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SAP is the world's largest inter-enterprise software company and the world's third-largest independent software provider overall. Wehave a rich history of innovation and growth that has made us a true industry leader.

SAP Americas

12 Million Users. 100,600 Installations. 1,500 Partners.

SAP Americas is a subsidiary of SAP AG, the world's largest inter-enterprise software company and the third-largest software supplieroverall. SAP Americas's corporate headquarters is located in Newtown Square, PA, a suburb of Philadelphia. Our officers andexecutives lead a team of professionals dedicated to delivering high-level customer support and services.

Founded in 1972 as Systems Applications and Products in Data Processing, SAP has a rich history of innovation and growth that hasmade us the recognized leader in providing collaborative business solutions for all types of industries -- in every major market. Thecompany, headquartered in Walldorf, Germany, employs more than 37,700 people in more than 50 countries, and serves more than34,600 customers worldwide.

Experience, Knowledge, and Technology for MaximizingBusiness

SAP has leveraged our extensive experience to deliver mySAP Business Suite, the definitive family of business solutions for today'seconomy. These solutions are open and flexible, supporting databases, applications, operating systems, and hardware from almostevery major vendor. What's more, mySAP Business Suite allows employees, customers, and business partners to work togethersuccessfully -- anywhere, anytime.

By deploying the best technology, services, and development resources, SAP has delivered a business platform that unlocks valuableinformation resources, improves supply chain efficiencies, and builds strong customer relationships. And through the GlobalSolution Center, SAP Americas identifies customer needs and develops solutions to meet these needs.

SAP is listed on several exchanges, including the Frankfurt Stock Exchange and the New York Stock Exchange, under the symbol"SAP."

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3-tier client server systemWeb serverInternet transaction serverBrings it to a single database across the world.What is Client-server Computing?The short answer: Client/server is a computational architecture that involves client processes requesting service from server processes. The long answer:

Client/server computing is the logical extension of modular programming. Modular programming has as its fundamental assumption that separationof a large piece of software into its constituent parts ("modules") creates the possibility for easier development and better maintainability.Client/server computing takes this a step farther by recognizing that those modules need not all be executed within the same memory space. Withthis architecture, the calling module becomes the "client" (that which requests a service), and the called module becomes the "server" (that whichprovides the service). The logical extension of this is to have clients and servers running on the appropriate hardware and software platforms fortheir functions. For example, database management system servers running on platforms specially designed and configured to perform queries, orfile servers running on platforms with special elements for managing files. It is this latter perspective that has created the widely-believed myth thatclient/server has something to do with PCs or Unix machines.

What is a Client process?The client is a process (program) that sends a message to a server process (program), requesting that the server perform a task (service). Client programs

usually manage the user-interface portion of the application, validate data entered by the user, dispatch requests to server programs, and sometimesexecute business logic. The client-based process is the front- end of the application that the user sees and interacts with. The client process containssolution-specific logic and provides the interface between the user and the rest of the application system. The client process also manages the localresources that the user interacts with such as the monitor, keyboard, workstation CPU and peripherals. One of the key elements of a clientworkstation is the graphical user interface (GUI). Normally a part of operating system i.e. the window manager detects user actions, manages thewindows on the display and displays the data in the windows.

What is a Server process?A server process (program) fulfills the client request by performing the task requested. Server programs generally receive requests from client programs,

execute database retrieval and updates, manage data integrity and dispatch responses to client requests. Sometimes server programs executecommon or complex business logic. The server-based process "may" run on another machine on the network. This server could be the hostoperating system or network file server; the server is then provided both file system services and application services. Or in some cases, anotherdesktop machine provides the application services. The server process acts as a software engine that manages shared resources such as databases,printers, communication links, or high powered-processors. The server process performs the back-end tasks that are common to similar applications.

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We will setup and execute the 3 major processes an organization

We created a pen because it was very easy to setup and understand. The IDES has a motorcycle, but that is morecomplex than we need to teach the system.

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ERP - Enterprise Resource Planning - breaks down the traditional barrier that exist within a corporation. For anyone tobenefit from ERP, everyone has to contribute, this is the key to ERP survival.

