must be accessible to all functional areas and function members. Formal dealings are only possible once comprehensive access to complete information has been realized (i.e., comprehensive access to management-relevant documentation). The step toward digitalized document management with comprehensive electronic archiving is an urgent necessity in our information society. Research, access, as well as analysis and reception can be handled productively with the aid of an efficient document and archive management system. Apart from internal documentation (management and controlling, product management, time management, accounting and finance) CSB-Archival also enables the processing of paper-based documents (invoices, balances, contracts). Data contained “on paper” are simply scanned into the system by any available scanner. The source documents or vouchers are processed as de facto originals, and stored onto adequate media (CD, DVD, tape, etc.). Documents originating from the CSB-System can be directly stored within the system without needing to revert to paper. Assigned an appropriate key word, they are automatically deposited in the archive, and thus accessible for all authorized members. An intelligent “from-bin” transfer procedure warrants the security of all archived documents. The result of a search is shown in an on-screen list.

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Every authorized user workstation can export or print archived documents. The legal requirements for tamper-resistant “from-bin” transfer must be comprehensively adhered to in order to realize the “paperless office.”

3.4.3.2

Contact Control

Communication creates information that must be stored and be subject to analysis. IT-guided and documented communication is therefore the prerequisite for reliable information utilization. All corporate communication takes places through communication channels that provide the communication infrastructure between company and market. Only a powerfully organized communication management system can handle all market contacts (customers, potential customers, target groups, etc.) efficiently. The tools required for this purpose are contained in “Communication Ware.” This consists of the following:

CTI solutions Integrated Call Center (inbound, outbound, etc.) Phone Management (Electronic Telephone Book, Helpdesk, etc.) Contact Management (activities, navigation)

With Communication Ware, all communication channels (Internet, intranet, EDI, e-mail, fax, video, CTI, etc.) are constantly accessible on screen, are user friendly, and therefore simple. All documentation and information required for communication are directly allocated to the respective “address.” By connecting all documented activities, communication processes become more efficient. It is therefore necessary to create and classify all basic data in a company-specific way. Access to the system is organized by authorization levels via the “navigation menu” assigned to each specific user. Activities to be performed in the individual function and activity areas first must be defined in the system. The individual activities are linked via “Contact Management.” Activities allocated to an address are made available for every contact (e.g., phone contact). The allocation of activities takes place on the basis of a companyspecific activities list, enabling purposeful address-related processing (e.g., of customers, prospective customers, and trade show contacts).

3.4.3.3

Contact Manager

Automated process support of information access is of extreme economic significance for every active or passive contact to a target group. The Contact Manager provides secure information at the time of contact and

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enables navigation throughout all relevant activities. Quick access to all performed and planned activities in regard to a contact enables competent call guidance and reliable performance by substitute workers at any workstation. Service quality when addressing target customers will strongly influence a company’s productivity in the future. Predatory pricing policies among established providers will lead to a higher degree of contact among market competitors. Customer and lead contacts must be optimized to the highest possible degree to directly gain additional competitive edge.

3.4.3.4

Appointments

The task of planning and coordinating appointments in all business areas, depending on the size of the company and number of professionals, is an increasingly difficult and time-consuming endeavor. It is therefore a great advantage for the entire appointments management system to be processed with the aid of IT. Individual appointment scheduling can therefore be coordinated to avoid conflicts of individual employees and work groups (Figure 3.30). Planning or coordinating large numbers of group appointments is carried out with the help of on-line information such as “Who’s in the building?” or “Where can everyone be reached?”

Figure 3.30

Appointment setting in communications management.

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Modern communication must be current, instantaneous, and on a complete information basis. The modern communication technology used for this purpose must create both internal as well as external links to individual contacts via ISDN. Information as knowledge (language, data, and images) can be interchanged via the CSB-Phonemaster within the company as well as among external companies. In our fast-moving information society, the speed and security of information processing is becoming crucially important for companies in all sectors to remain competitive.

3.4.3.5

Tasks

The quality and reliability of a company is assessed on the basis of the attitude of each and every employee toward the company’s business partners. Management therefore must organize not only the structured procedures within the company (e.g., in goods management, time management, and accounting) but also the “random” procedures in all commercial relationships. The nonspecific and random communication with commercial partners gives rise to a whole range of tasks. The responsibility of determining duties, passing these on to competent employees, and monitoring them until they have been completed, is a time-consuming undertaking for all professionals in the company. Processing all tasks to be carried out and recording self-imposed obligations and requirements until the relevant procedure is finally concluded are organized effectively and reliably with the help of the user-differentiated task management system. The analysis of the tasks “produced” within the company allows conclusions to be drawn in terms of the structure and efficiency of internal work procedures. Management must prevent from the beginning a self-perpetuating increase in the number of unnecessary administrative tasks, which occur according to “Parkinson’s law.” Administrative procedures must be reviewed on a permanent basis because this is the only way to achieve an increase in productivity with organizational work procedures.

3.4.3.6

Process Control

Monitoring efficiency of administrative tasks is the r esponsibility of internal controlling. Once a QC system (in accordance with DIN ISO 9000) has been implemented within a company, the tasks of controlling and conducting internal audits to examine administrative duties may coincide. Every commercial action results in a traceable procedure within all business areas and functions. These individual processes all have a

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Figure 3.31

Project management.

beginning and an end. If the process cycle is interrupted, then the manager responsible must be able to intervene anywhere within the cycle from the start point to the end objective. The process control system in the CSB-System enables the user to scroll on-screen through all prior actions and all subsequent stages of the selected pr ocedure. In this context, whether some of the documentation on this specific procedure has already been archived is irrelevant. Individual access to documents relating to the procedure is enabled by way of search terms or project numbers in the archive, and original document duplicates can be printed out directly as required. An efficient system of process controls also includes the management of all projects to be carried out in the company (Figure 3.31). The anticipated ROI for each and every investment project can only be achieved if the associated work procedures are kept within the planned budget for time and costs. A comprehensive system of controls for all streamlining measures will produce desired profitability gains, provided the project objectives are met. This results in a real-time and on-line project management organization. Time and work delays must be able to be identified immediately by management so that prompt action can be

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taken at any time to secure the ROI. A comprehensive system of procedure controls must ensure that streamlining measures, especially those associated with a high degree of investment, are monitored so these are unable to develop into “liquidity issues,” which may threaten the very existence of innovative companies willing to take risks.

3.4.4

The Decision-Making Process

The process leading to a decision being made within a given situation is known as the decision-making process. Binding decisions to help meet goals set by management are the result of a specific set of requirements. Decisions are choices of action and are made by the relevant competent employee at all organizational levels within the enterprise. The economic relevance of these individual decisions ranges from “minor” to “crucial.”51 In the information age, “sound decision making” is shaped primarily by readily available factual knowledge. Real-time data processing of commercially relevant facts and the integration of all procedures related to “potential performance factors” form the prerequisites for sound decision-making preparations. As shown in Figure 3.32, the preparation of information requires an analysis hierarchy oriented toward the organizational structure. Categorizing the relevance of decisions between “crucial” and “minor” is reflected in the organizational structures, and is shown in detail in the job descriptions for the individual areas of competence. The question “who is allowed to do what?” must be reflected in the application structures of the software system. Only under these conditions can decision-making competences be laid down within the department that can also be asserted in the enterprise. Rules must be set out not only for “individual competence” but also for “group competence” in terms of decision making within the organization. Within the framework of his or her defined decisionmaking competence, every member of staff or group has the right and the duty to make required decisions without delay. This need for decisions arises from the process of combining elementary business factors, as well as from the relationships between the company and its business partners. The extent to which theoretical models used for decision making (e.g., the approaches of game theory) are subconsciously or consciously applied to the everyday decision-making process by management, must be left to empirical research and will not be the subject of further discussion at this point. What can be stated, however, is that successful companies ensure progress and profit on the basis of their approach to decision making, the grounds for which lie in the positive effect of the decisions themselves.

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Department Managers

Assets

Figure 3.32 Integrated information analysis with controlling functions from management through to the operational department.

The benchmark for success, taken from the target−actual comparison, is documented via accounting and product management. The resulting analyses are therefore part of the tool used to examine decisions. The organizational structure of an enterprise indirectly affects decisionmaking behavior at executive levels. Companies organized in a pyramid structure display decision-making processes different from those of a teamoriented organization with a flat corporate hierarchy.

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Companies with the need for high response levels require a quickly modifiable form of organization. The ability to change within an organization entails a certain level of flexibility, and therewith reactivity to changes in the business environment and the market. Management teams, harboring the best possible qualifications for the challenges at hand, should ⎯ supported by the organizational form ⎯ take on these challenges until their timely completion. A team-oriented organization is indispensable for innovative process control. Here speaks the insight that the conversion of tacit knowledge (from the individual) leads to broader and deeper organizational knowledge as a result of team formation. The level to which a staff member identifies with and responds to decisions made by a management team within a department (based on operational competence) is far greater than decisions made by a superior within a hierarchically organized department. Executive management should be defined along organizational guidelines based on changes in the business environment and the dynamics of product-related growth. The decision-making behavior of management is primarily responsible for the quality of corporate management: Actions and measures increasing the total benefit in functions or business areas are the result of “right” decisions with positive effects for the company. Organizing the necessary coordination behavior in management requires that certain principles be maintained in the decision-making process. In this context, the following steps must be taken:

Determination of urgency Determination of valid decisions Comprehensive access to all decisions Target fulfillment evaluation of all decisions

Adherence to a structured process at all executive levels should cause a maximum or positive effect for the company.

3.4.4.1

Basic Data Decision-Making Process

New decision-making situations for all corporate levels (from management to executive levels) result in new decision-making requirements. After examining results, previously made decisions may be questioned again. New situations require new assessments, calling therefore for a new decision resulting from actual or possible activities. The diversity of constantly changing decision-making situations must be structured and be made accessible to decision makers (single or group). An integrated software system for corporate management enables access to data and current situations in all business areas and functions down to the workflow

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level within the factor process. The information accessible within an MIS has already been dealt with. Based on this information, management is able to process all relevant decision-making tasks. These results are valid decisions for the operative activities of all employees involved.

3.4.4.2

Decisions

Corporate decisions should be divided into management and implementation decisions. Competence for management decisions lies within the realm of management. Implementation decisions are made at function and user levels. Decisions, which must be made in every company, take place according to predefined rules. In this respect one should note that in every company there are general rules about decisions, which must be applied in certain situations. In this context, a distinction must be made between the decisions for fixed processes (e.g., in administrative and production work) and decisions for overall objectives (e.g., strategic decisions). However, it must be emphasized that even for management decisions there are rules that must be followed for the decision-making process. One of the basic rules of commercial activity is “to expand and utilize the positive effects stemming from the decision.” Decisionmaking rules that have a positive effect can be expanded as well. Basically, it should be pointed out that corporate management that has a positive effect is based on decision-making rules that encourage productivity. The following division applies to the effectiveness of decisions: Short-term “operative decisions” Long-term “strategic decisions” Operative decisions, which must be made in a certain decision-making situation, are completed once actions to be taken have been determined. They therefore merely have a problem and resolution effect, with positive, negative, or neutral consequences to the company. Long-term strategic decisions, on the other hand, have binding consequences far beyond the reaches of the decision itself, and are valid until they are disabled or replaced by newly made decisions. Timely observance by all company staff of decisions made by management is an essential prerequisite for the optimal implementation within business areas, functions, and work processes within the company. In the CSB-System, decision-making information is identifiable at the point of entry (in the program

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module Communication Management). A stipulated distribution code guarantees that the information reaches the proper recipients and simultaneously ensures the confidentiality of the information. Correct decisions made by management are positive factors of performance within an enterprise. Goals involved with this process can only be effectively attained once all associated activities have been completed correctly. The “integration factor” originating from integrated IT optimally supports the implementation of creative, well-organized, and goal-oriented management actions, without any loss of quality across all levels of the company. Integrated information processing eliminates unauthorized “decision forgery” caused by the unstructured transmission of information. Within the integrated corporate management system, the effects of business decisions can be measured accurately, as they cannot be falsified by personal influence throughout all organizational levels.

3.4.4.3

Assessment and Evaluations

The ongoing efforts of management to improve decision-making processes must be supported by IT. The analysis systems (MIS, AIS, and Communication Management) explained above provide the indispensable “factual information” for this purpose. Obviously, the degree of efficiency of decisions made on the basis of these methods cannot be “predicted” at the time the information is provided. Over time, the course of action resulting from a decision can be demonstrated with numbers. The quality of the decisions with regard to alternative, improved, or optimum courses of action is normally not subject to structured examination or analysis. The estimated achieving or exceeding of forecast values does not say much about the theoretically improved values that the company could have achieved as a result of alternative decisions. Even “if−then” statements are speculative and only transmit subjective “impressions” originating from numerous forms of market information. The examination of decisionmaking behavior with reference to suggested future behavior only has a political quality and should not be associated with “calculable benefits.” The conclusions for changing “strategic objectives” and the operational adjustments derived from these must nevertheless be drawn periodically, depending on industry needs. Figure 3.33 visualizes the closed system of integrated decision-making processes from strategy to result with regard to assessable decision quality. The formulation of corporate or strategic objectives from the wide range of structured data, collected knowledge, and “random impressions” of management, must be captured and channeled in good time and implemented as efficiently as possible. The aforesaid rule concerning the “expansion and utilization of positive effects” from decisions is the art of

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Execution Level Corporate Results

Figure 3.33

Closed circuit of integrated decision-making processes.

the successful entrepreneur. The reverse equally applies, preventing the isolation and underutilization of a given decision. Wrong decisions are corrected on the basis of continuous feedback between the decisions and the resulting consequences for the company. At the same time, a decision-making approach is stimulated on the basis of expected positive effects for a business area or function.

3.5 PERFORMANCE AND TIME MANAGEMENT The process of combining the elementary factors of labor, operating resources, knowledge, as well as the materials, creates the goods required to meet the demand of businesses and consumers. In the economic activity of a company, services provided by willing employees (labor) for defined periods of time (normal working hours) are made available in return for compensation. In this context, any possible leisure time is in competition with paid working hours in regard to the available elective time of each and every individual. The knowledge that “time flies” or “time is money” gives rise to the demand by the economically oriented person to “make use of the time” according to his or her own individual benefit. Labor policies and negotiations between employer associations and trade unions, along with

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personal “time budgets,” play a role in developing an entire range of collective demands on the structure of working hours. These demands must be coordinated with the existing needs of the whole economy to supply goods. “Undercapacities” as well as “overcapacities” in individual companies can stem from the process of labor agreements. Each of these two cases produces inefficient situations for the entire economy. The optimum utilization of “work materials” in companies as a standard for the level of national economic prosperity is measured by the unit “time.” The saying “time waits for no man” (H. von Hofmannsthal) also applies to production capital. The dynamics of technological progress cannot be stopped. The “basic unit” used to capture capacities of human labor as well as operating resources is therefore time. It follows from this that labor and other operating resources must be utilized with time management to make optimum use of their potential for both the economy and individual business. Productivity resulting from human labor as well as operating resources is determined by output quantity or added value per “time unit.” As explained earlier, the basic elements for integrated corporate management “addresses, items, conditions, and procedures” are utilized by IT to identify and allocate criteria. The integrated combination of the basic elements with the aid of IT can be used to show real-time quantified values per work unit in the production process (for details, see the layout in Figure 3.34). Therefore, the calculation of costs and work using the elementary factors of labor and operating resources becomes an essential component within time management. The direct evaluation of performance output in production provides management with a sound decision-making basis in terms of assessing available technical production capital.

3.5.1

Basic Data Time Management

Time is the basic unit for capturing available capacities for the elementary factors of labor and operating resources. Goods (products and services) are produced in the company during the respective production time available and offered to the commodity market. To have optimal utilization of “production capital” (operating resources) in terms of “production time,” management itself must set the task of organizing all work-related time data so that the data can be utilized comprehensively. Accordingly, all the facts and information required to organize the processing and settlement of the organization is considered basic time data. The entry of time data from the beginning to the end of the process can be performed by a wide range of technical systems. The degree of differentiation between labor productivity and machine productivity depends on the company and industry-specific circumstances within the manufacture of goods.

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Real-Time Assessed Performance

Assets

Figure 3.34

Integration and valuation of elementary factors.

Personnel deployment planning and the “allocation” of equipment and machinery require detailed capacity planning via the Advanced Production Scheduling (APS) system on the basis of production and sales. The enterprise can obtain reliable “lead times” from the production schedule. These generally correspond to the fixed daily working hours of one-shift to three-shift operations. Within goods production, the consumption of time takes place as a physical dimension of the costs caused by the human labor and the operating resources used. This gives rise to the need to relate utilization of capacity in terms of labor and operating resource units of time (hours or minutes) to a cost accounting basis. Idle time, which can be found more or less in any company, reduces productivity and increases the effective costs of the production factors (labor and operating resources) per unit of time.

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The term “idle time” refers to all unused “work time” of personnel (also sick leave and absences) as well as downtime for machine resources. Basic time data contain all facts and conditions required for the measurement and utilization of the “time consumed” by personnel and investment goods.52

3.5.2

Human Resources and Labor

Organizational as well as operational tasks are performed by available personnel in the company. The optimum utilization of all employees within the company is an ongoing managerial task. As a result of the constantly changing market and production conditions, the business processes must be subject to continuous adjustment. The total costs of organizational work (of all managerial personnel) depend on the number of management levels, as well as the number of divisions and areas within the corporate organization, assigned to each management level (Figure 3.35). In the age of information technology, the comprehensive integration of all business processes represents the latest “state of the art”; consequently

Figure 3.35

Assignment of activities and functions.

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the organization should take advantage of this development. The term lean management refers to reduction at the management level. The ability to dispense with entire management levels became possible only with the introduction of integrated software for corporate management. Direct access to real-time process data (time management and product management data) enables the specifically authorized user to quickly make necessary decisions or perform activities on the basis of sound data. The streamlining potential demonstrated by the performance factor “integration” can only be utilized if unnecessary management levels that form an additional obstacle to quick decision-making are removed. The commercial benefits of the “integration” factor are not put to optimum use in “traditional” highly structured organizations. In these companies there is a pressing need to achieve “flatter” organizational structures to restore their market competitiveness within our information society. In all companies, operational work is organized by management or senior personnel. Strategic objectives set out by management must be incorporated into guidelines for planning, procurement, and production control (this also applies to future planning periods). Activities needed to guarantee a corresponding level of productivity must be derived from cost and performance data, which is constantly evolving from the production process. Real-time monitoring of production processes enables future progress in productivity. Increasing labor costs per unit of time will only be feasible for companies if there is a continual rise in work productivity.

3.5.2.1

Human Resource Planning

Scheduling, in terms of the required work capacity, is initiated by the short- and medium-term objectives of corporate development, based on strategic and operational planning. Work capacities required in this respect depend directly on the structure of the operating resources and the planned output quantity of the products to be manufactured. As a logical consequence of technology, the work required (for a given volume of goods) will, in the long run, be determined by technological developments in the production process. The technological progress enabled by manufacturing engineering basically influences the relation of work input to goods output within the company. These productivity effects also must be taken into consideration within human resource planning. Offering additional new goods on the market and producing them by using the best possible technology also require comprehensive human resource planning, including analysis of internally available labor as well as additional external labor. The task of filling these newly created management and operational positions calls for an information system that handles both external as well as internal

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capacities. These personnel requirements must be coordinated with the corporate human recourses development plan, and candidates must be allocated to the selection process.

3.5.2.2

Recruitment

In our specialized economy, with its specialized labor, the recruitment of staff required for managerial and operational positions is subject to a structured and differentiated selection process. Standardized and computer-aided methods in personnel selection complement the subjective assessment criteria of management and human resource staff in virtually all large enterprises. The quality of personnel directly determines the performance of each and every company. Insufficient knowledge of operations and lack of management performance within a corporation are the prominent causes of “human error costs,” which should be avoided wherever possible. Standardized methods used in a company-wide quality assurance system (e.g., under DIN ISO 9000) are not able to prevent human error costs resulting from an inadequate system for personnel selection; instead, they merely highlight these problems when the error situation has occurred. The necessary modifications to be deduced from this are generally in the form of additional training measures or the appointment of new staff to the “afflicted position.” The description of the problem whereby the wrong person occupies a particular position as explained above identifies the need for a qualified system of personnel selection. A scenario in which a wrong person is holding a management position is generally more serious in terms of negative effects than is an operations position being occupied by an unqualified person. As a result of the greater effect of management decisions compared with operational activities, particular importance must be placed on the selection of managerial staff. At this point the topic concerning the general economic conditions required to successfully fill a position will be considered. New appointments to positions can only be made provided there are a sufficient number of qualified personnel in the job market. The personnel required are recruited from among those people currently not at work, corporate areas that are undergoing a structural change, as well as from personnel who have been released as a result of “downsizing” measures. It is the task of a growing and progressive national economy to fill new, innovative, and future-oriented positions by attracting employees with corresponding qualifications from other companies.

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Growth potential for the entire economy is determined in the short and medium term by the availability of qualified personnel. In the long run, the well-being of national economies depends on the availability of adequate skills within companies to enable them to play a key role in the international advancement of technological labor resulting from increased productivity of goods manufacture, areas which are significant to the economic viability of each individual country. In this respect, the standard practice used by many companies of giving preference to filling new management positions internally is quite understandable. Particular aid is given by “personnel assessment documents,” and personnel development plans, which ar e kept throughout the employee’s period of employment. However, a truly objective assessment for the purpose of filling a position from a list of potential applicants is never possible due to the “subjectively oriented” nature of the decision maker. Despite the most objectively designed human resource assessment criteria possible, and due to their inherent nature, the decision-making structures are subject to human assessment criteria and, in the fi nal analysis, cannot be executed objectively.

3.5.2.3

Work Capacities

Utilizing available work capacities within a company in a productive manner is a permanent managerial responsibility. In the short term, departmental work capacity requirements depend on the current order situation, and in the medium term, they depend on the utilization of operating resources, which is subject to technology. The efficient coordination of available work capacities as well as the capacities required throughout the company require comprehensive preparation of time data and detailed planning of all work procedures. The total of all planned times divided by the total required work based on “planned production quantities” represents the “planned working time capacities” of the company. These planned capacities must be coordinated with the actual available work capacities of the current planning period (Figure 3.36A and B). Capacity adjustment processes resulting from the production plan must be carried out throughout all departments on the basis of a job function profile, which is documented for each individual member of staff (Figure 3.37). The comparison between available work capacities (divided into activities or activity groups) and the working times required in accordance with the production plan gives the adjustments required throughout all departments. The degree of job assignment variations possible within the

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(A)

(B) Figure 3.36

Planning labor positions to cost centers.

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Figure 3.37

Production orders per department.

production process can be fully exploited by optimizing work capacity. The management of seasonal and holiday-related bottlenecks cannot function without work capacity optimization. The optimal allocation of individual production activities to satisfy rapid market fluctuations can only be performed if freely definable priority codes are enabled in production planning. Assigning priority sequences also enables rapid changes in production sequence that may occur at short notice as a result of unexpected sales.

3.5.2.4

Job Performance

Absolute job performance depends on the technical condition of the workplace and the “technological state of the art” that this r eflects. International labor specialization leads to the ongoing competition in terms of work output, and consequently the increase in work productivity throughout the entire economy. For the individual enterprise, increasing the work output on a continual basis is an absolute necessity. An enterprise’s competitive situation is strengthened only if the total work outputs per unit of time increase. Increases in labor costs are only economically justifiable if this is accompanied by a continuous improvement in the productivity of its staff.

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The relative performance output of every area within a company must be determined to calculate one’s own competitive edge on the commodity market. Productivity advances achieved within a company are documented on the basis of internal performance data. The company’s competitive situation will deteriorate in the event that its competitors in the market achieve productivity levels that exceed those that can be achieved internally. Management must be provided with all corporate-specific evaluations resulting from job performance, which is subject to continuous calculation. This data are prepared in the MIS and included for the purpose of formulating objectives and for investment planning. The full integration of job performance data capture within production is indispensable, as subsequent entries can be based only on unreliable data. Streamlining measures can therefore be implemented only if all the grounds for decisions are based on reliable and computable data. The determination and assessment of performance data have a motivating effect on personnel only if: Transparent and objective criteria are assessed. A generally applicable and verifiable scale of values is used, which leads to increased performance and additional income. Motivational and corrective methods are fairly and consistently applied. The extent to which these principles can be applied is governed by state and federal employment regulations, collective bargaining agreements between unions and corporations, or by the state of the whole national economy. Competitively oriented economies presuppose the existence or encourage the timely implementation of conditions needed to increase productivity.

3.5.3

Investments and Operating Resources

Operating resources are manufactured production machinery and defined as the “technical capital equipment” of the company. From a commercial perspective, technical capital is implemented within the framework of streamlining measures to induce an increase in corporate productivity. Economically, the term “operating resources” is defined as technical investments as well as land. The term “capital,” in an economic sense, does not include “land” but does include operating resources; the definition of the term operating resources here is based on the definition used by Gutenberg.

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The productivity of a company increases the more goods (of the same quality) are produced within the same production period without any change in factor resources. Management can calculate the rise in productivity created by technological progress, and can incorporate technology into the investment plan together with available financial resources. Consequently, this increase can be realized within the company in accordance with other priorities. The capacity utilization of operating resources is calculated using “time” as an absolute standard for the effectiveness of the technical capital throughout the entire life expectancy of the investments. The actual “useful life” of an operating resource significantly influences the capital productivity of the investments. It follows from this that operating resources of long-lasting quality, which are also subject to a high rate of innovation, must be utilized, and over the maximum possible useful life. Artificial “reductions in useful life” will result in these investments being moved and utilized in areas where these “reductions” do not apply. Consequently, extending the operating times of machinery beyond the useful lives previously achieved will, subsequently, contribute to the increases in productivity distributed among companies and staff. The separation of actual working hours from the useful life of the operational resource is the necessary prerequisite for progressive and capitalintensive companies that wish to enhance their competitive edge. They therefore form another basis of maintaining and improving the market position attained. The physical, i.e., absolute, useful life achieved from technical capital determines operating resource capacities. These utilization capacities are calculated as useful lives and consequently calculated as a value or costs per time unit. In time and attendance management, cost and activity accounting of the operating resource is integrated by capturing the actual utilization time. Productivity contribution is determined in real time during the production process. All cost and activity data of the operating resource are prepared for and relayed to the MIS. They are of utmost importance for calculating ROI and all other investment-related decisions.

3.5.3.1

Investment Planning

The vantage point for all investment decisions is the company’s intention to improve its competitive edge within the market. From continuous advances in technological developments, changes occur not only in the production processes, but also in the structures of the markets within our

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economy. Hence, there is a need for prompt and comprehensive planning of productivity-enhancing investments (as replacement or expansion) by management. Each individual investment competes for the limited funds available in companies and economies. Problems concerning priority in the authorization of investment projects must be solved by management using quantitative methods aided by management software. Establishing the priority of investment requests submitted to management is done by means of profitability estimates. In economic literature, various computing methods used to determine the profitability of investments are dealt with in detail.53 Profitability calculations in the investment planning stage always refer to future utilization or production periods. Therefore, all computational methods are subject to uncertainty within the framework of a company’s economic development. In practice, however, this generally results in cost comparisons for investment goods that are not accurate. Profitability studies that do not take account of the improvements in performance achieved by the investments are therefore inefficient. In this case, management decisions based on these studies possess insufficient competence in terms of assessment and will therefore always lead to future wrong decisions in investment planning. The positive effects of individual investment projects can be determined by comparing cost and yield (Figure 3.38). The comparison of various investment goods (for the same tasks) results in “relative profitability coefficients.” If the income in the profitability calculation cannot be quantified, it (I) can be replaced by the performance (P) (achieved by the investment).54 This method, however, requires that the quality of the performances can be subject to comparison. Apart from the static approaches to profitability calculation, special attention should also be given to dynamic methods of profitability assessment concerning the entire useful life of the investment plan. 55 All dynamic methods of profitability assessment for planned investment projects are subject to the uncertainty of related income and expenditures. An additional, alternative approach to examining profitability can be found in the analysis of the previous accounting period. The comparison between “investments utilized” and planned “new investments” gives an accumulated profitability level on the basis of cost accounting for the period under review, and for the planned investment. This “ex post analysis” of the cost-reduction potential of a planned investment can be directly determined with the CSB-System program “Plan Component Exchange” for all goods associated with this investment.56 With “planned marginal costing” a comparison can be made of “old GM” to “planned GM” (as a consequence of new investment) with which the absolute profitability value can be calculated for a certain review

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Figure 3.38

Determining the profitability coefficient.

period. Dividing the profitability level by the number of production days (taken from the period under review) produces the “daily profitability level.” If the cost of investment (for the planned new investment) is divided by the “daily profitability value” this amounts to the number of production days required to recoup the planned investment costs (Figure 3.39). Selecting the investment priorities from those submitted to management should take place on the basis of the lowest number of ROI days for the individual investment projects.

3.5.3.2

Operating Resource Procurement

The procurement of operating resources is performed in close coordination with financial accounting. Management should specify the priority of each individual investment project. In this context, priority is given to replacement investments over investments in streamlining and expansion. Available funds ultimately determine the volume of investment procurement. The level of financial resources placed at the disposal of the company by lenders depends on the visible earning capacity of the company itself, and the positive forecasts in terms of planned investment projects. Risky investment projects should be funded on the basis of liquid assets.

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(per production day)

R eturn Days return

Figure 3.39 Priority allocation in the investment plan according to the least investment reflux days.

Bad investments actually threaten a company’s livelihood if the financial resources involved (for non-achieved ROI) limit liquidity to an extent that it puts working capital at risk, which ultimately cannot be maintained. Keeping the risk potential of all planned investments within a justifiable framework is primarily a managerial task. In addition to setting priorities, investment planning must also be analyzed from the aspect of financial risk. The analysis and classification of investments into risky and risk-free investment categories applies to expansion as well as to replacement investment. The investment volume of risky investment projects should not exceed the volume of finance provided from owned resources.

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A comprehensive performance review of alternative investment goods between the chosen providers is generally carried out during the investment planning stage by the individual technical departments, under the responsibility of the manager. An investment application then has a chance at approval by management if the determined “ROI days” can be achieved within the shortest possible amount of time. The most optimistic or pessimistic assessment of the investment project (by the respective project group responsible) will therefore directly influence the final ROI calculation. Higher costs (as total expenditur e) of an investment project will therefore primarily have the effect of “extending the ROI period” if the investment performances of all the providers are compared only in terms of their quality (in lieu of comparison data). These situations are one cause of extremely hazardous conditions for investment decisions. This leads to the need for management to confirm that an investment decision is the right one (for the company) and to limit the number of wrong decisions. Comprehensive review of all facts on which an investment application is based should therefore be performed by management in great detail. This double review process minimizes the risk of false estimates, and thus the risk of extremely dangerous “mis-investments.” Computer-aided processing of operating resource procurement is performed via industry-specific software, from calls for procurement offers to order placement, and from goods receiving to project settlement (of the investment plan), and to invoice and budget control.57 Integration with the accounting system provides for precise cost point allocation to open-item management and the subsequent settlement of payments. Processing all procurement procedures with the use of software technology enables comparisons to be made for operating resources as well as for materials (as explained in Section 3.7.1). Special procedures relating to the various investment goods can also be visualized with industryspecific software. This visualization takes place via the basic elements: addresses, items, conditions, and procedures. The comprehensive integration of the basic elements with time and product management is used to create an organizational structure that enables transparency for management, which enables a complete system of investment and productivity controls via the MIS. This also enables the subsequent review of investment projects.

3.5.3.3

Operating Resource Capacities

Available operating resource capacities depend on their potential useful lives. If the useful lives are linked with employee working times as stipulated in collective bargaining agreements, the potential capital

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Figure 3.40

Operations resource (asset) definition.

productivity will be restricted or reduced each time there is a new agreement that reduces working hours. It is the permanent task of collective bargaining agreement partners to expand the useful lives of capitalintensive investments through flexible working hour programs. It is only on this premise that capital productivity can be subject to short-term improvement, providing the expansion of an asset’s useful life can be coordinated with the level of goods sold. The effective cultivation of operating resource capacities requires that customer sales orders receive timely processing in production. Comprehensive cultivation of all operating resources (aggregates and machines) is an absolute must for this purpose (Figure 3.40).

Aggregate and Machine Control

Definition of capacities Performance degree per function Maintenance and inspection plans Allocated spare parts and consumable materials Availability and resource planning Cost rates for various allocation variants

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Management is responsible for a company’s competitive edge and therefore also for the comprehensive utilization of operating resources. The technological capacities available within a company must be optimized to full daily capacity on the basis of integrated production scheduling.58 A daily target vs. actual analysis of the capacity utilization can be performed by recording the time data on all operating resources. The adjustment actions required are carried out by using machine utilization variants in accordance with the capacities required by the production schedule, as provided by user-friendly analysis via industryspecific software. To defuse bottlenecks within technical capacities, priorities must be made for the processing sequence of the manufacture of goods. The optimization of production output takes place by taking ABC analyses of the gross margin into account. The resulting prioritized positions enter production control for each single product line.

3.5.3.4

Operating Resource Performance

The productivity of technical capital is influenced by the total output of goods within a specified period. Accordingly, operating resource performance defined in this manner is dependent on the performance of the investment goods as well as the total useful life within the stated period. The difference between the technically possible and actually achieved output ⎯ by the respective investment item ⎯ can be described as an “output gap.” As these two output values are subject to comparison (or shown as a percentage value), they result in the “output level” of the investment item. Where the useful life per day or year (as an example of variable assessment periods) remains unchanged, the output quantities of goods are the most important output data to be recorded on a permanent basis. The output data, which, in the performance process, are to be assessed in real time per cost center, reflect the productivity of each cost center. An increase in productivity can only be attained, with identical conditions, if the “output gap” is smaller or closed, which in turn increases the “degree of performance” in terms of operating resources. These “output gap” performance data are an indispensable source of information for corporate management. All relevant statistical data concerning operating resource performance is prepared on an industry- and company-specific basis via PMI and can be accessed on-line any time in the MIS.

3.6 AUTOMATED ECONOMY In our information and knowledge society, goods and product management is performed within a framework of constantly increasing automation.

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Available worldwide knowledge causes progress that, within the framework of highly developed economies, comes together within an “automated economy.” As illustrated in Section 1.4.2, factor and commodity market development, the change from the industrial age to the information age takes place on the basis of the factor “knowledge.” Communication and IT is the prerequisite for the comprehensive cultivation of knowledge. This available explicit knowledge becomes effective within the global economy by way of “dynamic elements” and “expansive forces” (refer to Figure 1.4). Management is responsible for the implementation of any possible integration of information, communication, and production technologies. A company’s competitive edge depends on the degree of integration achieved in available and implemented technical and automated systems. A constant increase in productivity is the ultimate goal of technical integration in goods and product management. Management’s ability to effectively coordinate “expansive knowledge” and its successful implementation within corporate-specific product management directly influences the sustainability of the company itself. The automated economy generates a virtual flood of data with the intention of creating usable information. Knowledge resulting from information, however, can only be acquired if appraisable, accessible, and comprehendible information arises from this data flood.

3.6.1

Factor Combination

The focused combination of production factors is a task of all businesses within an organized economy. The factors required for the creation of output are the resources by which growth and prosperity are measured. In traditional economics, the elementary factors are scientifically defined within the framework of economic industrialization (marking the downfall of feudal economics) of an advancing industrial society (Figure 3.41). From a standpoint of economics, production factors are factors that are solely based on their physical existence. Goods offered on the market are the result of the combination of the production factors59 within individual businesses. In this context, the corporate structures, which are organized and created by the management for the production of goods, must compete daily. An analysis of the competitiveness of goods offered on the market by a respective company begins with a price, quality, and per formance comparison against the same goods offered by the competition. This is

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Figure 3.41

Combinations of production factors.

followed by the cost analysis of the goods production process, and the associated review of the existing functions that combine factors. In the production process of individual businesses, the factor combination is (generally) carried out in line with the “type B” pr oduction function. It follows from the type B production function that even the more costly factors cannot be replaced by substituting other factors in the production process, because this kind of change cannot be implemented from a technical viewpoint (with the given investment structure). If a change in factor combination (through substitute or expansion investment) takes place as the result of technological progress (e.g., through new capital investments), then this represents a new production function. The type B production function is characterized by the limiting nature of the production factors. The theoretical approaches of the traditional type A production functions (established in the national economics as the “law of profit” by J.H. Thünen and J. Turgot) will not be dealt with here. The performance potential of a company must be considered each time it is reviewed. Performance increase, however, is still a primary managerial responsibility. This leads to the necessity for optimized individual factor performance. The transition from industrial to information society is based on the changing priorities of the production factors. In feudalism, the land factor was far more significant than in the later industrial age. In today’s information society quick and reliable information is of the utmost importance in view of competitive pricing policies.

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Companies acquire information from internal and external data. Knowledge required by a company for advancing specialization must be entirely accessible by research and development as well as by management. The integration of communication and IT in enterprise-wide databases determines the competitiveness of each and every company. Technological progress from “expansive knowledge” and the globally available specialized technical labor enable management to alter the factor combination within the company in such a way that increases its competitiveness. Movements in the market price of factors, and consequently the costs within companies, are significantly responsible for the changes in the structures of factor combination. The cooperation or integration of

Elementary factors Labor Operating resources Materials Knowledge

and the administration of this process via Management factors Planning activities Integration takes place within the company IT “visualization system” in the function areas of

Management and Controlling Communication Management Knowledge Management Performance and Human Resource Management Commodities and Product Management Finance and Accounting

via the basic integration elements

Addresses Items Conditions Procedures

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into information and communication-technology driven production process for goods manufacturing. The term information society is the direct result of the sustained influence on the part of IT on the improvement of all coordination processes in the economy of an individual or company. The factor combinations in the production process as shown in Figure 3.42 clearly demonstrate that the corporate performance potential (labor, operating resources, and material capacities) is portrayed from the process engineering and cost accounting aspects in combination with the “integration” performance factor, via the basic elements (addresses, procedures, items, conditions). The factor inputs:

Job performance Operating resources Material usage Specific knowledge management

which are incorporated into the production of goods, can be computed in real time with IT and differentiated within production from department to department. To properly analyze individual work procedures, the performance of machines and the consumption of materials (in value as well as physical count) must be directly attributed to the individual cost centers within the respective department. This leads to the necessity to regard cost accounting as an integral element of product management. The integrated software system therefore ensures that applications supporting the production process are directed to the cost center in real time and on-line, and consequently the “actual costs” of the individual goods can be clearly displayed at any given point in time. This process of reflecting the production of goods within an information system must be categorized according to industry-specific criteria. The division of companies into industry groups, industry types, and industry businesses is carried out under the proviso of an industry-specific software suite.

