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This module is quite a bit different than the other four modules in the AIS package. First of all it deals with the SAP BW/SEM system and not the SAP ERP system. The second point is that most AIS textbooks have very little material dealing with data warehouses, balanced scorecard or the other topics covered in this module. This means that you will need to spend more class time lecturing on these topics since the material isn’t covered in the text. I make more slides available in this module than in the other modules since you will be covering both the theoretical material and the application of that theory to the SAP system.

The stated primary learning objectives in the assignment are an introduction to advanced data warehousing data analysis tools, to see how data warehouse data can be used in a digital dashboard and to see how data warehouse data can be used in a balanced scorecard. However, one of the unstated objectives is to show the students some “sizzle” related to dealing with an ERP system. Some students picture the SAP ERP assignments as being drudgery and don’t yet understand that the system has to have its inherent complexity in order to handle complex business situations in an integrated fashion. This assignment stresses that the data coming from the ERP system can be loaded directly into a data warehousing system and be used for doing complex tactical and strategic analysis. Most businesses find that a legacy environment has so many data integrity problems that building the data warehouse is such a monumental task that little resource is then available to use the tools that a data warehouse provides.

Unlike the ERP system the SEM system has graphical output and is substantially more user friendly. The environment in the assignment illustrates that non-technical employees can use this system without being overwhelmed. We purposely ignore the more traditional multi-dimensional analysis tools (pivot table variants) associated with a data warehouse and show the students the more user friendly analysis tools of the balanced scorecard and the management cockpit.

System Configuration

This assignment is designed to run on a standard IDES BW/SEM system (BW 7.0 and SEM 6.0). No special set up is needed for the assignment. If you are hosted then you need to contact your hosting center to obtain access to a system. If you are self-hosted, you need to confirm that you do indeed support the BW/SEM system.

You should note that the BW system is different than the ERP system in that it supports only a single client. Hence, your students will possibly be accessing the system on the same client as many other students from other classes and universities. This assignment is designed for read only access to the system, so when you request accounts be sure to confirm that the students will only be granted read only auhorizations. Making sure that your students are not allowed to alter anything within the system is important. In this way you can prevent your students from being accused of damaging the system.

Solution

This assignment is straight-forward and is a very gentle introduction to the SEM system. The student video provided with these materials walks the students through many of the steps. In the following I will present some of the screen captures of the steps the students should take. In addition, I include some notes where appropriate.

Entering the BW/SEM system: The two areas of interest for this assignment are highlighted. We examine the balanced scorecard first.

Part 1: SAP SEM-BSC (Balanced Scorecard)

Be sure to select the SBC Software and select the correct dates. There is a very limited amount of data in the system, so entering the right dates is important.

a.  Using the BSC overview, summarize the June 2004 performance of PC4YOU's Software SBU. That is, state which perspectives/objectives have good performance and which ones do not. Just focus on the perspectives and objectives. Be sure to discuss all four perspectives of the scorecard.

The first thing the students need to look at is the symbol key to determine what the various symbols indicate. (See below)

Only the Learning & Growth Perspective has the symbol that denotes very good performance. The other three perspectives have a rating of good. So in general we are functioning well, but there is still some room for improvement in three of the four areas.

Moving on to the objectives, there is quite a bit more variability. The Learning & Growth Perspective is the only one in which all objectives are either good or very good. The other three perspectives have at least one objective that has an action required indicator. The good news is that no objectives have the indicator, which shows poor performance.

b. Which perspective would an accountant be most closely associated?

This should be an obvious answer. The Financial Perspective should be of most interest to an accountant. However, wherever business performance measurement is involved, an accountant could also be involved. So while there will be most involvement in the financial perspective, the accountant could be involved in all perspectives.

c.  Select the button and display the Perspective/Objective/Measure view in Analysis. Looking only at the financial perspective, what is the score for the perspective and each objective under that perspective?

Here is the resulting screen.

Now show how the perspective score is calculated and how each objective score is calculated (starting with the measure score values). [NOTE: You do not need to show how the measure score values themselves are calculated in answering this question. This is a simple answer, don’t look for something complex. Hint: Look at technical settings ] What assumption do the calculations make about the importance of each measure (with respect to each objective) as well as the importance of each objective (with respect to the perspective)?

From the above screen you can see that the perspective score is calculated by taking the simple average of the objective scores.

The objective score is calculated using the simple average of the measures for three of the four objectives. The Grow Stronger than the Overall Market objective uses the best case of all of the measures. (See below)

The assumption for the perspective and three of the four objectives is that everything has an equal weighting. Only the Grow Stronger than the Overall Market objective assume that the top measure is the only one that should be counted.

e. Now examine the measures under the two objectives Optimize Value Added and Grow Revenue from Strategic Customers. How are we doing? Explain the situation and also explain what each of the three graphs is displaying.