There has to be a common agenda throughout the business. To get the commitment from everyone, everyone has tobelieve their needs and objectives are addressed by the plan, learning the tools and techniques to accomplish this isthen relatively easy.

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All of this together makes up the Master Record for a Material.

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The system carries out the following activities when an outbound delivery is created:

Checks the order and materials to make sure the outbound delivery is possible (for example, itchecks for delivery blocks or incompleteness)

Determines the delivery quantity of an item and checks the availability of the material

Calculates the weight and volume of the delivery

Calculates work expenditure

Packs the outbound delivery according to the reference order

Checks the delivery situation of the order and any partial delivery agreements

Redetermines the route

Adds information relevant for export

Checks delivery scheduling and changes deadlines (if necessary)

Assigns a picking location

Carries out batch determination (if material is to be handled in batches)

Creates an inspection lot if the material must pass a quality check

Updates sales order data and changes order status

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Changes in delivery will update the sales order.

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In the system standard settings, it is a prerequisite for goods issue to be posted before the item relevant for picking can be pickedcompletely. Therefore, delivery quantity and picking quantity (picked quantity) in the outbound delivery must be equal.

Considering the picking lead time the picking date will be assigned based upon material availability

The picking process involves taking goods from a storage location and staging the right quantity in a picking area where the goods willbe prepared for shipping.

Depending on the picking procedure being used, you can either determine delivery-relevant data before picking or wait until afterpicking is completed to record it. Delivery-relevant data may be made up of the following:

Which batches a material is picked fromWhich serial numbers are pickedWhich valuation types the stock is taken from

The use of the WM transfer order as a picking order offers you the following advantages:Determining of target data for transfer ordersSplitting transfer orders according to target dataPrinting transfer orders or transmitting them in IDoc formatDetermining actual data for picking with option of executing incentive wage calculations using the HumanResources (HR) moduleConfirming transfer orders

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The Packing component and related packing information enables you to:

Update the stock situation of packing materials

Monitor returnable packaging stocks at the customer's or forwarding agent's place of business

Help you find you what was in a particular container (for example, if a customer maintains thatthey have received an incomplete delivery)

Make sure that the weight and volume limits have been adhered to

Ensure that products have been packed correctly

UCC-128: Universal Container Code – Uniform packing code

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As soon as the goods leave the company, the shipping business activity is finished.

The outbound delivery forms the basis of goods issue posting. The data required for goods issue posting is copied fromthe outbound delivery into the goods issue document, which cannot be changed manually. Any changes must be madein the outbound delivery itself. In this way, you can be sure that the goods issue document is an accurate reflection ofthe outbound delivery.

When you post goods issue for an outbound delivery, the following functions are carried out on the basis of the goodsissue document:

Warehouse stock of the material is reduced by the delivery quantity

Value changes are posted to the balance sheet account in inventory accounting

Requirements are reduced by the delivery quantity

The serial number status is updated

Goods issue posting is automatically recorded in the document flow

Stock determination is executed for the vendor's consignment stock

A worklist for the proof of delivery is generated

A worklist for the proof of delivery is generated

After goods issue is posted for an outbound delivery, the scope for changing the delivery document becomes verylimited. This prevents there being any discrepancies between the goods issue document and the outbound delivery.

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Billing represents the final processing stage for a business transaction in Sales and Distribution. Information on billing isavailable at every stage of order processing and delivery processing.

This component includes the following functions:

Creation of:

Invoices based on deliveries or services

Issue credit and debit memos

Pro forma invoices

Cancel billing transactions

Comprehensive pricing functions

Issue rebates

Transfer billing data to Financial Accounting (FI)

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Creating Billing Documents Explicitly

Purpose

If you only have to bill specific orders or deliveries, you can carry out manual billing explicitly.

When processing the billing due list, you do not need to enter the individual documents to be invoiced. The system liststhe documents to be invoiced on the basis of the selection criteria you enter. It can also combine several deliveries inone invoice.

