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    TERP01 SAP ERP: Introduction > About This Module > Introduction

    TERP01 SAP ERP: Introduction

    Organizational Levels and Master Data is the basic framework that supports business processes. As part of this module, you will be introduced to

    the transition from R/3 to SAP ERP, and therefore understand how to create the Organizational Levels and Master Data for the business

    processes inside SAP ERP.

    Module Objectives

    Module Content

    Target Audience

    A New Wave of InformationTechnology

    As technology grows and changes, software

    has to upgrade accordingly.

    However, SAP believes in an environment

    where you do not have to scrap your existing

    software setup. Instead, it would provide

    upgrades and extend the functionality of the

    existing software, thereby reducing costs.

    In this image, you can see that to begin withSAPs technology was based on Mainframe

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    architecture based on ABAP and R2. Keeping pace with business requirements and integrated business processes, technology changes weremade from R2 to three tier R/3 and moved from Mainframes to Client-Server Architecture. SAP R/3 has always been an integrated system

    where business processes were integrated within an enterprises operations. Capable of e-commerce since 1996, SAP products incorporated

    business technology for the future, thus paving the way for incorporating future developments. This eliminated the need for customers to change

    existing systems and allowed for integration of business processes between enterprises.

    Finally, with Technology advances and the internet revolution, you now have services catering to adaptive businesses like Web services. SAPsEnterprise service architecture platform features Netweaver, business suites and xApps offerings, keeping pace with the business requirements of

    today and the future.

    TERP01 SAP ERP: Introduction > SAP ERP Positioning > Architecture of SAP ERP

    After the SAP R/1 and SAP R/2 products, SAP

    introduced SAP R/3. Later, in March of 2003,

    SAP released SAP ERP, where many other SAP

    components were included along with SAP R/3.Inside SAP ERP, SAP R/3 enterprise was just a


    As you can see here, from this point on SAP

    ERP was more than just SAP R/3 Enterprise

    with SAP NetWeaver, since it offers many

    functional enhancements like Self Services, self

    service procurement, internet sales, and SAP

    SEM. SAP Net Weaver also contains the SAP

    Web Application Server. With SAP ERP, a new

    SAP solution was born.

    The SAP ERP Central Component or SAP ECC,is the evolutionary successor of the previously

    offered SAP R/3 Enterprise, and is the central

    core of SAP ERP.

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    Compared to the SAP R/3 Enterprise, in SAP ECC there are architectural changes with respect to Enterprise Services Architecture, enhancedusability and new developed functionality, like the new general ledger.

    SAP Business Warehouse, SAP Strategic Enterprise Management, and Internet Transaction Server integrated into SAP ECC. Customers now

    have the option to run these components on the same instance that runs SAP ECC to reduce the system landscape and save costs. Running the

    components on separate instances is also possible. SAP Web Application Server contains all capabilities of SAP basis as well as additional web


    SAP ERP and SAP NetWeaver

    Audio Transcript

    SAP ERP is the result of an ERP

    offering to SAP R/3. SAP ERP includes

    all the functionality of SAP R/3

    Enterprise with the large number ofadditional business processes like self

    service, strategic management, andothers. SAP ERP is an integrated and

    personalized functionality. SAP ERP is

    built on the NetWeaver technology. SAP

    NetWeaver is used as a technology

    platform for integration and as an

    application infrastructure with open

    connections to Microsoft .NET and IBM


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    SAP ERP is a Solution within SAP Business Suite

    Audio Transcript

    SAP Business Suite comprises SAP ERP, SAP PLM, SAP CRM, SAP SCM, and SAP SRM.

    SAP Business Suite is built on SAP NetWeaver. As

    you can see from this image, the core component of

    the Business Suite is ERP. SAP ERP consists of:

    Life Cycle Data Management Quality and Asset Management

    Sales Order Management

    Internet Sales

    Inventory Warehouse Management

    Manufacturing and Transportation

    Purchase Order Processing.

    SAP ERP also supports mobile technologies

    featuring GPS and GSM-supported service optionsfor collaborative businesses.

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    SAP ERP Solution Map

    Audio Transcript

    The slide here shows the solution map. As is the case with other SAP solutions, a solution map shows you the processes enabled by a specific

    solution. In the image shown here, you can see various highlighted areas in different colors. These areas indicate additional capabilities offered

    by SAP ERP as against those already available to SAP R/3. For example, you have New General Ledger in Financial Accounting, E-Learning,

    and E-Recruitment in Work Force Process Management, and Self-Service Procurement in Procurement.

