FUNCTIONAL ASPECT OF ERP & SAP

S.Prakash
Asst. Professor
VSB Engineering College, Karur
98420 40400
prak.1221@gmail.com
ABSTRACT:
Enterprise resource planning (ERP) integrates internal and external management information across an entire
organization, embracing finance/accounting, manufacturing, sales and service, etc. ERP systems automate this
activity with an integrated software application. Its purpose is to facilitate the flow of information between all
business functions inside the boundaries of the organization and manage the connections to outside stakeholders.
ERP systems can run on a variety of hardware and network configurations, typically employing a database to store
data. SAP stands for systems, applications, products in data processing. The full name of the parent company is
SAP AG. It is the third largest software maker in the whole world. It is listed in Frankfurt stock exchange and NYSE.
Sap delivers software to small and mid sized companies also. SAP solutions that are used in small and mid sized
business are SAP business one, SAP business all-in-one etc. SAP business one is specially designed for small
concerns mostly for 10 to 100 employees. It covers the core operations to run a successful business like customer
relationship management, accounting, e-commerce, reporting and warehousing and partner management. Sap
products and services integrate an organization from financials to human resources to manufacturing and sales and
distribution.
KEYWORDS: Applications, Implementation, Integration, Products, Systems.

ERP
INTRODUCTION:
ERP, which is an abbreviation for Enterprise Resource Planning, is principally an integration of business
management practices and modern technology. Information Technology (IT) integrates with the core business
processes of a corporate house to streamline and accomplish specific business objectives. Consequently, ERP is an
amalgamation of three most important components; Business Management Practices, Information Technology and
Specific Business Objectives.
In simpler words, an ERP is a massive software architecture that supports the streaming and distribution of
geographically scattered enterprise wide information across all the functional units of a business house. It provides
the business management executives with a comprehensive overview of the complete business execution which in
turn influences their decisions in a productive way.
Todays ERP software architecture can possibly envelop a broad range of enterprise wide functions and integrate
them into a single unified database repository. For instance, functions such as Human Resources, Supply Chain
Management, Customer Relationship Management, Finance, Manufacturing Warehouse Management and Logistics
were all previously stand alone software applications, generally housed with their own applications, database and
network, but today, they can all work under a single umbrella the ERP architecture.

REVIEW OF LITERATURE:
Study
ERP systems helps in reducing inventory level by 15-20% in overall channel
Financial accounting and treasury management module helps in improving
cash management
Extended ERP with CRM and SCM packages strengthens the overall
supply chain of the organization
Top management commitment to restructuring and following an
enterprise-wide design which supports data integration.
Implementation requires major commitment from an organizations employee.
ERP reduces organizational business risks and enhances regulatory compliances

Authors
Elsiabeth J. Umble & Michael
Umble
Fiona Fui-Hoon Nah,
Kathryn M. Zuckweller,
Janet Lee-Shang Lau
Fiona Fui-Hoon Nah,
Kathryn M. Zuckweller,
Janet Lee-Shang Lau
Mary Sumner
Theodore Grossman and James
Walsh
Pernille Kraemmerand,

Charles Moller, Harry Boer

Elsiabeth J. Umble &
Michael Umble

New ERP applications are Y2K compliant

Table-1

INTEGRATION IS KEY TO ERP SYSTEMS:

Integration is an exceptionally significant ingredient to ERP systems. The integration between business processes
helps develop communication and information distribution, leading to remarkable increase in productivity, speed
and performance.
The key objective of an ERP system is to integrate information and processes from all functional divisions of an
organization and merge it for effortless access and structured workflow. The integration is typically accomplished by
constructing a single database repository that communicates with multiple software applications providing different
divisions of an organization with various business statistics and information.
Although the perfect configuration would be a single ERP system for an entire organization, but many larger
organizations usually deploy a single functional system and slowly interface it with other functional divisions. This
type of deployment can really be time-consuming and expensive.
There are five major reasons why companies undertake ERP.
1.

Integrate financial informationAs the CEO tries to understand the companys overall performance, he
may find many different versions of the truth. Finance has its own set of revenue numbers, sales has
another version, and the different business units may each have their own version of how much they
contributed to revenues. ERP creates a single version of the truth that cannot be questioned because
everyone is using the same system.

2.

Integrate customer order informationERP systems can become the place where the customer order
lives from the time a customer service representative receives it until the loading dock ships the
merchandise and finance sends an invoice. By having this information in one software system, rather than
scattered among many different systems that cant communicate with one another, companies can keep
track of orders more easily, and coordinate manufacturing, inventory and shipping among many different
locations at the same time.

3.

Standardize and speed up manufacturing processesManufacturing companiesespecially those

with an appetite for mergers and acquisitionsoften find that multiple business units across the company
make the same widget using different methods and computer systems. ERP systems come with standard
methods for automating some of the steps of a manufacturing process. Standardizing those processes and
using a single, integrated computer system can save time, increase productivity and reduce head count.

