IBM Global Services

ERP / SAP Overview

ERP / SAP Overview | 1.01

March-2005

© 2005 IBM Corporation

IBM Global Services

Objectives
 The participants will be able to:
 Recognize the evolution of ERP solutions.  Appraise the concept, benefit and use of ERP solution.  Define the SAP R/3 Overview.  Identify the different SAP R/3 Functional modules/areas.  Distinguish the components of SAP R/3.  Judge the use of ABAP programming language.

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ERP Overview

Enterprise Resource Planning

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Enterprise Resource Planning
... synchronization of Company functions...

Purchase

Manufacturing

Finance

Sales

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© 2005 IBM Corporation

IBM Global Services

Enterprise Resource Planning
… and extended to the complete value chain...

Tier I Component Manufacturer

Vehicle OEM Tier II Component Supplier

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Enterprise Resource Planning
... delivering administrative and decision support with...

Decision support and analysis

Processes monitoring & feedback

Administrative registration

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What is an ERP solution...?
…Integrated across the primary and support processes
Distribution Manufacturing Marketing

Materials

Planning and Execution

Finance

Engineering

Sales Human Resources

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The ERP application
 An integrated suite of business applications, which..
 Closely links, monitors, and controls primary enterprise resources like manpower, machine, material, methods, market and money.  Enables corporates to readily change their processes to adapt to the ever changing business scenario.  Provides expertise in industry specific business processes.

 Entails
 Parameterization / Configuration  Designing & Customization  Testing and Implementation  Training

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Why clients buy ERP?
 Corporate Initiatives
 Strategic initiatives
 A requisite capability in a competitive global business

 Operational initiative
 A foundation for performance and cost improvement via integration

 Organizational initiative
 To initiate a major organizational change within the company

 Technology
 IT is making the transition from a supporting operational entity to becoming a strategic competitive tool.

 Because others are buying it !!!

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Recent business trends favoring ERP growth
 Business Process Reengineering ( BPR )
 Most large companies are attempting to cut in-house development costs, improve customer service, and speed products to market by reorganizing their existing business processes.

 Software Pricing
 Licensing and pricing of mainframe based packaged applications are tied to the size of mainframe system on which the applications run, but now customers are now demanding user-based licensing options and major corporate applications like SAP provide this instead of the conventional platform-based pricing technique.

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March-2005

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Recent business trends favoring ERP growth
 Globalization
 As businesses are becoming more global in scope, people are demanding packaged corporate applications that are available in a variety of languages with support for multiple currencies.

 Integration
 As more and more companies are going for BPR, there is increase in demand for integrated solution e.g.. different applications sharing a common database and thus enabling data definitions and business rules to be applied across an entire organization with the facility of doing modifications at one location only.

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Business process benefits clients expect from an ERP project
 Global process/ Product management  Integrated Supply Chain Management  Leverage purchasing and vendor management  Order cycle time/ customer service improvement  Inventory reductions  Reduced information systems costs on an ongoing basis  Improved business management through worldwide integration and information

Vendors

Inbound Logistics

Manufacturing

Transportation Distribution

Delivery

Customer

Consumer

Logistics and Distribution

Sales & Customer Service

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March-2005

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Major ERP vendors
 SAP R/3  Oracle ( Peoplesoft and JD Edwards were independent ERP venders earlier,
but are subsets of Oracle now )  Peoplesoft  JD Edwards

 Baan

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What results can be expected from an “ERP culture”?
         Reduced working capital requirements Improved customer service Improved direct labor productivity Reduced purchase costs Reduced obsolescence Reduced overtime Having the figures to make decisions Having accountability throughout the organization Improved quality of life

ERP

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SAP R/3 Overview
 Systems Applications & Products

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SAP AG – At a Glance
 Founded in Germany in 1972  Market Leader in Industrial Enterprise Application (IEA)
 About 56% market share in the ERP market

 Worldwide presence in over 50 countries
 18,000+ employees  Trained consultants doubled since 1996 (40,000)

 About 20,000 companies in 120 countries
 Around 64,500 installations of SAP

 Strength lies in its high degree of integration, mainly for large, global corporate enterprises  Significant presence in Global Fortune 500 companies

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SAP R/1 , R/2
 The R/1 system
    Developed for ICI Chemical Released 1972 Focused on Sales & Distribution and Materials Management Discontinued after release of R/2

 The R/2 system
R/2 Basis System

 Reorganized as leading mainframe software for large multinational corporations  No sales effort planned – reactive only  4,300 copies worldwide in 1993  Mainframe-based to replace user legacy software; co-existence and migration strategy underway for R/2 and R/3

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SAP R/3 : Latest Release

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March-2005

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SAP R/3 : Latest Release (Contd.)