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    TERP01 SAP ERP: Introduction > Organizational Levels > About This Topic

    Organizational Levels Terminology

    Audio Transcript

    An Organizational Unit is a unit used to map an

    Organizational Structure of an enterprise to the SAP

    Application. Familiar terminology like Storage

    Location, Sales Office, Profit Center, and Legal Entity

    are all represented by the team Organizational Unitinside the SAP Application.

    In the image here, the Organizational Unit CLIENT

    is the highest on the order and is used to represent the

    complete Enterprise.

    Next would be the company code followed by Plant,

    Sales Organization, Division and Storage Location. The

    purpose of this hierarchy or Organizational Unit is to

    avoid re-entering data more than is required. For

    example, specifications or data that is valid for all

    organizational units in all R/3 applications can beentered at the CLIENT level, eliminating the need to

    enter this information more than once. A client usuallyrepresents a company in an SAP system.

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    A company code is an independent legal accounting entity. An example would be a company within a corporate group. Here company andsubsidiary in SAP can be called as company code. This is required for Financial Accounting.

    Similarly, Plant is the central organizational unit for Production Planning and in the context of Sales and Distribution, the Sales Organization is

    the central organizational element that controls the terms of sales to the customer. Division is usually used to represent a product line.

    Organizational LevelsAudio Transcript

    In this image, you can see how Organizational Units are used to represent the Enterprise Structure. At the highest level is the Client. This has

    two derivative Company Codes, 1000 and 3000. Company Code 1000 has two derivation Plants under it, and similarly Company Code 3000 has

    one plant and one Controlling area under it.

    When you define the organizational units for your enterprise, please bear in mind how you would like the data to be entered, tracked, and

    extracted from the system, as this is a representation of the existing business processes.

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    Sales Areas

    Audio Transcript

    Sales and distribution is organized according to the sales organization, distribution channel and division. A combination of these three

    organizational units forms the sales area. The sales organization is an organizational unit within logistics that structures the company according

    to its sales requirements.

    A sales organization is responsible for the sale and distribution of goods and services. The distribution channel represents the channel through

    which saleable materials or services reach customers. Typical distribution channels include wholesale, retail and direct sales. In the SAP ECCSystem, you can define a division-specific sales organization. Product groups, or divisions, can be defined for a wide-ranging spectrum of

    products. In this image, you can see that in sales organization 1000, products of divisions 02, 03 and 05 are only sold through distribution

    channel 10.

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    Purchasing Organizations

    Audio Transcript

    Let us now look at a Purchasing Organization. A purchasing organization is an organizational unit within logistics, subdividing an enterprise

    according to the requirements of Purchasing. This Unit procures materials and services, negotiates conditions of purchase with vendors, and

    bears responsibility for such transactions. Each country in which plants operate has one purchasing organization.

    Hence, you will notice that Purchasing organization 1000 purchases for plants 1000, 1100, 1200, 1300, and 1400, which are located in one

    country and posts all the entries into the countrys company code in 1000.

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    TERP01 SAP ERP: Introduction > Master Data > About This Topic

    Master Data: Customer Master

    Audio Transcript

    Let us now understand what we mean by Master Data. Any data that has to be used across several business processes and is consistent for longer

    periods of time can be termed as Master Data in the SAP System. Master data is usually created centrally and is then available across

    applications and users. For this slide, you will look at the Customer Master as an example.

    A customer master contains information that defines the business relationship between a company and its customer. The master contains data

    that is required to execute key business processes between the customer and the company. Example of such activities would include customer

    requests, deliveries, invoices, and payments. The customer master is organized into three views which are located at different organizational


    General Data: which does not depend on the company code. This data is entered at the client level.

    Financial Accounting Data: is relevant to

    Financial Accounting and applies to onecompany code.

    Sales Data: wherein data for one customer

    can differ for each sales area. As you have

    seen earlier, the sales area is a

    combination of sales organization,

    distribution channel and division. This

    data is only relevant to Sales andDistribution.


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    Audio Transcript

    While Master Data refers to data that remains unchanged for longer periods of time, transactions are application programs which execute

    repeating business processes, referencing the master data, such as creating a customer order, posting an incoming payment, or approving a leave


    Any transaction that has been executed in the system creates a document. When these documents are created, they will automatically copy thereferenced predefined data from the master eliminating the need to enter it again.

    Process Overview: Purchase to Pay

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    Audio Transcript

    Let us understand the business process flow from purchasing goods to paying for the same. This is typically termed as the Purchase to Pay

    process flow. We will be referring to two courses, the MM or Material Management Course and FI or Finance Course.