3.6.2

Knowledge as Elementary Factor

Organizing the application of the “knowledge” factor within companies is the most important and pressing responsibility for management in our information and knowledge society. The performance potential of every individual employee is determined by his or her own personal knowledge. We acquire implicit knowledge through education, constant learning, observation, experience, and combining. Transferring implicit knowledge into explicit

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Assets

plant supplies

Figure 3.42 Factor combination for the manufacturing of goods as an information technology process.

knowledge is a requirement of the corporate-wide effort to transfer knowledge to staff. In contrast to explicit knowledge, implicit knowledge cannot be processed by IT. The subjective and intuitive nature of implicit knowledge contradicts the systematic and productive transfer of knowledge. Explicit knowledge, however, can be comprehensively processed, transferred, edited, and accessed.

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The aim of knowledge management within a corporation is to multiply the effect of knowledge by means of: Comprehensive support in all learning and training processes Multidimensional knowledge availability through corporate-wide integration of Data Warehouse, industry-specific software, and Communication Ware Complete documentation of experience Accessibility to all corporate processes and solutions within a corporate-wide knowledge database Measurement of staff activity via time-optimized access to “total knowledge” for each task assignment via all available communication channels Improving the usability of existing knowledge can only be successful on the basis of the aforesaid organizational measures. Dynamic economic development can only be effective when new, expansive knowledge is utilized. Progress is therefore a result of “special new knowledge,” which directly leads to the creation of specialized goods. The advancing specialization in business life is visible evidence that knowledge is the most significant production factor in the information society. The traditional combination of production factors enters a new dimension through the independent factor “knowledge” (Figure 3.43).

Assets (capital)

Figure 3.43

Multidimensional linkage of the (elementary) production factors.

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The knowledge factor influences the relation of all production factors forming one sole “dynamic production function,” which in turn causes further technological and economic progress. Economic knowledge is directly connected to the economic subject. This leads to the conclusion that the purely scientific approaches of traditional economic theory are, in fact, questionable in view of our information society! Economists must become aware of the necessity to develop a comprehensive theory of knowledge acquisition in our information society. Kernel aspects of this task are the following:

Acquisition of knowledge Knowledge collection Utilization of existing knowledge Creation of new knowledge

Taking new paths requires abolishing and overcoming dualism, which discusses the philosophical possibility of combining mind and body. Subjective knowledge is physically attached to the knowledge bearer. Nevertheless, it is absolutely imperative for a dynamic economy to create explicit knowledge from implicit knowledge. Existing knowledge becomes structured knowledge based on the methods of cognitive knowledge processing. This results in the access to new knowledge (Figure 3.44). The intelligent detection of nontransparent information relationships also takes place with the “Data Mining” tools (this is dealt with in detail in Section 3.4.1.4, “Results Presentation”). The success of dynamic enterprises can basically be ascribed to the company’s ability to efficiently transfer its knowledge to new products and new actions. Innovation is the result of information that arrives in research and development from internal as well as from external sources. At the same time, these innovative ideas will also generate or provide new knowledge for the associated environment (science, business, individuals, etc.). Progressive enterprises today are well aware of the need to manage existing knowledge better. As with any other commodity (especially a production factor), knowledge must be managed in a technological, economic, and personified manner. The economic aspect of knowledge management must be contrasted to the creative chaos as a source of new ideas. Research and development survives on individual freedom and creative research projects. Between

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Figure 3.44

Information alliance in lexical knowledge processing.

these opposite poles, on the one side the controlled cultivation of knowledge, on the other side the creative chaos in research, we find the flow of the resulting insights (new knowledge) benefiting economy. The power to innovate within our economy, and therewith the survival of companies in international competition, is a direct result from the fabric generated by available, structured knowledge and the impulses of unstructured knowledge.

3.7 COMMODITY AND PRODUCT MANAGEMENT Emphasis will be placed here on the integrated coordination processes designed to optimize product management. An effective system of corporate management first requires that management, as well as function or department heads, has access to all decision-r elevant data in order to consequently implement a results-oriented product management system. The industry-specific software (CSB-System) is a practice-proven corporate management instrument within specialized businesses and verifies the aforesaid theoretical model for economic development; specifically the theoretically formulated effects in level four “automated economy” (refer to Figure 1.4).

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The quality of the combination of factors for companies in the information age is determined by the level of integration achieved, and therefore by the reliability achieved within coordination tasks. Organizational work in the coordination process between product management functions (procurement, warehousing, production, and sales) is carried out by planning lead-time intervals. The level of reliability in organizational work increases, the more frequently the event occurs. Forecasting anticipated economic data are generally subject to a higher degree of uncertainty when making predictions a long way in advance, especially when the distance is greatest between the event date applicable for the forecast and the point at which the forecast statement is made. The less time available for the organization and planning of individual production processes, the more difficult it becomes to structure the task of realizing an optimal degree of performance potential. Simulation and optimization enable the adaptation of available resources within production processes to meet the demand from sales. For this purpose, industryspecific support is required by industry-specific software for production scheduling. Production process scheduling ⎯ from just-in-time supply in procurement, to warehousing and capacity utilization, to production aggregate monitoring (as performance functionality within the CIM concept) ⎯ are oriented toward fulfilling current sales orders. This explanation of the production and organizational and planning process is illustrated in Figure 3.45. The schematic diagram shows the need for integration between all functions, including organization and planning, as a prerequisite for realizing an optimum product management system.

3.7.1

Procurement

The procurement of all performance factors required by sales and production is the center of attention for bottleneck-free product management. Goods offered by companies can only be delivered on time once the capacities for the goods production and their delivery are scheduled and made available to all production processes. It becomes even more difficult to control the production process in an optimum effect the longer and more varied the procurement lead times are for the individual factors. The task of procurement in product management in terms of meeting demand requirements is organized in integrated industry-specific software for corporate management according to the specific industry groups.60 In this context, individual performance factors are carried out via various functional areas according to the specific company or organization. It is recommended that the procurement processes be divided and organized as follows:

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Figure 3.45

Integrated and planned synchronization process.

Labor,61 coordinated via time, human resource management and financial functions Operating resources,62 optimized via time, human resource management and financial functions Materials, to be coordinated via the functions of product management, in agreement with inventory management and the given production capacities, with the level of sales achieved (sale of goods) to meet the required deadlines Knowledge, via corporate and worldwide knowledge management This division of procurement tasks shows that integrated corporate management enables the division of the procurement process (without loss of time or information) to be organized by area, i.e., rationally. The term procurement deals with the materials that are a central element of product management. The various goods are placed in a more comprehensive

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category according to the specific industries under the general term of operating materials. In the CSB-System the defined procurement items are captured under the item element.63 The following is necessary for the optimized provision of all items required for the production process: International procurement market analysis Complete definition of basic data for material procurement Comprehensive demand planning in respect of all items as well as the integrated processing of the general and special procurement procedures Industry-specific features are divided into general and special procurement processes. The organization of the procurement process takes place industry specifically. The particularities to be taken into account in this respect are specifically defined using parameters. Company-specific organizational procedures within the procurement process are defined via the specialized level of application control.64 The essential organizational steps within industry-specific software for corporate management are described in the following sections.

3.7.1.1

Procurement Market Analysis

A comprehensive analysis of developments within the commodity markets reveals that the prosperity of industrialized nations is the result of worldwide and permanently progressive labor specialization. Future-oriented innovations give rise to new goods with noticeable benefits in performances and/or costs for the consumer. This leads to a dynamic change of the priority of necessities and therefore also a change in production structures on the commodity market. New and better goods displace conventional, established goods over time in the competition for scarce financial resources on the free markets. This takes place to the benefit of consumers in all economies. For companies keen on research and willing to take risks, international patent law secures additional license income for a fixed period and consequently in most cases a lead over their competitors. Protected knowledge is subject to economic usage and is therefore an independent commodity. Fair international competition is an absolute necessity for the successful marketing of innovation. The providers of new, improved, and competitive products must have the opportunity (including the calculated risk) to address an economically feasible amount of consumers on the international

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commodities market, that in turn are able to acquire these goods without limitation for fair prices. A free and open world economy represents the necessary infrastructure for the commodity market. Only on this basis can permanent growth and worldwide prosperity be achieved. The market requirements as mentioned above must first be fulfilled before a comprehensive procurement market analysis makes sense, and can be applied to the procurement functions within an efficient corporate management system based on specialized labor. The procurement of goods required for production and trade (products and services) in the modernday information age takes place on the condition that wide-ranging information on goods is available in transparent form and generally accessible to a selection process. Which products and services are to be procured must be seen in connection with the planned or given sales situation, warehouse, capacity, and production conditions available within the company. The aim of efficient procurement within individual businesses is to increase the productivity in the performance factor combinations. On the basis of these tasks the following procurement activities must be planned for a specified or planned range of goods:

Current fulfillment of demand Short-term bottleneck elimination Medium-term productivity increase Long-term improvement of the factor combination as a result of technological progress from newly acquired, expansive knowledge

The procurement tasks resulting from these objectives must be fulfilled by the integrated industry-specific software system (Figure 3.46). All information recorded for comprehensive procurement market analysis must be allocated to the integration elements addresses (suppliers) and items (materials). The Internet-based procurement market analysis has become an indispensable tool in the age of e-commerce (B2B Communication). In the near future, e-procurement will fundamentally change the face of traditional purchasing methods. The creation of necessary frameworks, however, is always indispensable. For example, a uniform standard for exchanging electronic item catalogs must be established. The uncontrolled

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Figure 3.46

Procurement market analysis program group.

growth of various catalog languages used on the Inter net should be replaced with a standard catalog language. Large companies with more than 200,000 suppliers worldwide, all with varying catalog languages, can hardly be brought to a uniform format within B2B communication. The benefits of e-procurement are obvious:

Internet-based integration of existing IT systems On-line orders Savings on postage, paper, and administration costs Significant cost reductions in administrative processes in purchasing

All detailed information prepared for the comprehensive procurement market analysis is incorporated into “procurement data” and made available on-line in the programs that support the daily procurement functions of authorized users.

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Figure 3.47

3.7.1.2

Basic procurement data program group.

Basic Procurement Data

The term basic procurement data refers to all factors, facts, and data required for the software configuration pertaining to the procurement of all materials (Figure 3.47). This procurement data are processed industry specifically and company specifically and is reflected in the industryspecific software. With this information, the enterprise possesses all necessary information for operative procurement. Systematizing the integration elements65

Addresses Items Conditions Procedures

enables the required integration throughout all functional areas and functions. At the same time, an objectively structured basis for managerial decisions is created from this procurement information. An item-price comparison for equivalent goods is carried out by providing all the valid supplier terms, calculated precisely for each item on-line, and made transparently accessible for all users with decision-making responsibilities.

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Meeting the current demand for all the necessary items (within the process of goods production) requires knowledge of the complete range of goods available from each and every supplier, and the associated general terms and conditions to achieve the optimum purchase prices for all procurement items. This requirement gives rise to the need for a comprehensive system for master data maintenance, which must take place automatically through the integration of all operational functions within the purchasing process (from the invitation to quote to receipt of invoice), and without any additional data acquisition costs.66 The procedures to be followed by the suppliers in order processing are also set out in the basic procurement data, and only modified in the event of new agreements. All procurement specifications are recorded in the precise terms of the agreement to enable different types of source documents, standard comments, returns processing, as well as the agreed method of payment for each individual supplier, all displayed in real time to the authorized user for each work process, and systematically calculated by the operational programs. The efficiency and reliability of data in the procurement process depends directly on the quality of the basic data, and by the procedural organization established by management for all work processes in the procurement functions.

3.7.1.3

Procurement Organization

When implementing industry-specific software for procurement, the existing procedure organization structures should be examined in detail in all operations. This approach is crucial if, as already explained above, the quality assurance measures (in the companies certified in accordance with DIN ISO 9000) are to be integrated into the work procedures of the procurement processes. Any additional labor costs in preparing these quality assurance measures are therefore not required. Organizing procurement and, at the same time, all quality assurance tasks on a paperless basis requires a comprehensive analysis of the work processes for the individual industries and companies. Based on this knowledge, the procedures for the individual procurement steps should be set out in detail in the procedure descriptions and used simultaneously as a QC system document. All the quantitative test instructions for the procurement process should be laid down for a “screen-based QC manual” and integrated into the individual work processes. Allocation of the procurement steps to the individual positions must take place on the basis of the principle of reciprocal controls. It follows from this that the individual work steps, from the invitation to quote, order entry, the receipt of goods with quality inspection, and finally invoice controls and payments may be undertaken by positions independent of each other. This form of procedural organization will give rise to

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the continuous examination and documentation of the work steps based on the principle of double-checking. Efficient procurement organization must meet current fulfillment demand on time and clear all existing bottlenecks in the supply of operating materials insofar as how these tasks are resolved. Furthermore, the procurement function assists management in analysis of the procurement markets with the aim of realizing procurement-based boosts in productivity (as positive, goods-related effects). Procurement markets change with technological progress, as do the competitive situations on the market for the respective individual companies. Therefore, the need for the procurement activities must be continually adapted to the technical level of production. The procurement of operating resources needed for restructuring is a strategic management decision, which must be made on the basis of comprehensive performance and ROI data.

3.7.1.4

Procurement Planning

Required materials must be subject to comprehensive procurement planning based on the corporate production structure as well as existing human resource, warehouse, and aggregate capacities. The production demand for raw material, supply and fuel items, triggered by sales orders, must be planned to optimum effect in terms of quantities and costs.67 The price advantages of larger batch quantities, minimum stock levels, and fixed delivery costs per order directly affect the unit price of all procurement items through interest and warehouse costs. Procurement lead-time as well as available warehouse space are the short-term dominant restrictions and are therefore given priority treatment. The current demand for items and the rapid clearance of bottlenecks must be planned on the basis of the production cycle and coordinated with the periods of production plans, which extend over and beyond normal cycles. Effective procurement is based on IT-derived consumption trend information and provides the calculated demand quantities for all operating materials on time. The information required for this purpose can extend into planning lead times, which can be of any length. The only data relevant to decisions, however, is that which has created extremely reliable organization and planning on the basis of product management activities (sales orders, goods in transit, product depletion, and planned outflow). Prompt action in the procurement process can be achieved to address changes in inventory. In addition, the item requirements lists show which items must be supplied to production and when. In this context, the production orders are based on actual or forecast sales figures, together with quantities stipulated by production plans. The item requirements lists

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contain the existing or anticipated demand for all items and, as such, form the basis for the strategic avoidance of bottlenecks in procurement. All this information can be accessed on-line and in real time by users with appropriate authorization. The development of anticipated stock levels and planning periods avoids the bottleneck situations that cause emergency procurement activities, shutting down production, or stopping sales.

3.7.1.5

Procurement Management

The operational procurement tasks must be carried out in line with the organizational requirements on the basis of comprehensive procurement planning. In industry-specific procurement activities, we distinguish between general and special work procedures. The purchase procedures encompassed by the term general procurement record all procurement items, which are processed using the same procedural method throughout all industries. Industry-specific procedures are defined by the special procurement procedures that require specialized treatment within the procurement process (Figure 3.48).

Figure 3.48

Procurement order entry.

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Every procurement process starts with the analysis of procurement market data. The acquisition of offers for comparable goods takes place periodically from market data (via information from selected vendors). Order placement occurs on the basis of current requirements. The following methods of order placement are possible:

Single order (single item order) Supplier assortment order Contract order Call order (from consignment warehouse)

These four different order versions require special master data, which must be continuously updated. An “item-supplier-price comparison” during contractual negotiations with the respective supplier will only prove successful and consequently effective if there is an objective basis for comparison. All comparable quality and price information must be shown to the purchaser on-line and in real time. These data must be available to the user as statistical data (from previous periods), as well as in the form of current price data, instantaneously at the press of a button. Only once these IT technological requirements have been fulfilled can contracts be awarded to individual suppliers to optimum effect and on a performance-related basis.68 The procedures for commissioning contracts, as explained above, can be performed by telephone, mail, fax, or EDI, and is available in the integrated corporate management system to all users for the purpose of supplying the latest information and for further order processing. Following the order, the receipt of goods takes place based on the items ordered from the supplier. The inspection process for all qualitative and quantitative parameters is performed on-screen at the receiving workstation and, if necessary, reported to the supplier. All quality assurance measures set out in the quality manual “pop-up” on entry of the received item, and are displayed to the user as “mandatory entry fields.” Quantity and quality audit controls are performed as one work step, at the same time, and the captured assessment data are continuously updated for supplier assessment. The received items are then forwarded to predefined storage areas either fully automatically or to stipulated points, depending on the individual supplier, using traceable batch numbers. The procedures defined by the quality assurance management system specify the checkpoints (within the HACCP concept) for individual data capture stations in the company.

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Figure 3.49

Receiving of purchased items.

The procurement procedure generally consists of the following: obtaining quotes, commissioning contracts, confirmation of goods received and quality confirmation, receipt and delivery note, as well as the invoice with account data, and payment notification. As part of the procurement controls, all the documentation associated with the procurement procedure is automatically checked, using audit steps stipulated for this purpose, to ensure that all invoice data (individual prices, terms, final totals etc.) is complete and accurate (Figure 3.49).

3.7.1.6

Special Procurement

Industry-specific purchasing for material acquisition can generally only be effectively managed with specialized industry-specific program modules. This statement also applies to the manufacture of raw material and finished goods, and discrete as well as batch production. These differentiating requirements of the procurement programs also apply in the service

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sector.69 It follows from this that the characteristic features of the individual industries must be portrayed in the industry-specific software system, and that they also reflect the specific requirements of the company. The optimal procurement of all “joint products” (e.g., meat cuts, food ingredients, mineral oils, and other materials resulting from the disassembly process) can only be realized if the expected results from the cutting process can be simulated in purchasing in real time. The purchasing options, with regard to the procurement of “whole” uncut products compared with the individual cut products (resulting from the cutting process itself), can only be evaluated if these special production cutting procedures are reflected in the software in a way that is relevant to the industry requirements. In the food industry, joint products also include items, e.g., whole animal carcasses and fish as well as vegetables and fruit. The same also applies to the mineral oil industry or the plastics processing industry. These industries can also procure raw materials as “linked products” or as “uncut products” directly from the raw materials market.

PCS: Producer Clearance System Procurement processes on the food and beverage market should be processed via special programs. The Producer Clearance System (PCS) was developed in the CSB-System for this purpose. The PCS takes all the various requirements of raw materials purchasing in the food industry into account:

Purchase contract planning Quality assessment methods Quality statement models Shipment entry processes Control and evaluation methods Integration into product management Integration into accounting and finance

The PCS is a purchasing clearance (quality-based payment) system for basic and raw material that are subject to price fluctuations based on measurement analysis. These materials are subject to assessment within a special quality assessment procedure. Determination of accurate cost prices is a necessary requirement for an integrated product management system. This requires the budget accounting for the cutting or disassembly process to be incorporated in the purchasing programs. The integration

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of joint product production uses these definitions for the integration elements: Items = joint product and uncut raw material Conditions = price and quantity assessment Procedures = cutting process visualization If supplier-specific data are also included in the decision-making process, the basic element address is included in purchasing optimization. Differentiation is also necessary for each individual item derived from the cutting process, specific to the respective industry, and therefore each joint product must be individually visualized in the production process data. In the case of agricultural raw materials, the quality and productspecific features in the cutting process must also be taken into account and examined in a target-actual yield analysis of the subsequent production process. An analysis of every single batch in the cutting process (and a supplier-related analysis) is indispensable in the case of agricultural raw materials and must be followed right into the respective warehouse. This is the only way a permanent review of joint product procurement can be carried out and the viability of the decisions relating to corresponding analyses can be verified for those in charge of purchasing as well as management. The procedures of all procurement settlement processes, from obtaining quotes to payment within general procurement, also apply supplementary to special procurement. The integration of the data relating to the areas of inventory and production is additionally identified by the special pricing mechanisms in joint product production.

3.7.1.7

Procurement Evaluations

The evaluation of procurement data should be organized in a user-specific way. For the department or function manager in materials procurement, special emphasis is generally placed on, for example, special comparative analyses (using budgeted and actual values over any length of period). The controller expects to have complete documentation on procurement transactions from quotes to the transfer of the payment amount (with access to all original documents on file).70 The ABC analysis of all procurement items (with comparisons including calculation of the net–net prices attained) is at the center of the buyer’s application. This requirement for an analysis and statistics generator shows the need for a flexible and comprehensive tool within industry-specific software (Figure 3.50).71

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Figure 3.50

Procurement evaluation program group.

The term “net–net price” describes the payment amount for the item after all the terms granted by the supplier (rebate, discounts) have been deducted. Direct access to all procurement information from the MIS as well as from the AIS must be provided at all times, and will consequently allow an effective control function to be established.

3.7.1.8

Cost Prices

The price effectively paid for individual materials (items) is described here as the cost price. If identical items are offered at different conditions, from different suppliers, on the same day or in the same week, the respective cost price is calculated from the mean average daily or weekly price for these items. Pricing takes place in real time with the individual items captured at the goods reception, and consequently at the same time as the physical movement of the goods from supplier to purchaser.

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Figure 3.51

Pricing in procurement.

Cost accounting requires a permanent price structure in procurement to compute the assessed production value on an actual price basis. Profitcenter accounting in line with precise cost centers can only take place on the basis of correct cost prices available in connection with the goods movement. The daily corporate profit statement relies on direct pricing structures and is only relevant on the basis of this data. The pricing procedure for the precalculated price (as a day or week price), the assessment of the item for the plan price, and the connection to cost accounting, are illustrated in Figure 3.51. The integration of procurement within all other functions of product management ensures that the individual departments in the company do not operate with widely differing approaches to costs in their assessment of figures.

3.7.1.9

Procurement Controlling

Effective procurement controlling goes far beyond supplier-related price comparisons. Subjecting the entire procurement process to comprehensive controlling methods is an indispensable concern for procurement. Procurement controlling should be divided into four core areas:

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1. 2. 3. 4.

Controlling of procurement processes Integration controlling in the entire product management system Performance control via the four integration elements Results presentation of procurement controlling

Controlling of Procurement Processes Procurement procedures defined by management must be subject to procurement controlling. In this context, procurement processes should be divided into “recurring” and “nonrecurring” actions. Recurring purchases (e.g., raw materials) are prepared in industry-specific software via standard procedures that can be predefined within the user-specific workflow. The controlling processes are aided with workflows, and are defined in the sales analysis programs (Figure 3.52).

Figure 3.52

Generation of procurement analysis.

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Integration Controlling The procurement function should be seen as a service function for inventory, production, and sales. Procurement processes are regulated throughout the entire product management system: Optimized inventory Permanent production mobility Short-term dispatch readiness A smooth corporate process can be organized with integrated product management. The supervision and optimization of the goods flow within an enterprise is a responsibility of integration controlling. Special analysis programs should be used to check the following: 1. Whether inventory levels are too high 2. Whether production has been impaired and capacities are not fully operative 3. Whether shipment of sales items has been affected 4. Whether the costs in integrated procurement are used throughout production Integration controlling reveals the degree to which the procurement process has been involved in terms of productivity of the entire company. At the same time, critical points are pinpointed by the procurement analysis.

Performance Controlling Monitoring supplier performance and comparing this information with the market is a permanent task of procurement management. A structured performance analysis should be organized on the basis of the four integration elements (addresses, items, conditions, and procedures). The analysis programs available in the procurement evaluation can check supplier figures (Figure 3.53): 1. Average prices per item and supplier, with minimum and maximum pricing 2. Quality differences per item and per supplier, corrected per season, and quantified 3. Contract evaluation with premium statement at any time or for any period required 4. Price optimization potential via on-call and on-line statistics

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Figure 3.53

Printing vendor prices.

Results Presentation of Procurement Controlling The provision of procurement controlling takes place at three levels: Level A: Management level Level B: Area manager level Level C: Buyer level It occurs for variable time periods: 1. Period dates ⎯ via relative date and period 2. Due dates –– to reconcile planned stocks within budget controlling Automated evaluations are performed via levels A to C including defined time periods, and are available to the specific user on-line. Actions derived from this must be initially formulated and processed; the results then must be monitored and valuated.

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3.7.2

Inventory

Inventory supply affects the entire goods management process. Widely differing warehousing concepts found in practice are based on the requirements of the various industries and the specific corporate structures. All decisions affecting inventory are based on clearly defined objectives that can be included under the term cost minimization concepts. Crucial influencing factors concerning the organization of optimized warehousing are: Procurement reliability (in terms of delivery dates and quantities, as well as prices of all raw materials) Warehouse capacities (internal and external short-term availability of all materials and goods) Retention of value (through safeguarding the storage life, use-by dates, quality features, and shrinkage) Production readiness (flexibility to ensure production of all goods) Marketability (guarantee of constant ability to deliver the sales goods) Financing capability (providing the necessary liquid assets for warehouse financing) As shown in Figure 3.54, the influencing factors mentioned above have an effect on inventory in the form of facts and data. Values are depicted in an industry-specific way in the product management systems by means of the basic elements of integration (addresses, items, terms, and processes). The actual options open to inventory management are derived from the respective industry-specific weighting of the above-mentioned influencing factors. Warehousing concepts are formulated and implemented in line with the objectives set by the management. The individual inventory data for each item (basic inventory data) must be established as an organizational requirement. Procedural organization in an inventory management system must be structured in accordance with HACCP, as well as to support an integrated quality assurance system. Industry- and company-specific quality assurance standards should be built into the supply of operating materials (as a buffer for intermediate products) as well as the storage of finished products along with the subsequent order picking and shipping. Just-in-time production concepts should be examined from the viewpoint of the warehouse reorganization and other additional costs, compared with the potential savings.

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High Product Availability

Figure 3.54

Factors that influence inventory management.

The extent to which just-in-time production spurs benefits throughout the economy is highly questionable, since the actual infrastructure requirements lead to considerably higher transport costs which, in the final analysis, must be borne by the primary suppliers and hence affect the costs of the products to be supplied. Buying behavior and the subsequent inventory processes determine the costs of the individual materials. Material consumption in each individual production department is assessed by the internally calculated cost prices. Materials or intermediate products are withdrawn using prices calculated by the integrated data processing system.

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Figure 3.55

3.7.2.1

Basic inventory data program group.

Basic Inventory Data

The task of recording warehouse capacities and managing the individual warehouse locations or storage areas is part of the basic work of inventory management (Figure 3.55). The stock level parameters for each individual procurement item are calculated and specified on the basis of the demand for the materials. Apart from the minimum and maximum stock level, the recommended order quantities and the replenishment levels are also stipulated. The replenishment level and minimum stock level are calculated on the basis of generally accepted formulas. Opening balance × procurement lead-time Replenishment Level = ----------------------------------------------------------------------------------------------------------------Storage time in days Minimum Opening balance × procurement lead-time + safety time Stock = ---------------------------------------------------------------------------------------------------------------------------------------------------Storage time in days

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In addition to predefined warehouse capacities, capital costs and quantity discounts (large batch quantities) also determine the definition of inventory parameters. The above-mentioned factors that influence the warehouse items must be examined in terms of their potential interactions with each item, and the individual inventory parameters must be aligned accordingly. The inventory parameters determine the six most significant influencing factors on inventory items: Procurement security: The need for reliability in the supply function of inventory determines the size of the reorder levels and minimum stock level per operating material. Warehouse capacity: The natural limits of inventory management quantities are the direct result of available warehouse capacity. Optimization of the warehouse capacities is achieved through dynamic storage space management throughout all automated warehouse systems (e.g., high shelving warehouses for crates, pallets, etc.).72 Retention of value: In addition to the retention of the common monetary value, the retention of the physical value of the raw materials must also be supported. As a result of continuous technological progress, technology components are at risk of becoming obsolete; this leads to a restrictive storage life. Agricultural raw materials also suffer from losses in quality, changes in properties, as well as weight loss, changes in consistency, etc. These processes entail cost effects, which are reflected in properly defined basic elements (items, conditions, and procedures). Production mobility: As with raw material items, sufficient quantities of all intermediate products (partially produced “subassemblies”) must be provided to safeguard production. All intermediate products must also be subject to reorder level and minimum level stock management. These “buffer warehouse stock levels” for all intermediate products are also taken into account in advanced production scheduling. Marketability: The items available for shipment in the warehouse determine the delivery availability for all sales products. Sales forecast models are used to provide important aids to decision making in production scheduling, particularly for “seasonal items.”73 The consequences of “shrinkage” or “nondeliverables” must be monitored continuously by the management (for details see MIS sales analyses). Financing capability: Capital tied up throughout inventory has a direct effect on the freely available liquid assets of the company.

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This leads to inventory optimization approaches and the effects to any of the influencing factors listed above. The consequences for the financing of current assets must be analyzed in financial management and the corresponding financial planning implemented. Basic inventory data are incorporated into the inventory organization programs as well as the inventory management and inventory pricing programs. By comprehensively integrating inventory management into the corporate management system, all facts, situations, and effects relating to production material costs throughout all production process are reflected in real time with the industry-specific software system, providing transparency in all functions of production management.

3.7.2.2

Inventory Organization

The organizational processes within individual company warehouses are determined by the methods used in material and product management, as well as by industry- and company-specific situations (Figure 3.56). An optimal and effective method for the supply of all inventory items can be specified only in terms of specific item groups and on a process-oriented basis. The processing of inventory data is defined with high regard to the integrated quality assurance system, and in accordance with the respective HACCP concept.

Figure 3.56

Inventory control program group.

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A wide variety of procedures have been put to practice in this context. Technology products call for different storage methods than agricultural products. Concepts used by food manufacturers to operate their warehouses differ from those used by machine manufacturers. The specific features of each individual industry determine the way in which the various inventory system solutions are organized. To classify various warehousing systems, companies must be grouped according to their manufacturing methods, such as:

Batch-oriented production Continuous flow production Unit (discrete) production Batch production

The most efficient inventory procedures must be selected in keeping with the method of production within the respective company. It should be noted in this context that the various “inventory items”: Materials (raw, auxiliary, and production materials) Intermediate products (all semifinished products) Finished products require a different form of technical inventory management in each case to provide the most optimum and most effective system of processing. A comprehensive cost−benefit analysis calls for the need for warehousing methods to be organized according to the specific requirements of each company. These methods may contain the following procedures: 1. 2. 3. 4.

Manual storage and issue Semiautomated inventory management Fully automated warehousing systems Hybrid systems of 1 to 3

The most rational procedures can be derived from the industry-specific conceptual formulation and the given quantity structure. For example, a fully automated shelving warehouse system is recommended for handling large quantities of standardized boxes used for raw material and intermediate production, as well as finished goods. Storage and retrieval processes are performed by an IT-guided inventory management robot (IMR). In this context, the operating materials are automatically transported to the production departments in accordance

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with the production orders, in the stipulated quantities, and in the defined production sequence. The warehouse entry and exit movements to buffer areas are processed automatically in accordance with production scheduling, taking into account all the subsequent production processes. Storage and retrieval processes are performed on a fully automated basis with the “Express-Master,”74 and any potential bottleneck situations in the supply of all items are directly identified. Standardized order-picking processes (i.e., complete boxes or containers) from different high-bay storage areas in any storage department are combined via the ExpressMaster independently and fully automatically, and prepared for dispatch together with all necessary documents. The degree of automation attained with the Express-Master increases work productivity more than 10 to 15 times that of a manual order-picking system. The task of reviewing the procedures of warehouse processes, and assessing possible streamlining potential against the current state of the art is the responsibility of management as well as function or department heads.

3.7.2.3

Inventory Management

Inventory management within industry-specific product management is a centrally integrated software module to ensure smooth production processes and to maintain the company’s continuous capability to supply sales with finished goods. All item movements, from receiving, throughout all production levels, to shipping, are recorded and evaluated on-line and in real time at the point of the physical inventory movement. Based on the industry-specific organization of inventory parameters, each specific piece of data is recorded only once (no duplicate or triplicate entries) and, at the same time, the data are made available to all the departments (cost centers) concerned. By integrating conveyor technology, live storage rack systems, and high-bay storage, central inventory management becomes a supervisory control system for the support of procurement, production, and sales.

3.7.2.4

Inventory Control

With increasing automation (as a result of technological progress), an efficient product management system depends on the internal “infrastructure conditions” in regard to material movement and conveyer processes, and to standard quality assurance procedures performed simultaneously.75 The traceability of all inventory items (back to supplier and lot) is organized based on appropriate parameters (production line, item code, batch number, etc.) with direct reference to the origin and quality data

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recorded by inventory movements. The parameters that support warehousing management data such as:

Supplier number Batch number Lot number Cost center number Workstation number Reference number Serial number

enable comprehensive analysis of all inventory movements and quality. The item flow controls enable necessary conclusions to be made for materials and intermediate product lead times, as well as finished products in production control. Inventory item coding takes place automatically, which enables the real-time traceability of all inventory movements. The monitoring of the lead-times of raw material, intermediate product, and finished goods results from the need to reduce the flow times of all items in production. Onscreen reports of individual “actual inventory times” compared with “expected inventory times,” as required for technical reasons in production, may also reveal the potential to streamline inventory management. Inventory stock control is a permanent task of all department heads within the product management process. It follows from this that there is a need to carry out a comprehensive random sample stocktaking of actual warehouse levels recorded per item at any given point in time, and for this to be compared with the expected inventory levels for each item in real time. The analysis of the difference between the two provides the basis for relevant conclusions to be drawn on the level of discipline achieved in compliance with issue control guidelines, and in the actual quality of the product management process within the company.

3.7.2.5

Stocktaking

The valuation of inventory items within permanent stocktaking takes place in line with traditional methods. However, inventory pricing is dealt with in more detail. Inventory processing encompasses all programs involved in the execution and evaluation of stocktaking. Stocktaking entry refers to the physical recording of all inventory items. The new actual inventory level is formed on the basis of stocktaking data capture (Figure 3.57). The “expected inventory level” indicates the new stock level by measuring production totals, and making retroactive calculations based on the production parts lists. This method of inventory usage posting is

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Figure 3.57

Stocktaking program group.

recommended for all production processes in which component utilization cannot be captured per single component or physically. To inspect material usage it is necessary to synchronize expected stock levels with actual data on a regular basis. The required stocktaking lists and stocktaking entry procedure are comprehensively supported by IT (i.e., “cycle counts”). This stocktaking data must be recorded in order for the individual stocktaking values (per item) to be available in an integrated fashion.

3.7.2.6

Inventory Evaluations

Comprehensive and flexible inventory evaluations must be carried out to review the inventory management objectives set by the management. The organizational requirements for inventory management vary from industry to industry as well as from company to company, so the evaluations required must be accessible to a wide range of parameters and combinations of variables. Materials are, by far, the largest cost factors in any manufacturing industry. In the food industry, raw material costs, for example, in meat production, are considerably higher, approximately 50% to 70% (depending on the product group) than in metal processing companies.

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It is therefore necessary to carry out special “material controlling” processes within the company. Evaluations required for this purpose can be called up at any time by the controller and appear in any desired form to report material usage via “daily reports” or the “inventory usage evaluation.” Analysis of critical points and the resultant proposals for improvements in the process of supplying materials for production require detailed preparation and analysis of all inventory data. The real-time availability of all inventory data enables department heads and management to respond directly to signs of potential bottlenecks in the supply of finished goods and raw materials, and consequently to prevent bottlenecks or idle times in production.

3.7.2.7

Inventory Prices

The cost valuation of inventory items is performed immediately on receipt of raw materials (or “purchase items”) at the goods receiving point. This requires IT-assisted advance recording of order data, including all procurement parameters to be tested for quality, or checked on receipt (in terms of quantities and prices). On accepting or rejecting items, their cost prices are determined on-line and updated as inventory costs. To ensure that individual items can be retraced to the supplier, it is recommended that the warehouse operation be organized on the basis of individual supplier batches. In this case, inventory pricing is lot related. However, if the items delivered are processed according to storage locations without any supplier reference, then the cost price in inventory is calculated according to the mean average of the current stock levels and the new receipts. Special inventory pricing is required for the production of “joint products” or “cut products,” which require disassembly or “cutting.” The “joint product package” (uncut raw material) to make cut products is ordered according to predefined quality classes, inspected at goods receiving, and entered with the agreed-on price per supplier lot. The individual costs for each of the cut products are included in the uncut raw material cost as “target prices” with “target quantities” as calculated using theoretic cutting process standards. The joint product packages are ordered in accordance with the above quality and value assumptions. In the subsequent physical cutting process the value of each cut product (for each individual supplier) is verified by batch calculation.76 The calculation for inventory costing of the individual cut products from the anticipated target cost to the computed actual cost is shown in Figure 3.58. The price produced from the actual yield is the “actual price” and the price anticipated is the “target price.” The difference between the

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Cut-Process Daily Price

Expected Price

Figure 3.58 Inventory pricing in joint-product production from expected price to actual price via IT calculation.

target and actual price results from the variation in value for all cut products from all supplier lots. “Inventory items” are always maintained as raw materials, cut products, intermediate products, or finished goods, and always at the target and effective inventory price. The calculation of this inventory price is based on the “flexible cost-unit accounting” method that covers procurement, the cutting process, and any individual production step from department to department, and is allocated to the individual item as a production price as it leaves each department. The calculated costs (in the form of the individual item and for each department) is valuated accordingly as a “production price,” on a differentiated basis at four price levels:

Materials price Cost price Break-even price Calculated sales price

These “allocation-differentiating prices” enable the partial and total costs to be calculated for each cost unit. A system of profit center accounting

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for each individual department can only be applied if the work produced is simultaneously valued at budget and actual costs.77 The inventory prices are transferred to value inventory stock levels in the balance sheet, on the basis of balance sheet policy, and in accordance with the principle of assessment continuity (FIFO, LILO). The inventory price can therefore be calculated company specifically as a balance value at any price level, and is available for accounting purposes as an integrated component.