Process Flow

1. You select the function for creating a billing due list.

2. You enter the selection criteria for the billing documents to be created. For example, enter billingtype F2, if you only want to create invoices with this billing type.

3. You then display the billing due list.

4. The system uses the selection criteria to create the billing due list (a list of sales documents to bebilled). You can now process this list, e.g. select some or all of the sales documents to be billed.

5. You select the function for billing. The system creates the corresponding billing documents for theselected documents.

Automatic Posting to Finance (next slide)

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You can set the system to create one billing document for each sales document, e.g. one invoice per delivery.

As long as certain data agrees, you can also combine different documents (orders and/or deliveries) fully or partially in acommon billing document:

If you want to guarantee that invoices are created separately according to certain criteria, you can do this by definingcertain split criteria.

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A purchasing organization is an organizational unit within logistics subdividing an enterprise according to therequirements of Purchasing. It procures materials and services, negotiates conditions of purchase with vendors, andbears responsibility for such transactions.

A purchasing group is a group of buyers who are responsible for certain purchasing activities.

The purchasing group is:

- Internally responsible for procuring a material or a class of materials

- Usually the principal channel for a company's dealings with its vendors

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All of this together makes up the Master Record for a Material.

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This is a standard view of the procure to pay process and the most common. It may vary significantly based upon thecompany procedures, the products/services purchases and other factors.

SAP allow businesses to tailor it to their needs.

Starts with a requisition or need that needs to be filled. This can come from Planning (MRP), manually or other

The purchase order is the document to fill the need: usually includes the vendor, cost/price, quantity, terms and otherpertinent information. [ part one of the 3-way match]

Notifying the vendor

The goods are shipped and brought to the organization

The goods are received (typically at the dock) and then put away [ part two of the three way match]

An invoice is received from the vendor [third part of the 3-way match]

After the tolerances/verification of the 3-way match are met a payment is made according to the terms agreed to on thepurchase order.

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Requisitions can be created indirectly in the following ways:

Via materials planning and control

The component Consumption-Based Planning suggests materials that need to be ordered on the basis of past consumption or usagefigures and existing stock levels. The order quantity and the delivery date are determined automatically.

Via networks (from the component PS Project System)

Requisitions are generated automatically from networks if:

A material component with non-stock material or an external service component has been assigned to an operation and the indicatorallowing automatic generation of requisitions immediately the network is saved has been set in the network.

Via maintenance orders

Requisitions are generated automatically from maintenance orders if:

A material component with non-stock material has been assigned to an operation, or

An operation with the control key for external services has been created.

For further information, refer to the section Planning of an Order in the PM Maintenance Orders documentation.

Via production orders (from the component PP Production Planning and Control).

Requisitions are generated automatically from production orders if:

They contain an external processing operation (e.g. subcontracting work). A precondition is that the control key for the operationallows or prescribes external processing.

They contain non-stock components.

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An outline purchase agreement is a longer-term agreement between a purchasing organization and a vendor regarding thesupply of materials or the performance of services within a certain period according to predefined terms andconditions.

Agreements are subdivided into:

- Contracts - Centrally agreed contracts ; Distributed contracts

quantity, or value

You can also set up corporate buying contracts with your vendors. These are valid for all plantsand company codes within a client (see Centrally Agreed Contract).

Over the contract validity period, certain quantities of the materials or services covered arereleased (called off) against the contract as and when required through the issue of purchaseorders referencing the latter. Such purchase orders are thus termed "contract release orders" orsimply "release orders". (Outside SAP, particularly in the UK; they may also be referred to as"call-off orders".)

- Scheduling agreements - Scheduling agreement referencing a centrally agreed contract

outline purchase agreement under which materials are procured on predetermined dates within acertain time period.

Delivery of the total quantity of material specified in a scheduling agreement item is spread over acertain period in a delivery schedule, consisting of lines indicating the individual quantities withtheir corresponding planned delivery dates.

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A quotation is legally binding on the vendor for a certain period.

A quotation consists of items in which the total quantity and delivery date of an offered material or service are specified

Determining which vendors to send RFQs to is the first step in the bidding process.