4.

Reduce inventoryERP helps the manufacturing process flow more smoothly, and it improves visibility of
the order fulfillment process inside the company. That can lead to reduced inventories of the stuff used to
make products (work-in-progress inventory), and it can help users better plan deliveries to customers,
reducing the finished good inventory at the warehouses and shipping docks. To really improve the flow of
your supply chain, you need supply chain software, but ERP helps too.

5.

Standardize HR informationEspecially in companies with multiple business units, HR may not have a
unified, simple method for tracking employees time and communicating with them about benefits and
services. ERP can fix that.

THE IDEAL ERP SYSTEM:

An ERP system would qualify as the best model for enterprise wide solution architecture, if it chains all the below
organizational processes together with a central database repository and a fused computing platform.
MANUFACTURING
Engineering, resource & capacity planning, material planning, workflow management, shop floor management,
quality control, bills of material, manufacturing process, etc.
FINANCIALS
Accounts payable, accounts receivable, fixed assets, general ledger, cash management, and billing
(contract/service)
HUMAN RESOURCE

Recruitment, benefits, compensations, training, payroll, time and attendance, labour rules, people management.
SUPPLY CHAIN MANAGEMENT
Inventory management, supply chain planning, supplier scheduling, claim processing, sales order administration,
procurement planning, transportation and distribution.
PROJECTS
Costing, billing, activity management, time and expense.
CUSTOMER RELATIONSHIP MANAGEMENT
Sales and marketing, service, commissions, customer contact and after sales support.
DATA WAREHOUSE
Generally, this is an information storehouse that can be accessed by organizations, customers, suppliers and
employees for their learning and orientation.

ERP SYSTEMS IMPROVE PRODUCTIVITY, SPEED AND PERFORMANCE:

Prior to evolution of the ERP model, each department in an enterprise had their own isolated software application
which did not interface with any other system. Such isolated framework could not synchronize the inter-department
processes and hence hampered the productivity, speed and performance of the overall organization. These led to
issues such as incompatible exchange standards, lack of synchronization, incomplete understanding of the
enterprise functioning, unproductive decisions and many more. For example: The financials could not coordinate
with the procurement team to plan out purchases as per the availability of money. Hence, deploying a
comprehensive ERP system across an organization leads to performance increase, workflow synchronization,
standardized information exchange formats, complete overview of the enterprise functioning, global decision
optimization, speed enhancement and much more.

SAP
INTRODUCTION:
SAP Company was founded by five former IBM employees- Dietmar Hopp, Hans Werner Hector, Hasso Plattner,
Klaus Tschira and Claus Wellenreuther. It was founded in Germany in the year 1972. SAP stands for systems,
applications, products in data processing. In a year's time the first financial accounting software was completed
which was known as R/1 System. R stands for real-time data processing. The full name of the parent company is
SAP AG. It is the third largest software maker in the whole world. It is listed in Frankfurt stock exchange and NYSE.
Sap delivers software to small and mid sized companies also. SAP solutions that are used in small and mid sized
business are SAP business one, SAP business all-in-one etc. These solutions are affordable, easy to use.
SAP business one is specially designed for small concerns mostly for 10 to 100 employees. It covers the core
operations to run a successful business like customer relationship management, accounting, e-commerce, reporting
and warehousing and partner management. Sap products and services integrate an organization from financials to
human resources to manufacturing and sales and distribution. Because of this integration the companies can
optimize supply chains, strengthen customer relationships and make correct management decisions.
SAP R/3 is a software solution for client/server computing. This software can be used by a small grocer to a billion
dollar companies. This software is generally designed to meet the needs of the customer. SAP R/3 can be used on
several databases like oracle, Adabas D, Informix, DB2 for UNIX, DB2/400 and Microsoft SQL SERVER 6.0. SAP R/3
software is used in many industries like insurance, banking, automobiles, oil and gas, public sector, manufacturing
and material, services, transportation, aerospace, defense, construction, pharmaceuticals and chemicals.

SAP R/3
SAP R/3 is the former name of the main enterprise resource planning software produced by SAP AG. It is an
enterprise-wide information system designed to coordinate all the resources, information, and activities needed to
complete business processes such as order fulfillment or billing.