3.7.2.8

Inventory Controlling

In inventory management controlling, the “provision functions” are at the forefront of the analysis. In this context, inventory controlling is divided into four areas that are subject to detailed analysis: 1. Controlling of inventory management processes 2. Integration controlling of inventory throughout all product management 3. Performance controlling via inventory provision functions 4. Presentation of controlling results The settlement of controlling measures should be organized via userspecific workflows.

Controlling of Inventory Management Processes Subjecting the entire warehousing process to comprehensive controlling methods is an indispensable concern for effective procurement (and sales). In this context, the prompt recognition and elimination of essential weak points is a core aspect in inventory management. Inventory management starts with the sales order and ends with the shipment of the product to the customer. This results in the core aspects and tasks of a controlling system in inventory management. Specifically, these consist of: 1. Analysis of shipping processes of all inventory, incoming and outgoing 2. Monitoring of all quality assurance activities for all items 3. Seamless control of items throughout all inventory entry processes 4. Accurate production supply of all inventory items 5. Date and quality-oriented shipment of all items 6. Stock monitoring for all items (raw, auxiliary, interim, and final products)

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Administrative processes associated with comprehensive inventory management should be subject to constant controls in terms of the requirements and instructions received by staff.

Integration Controlling of Inventory Inventory functions within the entire product management system should be organized throughout procurement, production, and sales at a highly integrated level. The integration of inventory processes is managed by defining basic integration elements: Addresses: Supplier, receiving center, storage location, cost centers, etc. Items: Purchase items, inventory items, interim products and final products. Conditions: Prices, physical and quantified item changes, etc. Procedures: Quality reviews, quantitative entries, activities, functions, etc. The redundancy-free and seamless visualization of all inventory entry and exit processes is enabled via the proper configuration of the basic integration elements. Recording all necessary data in the handling of inventory items in production may take place at the physical location of the activity, using production workstations. This way quality inspection and data capture become one work process built into the inventory entry/exit program for any cost center. Seamless traceability of all recipe components from the supplier to the customer is only possible if inventory processes are highly integrated into product management. To support this, identification systems, such as barcode scanning, should be introduced into the entire product management process.

Performance Controlling via Inventory Provision Functions A disturbance to the provision of inventory leads to negative effects within the entire product management system. Spotting disturbances within inventory entry and exit processes is a core task of performance controlling in inventory management. The examination of cost reduction requirements in inventory management directly affects performance-controlling processes. It should be noted that the organization of an optimal inventory management system should always observe all factors that influence inventory management:

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Procurement accuracy Warehouse capacity Retention of value Production mobility Marketability Financing capabilities

Comprehensive performance controlling can only be effected through detailed analysis programs throughout the entire inventory management system.

Presentation of Controlling Results Results, as inventory controlling reports, are utilized to improve inventory management processes at three levels: Level A: Management Level B: Area management Level C: Stockroom employee All on-line or printed reports should be included in the user-specific directory as required or on an interval basis.

3.7.3

Production

Optimum utilization of production capacities can be achieved only if sales management also pursues this objective and is able to market the goods produced by the company, at prices that cover the costs or secure a profit. The most profitable production scheduling procedures can be derived from the two-way dependence of sales and pr oduction. Short- and medium-term fluctuations between forward production scheduling and actual production level output create the need for adjustments in all functions of the product management system. The types of adjustment required: Intensity adjustments Time adjustments Quantity adjustments must be calculated for the individual production company to warrant situation and cost optimization. The industry-specific software system for corporate management provides the optimization programs required for this purpose. The individual functions within the production system must

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reflect industry-specific and company-specific integrated procedures to provide the necessary support for management in their decision-making and coordination processes. Recording every aspect of the production procedures via industryspecific software and planning or simulating the necessary processes specifically require: Structured and industry-specific definition of “basic production data” Detailed specification of the corporate production organization Production scheduling at all levels Definition of production process data through the entire production assortment Visualization of all production procedures, from the standardized to the specialized production processes on-line and real-time monitoring of production processes as a centralized CIM concept throughout all departments Organization of a detailed cost accounting system, and the measurement of productivity throughout all departments and production levels, to be implemented as budget vs. actual Every company involved in production secures its market position by inspecting all its production processes. The company will be able to offer competitive goods on the market only if it is constantly involved in seeking streamlining potential and the quick implementation of new technological knowledge (e.g., obtained from research and development). Making financial decisions calls for sound knowledge of factors that influence the production process. Once management knows the most significant “influential factors” and has constant access to the necessary information, activities can be planned with a high degree of achieving results. According to Gutenberg, there are five parameters that affect the primary costs in a company: (1) factor quality, (2) activity, (3) factor prices, (4) operating size, and (5) the production program. The aim of progressive corporate management78 is to achieve the maximum streamlining effects with scarce and limited “financial resources.” According to the costs-by-cause principle, the total costs of a business period should not be exclusively apportioned to the manufactured goods. However, as a provider on the goods market, only those companies whose

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total revenues are “greater than or equal to” the total costs will be able to survive in the long term. This rule is nullified by subsidized companies, and the cost backlog is absorbed by the taxpayer. Companies making a profit emit positive signals to the economy. The profitability of a company is enabled by the detailed knowledge of management on the composition and weighting of the individual cost factors.79 Alternative economic processes that increase the productivity of human resource and product management functions can only be effective with a comprehensive cost analysis of a progressive company.

3.7.3.1

Basic Production Data

The production process in the manufacture of goods can only be properly visualized if all data, facts, and figures are clearly stipulated or defined as the “smallest” possible component of the economic process. Once this “basic production data” has been recorded, production processes can be built on the industry-specific software system. The industry-specific and company-specific reproduction of all corporate processes determines the quality and thus also the effectiveness of the overall IT project. The integration of all economic processes throughout all business areas and functions is based on the basic integration elements (addresses, items, conditions, and procedures) as well as the basic pr oduction data (Figure 3.59).80 Basic production data are grouped and entered into the industryspecific software system as follows: Components and recipes are portrayed in accordance with their production process throughout all levels of production. Component controls and the interchange of components require direct access to all the production structures, which are set out in the product recipes (or parts lists). The production process throughout all levels of production is described in the technology descriptions, and simultaneously documented as a production quality assurance instruction in the integrated QC system. Ingredients and ingredient categories for the respective sales item must be described and documented in food and pharmaceutical production in accordance with the applicable legislative requirements of each individual country or region.

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Figure 3.59

Basic production data program group.

Labor and machine times (operating resources) to be used in the production process must be defined via the activities and functions as time standards (as per industry guidelines) in the recipes or component parts lists. Measurement indicators for analyzing recipe production as well as nutritional content for food products should be regarded as requirements in optimization processes and quality inspections. Once these basic production data have been completely documented in detail, the production process can be planned, visualized, monitored, and controlled in accordance with production organization. The production results are analyzed and shown in cost accounting with immediate calculation of the actual costs. The “physical items,” defined using the basic production data, are defined to provide an “actual reflection” in the IT system so that the actual costs of production processes can be analyzed in detail and documented from the cost accounting aspect.

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This accurate item definition removes the need for any additional cost accounting-based presentation of costs in the CSBSystem, because together with the production process, the total consumption of value within the company is simultaneously (in real time and on-line) calculated on an integrated basis for all items.

3.7.3.2

Production Organization

Structuring the production process effectively demands comprehensive and detailed knowledge of the special requirements that apply to production procedures for each individual industry and company. The same applies to the ability of the industry-specific software system to visualize individual production processes throughout all departments (cost centers) within the company. The process procedures must not be prevented from being optimally organized by the limited capability of a general-purpose software package. The competitive superiority of a production company is attributed to the level of productivity achieved in the combination of factors. Consequently, in the age of information technology, the capabilities of industryspecific software determine the level of quality that can be achieved in the organization of production and decision making in the company. Organizational and administrative costs involved in creating and managing information within the production process is also directly determined by the software used. Thus, in the medium to long term, the only companies that are able to maintain their market position are those that make optimum use of the opportunities offered by a industry-specific and companyspecific software package. Specifically, the production procedures related to the individual company must be organized in detail and reflected in the industry-specific software system so that: Production scheduling is performed in close coordination with sales, procurement, and inventory management. Optimal yield is utilized in providing all material components from the cutting and joint product production processes. Batch and process production can be recorded specific to each situation (using minimum labor costs) with the help of IT. All other industry- and company-specific production procedures can be configured with the use of parameters. Comprehensive optimization of production minimizes the material, labor, and operating resource costs. A monitoring and cost-reducing function can be attributed to production control on a process-specific basis.

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Critical points can be evaluated and future streamlining effects identified with the aid of detailed production analyses. Planned and actual productivity measurements are allocated to the cost unit throughout all departments on a differentiated basis through integrated cost accounting. The organization of all production procedures must be established in line with an integrated and paperless QC system. Integration of all qualityrelevant procedures within the production process prevents extensive and unnecessary work, and enables QC measures to be effected in compliance with ISO 9001 guidelines.

3.7.3.3

Production Scheduling

Production scheduling for each specific production area is a prerequisite for ensuring that the capacity of all production departments is utilized to the optimum level. Orders generated by sales form the basis of the data for short-term production scheduling. The shorter the period between order entry and shipping, the shorter the available production time. “Make-to-order” production is then replaced by “forecast-based” production to support the delivery of orders that are received too late to be produced by the existing production technology.81 The quality of the sales forecasting model, which also affects production, therefore determines the achievable degree of accuracy between effective demand and achieved supply. This is dealt with in Section 3.4.2, “Area Information System,” in terms of sales and production influencing each other in scheduling. Sales and production planning geared toward existing or planned capacities is indispensable for a competitive enterprise. The “Planning Manager,” a mediating software module between sales, inventory, and production, was developed for this purpose.

Operative Planning with the Planning Manager The Planning Manager aids management in planning (“Operative Planning,” Section 3.4.2.1) and the creation of forecasts in terms of possible sales scenarios for any required time period. To create new forecast models, any (exiting) data can be selected and be provided with formulas (forecast formulas) (Figure 3.60). Columns can be freely defined in the Planning Manager. Each “defined” evaluation day is displayed in a matrix. Here, the origin of the data used for the forecast is specified (data source) and for which purpose the result of the forecast can be utilized (the “data target”).

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Figure 3.60

Integrated Planning Manager.

Every forecast model acquires data from certain “source days” and will generate results for defined “target days.” This requires providing predefined source days with a weighting (formula). The period to forecast is specified via the “relative date” setting, on the basis of a definable “start date.” The target days are freely definable (e.g., by daily order, shift on first Monday in month, etc.). This enables precise planning processes for any time period (public holidays are automatically considered in the production calendar) (Figure 3.61). The quality of any planning model depends on the reliability of its forecasts. Identifying any possible influencing factors in terms of quantity changes between source days and target days is defined via forecasting formulas. The Planning Manager has the task to take statistical data and

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Figure 3.61

Date assignment in the Planning Manager.

to forecast sales quantities via formula definitions. A permanent improvement of the forecast model can only be achieved if the formula input is subject to freely definable structures. As a result one must be able to define formulas for each individual production process. This way the closest possible match between forecast and actual production is achieved. The handling of exceptional sales orders, which are expected perhaps in the holiday season or when promotional campaigns are held, is also extremely important in forecasting the most realistic scenario. With this forecast model forming the groundwork, the implementation is dealt with by production control. Production capacities in particular are taken into consideration in this context (Figure 3.62). The full utilization of production potential can be more easily achieved with long-term production orders than it can be with short-term production. The reverse of this situation increases the difficulty of production planning, making effective production planning possible only by using forecast information from the sales organization.82 In the batch-oriented industry, the particularities of

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Figure 3.62

Defining formulas in the Planning Manager.

Single-customer order planning Production data control for customer orders (for special customer recipes) Promotion order planning Exception planning in case of incidents (manual intervention) throughout all levels of production planning and control need to be fully IT supported and enabled. A complete period overview is generated on the basis of long-term production scheduling. Corporate capacities are divided as follows:

Labor capacity (activities) Machine capacity (functions) Material capacity (available items) Financial budgets (plan/actual cost accounting)

Long-term planning data become short-term production scheduling data divided into periods. Production scheduling data are updated via current sales order data, and are generated as “planned production orders” by the forecasting systems.

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Detailed production scheduling calls for the portrayal of all schedulingrelated elements within the industry-specific software system and therefore also for comprehensive human resource planning.

Human Resource Planning The optimum planning of human resources takes center stage within comprehensive “human resource planning.” A system for the efficient planning and management of human resource capacities must be able to visualize all internal as well as external factors and reveal their effects. The following directly influences human resources: Available staff for required activities (qualification) Scheduled vacation leave for all staff and departments (cost centers) Unplanned absences (actual status) due to sickness or other forms of absence affecting the balance of work time available in regards to any valid labor time agreement Planned times for all activities and functions throughout all departments based on the updated production schedules All unplanned absences occur without any prior warning and must be assessed by the user quickly and efficiently. The integration of these “absences” into the entire human resource management system as well as into current production scheduling is an absolute must. Resource planning, in terms of production staff, to support seamless production scheduling must take place in line with current and concrete workforce data. This calls for on-line and real-time availability of all data within human resource management (Figure 3.63A and B). Processes such as effective human resource planning within all departments, the achievement of production schedules, and the management of production orders necessitate the observance of the factors that affect these areas: Status of open sales orders, new orders, and scheduled sales Conversion of sales order and planned sales data into time units to determine required human resource time per department Possible cost center change (from Department A to B) due to capacity information forecasts with staff-dependent patterns Automatic consideration of free time (break time) as planned absence times Support when scheduling variable and temporary shifts for seasonal and exception-related production capacities (i.e., overtime)

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(A)

(B) Figure 3.63

Human resource planning.

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Human-resource allocation control requires the synchronization of all plan data with the actual values. A human resource plan/actual analysis is therefore an integral element of any effective production scheduling system (Figure 3.64).

Production Order Planning The final production orders are established through forecasting models from the production planning data, and corrected from the current sales order data. Production plans and production orders are generated on the basis of variable and fixed planning intervals. Their feasibility is examined on the basis of capacity and material requirements, based on needed production quantities and on the individual production orders distributed to each individual department. Allowable measures for bottlenecks that may occur are defined by production management. Possible adjustment forms in production are the following:

Intensity adjustment Time adjustment Quantity adjustment A mixture of the above

It is important not to forget in this respect that the adjustment measures can be optimized by taking a proactive approach through the real-time supply of information in scheduling and organization to prevent bottlenecks, and by the complete integration of sales order processing. Integrated IT support for this is made available to management via various program modules from procurement, production, and sales.

3.7.3.4

Cutting and Joint Product Production

Raw materials used in batch and process production can be ordered on the procurement market as “individual components” or as “joint products.” Joint products are component parts of a “joint product package” and are separated via the cutting process. Specialized labor also affects the depth of production (i.e., the total number of steps in production in the vertical production chain) in the creation of final products in the company. It follows from this that the preliminary cutting of joint product packages and the processing of “individual components” have developed as separate and independent company processes.

Long-term sales planning model for resource scheduling.

Investment Planning

Procurement Budget

Recruiting

Figure 3.64

Available Machines

Machine Utilization

Plant & Equipment Requirements

Procurement Contracts

Coverage

Material Requirements

Available Personnel

Labor Coverage

Labor Requirements

Resource Requirements

Long-Term Sales Planning

Budgeting Actual vs. Expected

Available Cash

Cost Coverage

Financial Requirements

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The production processes for foods, pharmaceutical products, chemicals, and other batch-oriented manufacture, are referred to as batch and process production. The question whether it is economically viable to integrate preliminary cutting processes (to yield individual components from joint product packages) into the company’s vertical production process is dependent on the following conditions: 1. Quality assurance for the joint product packages and the resultant individual components (or cutting products) 2. Yield value as a ratio between the quantity-based relationships of high-value and low-value components (cutting or joint products) 3. Availability to procure joint products as raw material without any significant seasonal influences 4. Price stability between the market price changes for the joint product packages and the relative price changes for the individual cutting or joint products (without any major speculation effects) The raw material-related procurement risks are shown in points 1 and 2. Points 3 and 4 illustrate the uncertainties that affect the market price.

Points 1 and 2: Quality Reliability and Yield Value In the case of biological raw materials the quality and yield factors fluctuate considerably. A higher degree of procurement reliability can be achieved only with comprehensive testing methods83 that must be integrated into the QC system. Factors that influence the procurement price must be documented, on a reproducible basis, from the calculated measurement values. By measuring the results of the cutting process, the values as calculated above are checked against the actual yield levels achieved by the individual joint products. Based on the comparison between the target and actual values of the cutting process, the economic effects of both the individual quality categories as well as those of the cutting process itself become transparent and can be assessed by management.

Points 3 and 4: Availability and Price Reliability Extending the vertical production chain back to the primary production processes will prove effective only if actions in the procurement market could have a negative effect on the productivity of downstream production processes. Conversely, a specialized system of final product manufacture

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(with direct procurement of all cutting products as individual components) can be reliably established only from an accounting aspect on the condition that there is open competition on the raw materials market. However, if competitors obtain a procurement price advantage by extending the vertical production stages back to the preliminary cutting processes, a relative increase in the raw material costs for the specialist companies will follow. Extending the depth of production secures the raw material procurement sources for companies; at the same time, speculative price fluctuations (caused by an overreaction by the market) have no effect on costs. In addition, the company has the opportunity to operate on any “product level” (final product, joint product, intermediate product) as a supplier or customer on the market, provided the company has an IT system that has a detailed vertical production structure. As a result of the uncertainty in the biological joint product situation as described above, batch and process-related companies administer differing procurement and production processes in practice. The most frequent form of production structure found in food manufacturing consists of a mixture of upstream joint product production (which reserves a minimum capacity for cutting processes) as well as a specialized system of goods manufacture. Optimal utilization of operating resources (given certain production capacities) and the purchase of all joint products at the lowest possible price require the use of IT-aided optimization.84 The quality-based values for joint product packages, plus the valuation of the individual joint products or cutting products to reflect market requirements, provide the basis for the costs to be specified. The individual prices for the cutting products created in the cutting process must be portrayed as a settlement price in the item master. The “price calculation method” used in this respect must comply with certain principles of an appropriate costing system. In practice, this gives rise to four practical methods for calculating settlement prices for the individual cutting products: Equivalent figures calculation: This assumes that there are no purchase prices for the individual cutting products that are immediately turned into sales items through the cutting process, and therefore the individual sales prices are given equivalent figures for the settlement prices. Subtraction method: If the subtraction method is to be used, then it is assumed that there is a maximum of one primary product that

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has resulted from the cutting process. The proceeds from the auxiliary products are deducted form the overall costs of the joint product production, and the remaining costs are attributed to the primary product as a settlement price. Market prices:85 The cutting or joint products created in the cutting process are assessed at the current market prices on the procurement market. This assumes that the quality and the ingredients of the individual cutting products are comparable to the market, and that market pricing can take place on the condition that there is open competition. Variable and fixed settlement prices: The above three methods of pricing cannot be applied to all cutting processes. The following procedure is recommended to establish a general standardized solution for calculating settlement prices, with the help of IT: 1. Joint product package: The joint product package is valuated at the actual purchase price paid (as a cost price) and consequently as a starting basis for joint pr oduct production calculations. 2. Cutting products with value: Settlement prices for cutting products that have value are specified as variable factors in the item master (as equivalent figures) on a market price-related basis, or adjusted in accordance with price changes. 3. No-value or low-value cutting products: For cutting products with no value, or those consuming value (with disposal costs), the settlement prices or disposal costs (in this case a negative figure) are also set as fixed prices in the item master. The fixed prices refer to the defined quantity units. 4. Conditions: Changes in the cutting process and intermediate storage that affect the individual joint products are taken into account in the calculation of the settlement prices. Allowance is made for these consequences by defining “condition formulas” as additional terms in determining the settlement prices. These conditions only serve to change or modify the settlement prices of cutting products that have a value assigned. Settlement prices calculated on the basis of the above methods (1 to 4), contain the necessary market and process relevance to enable the “valueadded” effect from the cutting process to be applied to each individual cutting product. These prices are incorporated into the system for settlement price calculation as shown in Figure 3.65. Cutting processes can be analyzed on a supplier-related basis (as batch accounting) using the variable and fixed settlement prices. The results

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Expected Cut Yields

Valuation Method Expected Price

Figure 3.65

Structure of settlement price calculation.

produced by these analyses provide management with valuable decisionmaking aids in the approach to procurement of joint product packages. The purpose of visualizing the cutting process in the “cutting process parts list” (as yield target requirements) is to examine the joint product package from the aspect of its yield level; as a result, the quality of the cutting process as a performance control is simultaneously reviewed. For biological cutting processes it should be noted that there is generally a whole range of potential cutting process versions used in joint product production. The task of determining, from this infinite number of cutting process versions, those processes that provide the maximum added value is achieved by a set of linear equations. The predefined versions of the cutting process are defined in the CSB-System via a set of linear equations, and consequently the optimum cutting process organization and planning (coordinated with demand) is ascertained. This then becomes the binding procedure for the joint product production department.

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The construction of the knowledge base required to determine the possible cutting process variants is company specific, and requires precise data capture of item quantities in the cutting process entry and exit. The most economic cutting processes are incorporated into the “knowledge base” of cutting process guidelines in the form of “cutting process structures” (without proportion guidelines for the individual joint products). However, joint-product production, specified via the cutting process organization and scheduling, is by itself generally not capable of providing the items required for sales through downstream production. Optimization of both the cutting process and purchasing system is required to support comprehensive coordination between procurement, warehousing, production (in this case joint product production), and sales.86

3.7.3.5

Batch and Process Production

Preparations for the individual production batches throughout all departments are carried out in accordance with production scheduling. The adjustments needed to coordinate pr oduction capacities (operating resources, labor, and materials) and requirements from sales (taking into account procurement and inventory levels) are controlled through process planning. Valid production orders for each individual production department are generated at the end of this organizational and planning process. However, before the individual batches are processed (as staged, intermediate, and end products), the question whether the combination of recipe components will create raw material bottlenecks in the production process must be examined. The item coverage (item substitution) list can be used to call up those items that cannot be supplied in sufficient quantities (raw materials, supplies, intermediate products in all stages of production, and finished products) in the multilevel production process. The approved, predefined exchange of components allows for a controlled response for production batch processing, consequently ensuring the uninterrupted continuation of the production process. The same methods are applied when new “alternative components” (in all the relevant recipes) are to be used in place of the current components; e.g., by changing one of the components in all recipes (from Supplier A to B). In the production of food products it is possible to exchange recipe components for optimum product costs. This procedure is also known as “recipe optimization.”87 The objective is to determine cost-effective recipes while still conforming to optimum quality standards.

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The task of organizing the batch finishing process according to the specific requirements of the individual business, and to provide the capacities required for this purpose, on time, is the responsibility of the production management. It is therefore necessary to make data from production available on-line and in real time. In the CIM concept, 88 all production-related data are captured and evaluated at the place of origin. This is the only procedure that ensures a fully functional, paperless, and integrated QC system. Organizing and successfully implementing batch production of complex processes throughout all departments within a coordinated cycle can be ensured only with the comprehensive support of IT. In this respect, one must note that industry-specific features also must be organized to support multistage batch processing sequences. The defined sequence requirements for the individual batches are assigned using priority codes for processing in each department (taking into account parallel, staged, and batch-staged production procedures), and displayed on the control center screen (CSB-Rack) in the preselected sequence. In line with further streamlining potential, the physical movement of all internal raw materials and intermediate and end products is also increasingly being automated. Individual components required for batch processing enter the batch production process directly and in the required quantities via high-bay storage using automated conveyor technology.89 Random sampling as well as complete batch component controls must be carried out as part of the QC system. Seamless batch component control with the simultaneous control of stock issue is indispensable, and sometimes legally mandatory, e.g., in the pharmaceutical industry. Traceability in batch production from suppliers of the individual recipe components must also be applied. This necessitates direct documentation, receiving, and supplier-related storage entry of all raw and auxiliary materials as well as operating resources90 (as vendor lots) including all quality-relevant data. When the components are called up for batch production, this identification method is used to record the batch number (and consequently indirectly the supplier number) in the production process. The production throughput must be recorded throughout all batchprocessing departments to provide a system of countercontrols for the whole batch processing cycle. Data capture on production exit can also simultaneously update all inventory items not directly included in the original component issue (e.g., packaging items, etc.). In line-specific production throughput capture, a system of performance-related pay in batch production is of particular significance. In this context, it is important to ensure that the individual time and performance data are processed on-line and in real time, thus forming a

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tamper-proof method of data capture at the production exit stage of each individual department. In multilevel recipe production, the exit flow of batch items from the primary departments is at the same time an incoming flow (e.g., as an intermediate product) for the next stage. The comprehensive capture of production data turns a comprehensive system of material flow controls into an excellent production control instrument. All key data are automatically prepared and transferred to the AIS and MIS, giving management access to any facts and situations identified as significant variances. An increase in productivity primarily amounts to full utilization of available capacities in the short term and eliminating weaknesses as they occur.

3.7.3.6

Other Means of Manufacture

Visualizing industry-specific production processes with a corporate management system requires comprehensive and precise definition of production process parameters. Industry-specific software is expected to be able to illustrate individual production processes in an industry-specific and company-specific way. It must be noted in this context that the smallest “components” in the production process are defined via the basic integration elements: addresses, items, conditions, and procedures. In addition to this, all the production process facts, figures, and situations must be defined as part of this basic production data. Effective information management is possible only if production processes are precisely reflected in the industry-specific software system. The basic data structure and data capture of various production processes have been described above in connection with batch-oriented production such as foods and pharmaceuticals. It is therefore expressly intended at this point to dispense with a presentation of the various production processes within individual industries. In terms of individual manufacture processes (single and batch production or flow and continuous production) a standardized, structured approach to determining all master and process data must be organized.91

3.7.3.7

Optimization Procedures

The approaches for production optimization are a result of decided actions (defined as alternative decisions) within the production processes. Since its introduction into economics, “operations research” has sparked the development of a huge number of optimization models for partial and total process optimization.92 It should be noted in this respect that only those models that include transparent approaches (or objectives) and, at the same time, allow the user to intervene in process details have achieved practical acceptance.93

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Figure 3.66

Optimization (least costing) program group.

The application of production optimization procedures is limited here to the cost-reducing effects in the following three areas: 1. Cutting process and joint product package acquisition 2. Standardization procedures and optimization 3. Recipe organization and optimization (Figure 3.66) Reference has already been made above to the optimization of capacity and resource deployment of the production process.94 All that remains to be discussed is that on the basis of given production resources (operating resources and labor), where production capacities are being fully utilized, priority is given (via production scheduling) to those production items that generate the maximum gross margin (GM4). The search for a constant increase in productivity and profits inevitably leads to production process optimization, where the aim is to reduce material costs while maintaining consistent product quality.

Cutting Process and Joint Product Package Acquisition The task of cutting joint product packages into individual cutting products in the cutting process can be carried out in various ways. The most

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profitable or cost-effective method must be chosen from the whole range of potential “cutting variations.” It is therefore quite clear that an additional quantity, yet to be calculated, of joint products may need to be purchased to meet the demand for those joint products for further production and sales. A special algorithm is implemented to solve the above problem, which incorporates past as well as current experience and knowledge of the specialist. By contrast, a system of experts portrays the problem area with the help of facts and rules, which are resolved using an inference machine to create the desired situation. The quality and benefits of this system are directly dependent on the quality of the cutting process standards (cutting variants). To improve this procedure, cutting process optimization is achieved with the aid of intelligent algorithms. “Cutting process parts lists” generated in this manner become the optimal and most favorable standard (biologically and technologically) for cutting process control. For this purpose, it is necessary to define the optimization process and to make all optimization-related data accessible. Optimized cutting processes and optimized joint package procurement in companies working along traditional lines lead to considerable material and cost savings (Figure 3.67).

Standardization Procedures and Optimization In the cutting process used for biological joint product packages, there is a variation in the quality and usefulness of the individual cutting products created, based on the content of certain identified ingredients (i.e., fat content). To enable the subsequent production processes to utilize standardized raw materials, all raw materials must be divided into standardized groups, depending on the measured ingredient composition of each raw material group. For the raw material meat, for example, the analysis of all highvalue and low-value ingredients must be determined and assigned minimum and maximum values for each stipulated “standard raw material.” The analytical definition of raw material standards takes the form of ingredient measurement after the cutting process, or ingredient specification during procurement, of the standardized raw materials. The standardization process for all raw materials makes all subsequent r ecipe

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Figure 3.67

Definition of cutting optimization.

production processes more reliable, and enables them to be implemented in accordance with the QC guidelines, as it ensures the proper ingredient composition of the recipe (Figure 3.68 and Figure 3.69). Cutting products that require standardization are booked out of inventory, the ingredients are measured, and the “new” or verified standardized raw material (with the inventory price calculated in real time) is booked into the raw materials warehouse. This batch-oriented process is required for all raw materials that contain ingredients subject to fluctuation.

Recipe Organization and Optimization The optimization of recipe production presupposes the provision of all other recipe production-related data. A production data basis that fulfills the corresponding requirements is required to meet the real-life demand for optimum recipes. For food production, this objective means that the optimum recipe must comply with food regulations and sensory requirements, and can be manufactured from a wide range of alternative raw material combinations.95 The optimization model below is based essentially on the following approach, taking into account:

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Figure 3.68

Recipe optimization program group.

Raw material input on a minimum cost basis Allowances for production losses Consideration of additives in mixture Food legislation requirements Sensory requirements

The requirements above are defined as restrictions in the range of allowable optimization instructions. The results of recipe optimization are transferred to the components parts list (BOM) as the optimum recipe. This optimum recipe is accessed directly in the production scheduling process for material requirements calculations and production batch processing. All further steps in complete and integrated product management are performed in real time. Recipe optimization for food and beverage products should be constructed industry specifically. The three procedures below exemplify this: 1. Meat product optimization 2. Processed cheese optimization 3. Fruit mix optimization

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Figure 3.69

Standardization components of recipe optimization.

Various situations can be used to form the basis for the recipe optimization. Some examples: A. Production scheduling is the basis. Here, the various scheduling horizons are taken into consideration (long-, mid-, and short-term planning). At this point, procurement of the components of the scheduled recipes has not yet been carried out. Now, the “recipe optimization plan” becomes the tool for the procurement of the most profitable raw material and components. B. Available raw material or component stock is the basis. This presupposes that the production process may be subject to sudden changes without prior notice. This may occur in cases such as production malfunctions or special customer orders. In this case, recipe optimization is performed to make best use of available components in inventory.

Recipe Optimization in Meat Products The aim of recipe optimization is to create a cost-effective sausage or other processed-meat recipe with the aid of linear programming. The

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materials recipe (optimal bill of materials for the recipe components) that needs to be determined by the optimization calculation should in all aspects (compliance with foodstuff regulations, sensory values) be as “good” as a comparable product using traditional recipe formation. Meat product recipe optimization takes place in four steps: Step 1: The raw materials “A” available on the market or raw materials “B” required recipe components are calculated according to the model. Each raw material item has its own market or inventory price. There is a required ingredient analysis for each standardized raw material, which enters the optimization calculation. Step 2: Formulation of the restrictions for the recipe to be optimized should be established. The sensory conditions are defined as master data in respect to approval restrictions, and modified as necessary. Restrictions in terms of food legislation are based on the regulations for meat and meat products. These restrictions are specified in the analysis standards of the finished product recipe (item) as a component of the parts list. Step 3: Optimization calculation can be performed as unit optimization (for a single recipe, as for a new product) or as “batch optimization” for the entire production range. The above data (steps 1 to 3) enter the optimization calculation. Furthermore, additional ingredients defined in the parts list and the expected production losses (insofar as they affect the analysis values of the final product) are included in the optimization calculation. Step 4: The results of the unit optimization or batch optimization are automatically transferred as “active variants” in the parts lists. Material acquisition and production scheduling are initiated on the basis of these optimized parts lists. The high degree of integration in recipe optimization within the entire system of Advanced Production Scheduling (APS) is an essential prerequisite for competitive batch production of all food and beverage manufacturers.

Recipe Optimization of Processed Cheese The optimization of a processed cheese mixture is to be established with the same objectives as stipulated in step 1. The optimization calculation procedure is performed as the four steps illustrated in recipe optimization for meats:

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Step 1: Definition of the raw materials needed for recipes Step 2: Formulation of sensory and food legislation requirements Step 3: The execution of optimization calculation for all recipes as “batch optimization” Step 4: Transfer and activation of optimized recipes as “active variants” of the parts lists. Selection from various materials in soft cheese optimization to yield a stable finished product is the main requirement that must be fulfilled in the formulation of restrictions (sensory, analytical). Recipe optimization can induce considerable cost reductions in raw materials, while still retaining the specific quality. The price competitiveness of an optimized final product therefore directly affects the sales of the product.

Optimization of Fruit Mixtures The general objectives on which fruit mix optimization is based ar e comparable to the basic prerequisites stipulated above. Optimization of fruit mixes also takes place in four steps (Figure 3.70):

Figure 3.70

Recipe optimization of fruit mixes.

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Step 1: Raw materials used in the optimization calculation are allocated to the source recipe. The optimized recipe is determined on the basis of these components. Step 2: Restrictions that are to be formulated for the target recipe (based on sensory and food regulations) are stipulated in the optimization model. Step 3: The optimization calculation takes places for all recipes or for just one individual recipe. Step 4: Transfer of optimized recipe components to the “active variants” of the parts lists. The results of recipe optimization for food and beverage products clearly show that predefined recipes must be replaced with variable recipes. The optimization models also give evidence that some components within recipes variants (optimized recipes) cause considerable cost reductions of material usage through fluctuating raw materials prices on the markets. Recipe optimization secures short-term competitive edge and creates additional scope in terms of streamlining the entire production process.

3.7.3.8

Production Control

The task of integrated production control is to control and monitor the entire production process via control points by using CIM. The flow control of goods production starts with the data capture at the raw material receiving point, and ends at the last production line step. All inventory processes involved with production are managed via inventory control.96 The storage of intermediate and final products, together with the buffer inventories to be controlled separately by each individual department, is also processed via the integrated and automated inventory control system. Comprehensive production control requires an all-embracing inventory control system. Data capture tasks of a company-wide quality assurance system must be linked on-line with production control (in accordance with the HACCP concept). Using this method of uniform IT,97 multiple tasks are able to be processed in one single workflow. Figure 3.71 illustrates the data capture process in batch-oriented production. The visualization of each individual process takes place via the basic integration elements:

Addresses Items Conditions Procedures

Figure 3.71

Data capture in batch-oriented manufacturing.

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The integration elements are the smallest elements that clearly identify and define all individual steps within the entire corporate production process. Standardized data capture and control technology are required to ensure that process data are recorded throughout all departments (or cost centers), independent of individual skill-level, and in a way that can be easily comprehended. The only way to ensure that automation also simultaneously secures streamlining effects is for the data entry process parameters to be set such that they can be easily grasped and applied on a workstation-related basis. As can be seen in Figure 3.71, the automation system can be scaled as required to support any batch-oriented manufacture process and any associated data capture via “individual control points” (the CSB-Racks in the corporate-wide network). For example, the following production control processes can be organized industry specifically, by setting the parameters as required for each individual workstation, and as required for each of the program processes in the CIM concept, including integrated QC.98 This includes the following sample capture points:

Receiving The capture point “receiving” records procured deliveries for production, such as raw and auxiliary materials and operating resources. The integration elements clearly define the entry process: Addresses: All suppliers are identified and selected via the integration element “address.” Items: Raw and auxiliary materials as well as operating resources are defined as “items,” and registered (counted, weighed, or physically entered) at the goods receiving point. Conditions: “Conditions” arranged for delivery (from procurement) are displayed and checked directly on order arrival, whereby any differences are registered immediately. Procedures: Predefined quality requirements are subject to precisely defined “procedures” in line with item-specific requirements, and defined quality test instructions, whereby all differences are recorded on-line and in real time.

Inventory Movement The control of product flow from goods receiving into “receiving storage” is also performed on the basis of the four basic integration elements of

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the highly integrated software system, including the integration of automated inventory systems (high-bay storage, pallet storage, etc.). Addresses: Every cost center and therefore every inventory area is a unique “internal address.” Entries and exits of items therefore constitute physical as well as IT system communication between two addresses (cost centers). Items: Products (raw materials, interim products, finished goods, etc.) exchanged among departments move between individual production departments recorded in the system. All items remain in the department until they are called for; i.e., they are listed as “buffer” or area storage. Conditions: All physical and cost-related changes caused to inventory terms are defined as conditions. Conditions effective in inventory can be allocated to the item, as well as the specific inventory location (address) via freely selectable formulae. Procedures: Activities to be regulated in inventory as well as quality inspection procedures are defined via the integration element procedure. Inspection processes are clearly defined for the individual products (items) or product groups (item groups). Compliance with these requirements is monitored for every cost center (address).