The system can help you to choose which vendors are to receive an RFQ if some or all of the information set out belowis available:

- Info records

- Source list

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Price LevelThis subcriterion compares relationship of a vendor's price to the market price. If the vendor's price is lower than the market price, he/she receives a

good score; if it is higher than the market price he/she is assigned a poor score.On the basis of the subcriterion Price Level you can compare a vendor's price to the current market price at a certain point in time.Price HistoryThis subcriterion compares the development of the vendor's price with the market price.On the basis of the subcriterion Price History, you can determine whether the vendor's price has increased or decreased over a certain period in

comparison with changes in the market price over the same period.Goods ReceiptThis subcriterion is used to evaluate the quality of the material that the vendor delivers. Quality inspection takes place at the time of goods receipt.Quality AuditThis subcriterion is used to evaluate the quality assurance system used by a company in manufacturing products.Complaints/Rejection LevelThis subcriterion is used to evaluate whether the materials delivered by the vendor are regularly found to be faulty subsequent to incoming inspection

(for example, on the shop-floor) leading to additional expense and loss of time (due to loss of production, reworking etc.).The score (QM key quality figure) is calculated in QM Quality Management and the data passed on to MM Vendor Evaluation. This key qualityfigure is converted for use in the Vendor Evaluation scoring system.

On-Time Delivery PerformanceThis subcriterion is used to determine how precisely a vendor has adhered to the specified delivery dates.Quantity ReliabilityThis subcriterion is used to determine whether a vendor has delivered the quantity specified in the purchase order.“On-time delivery performance” and “Quantity reliability” always have to be seen in conjunction. You can specify for each material (in the material

master record) or for all materials (in the system settings) the minimum quantity of the ordered materials that must be delivered in order for a goodsreceipt to be included in the evaluation. This enables you to avoid a situation in which a punctual goods receipt involving only a small quantity ofordered materials is included in the evaluation with a good score for “on-time delivery performance”. If this minimum quantity is not delivered, thevendor is not awarded a score. However, in this case the vendor receives a bad score for quantity reliability.

Compliance With Shipping InstructionsThis subcriterion is used to determine how precisely a vendor complies with your instructions for the shipping or packing of a material.Confirmation DateThis subcriterion is used to determine whether a vendor adheres to a previously confirmed delivery date (that is, whether the goods are actually received

on the date previously confirmed by the vendor).

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The purchase order can be used for a variety of procurement purposes. You can procure materials for direct consumptionor for stock. You can also procure services. Furthermore, the special procurement types "subcontracting", "third-party" (involving triangular business deals and direct-to-customer shipments) and "consignment" are possible.

You can use purchase orders to cover your requirements using external sources (i.e. a vendor supplies a material orperforms a service). You can also use a purchase order to procure a material that is needed in one of your plants froman internal source, i.e. from another plant.

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If a material is delivered for a purchase order, it is important for all of the departments involved that the goods receiptentry in the system references this purchase order, for the following reasons:

- Goods receiving can check whether the delivery actually corresponds to the order.

- The system can propose data from the purchase order during entry of the goods receipt (for example, the materialordered, its quantity, and so on). This simplifies both data entry and checking (overdeliveries and underdeliveries).

- The delivery is marked in the purchase order history. This allows the Purchasing department to monitor the purchaseorder history and initiate reminder procedures in the event of a late delivery.

- The vendor invoice is checked against the ordered quantity and the delivered quantity.

- The goods receipt is valuated on the basis of the purchase order price or the invoice price.

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When you enter a goods movement in the system, you must enter a movement type to differentiate between the variousgoods movements. A movement type is a three-digit identification key for a goods movement.

The movement type plays an important role in

- updating of quantity fields

- updating of stock and consumption accounts

- determining which fields are displayed during entry of a document in the system

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When you enter a goods movement, you start the following chain of events in the system:

A material document is generated, which is used as proof of the movement and as a source of information for any otherapplications involved.

If the movement is relevant for Financial Accounting, one or more accounting documents are generated.

The stock quantities of the material are updated.

