ERP’s Next Top Model: Organizational Modeling in Microsoft Dynamics AX 2012

You’re probably familiar with our “Get What Fits” campaign, which talks about how Microsoft Dynamics CRM works the way your business does, rather than forcing you to adapt your processes to the constraints of the software. The same is also true in the ERP world, where deploying software that reflects your organizational structure—rather than the other way around—can be a key to the success or failure of the implementation.

In Microsoft Dynamics AX, you can achieve this “fit” by using organizational modeling tools. The way you describe your organization in these tools can have a huge impact on the application features and scenarios. In the latest release of Microsoft Dynamics AX, we invested heavily in updating the organizational model to enable you to more accurately reflect the structure of your organization and to quickly reshape and restructure existing models as business conditions change.

Our first goal was to enable you, our customers, to “model as you operate”—that is, to define an organizational model that accurately reflects the nuances of your business. Our customers tell us that, in earlier versions of Microsoft Dynamics AX, they weren’t always able to model complex global operations with multiple legal and operating organization structures. We addressed this by introducing two new concepts to the Microsoft Dynamics AX organizational model:

• Legal entities are registered or legislated organizations that are typically required to prepare financial statements. They’re equivalent to companies in Microsoft Dynamics AX 2012.
• Operating units are made up ofresources and operational processes and may maintain their own separate P&L statements and management reports. In Microsoft Dynamics AX 2012, we’ve included predefined operating units for business units, cost centers, functional departments, and value streams (which are common in lean manufacturing).

Many larger organizations maintain separate legal entities and operating units, each with their own hierarchies. In Microsoft Dynamics AX 2012, these hierarchies can be used to define reporting rollup, security access, business policies, business processes, and responsibility for human and operations resources.

By introducing these concepts, we’ve provided a high degree of flexibility that in turn, should make it easier for our customers to operate their business in a more agile manner. Specifically:

• Creating different types of organizations. In Microsoft Dynamics AX 2012, new types of organizations, such as legal entities and operating units enable you to model your business to reflect how you operate without resorting to extensive customizations. Legal entities and operating units are defined independently of each other, giving you better flexibility.
• Modeling organizational hierarchies. Organizations often have one or more hierarchical structures that are used in defining business policies and rules and for security access and reporting rollup. The organization model framework in Microsoft Dynamics AX 2012 provides multiple hierarchies, each of which can operate over different effective dates. You can also create multiple hierarchies for different purposes—for example, legal structure versus operational structure.
• Sharing data and transactions between companies. In Microsoft Dynamics AX 2012, we’ve integrated the organization model framework with other application frameworks to support end-to-end application scenarios and provide visibility into transactions across companies. Organizations can be used as financial dimensions for financial reporting purposes, and you can define business rules and policies for organizations, which are applied to transactions that have functional dependencies on the organization. From a security standpoint, you can also control access to data by defining users’ access to organizations.
• Easily (re)configure and extend the organizational model. We know that companies are always evolving, whether through organic growth, mergers and acquisitions, or a continuous cycle of performance improvement. In addition to the aforementioned improvements, Microsoft Dynamics AX 2012 supports the iterative cycle of Monitor > Measure > Analyze > Improve down to a very granular level, giving you more effective management control. Plus, the easy-to-use graphical modeling tools allow you to quickly restructure or reorganize units and then run before-and-after scenarios, to truly understand the business impact of your changes.

How do you model separate legal and operational hierarchies for your business today? How easy is it to change those models, along with the underlying application scenarios? Do you have any best practices to share?

• Anonymous
  December 29, 2011
  Good discussions. It will be better if any case study alongwith demo will be greate help.

• Anonymous
  December 29, 2011
  Describe the tools available to maintain the organizational structure (hierarchies).  How they are maintained.  Are they effective dated to be able to report on organizations at different points in time?  Is there any specific document to explain our solutions.

• Anonymous
  March 27, 2012
  In Microsoft Dynamics AX 2012, these hierarchies can be used to define reporting rollup - where do we difine these roll ups?