Batch Processing Batch-oriented production processes are characterized by industry-specific traceability systems. The pharmaceutical and cosmetic industries, for example, make special demands on the documentation of component usage. Legislative traceability requirements in the area of food and beverages must also be taken into consideration. These requirements should be subject to seamless documentation and constant on-line availability throughout the entire chain of production processes. Component storage and issue in batch production therefore takes place via the seamless allocation of individual components to a supplier lot and to an internal inventory location (lot). This is done via the basic integration elements: Addresses: The batch processing area is a cost center in which components are combined to become interim products or final products. This cost area is an internal address, and is connected to the supplier lot (external level). This way, every batch number has a reference to a clearly identifiable supplier lot number.

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Items: Components used in batch processing are items that are directly allocated to quality inspection and reception inventory via a supplier lot number. Every single item (as a component in batch processing) can therefore be documented and traced from the producer all the way to the interim or final product. Conditions: All changes in batch processing in terms of physical consistency as well as quantity output (e.g., losses in storage or handling) are visualized on the basis of the condition. Freely definable condition formulae may be configured and allocated to individual components as well as interim and finished products. Procedures: The methods of batch processes are assigned to the individual products (intermediate or finished products) via special operating instructions. “Product-specific procedures” also apply to instructions for all quality assurance measures of the entire production process.

Automatic Internal Commodity Movements Effective production control must be able to organize components and products in each department with the least amount of logistical input. These processes are automated in mass production. Technical systems for the movement of inner-corporate commodity material are therefore also elements of production control. CIM encompasses internal corporate logistics within an integrated product management system and takes place via the integration elements: Addresses: The production location, the components or products required, and the time the material is applied to the individual cost centers (addresses) are determined within production scheduling. Via CIM, this information, as an integral component of product management (industry-specific software), becomes an internal movement order for the automated conveyor system. Items: The individual components (items) or products (as interim or final products) are uniquely allocated to the cost centers or inventory systems. In just-in-time manufacturing of batch production processes, the plan orders (of individual items) are handed to the departments as production orders (with quantities and schedules) just in time. Conditions: The within-company allocation of costs to inventory, material movement, and batch processing is performed using conditions, which can be defined as expected or actual costs and assigned to each individual cost center (internal address) or item. Parallel to the production process, the determination of the

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production department price takes place for each individual component, interim, or final product. Procedures: Instructions regarding how the individual items should be handled in the production department (internal address) are specified in the process descriptions (procedures). This applies to all activities that are performed in process-related quality assurance.

Production Exit Capture The transfer of interim and finished products into interim or finished goods storage is preformed with production exit data capture. Labeling the finished products takes place in compliance with traceability guidelines. Unique lot allocation in this context is also performed via the integration elements: Addresses: After leaving the production area, all finished products, having been provided with a unique batch number, are transferred to a sales or shipping warehouse. The necessary tracking data, contained within the batch number, are documented through to the customer receiving point (customer address), therefore ensuring seamless traceability of all components. Items: The “item inventory account” enables on-line and real-time information concerning finished goods items and their available quantity in the shipping and dispatch warehouse. Every inventory entry and exit is recorded on-line, so that advanced production scheduling has access to the very latest sales data. Conditions: Address-specific conditions (customer conditions), which are applied to customer orders of individual sales items, must be defined via the special “address condition.” These address conditions are supplemented by the “address item conditions” and together form the basis for handling “special conditions” in sales orders. Procedures: The method used (FIFO, LIFO, etc.) to transfer sales items from sales storage to the customer is specified in the special procedures for sales order picking. Automated inventory systems are integrated into this process. They are therefore an element of an all-encompassing industry-specific product management system within the CIM concept.

Summary The objective of the CIM concept is to comprehensively supervise and monitor all production processes. This makes it necessary for the

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Figure 3.72

Production evaluation program group.

manufacturer of the operating resources (production machines and devices) to establish standardized interfaces that enable corporate-wide communication among the information systems (network). The degree of automation in production always calls for the equivalent degree of integrated communication. The observance of this fundamental condition is the prerequisite for progressive production automation staying current with technological progress. This leads to the fact that the respective communication software must be standardized to support various production devices, and must also be industry specifically applicable for a whole range of companies.99 This requirement enables the economic feasibility of a corporate-wide CIM concept for any size of business. At the same time, it rules out the belief that control and communication software slants the competition between small, medium, and large companies. The respective ROI calculation for CIM projects gives proof to these statements, and is a necessity for each streamlining investment.

3.7.3.9

Production Evaluation

One of the main tasks of product management is to analyze the production data from all production departments (Figure 3.72). Production controlling

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encompasses not only the continuous monitoring of the production process, but also the specific analysis of weak points in all production processes and cost centers. Evaluation reports from the cutting process, joint-product production, and batch process production, including all QC measures, are instantly accessible as real-time information. The maxim for management is to filter out from the flood of production data the “essential facts,” which are important for improving production output. The quality of corporate management software is also measured by the style and how many “practice-proven layout evaluations” are made available to the user.100 Any number of evaluations can be created using the PMI (Print Management Interface)101 previously described; these evaluations may be displayed on-screen or printed out. Analysis programs of the entire production process, from production scheduling to production control, have the continuous task of optimizing production processes. Some information, such as comprehensive target vs. actual analysis, is processed to support current production scheduling immediately on its accrual. This especially applies to information on the following:

Batch processing Inventory control Quality assurance Optimization procedures Cost unit accounting Target vs. actual cost accounting

Evaluation analyses of the entire production system can be created from all departments. Real-time information acquisition is the only method that enables the effective coordination of production processes. The most essential information concerning the production process must be made available to management (in AIS and MIS) 102 on an automated basis (Figure 3.73). The quality of decisions essentially depends on the quality of the data supplied. It is therefore necessary, for each “problem situation,” to supply those analyses that create “production transparency.” This ensures that management has an accurate basis for decisions. Complex data can be retraced via several levels to individual transaction values through “drilldown” access. The theoretically available potential for cost reductions can be comprehensively calculated from the “target−actual performance and material consumption analyses.” Permanent improvement in all production processes can be achieved only if there is a guarantee that the consumption

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Figure 3.73

Automated generation of area evaluations.

and performance data are subject to continuous control within the organizational process. In the end, the installed control function, together with the information system, determines the efficiency of the total process cycle and consequently the actual level of productivity achieved in the company.

3.7.3.10 Cost Accounting The purpose of cost accounting is to provide comprehensive cost controls and product cost calculations in the multistage cost accounting system. The variable costs of factor deployment in production are determined by valuating the deployment of factors (work, operating resources, materials, and knowledge), and assigning factor prices. The constant costs (production-independent costs) as well as the fixed-cost components of cost units are to be added to these variable costs (product-related costs). This leads to the total expenses of a company: With the integration of IT throughout all function and business areas, the statements on cost theory must be calculated arithmetically via the cost accounting system (as the evaluated measurement of productivity by economic activity).

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The cost accounting method of “flexible cost unit accounting,” as in the CSB-System, can be used to portray all the main “cost accounting models” shown in the literature. This accounting system records both the “assessment differentiating” as well as the “allocation differentiating” cost accounting methods. Consequently, there is no need at this point to go into further detail with regard to the systems of “assessment differentiating” budget, standard and actual cost accounting or those of “allocation differentiating” total and partial cost accounting. The grounds for this statement lie in the detailed visualization of the costs via the “component parts lists” for every individual process. The structure of the component parts lists (or the recipes in batch-oriented production) can be subdivided in whatever way required via any number of substructures (as subcomponent lists or subrecipes). The basis for multistage partial cost accounting is established by visualizing all variable factors in the component parts lists. The recipe and cost unit master is the central program module for cost accounting. It is the basis for the following:

Preliminary calculation (planned costs calculation) Material planning (material requirements) Calculation of production data Basis for APS

The master data basis structure is illustrated in Figure 3.74.

Recipe/Product Costing Master Data

Activities & Functions

Job Groups & Functional Groups

Figure 3.74

Structure of product cost accounting.

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Figure 3.75

Sample product costing levels.

The structure of costs calculation within this multistage structure is geared toward subjecting costs to a comprehensive cost analysis. The allocation of the individual levels is freely definable and may be structured as shown in Figure 3.75. Various manufacturing costs, production losses, overhead rates, fixed and variable costs, as well as value modifiers (conditions) are defined and allocated via:

Item master Functions Activities Conditions

to the cost unit for any number of subrecipes required. The portrayal of process costs as well as the physical modification of the cost unit is formed on the basis of user-defined formulae in the condition master. An example is shown in Figure 3.76. Cost accounting is a component of production and encompasses “flexible cost unit accounting” through to sales channel calculations using all cost accounting-based processes in the industry-specific software system. By expanding the component parts lists and adding freely definable fixed-cost components (items, conditions, activities, and functions), multistage partial cost accounting becomes full cost accounting.

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Contributions/Dues

Figure 3.76

Conditions for cost accounting.

The wide range of markup rates can be recorded in the multistage component part lists as activities, functions, conditions, or items. Therefore, all individual or plant-wide overhead rates can be incorporated into cost accounting. The overhead rates may be calculated as absolute values, unit-related costs, as well as percentage values of various parameters (in accordance with the algorithms stipulated in the conditions master data). The following assessment methods are a result of the various assessment approaches of determining factor performances (as variable and fixed costs): 1. Standard cost accounting 2. Actual cost accounting 3. Plan/actual cost comparison

Standard Cost Accounting If factor component valuation in the product parts lists takes place at plan price, the results are: Determination of the planned cost of each margin level including full costing Determination of planned costs per cost center (or production department) for the entire enterprise, divided into total variable and fixed costs

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Figure 3.77

Item master.

This results in the entire planned cost budget for the planning period specified. The consumption difference is determined by the difference between planned quantity and actual quantity, valuated at the planned price.

Actual Cost Accounting The actual costs for job performance (activities) are determined per time unit. The same applies to operating resources (functions). These actual costs enter the product parts lists as actual prices. The actual prices of materials are determined as variable average costs used in production.103 The current component prices are recorded as actual prices in the item master by (Figure 3.77): Daily price (weighted average of last business day procurement price) Weekly price (weighted average of last business week procurement price)

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Figure 3.78

Planned and actual costs in the item master.

On the basis of these two prices (daily and weekly price) the valid actual prices for Current valuation of the cost unit (as post-calculation in partial and full cost accounting) Invoiced actual prices for all work factors can be calculated for all cost centers throughout the company via the actual quantities of total cost unit production (Figure 3.78).

Plan/Actual Cost Comparison The cost center is at the center of attention during the planned vs. actual cost comparison. The settlement of various planned costs per cost center is performed by flexible cost unit accounting per cost unit. The actual values of the cost types from all cost centers are recorded and evaluated in financial accounting and cost center accounting. With the reconciliation of data from production and accounting the expected−actual cost comparison is achieved per cost type, cost center, and cost unit.

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Comparing reconciled actual costs (as a product of the actual quantity times actual price) with the costs recorded as expenditures in the accounts (per cost center or as total costs) gives the variances in value terms from the cost structures that are shown in the product parts lists. These variances are periodically defined as “calculation cost variances.”104 The “calculation cost variance” can be analyzed using the differentiated breakdown of the individual cost factors and consequently made available to management as a decision-making basis. The price variance is calculated from the difference between [actual quantity times actual price] and [actual quantity times plan price]. The “assessment-differentiating” prices for calculations and cost accounting are derived from human resource and product management, as well as from the assessment rates of the basic integration elements. The prices below are incorporated into the flexible cost unit accounting system as assessment rates for the component value consumption of all items: Daily price: The respective current prices are calculated daily as a weighted average (of goods received) for all items. Weekly price: The projection of the daily prices as a weighted average forms the cumulative mean for the respective weekday for all items, which are then shown in the list of regular items as current weekly prices. Planned price: The planned prices stipulated for a planning period are recorded in the item master for each individual item. These prices are valid for the plan period and, together with their stipulated values, are incorporated into the planned cost unit accounting and preliminary calculations. Settlement price: In the cutting process of joint-product production, all cutting products, in accordance with the cutting pattern, are assigned corresponding assessment rates. The internal settlement price of these value-retaining cutting products is calculated from these assessment rates. For cutting products with low or disposal costs, the calculated internal settlement prices (possibly negative) are denoted as “fixed price.” If individual cutting products from the joint product production process are also available as procured components, then the costs included in the cutting process are taken from the item master. These costs are also automatically allocated to the cutting product (item) at the goods receiving

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point. In further production processes, the cutting products created from the company’s cutting production can therefore be compared with any optionally purchased cutting products. The wide range of partial cost accounting systems can be visualized company specifically on the basis of the “allocation differentiating” structure of the component parts lists. By dividing all “individual components” (items, conditions, activities, and functions) into variable- and fixed-cost types, partial cost accounting can be converted to full cost accounting via freely definable stages. Technical production factors (as variable costs), as well as nonproduction-related costs (as fixed costs), can also be recorded for cost accounting by way of defining any number of component lists, which can be broken down into whatever branching structure required.105 The price levels determined in this structure of multilevel parts lists can be defined specifically for each product. They provide, for example, in batch-oriented production, the following statements from a cost accounting perspective, defined as variable subtotals: Materials price: The variable material components, assessed at both target and actual prices, are combined and defined as a material price at the costing level established for each company. The definition of the term material price illustrates that only materials used for the manufacture of goods are incorporated into this pricing process, at their weighted prices. Cost price: The cost price of the specific unit is determined by additionally calculating other variable costs with material costs, such as costs resulting from activities, functions, and conditions. Cost price is a general term used to describe the process of settling in full all directly assignable, variable costs to the respective cost unit. Break-even price: The break-even point is met if the materials required for production (as fixed-cost components) are of the respective cost unit yield “full capacity utilization.” The definition or establishment of these break-even subtotals for flexible cost unit accounting may vary from product to product. The break-even price is established as a company-specific and product-specific subtotal within partial and full cost accounting on the basis of the respective production (process structure) of each cost unit. Calculated sales price: The “theoretical necessity” to clear all company cost totals (variable and fixed costs) against the costs per unit produced arises from the cost accounting-related approach of the full cost accounting method. The price acquired from this process (including the calculable profit) is defined as the calculated sale price.

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Cost Bearer

- Materials price - Cost price - Break-even price - Sales price

Figure 3.79

Pricing in cost accounting.

The pricing procedure described above is shown in Figure 3.79. These calculations are used to determine preliminary planned prices, which can also be ascertained on the basis of actual prices in a post-calculation for all cost units (with the aid of flexible cost unit accounting). These values are in the item master, and can be accessed at any time for executive decision making. The cost accounting system visualized with industry-specific software (with industry-specific parameter settings) is known as flexible cost unit accounting. The “assessment differentiating” and “allocation” bases are included for the purpose of calculating multilevel gross margins.106 The illustration below shows the integration of the basic elements as well as the relation between human resource and product management, to aid in the visualization of overall operations in regard to flexible cost unit accounting (Figure 3.80). The comparison of allocated costs and calculated gross margins with the corresponding cost totals in accounting shows the factual visualization of the imputed performance vs. cost allocation in flexible cost unit accounting. The variance ascertained is known as the “calculation cost variance.” The variance analysis encompasses four cost areas:

Figure 3.80

1. 2. 3. 4.

Calculation Level

Valuated Resource Consumption

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Flexible cost-unit accounting.

Material costs Labor costs Operating resources costs Other costs

Material Costs The materials costs of the individual cost units are calculated at target and actual prices (daily or weekly price) based on the component parts lists.

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The material price per cost unit is calculated as a subtotal via the flexible cost unit accounting. The material price reflects the “material input price” per cost unit. The comparison of the materials usage costs (based on actual quantity) grouped by cost types, to the accumulated total of each cost type, enables the determination of calculation deviations per cost type for the given statement period.

Labor Costs Information on the performance of individual cost centers can be acquired from the comparison between the allocated labor costs from the cost accounting system and the actual labor costs incurred during an accounting period. Separating work into operational and organizational activities, in terms of cost allocation, arises from the need to differentiate between the variable- and the fixed-cost labor components. The allocation of labor costs to the respective cost unit takes place in accordance with the method explained above, in line with the company’s operational and productspecific production situation.

Operating Resource Costs Performance data for the individual operating resources are prepared as industry standard values from human resource management. The performance assessment, for machine and equipment productivity in the production process, is calculated for the unit “time.” The costs of the “functions” (as productivity in terms of operating resources) are allocated to the respective cost units in flexible cost unit accounting. The operating resource costs can be designated as variable or fixed cost components. The corporate-specific and product-specific situations are key factors in the allocation decision. The calculation cost variance of the assessed operating resource usage in the company is produced by comparing the allocated costs from cost unit accounting with the data acquired in accounting (according to cost types and cost center accounting).

Other Costs Based on the costs-by-cause principle, we infer that the distribution of other costs is divided into variable- and fixed-cost components via allocation differentiation. Finally, although all cost items in the company are based on the goods produced, the individual cost types can be allocated

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to varying “degrees” (direct and indirect) to the cost unit on a differentiated basis. Commonly used “default” methods for apportioning cost items that cannot be directly assigned generally consist of various forms of overhead rate “markup” methods. These distribution methods are portrayed here via the various “condition types.”107 The cost items (as cost types), recorded as “conditions” and distributed via the cost unit accounting system, can be periodically checked against the actual costs incurred through the accounting system. For cost centers, an “address-related” analysis is required for checking the cost allocation procedure in the distribution of the individual cost units to the cost centers. Based on the “address,” the reference between the individual cost units and the (1) internal address (cost center) and (2) external address (sales channel) is created and can therefore enable relevant assessments in a detailed analysis of performance and costs.

Internal Address. The cost centers in the company are responsible for costs created in the process of goods manufacture. The production process is visualized per each cost center for all cost units produced (as intermediate product, semifinished product, and finished product). The individual work factors (materials, labor, and operating resources) are allocated to the cost center-related cost unit via the component parts lists or recipe (for batch production). The calculation cost variance per cost unit and cost center is a result of the calculation of the productivity consumption for target and actual quantities, as well as the consumption of value at target and actual prices (via flexible cost unit accounting). In batch-oriented production, both the system of cost monitoring and compliance with operating material consumption guidelines are of significance for QC. The target−actual variance in cost center accounting is established by comparing the allocated cost types in the individual cost centers (via flexible cost unit accounting) with the cost types per cost unit recorded in accounting and broken down into specific periods. External Address. The task of recording address-related “special costs” (from goods production to special sales costs) is the responsibility of “sales channel cost accounting.” The visualization of special customer-related cost types is based on a customer address via flexible cost unit accounting. This customer-related cost accounting method is calculated as a pre- and post-calculation from target and actual prices. Submitting “internal addresses,” e.g., as individual cost points or cost center groups, to a profit center examination, also requires a detailed assessment of the productivity consumption per cost unit. Standard gross

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margin subtotals can be calculated per department using partial cost accounting within the flexible cost unit accounting system. These gross margins (up to GM4) can be graduated variably and company specifically. “Internal marginal costing” within profit-center accounting is therefore an integral component of partial cost accounting on a plan and actual data basis. Gross margins calculations for “external addresses” (customers) on expected and actual basis are managed by yield calculation or analysis in sales.108 The period gross margin totals, across all customers, can be aligned with the individual profit levels based on business assessment needs. The difference determined here should equal the total “calculation cost deviation.” The achieved precision can be made comprehensible by the size of calculation cost deviation value.

3.7.3.11 Production Controlling The aim of production controlling is to maintain transparency of the entire production system. It encompasses the entire analysis of all production processes, from APS to production exit. Controlling guidelines should be defined on the basis of predefined workflows. Production controlling is divided into four core areas: 1. Production process controlling, including APS 2. Integration controlling within the entire product management system 3. Performance controlling of production output 4. Presentation of the controlling results for the senior production heads

Production Controlling and APS Production management requires a constant up-to-date overview of all production processes. Malfunctions must be communicated via Control Message Management (CMM) immediately on occurrence. Unplanned production downtimes have serious effects on the entire product management and should be prevented with all available means. If malfunctions or interferences do occur, they should be localized directly and the cause remedied. For this purpose, the CIM concept must be implemented into the integrated industry-specific software system. The entire production process control system becomes an integral element of the industry-specific product management. The key aspects of production controlling should be defined industry specifically. Below are some examples of controlling measures:

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1. Periodic analysis (shift, day, month, quarter, etc.) of planned and actual data for all production departments (cost centers) 2. Control and coordination of requirement and capacity for all production factors through analyses of activities (labor), functions (operating resources), and material usage (materials) 3. Production order monitoring from sales order entry to production exit 4. Special evaluations as required for cutting and joint-product production of biological raw materials throughout the entire cutting process 5. Batch and process production analysis including single raw material optimization (standard optimization and recipe optimization) 6. Process-related quality assurance analyses for all departments and items 7. Costs control through cost unit accounting and analysis of consumption and price variance

Integration Controlling Production is the most extensive part of product management. Integration controlling reveals weak points that occur in the function areas (procurement, inventory, production, sales) as a result of insufficient integration. The integration of production into the industry-specific software system takes place via the basic integration elements: 1. Addresses: The production departments (cost centers) are the internal addresses. 2. Items: All raw and auxiliary materials, operating resources, as well as interim and final products are items. 3. Conditions: All process affecting the item are defined as conditions. 4. Procedures: Technology instructions, activities, functions, as well as all quality assurance measures are processes. The visualization of the entire highly integrated product flow takes place via the integration elements. They therefore form the vantage point for comprehensive integration controlling. Analysis programs in production can perform company-specific evaluations on individual integration elements or a combination of these elements.

Production Performance Controlling The real-time capture of all production data from all departments and production processes lays the foundation for performance capture (quantity

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in relation to time and staff member per department). Quality and performance control also needs to be incorporated in any incentive program designed by management. Special controlling measures are necessary for incentive programs: 1. 2. 3. 4.

Seamless settlements per department and per shift Supervision of quality standards Single or group performance recording Controls for due dates

Real-time statements and coherent performance documentation enable a high degree of employee acceptance regarding performance-related payment systems.

Presentation of Controlling Results The preparation of information needed for production controlling is performed with standard evaluation tools. These evaluations are created for three levels: Level A: Management Level B: Area management Level C: Department or team management In this context, management receives overall consolidated data. Area management must be furnished with top-down production reports. This means that these evaluations must be available to area and group management as well, on a real-time and on-line basis. Evaluations for production control must be organized in line with transparent structures.

3.7.4

Sales

The goods produced in the company, plus all resell goods, are marketed via the sales function. Sales is an integral part of product management and represents the interface to the goods market. Management has the ongoing task of developing the most economic strategies for both production and sales because of the reciprocal dependence of production on sales and sales on production. In this respect, the limit of capacity utilization of corporate production potential must be regarded as the main hindrance in terms of short-term sales planning. The positive effects from the optimum use of the scarce financial resources will occur only if sales targets are successfully met. This creates the opportunity to develop new products using the company’s financial resources and to market these products successfully. The medium- and long-term sales strategies required

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to this end are normally formulated by management on the basis of an opportunities and risk analysis. If development risks exceed companies’ existing financial capabilities, aims are made to “socialize” the risks through subsidies, while at the same time maintaining the privatized method of profit opportunities. It follows from this that subsidies are detrimental to the national economy and should only be used for selected strategic development objectives (e.g., in R&D projects designed to secure future survival). New products replace current products on the market that have reached the end of their life cycle. These current products threatened by new substitution goods drop in price as a result of the existing surplus production capacities during the transitional period of introductory pricing. The successful entrepreneur recognizes this market change and realigns the structure of his or her operating performance potential toward new, profitable products. In the information age, management expects integrated industry-specific software for corporate management to provide comprehensive support for the sales decision-making processes. In particular, the following sales procedures applicable to individual industries and companies must be recorded in detail: Definition of all basic sales data as facts and figures Visualization and continuous review of the organizational structure and the implicit decision-making processes Effective use of marketing instruments to service the market efficiently Implementation of comprehensive sales planning as short-, medium-, and long-term standards for corporate development Provision of a “lean” and efficient sales administration, including the fulfillment of all the communication and information needs of customers and other market partners Automation, to a certain extent, of the sales process using the CIM concept, as a response to the requirements for greater flexibility, shorter response times, and a continuing increase in productivity Promotion of profitable goods, and the ability to visualize early market indicators to support a pricing policy based on internal cost accounting and external market forces Acquisition of relevant analyses of all-encompassing sales data for the purpose of diligent customer service and continuous product maintenance

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Calculation of gross margins as a relevant assessment of profits in respect to all products and customers Maintenance of a powerful and lean sales organization and the ability to quickly adapt to constantly changing market needs create the necessary conditions required for maintaining a competitive edge. Efficient companies able to respond quickly will progress faster in day-to-day competition than slow companies held back by rigid structures. The basis for this approach is set out in flexible, application-driven, and industry-specific software (with adjustable parameters). The time-consuming task of retrieving information from an inefficient system thwarts the work of the most essential purpose of sales; to successfully sell to the market without any loss of system time. These shortcomings give rise to the demand for a state-of-the-art “information system for corporate management.” The principle of efficient corporate controls states that “the more complex the operating process, the easier the user processes must be.” The consequent support of this concept reduces software implementation times and increases the entire productivity of the information system, and consequently the company’s competitive edge. The market waits for no man; instead, it rewards the winners in the race for performance and innovation.

3.7.4.1

Basic Sales Data

The visualization of all sales processes in the company from an IT perspective requires precise data capture of necessary information. In addition to the basic elements of integration (addresses, items, conditions, and procedures), basic sales data are recorded as the “smallest component” in the industry-specific software system. The basic data in sales applies to all information, descriptions, texts, procedures, and forms generally required as valid information within all sales operations. The structured entry of these data into the software system can be managed by any skilled user; the result forms the smallest information components of the sales organization (Figure 3.81). Written as well as electronic forms of basic communication data are defined here. At the same time, all corporate codes of practice in terms

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Figure 3.81

Basic sales data program group.

of sales documentation and payment methods are defined.109 Flexible handling is the basic requirement of industry-specific streamlining software for corporate management. The sales process calls for a high degree of flexibility. Only those companies that meet the special requirements of each “new customer” through the interchange of information at short notice will be able to create the conditions needed for sales expansion. The commodity market of the information age is characterized by extensive market saturation. It is therefore important for companies to pursue specific strategies in attempting to displace the competition. Fast and flexible action is a necessary requirement to this end. The IT tools to be deployed for this purpose must serve this strategy and should not restrict it in any way.

3.7.4.2

Sales Organization

Structuring a company-specific sales organization requires comprehensive knowledge of the specific industry. The industry-specific software required for this purpose must be able to reflect all industry- and company-specific standards.

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The objective of creating a lean and powerful sales organization is directly connected with the need for an integrated information system. When restructuring sales, all distribution structures and procedures must be made available. Restructuring with the intent of streamlined efficiency in sales requires: All marketing activities to be directed toward the sales plan and to the profitable items The sales plan to be coordinated with existing and planned production capacities The price flexibility of the individual goods to be utilized to optimum effect throughout all buyer groups The administration of the sales process to be designed to be more efficient with the aim of a more active approach to servicing the market Streamlining measures to be effectively implemented by using comprehensive sales controls in communication and logistics Necessary adjustment measures and new activities to be continuously derived from the sales analyses A results-oriented profit strategy to be developed and continually adapted based on valid gross margins per item and customer An effective sales controlling system to be established throughout the entire sales organization The development of an efficient and flexible sales organization is vital for any company to achieve a high level of competitiveness in the market. In our information society, the life cycles of the individual goods are becoming considerably shorter. Therefore, quick and flexible companies will prevail over slow and rigid enterprises. The dynamic entrepreneur110 brings about change within the economy and causes progress within society. However, the positive effects derived from the choice of activities are crucial to the commercial survival of these innovative and dynamic companies. Effective corporate management in sales requires rapid and sound decisions by management when changes occur in the commodities market. The quality and relevance of market information in the information system determine the reliability of the decision-making process and, as a result, the positive, neutral, or negative effects for the company itself.

3.7.4.3

Marketing

The term marketing generally designates the market-oriented decisionmaking behavior within the company.111 This allows the statement that

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one basic task assigned to marketing is the procurement, analysis, and assessment of all market data ⎯ in other words, market research. In this context, the parameters that affect the goods markets must be ascertained and their sales-promotional effects assessed. A successful marketing mix can be planned on the basis of this information. A focused marketing effort presumes the evaluation of one’s own market position. This includes the following: Determination of the market share attained for goods considered profitable Insight into the preferences of the customer in terms of the goods offered Analysis of the conditions opposing an expansion of the market for key products Assessment of the existing development potential in the company with respect to the improvement of the existing product range and the innovative capabilities to develop new and successful goods Strategic measures should be planned on the basis of this comprehensive analysis of the market position and the innovative assets within the company. The utilization of industry-specific software in sales requires unique definition of scheduling and operational work steps. A “closed-loop” marketing system exists if the following conditions apply: Sales targets have been substantiated. A structured marketing and sales procedure has been stipulated. Weak points are directly identified with the help of consistent progress reviews. New sales strategies or adjustments in the sales process are carried out on the basis of market observations as well as research and development. The implementation of the above-mentioned management tasks requires detailed analysis of the sales market as well as an appropriate distribution structure. The task of market research is to analyze the supply and demand situation on the basis of exogenous market data. Various market conditions and sectors of the national market will not be dealt with at this point. It is assumed that all entrepreneurs will utilize existing market situations to their benefit, and will apply all the sales instruments of the “marketing mix”

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available to change these situations over the course of time to gain advantage, provided that there are justified prospects of success. In this respect, the parameters that influence the sale of individual goods must be defined. The respective spectrum of “parameters” or influencing factors that affect the commodity market must be assessed, and consequently this range determines the framework of activities within the marketing mix. Empirical market research must make qualifiable and quantifiable data from the individual parameters of the commodity market available to sales management. The required integration of all information accesses is illustrated in Figure 3.82. A relevant market analysis can only be carried out if the items to be examined are clearly differentiated, and the basis for the data are permanently reviewed and updated.112 The respective scope of the factors that influence the commodity market, as well as the extent to which they affect the marketing mix, must be determined. The key parameters in this context according to H. Sabel are the following: 1. 2. 3. 4. 5.

Customers Competition Channels, in other words, distribution Communication technology Controls, meaning government

Customers On the commodity market, consumers do not base their buying decisions only on rationally comprehensible, objective criteria. The influence of a wide range of preferences also affects the decisions to buy individual goods. The task of determining the motives that drive the process of selecting particular goods and influencing these motives in a purposeful way is the responsibility of advertising. The task of assessing and analyzing the preferences among types of buyers and developing a specific product and pricing policy is the responsibility of market research. This is the basis for executive sales planning. Products and services whose benefits are well established through competition or alternative goods generally encounter a greater interest in demand. Marketing of products or services is responsible for making these benefits known in quantifiable terms. The continuous comparison of the quality of goods between the competing providers on the market encourages innovation and competition. New goods with enhanced benefits displace conventional goods, and as such enable improved sales

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Figure 3.82 Integrated information from market analysis and the interdependency with marketing and the sales processes within the enterprise.

opportunities for the innovative company dedicated to the enhanced quality and benefits. This leads to positive effects for sales volume and profits.

Competition The quantity produced is determined by the demand for individual goods on the market. Under- and overcapacities in output potential among the providers is the result of the adjustment process throughout the economy in terms of balancing market supply and demand of individual commodity

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goods. The resultant activities on the supply and demand side depend on the specific existing market situation. The categorization of various market forms into accepted market types in national economies is fluid within a free market system. In line with dynamic and periodic reviews, there is a continuous process of change in the supply structures on the commodity markets, consequently affecting the level of prosperity in national economies. The level of competition within a market can be derived from the number of consumers and suppliers. This statement applies as long as competing goods possess comparable quality and the framework for unrestricted competition is upheld. Supply and demand determine the prices for products and services. This forms the basis for an agreement in which all the terms and conditions of the purchase contract are laid down. Conditions therefore consist of the following: the list price, the discounts, the method of payment as well as all the conditions that have financial consequences for the legal transaction. Target-oriented offers to finance (e.g., for durable consumer goods) are also conditions that are used as effective marketing instruments to stimulate sales. As competition increases, prices fall. Conditions offered by competitors range from numerous to unmanageable. Often, the aim behind this is to make it difficult for the buyer to calculate the net price, taking into account all the obvious and “hidden” discounts. The task of fully utilizing the entire price differentiation range is the responsibility of terms and conditions marketing to optimize variable gross margins in the company.

Channels of Distribution The choice of distribution channels for marketing goods has a dir ect influence on the potential success of companies in the market. The number of distribution channels available for the various types of goods (consumable, durable, and investment) in each case is limited. One of the prominent tasks of sales management is to secure the optimum combination of distribution channels for the company. The analysis of existing distribution structures and the search for innovative ways of specifically reaching the individual target customer groups offer the opportunity to release considerable streamlining effects in distribution. Achieving the most effective influencing factors (customers, competitors, channels, communication technology, government) should be seen as a decision-making criterion and guideline for management distribution policy.

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Communication Technology The information society is influenced by the distribution and use of technically available communication systems. Business information circles the globe at lightning speed, which leads to shorter response times among market participants. The task of deploying the means of communication on an organized basis, from the traditional media to communication on the Internet, is the responsibility of communication policy. The implementation of various advertising methods is dependent on the available means of the company as well as the respective products.

Controls (Government) The final section of this book, “Growth through Effective Corporate Management,” is dedicated to the framework conditions for commercial activity as set by government. The method and contents of market research projects must be planned in detail, implemented, and reviewed. The instruments to be used in this respect must be supported by the industry-specific software system. In the information age, the data required may be created by IT-integrated communication systems.113 With the help of telephone marketing, information in each case is queried, recorded, saved, and analyzed on a persistent basis. Every marketing project intended to determine market data must be subject to comprehensive planning. In this context, the intended target groups must be precisely defined and the prospect data required for this purpose prepared. The wording of the marketing survey or project itself must be conceived as a script template for all members involved. Based on these specifications, the necessary data are acquired with aid of the telephone marketing module (Figure 3.83). All data, facts, and prospects required for successful marketing are incorporated into strategic sales planning. Operative sales planning takes place in line with predefined periods and requires periodic reviews of all market and sales-related data.

3.7.4.4

Sales Planning

The guidelines for the full utilization of the available and planned production capacities and the utilization of the given opportunities on the sales market are incorporated into the data for the periodic sales plan. Sales planning requires the experience gained from previous periods as well as the knowledge acquired from market and product research. Accordingly, sales management organizes the coordination between sales

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Figure 3.83

Sample telemarketing script.

and production, as well as between market analyses for new goods and the influence on R&D activities in the company. A planning system such as this is generally based on existing knowledge/data that is projected into the future via various scenarios, calculation models, and levels. Elements integrated into the planning processes, such as expert knowledge, continuously updated values, as well as the constant flow of actual product sales, enable a dynamic process in which the plan reflects an extensive image of reality. This provides a basis for optimization and coordination, in terms of capacities within the individual corporate areas, as well as for special activities on the procurement market. Products coming to the end of their life cycle become increasingly subject to price pressures caused by the high level of overcapacities (as a result of falling market demand for these goods) during the capacity adjustment phase. This trend must be identified as early as possible and be incorporated into sales planning. New products must be brought to market maturity in good time, and fill the resultant profit gaps. This requires coordinated marketing programs that stimulate demand for the product, and expand the market position of the enterprise for these new goods.

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Sales Planning Scenarios An effective sales planning system is distinguished by flexibility and its potential marketing opportunities. Various sales scenarios are planned for all sales channels, and made assessable in terms of their quantity and profitability. They may be established on the basis of past customer and item data comparisons, and are included in the sales planning forecasts in accordance with predefined scenarios. In the planning for fresh products (e.g., foods) the planning processes may be subject to greater uncertainty than, for example, those in the consumer goods industry. If the company receives orders with delivery deadlines that make it impossible for the goods to be produced on time, corresponding forecast models must be applied to guarantee coordination between sales and production to meet the requirements of the individual situation. Not even the most effective prognosis model can forecast all conceivable and real demand requirements. Especially in fresh food production, the shortened period between production and consumption represents a key criterion for “freshness,” and consequently for the market acceptance of the products created. In such cases, the distribution for ready-fordelivery products must be organized in a way that is acceptable to the market by using industry-specific software and the corresponding “shortened or allocation routines.”114 The factors influencing the management of product demand (and consequently the coordination between distribution planning and actual orders received) are numerous. The potential range of actions for the product mix is based on the combination of the most effective influencing factors on the market. It is the task of marketing, in close coordination with sales management, to implement the right sales-promotional actions at the right time.

3.7.4.5

Pricing

Of all sales-promoting instruments, pricing policy has the highest priority. Sales planning for the product range to be offered on the market is based on the knowledge acquired through market research. Two models are used as a basis in the theory to explain pricing: (1) the theory of the various market forms, and (2) the behavior of the market participants. However, these theoretical models will not be discussed at this point. It is assumed that entrepreneurs will adjust to the constantly changing market situations and, therefore, specifically seek the most effective and most economical solutions.

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First, the market position is analyzed. Then, strategic sales planning is oriented in line with corporate strengths. In this context, the price of goods has three basic functions to fulfill for the company actively involved in sales: 1. A market access function 2. A profit-securing function 3. A personalized function

Market Access Function The structure of the offer price for goods of homogeneous quality is of maximum importance in the active approach to sales. Displacing competition on a commodity market by way of pricing is a course of action taken by manufacturers on a daily basis for them to fully utilize their production potential. Options for price differentiation arise from new sales channels, which create additional potential for profit across different market groups. The preferences among consumers, enforced through advertising, support or create opportunities for prices to be structured on a group-oriented basis. Reactions from competitors are a necessary consequence of price marketing. Competitors respond in line with market activity, taking into account the possibilities and restrictions existing within the company. Action and reaction in price marketing is a characteristic feature of a properly functioning system of competition in commodity markets within a free economy. This results in a selection process among providers, a process that is indispensable to increasing the additional benefits for the entire economy.