The stock values in the material master record are updated, as are the stock and consumption accounts.

Depending on the movement type, additional updates are carried out in participating applications. All updates are basedon the information contained in the material document and the financial accounting document. For example, in thecase of a goods issue for a cost center, the consumption values of the items are also updated.

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It is in Logistics Invoice Verification that incoming invoices are verified in terms of their content, prices and arithmetic.When the invoice is posted, the invoice data is saved in the system. The system updates the data saved in the invoicedocuments in Materials Management and Financial Accounting.

An invoice can be processed in Logistics Invoice Verification in various ways:

Invoice Verification Online

Invoice Verification Online

Invoice Verification in the Background

Automatic Settlements

Invoices Received via EDI

Activate display of the MM and FI document numbers using the user parameter IVFIDISPLAY, by entering the value Xfor the user. In the standard system, only the document number from Materials Management is displayed.

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Requisition – Nothing really happens unless we get the goods or pay for them

The system does the transactions for you using the automatic account assignment

When we receive these, it can match the receipt against the PO

Debit Inventory (we now have additional inventory value)

Credit GR/IR (we are going to owe/pay for that additional inventory)

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Once we get the receipt –

Debit GR/IR – now a wash

Vendor AP Credit – we owe

Some companies book it as a liability right away (previous slides), but it really isn’t until you receive the goods

Unique to SAP

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Once we get the receipt –

Debit GR/IR – now a wash

Vendor AP Credit – we owe (it is debited: now a wash)

Some companies book it as a liability right away (previous slides), but it really isn’t until you receive the goods

Unique to SAP

Credit bank account (paid, now we have less cash)

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Goods Receipt

Debit Inventory

Credit GR/IR

Invoice Receipt

Debit GR/IR

Credit AP

Payment Program (A/P)

Debit: AP

Credit Bank

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Forecasting should be done primarily for end-item demand. In manufacturing situations, this means there is no real needfor forecasting component parts which make up the final item. When production quantities for the end item have beendetermined, component demand can be computed based on the production plan of the end item and knowledge of thebill of materials (BOM).

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Similar products: small variations

e.g. bike with a different color

If you are producing several similar products that have a lot of common parts, you can describe these products using avariant BOM. This is the case, for example, if you replace one material component with another to make a differentproduct. Variants can also differ by containing different quantities of a component. You create the new BOM as avariant of an existing BOM.

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Item Categories

Stock Item – place a reservation and removed from stock when needed

Non-Stock Item – Purchase Requisition will need to be created for the item

Document Item – CAD drawing, Engineering Documents, etc

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Routings enable you to plan the production of materials (products). Therefore, routings are used as a template forproduction orders and run schedules as well as a basis for product costing.

A routing is a description of which operations (process steps) have to be carried out and in which order to produce amaterial (product). As well as information about the operations and the order in which they are carried out, a routingalso contains details about the work centers at which they are carried out as well as about the required productionresources and tools (includes jigs and fixtures). Standard values for the execution of individual operations are alsosaved in routings.

In a routing you plan

- The operations (work steps) to be carried out during production

- The activities to be performed in the operations as a basis for determining dates, capacity requirements, and costs

- The use of materials during production

- The use of work centers

- The quality checks to be carried out during production

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Operations are carried out at a work center. In the SAP system work centers are business objects that can represent thefollowing real work centers, for example:

- Machines, machine groups

- Production lines

- Assembly work centers

- Employees, groups of employees

Use

Together with bills of material and routings, work centers belong to the most important master data in the productionplanning and control system. Work centers are used in task list operations and work orders. Task lists are for exampleroutings, maintenance task lists, inspection plans and standard networks. Work orders are created for production,quality assurance, plant maintenance and for the Project System as networks.

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Data in work centers is used for

- Scheduling - Operating times and formulas are entered in the work center, so that the duration of an operation can becalculated.

- Costing - Formulas are entered in the work center, so that the costs of an operation can be calculated. A work center isalso assigned to a cost center.

- Capacity planning - The available capacity and formulas for calculating capacity requirements are entered in the workcenter.

