An overview of the world’s leading ERP system

JR Batek, IT Audit Manager – Cooper Industries

Tim Guerinot, Sr. SAP Staffing Consultant – Whitaker IT
Introduction
JR Batek, IT Audit Manager – Cooper Industries
11 years of ERP experience
8 years SAP experience
6 years auditing SAP
2 years implementing SAP
Tim Guerinot, Sr. SAP Staffing Consultant – Whitaker
6 years ERP experience
3 years staffing SAP, all versions and modules
3 years selling ERP solutions
Avoid adult diaper answers!
Overview
What is SAP and who uses SAP (JR and Tim)
SAP modules and ERP information flow (JR and Tim)
How managers use SAP and ERPs to make decisions (JR)
Costs of implementing SAP:
Money (JR and Tim)
Cultural changes (JR)
Process changes (JR)
SAP Careers (Tim)
Wrap-up and Q&A
Case discussion
What is SAP? (the company)
Started in 1972 – five former IBM employees

Top 5 software company (MS, Oracle, IBM, Google)

Trades on NYSE: SAP

Headquartered in Walldorf, Germany (near

Heidelberg)
What is SAP? (the name)
The “good names”
 Pronounced “S” “A” “P” – NOT Sap
 Systeme, Anwendungen und Produkte in der Datenverarbeitung
 Systems, Applications and Products in Data Processing
The “other names”
Stops All Progress
Start And Pray
Software Acquires Problems
Satan’s Accounting Program
What is SAP? (the software)
Enterprise Resource Planning software
Quote-to-Cash (Revenue cycle)
Req-to-Check (Expenditure cycle)
Plan-to-Produce (MRP)
Finance and Controlling
Massive accounting package
Tool kit
Series of Modules
Bought and customized to your business
Who Uses SAP?
“the World’s best run companies….”
80% of Fortune 500
 Coke
 Conagra
 Caterpillar
 Exxon Mobile (over 60 instances)
 Chevron
 Marathon Oil
 Cooper Industries
 Nike
 General Electric
 Baker Hughes
 Enron….?
SAP – ERP and Data Flow
Manufacturing most popular

Growth out of MRP R/3

MM SD PP
9 basic modules
FI PLM CO

Interconnected and QM WM HR
independent
SAP – ERP and Data Flow
Data types
Master data
Vendor master
Customer master
Material master
Transactional data
Sales orders
Payments
Meta data
 SAP – ERP and Data Flow
Financial and Logistics Reporting

Cost Controlling

QtC Quote Sales Order

Inventory
Delivery Billing Customer
Sourcing Payment

Quote to
Cash

Sales & Material

PtP Operations
Demand
Requirements Planned Order
Production Production
Planning Planning Order Control
Planning
Plan to
Produce

RtC Purchase Vendor Purchase

Goods Receipt
Invoice Vendor
Requisition Selection Order Verification Payment

Requisition to Check

Business Information Warehouse

Other SAP Options
Other Modules, Components, and Grids
CRM
BI/BW
Treasury
Real Estate
Energy products
SAP Business one
AFS – Apparel Footwear Solution
Industry specific module
Governance, Risk and Compliance
Management Decisions
Data driven analysis
What are important pieces of information for a
material?
SAP material master
 20 different views
 Average 20 fields per view

 Several views change by plant

Real time accounting information

Accounts Receivable
Accounts Payable
Management Decisions
Profitability
What is profitable?
Who is profitable?
Where are we profitable?
Dude, where’s my cash?
Inventory – which materials
Accounts Receivable – which customers
Accounts Payable – which vendors
Others – prepaids, accrued payroll, other expenses
Management Decisions - No More
No longer decisions!
When to pay
What to buy
When to buy
What to make
When to make it
What to count (inventory stock take)
Who to hire (always MBA students)
Management Decision Changes
Removal of rote/routine decisions
Changes the types of decisions
From how much of product X
To should we sell product X
Flattens the organization
Creates new opportunities
How many analysts does it take…
Customer Profitability
Product Line Profitability
Inventory Balances
Costs of Implementing SAP
What does it cost?
Hardware
Software
Bioware
Cultural changes
Different organization
Change management
Process changes
Where to start?
SAP Implementation Costs
Adult diaper time!
$50-100 million, typical
My experience
One company, $50 million for current system
Previous company, >$250 million
 Everything in-house
 Highly customized

Others
Hershey failed in October (Trick or Treat!)
Enron went in smooth and easy
SAP Hardware Costs
Do you have an ERP ready data center? – not in $50 MM
Fire detection and prevention
Above 500 year flood level?
In hurricane, earthquake, or tornado zone?
Do you have a hot or cold backup site?
$5-10 million depending on size
Multi-mirrored
Real-time backup
Application, database, load balance
Do you need new PC’s?
Software Costs
$5-15 million up front
SAP licenses (various modules)
Oracle or other database licenses
BW or other analytics
Administration tools
Backup and recovery software (real time?)
Annual licensing/maintenance fees 20%
Hint – select the right state and download
Costs of SAP Expertise
$10-25 million on hardware and software

$40-75 million on bioware

SAP eliminates $10/hr data entry clerks
Now you need $100,000+/yr Basis administrators

Consultants can be expensive

You want the expensive ones
Know business and technical
SAP Consultants
Lots of consultants
Few have the skills
Find, a finder!
Lots of billing rates
SAP Platinum consultant - $300/hr
Quality, independent - $150/hr
Someone who read an SAP book – not worth the time
Good consultants – know the business!
Technical aptitude
Communication skills
Cultural Changes
Immediate fear
Job losses
Job changes
Management oversight
Dashboards
Drilldown
Centralized/Shared processes and resources
Cultural Changes
Unbelievable level of complexity
Learn to speak SAPaneese
Arguments change
 What is the correct authorization object?
 Which movement types are considered consumption?

Allocation of costs
Data is a valuable asset
Process Changes
What changes?
Nothing
Everything
Optimize your process first!
Streamline
Leverage technology
Only one big change
Document, document, document
Communicate, communicate, communicate
Is it Worth It?
YES!!!
If done correctly…
Eliminate non-value added steps
Improve management information
Significant soft cost saving
Focus resources
SAP Careers
SAP Business Analyst
Liaison between the business and the techies
Good communication skills
Understanding of local business and industry practices
Technical track
Functional track
Project management
Best – Technofunctional that can manage projects
IT Director
Consultant
SAP Careers
Salaries
Business Analyst - 70K/year
Basis – 110K
Functional – 90K
Project manager – 80K
Independent consultant
Bill at $150/hr
Take home $110/hr
Less travel costs
Approximates to $175K
SAP Careers
The downside!
Lots of travel (good or bad)
Long hours
Work-life balance challenges
Project work
 Projects end
 Jobs end

Specialized knowledge – not always transferable

Great opportunities with great companies
Wrap-Up
What is SAP and who uses SAP (JR and Tim)
SAP modules and ERP information flow (JR and Tim)
How managers use SAP and ERPs to make decisions (JR)
Costs of implementing SAP:
Money (JR and Tim)
Cultural changes (JR)
Process changes (JR)
SAP Careers (Tim)
Wrap-up and Q&A
Instant Case Time!
You are Ken Camarco, VP of Business Systems (CIO)

Company decided to implement an ERP solution

Chose SAP
Using outsourced data center

Which division(s) go first?