Profit-Securing Function In situations where goods production capacity is being fully utilized, the price determines profitability of the respective good. The aim of utilizing production to full capacity by way of a low pricing policy is diametrically opposed to the profit-securing function of a high-pricing policy. These seemingly contradictory functions result in a predatory pricing policy under the proviso of a free-market economy. The requirements (and therefore also the decision-making basis for the necessary market behavior by management) are the knowledge of the individual unit costs of the sales goods created when production capacities are being fully utilized.

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The traditional pricing theory has no significance in a growing economy that, from innovation and productivity increase, gives rise to progress and specialization. The traditional pricing theory is that the “long-term” equilibrium price is acquired on the basis of the natural price (cost price). This definition does not apply to a dynamic economy. Companies with uncompetitive production structures that have fallen behind the latest state of the art are forced out of competition, to the benefit of the most efficient and productive companies on the market. Productivity-enhancing investment is undertaken by companies being displaced only if external and internal conditions justify this type of approach; i.e., the corresponding goods have not reached the end of their life cycle and the necessary internal improvement in productivity can be achieved. The “right decisions” ultimately lead to positive effects for the company and therefore also for the entire economy. Tendencies in terms of pricing policies directed at developing new markets or ensuring profits depend on the overall assessment by consumers of the company’s position in the market as a supplier. The factors that influence the commodity market (qualities, quantities, preferences, distribution, and communication) within the particular range of goods offered by individual companies have a direct or at least an indirect influence on price flexibility. Goods that establish benefits above the level of competitors and/or alternative goods create an increasing profit-securing function for the supplier. It follows from this that only performance-oriented companies on the commodity market retain their freedom of movement in terms of pricing structures.

Personalized Function The method of assigning prices for individual target groups is laid down at the organizational level of the decision-making process. The strategic pricing policy is depicted on the basis of various price lists and terms that are defined for the individual sales channels and customers or potential customers. The available information and communication technology offers market participants the opportunity for more individualized business transactions. The large variety of conditions observed in the real economy between providers and consumers clearly shows the trend toward individualized business relations.

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Figure 3.84

Price conditions for buying and selling goods.

The vast amount of conditions found in the standard version of the CSBSystem reflects the ambitious efforts to individualize the buying and selling relations between market partners. Purchasing and sales relations are managed similarly, but in a “laterally reversed” way (Figure 3.84). This statement is affirmed by: General customer-specific conditions, such as: standing orders, special offers, special orders, will-call orders, consignment orders, etc. Item groups and customer conditions, such as product subcategories, product categories, “assortment” group reductions, etc. Customer-specific special conditions, such as: natural rebates, full quantity discounts, cumulated sales volume discounts, special assortment discounts, etc. Special customer prices for special quantities, periodic offers, rebate management, contracts, etc. The administration of price-relevant master data is of considerable significance. Sales flexibility must be integrated with on-line net costs, so that the profit-securing function is not overridden by the individualized function.

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The flexibility of pricing and conditions determines the achievable degree of price differentiation. Special price offers associated with periodrelated minimum quantities play a role in active price marketing to achieve better production capacities. Comparisons between managementapproved pricing policy and actual prices on sales orders must be performed on a continuous basis to enable the market position to be expanded while still maintaining the profit-earning capacity. These controlling functions are carried out in the AIS.115 The following price management and condition systems are organized and administered for the individual sales channels. Sales channel cost accounting is an indispensable aid in reviewing the bottom price level for quoting goods.116 In the final analysis, the net–net prices achieved on all marketing levels (following deduction of all terms) determine the gross margins achieved (from GM1 to GM4). The assessment of the gross margins achieved is part of the essential monitoring and decision preparation process throughout all sales channels.

3.7.4.6

Sales Channels

Price differentiation geared to demand and to optimum sales channels has a positive effect on the revenues that can be achieved in companies actively involved in the market. The task of sales policy is to assess innovative sales methods and to promote them on the market. The market success of each and every company depends on its degree of market penetration, the product awareness by the consumer, and the organization of effective, low-cost sales channels. The manufacturer is the starting point for all physical distribution of goods. The location of the manufacturing operation is therefore directly and closely linked with the potential target locations of the market and consequently with the consumers. The logistical requirements for the individual sales channels should be analyzed physically and on a cost accounting basis.117 Production and/or supply operations located close to the consumer are generally (in case of mass-market products for everyday use and consumption) preferred if the consumer must wait only for short periods between order and shipment. However, if these benefits are counterbalanced by other disadvantages due to location by the manufacturer, e.g., as a result of working hour-related or other restrictions that raise costs, then the consequence of prices is increased as a factor in competition for similar goods. The task of organizing and implementing the structure of individual sales channels in terms of information and communication technology is the responsibility of the industry-specific software system for corporate

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management. Sales channels for all types of goods can be divided into two groups: 1. Direct sales 2. Indirect sales

Direct Sales The search for direct access to the final consumer results from the manufacturer’s need to obtain the largest amount of independence for management in sales-related decisions. This desire for direct access to the final consumer conflicts with the pressures inherent in the most economic method of goods distribution. The development of a wide market, in today’s communication society, leads to the Internet. Generally, the communication with customers or potential customers takes place via the supplier’s Web site. Specialized portals enable companies to address larger target groups. The user interface of an e-shop must be geared toward the industry requirements of each and every customer. Intuitive user interfaces are an indispensable prerequisite for the success of a corporate-specific Internet strategy.

Indirect Sales The pressure to seek multistaged distribution comes primarily from the type of goods themselves. If the emphasis of the sales policy is on the need for quick market penetration, then only those sales channels that can be indirectly expanded (as the most effective sales channel) must be selected. Both direct and indirect “sales channel groups” also differ as a result of the necessary preproduction costs and lead times for market preparation and penetration. The existing financial resources of the company as well as the time available for market and sales development influence the choice of sales channels. Basically, multiproduct companies operate a mixture of various distribution channels. The technical opportunities offered by the information age open a low-cost, direct route to customers for companies actively involved in the market. By integrating communication and IT, the prerequisites for effective and controllable market coverage are created (Figure 3.85).118 In our information and communication society, telephone marketing and active telephone sales have increased considerably in importance. Products of every kind are sold via telephone sales, ranging from consumer goods to investment, financial, and service products. There are no types

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Figure 3.85

Sales channels program group.

of goods that remain unaffected by the innovative sales methods offered by modern communication technologies. Direct contact with the final consumer and the level of profitability achieved are crucial factors in this strong growth in active telephone sales. In practice, increases in productivity of 30 to 45% were achieved through using CTI systems. Active telephone sales reduced sales unit costs considerably and the market access costs were reduced to a minimum compared with alternative sales channels. The organization of conventional channels for consumer and hard goods via the specialist, wholesale, and retail trade requires detailed knowledge of the specific industry. The costs of the traditional sales channels must be reduced on a continuous basis and be visible as well (Figure 3.86 and Figure 3.87). Only a comprehensive subsidiary information system can ensure productive sales processing and profit protection at all subsidiary locations. Turning agencies and representatives into “co-entrepreneurs” calls for the promotion of a firm awareness of costs, and a profit-oriented approach to work by all those responsible for sales.

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Figure 3.86

Direct sales program group.

Profit-oriented remuneration for agents and representatives is of vital importance to the manufacturer for all types of goods. This especially applies to goods that are subject to price pressure in a competitive marketplace. An accurate, detailed, and up-to-date cost accounting system is an essential requirement for a profit-related system of commissions for those involved in sales (representatives, agencies).119 Linking the payment of commissions to the variable gross margins achieved, with absolute minimum prices specified (while, at the same time, stipulating minimum purchase quantities), is a recommended strategy for promoting an entrepreneurial approach to conducting sales on an active basis. The effective control of sales also encompasses real-time settlement of other sales activities. Sales activities associated with variable profit-related payment may be monitored and successfully serviced via representative and agency programs (Figure 3.88). Using variable performance systems to encourage sales staff as co-entrepreneurs is a sales strategy geared toward success. For most manufacturers, the direct sale of goods (factory accounts) is the easiest to monitor of all sales channels. This sales method provides the manufacturer with direct contact to the final consumer, allowing the manufacturer to acquire important information for product development

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Figure 3.87

Generating direct sales reports.

and pricing structure. A specialized survey and analysis of buying behavior provide important indications for marketing activities as well as the product or product range structure. In food distribution, increasing importance is being attached to direct home sales (in particular for fresh or frozen products) via mobile sales, also called driver-sales. In driver-sales, prior communication to coordinate appointments or delivery dates and to attract new customers is generally carried out via telephone marketing. The route planning and loading of the truck with the sales items highest in demand are crucial to determining the level of sales success. It follows from this that extensive organization of coordination processes between customers and the driver-sales personnel is imperative (Figure 3.89). The task of calculating the total costs for the individual sales channels is the responsibility of cost accounting, especially the calculation of sales channel costs. The comparison of costs and revenues throughout the individual sales channels provides information on the productivity of the selected sales method. Within the framework of growing globalization of the competitive marketplace, it is becoming increasingly important to open new markets beyond all national and language borders. As a general rule, the basic

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Figure 3.88

Program group for managing sales reps.

conditions that apply to foreign markets differ from those of the domestic market. Opening foreign markets requires that the industry-specific software system recognize, based on the selected customer, which export procedures and special terms must be observed when selling marketable items. This also clearly shows that the integration elements (addresses, items, conditions, and procedures) must comprehensively be able to reflect the respective country’s regulations in the interchange of communication and information. This is the only way to ensure that foreign markets can be serviced without any additional internal administrative costs (Figure 3.90).

3.7.4.7

Sales Support

The recognition that “knowledge is power” is repeatedly confirmed in the day-to-day trading of goods of every type. Those possessing more accurate information on competition, prices, volume, and speculative trends will create the basis to enable themselves to operate more profitably. It is therefore self-evident that all sales personnel are required to have real-time and “on-screen” access to profit-securing information at the time of the sales discussion to prepare for the sale. The task of the

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Figure 3.89

Generation of sales rep payment.

software module “sales support” is to filter special data from the large flood of sales data to furnish sales with differentiated and consolidated information. In the wake of the globalization of our economies and the resultant expanding degree of competition, companies actively involved in the market need to establish an efficient customer relationship management system. Total sales organization control with state-of-the-art IT (particularly Internet technology) encompasses new opportunities in enhanced customer orientation via: 1. 2. 3. 4.

Computer-Aided Selling (CAS) Sales Force Automation (SFA) Customer Relationship Management (CRM) Electronic Customer Care (ECC)

Computer-Aided Selling CAS systems are developed for active sales support. This involves the following measures:

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Figure 3.90

Country-specific driver-sales payment.

Sales management Sales controlling Sales control (internal) Field service control Call center service

In the application for industry-specific processing this support must be highly integrated. The individual software modules are dealt with in Section 2.2.3, “Communication Ware.” Increased transparency of sales activities and customer information is at the core of a CAS implementation: Comprehensive information on ABC customers, sales volumes, gross margins, active offers, potential customers, and market possibilities Technological support for all routine tasks in sales, i.e., integration of internal and external staff Utilization of all technology available for e-communication improvement via CTI (Computer Telephony Integration), e-mail, Internet, etc.

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Sales Force Automation The technological realization of increasing automation has changed CAS to SFA. In this context, use of all available communication technologies is at the forefront of sales support: Communication technology relevant for automated sales support was dealt with in detail in Section 2.2.3, “Communication Ware.” This basically applies to the following:

Electronic Data Interchange (EDI) Computer Telephony Integration (CTI) Internet and intranet E-mail and fax

Customer Relationship Management The aim to integrate the entire sales control process into corporate-wide IT gave rise to the development of CRM systems. Specifically, this means that sales controlling also involves the areas of marketing, sales processing, customer support and call centers, as well as sales management. The objective is to make all customer data available in the entire product management system of the company’s organization. CRM in the CSB-System places all relationship management aspects of customers and vendors into a transparent, IT-based process and controlling structure. In this context, customer retention, customer care, customer win-back, customer acquisition, as well as customer profitability are in the forefront.

Electronic Customer Care ECC is based on the Internet as its chief communication tool for customer–vendor relationships. We differentiate Internet communication based on the specific communication partners: Business to Consumer (B2C) Business to Business (B2B)

Business to Consumer. The e-shop is the most suitable platform in B2B for the manufacturer or trade company wishing to offer and settle the direct sale of its products via the Internet. Company-specific marketing strategies and sales activities to be implemented within the e-shop must reflect the corporate identity of the specific company. Harmonizing simple purchasing processes with the necessary security measures is a task of industry-specific product management software. The total integration of

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the e-shop into the industry-specific ERP system is an absolute necessity to ensure efficient customer management and the elimination of duplicate entries.

Business to Business. Adding Internet communication to the more traditional methods (e.g., EDI) of customer and vendor relationship management is a necessary consequence of growth on the electronic markets. Prerequisites to participate on the electronic markets must be fulfilled by every company in line with its market strategies, and are implemented within the industry-specific software (ERP system). The following requirements must be met: From the supply side of the vendor:

Product catalog (of significant products) Clear product classification and quantification Comprehensive descriptions of all products and services Transparent business terms Secure exchange of performance (goods against payment)

From the demand side of the customer: Identification system for all customers and potential customers Simple registration on supplier’s Web site Secure access to customer-specific information (e.g., open items, open orders, deliveries, current conditions, rebates, availability, shipping times, etc.) Optimized customer-specific processing of bulk orders Defined and secure monetary transactions, goods against payment, consideration of agreed credit lines and payment methods Connection of supply and demand on the basis of supply chain management: Integrating supply and demand into an efficient supply chain is the responsibility of Supply Chain Management. (Figure 3.91). The Internet is the ideal mode of communication for implementing Supply Chain Management. However, the necessary requirements of the electronic markets must be comprehensively met: Secure connection to the electronic market via Internet Standardization of protocols and data interchange formats Secure monetary exchange, including the corresponding international payment transactions

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Raw Materials Suppliers

Wholesale

Faster and safer information flow, reliable processes

Figure 3.91

Supply chain management.

Corporate processes that are triggered by the customers via the electronic market must consider syntactic exchange formats as well as the semantics defined. An electronically transmitted order via the Internet should abide by a defined syntactic exchange format (e.g., XML). From EDI management we already know that automated ordering can only be handled via uniquely identifiable order records. Descriptions concerning individual orders (e.g., customer-specific product requests) must also conform to a high degree of semantic precision. In addition to technical sales support, sales activities should be geared toward customers and customer groups that are essential for an enterprise’s profitability. It goes without saying that sales discussions should follow a priority based on the most profitable customers (with the highest gross margins). However, the task of placing these customers in an order of priority, taking account of the creditworthiness in the form of information on credit limits, as well as having the latest prices for the individual goods at hand during the sales negotiations, can only be pr ovided via an automatic information supply system. The task of providing the information required (for screen displays and printouts) for sales personnel, on request and on a user-specific basis, is the responsibility of the Print Management Interface (PMI). A wide range of sales support information is needed for individual sales channels. On-screen lists are also prepared via the list generator on a user-specific basis and made available in real time.

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Lists of non-ordering and non-supplying customers (on the screen or as a printout) provide information regarding which customers are failing to follow their regular order or delivery pattern and consequently are at risk of losing their status as “regular customers.” Early and quick response times by sales management are indispensable in categorizing customer/supplier relations. Failure to act on time will destroy the investment put into maintaining regular customers. The causes of slackened supplier/customer relations must be analyzed by sales management and the controlling department, and the knowledge gained must be incorporated into the operational decision-making processes of the relevant function areas.

3.7.4.8

Sales Processing

Organizing an integrated and efficient sales processing system throughout all sales channels requires specialist industry knowledge. Incorporating company-specific features into a sales processing system demands the ability for a wide range of parameters to be applied to the software system, from order management to accounting procedures. Creating a user-specific structure of individual sales work processes (guided by quality assurance) requires a comprehensive analysis of sales-related processes and the most efficient administration procedures (Figure 3.92). Starting with order management, the individual steps in the sales processing system are structured and set out in detail right up to the accounting procedure. At the end of the prospecting session in proactive sales there is, one hopes, a quote or offer. Gearing the offers to the needs of the customer requires an analysis of specific customer requirements. The degree of conformity to customer requirements and the reflection in the quote or offer increase the chance of successful sales for the provider. The quality of the offer gives the customer an idea of the quality of goods to be expected from the supplier. An inadequate offer cannot be subsequently improved by a “promise” to fulfill the order comprehensively. This means that where inadequate quotes or offers are submitted the chances of the supplier receiving an order (where there is competition) are reduced to near zero. Where “vendor preferences” apply, even if the vendor is categorized as poor, the supplier (despite the above-mentioned restrictions) may still receive the customer’s order. The task of assessing these “preference risks” associated with every offer is the responsibility of sales staff. Strategies for ruling out vendor preferences are specific to the individual type of goods, and should be defined by sales management. Objective performance comparisons between the products offered by different suppliers also depend on the subjective weighting of individual

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Figure 3.92

Sales processing and support.

features. Therefore, in addition to the price−performance ratio, the persuasive skills of the sales personnel or their argumentation expertise are of crucial importance to ensuring a successful sale. Order management processing differs according to the individual types of goods. For investment and higher-value consumer goods, a more complex procedure is necessary for processes associated with quote preparation and offer processing than is the case, for example, for foods and low-value, mass-consumption goods. These goods-specific and company-specific needs in the preparation of quotes and offers must be visualized via the industry-specific software system to establish the conditions for sales success. Once the offers have been submitted by the suppliers, the orders for mass-produced goods (food and beverages, consumer, durable goods) are awarded to the most efficient suppliers. In addition to the price−performance ratio, the quality assurance system under ISO 9001, implemented by the supplier, is increasingly becoming one of the important selection criteria applied by trade.

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Order placement for mass-produced products is normally based on the past performance of the goods to be supplied, and may result in standing orders. Order handling for all sales channels and types of goods must be organized efficiently, and at the minimum possible administrative cost. The individual work processes of sales must be structured industry specifically and company specifically, and are further enabled with userspecific parameters. It is only once these requirements are met that the sales department is able to deal with the tasks it has set out to do, without excessive system training and support. Easy-to-use operation and speedy order documentation ensure that customer orders received by phone are also captured directly on-screen. Orders are therefore available for further processing on-line and in real time. If the various product ranges are processed at different locations (departments or cost centers), the incoming orders must be passed on to these departments immediately on receipt of the order. It is difficult to coordinate production with the delivery requirements of short-notice orders for fresh goods and other mass-market products. Organizational support solutions must therefore be based on the most cost-effective way to allocate and move goods (especially perishable goods). The continuous assessment of deliveries helps improve the coordination between order intake and Advanced Production Scheduling (APS). Delivery assessment, together with sales forecast, is an important tool for demand-driven production. In addition, particular importance is attached to fresh-food production by the food industry. The implementation of reusable containers or reusable transport packaging is becoming increasingly important from the aspect of environmentally friendly commercial activity. The costs of reusable containers must be calculated for each individual customer. This requirement initiates considerable administrative outlay. It is therefore necessary to record the movements of all empty containers associated with the movement of goods (integrated with the dispatch control) and to analyze this data processing. The accounting procedures between the supplier and the customer must be organized industry, company, and product specifically. Industrywide standardization of accounting pr ocedures for the worldwide exchange of goods between suppliers and customers is not anticipated for the near future (short and medium term) (Figure 3.93).120 All accounting procedures must record the transactions between the addressees (supplier and customer) and account for every individual sales item in accordance with the defined procedures and the agreed conditions. All accounting methods are visualized clearly and comprehensively via the basic elements of integration (addresses, items, conditions, and procedures).

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Figure 3.93

Customer-specific tracking of reusables.

Paperless data exchange will become the rule: invoicing on paper, the exception. This development calls for error-free data communication on the part of everyone concerned. Software packages not certified (DIN ISO 9001) will no longer find customers, since the major trading partners will only approve certified data communication software (due to their own needs for security). As a result of the comprehensive automation of data communication for controlling, increasingly greater importance is being placed on reports concerning the documentation of sales processing. Automated processes to ensure accuracy are essential, particularly for all “value-related” transactions (unit, weight, price) in companies confronted with increasing competition. The ability to secure earnings potential is crucially dependent on the accuracy and efficiency of sales processing. Apart from the time-consuming physical task of reviewing mandatory records containing technical calibration information on

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endless strips of paper, the technical control aspect of paper-based systems is insufficiently reliable. These tasks must be processed exclusively with the aid of IT and allocated to automated differential report analyses. The essential information for sales staff must be filtered from the data on sales processing to provide the appropriate sales support, and should be available on-line for all active sales procedures, with the help of IT.

PCS Producer Clearance System Sales The sale of biological raw materials in the food and beverage industry is subject to special user-specific quality requirements. In this context, the following criteria must be taken into consideration: Customer-specific quality requirements for individual raw materials Implementation of quality assessment methods agreed on by the customer QC and evaluation methods (value and pricing methods) Integration into the entire product management of the industryspecific software Comprehensive contract management for quantities and qualities for all raw materials Delivery scheduling (quantities and qualities) with performance monitoring Production-exit data capture with creation of shipping documents and quality certificates Variable statement formats (time, quality, contract, as well as low and excess qualities) for customer-specific invoices and statements Evaluation of delivered qualities, quantities, prices, mark-ups, markdowns, rebates, etc. with the standard evaluation tools in sales analysis Comprehensive reusable packaging management for various units and picking systems Comprehensive contract-delivery schedules are established for raw materials with limited availability. Long-term customer loyalty is achieved by on-time delivery in accordance with customer requirements, and a timely monitoring of fulfillment results vs. the agreed-on contracts. The documentation of all qualitative as well as quantitative inspections must be performed completely and in accordance with customer agreements.

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Figure 3.94

3.7.4.9

Automated picking for faster delivery.

Dispatch Control

Competitive edge is often secured by minimizing the processing time between sales order entry and customer delivery. Increasing the number of orders via generally desired preferences such as:

High degree of delivery preparedness Direct picking Quicker order closing Direct delivery

stimulates the profit-securing function in sales (Figure 3.94). Maintaining the ability to accept orders right up to the last possible moment, and complying with the anticipated delivery dates, requires ongoing improvement in all coordination and logistical processes within the company. The integration of product management functions (procurement, production, warehousing, and sales), and integrating IT with CIM automation is absolutely imperative for reducing product flow times in the company, right up to delivery to the customer.

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The wholesale and retail trade is increasingly expecting shorter response times between order placement and supplier delivery. Every consignment of goods not supplied to the end consumer on time leads to lost sales. It follows from this that transportation logistics, as the last link in the chain, must guarantee that consignments are delivered on time. These requirements give rise to the needs for maximum flexibility in route and loading schedules, including giving travel directions to the driver of the vehicle. The comprehensive optimization of the routes, with universally applicable and economically viable criteria, is second to only the need to have the maximum possible flexibility in supply requirements. Figure 3.95 illustrates the entire order handling process from receipt of order to the final route check. Paperless picking can be implemented in any company on the basis of the following procedure, either stand-alone or hybrid: Customer picking Item picking Automated picking Customer-specific packaging and simultaneous price labeling is becoming increasingly important as a service by the supplier for r etail trading companies. Consequently, this labeling work must be integrated into the manual and automatic order picking process. Figure 3.95 shows the integration of price labeling into the order picking processes. The constantly growing demands for shorter order processing times call for continually more extensive degrees of automation of all the warehouse, packaging, price labeling, and order picking controls. The objective of the various forms of automatic order picking, if created for practical use, is to r educe flow times and reduce manual labor (Figure 3.96). Fully automatic order picking aims to replace all manual work processes by more efficient and faster automated order handling processes. Route-based delivery orders are fully processed automatically by the MDC master, picked, and transported to the precise dispatch center. The necessary container or pallet identification (e.g., labels), with all necessary shipping documents, is printed at the dock loading workstation, closing the entire order in the process. The streamlining effects caused by fully automatic order processing vary with each company and industry. The need to take account of specific

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Order Placement

Weigh Price Labeling

Route Scheduling

Figure 3.95

Order processing with manual and automated selection.

corporate structures must be reflected in concrete terms within the detailed CIM concept; in this context the effects of potential streamlining must be assessed comprehensively. Risks associated with automation can be reduced only by implementing standardized and practice-proven solutions. Any decision to invest in automation is a case of considering only those projects that not only minimize order flow times, but also enable considerable streamlining effects and consequently provide for a quick ROI.

3.7.4.10 Sales Evaluations The analysis and evaluation of all sales activities is a matter of ensuring survival for a market-oriented company. Drawing the necessary conclusions

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Figure 3.96

Integrated WLB in manual and automated picking.

in terms of which sales activities to initiate, based on all available sales data, requires the facility for different types of analyses (Figure 3.97).121 Sales analysis is the tool for comprehensive evaluation of the entire sales area. With sales analysis, all data and information is made available for the MIS, AIS, and financial controlling.

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Figure 3.97

Sales evaluation program group.

Evaluation requirements are generally set up industry and company specifically. An industry-specific corporate management system is expected to provide universally applicable analyses to be called up in the form of standard models. These sample analyses can be easily expanded upon with the help of the PMI tools, and can therefore be adapted to companyspecific requirements with minimal effort.122 The task of carrying out detailed and cumulative analyses of the data from marketing, sales planning, and sales channels is the responsibility of the sales organization. The corresponding company-specific and user-specific evaluations for each individual sales task must be produced via the analysis generator (Figure 3.98). For scheduling-related tasks, management must be furnished with decision-making-oriented evaluations. Staff involved in operational sales require sales data that promotes efficient selling. Making this data available directly on-screen, and organizing it to be accessible in a “drill-down” fashion is another task of the analysis generator. The responsibility of a modern information and communication system is to display analyses directly on the screen and to print these analyses to paper only on an exception basis. These data are analyzed automatically, inserted into the on-line statistics, and made directly available at any time

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Figure 3.98

Setting up sales reports.

both to the employees responsible for organization and planning and to those in the operational area. Both the user-based evaluations as well as the prepared evaluations (on-screen or printout) provide for a broad and differentiated analysis of all sales data, with on-line access for management and members of staff. Short-term progress reviews are an absolute necessity in sales. The shortest evaluation period is therefore 1 day. Building on this, a periodic view can be made using defined periods, and including history as well as current planning data. The decisions and measures to be taken in the event of any negative variances are defined at the management level, and may also affect sales strategies, depending on the extent of the variance.

3.7.4.11 Gross Margins Incorporating gross margins as an assessment benchmark for the earning power of individual sales goods is the inevitable result of the partial cost allocation method used in flexible cost unit accounting. The individual gross margins are a result of the difference between sales revenue and the specific cost unit of the commodity including direct and indirect costs.

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The calculation of the gross margin is therefore not a cost accounting function but the result of the sales proceeds analysis, derived from the comparison between the sales proceeds and the corresponding partial costs for the individual sales goods. In this respect, for the purpose of reviewing the costs and proceeds, the price basis (as planned or actual prices) bears no relevance to the above statement that the calculation of the gross margin is “not a cost accounting function.” Which costs in cost unit accounting can be allocated directly or indirectly to the sales item depends on the cost accounting method selected and how it is organized. The individual levels for differentiated cost allocation are defined specifically for each product via the flexible cost unit accounting. Flexible cost unit accounting may execute any form of cost unit accounting method required, both in the way it differentiates with regard to allocation (from the partial cost accounting to the full cost accounting systems), as well as assessments (from the budget to the actual cost accounting) on a company-specific basis. This gives companies the opportunity to assess individual goods in profitdifferentiated terms and to evaluate the various sales channels. As can be seen in Figure 3.99, the individual gross margins (GM1 to GM4) are evaluated in sales (and here specifically by way of the sales analysis) as a benchmark for assessing the profitability of the individual goods (items) and customers (addresses). The four levels of gross margins for the individual goods, as well as for the total quantity of goods sold within a specified period, are determined as shown in Figure 3.99. The

Figure 3.99

Gross margin levels in GM calculation.

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Cost of Materials (COM)

Direct Materials + Indirect Materials

(CP) COM + Variable Costs Breakeven Price (BEP)

CP + Fixed Costs BEP + Desired Profit

Figure 3.100

Calculation of gross margin levels.

sales price is the actual sales price achieved for the individual items, as a weighted average of all sales channels or customers (addresses). The individual calculated price levels, as reflected in flexible cost unit accounting, can be organized according to the individual item and company. The allocation of the individual costs on a differential basis is carried out per cost unit from the partial cost allocation, “level-related,” to the full cost allocation (on the basis of a defined rate of utilization). Then, the defined cost prices are a result of the differentiation in the allocation of the individual costs to the respective cost unit: The cost prices determined in flexible cost unit accounting (for each of the four cost allocation levels), multiplied by the quantities of the manufactured goods (items), result in the total of all allocated costs during the respective accounting period. As can be seen from the illustration, the “calculated cost variances,” which can be periodically calculated, are produced by comparing the totals of these computable total costs with the appropriate, corresponding cost types in the accounts123 (Figure 3.100). The analysis of the gross margins via the four gross margins levels contains key information for sales management on the assessment of the profitability of the individual goods and customers. With reference to the gross margin level per item (using total item quantities and a detailed sales and cost analysis), the assessment categories explained below are produced on the basis of the four gross margin levels. The key gross margin situations, based on average values for items and addresses, are displayed in Figure 3.101. The gross margins for individual and total values are divided into four results groups (I to IV) in Figure 3.101 (items = rows, addresses = columns). The GM item analysis can be performed for individual prices, average prices (taken from a weighted average), and total values (quantities times

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Figure 3.101

Assessment matrix for GM analysis.

prices). For the address-related GM analyses it is recommended that the customers (addresses) be divided into two average price categories: A > average value and B < average value The following descriptions are based on the result groupings of the assessment matrix of GM analysis for the items (sales goods) and addresses (customers): I. Positive Gross Margins (GM1 to GM4) If the gross margins on all four levels from GM1 to GM4 are positive, i.e., the actual sales prices achieved (as a weighted average) equal or even exceed the calculated sale prices, this company is successful in the market and its profits are secure. A company’s market strength can be ascertained on the basis of these gross margins, and compared to previous periods and plan levels. Companies operating positively in all areas generate positive gross margins (as average values) throughout all GM levels. II. Gross Margin Level 4 Is Negative If a company does not generate a profit, and if the costs of the goods produced have been portrayed correctly, the total value of GM4 is negative. As a result of being displaced by the competition, triggered by the low prices offered by companies using efficient manufacturing or by companies pursuing market development via an aggressive pricing policy, all providers encounter a decrease in revenue for goods of equal quality.

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The necessary corrective activities are to be inferred from the goods depending on their respective product cycle phase. These activities may involve cost reductions in any part of the entire spectrum of human resource and product management functions, and/or new profitable sales channels developed. III. Gross Margin Levels 3 and 4 Are Negative If the GM3 level is negative, then the GM4 is also negative; i.e., the fixed costs are not being met by the total company’s sales proceeds achieved using average prices. A gross margin analysis by customers in the categories A > average value and B < average value can show that sales to certain customer groups or certain sales channels may be profitable; this means that the GM3 and GM4 may be positive for these customers. Companies with this sales structure must expand or promote the profitable sales channels and goods, and cut back on customers and goods with poor returns. It is questionable, however, that the financial resources of these companies are sufficient to undertake investments to improve productivity. These measures are only commercially justifiable if a growing market sales volume is expected for the goods produced in the company, and if corresponding cost-reducing progress in productivity can be achieved and implemented on a short-term basis through viable investments. IV. Only the Gross Margins Level 2 Is Positive Companies with this cost and GM structure drop out of the market as competitors in the short or medium term, depending on their available financial reserves. This process can only be prevented with the aid of government assistance. However, the subsidies paid under these economic conditions to companies with difficulties consequently have negative effects on the rest of the economy and reduce or even destroy the prosperity achieved. The absence of any gross margin, even to the extent of the amounts required to meet costs, is compensated for in these subsidized companies by payments transferred from households and businesses (in the form of taxes). This results in negative financial effects for the entire economy. In addition, if the goods subsidized in these companies cannot be sold on the market, then the negative effects will take on even greater dimensions. The justification for preventing these negative effects within a national economy, from a economic and supply viewpoint, is the demand for more profitable use of financial resources, to strengthen the investment and/or

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consumption capacity through market participants operating profitably in a free-market economy. The gross margin totals (GM1 to GM4) of the four results groups (I to IV) reflect an accurate grading of the corporate result (from R1 to R4) and one that corresponds with the G/L accounts, under the following conditions: The costs allocated in the flexible cost unit accounting correspond to the costs totaled in the G/L accounts as cost types or by cost centers, so there are no essential differences in the amounts of the periodic “calculation cost variances.” The intermediate total results (R1 to R4) shown in the G/L accounts correspond to the cost definitions in the flexible cost unit accounting (as a differential reflection of the point above) defined as gross margin levels. The financial credit entries recorded exclusively in the accounts on the basis of individual customers or sales channels and retroactive price reductions (as rebates and discounts) are taken into account in the calculation of the gross margins. Because these address-related reductions cannot be reflected in cost unit accounting, they must be analyzed as conditions that have become “subsequently” effective in a reduction in revenues, on a customer-specific basis. For details, refer to the pricing for gross margin accounting as shown in Figure 3.102. The analyses required for this purpose are generated via the PMI and their effect on profits taken into account when calculating the gross margin.124 In everyday practice, we find a whole range of interim stages between these four results groups mentioned above, i.e., for the individual companies in their respective revenue and cost situation, which fluctuate considerably on a periodic basis and result in corresponding changes to the gross margins (from GM1 to GM4). The most pressing task of sales management is to periodically analyze gross margin development by goods and customers on a differentiated basis. Corresponding conclusions must be drawn from this analysis, and both strategic and operational sales plans and activities must be initiated without delay. Companies operating successfully on the market (with positive GM4) secure their market position and competitive edge. They are therefore able to create and finance new and innovative products. The prerequisites created for economic progress will benefit the company as well as the entire economy.

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Shipping Data

Figure 3.102

Pricing for GM calculation.

3.7.4.12 Sales Controlling The sales strategy stipulated within sales forecasting is the vantage point for a comprehensive sales controlling system. Periodic analysis of all sales data can be set up via special workflows. Sales controlling can be divided into four controlling areas: 1. Controlling of the entire sales process 2. Integration controlling within the entire product management system 3. Sales performance controlling for all sales channels 4. Presentation of the controlling results for sales organization

Sales Process Controlling Making procedures in sales part of the controlled measures is an absolute necessity for companies actively involved in the market. Sales management must be able to access all necessary information concerning all sales processes, as well as the latest data on customer satisfaction.

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Information about individual controlling measures are organized with special workflows: Market progress reviews to periodically compare the development of potential customers (A, B, C), quotes, and orders with previous year data or plan data Determination of order fulfillment as a result of the analysis between order entry and delivery, including partial deliveries Customer complaint analysis with comprehensive cause studies of communication data from Contact Management (call center) Lead-time analysis from order entry to delivery within the agreed time Analysis of faulty deliveries, returns, and other losses via a comprehensive product return flow analysis Seamless quantity and price controlling of all customers and items Comprehensive profit analysis by customer and item via marginal costing I to IV (see Section 3.7.4.11) Creation of risk analysis of insolvent customers as well as credit rate analysis to secure against losses

Integration Controlling Successful sales require the efficient coordination of all product management processes within the entire company. The periods between a customer’s order and the desired delivery are becoming significantly shorter. The elimination of intermediate warehousing, as well as the need to improve fresh product quality and shelf life have been responsible for this. The monitoring of coordination and visualization processes within sales is performed by integration controlling using: 1. Addresses: Identification as well as visualization of the supplier and customer takes place on the definition of a unique address. 2. Items: The physical content of any transaction in product management (products and services) is defined via the item. 3. Conditions: Terms of exchange in product management between supplier and customer are subject to binding arrangement by the condition. 4. Procedures: The exchange of contract data, as well as the physical process of product and commodity exchange, is subject to contractually binding procedures.

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Seamless integration controlling takes place using the smallest element of a transaction between a supplier and the customer: the integration elements. Industry and company-specific evaluations are transparently portrayed using all integration elements and their relations with the sales analysis programs.

Sales Performance Controlling The comprehensive controlling of all sales channels is necessary to review current sales strategies in real time. The output of the individual sales channels must be subject to constant evaluation via a target−actual analysis of the sales activities. This especially applies to the analysis of main and secondary sales channels: Agency and sales-representative distribution as well as wholesale and retail trade Direct sales to the final consumer via B2B and B2C via Internet (e-shop) and EDI (with large chain stores) Subsidiary and regional warehouse sales All other company-specific sales channels The profitability of all sales channels must be subject to constant monitoring. This gives rise to the need to make compr ehensive cost unit accounting for all goods (products and services) available to management on a real-time basis. The periodic determination of gross margins achieved by all: Customer and customer groups (addresses) Products and product categories (items) as well as the analysis of special offers: Customers, products, and special offers (address-item conditions) Customer-specific product design (addresses, items, conditions, procedures) require address-specific sales channel cost accounting. It is only under the proviso of these requirements that the profitable function of sales can be transparently organized throughout all products and customers and be objectively assessed (Figure 3.103).

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Figure 3.103

Sales channel evaluation.

Presentation of Controlling Results The special requirements of the varying levels within a sales organization must be structured with user-specific evaluation layouts: A. Management needs compressed data concerning all sales channels and all customers to achieve permanent control of the defined sales strategy. B. Sales managers must be able to access sales actions in detail (down to even the smallest promotional campaign). Detailed as well as cumulated sales data (quantities, prices, conditions, and gross margins GM1 to GM4) must be accessible with drill-down functions in a comprehensive area information system (AIS; see Section 3.4.2). C. All sales staff require a seamless view on the sales areas assigned to them. This includes all communication data (call center information), sales activities (as planned vs. actual analysis), as well as yield-relevant information concerning sales channels, customers, and items.

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Figure 3.104

Accounting and finance program group.

Controlling evaluations should be designed using the standard evaluation tools of the industry-specific software system, and made available as realtime information.