- Simplifying operation maintenance - Various default values for operations can be entered in the work center

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Aggregate forecasts of a group of similar products are generally more accurate than individual forecasts of the individualproducts that make up the group.

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Reyovac Batteries

Constant Production building up On-hand inventory

90% of battery sales are in Nov and Dec for christmas

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Supply chain planning, to a large degree, starts with forecasting. Matching supply and demand is an important goal formost firms and is at the heart of operational planning. It is also of significant importance as the overly optimisticCisco found in 2001 when it took a $2.2 Billion inventory write-down because of their ability to “forecast demandwith near-scientific precision” 1. Since most production systems can’t respond to consumer demand instantaneously,some estimate, or forecast, of future demand is required so that the efficient and effective operational plans can bemade.

Forecasts are always wrong, but some are “more wrong” than others. Forecasting the demand for innovative products,fashion goods, and the like is generally more difficult than forecasting demand for more “commodity-like” productsthat are sold on a daily basis. Aggregate forecasts of a group of similar products are generally more accurate thanindividual forecasts of the individual products that make up the group. Finally, the longer the forecast into the future,the less reliable the forecast will be.

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A more recent proposal to fix forecast errors is to use collaboration. The idea is that if different parts of the supply chaincollaborate on a common forecast and everyone plans based on that single forecast; then there is little need for onepart of the chain to hedge based on the uncertainty of what is done in other parts of the chain. Intra-firm collaboration,you would think, would be common place – seems that a little common sense would dictate that everyone in a firmcome together with a common set of forecast figures. But this is rarely the case. Marketing has a set of forecasts, sotoo does operations. Sales has their forecast and it’s possible that for budgeting purposes Finance uses still another.The advancement of enterprise resource planning (ERP) systems is helping ensure that there is only one forecast,based upon the principles of a single data repository used by all areas of the enterprise.

Forecasts affect most functional areas of the firm and are the starting point for resource allocation decisions. Forexample, manufacturing must plan production on a day to day basis to meet customer orders, while purchasing needsto know how to align supplier deliveries with the production schedules. Finance needs to understand the forecasts sothat the proper levels of investment can be made in plant, equipment, and inventory and so that budgets can beconstructed to better manage the business. The marketing function needs to know how to allocate resources forvarious product groups and marketing campaigns. Forecasts also determine the labor requirements required by thefirm so that the human resources function can make proper hiring and training decisions when demand is expected togrow.

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Aggregating forecasts across multiple items reduces forecasting errors. A clothing store, for instance, might be able toestimate within a pretty narrow range what the demand will be for men’s dress shirts. But when that store tries toestimate the demand for individual styles, colors, and sizes of shirts, the accuracy of their forecasts will beconsiderably worse. Firms handle this kind of forecasting problem usually in one of three ways; they either forecastfrom the bottom up, from the top down, or they start in the middle and work both up and down. The “top down”forecast essentially estimates total sales demand and then divides those sales dollars level by level until the stockkeeping unit (SKU) is reached. The “bottom up” method, as one might expect, starts with forecasts at the SKU leveland then aggregates those demand estimates level by level to reach a company–level forecast. Another method, onemight call the “in-between” method, starts forecasts at the category level (like men’s dress shirts), and then works upto determine store sales and works down to divide up the forecast into styles, colors and SKUs.

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Planning strategies represent the business procedures for the planning of production quantities and dates. A wide range of production planning strategiesare available in the SAP R/3 System, offering a large number of different options ranging from pure make-to-order production to make-to-stockproduction. Depending on the strategy you choose, you can:

Use sales orders and/or sales forecast values to create the demand programMove the stocking level down to the assembly level so that final assembly is triggered by the incoming sales orderCarry out Demand Management specifically for the assemblyStrategies for Make-to-Stock ProductionPurposeThe planning strategies explained in this section are designed for planning procurement (production or purchasing) of components by planning the final

products. If you can plan at component level more easily.PrerequisitesChoose a make-to-stock strategy, if:The materials are not segregated. In other words, they are not assigned to specific sales orders.Costs need to be tracked at material level, and not at sales order level.