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SAP R3E and mySAP.com

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© 2005 IBM Corporation

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SAP NetWeaver

Existing Systems
21 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

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SAP R/3 : 3 Tier Architecture
The Presentation Layer Those SAP R/3 software components that specialize in interacting with end-users form the Presentation Layer.

The Application Layer Those SAP R/3 software components that specialize in processing business applications form the Application Layer. The Database Layer Those SAP R/3 software components that specialize in the management , storage and retrieval of data form the Database Layer
22 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

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SAP R/3 : 3 Tier Architecture

Presentation Layer components reside in:

Application Layer components reside in:

Database Layer components reside in:

Presentation servers: Systems capable of providing a graphical interface.
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Application servers: Specialized systems multiple CPUs and vast amounts of RAM.
March-2005

Database servers: Specialized systems with fast and large hard drives.
© 2005 IBM Corporation

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SAP R/3 : 3 Tier Architecture
Presentation Layer components are installed across many PCs

The Application Layer components are installed across one or more highend servers. The Database Layer components are installed on high-end database server.
24 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

IBM Global Services

SAP R/3 Overview
SD Sales & Distribution MM PP Materials Mgmt. FI Financial Accounting CO Controlling

Product Planning

R/3
Client/Server ABAP/4

TR Treasury

QM Quality Mgmt. PM Plant Maintenance HR

PS Project System

WF IS Industry Solutions

Workflow

Human Resources

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Integration
All business processes throughout the supply chain are executed in one system sharing all information

SAP R/3
S U P P L I E R
Procurement MM

Workflow

C U S

Production PP Finance and Accounting

Distribution SD

T O M E

FI

CO

R

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SD: Sales and Distribution

SAP R/3

SD

Sales & Distribution . . . . . . . .

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SD Overview

SD
Inquiry

Quotation Materials Planning Sales Order Pricing Delivery to Customer Picking Packing Goods Issue Invoicing
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Purchasing Production

Goods Receipt Customer Stock

Transportation

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© 2005 IBM Corporation

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Process Chain: Sales Distribution
Inbound Logistics from Materials Management Sales/Distribution Chain Sales Order & Distribution Process
Receive Payment
FI

Outbound Logistics to Customer Support Customer Sales (Customer Info Analysis) - Optional Process Customer Inquires - Optional Provide Customer Quotations - Optional Support Customer Agreements - Optional -

Create Invoice
- Create pick list - Create transportation work list - Create loading work list

FI/CO/PA

Issue Goods (Ship Product)
FI MM

(Documents)
- Check credit -

Create Delivery Note
Create Sales Order
FI/CO/PA MM PP

Check product availability - Determine pricing - Estimate delivery schedule - Determine conditions of sale (Activities)
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Order Entry
FI
Credit Management Dynamic Availability Check Cash Forecast

PP MM FI

OK

?

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Delivery/Shipment Processing

FI
Ship to party: C100 Item Material Qty 10 6301 10 20 6412 10 30 1507 25 . . . .

MM
Credit Management Static Availability Check
Picking List
Delivery Note

MM WM

Picking Packing Transportation
31 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

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Picking/Packing
Sales Order

Delivery

Picking without Picking Confirmation
Print Picking List

Picking with Picking Confirmation
Picking Request

Confirm Picking Request

Picking Confirmation

Goods Issue
32 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

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Invoicing
CO PA CO PCA

Profit Center Accounting/Profitability Analysis Accounts Receivable/General Ledger Cash Forecast

FI FI

Single Invoices Collective Invoices Invoice Lists Credit/Debit Notes

EDI

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MM Overview

SAP R/3

MM

Materials Management . .

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© 2005 IBM Corporation

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MM Overview (Contd.)