3.8 ACCOUNTING AND FINANCE Corporate financial activities are documented by recording all operational processes in the accounts and through financial movements triggered by such business transactions (Figure 3.104). The first standard programs designed for corporate use were therefore intended for “mass processing” in accounting and payroll. The standards laid down for these processes by statutory practices then required the development of standardized programs for these areas. Historically, from ancient commerce to the business sciences of the industrial age, all tasks in the accounting and finance function area involving corporate controls, liquidity protection, and performance documentation

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were dealt with on a centralized basis (i.e., in office writing rooms). The corporate process of physical goods manufacture was thus isolated from data processing and operational accounting and controlling processes. The CSB-System software solution for corporate management, however, is geared toward on-line and real-time data capture and processing throughout the entire goods production cycle, and in line with the current means of the information age. It follows that the structures of the industryspecific CSB-System must be adjusted to wholly encompass corporate processes. The shift in emphasis from financial matters to human resource and product management in the organization of information and communication is illustrated in the comparison between the traditional categorization of software and the new categories in integrated corporate management, as shown in Figure 3.105. According to the traditional perspective, the integration of corporate processes is performed on the basis of the general ledger in accounting. Therefore, the general ledger as the central integration element125 is the central component of the SAP R3 System. In this sense, purchasing takes places via accounts payable, sales via accounts receivable, and personnel and the administration of assets and materials via these five “contributory accounting units.”126 Cost type, cost center, and cost unit accounting as well as calculation and results are thus also integrated components of the general ledger. They, too, have no real “on-line and real-time relation” to the process of the evaluated performance consumption in the production of goods.127 The concept of an integrated and company-wide system for on-line and real-time data capture and processing was installed within the CSBSystem based on the assumption that every competitive company will utilize the commercial opportunities offered by information and communication technology. In this concept, the production of goods is the center of attention of corporate management. The estimated productivity result is directly recorded in human resource and product management terms, using IT and depicted on a “1:1” basis with the actual production process. The integration of the functional areas “finance and accounting” with “human resource and product management” takes places with the basic integration elements: addresses, items, conditions, and procedures. The integration core in the CSB-System is based on the universal integration of these four integration elements and their ability to reflect all economic data, information, and facts (as smallest elements). Accordingly, accounting and finance concentrates on portraying the accounts-related cross-checks for all human resource and product management processes from an accounting aspect. It follows that cost accounting is an integral element of the goods production process. Consequently, the estimated utilization of productivity throughout the company can be portrayed in “real” terms

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Figure 3.105

Standard software outline: classical vs. integrated approach.

via flexible cost unit accounting, differentiated according to assessment and allocation.128 As a result of the sales revenue analysis, the calculation of the gross margin enables the results of entrepreneurial activity to be clearly identified with respect to each individual product (item) and customer (address).129 The periodic comparison of allocated costs (via flexible cost unit accounting) with the costs posted in accounting produce the “calculation cost variance.” Calculable variances in revenues are calculated on the basis of the gross margins, differentiated on the basis of the profit levels, and in respect to the interim profit totals calculated accordingly.

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The analysis of these cost and yield variances between product management and accounting enables management to formulate and implement decisive controlling instructions. As previously mentioned, the accounting tasks to be carried out for labor and operating resource accounting are derived from human resource management. The standard programs payroll accounting and asset accounting fulfill all legal requirements within the integrated human resource management. The tasks of financial accounting and cost center accounting within a corporate management system are to fulfill the requirements in terms of orderly bookkeeping, as well as periodic closing procedures and balance sheets for each individual company, including the consolidation of an entire corporate group. The comprehensive integration of human resource and product management with accounting and finance ensures that these tasks can be performed efficiently and effectively and without the costs of duplicate entries. The CSB-System controlling function has direct access to all cost- and revenue-related data (integrated and in real time) by using the analysis procedures shown in the “management and controlling” program modules. Controlling is therefore not merely an exclusive accounting task; it is integrated into the CSB-System and affects all corporate processes “top-down.” (For example, this could mean that it directly influences each individual process in goods production and sales.) The control functions available range from consolidated totals to checking individual source documents in product management.

3.8.1

Payroll

The work performed by all employees is recorded via human resource management. All time-related data required for the compensation of the human labor factor enter the payroll programs by way of integrated time management (Figure 3.106).

3.8.1.1

Basic Data Payroll

The basic payroll data must be recorded and maintained as required to effect settlement of payment for labor supplied. Effective and user-friendly data processing is highly emphasized by software services in terms of administering all basic data.130

3.8.1.2

Accounting Data

Accounting requirements are a direct result of company-specific payroll systems as well as country-specific and state-specific legal requirements.

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Figure 3.106

Work statistics.

Performance-related pay encourages enthusiasm and consequently places the “performance principle” at the center of corporate activity. The performance-related data prepared in human resource and product management are then used in payroll accounting for the purpose of calculating payment amounts. Payments resulting from this procedure are automatically prepared. Payroll-related cost data are generated, in integrated form, from financial accounting as well as cost center accounting. The cost accounting analysis of these cost types, the comparison between the actual and target costs, plus the task of ascertaining the calculation cost variance are also carried out in financial accounting and cost center accounting.

3.8.1.3

Closing Operations

The task of the program module “closing operations” is to automatically administer monthly recurring closing operations and the preparation of data for each new month. Every industry-specific software package is expected to analyze the necessary data required in line with legal requirements and to make it available on request. The electronic archival of all payroll accounts and legal recording simplifies routine tasks and streamlines office work in human resource management considerably. The reduction of all excess administrative work is emphasized by modern standard payroll programs.

3.8.1.4

Payroll Evaluations

Analysis of individual salary types and personnel costs per cost unit (i.e., product cost) can be acquired from the payroll evaluations. Effective

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personnel cost controlling requires a differentiated evaluation system. Accordingly, all evaluations should be freely definable and accessible to any analysis method.

Labor Costs ⎯ Budgeting Personnel cost planning within the framework of total cost budgeting takes place via “net gross plan calculation.” Budgeting of personnel costs can be performed on the basis of departments, cost centers, corporate areas, or any other grouping required (via freely definable personnel lists). Planned personnel cost calculation takes place on the basis of a single net−gross calculation. The integration of asset accounting into financial accounting is a preliminary condition for an all-encompassing information system. The interpretation of payroll cost analysis and management decisions based on these is geared toward achieving continuous improvement in productivity. In the final analysis, an increase in labor costs and consequently higher wages and salaries as a reward for labor can be justified in any company only on the basis of the additional revenue generated. The extent to which the generally applicable wage and salary standards are economically viable in a rapidly changing society can be assessed on the basis of logical thinking. Economic activity is automatically regulated within the economic cycle to the detriment of the weakest economic units, while invigorating the most competitive. Corporate management working positively is geared toward increasing productivity. It follows that corporate management must divide the rewards of actual productivity increases between increased wages and salaries and capital growth in a way that is both fair and proper and secures the company’s future (Figure 3.106).

3.8.2

Asset Accounting

The capture of all operating resources and investment goods within an enterprise is performed within Asset Accounting. The purpose of integrating asset accounting into CSB-System industry-specific software for corporate management is to simplify the administration processes of assets, to automate all routine tasks, and to enable year-end closing and evaluations as efficiently as possible.

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3.8.2.1

Basic Data Asset Accounting

Capital assets recorded with the use of data technology must still be in accordance with legal and accounting-related requirements. The respective regulations on the registration, assessment, and depreciation of capital inventory are based on the aspects of business law, corporate tax law, and perhaps other laws as well. Entry of all assets is performed based on asset groups (with any group definitions required) via the asset master, which manages the data of asset accounting. The presentation of reports such as asset status, balance sheets, and other evaluations is also defined in the basic asset data. The opportunity to balance the allocated costs of goods production with the actual depreciation values results from the allocation of assets to the individual cost centers. The calculation cost variances are shown in financial accounting as well as in cost center accounting under the corresponding cost types.

3.8.2.2

Asset Processing

The processing of the individual asset items extends to all accounting processes, as well as the recording of total quantities and values in the asset accounting system. The following need to be processed in particular:

Acquisition of assets Quantity and value-related changes Automatic depreciation determination Determination of profit and loss effects resulting from asset changes Transferring assets Recording asset retirements

Individual postings in asset accounting take place via a separate accounting area known as “postings in asset accounting.” All movements and transactions as well as partials are posted here. The depreciation types may be freely defined and can be based on any algorithm required. Depreciation types can be changed whenever necessary and can therefore be adjusted to new legal requirements (by changing appropriate parameters).

3.8.2.3

Asset Evaluations

One of the tasks required of any industry-specific software system is to provide the relevant necessary analyses. Asset items must be summarized in an “analysis of fixed assets,” such as stipulated under governmental tax

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laws. In addition, a file on the history of every inventory item must also be kept. Separate evaluations must be produced for accounting reports and the status of assets in accordance with the requirements of the specific company.

Leased Inventory Management Leased inventory management is a necessary function in various areas of the food and beverage industry (e.g., breweries, beverage producers, beverage retail, coffee roasters, etc.). The management of leased assets encompasses the following procedures: Departure from inventory to recipient (lessee, owner, etc.) Return of asset to inventory (for long- and short-term matters) The following services are also an element of leased inventory management: Object Management: Every object is allocated to an inventoryreceiving center as an address. The operator or owner is also registered as an addressee in object management. Contract Management: In contract management, the contract contents are defined and classified: Standard loan management Amortizable loan Redeemable loan Financing loan Subsidy management Lease management Saving accounts Deposit management Interest calculation The central element in leased inventory management is object management. Here, the objects are assigned to the addresses, definitions, as well as the specification of contracts for operator and owners. Flexible evaluations (via SSM) can be produced based on allocated sales representatives and projects.

3.8.2.4

Year-End Closing

The work required for preparing the year-end closing accounts must be geared toward the balance sheet requirements under business and tax laws. This work involves:

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Generation of all closing balance lists Comprehensive maintenance and processing of inventory data History file printout Repeatable annual accounts Asset update

Integrating asset accounting into financial accounting and cost center accounting ensures that all data on capital assets are available for further processing and balance sheet accounting (Figure 3.107).

Figure 3.107

Lifecycle trade balance.

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Figure 3.108

3.8.3

On-line accessible accounting functions.

Financial Accounting

Product management and human resource management processes are directly recorded in the CSB-System during processing or with the movement of goods, and simultaneously these data are made available for further use by all the corporate areas concerned (Figure 3.108). This on-line and real-time information and communication technology enables a shift of control, operational accounting, and results determination away from finance to the applicable human resource or product management area. This frees the accounting department to concentrate on accounting crosschecks of all human resource and product management processes. Financial accounting, as an integral component with an accounting focus, is incorporated fully into the corporate management system. The high degree of integration results in considerable streamlining effects within the financial accounting organization. This avoids any duplicated processing (of the operational data and accounting data) and consequently enables tracking and tracing of superfluous and duplicated administrative work. The tasks of financial accounting are to register all business processes, from an accounting aspect, to adhere to the principles of orderly bookkeeping, as

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well as to comply with all the tax law regulations.131 On the basis of these key aspects, financial accounting can be divided into the following five groups.

3.8.3.1

Basic Data Financial Accounting

The basis for financial accounting is created by comprehensively defining all basic accounting data. All entry-related data and facts must first be recorded as the “smallest components” in financial accounting, based on the defined accounting framework such as tax rates. Bank information and interim accounts must be administered to process payment transactions: National payment transaction processing Execution of foreign payment transactions including foreign trade regulations Bank data import in paperless payment transactions Settlement of all debit entries (suggestions and payment) Defining standard posting comments and variable user-entered comments simplifies accounting tasks in the general ledger. In addition, user-specific notes and workflows are shown to aid any posting and closing tasks (Figure 3.109).

3.8.3.2

General Ledger

Postings resulting from human resource and product management-related transactions take place fully automatically within the integrated data flow. Specifically, these automatic postings in the general ledger are executed for the following areas: Human resource management via payroll as well as asset management Product management via procurement inventory production and sales This posting information is simultaneously integrated and transferred to cost center accounting. Duplicate entries are therefore entirely ruled out, which then creates considerable streamlining effects in financial accounting. The recording of manual entries for all business transactions not automatically imported can also be recorded in 12 + 1 periods and for two fiscal years.

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Figure 3.109

User-specific financial report functions.

Compliance with legal requirements is a given necessity. Comprehensive support is provided for posting in the form of automated calculation, transfer, and distribution as well as the on-line display of financial controls. This considerably simplifies and streamlines accounting work. Specifically, the following support functions are part of an efficient accounting system: automatic import of human resource and product management data, sales tax determination, discount calculation, balances carried forward, cost distribution keys, plausibility checks, control totals, outstanding items search, as well as on-line display of all work process-related information. This list is not exhaustive and is intended to demonstrate that streamlining effects can be released by gearing industry-specific software toward comprehensive efficiency.

3.8.3.3

Payables and Receivables

Payables and receivables are automatically generated as a consequence of the processes in administrative accounting, goods exchange as well

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Figure 3.110

Payables and receivables functions.

as payments between external economic units and the company. Payables and receivables resulting from product management are distinguished in the balance sheet from “other” (nonproduct-related) payables and receivables. The integration of product management into corporate management also involves the integration of accounting (and therefore the connection to receivables and payables). Accordingly, the integration elements addresses, items, conditions, and procedures are the smallest possible components in the information processing control system. It follows that the accounts are processed on an individual basis (as addresses), and the assessed movements of goods on a goods-specific basis (by items), at the agreed on terms (conditions), and in accordance with the selected communication processes (as procedures) in the interchange of data between supplier and customer (Figure 3.110). The starting point for IT-based payables and receivables is at the goods physical movement point. Based on the order to the vendor and verified by incoming goods reception, the confirmed accounts payable is created through the acceptance of quality and quantities. A corresponding data

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technology process is also linked to the creation of the receivable at the “goods-out” point (loading dock). Therefore, it is not necessary to focus on the generated document for the ledger,132 but simply on the on-line and real-time physical movement of goods, which creates preliminary data for controlling. The “core” of all information within the CSB-System is linked with actual product movements. This procedure aids in establishing a new dimension in the integration of the goods processing into IT. Corporatewide controlling functions in product management are integrated into this process on the basis of on-line and real-time process monitoring. Access to all handling procedures within the information processing system, in terms of original receipts, is ensured via the digitalized archival system in office management. The facility to access the file archive for outstanding items (payables and receivables) means that all documentation that is part of a transaction can be directly displayed in continuous and chronological order on-screen. Processing outstanding items, clarifying disputed items, initiating payment transactions, and managing arrears interest requires comprehensive integration throughout the entire corporate management system. The management of outstanding items consists of monitoring order and payment transactions from payables and receivables on a due-date basis. Deviations from the agreed payment procedures, as well as any due receivables or payables, must be processed in real time. In this respect, short- and medium-term financial planning is one of the prerequisites for protecting liquidity in an expanding company. Quality fluctuations and other negative influences on products within operations can cause an increase in receivables. The real-time monitoring of outstanding items (in this case receivables) will provide important information for management concerning the need to take prompt corrective action. Access by controlling personnel to the MIS (to all processes including archived documents) is vital for reducing response times, therefore also helping to intelligently streamline administration.

3.8.3.4

Business Transactions

The closing of accounting periods, from an administrative and data technology aspect, is carried out via the “business closing account” program module. Closed periods must be “bracketed” in compliance with set accounting standards. This process, however, should not have any restrictive effects on the analysis of stored data.

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In traditional financial accounting systems, the closing accounts are closely linked with the analyses. In this process, data from previous periods are withdrawn and therefore no longer available for any further analyses. Even individual entries must enable unrestricted access for any analyses, even after the accounts have been closed. A new fiscal year is opened once year-end closing has been effected and the carry-forward entries are generated automatically. All analysis options (including previous period comparisons) remain unaffected by this year-end closing. The evaluation programs therefore have comprehensive access to “closed year” data.

3.8.3.5

Balances and Evaluations

The purpose of drawing up balance sheets of the operational accounts is to determine the respective annual results in the company. In a wider sense, the term balance sheet also covers the calculation of assets and capital, the profit and loss statement, as well as the creation of the annual report. Good accounting principles as well as commercial and tax regulations must be observed when preparing the balance sheet. Key criteria for general balance sheet requirements are:

Orderliness (balancing in line with business law) Clarity (detailed presentation) Validity (objective valuation and observance of legal requirements) Comparability (context and continuity of balance sheet accounts) Completeness (including possible commitments and risks arising from contracts) Country specifics for the United States, Canada, European nations, etc. Closing the posting period brings about a defined year-end closing as well as the ability to undo the year-end closing Access to all cost center postings and account information for all cost accounts on-screen In line with the above requirements, financial statements should be produced with the comprehensive support of the industry-specific software and should observe all formal requirements as well as valuation guidelines. The layouts are individually defined according to their purpose, e.g.:

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Balance sheets Flow statements Profit and loss statements Business evaluations Annual reports Budget evaluations

Every authorized user can access them via on-screen display or printout. Freely definable evaluations (business reports, profit and loss statements, as well as annual reports) enable management to place more emphasis on critical cost and yield areas. The potentially large number of specifically applied analyses creates the need for a user-friendly comprehensive “management analysis system” in the company-specific software system. The flow statement was developed by W. Bauer for financial control purposes.133 In this connection, the inventory changes of the individual balance sheet items were determined as a difference between the initial value and final value for the specific review period (monthly, quarterly, and/or yearly). Balance sheet comparison for two periods takes place by accumulating balances and arranging them according to “source of funds” and “application of funds.” If one ignores the changes in “cash resources” (in the period comparison): The source of funds will result from an increase in assets. The application of funds will result from an increase in assets and a reduction in liabilities. The result of the “grouped” comparison of the sources of funds and application of funds is a change in liquid assets. An increase in liquid assets reflects a positive difference between sources and applications of funds; a decrease, however, reflects the opposite development. The subsequent effects of asset redeployment on liquidity are shown in Figure 3.111. Neubert developed the financial flow calculation from the insight that all expenses and proceeds (when reconciled to inventory changes) equal expenditures and income. The fundamental advance from the flow statement is to the cash flow statement, which applies a comprehensive financial control not only for balance positions, but also to the cost and proceeds positions (from the income statement).134 Cash Flow Accounting in the CSB-System is based on these theoretical approaches. Figure 3.112 shows a company’s development of periodic profitability.

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Inventory

Retained Earnings

Figure 3.111

The flow statement as a global instrument for financial controlling.

Cash flow accounting not only helps to determine the level of the company’s self-financing capabilities but also to evaluate the trend in liquidity.135 Fluctuation in profitability resulting from normal business activity can be ascribed to the following: 1. Cost variances 2. Changes in the yield situation

Cost Variances The allocation of costs to the cost unit within the manufacture of goods takes place via flexible cost accounting.136 The calculation cost variance

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G ross I ncome M eans of F inance P etty C ash B anks

I ncome I ncome

C ash Operat. Expenses Extraordinary Expenses

Available cash from operations increase

Total Liquidity

Total Cash Available

Figure 3.112

Periodic cash flow statement.

results from the comparison of all allocated cost types, calculated via flexible cost accounting to the posted cost totals in accounting. The focus of goods production process control, by way of flexible cost unit accounting is monitoring the physical consumption of productivity in every process of product management. Accordingly, the calculated cost variances are created by three influencing factors: Genuine difference in the amount of productivity between the target vs. actual for goods production Difference in the defined values used for flexible cost unit accounting vs. those used for accounting cost totals Expected/actual differences of overhead costs Production controlling can identify the deviations of production work and materials, on-line and in real time, so that all the necessary corrective measures are organized on a process-supporting basis in real time).137

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The examination of the theoretical “standard costs” derived from flexible cost unit accounting can take place only on the basis of analysis within corporate accounting. From the procedures of allocation differentiation and depreciation differentiation in flexible cost unit accounting, the calculation deviations for target and actual values can be determined by the comparison to the accrued expenses of each cost type. Figure 3.113 shows the difference between costs figured from “costunits” and costs from actual “cost-type” totals. These cost types are grouped according to the classification of the elementary factors (human labor, operating resources, and materials). It is based on the cost organization of flexible cost unit accounting and is divided into four cost areas:138

Material costs Labor costs Operating resource costs Other costs

The above division into four main cost groups can be subdivided according to company-specific requirements, and is based specifically on the accounting-related needs and possibilities of product-differentiated recording of cost components. The differences determined in the calculation variance are made available for corrective measures in MIS and AIS.

Changes in the Yield Situation Goods without any comparable competition enjoy increasing trading volume, and hence an increase in the company’s yield situation. The opposite leads to a price decline for goods that are subject to tough competition, and diminished yields, if the respective manufacturing costs are not brought down in relation to this trend. Yield controlling also encompasses the yield changes throughout all product groups, as well as cost and profit analysis for all sales goods and customers. As shown in Figure 3.114, the gross margin totals (GM1 to GM4) reflect the individual subtotals (R1 to R4), provided the costs of the individual goods are properly depicted in the flexible cost unit accounting. The variances identified between the GM totals (GM1 to GM4) and the results subtotals (R1 to R4) are derived from the revenues recorded directly in the accounts. This also includes all customer-related reduced revenues, and receivables lost (caused by bankruptcies and settlements). The financial debits (rebates, commission payments) subsequently produced by customers reduce address-related gross margins and consequently create a variance from the individual gross margins. These reduced revenues must be calculated in the margin analysis on a customer-specific

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Labor

Assets

Figure 3.113

Grouped calculation deviation.

basis. A summary of all the reductions in revenues can be seen in the “GM results analysis.” Gross margin results (GM1 to GM4) in a comparison to the previous year and to the target figures enable management to analyze changes in revenues in the short term (weekly, monthly, or quarterly) and to effect appropriate corrective action in good time.

3.8.4

Cost Center Accounting

Cost centers are regarded as internal addresses, which reflect departments within the organizational flow of the company. The purpose of the profit center review in accounting of each individual department is to compare the added value in work production with the costs created per cost center. However, it is not only the cost centers indirectly and directly associated with production that must be recorded from the cost accounting aspect; administration, sales, as well as auxiliary cost centers must be integrated into a self-contained cost accounting system (Figure 3.115). In traditional cost accounting, cost center accounting forms the link between cost type accounting and cost unit accounting.139 The focus in this context is on the question: Which cost types affect the individual cost units of the individual cost centers in the production process?

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R R

Figure 3.114

Results analysis of gross margins.

By using integrated data processing in product management, the estimated productivity output (on-line and in real time) is captured via IT parallel to the physical production process. The cost account-related visualization of the manufacturing process for each specific sales product, per cost unit, and per cost center, is implemented by flexible cost accounting. Respectively, cost center accounting in the CSB-System is used to perform cost accounting cross-checks of the cost types that have been allocated via the flexible cost unit accounting in each cost center. In addition, cost center accounting represents the basis for the comparison between recorded cost type totals in the operating accounts for each period.140

3.8.4.1

Basic Data Cost Center Accounting

The structuring of cost centers within a company is a task of corporate organization. The structure depends on the goal, which should be pursued with cost center accounting. Essential goals are:

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Figure 3.115

Integrated cost center accounting program group.

Cost planning via all cost centers Cost control within the performance consumption Visualization of physical production units Valuation of interim and final products

The data, facts, and figures required to configure cost center accounting are recorded in the program module “Basic Cost Center Accounting Data.” Apart from determining the cost center hierarchy (main and subcost centers), all system information is defined, as well as control data and cost-distribution structures. This also applies to the organization of a distribution hierarchy for automatic postings, and the structure of hierarchy for auxiliary cost centers.

3.8.4.2

Cost Allocation and Distribution

The cost entries recorded in the general accounting department, as well as the cost types produced from internal cost recording, must be distributed among the individual cost centers within the company on a structured

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and definite basis. From a cost transparency perspective, each department manager will endeavor to enter as many cost types per individual cost center costs as possible. The corresponding software modules enable the efficient administration of all cost allocations, and the distribution of the recorded cost types to the individual cost centers. In addition to these accounting tasks, this is also where all the information required for the cost overviews and analyses is provided. The actual costs from financial accounting are compared to the target costs from cost unit accounting via the cost center accounting module. The actual costs (cost types) are periodically compared to the expected costs via freely definable cost-distribution structures. The expected/actual variance may be examined: Per cost center, with cost center hierarchy and period reference Per cost unit, via a distribution hierarchy The comprehensive coordination of cost accounting with financial accounting is shown in Figure 3.115. The cost unit-related distribution of actual costs takes place with actual cost entry in product management via:

Item usage (raw to finished items) Activity reports (work activities) Function entry (machine functions) Condition determination (defined conditions)

in separate financial accounts. Production data from all cost centers (departments) and for all items (interim and finished products) are posted into the accounts as actual values in the specific UOM (piece, liter, pounds, etc.). This information is subject to periodic comparison against the planning figures from production scheduling. This comprehensive data capture facility throughout all cost centers is the basis for the actual cost calculation (as calculated for periodic posting). Cost Unit Accounting (or Product Costing) is achieved via allocation of actual costs as partial costs or absorbed costs, and can be calculated as actual values, enabling comparison to the target or expected costs of the cost units (cost objects). The actual data captured as actual costs (cost types) in the cost centers are collected in the CSB-System on-line at the source. The assignment of costs to the various cost centers is documented by way of the cost center journal and cost point summaries. Access by the

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Figure 3.116

Flow of actual costing with expected−actual comparison.

central controlling department to all cost center data is provided throughout the company on an integrated basis via the MIS. The intermediate products created within the individual cost centers must be compared with the equivalent products available on the procurement market to determine valid costing policy for the intermediate product. Costing in the CSB-System takes place on the basis of flexible cost unit accounting. All cost centers within the company must be administered on a profit center basis so that the costs of productivity in goods production can be compared with the value-added process.

3.8.4.3

Cost Center Overviews and Evaluations

Various methods of cost accounting are used to reflect the cost types allocated to individual cost centers, as shown in Figure 3.116. The cost center overview in tabular form is the simplest way of portraying all associated costs of an individual cost center.

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Based on the results of cost center analysis as well as basic account information, every authorized user can view the values of all cost centers and cost center hierarchies (subcost centers). The cost center values can be subject to a comparative analysis with previous year budget and actual values, which can be either viewed onscreen or printed out. The expense distribution sheet reveals all corporate costs by cost center and allocated cost types. The format of the expense distribution sheet is constructed in line with the company’s requirements. The degree and appearance of detail can be specified in the “sample layout,” with which the evaluation format is defined. If required, the calculated costs per cost center are compared to the budget values for the specific accounting period and cumulated for the current fiscal year. The actual−target variance provides essential information concerning the valuation of production processes in the manufacture of goods. The economic evaluations for all cost centers within a company are clearly oriented toward each specific industry. New requirements for precise cost center accounting in terms of measuring productivity are a result of technical changes (replacement and expansion investments) to corporate-specific production processes. The flexible evaluation systems in accounting must observe these specific requirements. The purpose of an evaluation is to provide transparency and control of the performance of the goods manufacturing processes for all cost centers (departments) within the company. Management is able to infer cost-effective scheduling decisions from the analysis and comparison of planned and calculated expenses per cost center. The comparison of planned costs and actual costs per cost center (of interim products and finished products) takes place via flexible cost unit accounting and cost center evaluation. The result of the comparison (plan to actual costs) per cost center and per cost unit is the calculated cost variance. The cost differences between plan and actual costs determined in Figure 3.117 are allocated to the following cost-type groups:

Material costs Labor costs Operating resource costs Other costs

A differentiated analysis can be performed to the cost-type level and can be produced in accordance with company-specific requirements from freely defined report layouts. All information required is automatically

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Figure 3.117

Planned vs. actual costs.

prepared within the MIS and the AIS and is made available to authorized users at the press of a button. The “total efficiency” of a company is the result of the sum of each cost center’s productivity. An objective review of the respective productivity of each cost center can only take place if the products or interim products generated by the cost center are also available on the market in a comparable form. The procurement market analysis141 is therefore an important element of cost center monitoring. Profit center treatment is an inevitable necessity in terms of maintaining corporate competitiveness. In terms of economics, the improvement of a business from specialized labor is verified by the implementation of cost center comparison for all produced intermediate or finished goods. The maintenance of competitive edge within the individual cost centers (departments) must be a top responsibility of each individual department head. This process requires transparency (in product cost and market price information) that must be implemented throughout the entire corporate management system and all manufacturing process within the company.

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3.8.4.4

Cost Center Controlling

The comparison between cost accounting in product management and cost totals in accounting occurs via cost center controlling. Cost center accounting is a tool designed to supply management with information concerning cost and profit trends within the company. The requirements placed on profit center statistics create a demand for the analysis of costs and revenues. The analysis programs within cost center accounting are the basis for a comprehensive cost center review.

Cost Center Integration Controlling The integration of cost center accounting in the CSB-System, i.e., the IT integration of product management and accounting, is defined via the integration elements: Addresses: Cost centers are defined as “internal addresses” within the entire enterprise. Departments are generally organized as cost centers and subcost centers. Items: Items are the processes, administered and stored within cost centers. All item information on internal addresses is visualized via the relationship between: Addresses ⇔ Items Conditions: Physical and cost-related conditions that influence the items and addresses are defined via individual conditions (according to condition groups): Addresses ⇔ Items ⇔ Conditions Procedures: Predefined procedures such as activities, functions, and quality assurance measures are depicted in detailed and fixed procedures. The visualization of cost center processes in production is via the incorporation of the four integration elements: Addresses ⇔ Items ⇔ Conditions ⇔ Procedures Based on the integration elements, the visualization of all corporate processes becomes more transparent and thus describable. In cost center controlling, the integration elements are the smallest building blocks of cost and yield analysis within an organization of profit centers.

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Results of Cost Center Controlling The establishment of a comprehensive cost center controlling system should always be geared toward industry-specific and company-specific circumstances. Cost center controlling should supplement product management results from procurement, inventory, production, and sales, providing an “overall data layer” throughout the entire enterprise. Top-level management must have permanent access to all relevant analysis from cost center accounting. Management’s requirements were sufficiently dealt with in the MIS segment. The results of strategic and predefined efficiency increase via productivity-enhancing projects or special sales activities must be reflected within cost center controlling. Effective corporate management needs quantifi able feedback between objectives and results for all relevant decisions within the company. Performance goals and results must be reflected in real time, and should be assessable by management at all times. This aim is achieved only with the aid of fully integrated industry-specific software.

GROWTH THROUGH EFFECTIVE CORPORATE MANAGEMENT In a free market only the most efficient companies are able to maintain and expand their market position. Integrated IT aids corporate management in creating and implementing streamlining measures required to achieve an increase in productivity by providing a comprehensive view of all work processes in the enterprise. Entrepreneurs will operate with positive results only if they manage their company efficiently in the financial control cycle, leading it to produce positive corporate results. Growth throughout the economy is achieved if the sum of all the goods and monetary-related effects is positive. One must consider in this context that subsidized companies, unable to survive on the basis of their own earnings capacity, along with other nonproductive activities of the government, create negative effects in the cycle of the integrated economy. It is only the net balance between the total positive and negative effects that creates growth and increased prosperity among national economies. Progress is created on the basis of productivity-enhancing investments, which are the result of innovations that bring positive effects. These activities can be carried out only on the basis of a free-enterprise economy within a free culture. The fall of socialist state economies is conclusive evidence that the rights to individual freedom and economic freedom are inseparable. Once a system of free choice of goods is introduced into totalitarian state economies, the freedom to make corporate decisions and, as a consequence, all the other rights to freedoms for the economic institutions, develop out of necessity. The economic theory of convergence, as a potential theoretical perspective of development, has perished along with the socialist state economies of the Eastern European bloc. Restrictions to entrepreneurial activity always lead to a reduction in the potential for economic growth. Entrepreneurs working to achieve positive 347

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results require wide-ranging freedom of decision, so they can apply their creativity and innovations to yield commercial success. It should be noted in this respect that the risks arising from “entrepreneurial misconduct” must be borne by the respective companies and entrepreneurs themselves. Applying the principle of equal treatment, it is self-evident that there is no justification for governmental funding of unprofitable and underachieving companies with taxpayer money, while at the same time tens of thousands of small and medium-sized companies each year do not qualify for government aid and withdraw from the market due to bankruptcy. It goes against common business sense and the principle of free trade that profits in large-scale companies are enjoyed by the major shareholders, but that disastrous losses of these concerns are absorbed by the public. It is only under free trade conditions that the most efficient and most commercially successful will continue to grow, and consequently increase the prosperity for all. Even if the state connects subsidy payments to the noble objective of saving jobs, this will not provide the required impetus for growth. Creating jobs should not mean “if needs be digging a hole” (J. M. Keynes) and then subsequently covering it up again; this only uses up resources and energy without having any positive effects on increasing the prosperity in a national economy. Although the government is increasingly taking on the task of supporting individual business developments, it becomes in these cases a co-entrepreneur and consequently distorts the competitive structures of the free market economy. In the worst-case scenario, government intervention creates problems for rival companies that have already implemented productivity programs to be more competitive, and following these investments have geared themselves toward an expansion of their market volume. The state is not intended to become involved as an entrepreneur or as a co-entrepreneur because it does not rely on a profit-oriented approach for its viability. Subsidies prevent or postpone the crisis, which can only be overcome by entrepreneurs producing positive effects on the economy. As a result, the “breeding ground for a whole host of

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innovations,” which, according to Schumpeter, is created out of crisis situations, is hampered by state-directed measures, and hence innovative progress is cut off. The negative consequences felt throughout the economy from government subsidies, including plans for market expansion, can be readily predicted and empirically verified. If the state becomes involved in individual corporate sectors through its expansionist approach, it will displace private free enterprise in these industries, and will also displace the force for efficient businesses. In this respect, it is irrelevant whether the state finances this expansion with additional tax revenues or deficit spending. In both scenarios and to the same extent, the state body depletes the respective sector of the necessary drive for new investments and efficiency. Although both state institutions and private entrepreneurs (those starting up new businesses) compete for the limited amount of credit available in the banking sector, the banking institutions cannot be blamed for giving preference to the state as a creditor. The state, however, does not place any emphasis on “return on investment,” in contrast to private businesses, which are only able to repay their loans and interest with funds generated from profits. The political office holders in democracies depend on being elected for a fixed term, and are therefore populist in nature. The resultant opportunistic behavior of the incumbent as well as the opposition is driven by actions geared to retain or achieve electoral power, and is not of a primarily economically oriented nature. These political facts form the basis for the still unresolved economic crises in the coal, steel, and shipyard industries. To the detriment of the entire economy, subsidies are provided with tax money in the afflicted regions for politically strategic reasons. It follows that the government must use its political power to restrict itself. Only through the reduction of government intervention will companies be able to freely evolve in new fields. The state must not see its primary task as being a substitute fr ee enterprise system and a source of prosperity. Instead, it should utilize its necessary legal, sociopolitical, and general economic infrastructure conditions to enable positive self-reliance on the part all citizens and businesses involved in commercial activities. This will create economic

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motivators under the motto: “Performance pays off.” This will result in an increase in the willingness to take risks, which in turn will provide new impetuses for free enterprise. Legislative, governmental, and licensing procedures as well as the establishment of a reliable tax system, with equal rates no matter the size of company or business, must be implemented as quickly as possible. All state-run institutions must strive for efficiency to the benefit of the citizens. This necessitates the adoption of the performance principle in all public institutions and facilities. Abolishing the “Parkinson effect” in virtually all public institutions is long overdue and should no longer be borne by the community of taxpayers. Some government investments, especially investments concerning transportation infrastructures, are quite necessary, and should also be subject to economic and strategic reviews. The state is called on to create and maintain the infrastructure conditions required by the economy. The construction of roads in states, counties, and cities generally helps to improve the flow of traffic. For this reason, roads were widened and in some locations new ones constructed. Only years later, the same roads deteriorate to their original state. Transport is hampered in an unbearable fashion as a result of longer traveling times, resulting in negative effects on the economy. In the process, tax income is literally destroyed, without anything in return. If the whole economy grows and there is an expansion in the economic area for companies operating in the international market, then it is the task of the government to ensure the free and unrestricted movement of goods in cooperation with other governments (assuming these countries have the same interests). Globally acting companies cannot create the necessary infrastructure prerequisites to sustain the achieved levels of intertwinement on a permanent basis. It is therefore absolutely vital to create the required prerequisites in terms of currency, political, and physical infrastructures to secure the already achieved levels of business relationships in a binding fashion. There is no “optimum economic policy” in itself, just an international exchange of goods between individual businesses, using a system of adequate or inadequate tools. In the event that the necessary infrastructure for the achieved level of integration is not created in a timely fashion by the involved governments (such as the European Union),

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the internationally established benefits of specialization and technology will be forfeited ⎯ at the expense of all. This will result in a fall in prosperity for all economies concerned. The same standards should also apply to corporate organization and management in growing companies. The necessary investments to support and improve the infrastructure of communication and IT must be initiated in due time as well. In a progressive information and multimedia society, reliable decisions in corporate management demand highly integrated communication systems, from which management can fully unleash its potential. Only when these conditions are met will corporate growth be effectively realized, spawning positive effects for companies in the “integrated circuit” of doing business devoid of chaotic procedures. The objectives are clear: Adequate action is required. Those persisting in traditional viewpoints risk losing future perspective.

RECOMMENDED LITERATURE The following recommended literature, arranged according to subject, represents a thoughtful selection. It is intended to enable the reader to carry out an in-depth examination of the subject matter, and the reasoning behind the suggestions provided by this book. The works have been selected from the viewpoint of their importance and topicality. Of course, the list may also include works that do not necessarily reflect the views of the author. For the purposes of clarification, “help in defining a term” is given priority over “supporting the accuracy of the viewpoint.”