Strategies for Planning ComponentsPurposeThe planning strategies explained in this section are designed for planning the procurement (production or purchasing) of components by planning the

components themselves. This is particularly useful in the following cases:There is a variety of finished products (possibly with an irregular demand pattern where planning is not possible).The finished products are consumption-based.The overall purpose of planning at component level is to procure components to stock (without sales orders) in order to react to customer demand as

quickly as possible.PrerequisitesChoose a strategy for planning components, if:The components are not segregated; that is, they are not uniquely linked at specific orders.Costs should be tracked at component (material) level and not at order level.

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Strategies for Make-to-Order (MTO) ProductionPurposeThe planning strategies explained in this section are designed for the production of a material for a specific individual sales order. In other words, you

do not want to produce finished products until you receive a sales order. This means that make-to-order strategies always support a very closecustomer-vendor relationship, because your sales orders are closely linked to production.

The same relationship exists between the sales order and production that exists in a make-to-order environment. Make-to-order is also used in thefollowing environments.

Production using variant configurationAssemble-to-orderPrerequisitesChoose a make-to-order strategy, if:The materials are segregated. In other words, they are uniquely assigned to specific sales orders.Costs must be tracked at sales order level and not on material level.

Strategies for Configurable MaterialsDefinitionA configurable material is a material for which different variants are possible.The strategies for configurable materials allow you to plan products with an almost unlimited number of possible combinations of characteristics and

combination value keys. Use these strategies if you want to plan a product that uses a feasible combination of characteristic values and that does notinclude final assembly. Typical examples of such products are cars, elevators, forklifts, trucks, buses.

Assemble-to-orderAn assemble-to-order environment is one in which the product or service is assembled on receipt of the sales order. Key components are planned or

stocked in anticipation of the sales order. Receipt of the order initiates assembly of the customized product. Assemble-to-order is useful where alarge number of finished products can be assembled from common components.

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Using MPS you can carefully plan important parts or bottleneck parts in a separate planning run

at the highest BOM level before the planning results have an effect on all of the production levels.

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The central role of MRP is to monitor stocks and in particular, to automatically create procurement proposals forpurchasing and production (planned orders, purchase requisitions or delivery schedules). This target is achieved byusing various materials planning methods which each cover different procedures.

Consumption-based planning is based on past consumption values and uses the forecast or other statistical procedures todetermine future requirements. The procedures in consumption-based planning do not refer to the master productionschedule. That is, the net requirements calculation is not triggered either by planned independent requirements ordependent requirement. Instead, it is triggered when stock levels fall below a predefined reorder point or by forecastrequirements calculated using past consumption values.

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The lot-size calculation is carried out in MRP. In the net requirements calculation, the system determines material shortages for eachrequirement date. These shortage quantities must be covered by receipt elements. The system then calculates the quantities requiredfor the receipts in the planning run in the procurement quantity calculation.

In static lot-sizing procedures, the procurement quantity is calculated exclusively by means of the quantity specifications entered in thematerial master.

FeaturesThe following static lot-sizing procedures are available:Lot-for-lot order quantityFixed lot sizeFixed lot size with splittingand overlappingReplenishment up to maximum stock levelIn period lot-sizing procedures, the system groups several requirements within a time interval together to form a lot.FeaturesYou can define the following periods:

• days• weeks• months• periods of flexible length equal to posting periods• freely definable periods according to a planning calendar

The system can interpret the period start of the planning calendar as the availabilitydate or as the delivery date.In static and period lot-sizing procedures, the costs resulting from stock keeping, from the setup procedures or from purchasing are not

taken into consideration. The aim of optimum lot-sizing procedures, on the other hand, is to group shortages together in such a waythat costs are minimized. These costs include lot size independent costs (setup or order costs) and storage costs.

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A request or instruction from a purchasing organization to a vendor (external supplier) or a plant to deliver a quantity ofmaterial or to perform services at a certain point in time.