For Economic Value Added (EVA) under Optimize Value Added we are doing very well. We have been consistently above the planned values and have had consistent growth except in the last month. If there is to be any concern, one should look into seeing if the drop in performance in the month of June should be of concern or whether it is just an odd event. (See screen shot below)

With respect to Grow Revenue from Strategic Customers we have not been meeting our targets in both the grow measures and the total revenue measures. Performance has improved considerably in the grow measure, but it appears that we still need to make improvement to reach our target and the final month indicates that performance may have leveled off. However, it should be noted that for both the growth and total revenue measures the target values have been very aggressive. (See screens below)

The wholesale revenues have been growing steadily but the gap between planned and actual activity has been growing. There probably needs to be an investigation into whether this is a performance problem or if it is a problem of having a too aggressive plan.

f. Looking at each of these measures rationalize why one could conclude that we are having good performance and on the other hand discuss that we are actually having poor performance. That is, argue both sides of the performance issue using the information that is provided. Be sure to discuss both the planned and actual values and how they relate and how they influence the calculation of the measures.

Restating what was discussed before, the EVA measure looks good, but the final period has had a substantial drop. This may be an indicator of things to come or it may be just an odd occurrence. With respect to the total revenue measures we have been performing below our desired levels, but the growth has been tremendous and the planned values are very ambitious.

g. There are no initiatives for the financial perspective. Discuss what initiatives may be appropriate in order to reach the stated objectives within the financial perspective.

There are many possible answers to this question. Here are some possible initiatives:

·  For Optimize Value Added: Start a system integration practice with bundled software and hardware as a single product

·  For Become no. one supplier in installed base: Bundle software into a unified suite

·  For Grow stronger than overall market: Start a marketing campaign to emphasize brand strength

·  For Grow revenue from strategic customers: Offer discounts for customer loyalty and for volume purchases

Part 2: Management Cockpit (transaction code UMM_PRES)

Again, choose the PC4YOU Corporation cockpit for June 2004. If you expand each of the walls you will see status indicators for each measure. These indicators can be ignored since they relate to the data coming from the data warehouse and for this situation we have no control over them. Following are the questions you need to answer concerning the management cockpit.

Before proceeding you should note that when each overview is expanded that there are traffic light indicators to the left of each item. We tell the students to ignore them and finding the documentation on them is not straightforward. However, if the students are interested, you can tell them that they are status indicators for the data in the management cockpit. Here is the meaning of each:

The button denotes a completed element.

The button denotes an edited/incomplete element

The button denotes a new/unedited element

The button denotes an undefined element

a.  How many walls are there in this cockpit? What is the general area of each? How does this relate to the perspectives in the balanced scorecard?

There are four walls in the cockpit (see below). This is normal. The four walls are: Financial Situation, Market Situation, Processes and Infrastructure. The financial situation deals with the measures primarily coming out of the financial accounting and cost accounting areas and this aligns with the financial perspective in the balanced scorecard. The market situation deals with sales, marketing and customer satisfaction and again it aligns well with the customer perspective in the balanced scorecard. The processes wall deals with the internal operations of the organization and again aligns well with the internal perspective in the balanced scorecard. The final wall, infrastructure, deals primarily with the technology infrastructure and the knowledge workers. While there is a good amount of overlap between the learning and growth perspective in the balanced scorecard, these measures will be of a much shorter term than the measures in the balanced scorecard.

b.  Double click the SBU Hardware: Financial Details. Then double click the SBU Software: Financial Details. Each of these has the same measures. Explain in your own words what these measures are and why they would be important items to measure. (Note: do not just cut and paste you answer from the description in the management cockpit.)

Here are the descriptions as shown in the management cockpit (I cheated and cut and pasted):

Asset Turns / = / Total gross product revenue / Total net assets

Asset Turns or Asset Turnover is considered a financial activity ratio. An activity ratio relates information regarding how effectively the firm’s assets are being managed. The level of a firm’s investment in assets depends on many factors, such as seasonal, cyclical and industry considerations. How can the appropriate level of investment in assets be measured? A starting point is to compare assets with sales for the year to arrive at turnover. The idea is to find out how quickly assets are used to generate sales. The generic definition of a turnover ratio is the measurement of the gross benefit, relative to the resources expended.

Asset turnover is the ratio of sales to total assets; it indicates the extent that the investment in total assets results in sales or how hard the firm’s assets are being put to use.

Application of the ratio:

For every $1.00 of Total Assets invested in the business, the company generates [asset turns ratio * $1.00] in sales per year.

Components

The total asset turnover ratio is determined by dividing total operating revenues (also referred to as Total Gross Product Revenue or Annual Sales) for the accounting period by the average of total assets.

Total Operating Revenues / Total Assets (average).

Decomposition

Total Assets (average) = Beginning Balance Sheet Assets + Ending Balance Sheet Assets / 2.