1. ECONOMICS AND POLITICAL ECONOMICS Dornbusch, R. and Fischer, S., Macroeconomics, 6th ed., McGraw-Hill, New York, 1994. Felderer, B. and Homburg, St., Macroeconomics and New Macroeconomics, 7th ed., Springer-Verlag, Berlin, 1994. Gutenberg, E., The Basics of Business Economy Apprenticeship, Vol. I, Production, 24th ed., Springer-Verlag, Berlin, 1983. Gutenberg, E., The Basics of Business Economy Apprenticeship, Vol. II, Sales, 17th ed., Springer-Verlag, Berlin, 1984. Gutenberg, E., The Basics of Business Economy Apprenticeship, Vol. III, Finance, 8th ed., Springer-Verlag, Berlin, 1980. Keynes, J.M., The General Theory of Employment, Interest, and Money, Harcourt, Brace, New York, 1936. Mankiw, N.E., Principles of Macroeconomics, 2nd ed., Dryden Press, Mason, OH, 1997. Parkinson, G.N., Parkinson's Law, and Other Studies in Administration, HoughtonMifflin, Boston, 1957. Ricardo, D., Principles of Political Economy and Taxation, Prometheus Books, Amhurst, NY, 1996. Samuelson, P.A. and Nordhaus, W.D., Macroeconomics, McGraw-Hill/Irwin, New York, 1997. Schimitzek, P., Rezepturoptimierung für Fleischerzeugnisse, dissertation, Aachen University of Technology, 1981.

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2. CORPORATE PROCESS MANAGEMENT/WORKFLOW MANAGEMENT/TOTAL QUALITY MANAGEMENT/REENGINEERING/OPERATIONS RESEARCH Hammer, M. and Champy, J., Reengineering the Corporation: A Manifesto for Business Revolution, HarperBusiness, New York, 2001. SAP, The Finance of SAP, System R 3, Release 1.1, SAP, Walldorf, 1992. Scheer, A.-W., Architecture of Integrated Information Systems: Foundations of Enterprise Modelling, Springer-Verlag, Berlin, 1992. Scheer, A.-W., Business Process Engineering: Reference Models for Industrial Enterprises, 7th rev. ed., Springer-Verlag, Berlin, 1997. Töpfer, A. and Mehdorn, H., Total Quality Management, 4th ed., Neuwied, Kriftel, Berlin, 1995.

3. ECONOMIC BEHAVIOR IN A MARKET ECONOMY, BASICS Buchanan, J.M., The Limits of Liberty, University of Chicago Press, Chicago, 1975. Hayek, F.A. v., The Constitution of Liberty, University of Chicago Press, Chicago, 1978. Schumpeter, J., Theory of Economic Development, Harvard University Press, Cambridge, MA, 1949. Smith, A., The Wealth of Nations, Prometheus Books, Amhurst, NY, 1991.

ENDNOTES CHAPTER 1 1. In physics, the energy found in space is divided into four forces: (1) electromagnetic force, (2) weak interaction, (3) strong interaction, and (4) gravity. It should be noted that the Big Bang theory, and the associated release of energy into the four forces during the period in which space cools, is still the subject of highly controversial discussion. 2. The value of the elementary factors on the market is determined by supply and demand. The exchange value for labor is pay, for operating resources (capital) interest, for materials (land) the price, and the exchange value for knowledge is progress. Changes within the combination of factors in the drive to change and advance and the international specialization of labor throughout all business are a direct result of the dynamic knowledge factor. The elementary factor of knowledge affects progress and therefore a permanent state of adjustment: changes in wages in relation to employment, changes in interest in relation to investments, changes in the exchange rates, and therefore also the demand observed in a dynamically evolving economy. The reciprocal influences of the above effects amplify the positive and negative change tendencies, and determine the potential for growth within an economy. 3. Management factors such as “scheduling activities” and “integration” form the necessary framework for the specialization and utilization of labor. The value of the management factors cannot be directly assessed on the basis of the cost of management and the investments made in integration technology. Only the competitive edge achieved and the resultant positive effects for each specific company can determine the value of management’s performance. 4. Scientific propositions are based on reliable and generally accepted epistemological methods. Whether the analytical or the dialectical method is used to determine true knowledge, a proposition is scientific only if this proposition is regarded as an “unambiguous proposition” by a “group of specialists” (H. Seifert, Introduction to 355

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Science Theory). Under certain “conditions,” “laws” can be extracted from actual phenomena that, in turn, are also the product of laws arrived at under certain conditions (H. Seifert, p. 157).

L2

A1

A2

I1

L2 I2 A = ancillary conditions L = law I = individual situation

In contrast to the analytical method, dialectics is inextricably associated with its main proponents, Georg Wilhelm Friedrich Hegel (1770−1831) and Karl Marx (1818−1883). Hegel’s most significant writings reflect a three-staged systematic method. His dialectic concept is portrayed as a sequence of three motions. Each newly acquired synthesis always forms the thesis for a new motion of three stages. AT1

T1 ST1

T2

AT2 ST2 T = thesis AT = antithesis ST = synthesis

CHAPTER 2 5. For example, technically related scientific tasks are usually tackled with programming languages such as FORTRAN, C, PASCAL, or ASSEMBLER. The programming language COBOL is used for business applications worldwide. What these programming languages have in common is that they are taught worldwide and therefore publicly financed worldwide. 6. CSB-SYSTEM AG has created the universally standardized interface “IO-Sys.” With this standard, all internal-transport, scales, labeling, and production devices can be integrated into the IT system online and in real time. 7. See SAP, The Finance of SAP, System R 3, Release 1.1, Walldorf, 1992.

Endnotes 357

CHAPTER 3 8. The PMI was designed by CSB-SYSTEM AG as a user, evaluation, and list system and is included with every standard program. 9. ODBC = Open Data Base Connectivity. 10. Gutenberg, Vol. I, p. 236. 11. Gutenberg, Vol. I, p. 237. 12. The organizational rules mentioned here have no necessary significance for the CSB-System software in corporate management. 13. For further information, refer to Section 1.3.5.1. 14. The entire range of services of the CSB-System address management is not described here, but is dealt with in the program documentation. 15. For further information refer to Section 2.2.2. 16. The basic principles in this context are discussed in Section 1.3.5.2. 17. Item management in the CSB-System is dealt with in detail in the program and user documentation. 18. This presupposes a regulated monetary economy. 19. The basic principles in this context are discussed in Section 1.3.5.3. 20. The basic principles in this context are discussed in Section 1.3.5.3. 21. The entire performance scope of the basic element “procedures” is dealt with in the program documentation of the CSB-System. 22. The term economic unit applies to any form of nested corporate division (or structure). 23. The German purity law for all beer products was passed by Duke Wilhelm IV of Bavaria in 1516 and still has relevance today. 24. Parkinson’s law provides an adequate explanation for the “deterioration” of public administration and control explosion. Parkinson, G.N., Parkinson’s Law, and Other Studies in Administration, Houghton-Mifflin, Boston, 1957. 25. The HACCP concept includes all critical and quality-oriented data capture and control. HACCP = Hazard Analysis and Critical Control Points. 26. The two elements and chapters for ISO 9000 will not be dealt with in this context. It is assumed that the reader is familiar with the ISO standard, and compliance with the individual elements is reflected in the relevant QC manual of the individual company. 27. It should be pointed out that QC is dealt with in detail in the CSBSystem user documentation. 28. The full description of the performance capability of the “management” area can be found in the CSB-System user documentation. 29. For further information refer to Section 3.4.3.5. 30. It is not intended to go into further detail on the individual forms of the ROI analyses.

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31. The formulas used to calculate capital tie-up are described in detail in the general literature and covered as “capital requirement formulae” in the standard software of the CSB-System. 32. In the CSB-System, the parameters used to divide short-term financial plans into periods can be set as required, i.e., ranging from daily, weekly, monthly, to quarterly periods. 33. See Figure 3.23: Periodic financial plan overview as target−actual comparison. 34. In the literature a distinction is made between “first, second and third level liquid assets,” from which, accordingly, the resulting degree of liquidity is discerned. 35. Cash flow is used as a profitability assessment benchmark in American companies. 36. The parameters used to categorize the cash flow account, as well as the basis of the numerical values (budget or actual figures), can be set for any divisible period in the CSB-System. 37. In the economics literature, reference is made to the fact that the “actual value of the company” can only be ascertained through the final total account, i.e., at the end of the economic life of the business. 38. Earning value = (net yield × 100)/capitalization base. 39. Reference is made in the literature to two procedures for “calculating the total value” on the basis of a mixture of the earnings value and the asset value: (1) the Berlin method and (2) the Stuttgart method. The latter method places greater emphasis on the asset values than the earnings values. 40. Examples in the ZVEI (the German electrical and electronic manufacturers’ association) indicator system are explained below. 41. For example, material costs other costs costs ------------ = ----------------------------------- + --------------------------sales sales sales This breakdown provides a more precise definition of the material cost situation for the level of sale volume achieved. This allows any other reference indicators to be ascertained. 42. For further information on PMI, refer to Sections 3.1.5.3 and 3.1.5.4. Detailed information on results presentation can be found in the CSB-System user documentation. 43. It follows that the program functionality will not be dealt with here. Detailed information can be found in the CSB-System user documentation.

Endnotes 359

44. The program modules required for this purpose (PMI and SMI) have already been explained in detail above (Sections 3.1.5.3 and 3.1.5.4). 45. The integrated procedure for pricing in real time is dealt with in more detail in Section 3.5.1. 46. Further deliberations on pricing and market theory are not presented here. 47. This is done in the CSB-System by the PMI. 48. It should be pointed out that this is dealt with in detail in the CSBSystem user documentation. 49. The integration of telephone systems into the IT system is performed via the CSB-Phonemaster. For further information refer to Section 2.2.2. 50. Letters are entered with a scanner and fax messages are digitalized directly via the fax server. 51. The absence of theoretical approaches in terms of decision-making theories is deliberate. 52. Further detailed information can be found in the CSB-System user documentation. 53. The MAPI formula is one of the most well known practice-oriented methods to evaluate the profitability of a planned investment. This method was developed by the Machinery and Allied Products Institute (MAPI) in Washington, D.C. The “MAPI formula” calculates the relative return of the following year: B+C–D–E R% = ------------------------------------ × 100 A where R% = return after tax % B = absolute return increase, excluding cost savings through investments C = sales revenue of the replaced investment goods at the beginning of a period divided by liquidity revenue at the end of a period D = capacity consumption of the following year (this value is taken from the MAPI diagram) E = tax on profits (on increase in line with B) A = investment costs divided liquidity proceeds for the substituted “old investment item” and repair costs not incurred. See also Wöhe, G., p. 368. 54. P = O/C, where P = profitability coefficient, O = output, C = costs.

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55. P = RO/(CO + I), where P = profitability coefficient, RO = cash value of revenues, CO = cash value of expenses, and I = investments. These also include the capital value and inter nal base methods. See also Joschke, H. K., p. 250. 56. See also Section 3.8.2.3. 57. The procurement processes are explained in detail in Section 3.7.1.5. 58. Further information on production scheduling and supply of operating resources can be obtained in Section 3.7.3.2. 59. The term performance factors combines the elementary factors of labor, operating resources, and materials as well as the management factors of organizational activity and integration. 60. See Section 3.5.2, plus the detailed documentation of the CSBSystem. 61. See Section 3.5.2. 62. See Section 3.5.3. 63. In trading companies the “item” is simultaneously the procurement, inventory, and sales item. For production companies all raw materials, supply, fuel, semifinished, and sales items are defined as “items.” See Sections 1.3.5.2 and 3.2.2.2. The procurement of the materials is also processed via the procurement program using IT technology. 64. A full presentation of the scope of work carried out by the procurement program module is dealt with in the CSB-System user documentation. 65. See Section 3.2.2.1 to Section 3.2.2.4. 66. These detailed steps are explained in detail in the procurement user documentation of the CSB-System. 67. The formula for the optimum order quantity, taking into account the interest, inventory, and order costs, was developed by StefanicAllmayer: Optimal order = quantity

200 × annual requirements × fixed delivery costs -----------------------------------------------------------------------------------------------------------------------------------Cost price × (interest rate + inventory cost rate)

68. The integration of telephone functions in order processing (via the CSB-Phonemaster) increases buyer productivity considerably. Further detailed information can be found in the user documentation. 69. For example, procurement processes in the service sectors, such as retail, banks, etc., have varying structures. 70. See also Section 3.4.3.4. 71. See also Sections 3.1.4, 3.4.1, and 3.4.2.

Endnotes 361

72. These inventory systems are directly integrated in the CSB-System via CIM modules. 73. See also Sections 3.7.4.3 and 3.7.4.4. 74. The “Express-Master” is a warehouse management system by CSBSYSTEM. For further information, refer to the user documentation on inventory management. 75. The CIM concept realized in the CSB-System, the integration of application software with the control software for all production and transport equipment, ensures efficient corporate management. 76. For further information refer to Section 3.7.3.4. 77. Pricing for all cost units (from the interim product to the finished item) is discussed in detail in Section 3.7.3.10 and here in “Flexible Cost Accounting.” 78. See also Sections 3.5.3.1 and 3.5.3.2. 79. For further information refer to Section 3.7.3.10, “Cost Accounting.” 80. The isolated “island worlds” often found in IT systems of everyday business are eliminated by the integrated CSB-System. Further detailed information can be found in the user documentation. 81. This situation often occurs in the fresh-food industry. 82. For further information please refer to Sections 3.7.4.3 and 3.7.4.4, especially “active phone sales” in sales. 83. For example, ultrasound readings taken of the raw material meat (animal carcasses and whole pieces) enable the assessment of the precise quality offered by the provider. (See product description “CSB Ultra-Meater.”) 84. For further information refer to Section 3.7.3.7, “Optimization Procedures,” and “Cutting Process and Joint Product Package Acquisition.” 85. Methods 1, 2, and 3 are applicable for cutting processes according to Riebel. See P. Riebel, H. Pandke, and W. Zscherlich, Verrechnungspreise für Zwischenprodukte, Opladen, 1973. 86. Please also refer to Section 3.7.3.7, “Optimization Procedures.” 87. See Section 3.7.3.7, “Optimization Procedures,” for further details on this procedure. 88. Data are captured in the CSB-System via multifunctional workstations (CSB-Racks). 89. STR = shelf transportation robots integrated into the CSB-ExpressMaster; see also Section 3.7.2.3. 90. Required in pharmaceutical and food production, possibly with storage entry capture into quarantined warehousing and subsequent release following completion of the quality tests. 91. This processing and control of data capture are predefined industry specifically via the CSB-System. The corresponding tools (PMI and SMS) are provided for this purpose; see Sections 3.1 and 3.2.

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92. See J. Biethahn, The Planning and Execution of the Optimal Meat, Production, and Purchasing Programs, Frankfurt, 1973; G. Hudelmaier, The Calculation of Processed Products in the Meat Industry by Means of Linear Programming, Ludwigshafen, 1968. 93. Integral “corporate process optimization” in the past never progressed beyond the application model and for this reason is not dealt with in further detail at this point. 94. Refer to Sections 3.5.2.3 and 3.5.3.3. 95. See P. Schimitzek, Recipe Optimization for Meat Products, dissertation, Aachen, 1981. 96. For further information refer to Section 3.7.2.4, “Inventory Control.” 97. The necessary connections between QA system, data capture processes, and control tasks are integrated into the application software of the CSB-System. Work is processed via the CSB-Rack (as a control and data capture station) and the automated procedures are processed and monitored. 98. Please also refer to Section 3.1.4. 99. The programs for controlling productivity with the CIM concept were realized in the CSB-System in accordance with this rule. Please refer to the corresponding product descriptions and user documentation of the CSB-System. 100. Several hundred sample analyses in the CSB-System are provided on an industry-specific basis for the user to select. These report layouts can be adjusted or expanded as required. 101. Also refer to Section 3.1.2. 102. For further information refer to Sections 3.4.1 and 3.4.2. 103. Refer to Sections 3.7.1.7 and 3.7.2.6. 104. Please also refer to Section 3.8.4, “Cost Center Accounting.” 105. The component parts lists can be subdivided into any number of categories required (via subcomponents or subrecipe lists). Each component list or subrecipe list has nine stages to determine subtotals. Further information can be found in the CSB-System user documentation. 106. For further information on marginal costing refer to Section 3.7.4.11. 107. Further information on the basic element “conditions” can be found in Section 3.2.2.3. 108. Please also refer to Section 3.7.4.11. 109. The diverse transaction methods used between suppliers and customers, as required by trade, call for all communication process parameters in the software to be set out in comprehensive form. For further information please also refer to the user documentation of the CSB-System.

Endnotes 363

110. See J. Schumpeter, Theory of Economic Development, 5th ed., Berlin, 1952. 111. See E. Heinen, Industrial Company Apprenticeship, Level II, Wiesbaden, 1972, 350. 112. The extent to which economic information services are able to meet these requirements and the extent to which the data can be accessed in the company’s IT system in the form of database information are not subject to further analysis at this point. 113. Please also refer to CSB-Phonemaster, Sections 2.2.2 and 3.4.3. 114. Please refer to the detailed CSB-System user documentation for further information. 115. See also Section 3.4.2.4. 116. See also Section 3.7.3.10. 117. For further information refer to Section 3.6.1, “Factor Combination.” 118. For further information refer to Section 2.2.2, “Information and Communication Technology.” The integration module between information and communication technology is the “CSB-Phonemaster.” 119. For further information refer to Section 3.7.3.10, “Cost Accounting.” 120. Not included are standardization measures in the framework of EDI procedures. For further information see Section 3.2.2.4, “Integration Element: Procedures.” 121. The evaluation of all sales data within the CSB-System takes place via PMI or SQL. For further information refer to Section 3.1.4. 122. Depending on the volume of the evaluation, the experienced user needs from 10 min to a maximum of 1.5 h with the PMI to expand, modify, or redefine a sample analysis. 123. The differentiated analysis of all calculated cost allocations in “flexible cost unit accounting,” and the coordination between the cost type and cost point accounting is dealt with in detail in the accounting system in Section 3.8.4. 124. For this purpose, the evaluation forms have to be generated in PMI. The results on-screen or as a printout accordingly contain freely definable line numbers, formulae, functions, output texts, percentage portions of line values, and the output design. 125. See SAP, Financial Accounting SAP, System R3, Release 1.1, Walldorf, 1992, 3-3. 126. Ibid., 2-6. 127. Ibid., 2-6. 128. For further information refer to Section 3.7.3.10, “Cost Accounting.” 129. Please also refer to item Section 3.7.4.11, “Gross Margins.” 130. Detailed information can be obtained from the performance description as well as the user documentation on payroll accounting in the CSB-System.

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131. CSB Financial Accounting is a certified accounting system. Detailed information on individual features can be obtained from the user documentation. 132. See SAP, Financial Accounting SAP, 3-3. 133. See Bauer, W., The Flow Balance and Its Applicability, ZfhF, 1926, 485. 134. See Kosiol, E., Financial Balancesheet: Vocabulary of Commercial Accounting, Described, Vol. III, 2nd ed., Stuttgart, 1956, 2085. 135. For further information refer to Section 3.4.1.2, “Financial Management.” 136. For further information refer to Section 3.7.3.10, “Cost Accounting.” 137. For further information refer to Section 3.7.3.9, “Production Evaluation,” and Section 3.4.2.2, “Function Controlling.” 138. For further information refer to Section 3.7.3.10, “Cost Accounting.” 139. See Schweitzer, Hettich, and Küpper, Systems of Costs Calculation, 2nd ed., Munich, 1975, 155. 140. For further information refer to Section 3.7.3.10, “Cost Accounting.” 141. Further details can be found in Section 3.7.1.1, “Pr ocurement Market Analysis.”

CSB-SYSTEM APPLICATIONS MENU

Communications Management Management & Controlling Integration Elements Business Organization Quality Management Product Management Accounting & Finance

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Communication Management Phonemaster Telephone Book Telephone Communication Telephone Evaluation User Telephone Book Telephone Provider Master Telephone Tariffs Communication Manager Mail Manager Mailbox Maintenance Help Desk Communication Entry Communication Key Communication Evaluation Employee Menu Mail & Fax Outgoing Mail Incoming Mail Delivery Types Postal Charges Table Magazine Master Magazines Receiving Magazine Forwarding Magazine Distribution Master Text Management Text Module Management Word Processing Fuzzy Search in Texts SMS Services SMS Order Log SMS Communication Services Contact Management Basic Contact Data Navigation Basic Data Navigation Menu Category Master Basic Activity Data Activity Menu External Program Master Contact Control Contact Manager Activity Allocation

CSB-System Applications Menu

External Document Allocation Allocate Calls Word-Excel Link Contact Manager Evaluation Appointments Appointment Status Activity Key Appointment Manager Appointment Manager Evaluation Batch Job Appointment Entry Resource Management Resource Groups and Allocation Resources Master Resources Reservation Task Management Task Management Task Management Evaluation Document Management Basic Data Documents & Archiving Archiving Indices Document Groups Document Classes Images Management Document Classification Document Scanning Document Search Archive Log Evaluation Scan/Fax Module External Archiving Print Layout Selection Archiving COLD Export Post Indexing with Bar Code Archive Protocol Evaluation Export Archived Documents Import Archived Documents Configuration Entry Source Document Archive Management Archive Manager Archive Bookmarks Scan Delivery Notes Log Descriptor Configuration Research Server Fax and Mail Distributor Barcode Recognition

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MDC Import Animal Passport Batch Scanning Project Management Version Description Area Descriptions Work Objects Department Manager Allocation Project Management Program Lists Test Plan Management Test Plan Master Project Allocation Task Management Task Entry Task Groups Marketing Marketing Projects Call Planning Telemarketing Project Evaluation Marketing Evaluation Customer Categories Marketing Actions Transfer Data to EXCEL Personal Workflow Program Database Management Program Database Master Data File Type Master Properties Master Areas Master Systems Master Release Management Program Database Program Database Log Program Database Evaluation Abbreviations Database Source Code Allocation Help Generation Help Generation Automatic Help Generation Program and Menu Management Program and File Numbers Menu Entry Maintenance

CSB-System Applications Menu

Sales Item Definition Generation Script Management Generation Script Management Generation Script Master File Types Master Directories Master Methods Master Canteen Orders Canteen Management

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Management & Controlling Management Information System Power Analysis Power Interface Text Converter XML Converter DB Tool Engine Power Management Cockpit Power Transformer Power Database Power Control Power Minder Strategic Planning Financial Management Financial Planning Financial Planning Periods Financial Plans Financial Plan Overview Liquidity Liquidity Status Liquidity Ratio Cash-Flow Statement Management Statistics Shareholder Value Industry Comparison Market Indicators Business Results Operational Efficiency Yield Status Productivity Profitability Gross Margins Results Presentation MIS Evaluation MIS Presentation Area Information System Operative Planning Budget Periods Sales Planning Model Scenario Management Global Budgeting Detailed Budgeting

CSB-System Applications Menu

Planning Evaluation Batch Evaluation Data Functional Results Area Evaluations Automatic Area Evaluation Maintenance AIS-User Quick Select AIS-Quick Select Maintenance AIS-Quick Select Allocation Direct Starts per User Direct Starts Control Message Management Basic Data CIM Reactions Reaction Status Message Targets Control Conditions Control Specifications CMM Evaluations Reactions Log Control Evaluations Decision-Making Process Basic Data Decision-Making Decision Lists Assessments & Evaluations Functions Controlling Procurement Inspection Inventory Movement Control Production Monitoring Shipping Logs Price Controlling Procurement Prices Inventory Prices Production Prices Calculation Prices Sales Prices Time Controlling Personnel Times Aggregate Times Productive Times Knowledge/Human Resource Management Qualification Management Seminar Subjects Events

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Events Booking Training History Library Management Literature Master Publisher Master Literature Check-Out Url Distribution

CSB-System Applications Menu

Integration Elements Address Management Basic Address Data Address Groups Salutations Professional Titles Contact Person Functions Sector Master Address Origin Address Status Bank Masters Hotels States/Provinces Address List Types Credit Card Types Zip/Postal Codes Addresses Route Hierarchy Address Match Code Address Lists Address Information Testing Address References Personnel Data Personnel Lists Address Data Doublet Scan Internal Customer Information Variable Route Hierarchy Item Management Basic Item Data Product Categories Product Sub-Categories Item Groups Item Units Item Units Linear Dimensions Measures of Capacity Linear Dimension REUS REUS Scanning and Taring Group MSDS Item Definition Container Predominance

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Raw Materials Group Items Replacement/Additional Item Management Item Match Code Item Match Code per Item Item Lists Item Price Maintenance Item References Test Recycling Symbol Packaging Material Packaging Data Recycling Evaluation Packaging Groups EDI Update DSD Customer Item Price Lists PZN Allocation Hazardous Materials Hazardous Materials Hazardous Materials Allocation Item Transfer Hazardous Materials Import Hazard Data Hazardous Materials Menu Maintenance Condition Management Condition Value Groups Conditions Groups Conditions Condition Lists Procedure Management EDI Management EDI Basis Partners Module File Filter Converter Definitions Reference Tables EDI Error Management Error Grouping Error Allocations EDI Organization EDI Specifications EDI SEDAS Orders EDIFACT

CSB-System Applications Menu

SEDAS Invoices NON-NORM Linking File Archive Interchange EDI Actions Import Export EDI Server Administration Server Lists Servers EDI Job Management Job Definition Job Time Window Job Planning Job Execution Job Log Print CSB Internal Data Interchange Export Procurement CSB-CSB Import Procurement CSB-CSB Export Sales CSB-CSB Import Sales CSB-CSB Autom. Internal Data Interchange Dial-Up Data Transfer Export System Data CSB-CSB Import System Data CSB-CSB Export System Data CSB → E-shop Individual Data Interchange Master Data Data Transfer SAP Miscellaneous Address Data Import/Export Address Transfer to FiAc General Item Transfer Address Transfer to Word Import/Export of QC Data Miscellaneous Addresses to FiAc Zip/Postal Codes Import Export System Data Production Import Procurement Orders Procurement L/Item Transfer LS Data Transfer Inventory Movement Calculation Price Transfer

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Communication Wolfking Communication Quantum Communication Reimelt Communication Production Communication Mass Filling I Communication Mass Filling II Batching System Bollig & Kemper Purchasing Price Transfer APEGRO Sales Host Product Sub-Category Conversion Export Orders per Route Order Data Transfer Delivery Data Export Standard Statistics Transfer Carrier Data Transfer Crates Pool Import/Export Transfer REUS Data Transfer Quota Shares Price Update Lauer Database Accounting Transfer Open Line Items Communication Import Contact Data Batch Procedures Batch Job Processing Batch Job Control Autorun Management Manufacturing Execution System Basic Data MES Production Units Production Unit Production Unit Attributes Production Unit Types Logical Sub-Unit Allocation Logical Sub-Unit Basic Recipes MES Workflow Designer Process Steps Process Step Types MES Parameter Master Physical Materials Flow Process Chain Communication ERP → MES

CSB-System Applications Menu

Basic Procedure Data Individual Procedures Procedures Activities & Functions Machine Configuration Cutting Process Features Management Features Definitions Features Allocations Features Search

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Business Organization Workflow Management Workflow Processes Workflow Elements Workflow Manager Workflow Navigation Workflow User Grant Languages Translation Generator Dictionaries System Languages SyTranslator Business Structure Holding Companies Companies Company Groups Companies Departments & Cost Centers Cost Centers Cost Center Lists Departments Teams Positions Procedure Descriptions QC System Documents Spreadsheet Spreadsheet Item Allocation Process Control Logbook Modification Logs Interface Logs Central Error Messages Time Blocking Time Blocking Evaluation Company Data Management Currencies Foreign Currency Conversion Rates Currency Conversion Standard Text Management Tax Tables Tax Reasons Posting Tables Account Tables Tax Accounts Table

CSB-System Applications Menu

Application Control User Data Management User Authorizations Personnel & User Data Personnel Lists — User Data Enter User Menus User/E-Mail Allocation System Data Management System Data Basis Program Parameters System Files System Counters Address Specific Number Range Company Authorization Language Maintenance Period Management Swap Period Files Import Parameters/Masks Station Parameters Scales Descriptions Country Codes Sort & Selection Manager Individual Additional Data Evaluation Calendar Filter for SSM Lists Menu Management Menu Special Cases Menu Special Cases Definitions Calculation of Hard Drive Capacity Time Limit for Test Release Print Design Printer Control Spool File Processing Label Data Management Item Label Data Print Labels CODE128/EAN128 Structure CODE128/EAN128 Connection Barcode Settings PDF417 Structure SSCC Management Standardization Day Production Report

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SSCC Evaluation Output File Print Layout Print Output Authorizations Spool File Queue Allocation Central Print Allocation Reorganization Integration Data Reorganization General File Reorganization Item Reorganization Address Reorganization Conditions Reorganization Convert Co. Regulation No.→ ILN Type 2 Reorganization QM Data Procurement Reorganization Procurement File Reorganization Correction Purchase Statistics Reorganization PSC Data Inventory Reorganization Delete Zero Accounts in Inventory Delete Inventory Accounts Reference Numbers Reorganization Cumulate Inventory Accounts Join Period Files Production Reorganization Parts List Control Batch Weighing Reorganization Batch Statistics Reorganization Production Orders Reorganization Sales Reorganization Order Data References Test Reorganization Sales Data Replication Record Print Variable Names External SQL Statements SQL List Generator WAV Files for Error Alert Direct Starts Allocation Direct Starts per User Allocation Direct Starts per Program Direct Starts Station/User-Dependent Layouts Mask Scripts Process Analysis Process Analyzer

CSB-System Applications Menu

Quality Control/HACCP Basic Data Quality Control Quantitative Test Instructions Qualitative Test Instructions Test Instruction Types Test Status QC System Documents Test Specifications Item Test Specifications Cost Center Test Specifications Address Test Specifications Vehicle Test Specifications Machine Test Specifications Personnel Test Specifications Test Instructions Item Test Records Cost Center Test Records Address Test Records Vehicle Test Records Machine Test Records Personnel Test Records QC Evaluations Statistical QC Evaluations Personnel Evaluation Test Recording Analysis Automatic Area Evaluation Evaluation Test Specifications QLS/LIMS Magis

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Product Management Procurement Basic Procurement Data Vendor Conditions Last Vendor Orders Vendor Order Range Standard Text Management Procurement Source Document Types Payment Types Returns Reasons Procurement Batch Price Update Procurement Market Analysis Order Requirements Procurement Planning Procurement Management Contract Management Orders Purchase Order Entry Print Orders Order Overview List Receiving Receiving Entry Order Control Print Receiving Notes Procurement Control Invoice Control Incoming Invoices Book Invoice Entry Print Checks Month-End Closing Price & Modification Log Reusables Processing REUS Evaluation Invoice File Processing Procurement Evaluation Procurement Evaluation Automatic Area Evaluation Procurement Analysis Evaluation of Entered Invoices Cost Prices Plan Price Determination PUR Price Determination Statistics GM Pricing

CSB-System Applications Menu

Procurement Price Management Price List Maintenance PUR Price Group Descriptions Price Group Intervals PUR Price Group Management PUR Price Maintenance Period Prices PUR Special Procurement Livestock Management Basic Data Livestock Management Complaints Diagnosis Codes Qualification Codes Confiscations Vendor Slap Number Allocation Grades Recognition Grade Sorting Criteria Livestock Features Statement Types Species Price Management LS General Conditions LS Price List Maintenance LS Price Group Descriptions LS Price Groups Management LS Price Group Intervals LS Print Price Lists Price List Print Matrix Price Formation Quality Addition List Quality Determination Parameters Price Determination Tables Raiser/Processor Subsidies Breeding Planning Breeder Master Mother Herd Artificial Insemination Breeds Master Poultry Slaughter Planning Collection Data Entry Driving Instructions Purchase Order Entry Print Order Entry Customer Planning

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384 The Efficient Enterprise

Slaughter Payments (P) Truck Acceptance Pigs Transporter Truck Reception Registration Truck Reception Entry Truck Reception Closing Truck Reception IDC Pigs Reception Stunning Meat Inspection Grading/Scale Quality/Address Post-Entry Edit Slaughter Data Line Item Re-entry Change Slap Number Quality Features Batch Change Statement Statement Requirements Statement Statement Print Automatic Line Item Transfer Expected Carcass Yield Calculation Slaughter Payments (C) IDC Cattle Reception Killing Ear Tag Control Meat Inspection Grading/Scale Classification/Scale Sheep Quality/Address Post-Entry Edit Slaughter Data Quality Features Batch Change Statement Statement Requirements Statement Statement Print Automatic Line Item Transfer Expected Carcass Yield Calculation Evaluations Slaughter Data Log Single Carcass Evaluation Automatic Area Evaluation

CSB-System Applications Menu

Scales Note Batch Print Carcass Information Slaughter Data Modification Log Livestock Management — Information Data Transfer Slaughter Data CSB ↔ CSB Match Code Slaughter Data CSB Export Slaughter Data to MS Excel Import Slaughter Data Slaughter Line Items CSB Ultra-Meater Slaughter Data Import St. Gallen Import Grading Data Data Transfer CENTRAVO Data Transfer BREITSAMETER Automatic Weight Transfer Cross-Company Data Exchange MDC Data Exchange MDC Data Export MDC Data Import Data Import Data Transfer Vendee Concept Data Exchange Order Data Exchange LS Management Reorganization Milk Payment Basic Data Milk Payment Milk Business Years SLOM Texts Advance Payment Management Reasons for Termination Area Date Entry Collective Movement Key Attachment Master Temperature Limits Management Loans Master Collectives Master Statement Data MP Price List Maintenance MP Payment Classes Reference Quantity Management Quantity Range Tables Quantity Ranges Quality Data Entry Quality Data Averages

385

386 The Efficient Enterprise

Producer Clearance System PCS Basic Data Contract Types Standard Quality Values Quality Statement Tables Manual Statement Tables Producer Contracts Contract Evaluation (PCS) Specifications Master Purchasing Day Quantity Planning PCS Standard Quality Values p. Sort SLS Standard Quality Values p. Sort PU PCS Management Producer Order Entry Producer Receiving Quality Statement PCS Analysis Inventory Basic Inventory Data Stock-On-Hand Parameters Shrinkage Categories Shrinkage Curves N-Lots Bin Location Management Conveyor Track Data Shelf Storage Management STR Management Queue Routes Loading Intervals Lot Number Structures Inventory Status Entry Lot Numbers Inventory Management Inventory Movements Inventory Accounts Inventory Information Serial Number Management Inventory Status Control with Repost Inventory Status Control Continuous Flow Rack Inventory Movement Orders Order Track Storage Manual Track Storage Exit

CSB-System Applications Menu

Storage In/Out Control Express Weighing Automatic Reposting Quarantine Inventory Processing Change Inventory Status Individually Change Inventory Status in Batch Track Allocation Planning Call Visualization Online Information Work Progress Edit Track Information Inventory Control Automatic Inventory Exit Automatic Cutting Process Exit Shelf Storage Control Express Master Express Storage Exit Express Master Pick Station Pallet Storage Control Stocktaking Expected Stock Calculation Stocktaking Entry Inventory Ref/SSCC Pallet Stocktaking Box Stocktaking Stocktaking Entry Log Stocktaking Lists Stocktaking Evaluation Inventory Evaluation Stock-On-Hand Evaluation Day Log/Evaluation Inventory Consumption Evaluation Inventory Alignment Nieros/CSB Inventory Data to FiAc Batch Information System Print Inventory Reservations Spanned Stock Evaluation Print Interval Movement Batch Traceability Repair Service Repair Management Repair Spare Parts Repair Information Repair Evaluation

387

388 The Efficient Enterprise

Inventory Accounting Inventory Source Document Modes Allocation Inventory Source Document Modes Source Document Print Inventory Automatic Inventory Postings Track Storage Management Pallet/Crate Allocation Automatic Inventory Postings Pallet/Crate Allocation SSCC Reference Number Information Calculation of Warehousing Fees Warehousing Fees Master Data Print Warehousing Fee Statement Extended Stock-On-Hand Parameters Sales Area Classification Bin Location Stock-On-Hand Parameters Inventory Analysis Planning Management Planned Overview Management Planned Overview Parameter Sets Planned Overview Quantities Maintenance Planned Overview Manager Planned Overview Data Evaluation Inventory/Planned Overview Availability Planning Manager Retail Calculation Production Basic Production Data Basic Production Planning Machine Groups Master Machines Machine Calendar Vehicle Fleet Management Vehicles Parts Lists & Job Schedules Component Control Technology Description Job/Function Groups Jobs/Functions Food Labeling Ingredients Classes Ingredients Ingredients Allocation According to FCR

CSB-System Applications Menu

Analytical Code Numbers Nutritional Value Calculation Batch Number Ranges MRO Management Basic Data MRO Machines Machine Groups Master Spare Parts Allocation Maintenance Reasons Down-Time Reasons Maintenance Plan Types MRO Planning Maintenance Plans Maintenance Orders MRO Execution Order Processing Malfunction Entry Evaluation Order Evaluation Production Scheduling Production Schedule Production Schedule Orders Production Orders Material Requirements & Reservation Planned Overview Intervals Capacities & Demand Production Calendar Schedule for Item Production Network Plan Calculation Cutting Cutting Process Data Cutting Process Parts Lists N-Lots Workstation Allocations Inventory Movement Orders Premium Rates Cutting Process Management Cutting Process IN Cutting Process OUT Inventory Information Online Cutting Calculation Expected Cutting Calculation Cutting Process Reorganization

389

390 The Efficient Enterprise

Cutting Process Payments N-Lot Calculation N-Lot Evaluation Single Cutting Process Evaluation Cutting Process Recalculation N-Lot Calculation Grades Batch N-Lot Calculation Batch N-Lot Evaluation Batch & Process Production Batch Job Preparation Component Allocation Batch Processing Batch Control Production Quantity Entry Batch Job Batch Payment Optimization Procedure Cutting & Purchasing Least Costing Optimization Descriptions Optimization Information Pre-Blend Least Costing Standardization Materials Standardization Recipe Least Costing Optimization Descriptions Recipe Least Costing Optimized Recipes Information Unit Control Destination Master Block Control Batch Separation Batch Processing Control Production Quantity Entry Inventory Movements Production Evaluation Batch Calculation Batch Control Batch Status Call Post-Calculation of Batches Production Order Display Premium Payment Basic Commission Data Premium Types Premium Defaults

