A New Wave of Information Technology

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 with SAP’s technology was based on Mainframe

architecture – based on ABAP and R2. Keeping pace with business requirements and integrated

business processes, technology changes were made 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 enterprise’s 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. SAP’s Enterprise service architecture platform features

Netweaver, business suites and xApps offerings, keeping pace with the business requirements of

today and the future.

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 component.

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.

Compared to the SAP R/3 Enterprise, in SAP ECC there are architectural changes with respect to

Enterprise Services Architecture, enhanced usability 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 capabilities.

SAP ERP and SAP NetWeaver

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 of additional business processes like self service, strategic

management, and others. 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 WebSphere.

SAP ERP is a Solution within SAP Business Suite

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 options for

collaborative businesses.

SAP ERP Solution Map

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.

Summary

We now come to the end of the topic on SAP ERP Positioning.

Organizational Levels – Terminology

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 Unit inside 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 be entered at the CLIENT level, eliminating the need to enter this information

more than once. A client usually represents a company in an SAP system.

A company code is an independent legal accounting entity. An example would be a company

within a corporate group. Here company and subsidiary 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 Levels

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.

Sales Areas

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 ECC

System, 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.

Plants

Let us now look at what a Plant is in the Organizational Structure. A Plant is an organizational unit

defined in Material Management which represents a location where stock of material is kept or

manufactured. The assignment of plants to company code can be n to 1.

This means any number of Plants can be assigned to one Company Code. Here you can see plants

1000, 1100, 1200, 1300, and 1400 are all assigned to the company code 1000. Any relevant

company-code transaction from one of these five plants is posted to company code 1000 in

Accounting.

Purchasing Organizations

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 country’s

company code in 1000.

Summary

We now come to the end of the topic on Organizational Levels for ERP Basics

Master Data: Customer Master

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 levels.

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 one company 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 and Distribution.

Transactions

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

request.

Any transaction that has been executed in the system creates a document. When these

documents are created, they will automatically copy the referenced predefined data from the

master eliminating the need to enter it again.

Process Overview: Purchase to Pay

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 the SAP 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

SAP ECC system, the purchaser can control or supervise the processing status of the purchase

order. You can post the goods 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 the Material stock account or the consumption

account and crediting goods receipt or the invoice receipt account.

Invoice Verification: The vendor invoice receipt is then verified during invoice verification. All these

purchasing processes are settled in the SAP 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 settlement.

Process Overview: Order to Cash

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 the other

steps like incoming orders, billing, payment are almost identical to the steps in sales ex-stock.

Summary

We now come to the end of the topic on Master Data for ERP Basics.

Data Warehouse Concepts

OLAP or Online Analytical Processing is an approach 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 process management 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 warehouse.

Distinction: Operative/Informative Environments

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 first and,

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.

Summary

We now come to the end of the topic on Reporting and Analytical Solutions for ERP Basics