Enterprise System

Chapter 2
Introduction to Enterprise Systems
1
Learning Objectives
1. Discuss the evolution and key business benefits of
enterprise systems
2. Explain the role of enterprise systems in supporting
business processes
3. Differentiate the different categories of data within
SAP ERP
4. Understand the major options for reporting
2
Chapter 2
I. Enterprise Systems (ES)
II. Data in ES
3
I. Enterprise Systems
The three broad stages of evolution include:
1. The mainframe environment,
2. Client-server systems,
3. Service-oriented architecture (SOA)
4
Stage 1: Stand-AloneMainframe Systems
Stage 1: Stand-Alone Mainframe Systems
6
Components of anES Include:
• Hardware,
• Software,
• A database
7
• Hardware typically consistedof large, expensive
mainframe computers
• Software includes specialized operating system
software needed to execute operations from the
applications on the hardware and custom
applications that provide capabilities needed to
complete specific tasks, such as filling a customer
order
• Databases are used to store the data associated with
the ES. Early databases were extremely complex and
difficult to manage
8
• Only very large companies could afford to acquire
and implement an ES.
• The way users interacted with the ES was very

primitive. They had to use a terminal that was
physically connected to the mainframe to input
commands to the system using punch cards. There
was no such thing as a computer monitor or a
mouse.
9
The major drawbacks of the mainframe architecture:
+ Its limited scalability
+ Custom designed
12
Scalability:
• Scalability is a concept related to the number of users or
the volume of operations that a given
hardware/software combination can manage
• ES are designed to handle a maximum amount of users
or operations and are not designed for easy hardware
upgrades
• The more scalability (i.e., the number of users or
transactions) needed for an application, the higher the
upfront costs in hardware, so companies usually
purchase the ‘‘biggest’’ hardware they can afford for the
job they need to accomplish
13
Scalability:
• In the mainframe architecture, scalability was very
low, meaning that only a handful of employees could
use the system at any one time.
• The custom application, operating system, and
database were entirely contained on a single piece of
hardware. This arrangement made increasing
scalability prohibitively expensive because of the
extremely high costs of bigger mainframe hardware.
=> Companies had to limit both the capabilities and
the number of users for each system.
14
Custom designed:
• ES were designed to address the specific needs of individual
firms. => They could not easily be used by other companies.
Building a custom system is more expensive than utilizing an
existing system, and most small and medium-sized firms
could not afford this expense. => Only the largest companies
utilized ES.
Þ In the 1970s, software firms began to develop packaged

applications that can be used by many companies => reduce
the purchase price of the ES for each company
The IBM mainframe hardware, operating system, and database
needed to run the packaged application remained very
expensive 15
Technological advances during the 1980s and 1990s led to
an increased use of ES:
+ Hardware and software continued to evolve to become

more efficient and capable and less expensive. (more
advanced operating systems such as UNIX made it easier to
manage complex hardware).
+ Relational databases such as Informix made storing and
accessing data much simpler
+ The advent of networking technologies. Companies that
are connected to networks can access ES remotely rather
than having to physically install a system => the three-tier
client-server architecture 16
Stage 2: Client-Server Architecture
17
18
(1) Presentation layer: how you interact with the
application (using menus, typing selecting)
(2) Application layer: what the application allows you to
do (create formulae or charts, compose an
essay)
(3) Data layer: where the application stores your work
(on your hard drive or flash drive)
Some systems use a two-tier architecture in which the

presentation layer is separated from the application and
data layers. Example: Web application, instant
messageing system 20
The different layers can run simultaneously on different
computers rather than exclusively on a single
mainframe. The ES can be run on considerably cheaper
computers
ÞES to achieve much greater scalability and flexibility
ÞCompanies can achieve nearly infinite scalability by
simply adding more servers
ÞTo maintain data integrity, each application server
has to store its records in a single database
21
Stage 3: Service-Oriented Architecture
SOA
22
In the early 2000s, companies began to Web-enable
their three-tier applications so that users could access
the systems through a Web browser
By using Web services, companies could integrate

several client-server applications and create an
enterprise mashup, or composite applications that send
and receive data between and among ES
23
The systems involved could physically be located on