HISTORY OF SAP R/3

The first version of SAP's flagship enterprise software was a financial Accounting system named R/1 called as YSR.
This was replaced by R/2 at the end of the 1970s. SAP R/2 was in a mainframe based business application software
suite that was very successful in the 1980s and early 1990s. It was particularly popular with large multinational
European companies who required soft-real-time business applications, with multi-currency and multi-language
capabilities built in. With the advent of distributed clientserver computing SAP AG brought out a clientserver
version of the software called SAP R/3 (The "R" was for "Real-time data processing" and 3 was for 3-tier). This new
architecture is compatible with multiple platforms and operating systems, such as Microsoft Windows or UNIX. This
opened up SAP to a whole new customer base.
SAP R/3 was officially launched on 6 July 1992. It was renamed SAP ERP and later again renamed ECC (ERP Central
Component). SAP came to dominate the large business applications market over the next 10 years. SAP ECC 5.0
ERP is the successor of SAP R/3 4.70. The newest version of the suite is SAP ERP 6.0

ORGANIZATION:
SAP R/3 was arranged into distinct functional modules, covering the typical functions in place in an organization.
The most widely used modules were Financial s and Controlling (FICO), Human Resources (HR), Materials
Management (MM), Sales & Distribution (SD), and Production Planning (PP)
Each module handled specific business tasks on its own, but was linked to the others where applicable. For
instance, an invoice from the billing transaction of Sales & Distribution would pass through to accounting, where it
will appear in accounts receivable and cost of goods sold.
SAP typically focused on best practice methodologies for driving its software processes, but more recently
expanded into vertical markets. In these situations, SAP produced specialized modules (referred to as IS or Industry
Specific) geared toward a particular market segment, such as utilities or retail.

PRODUCTS:
SAP's products focus on Enterprise Resource Planning (ERP). The company's main product is SAP ERP. The current
version is SAP ERP 6.0 and is part of the SAP Business Suite. Its previous name was R/3. The "R" of SAP R/3 stood
for realtime even though it is not a realtime solution. The number 3 related to the 3-tier architecture: database,
application server and client (SAPgui). R/2, which ran on a Mainframe architecture, was the predecessor of R/3.
Before R/2 came System RF, later dubbed R/1.
SAP ECC is one of five enterprise applications in SAP's Business Suite. The other four applications are:

Customer Relationship Management (CRM) helps companies acquire and retain customers, gain
marketing and customer insight.
Product Lifecycle Management (PLM) helps manufacturers with product-related information.
Supply Chain Management (SCM) helps companies with the process of resourcing its manufacturing and
service processes.
Supplier Relationship Management (SRM) enables companies to procure from suppliers.

Other major product offerings include: the NetWeaver platform, Governance, Risk and Compliance (GRC) solutions,
Duet (joint offering with Microsoft), Performance Management solutions and RFID. SAP offers SOA capabilities
(calling it Enterprise SOA) in the form of web services that are wrapped around its applications.
While its original products were typically used by Fortune 500 companies, SAP now actively targets small and
medium sized enterprises (SME) with its SAP Business One and SAP Business All-in-One.
On 19 September 2007 SAP announced a new product named SAP Business ByDesign. SAP Business ByDesign is a
software as a service (SaaS) offering, and provides a fully integrated enterprise resource planning (ERP) solution,
On Demand. SAP Business ByDesign was previously known under the code name "A1S". In October 2007, SAP AG
announced the friendly takeover of Business Objects. This acquisition expanded SAP's Product Suite of Business
Intelligence (BI) solutions and increased the customer installed base to 89,000.
In February 2009 SAP AG, which invested in Coghead, purchased the start-ups intellectual property. SAP will only be
using the companys technology as an internal resource and has no plans to offer Cogheads products to its
customers.
In May 2010 SAP AG announced that it is buying the database software maker Sybase for US$ 5.8 billion in cash.
The deal closed at the end of July 2010. Sybase will continue to run as a separate, independent unit but will be
leveraged across the other SAP areas.
SAP Enterprise Learning (environment) is an enhancement of the previous version of the learning management
system, SAP Learning Solution 600. Apart from the features in SAP Learning Solution 600, SAP Enterprise Learning
(environment) contains a virtual learning room feature powered by Adobe Connect. SAP officials say there are over
100,600 SAP installations serving more than 41,200 companies in more than 25 industries in more than 120
countries. An example installation can be experienced in the SAP Learning on Demand Portal. SAP uses this for
delivering SAP Online training as a Learning on Demand offering. Some of this content is available as free elearning, e.g. as e-books or simulations.

SAP IMPLEMENTATION:
SAP implementation is the whole of processes that defines a complete method to implement the SAP ERP enterprise
resource planning software in an organization. The SAP implementation method described in this entry is a generic
method and not a specific implementation method as such. It is based on best practices and case studies from
various literature sources and presents a collection of processes and products that make up a complete
implementation method to allow any organization to plan and execute the implementation of SAP software.

Fig-1

CONCLUSION:
Open ERP has become established as the main free market-changing alternative for enterprise management
systems in amongst software from giants such as SAP, Oracle and Microsoft, and from the small software
developers in their own niches.
Until now, only two main alternatives existed for systems that manage a companys information: install a
proprietary ERP system, complete but usually overweight, inflexible, and expensive; or develop a solution internally,
adapted to current needs but often expensive to develop, not integrated, and incomplete.
With its free business model, Open ERP combines the advantages of a complete ERP system with the flexibility of an
in-house solution. The open source code, the projects general flexibility, and its hundreds of modules let you
construct a solution from a selection of the modules already available and you can then freely update it as your
needs evolve.

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