    Order Requirement: The first step in the purchase to pay process is the Order Requirement. Order Requirement can be done manually by

    registering a requirement using Order Requirement. In theSAP ECC system, the Order Requirement can also be

    automatically created. Note that at this stage no postings are

    created in the FI course.

    Order a Material: Next, in Purchase order process you

    order a material by using a basic form of the purchase

    order document. While creating a purchase order, data such

    as supplier, material, plant and any other data relevant to the

    purchasing of an organization must be provided. In the SAPECC system, the purchaser can control or supervise the

    processing status of the purchase order. You can post thegoods receipt or invoice receipt for the concerned purchase

    order. This purchase order creation is handled only in the

    MM course. In the SAP ECC system, no document is

    created in the FI course during purchase order creation.

    Good Receipt: Once goods are received after the purchase

    order is processed, the system compares the goods receipt

    with purchase order quantity. A goods receipt entry is

    passed in the MM course. Two documents are created in real time in the system, one for

    the material document and the other for the FI document. The material document is

    created to update the inventory. In the FI course, values are posted by debiting theMaterial stock account or the consumption account and crediting goods receipt or the invoice receipt account.

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    Invoice Verification: The vendor invoice receipt is then verified during invoice verification. All these purchasing processes are settled in theSAP ECC system via Logistics. The vendor invoice is posted in MM and, in real time, an FI document is created, by debiting the goods receipt

    or invoice receipt account, and crediting the vendor account.

    Payment: The final step is the payment process which is finally updated in Financial accounting, with details like the payment methods and bank


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    Process Overview: Order to Cash

    Audio Transcript

    Next, you will understand the Order to Cash process flow. A sales order is the basis of the sales process. Let us understand with the help of

    two examples: product sale ex-stock and sale of service.

    Product sale ex-stock: In this process, a sales order is created

    for material which is kept in inventory. Costs and revenues

    are derived automatically from the material production costs

    or from the SD Course.

    From the incoming order, you create the transport order,where in required goods are removed from the stock and

    prepared for delivery. Then outbound delivery document is

    created. The goods to be delivered are posted as goods issue.At the time of goods issue two documents are created. One in

    MM as a goods issue document and another in FI as an

    accounting document. Billing is done only after the goods

    issue is posted. During billing an invoice document is

    created. Finally you come to payment and dunning. When

    payment is received from the customer an entry of receipt is

    posted in FI. If you have not received payments from your

    customers by the net due date, the customers will be dunned.

    Our second example is for Sale of service: - Here you sell a service. A direct service generation process can also be displayed via a sales order

    item. The sales order item is a cost bearer; in this case, you need to define Goods lnward accounts in order to post the entries in to FI. All theother steps like incoming orders, billing, payment are almost identical to the steps in sales ex-stock.

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    TERP01 SAP ERP: Introduction > Reporting Solutions > About This TopicData Warehouse Concepts

    Audio Transcript

    OLAP or Online Analytical Processing is anapproach to quickly provide the answer to

    analytical queries that are dimensional in nature. It

    is part of the broader category of business

    intelligence. Typical applications of OLAP are in

    business reporting for sales, marketing,

    management reporting, business processmanagement or BPM, budgeting and forecasting,

    financial reporting, and other similar areas.

    OLTP or Online Transaction Processing is a class

    of programs that facilitate and manage transaction-

    oriented applications, typically for data entry and

    retrieval transaction processing. If you are using the

    transactions in the Logistics applications, the

    Logistics Information System (LIS) updates

    relevant information. You can also update

    information from other systems in the LIS. The LIS

    aggregates and stores this information in the data


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    Distinction: Operative/Informative Environments

    Audio Transcript

    This slide discusses some of the most important demands placed on a modern data warehouse. Decision criteria for the efficiency of a data

    warehouse solution are highlighted here.

    SAP BW enables the analysis of data from operative SAP

    applications, as well as, all other business applications and

    external data sources such as databases, online services, and

    the Internet. The transaction-oriented Online Transactional

    Processing, or OLTP and the analysis-oriented Online

    Analytical Processing or OLAP environment must be seen as

    an integrated entity.

    Master data, and the business processes that result from it,produce a multitude of information that cannot easily be used

    for target-oriented analysis. Therefore, data is cleansed firstand, because of the variety of its sources, it is prepared both

    technically and in terms of content. Knowledge can then be

    generated from the analysis that follows. This knowledge

    helps the organization to define its business strategy and

    supports the business processes derived from it.