MM
Material requirement planning

External procurement Purchasing

Internal procurement Production

Invoice verification

Goods receipt

Warehouse management

Inventory management
Goods issue Transfer posting

Master data Material Batch Vendor Customer G/L Storage bins

Internal and external accounting
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Sales and distribution
March-2005 © 2005 IBM Corporation

IBM Global Services

MM Overview (Contd.)

MM
Material requirement planning

External procurement Purchasing

Internal procurement Production

Invoice verification

Goods receipt

Warehouse management

Inventory management
Goods issue Transfer posting

Master data Material Batch Vendor Customer G/L Storage bins

Internal and external accounting
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Sales and distribution
March-2005 © 2005 IBM Corporation

IBM Global Services

Material - Central Master “Record” for Logistic
456
Inventory Purchasing Desc:---------------------

123
Inventory Quality Sales Information Production Information Desc:---------------------

Raw Material - 456

Product - 123

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© 2005 IBM Corporation

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Data in the Vendor Master
Maintenance Level
Client Purchase Organization • Mandatory maintenance at the Purchasing Organization Level • Optional Maintenance at the Plant Level, the Vendor Sub-Range Level or a combination of the two Company Code

General Data Address Phone and Fax No. Control Data

Purchasing Data Terms of Payment Contact Person Minimum Order Value

Account Data Payment Terms Payment Method Accounting Clerk

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ERP / SAP Overview | 1.01

March-2005

© 2005 IBM Corporation

IBM Global Services

External Procurement Environment
Requirement Determination Purchase Requisition RFQ

Source List Quota Arrangement

Quotation

Outline Agreement

Source Determination Vendor Selection

Price History Purchasing Data Info Record Invoice Receipt

Goods Receipt

Purchase Order

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© 2005 IBM Corporation

IBM Global Services

Goods Movement
Ad hoc.
Goods Receipt

Delivery Inventory

Production Inventory
Transfer Posting

Goods Issue
Consumption
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Goods Issue
Samples Sales Order
March-2005 © 2005 IBM Corporation

ERP / SAP Overview | 1.01

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Invoice Verification
CO FI Vendor Vendor invoice invoice Vendor 3 Vendor
Orders / Projects /Cost centers G/L accounts / Accounts payable Payment OK !

Tolerance Check? Blocked Invoice

Invoice Verification

e.g...

Release of Blocked Invoice

Delivery Invoice Preliminary Posting Automatic Price Update
41 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

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PP Overview

SAP R/3

PP

Production Planning . .

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© 2005 IBM Corporation

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Production Planning Cycle
Sales and Operations Planning Master Production Scheduling

PP
Master Data Material Master Bill of Materials Work Centers Routings PRT

Sales & Distribution

Demand Management

Materials Management

MRP

Capacity Planning

MRP List

Plant Maintenance

Costing

Production Order Cycle or Purchase Order Cycle

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© 2005 IBM Corporation

IBM Global Services

Production : Process Chain
Production Chain Inbound Logistics from Procurement or Production Chain Manufacturing Process Outbound Logistics to Materials Management or Sales Chain

Archive/Delete Order Settle Production Order FI CO Transfer Produced Goods to Inventory FI Confirm production of goods is completed Produce Goods

Determine Production Requirements via MRP Output or Manually) Create production order (via conversion of planned order to production order or manually) Check material availability (Automatic) Release Production Order Print shop floor papers (actual work orders)

Withdraw materials from inventory (automatic/manual) MM
44 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

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Production Planning
      Production Planning Functionality Master Data Sales and Operations Planning & Demand Management MRP Production Order & Capacity Planning

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© 2005 IBM Corporation

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Material Requirements Planning
Demands
Quantity: 12.000

Stochastic Deterministic Planning

Demands 3. Qrt 4. Qrt

Bill of Material Explosion
Capacity Planning Lot Sizing Procedure Net Change

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March-2005

© 2005 IBM Corporation

IBM Global Services

MRP - Planning Procedures
Planning Procedures

Deterministic MRP

Consumption-Based Planning

Forecast-Based Planning

Reorder Point Planning

Automatic Reorder Point

Manual Reorder Point

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© 2005 IBM Corporation

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Production Control
MM

FI CO

Goods Issue Costs
Open Production Order

Release Production Order

Planned Orders

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© 2005 IBM Corporation

IBM Global Services

QM Overview

SAP R/3

QM

Quality Management . .