CSB-System Applications Menu

Commission Entitlements Premium Allocation Item Quantity Allocation Time Entry Premium Evaluation Cost Accounting Flexible Product Costing Item Calculation Sales Channel Calculation Calculation Evaluation Sales Basic Sales Data Delivery Types Payment Types Order Coding Returns Reasons Delivery Reasons Action Groups Actions Form Types Invoicing Periods Source Document Type Management Separation and Sort Criteria Customer Item Criteria Standard Text Management Pricing Maintenance Last Reference SDL Pallet Construction Basic Evaluation Settings Sales Planning Planned Overview Quantities Sales Order Availability Planning Manager Plan Subsidiary Sales Plan Subsidiary Basic Data Subsidiary Calculation Periods Subsidiaries Cost Types Subsidiary Planning Plan Calculation Data Subsidiary Statistics Costs Cash Receipts

391

392 The Efficient Enterprise

Stocktaking Opening Balances Accounts Receivable Plan Item Trading Volume Sub-System Reports Evaluations Subsidiary Evaluation Subsidiary Overview Order Forecast Subsidiary Calculation Subsidiary Scenarios Scenarios Calculation Data Subsidiary Statistics Costs Cash Receipts Stocktaking Opening Balances Accounts Receivables Scenario Item Trading Volume Evaluation Subsidiary Evaluation Subsidiary Overview Order Forecast Subsidiary Calculation Pricing Price Management Price List Maintenance Price Groups Descriptions Price Group Intervals Price Groups Management Print Price Lists Price Information Price List Print Matrix Price Maintenance Period Prices FA Price Maintenance Calculation Run Condition Management Condition Value Groups Conditions Groups Conditions Customer Conditions Management Condition Lists Customer Item Price Lists Sales Channels

CSB-System Applications Menu

Cash & Cash Till Sales Cash Book Cash Book Data Cash Book Entry Active Telephone Sales Call Planning Sales Order Entry Subsidiary Sales Basic Subsidiary Data Subsidiary Calculation Periods Cost Types Subsidiaries Subsystem Report Manager Subsidiary Calculation Data Subsidiary Statistics Costs Cash Receipts Stocktaking Accounts Receivable Item Trading Volume Report Sub-System Reports Evaluations Subsidiary Overview Subsidiary Evaluation Sub-System Report Analysis Subsidiary Calculation Subsidiary Assessments Quantitative Test Instructions Qualitative Test Instructions Test Instruction Types Test Status Address Test Specifications Address Test Records Subsidiary Communication Basic Subsidiary Communication Data Frequencies User Data PLU Data Subsidiary Organization Structure EDI Module Sub-Systems Filter/Communication Sales Reps & Distributors Distributors

393

394 The Efficient Enterprise

Distributors Distributors Day Journal Sales Reps Sales Reps Area Protection for Sales Reps Commissions Sales Rep Payment Posting Table Compensations Invoice File Processing Access Master Data Route Accounting Sales Driver Inventory Driver Change Evaluation Sales Driver Payments Sales Support Offer Processing Customer Assortment Management Customer Order Range Print Order Record Print Order Forms Order Monitoring No Order List No Delivery List Last Customer Orders Delivery Quotas Sales Processing Offer Management Offers Offer Processing Contract Management Contracts Contract Evaluation Standing Order Management Standing Orders Batch Standing Order Processing Process Standing Orders Order Intake Order Processing Sales Order Entry Order Separation Additions/Reductions Print Orders Print Orders

CSB-System Applications Menu

Print Order Lists Order Analysis Print Picking Notes Labels Batch Print Reusable Transport Packaging Reusables Processing Reusables Evaluation Route Management Basic Route Data Route Descriptions Route Lists Routes Vehicles Personnel Groups Transport Costs Route Determination Loading Times Route Plans Route Planning Route Set-Up Loading Plan Entry Loading and Unloading Notes Transport Costs Log Carrier Statement Carrier Master Carrier Fees Carrier Calculation Customer Picking Shipping/Goods Issue Entry Express Master Pick Station Returns Entry Order Processing Direct Deliveries Combine Orders Automatic Order Closing Price Update — Orders Item Picking Item Picking Express Master Pick Station Order File — Item Picking Automated Picking Basic WLB Data WLB Control

395

396 The Efficient Enterprise

WLB Database Maintenance WLB Configuration WLB PLU Master WLB PLU Master Allocation WLB-Plan Data External Labels Weigh Labeling WLB Server Call Maintenance WLB Item Picking WLB Customer Picking DIGI Weigh Labeling DIGI WLB Orders WLB-Master Bizerba P8000 Programming Picking Management Export Processing Basic Data General Export Specific Item Info Border-Crossing Factors Tariff Texts Customs Authorities Commodity Numbers Basic Data Specific Destinations Manufacturer's Statement Preferential Agreement Raw Materials Basic Data Form Related Export Document Manager Export Documents Forms Export Documents Print Defaults Customs Export Document Check Refund License Management Intrastat Intrastat Messages Hazardous Material Processing Declarations Sales Calculation Delivery Notes/Single Invoices Period Invoices Statements

CSB-System Applications Menu

Outgoing Invoices Book Debit Notes Rebate Settlement Rebate Settlement Rebate Contract Management Rebate Groups Rebate Pre-Discounts Rebate Contract Matchcode Access Master Data Source Document Print Period Delivery Notes Invoice File Processing Delivery Notes & Invoices Special Statements Partner Payments Company Payments Statement Control Weighing Report Delivery Note Log Differences Log Reclamation Control Value Corrections Correction Calculation Sales Evaluation Statistical SLS Pricing Evaluation Generator Budget Calendar Evaluation Periods Detailed Sales Evaluations Cumulated Sales Data Online Statistics Sales Analysis Sales Analysis Parallel Processing Master Call Parallel Processing Slave Call Parallel Processing Gross Margins GM Pricing Detailed Sales Data Cumulated Sales Data Producer Clearance System PCS Basic Data Contract Types Producer Contracts

397

398 The Efficient Enterprise

Specifications Master Sales PCS Management Producer Order Data Producer Shipping Customer-Specific Sales Programs Sales Order End Control Goods Way Bill Processing Order Data Exchange Export Logistical Data Logistical Export Data Communcication Pick-by-Voice Traceability Traceability Management Animal ID Data Management Lot No. Management Match Code Origin Data HIT-Batch Controlling Traceability Data Address Master Deletion of Origin Data Origin Data Information Proof of Origin Archive Reorganization Origin Data Ear Tag Origin Data Archive Lot Number Origin Data Archive Origin Data Logging Proof of Origin Evaluation Update of Origin Log Pool Data Origin Log Origin Data Weighing Report Proof of Origin Evaluation SSM Origin Log Origin Log Update Origin Log Weighing Report Export Origin Data Update Online Display Breed Proof of Origin Proof of Origin Categories Origin Label Duplicate Print Origin Addresses

CSB-System Applications Menu

Accounting & Finance Accounting Basic Accounting Data Account Management Accounts Account Selections Account Master Print Fixed Accounts Bank Details/Interim Accounts Tax Accounts Table Master Data Text Lines Standard Posting Texts Source Document Types Country List Balance of Payments Statistics Export Payments Distribution Key Budget Values System Data System Information Test Program Delete Accounting Data Copy Accounting Data Posting Periods Reorganization Financial Accounting Accounting Transaction Entry Normal Postings Split Postings Recurring Normal Postings Recurring Split Postings Batch Job Postings Transfer Batch Job Postings Accounts Information Transaction Reports Journal Journal Totals Accounting Forms Trial Balance Export Totals & Balances (ASCII) Export Totals and Balances (DATEV) Summarizing Reports Self Auditing List (Hungary) Advance Sales Tax Report GST Advance Registration

399

400 The Efficient Enterprise

Account Allocation GST Adv. Return Form Management GST Adv. Reg. Data Exchange — Posting Data Data Import Import Posting Data Import ALAC Asset Accounting Import Data Medium Kommerzbank Import Line Items Import Data Medium VESR Data Export Export Line Items Account Number Allocation Cross Control with Sales Data Payables & Receivables Balances Analysis Lists of Receivables Payables Lists Negative List Overdraft Lists A/R Accounts Balances Reports Trading Volume Lists Balanced Accounts Open Item Management Open Line Item Evaluation Aging Report Account Statements Reminder Suggestions Reminders Data Exchange — Open Line Items Export Open Line Items Export Factoring Export Personnel Purchases OLI Deferment Reminder Management Generate Reminder Suggestions Print Reminder Suggestions Change Reminder Suggestions Generate Reminders Interest on Arrears Management Late Charge Parameters Interest on Arrears Suggestions Interest on Arrears Calculation Late Charge Invoices

CSB-System Applications Menu

Cash Management Cash Receipts Payment Voiding Bank Reconciliation Payment Transactions Generate Payment Suggestions Print Payment Suggestions Change Payment Suggestions Generate Payment Bearers Debit Notes Generate Debit Note Suggestions Print Debit Note Suggestions Change Debit Note Suggestions Generate Debit Notes LCR Management Financial Statement & Analyses Sample Layout Evaluation Management Accounting Evaluations Posting Data Analyses Closing Activities Month-End Closing Year-End Closing Test Program Year-End Closing Budget/Previous Year Values Transfer of Previous Year Values Consolidation Company Allocation Consolidation Status Transfer of Account Values Delete Consolidation Data Asset Accounting Basic Asset Data Date-Related System Information System Groups Depreciation Types Depreciation Clearance Formula Asset Processing Entries Postings Data Depreciation Simulation Monthly Depreciation Calculation

401

402 The Efficient Enterprise

Year-End Closing Asset Analysis Asset Data Analysis Payroll Basic Payroll Data Health Insurance Salary Types Salary Types Lists Posting Lines Employment Data Tax Data Sort Criteria Personnel Payroll Data Personnel Data Payroll Personnel Lists Payroll Sort Keys Payroll Personnel Group Keys Positions Statements Notes Data Entry Absence Data Additions/Reductions Import Time Data Statement Data Modifications Log Entries Log Payment Transactions Cash Payments List Excess Payment List Payment Transactions Detailed Payroll Information Salary Types Totals List Posting List Costs Center Statistics Differences Log Temp Workers List Closing Activities Monthly Closing Payroll Accounts Tax Forms Year Closing

CSB-System Applications Menu

Payroll Evaluations Certification Management Net-Gross Plan Calculation Net-Gross Calcualtion Cost Center Accounting Basic Cost Control Data System Information Cost Center Accounting Cost Centers Cost Center Lists Cost Center Hierarchy Distribution Key Delete Cost Accounting Data Copy Cost Accounting Data Test Program Reorganization CoAc Cost Allocation & Distribution Internal Cost Capture Cost Allocation Recurring Costs Entry Distribution Hierarchy Accounting Allocation Batch Job Postings Transfer Batch Job Postings Cost Center Information Cost Center Journal Cost Center Summary Sheets Cost Outline & Analyses Expense Distribution Sheet Cost Center Analyses Budget/Previous Year Values Transfer Previous Year Values Cost Accounting Basic Cost Accounting System Information Cost Center Accounting System Information Project Cost Accounting System Information Cost Accounting Cost Allocation and Distribution Internal Cost Capture Cost Allocation Recurring Costs Entry Batch Job Postings Transfer Batch Job Postings Cost Accounting

403

404 The Efficient Enterprise

Evaluation Cost Accounting Cost Analysis Cost Accounting Budget Values Time Management Basic Data Basic Data General Categories for Absence Reasons Time Management Periods Cost Centers Job/Function Groups Public Holiday Master Posting Time Types Wage Types Match Code Allocation Control Data Basic Personnel Data Personnel Calendar Personnel Groups Personnel Lists — Time Management Personnel List Generator Personnel Data Time Management Basic Data Terminal Terminal Data Terminal Allocation Terminal Configuration Basic Data for Work Hour Rules Rounding Rules Break Rules Daily Models Working Hours Models Day Model Allocation Expected Time Models Overtime Order Basic Statement Data Time Accounts Evaluation Time Types Reorganization Master Data Reorganization Reorganization Transaction Data Posting Data Access Control Access Profiles

CSB-System Applications Menu

Send Access Profiles Access Data Data Transfer Import Postings Posting Data Data Transfer Terminal Posting Data PC Bookings Statements Day Calculation Reposting Processing Evaluations Present/Absent Information Annual Overview of Employees Period Overview Time Account Information Data Transfer Time Management Time Account Analysis Non-Master Cost Center List Operational Schedule Absence Application Average Value Calculation

405

INDEX A Accounting asset basic data, 325 description of, 324 evaluations, 325–326 processing, 325 year-end closing, 326–327 cost actual, 263–264 conditions for, 262 description of, 207 flexible, 260–261, 309–310 partial, 266 price calculations, 265 pricing in, 266–267 production, 259–271 purpose of, 259 sales channel, 288 schematic diagram of, 260 standard, 262–263 cost center assignment of costs, 341 basic data, 339–340 competition considerations, 344 controlling, 345–346 cost allocation and distribution, 340–342 description of, 322, 338–339 evaluations, 342–344 goals for, 339–340 overview of, 342–344 description of, 6 financial balances, 333–338 basic data, 329 business transactions, 332–333

description of, 328–329 evaluations, 333–338 general ledger, 320, 329–330 payables, 330–332 receivables, 330–332 sales, 301 Achievement potential, for workforce, 108–109 Actions, 92 Address conditions, 10 Addresses batch processing, 254 communication between, 154 description of, 9, 120–121 external, 270–271 internal, 270 inventory movement, 254 Advanced production scheduling, 60–61, 170, 271–272 Aggregate control system model, 24–29 AIS, See Area Information System Allocation-differentiating prices, 221 Alternatives, 92 Application Layer, 41 Appointments, 160–161 APS, See Advanced production scheduling Area Information System description of, 150 function controlling, 151–152 operative planning, 150–151 price controlling, 152–153 time controlling, 153–154 Asset accounting basic data, 325 description of, 324 evaluations, 325–326 processing, 325 year-end closing, 326–327

407

408 The Efficient Enterprise Automated economy, 32–33, 184–185 Automatic internal commodity movements, 255–256 Automation, in production, 257

B Balance sheet, 333–334 Banking institutions, 349 Bankruptcy, 36 Batch processing, 254–255 Batch production, 241–243 Behavioral theory, 25 Biological joint product production, 237–238 Branch points, 92 Break-even price, 266 Budgeting, 140, 324 Business factors conversion to commodities, 29 developmental theory of, 31 scarcity of, 29 Business to business communication, 297 Business to consumer communication, 296–297 Business transactions, 332–333

C Calculated sales price, 266 Calculation cost variance, 265 Capital productivity of, 184 working, 140 Career management, 108 Cash flow statement, 142, 336 Chaos, 8 Client–server connectivity, 55 CMM, See Control Message Management Commissions, 291 Commodities, 2 Commodity and product management description of, 192–193 inventory basic data, 213–215 control, 217–218 controlling, 222–224 description of, 211 evaluations, 219–220

factors that affect, 211–212, 214 integration controlling of, 223 management, 217 marketability, 214 minimum stock levels, 213 organization, 215–217 prices, 220–222 replenishment level calculations, 213 retention of value, 214 stocktaking, 218–219 traceability of items, 217–218 warehousing, 211, 214 procurement analysis, 208 basic data, 198–199 controlling, 207–210 cost prices, 206–207 definition of, 194–195 description of, 193–195 division of, 193–194 E-, 196–197 evaluations, 205–206 general, 201 management, 201–203 market analysis, 195–197 order placement, 201 organization of, 199–200 planning, 200–201 Producer Clearance System, 204–205 special, 203–205 production adjustments in, 224 automatic internal commodity movements, 255–256 automation in, 257 basic data, 226–228 batch, 241–243 controlling, 271–273 control of, 251–257 cost accounting, 259–271 cutting and joint product, 235, 237–241 decision making, 257 evaluation, 257–259 exit capture, 256 miscellaneous methods of, 243 optimization of, 224, 243–251 organization, 228–229 process, 241–243 recording of, 225 scheduling of, 224, 229–235

Index 409 results-oriented system of, 192–193 sales analysis of, 307–308 basic data, 275–276 channels for, 288–293 computer-aided, 294–295 controlling, 315–319 description of, 273–275 direct, 289 dispatch control, 304–306 evaluations, 306–309 gross margins, 309–314 indirect, 289–293 integration controlling, 316–317 marketing, 277–282 organization, 276–277 planning, 282–284 pricing, 284–288 procedures for, 274–275 processing, 299–303 support, 293–299 Commodity market development automated economy ↔ information economy, 32–33 cultural economics ↔ exchange of goods, 30, 32 mechanized economics ↔ monetary economy, 32 model of, 29–30 natural economics ↔ barter, 30 positive effects, 35 theory of, 31 Communication document administration, 158 market-oriented focus of, 156–157 verbal, 156 written, 158 Communication management action linkage in, 155 appointment setting, 160–161 classification of, 155–156 Communication Ware, 67–72, 157 contact control, 159 Contact Manager, 159–160 description of, 154 process control, 161–162 random communication, 161 requirements, 154 tasks, 161 verbal communication, 156 written communication, 158

Communication technology, 63–67 Communication Ware, 67–72, 157 Competition, 280–281 law of, 23–24 regulated, 23 Computer-aided selling, 294–295 Computer integrated manufacturing, 60–63 Computer telephony integration, 52, 63–67, 156 Conditions batch processing, 255 description of, 10, 123–125 inventory movement, 254 Consumption, 15 Contact control, 159 Contact Manager, 159–160 Context, 92 Control and Configuration Manager, 50–51 Controlling, See also Management and Controlling cost center, 345–346 function, 151–152 integration cost center, 345 description of, 209 of inventory, 223 production, 272 sales, 316–317 internal, 161 inventory, 222–224 performance, 209 price, 152–153 procurement, 207–210 production, 271–273 production performance, 272–273 sales, 315–319 time, 153–154 yield, 337 Control Message Management, 61, 152 Corporate financing, 140 Corporate management system description of, 42 implementation costs for, 59 integration of communication ware, 67–72 computer integrated manufacturing, 60–63 information and communication technology, 63–67 progressive, 225 traditional software vs., 321

410 The Efficient Enterprise transition from in-house software to, 81–82 Corporate organizational structure, 116–119 Corporate performance capacity for, 153 decision making and, 167 description of, 145–146 Corporate success industry-specific comparison figures, 144 intangible value, 143 Corporate value, 143 Cost(s) allocation of, 340–342 distribution of, 340–342 factors that affect, 225 fixed, 269 labor, 269 material, 268–269 operating resource, 269 planned vs. actual, 344 sales channel calculations, 292 variable, 269 Cost accounting actual, 263–264 conditions for, 262 description of, 207 flexible, 260–261, 309–310 partial, 266 price calculations, 265 pricing in, 266–267 production, 259–271 purpose of, 259 sales channel, 288 schematic diagram of, 260 standard, 262–263 Cost center(s) competition considerations, 344 description of, 264, 270 Cost center accounting assignment of costs, 341 basic data, 339–340 competition considerations, 344 controlling, 345–346 cost allocation and distribution, 340–342 description of, 322, 338–339 evaluations, 342–344 goals for, 339–340 overview of, 342–344 Costing, 152–153, 261 Cost minimization concepts, 211

Cost prices, 206–207, 266 Costs-by-cause principle, 225 Cost variances, 335–337 Country generators, 99–100 CRM, See Customer relationship management CSB-Phonemaster, 64–65, 161 CSB system business organization description of, 116 integration elements, 119–126 organizational structure, 116–119 Contact Manager, 69 corporate profile business structure, 103–106 country generators, 99–100 industry allocations, 100–102 language generators, 99–100 overview of, 98–99 CSB-QL, 53 development process organization in, 105 industry structure in, 104 information structure in, 78 integration elements addresses, 9, 120–121 conditions, 10, 123–125 description of, 8–9 items, 10, 122–123 procedures, 10–11, 125–126 knowledge and human resource management available knowledge, 106 career management, 108 employee training and education, 106–107 workforce achievement potential, 108–109 objectives of, 74, 76 open system architecture, 55–57 Workflow Manager, 91–96 CSTA, 64–65 CTI, See Computer telephony integration Customer(s) description of, 279–280 packaging specific to, 305 pricing based on, 286–287 Customer care, electronic, 296–299 Customer relationship management, 296 Cut products, 220–221 Cutting processes

Index 411 description of, 238–240 optimization and, 245–246 standardization procedures, 245–246 Cutting products, 235, 237–241

D Daily price, 265 Data access machine, 53–55 Database independence of, 40, 54 management of, 146–147 Data capture, 253, 341 Data exchange formats, for Internetcapable industry-specific software, 86 Data interchange, electronic, 70–72 Data processing, 69–70 Data Warehouse, 146–147 Data Warehouse manager, 147–148 Decision(s) implementation-related, 166 long-term, 166–167 management-related, 166 operative, 166–167 short-term, 166 Decision-making process assessments, 167–168 changes in, 165 "crucial" vs. "minor" decisions, 163 decisions, 166–167 description of, 163–165 economic relevance of, 163 evaluations, 167–168 production, 257 requirements, 165–166 steps involved in, 165 theoretical models used in, 163 Demand development of, 168–169 price differentiation based on, 288 price lowering to increase, 27 Developmental inevitability, 18–21 DIN norm, 128, 199 Dispatch control, 304–306 Distribution channels, 281 Documents administration of, 158 storage of, 158–159 Dynamic elements, 33–34

Dynamic production function, 191

E Earnings value, 143 E-business, 89 Economic development theory aggregate control system model, 24–29 description of, 18 developmental inevitability, 18–21 dynamic elements, 33–34 expansive knowledge, 190 growth forces, 33–34 Labor-Land-Capital-Knowledge, 30 law of competition, 23–24 law of scarcity, 22–23 positive effects, 34–36 Economic policy, 25 Economics information technology and, 3 traditional view of, 19 Economy automated, 32–33, 184–185 changes in, 30–31 driving factors in, 2 governmental subsidies effect, 349 growth in, 174, 347 information, 32–33 monetary, 32 progressive forces, 19 Electronic customer care, 296–299 Electronic data interchange, 70–72 Elementary factors description of, 11 knowledge, 14–15, 188–192 labor, 12 linkage of, 190 materials, 13 operating resources, 12–13 Employee(s), See also Labor achievement potential for, 108–109 payroll, 322–324 performance potential of, 188 training and education of, 106–108 Enterprise resource planning, 1 Entrepreneurial misconduct, 348 Entrepreneurs factor market contributions by, 18 risks taken by, 347–348 E-procurement, 196–197

412 The Efficient Enterprise ERP, See Enterprise resource planning Expansive knowledge, 185, 187, 190 Expense distribution sheet, 343 Explicit knowledge, 7, 188–189 Exports, 28 External address, 270–271 External labor, 109 External procedures, 11

finance, 6 goods and product management, 5–6 integration of, 4–5 management and controlling, 5 performance and time management, 5 Function controlling, 151–152

G F Factors business conversion to commodities, 29 developmental theory of, 31 scarcity of, 29 elementary description of, 11 knowledge, 14–15, 188–192 labor, 12, See also Labor linkage of, 190 materials, 13 operating resources, 12–13, See also Operating resources production combinations of, 185–188 definition of, 185 description of, 185 Finance, 6 Financial accounting balances, 333–338 basic data, 329 business transactions, 332–333 description of, 328–329 evaluations, 333–338 general ledger, 320, 329–330 payables, 330–332 receivables, 330–332 Financial management, 139–142 Financial plan, 140–141 Finite supply, law of, 22, 30 Fixed costs, 269 Flat-management hierarchy, 118 Flexible cost unit accounting, 260–261, 309–310 Flow statement, 334–335 Freedom of choice, 38 Free trade, 347–348 Functional areas accounting, 6

General ledger, 320, 329–330 Goods competitiveness of, 185 direct sale of, 291–292 distribution channels for, 281 in economic world, 20 free choice of, 347 management of, 5–6 on-time delivery of, 193 procurement of, 196 production of, 169–170 productivity effects, 178 proffered, 28 Government co-entrepreneur role of, 348 efficiency by, 350 funding by, 348 subsidies by, 348 Gross margins, 271, 309–314 Growth forces, 33–34

H HACCP concept, 130–131, 133–134, 251 Hardware description of, 42–43 neutrality of, 42–44 High Level Application Interface, 61–62, 152 HLAI, See High Level Application Interface Human resource management, See Knowledge and human resource management Human resources and labor, See also Labor description of, 171–172 job performance, 176–177 planning, 172–173, 233–235 recruitment, 173–174 work capacities, 174–176

Index 413

I Idle time, 170–171 Implicit knowledge, 188 Imports, 28 Independence, software freedom of choice vs., 38 system, 39–42 Indirect sales, 289–293 Individual additional data, 115 Industrial society transition to information and communication society, 32, 186 Industry allocation, 100–102 Industry-specific comparison figures, 144 Industry-specific software application controls Personal Workflow, 110–111 user information, 113–116 user requirements, 109–110 Workflow Navigator, 111–113 business processes visualized in, 84 corporate profile business structure, 103–106 country generators, 99–100 industry allocations, 100–102 language generators, 99–100 overview of, 98–99 description of, 37, 80–86 Internet-capable, 86–91 knowledge and human resource management available knowledge, 106 career management, 108 employee training and education, 106–107 workforce achievement potential, 108–109 staff training, 85 transition to, 83 Information acquisition, 187 Information age, 2 Information economy, 32–33 Information society definition of, 188 global company responses in, 35 industrial society transition to, 32, 186 Information technology description of, 3 integration benefits of, 32, 63–67 "transmission mechanism" use of, 15 Infrastructure, 57–58

Insolvency, 36 Intangible value, of company, 143–144 Integration description of, 8 elements of addresses, 9, 120–121 conditions, 10, 123–125 description of, 8–9 items, 10, 122–123 procedures, 10–11, 125–126 schematic diagram of, 170 factor performance, 4–5 Integration controlling cost center, 345 description of, 209 of inventory, 223 production, 272 sales, 316–317 Internal address, 270 Internal controlling, 161 Internal labor, 109 Internal procedures, 11 Internet-based procurement market analysis, 196 Internet-capable industry-specific software corporate integration via Internet, 89–90 E-business, 90–91 software-related requirements, 86–88 user-specific requirements, 88–92 Inventory basic data, 213–215 control, 217–218 controlling, 222–224 description of, 211 evaluations, 219–220 factors that affect, 211–212, 214 integration controlling of, 223 management, 217 marketability, 214 minimum stock levels, 213 movement of, 253–254 organization, 215–217 prices, 220–222 replenishment level calculations, 213 retention of value, 214 stocktaking, 218–219 traceability of items, 217–218 warehousing, 211, 214 Inventory management controlling of, 222–223 leased, 326

414 The Efficient Enterprise Inventory management robot, 216–217 Investment planning, 178–180 Investments definition of, 177 description of, 177–178 governmental, 350 hardware, 42–43 liquidity effects, 181 planning, 178–180 procurement, 180–182 protection of, 42–45 software, 44–45 IO-SYS WIN 32, 51–52 ISO 9000, 128–137, 199 Item(s) batch processing, 255 description of, 10, 122–123 inventory movement, 254 Item coverage list, 241 Item master, 263

J Job assignment variations, 174–176 Job performance actual costs of, 263 description of, 176–177 Joint product production, 235, 237–241 Joint products, 220 Just-in-time organization, 70 Just-in-time production, 211–212

K Knowledge access to, 7, 14 adding and multiplying of, 58–60 as elementary factor, 14–15, 188–192 collection of, 14 description of, 6–7 economic activity-related, 15 expansive, 185, 187, 190 explicit, 7, 188–189 implicit, 188 lexical, 192 optimization of, 59 performance potential and, 188–189 procured, 7 subjective, 191

theory of, 58 Knowledge and human resource management available knowledge, 106 career management, 108 employee training and education, 106–107 goals of, 190 workforce achievement potential, 108–109 Knowledge base, 14, 241 Knowledge Discovery Database, 146–147

L Labor, See also Employee(s); Human resources and labor costs of, 176, 269, 324 economic activity and, 168 integration elements for, 12 planning of, 175 productivity of, 12, 169 recruitment of, 173–174 specialized, 235 Language dictionaries, 100 Language generators, 99–100 Law of competition, 23–24 Law of finite supply, 22, 30 Law of scarcity, 22–23 Lean management, 172 Leased inventory management, 326 Lexical knowledge, 192 Link element, 92 Liquidity, 141, 181 Long-term decisions, 166–167

M Machine productivity, 169 Macroeconomic control system, 25–26 Management growth through, 347–351 integrated control system, 15–18 performance potential factors, 3–4 role of, 60 Management and Controlling Area Information System description of, 150 function controlling, 151–152

Index 415 operative planning, 150–151 price controlling, 152–153 time controlling, 153–154 communication management action linkage in, 155 appointment setting, 160–161 classification of, 155–156 contact control, 159 Contact Manager, 159–160 description of, 154 process control, 161–162 random communication, 161 requirements, 154 tasks, 161 verbal communication, 156 written communication, 158 decision making process assessments, 167–168 changes in, 165 "crucial" vs. "minor" decisions, 163 decisions, 166–167 description of, 163–165 economic relevance of, 163 evaluations, 167–168 requirements, 165–166 steps involved in, 165 theoretical models used in, 163 description of, 5, 137–138 management information system, See Management information system management module for, 77 Management indicators, 143–146 Management information system description of, 138 financial management, 139–142 management indicators, 143–146 MIS Analysis, 148–149 MIS Data Mining, 149 MIS Reporting, 148 MIS User Interface, 149 results presentation, 146–149 strategic planning, 139 Management teams, 165 Marginal utility, theory of, 23 Market access function, 285 Marketing "closed-loop," 278 communication technology for, 281 competition, 280–281 controls for, 281

customers, 279–280 definition of, 277–278 distribution channels, 281 focused, 278 telephone, 289–290 Marx, Karl, 18 Materials consumption of, 212 costs of, 268–269 description of, 13 quality of, 237 yield value of, 237 Materials price, 266 Mechanized economics, 32 Minimum stock, 213 MIS Analysis, 148–149 MIS Data Mining, 149 MIS Reporting, 148 MIS User Interface, 149 Monetary economy, 32 Monopoly theory, 23

N National economy globalization of, 25, 27 political influences, 25 Net asset value, 143 Net–net price, 206 Neutrality of hardware, 42–44

O Offer, 299 Open system architecture, 55–57 Operating resources capacities, 182–184 capacity utilization of, 178 costs of, 269 definition of, 177 description of, 12–13 integration elements for, 13 optimization of, 194 performance, 184 procurement of, 180–182 Operating system independence, 40 Operational work, 172 Operative decisions, 166–167 Optimization

416 The Efficient Enterprise cutting process, 244–245 joint product package acquisition, 244–245 production, 243–251 recipe definition of, 241 description of, 246–248 fruit mixtures, 250–251 meat products, 248–249 processed cheese, 249–250 Orders handling of, 301 management processing, 300 placement of, 202 processing times for, 305–306 response times, 305 Organization change in, 165 flexibility of, 165 global, 350 sales, 275, 277 structure of, 116–119, 164 Organizational work, 171 Output gap, 184

P Paperless data exchange, 302 Parkinson effect, 350 Payables, 330–332 Payroll, 322–324 PCS, See Producer Clearance System Performance and time management basic data, 169–171 description of, 5, 168–169 human resources and labor description of, 171–172 job performance, 176–177 planning, 172–173 recruitment, 173–174 work capacities, 174–176 investments and operating resources definition of, 177 description of, 177–178 investment planning, 178–180 liquidity effects, 181 procurement, 180–182 Performance controlling, 209 Performance potential classification of, 6–7

description of, 186 employee, 188 factors of, 3–4, 7 Personal computers, 154–155 Personal Workflow, 110–111 Personnel assessment documents, 174 Physics, 8 Plan Component Exchange, 179 Planned marginal costing, 179 Planned price, 265 Planning human resources, 172–173, 233–235 investment, 178–180 procurement, 200–201 sales, 282–284 strategic, 139, 150 Planning Manager, 229–233 PlayIt, 149 Politics description of, 349 economic policy influences on, 25 Power Control, 148 Power Minder, 149 Price controlling, 152–153 Price differentiation, 288 Price labeling, 305 Price variance, 265 Pricing cutting products, 238–239 flexibility of, 288 inventory, 220–222 sales, 284–288 settlement, 239–240 traditional theory of, 286 Print Management Interface description of, 48–50 MIS Reporting, 148 performance features of, 113–114 user-specific data in, 113–116 Procedures batch processing, 255 description of, 10–11 inventory movement, 254 Processes, 92 Process production, 241–243 Procured knowledge, 7 Procurement analysis, 208 basic data, 198–199 controlling, 207–210 cost prices, 206–207

Index 417 definition of, 194–195 description of, 193–195 division of, 193–194 E-, 196–197 evaluations, 205–206 general, 201 management, 201–203 market analysis, 195–197 order placement, 201 organization of, 199–200 planning, 200–201 Producer Clearance System, 204–205 security, 214 special, 203–205 Procurement market, 145 Producer Clearance System, 204–205, 303 Production adjustments in, 224 automatic internal commodity movements, 255–256 automation in, 257 basic data, 226–228 batch, 241–243 controlling, 271–273 control of, 251–257 cost accounting, 259–271 cutting and joint product, 235, 237–241 decision making, 257 definition of, 15 evaluation, 257–259 exit capture, 256 improvements in, 17 just in time, 211–212 miscellaneous methods of, 243 optimization of, 224, 243–251 organization, 228–229 process, 241–243 recording of, 225 scheduling of, 193, 224, 229–235 Production factors combinations of, 185–188 definition of, 185 description of, 185 Production performance controlling, 272–273 Productivity capital, 184 company success and, 228 goods and, 178 investments that enhance, 347 labor, 12, 169 machine, 169

Product management, 5–6, See also Commodity and product management Profitability cost variances effect, 335–337 description of, 179–180 fluctuation in, 335 yield effects, 337–338 Profit-securing function, 285–286 Programming languages description of, 39 for Internet-capable industry-specific software, 86 selection of, 58 training costs for, 58 Project management, 162

Q Quality assurance, 134–137, 173 Quality control system business-related regulation requirements, 126–128 data in, 130–133 DIN certification, 129–137 integrated, 133–134 ISO 9000 certification, 128–137 organization and, 128–129 principles of, 129–130 standards, 45, 126–128, 173 Quality laboratory information systems, 134–137 Quality standards, 45, 126–127

R Raw materials, recipe optimization for, 248–249 Real system, 19 Real-time data processing, 77 Real-time process data, 172 Real-world systems, 2 Receivables, 330–332 Recipe optimization definition of, 241 description of, 246–248 fruit mixtures, 250–251 meat products, 248–249 processed cheese, 249–250 Recruitment, 173–174

418 The Efficient Enterprise Replenishment level, 213 Resource optimization adding and multiplying of knowledge, 58–60 infrastructure factors, 57–58 open system architecture, 55–57 overview of, 45–46 software development, See Software development Return on investment, 162, 182 Reusables, 301–302 ROI, See Return on investment

S Sales analysis of, 307–308 basic data, 275–276 channels for, 288–293 computer-aided, 294–295 controlling, 315–319 description of, 273–275 direct, 289 dispatch control, 304–306 evaluations, 306–309 gross margins, 309–314 indirect, 289–293 integration controlling, 316–317 marketing, 277–282 organization of, 276–277 planning, 282–284 pricing, 284–288 procedures for, 274–275 processing, 299–303 support, 293–299 Sales force automation, 296 Sales market, 145 Sales organization, 275, 277 Sales price, calculated, 266 Scarcity, law of, 22–23 Scheduling description of, 172 production, 193, 224, 229–235 Screen Management Interface, 47–48 Settlement price, 265 Settlement pricing, 239–240 SFA, See Sales force automation Short-term decisions, 166 Smith, Adam, 20 Software

independence freedom of choice vs., 38 system, 39–42 industry-specific, See Industry-specific software investment considerations, 44–45 modifications, 81 objectives for, 37 streamlining introduction of, 82 transition to corporate management system, 81–82 transmission effect of, 4 upgrades, 81 Software development approaches to, 73 in-house tools for, 47 internalization of, 46 third-party tools for, 46–47 tools for, 46–53 Software engineering, 1 Software integration core of, 74–77 description of, 72–73 lack of, 72 market considerations, 79 market for, 72 model of, 74–77 multidimensional, 77–80 Special procurement, 203–205 SQL list generator, 106 SSM, 114–115 State Machine, 52–53 Stock control, 218 Stocktaking, 218–219 Strategic planning, 139, 150 Subjective knowledge, 191 Subsidies, 348 Supply chain management, 297–298 System independence database, 40 definition of, 39 description of, 39–40 layer structure of, 40–42 operating system, 40

T TAPI, 64 Team structures, 117 Telephone marketing, 289–290

Index 419 Telephone system integration, 63–67 Time description of, 169 idle, 170–171 Time controlling, 153–154 TouchIt, 149 Trade laws, 20 Training employee, 106–108 staff, 85 Transparency, 79

U Users information for, 113–116 specific data for, 113–116 specific requirements of, 109–110 Utility maximization, 22

V Value corporate, 143 intangible, 143–144 Variable costs, 269 Verbal communication, 156

Visualization description of, 1 "real system" approach, 2

W Warehousing capacity of, 214 description of, 211 organization of, 215–216 Weekly price, 265 Windows Utility Write All, 56–57 Work capacities, 174–176 Workflow management, 91–96 Workflow Manager, 91–96 Workflow Navigator, 111–113 Workflow systems, 81 Workforce achievement potential, 108–109 Working capital, 140

Y Year-end closing, 326–327 Yield controlling, 337