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List Types

The SAP system differentiates between the following types of lists:

Operation-based lists, for example, time tickets, confirmation slips

Component-based lists, for example Pull List, material withdrawal slips

PRT lists, for example, PRT overview

Multi-purpose lists, for example, object overview, operation control ticket

This type of list can contain information about operations or production resources and tools, for example.

The lists that the system generates and prints refer to all operations, suboperations, components, and production tool andresources contained in a production order.

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You can withdraw materials for an order that are not listed as components in the order. These "unplanned withdrawals"cause the actual costs of the production order to be updated.

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Since production costs were higher than planned, the additional expenditure negatively affects the operating profit. Thismeans that the profit decreases by the amount by which the actual costs charged to the production order exceed thestandard price.

The actual costs charged to the production order affect net income just as the posting of the inventory change at the timeof the goods receipt. Since the actual expense was 20 higher than expected, the operating profit is 200 lower than itwould have been if production had been at standard cost.

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Calculate and analyze planned costs, target costs, and actual costs of production orders and process orders

Calculate or update the work-in-process inventory and the finished goods inventory

Calculate and analyze variances

Transfer data to Financial Accounting (FI)

Transfer data to Profitability Analysis (CO-PA)

Transfer data to Profit Center Accounting (EC-PCA)

Transfer data to Actual Costing / Material Ledger (CO-PC-ACT)

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2070.00 – 1987.00 = 83.00

83.00 is the difference between what it cost to make the product and what we value it at in the Material Master.

Accounting 1 Screen Material Master

460 EPENS @ 4.50 = 2070.00

So we make it cheaper then we value the product.

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This diagram shows the integration between finance and controlling:

The expense accounts are managed in both the P&L expense account and the primary cost element in controlling.

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This diagram show a purchase order. In this case the cost of the purchase order is assigned to Cost Center C0001.

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Transactions can have an effect on both FI and CO.

The transaction will create a debit and a credit for FI (FI transaction)

If CO is turned on a cost center or cost element bucket will be updated. (CO transactions)

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This diagram show a purchase order. In this case the cost of the purchase order is assigned to Cost Center C0001.

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This figure shows an example of statistical key figures. A project cost center has 12 hours worth the activity. Thestatistical key figure is hours and is split at:

30% to the Work Center

50% to maintenance

20% to IS

All costs for the labor will be allocated in this fashion

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In Distribution and Assessment, you further allocate costs (or quantities for Indirect Activity Allocations) collected on acost center during the accounting period to receivers, according to user-defined keys. These are therefore indirectallocation methods, because the exchange of activity is not the basis for allocating costs/quantities. Instead, user-defined keys such as percentage rates, amounts, statistical key figures, or posted amounts provide the cost/quantityassignment basis.

The advantage of these methods is that they are easy to use. You usually define the keys and the sender/receiverrelationships only once.

Distribution and assessment are used primarily for cost centers. This is because direct cost allocation is not possible heredue to the variety of transactions, the lack of clearly defined individual activity types and the fact that the entry of theactivity is too time-consuming. For example, the costs of the company cafeteria may be assigned based on the numberof employees in each cost center. Telephone costs are seldom allocated directly to the individual cost centers, but arecollected on a clearing cost center for each period. They are then reposted or distributed at the end of the periodaccording to the number of telephone units or telephone installations in each cost center.

Assessment is a method of allocating primary and secondary costs in Cost Center Accounting and Activity-BasedCosting. The following information is passed on to the receivers:

The original cost elements are assigned cumulatively, or in groups, to assessment (secondary) cost elements. The originalcost elements are not recorded on the receivers.

Sender and receiver information (sender cost center, receiver cost center, or business process) appears in the Controlling(CO) document.

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In this example the distribution of the rent expense is by square footage occupied by each of the cost centers. By the piechart we see that distribution and administration have the most square footage.

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Distribution and administration having most of the square footage thus have the majority of the distribution costs.

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In this example IT expenses are accumulated. Periodically, the costs are reallocated to the primary and secondary costelements based upon the budgeting and expense policy of the company. Notice how Sales now has a much largerportion than the other departments.

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The reallocation in Dollars

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