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QM Overview

QM
 The QM application module is a quality FI SD control and information system supporting Financial Sales & Accounting Distribution quality planning, inspection, and control for CO MM manufacturing Controlling and procurement Materials
Product Planning

PP

Mgmt.

R/3

Fixed Assets Mgmt.

AM

Quality Mgmt. Plant Maintenance

QM

PM

Workflow Industry Solutions

WF

Project System

PS

Human Resources

HR

IS

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March-2005

© 2005 IBM Corporation

IBM Global Services

QM in Logistics
Goods receipt History-dependent intensity of quality inspections

Production Inspection during production Defects recording in QM Control charts

Goods issue Quality management in SD (certifies quality)
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PM Overview

SAP R/3

PM

Plant Maintenance . .

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© 2005 IBM Corporation

IBM Global Services

Plant Maintenance - Overview

PM

Pre-defined work steps Notifications Create Work Orders Emergencies Labor

Parts/Supplies

External Services

Material Requisitions

Reporting

Planned Work Orders

Schedule WO’s

Close and Settle WO

Special Tools

Shop Papers Preventive/Predictive Maint. WO’s

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© 2005 IBM Corporation

IBM Global Services

FI Overview

SAP R/3

FI

Finance . .

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Components of FI
FI

General Ledger FI-GL FI-SL Accounts Receivable FI-AR FI-LC Accounts Payable FI-AP FI-AA Asset Accounting Legal Consolidation Special Ledger

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IBM Global Services

Corporate Structure
Financial Management Area Financial Management Area Financial Management Area

Corp. Group Level

Company Code (Company) Legal Entity
Controlling Area

Controlling Area

Controlling Area

Controlling Area

Controlling Level

Plant

Cost Centers Management Units

Work Place/Job
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Material Product
March-2005 © 2005 IBM Corporation

IBM Global Services

The Elements of Financial Accounting

Foreign Exchange Management

Business Analysis

Finance Information System Executive Information System G/L Information System

Cash Management and Forecast

Multiledger Accounts Payable
Invoice Verification
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Bank Accounts
Receivables Payables General Ledger

Accounts Receivable
Credit Management
March-2005 © 2005 IBM Corporation

Extended General Ledger

Consolidation

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The Components of FI
Configuration
Organizational Structures Company Codes Business Area Organization of Accounting Ledger/Sub-ledger Chart of Accounts Credit Control Setting Credit Limits Master Records G/L Accounts Customers Vendors Banks Chart of Depreciation Depreciation Areas Assets Extended General Ledger

Functionality
Documents/Transactions Posting Payment Terms Foreign Currency Taxes Special G/L Transactions Planning Payment Program Fiscal Year Adjustments Balance Sheets/Income Statements Closings On-Line Display Interest Calculation Correspondence Fixed Assets Reporting Analysis Legal Consolidations

Modules
General Ledger Accounts Payable Accounts Receivable Asset Accounting Special Ledger Legal Consolidations Credit Management Cash Management and Forecast Treasury

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IBM Global Services

CO Overview

SAP R/3

Controlling. . CO

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Components of CO

CO

CO Configuration
Organization Structures Master Data Planning Setup Criteria and Values Valuation
• Cost Center Accounting • Order and Project Acctg. • Transaction-Based Postings • Periodic Allocations

CO Modules
• Profit Center Acctg. • Product Costing • Activity-Based Costing • Product Costing • Budgeting • Profitability Analysis • Business Planning & Control

Functionality
• Settlement • Internal Orders • Open Item Management • Profitability Analysis • Overhead Management • Planning • Transaction-Based Posting • Periodic Allocations • Monitoring Actual Activities vs. Planned

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The Elements of Managerial Accounting
Overhead Cost Controlling
Cost Centers

Overhead Cost Controlling

Profitability Analysis
PA

Cost of Sales PCA

Report Structure: Market Segment Region Division

Cost of Period Report Structure: Profit Center, GL Accounts
March-2005 © 2005 IBM Corporation