servers sitting on several different continents. Web
services provide a standardized and reliable way for
multiple systems to communicate in a very fast and
scalable way to bring added value and efficiency to a
business process.
24
Types of Enterprise Systems
25
Application suite:
+ Enterprise resource planning (ERP)
+ Supply-chain management (SCM)
+ Supplier relationship management (SRM)
+ Customer relationship management (CRM)
+ Product life cycle management (PLM)
26
ERP:
• ERP focus primarily on the internal operations of an
organization, and they integrate functional and cross-
functional business processes.
• Typical ERP systems include Operations(Production),
Human Resources, Finance and Accounting, Sales
and Distribution, and Procurement.
• ERP systems support processes within a company, or
intracompany processes
27
ERP:
28
intercompany processes is processes that take place

between and among companies => SCM, SRM connect
a company’s ERP system to those of its suppliers
30
SCM:
• SCM connects a company to other companies that
supply the materials it needs to make its products.
• SCM systems help companies plan for their
production demand requirements and optimize
complex transportation and logistics for materials
31
SRM:
• SRM systems typically manage the overall
relationships with the materials suppliers.
• SRM systems contain functionality to manage the
quotation and contracts processes
33
CRM :
• CRM systems connect a company’s ERP system to
those of its customers.
• CRM systems provide companies with capabilities to
manage marketing, sales, and service for its
customers
35
PLM :
• PLM systems help companies administer the
processes of research, design, and product
management.
• PLM systems help companies take new product ideas
from the virtual drawing board all the way to the
manufacturing facility
37
The ES application suite
39
In addition to application suites, today’s global
companies typically have an ES landscape that includes
custom and packaged applications from several
vendors.
The most common of these applications are best-of-

breed applications and niche applications
40
• Best-of-breed applications are typically isolated to one
process or part of a process and have evolved from
departmental applications
Ex:
- I2 is a popular supply chain planning system,
- Ariba is a popular procurement system
A typical company ES landscape will have one or

two core ERP or suite ES plus several best-of-breed
applications
41
• There are thousands of smaller independent software
vendors (ISVs) who offer highly specialized niche
applications for various industries and functions.
Many ISVs build composite applications that sit on
top of an ES that was developed by a suite or best-of-
breed vendor
42
Example niche applications :
Vendavo is a small ISV that produces a pricing
management tool to assist retailers in
maximizing profit for retail sales. Vendavo must
pull product and pricing information from
several ES to do its job of analyzing pricing
conditions to suggest the optimum price for a
product
43
Example niche applications :
Nakisa is another small ISV who produces
visualization tool that dynamically displays the
organizational chart of a company with detailed
human resources information.
Nakisa must take information from the human
resources module of an ERP system and present it in
a corporate intranet together with data from an
organizational charting tool.
44
Size of the enterprise: Company size can be measured in
terms of the number of employees or the company’s
total revenues.
• For large enterprises (companies with more than
1000 employees), SAP and Oracle tend to be the
most popular vendors based on their scalability and
industry-specific functionality.
• For midsized companies (1000–100 employees), SAP
and Oracle are joined by Microsoft and Sage.
• For small companies (fewer than 100 employees),
SAP and Intuit are quite popular
45
Method of delivery :
• ES delivery involves installing the software in a typical
three-tier or SOA configuration on physical hardware
located at the customer site. Companies purchase
the ES software and hardware and then physically
install the ES at their facility
• Software-as-a-service (SaaS), deliver ES solutions
entirely from the Web enables companies to acquire
certain ES functionalities without physically installing
software on their servers
46
Application Platforms: serve as a type of “enterprise
operating system” for a company’s ES landscape by
allowing all of the various systems to communicate
seamlessly with one another as well as with systems
outside the company (SAP NetWeaver)
47
Application Platforms:
SAP NetWeaver is now an integral part of SAP ERP and

the SAP Business Suite. It contains the SOA capabilities
needed to integrate SAP systems with non-SAP systems.
In addition, it provides companies with a tool set to
build new composite applications or to plug in
independent software vendor (ISV) applications on top
of their core ERP and suite applications
48
SAP NetWeaver orchestrates the communication

among the applications, transporting the master data
and technical information needed by the applications at
different points in the process
49
SAP NetWeaver also contains several technical tools to

help companies extend the SAP Business Suite
applications, integrate with other non-SAP applications,
and build (compose) new applications
50
51
II. Data in ES
The data in an ES are classified into three types:
+ Organizational data,
+ Master data
+ Transaction data.
52
II. Data in ES
Organizational data
53
II. Data in ES
Organizational data
Organizational data: are used to define the
organizational structure of the business, and they rarely
change over time.
Examples of organizational structure are companies,