Controlling

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Integration within FI/CO
FI Financial Accounting
Asset Accounting Asset Accounting Investment Controlling Plant Maintenance Account Revenue
Central Documents
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Chart of Accounts Management Accounting
Overhead Cost Controlling Cost Center Controlling Actual Costing Static Standard Costing Flexible Standard Costing Order Controlling Product & Production Controlling Mass Production Continuous Flow Prod. Batch Production Make to Order Prod. Project Controlling
March-2005

CO

Asset Accounting Gen. Ledger Accounting Accounts Receivable Accounts Payable Cash Management

Sales & Profitability Controlling Cost of Sales Accounting Period Accounting

Central Line Items Central Totals
© 2005 IBM Corporation

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Integration
MRP Requirement on component level Purchase Order Goods Receipt Invoice Verification Accounts Payable
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Planned Requirement

PP
Customer Order

SD

MM

Planned Order Production Order

Shipping

Invoicing Account Receivable

Production completed

FI

CO
Order Settlement

FI

Which modules are involved?
March-2005 © 2005 IBM Corporation

IBM Global Services

SAP R/3 : Components
Application Master Data Transaction Data

ABAP Programs

Organization Structure Configuration Key Data Elements Functionality Configurations
64 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

IBM Global Services

What is Customization ?
 Customization
 The adaptation of application software to customer-specific needs is accomplished in two ways :

 Coding
 Programming customer-specific code that replaces or complements components of the application

 Configuration
 Rendering the application appropriate to a specific customer by specifying data on which the application operates

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IBM Global Services

Organizational Structures in R/3
Organizational Units
Cost Accounting External Logistics Accounting Client Controlling Areas Company Codes Sales Organizations Internal Logistics (MRP/Production) Purchasing Organizations

Valuation Areas Plants

Inventory Management
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Storage Locations/Batches/Special Stocks
March-2005 © 2005 IBM Corporation

IBM Global Services

Organizational Structure in SAP R/3
Production Planning Financial Accounting

Plant

Company Code

Controlling

Client

Human Resources

Controlling Area Sales and Distribution

Personnel Area Materials Management

Sales Area
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Purchasing Organization
March-2005 © 2005 IBM Corporation

IBM Global Services

ABAP Programming
 SAP R/3 applications are written in the ABAP programming language, and run within the application layer of the R/3 System.  ABAP programs communicate with the database management system of the central relational database (RDBMS), and with the graphical user interface (SAP GUI) at presentation level.

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Why do we need ABAP Development ?

SAP R/3 scope

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IBM Global Services

SAP Solution

SAP R/3 scope

Specific company requirements

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© 2005 IBM Corporation

IBM Global Services

SAP Solution

SAP R/3 scope

Specific company requirements

New Functionality Development

Non SAP applications

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Summary
 Materials Requirement Planning (MRP-I) began as a technique for developing enterprise-wide business solutions by providing automated tools for forecasting demands and planning according to the forecast.  ERP is an integrated suite of Applications to meet corporate needs.  Some major ERP vendors are : SAP R/3, Peoplesoft, Oracle, Baan and JD Edwards.  SAP AG was founded in Germany in 1972 and it is a Market Leader in Industrial Enterprise Application (IEA).  The latest SAP R3E Enterprise Architecture, have separate release numbers and release cycles for each of the 3 layers. There is no R3E release number as a whole.

     
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SAP Web Application Server (6.20) SAP R/3 Enterprise Core (4.7) SAP R/3 Enterprise Extension Set (1.10) People Information Business Processes Applications
ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

 SAP NetWeaver is a vision, or paradigm, of total integration of :

IBM Global Services

Summary (Contd.)
 SAP has a 3 tier architecture comprising of the Presentation layer, Application layer and the Database layer.  The SAP solution is divided in different areas or Functional Modules like SD, MM, PP, QM, PM, FI, CO etc.  R/3 applications are written in the ABAP programming language, and run within the application layer of the R/3 System.

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© 2005 IBM Corporation

IBM Global Services

Questions
 What is MRP ?  What is ERP ?  When was SAP AG founded ?  What are the 3 layers of the SAP R/3 ?  What is SAP Netweaver ?  What is the latest version of SAP ?  What are the different functional modules of SAP ?  What programming language is used for SAP applications ?  Why do we need ABAP developments ?

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