subsidiaries, factories, warehouses, storage areas, and
sales regions.
Organizational levels:
+ Client,
+ Company code,
+ Plant 54
II. Data in ES
Organizational data
55
II. Data in ES
Organizational data
+ Client,
• A client is the highest organizational level in SAP ERP.
• It represents an enterprise consisting of many
companies or subsidiaries.
56
II. Data in ES
Organizational data
+ Company code,
• Each company within the enterprise is represented
by a company code.
• Each company code represents a separate legal
entity, and it is the central organizational element in
financial accounting. That is, financial statements
required for legal reporting purposes are maintained
at the company code level.
• A client can have multiple company codes, but a
company code must belong to only one client.
57
II. Data in ES
Organizational data
+ Plant
A plant is an organizational element that performs
multiple functions and is relevant to several processes.
It is essentially a facility in which the following
functions are performed:
• Products and services are created.
• Materials are stored and used for distribution.
• Production planning is carried out.
• Service or maintenance is performed.
58
II. Data in ES
Organizational data
+ Plant
• A plant can be a factory, a warehouse, a regional
distribution center, a service center, or an office.
• It can be a part of a building, an entire building, or a
collection of buildings. A single building can house
multiple plants.
59
II. Data in ES
Organizational data
60
II. Data in ES
Master data
Master data: define the key entities with whom an
organization interacts, such as customers and suppliers.
These data change, but only occasionally
Typical entities are customers, vendors, products, and
employees
61
II. Data in ES
Master data
Master data:
• Master data for customers and vendors include
name, address, contact person, and avariety of
negotiated terms such as billing and payment
methods.
• For products, master data include product number,
description, physical characteristics such as weight
and color, handling requirements (e.g., fragile), and
typical storage location.
• Employee master data include name, address,
position data, payroll data, tax-related data, and
benefits data. 62
II. Data in ES
Master data
Material Master
Material master data is used in numerous processes
Procurement
Fulfillment
Production
Material planning
Asset management
Project systems
Lifecycle data management
63
II. Data in ES
Master data
Material Master
The material master is used in numerous processes, it must

include a large amount of data. To manage these data, the
material master groups them into different categories or views,
each of which is relevant to one or more processes
64
II. Data in ES
Master data
Material Master
65
II. Data in ES
Master data
Material Types
Raw materials (ROH)
Purchased, not sold, used in production
Purchasing- and production-related views
No sales-related view
Semi-finished goods (HALB)
Produced using other materials (ROH, HALB)
Used in the production of other materials (HALB, FERT)
Not purchased or sold
66
II. Data in ES
Master data
Material Types
Finished goods (FERT)

Produced using other materials (ROH, HALB)
Sold to customers
Trading goods (HAWA)
Purchased and resold without additional processing
Numerous other types
67
II. Data in ES
Master data
Material Types
68
II. Data in ES
Master data
Material Groups
• Material group includes materials with similar

characteristics
• Materials are grouped so that they can be managed
collectively
70
II. Data in ES
Master data
Organizational Level
Materials can be defined differently for different

organizational levels.
+ Different company codes
HALB in one, FERT in another
+ Different plants
Only exports or imports in specified plants, not all
+ Different sales-related organizational elements
Wholesale vs. retail
71
II. Data in ES
Transaction data
Transaction data: reflect the day-to-day activities of the
organization
• Data generated during execution of process steps
• Requires
– Organizational data
– Master data
– Situational data
• Example: Sales order creation
– Organizational elements: Client, Company Code, Sales
Area
– Master Data: Customer, Material
– Situational data: Date, Time, Person 72
II. Data in ES
Transaction data
73
II. Data in ES
Transaction data
Documents: Record of transactions
– Transaction documents
• Requisition, purchase order, invoice, delivery
document, etc.
– FI documents
• Record the impact on financial accounting
– CO documents
• Record the impact on management accounting
– Material documents
• Record the impact on material status (value, location)
74

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Enterprise System

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Chapter 2

Introduction to Enterprise Systems

• The way users interacted with the ES was very

Þ In the 1970s, software firms began to develop packaged

+ Hardware and software continued to evolve to become

Stage 2: Client-Server Architecture

Some systems use a two-tier architecture in which the

By using Web services, companies could integrate

The systems involved could physically be located on

intercompany processes is processes that take place

The ES application suite

The most common of these applications are best-of-

A typical company ES landscape will have one or

SAP NetWeaver is now an integral part of SAP ERP and

SAP NetWeaver orchestrates the communication

SAP NetWeaver also contains several technical tools to

Examples of organizational structure are companies,

The material master is used in numerous processes, it must

Finished goods (FERT)

• Material group includes materials with similar

Materials can be defined differently for different

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