What is SAP R/3? and What Makes SAP R/3 different?

 What is SAP R/3?

SAP is the leading Enterprise Information and Management Package worldwide. Use of this package makes it possible to track and manage, in real-time, sales, production, finance accounting and human resources in an enterprise.

What Makes SAP R/3 different?

Traditional computer information systems used by many businesses today have been developed to accomplish some specific tasks and provide reports and analysis of events that have already taken place. Examples are accounting general ledger systems. Occasionally, some systems operate in a "real-time" mode that is, have up to date information in them and can be used to actually control events. A typical company has many separate systems to manage different processes like production, sales and accounting. Each of these systems has its own databases and seldom passes information to other systems in a timely manner.

SAP takes a different approach. There is only one information-system in an enterprise, SAP. All applications access common data. Real events in the business initiate transactions. Accounting is done automatically by events in sales and production. Sales can see when products can be delivered. Production schedules are driven by sales. The whole system is designed to be real-time and not historical.

SAP structure embodies what are considered the "best business practices". A company implementing SAP adapts it operations to it to achieve its efficiencies and power.

The process of adapting procedures to the SAP model involves "Business Process Re-engineering" which is a logical analysis of the events and relationships that exist in an enterprise's operations.

SAP Application Modules

SAP has several layers. The Basis System is the heart of the data operations and should be not evident to higher level or managerial users. Other customizing and implementation tools exist also. From a manager's viewpoint the heart of the system are the application modules. These modules may not all be implemented in a typical company but they are all related and are listed below:

• FI Financial Accounting--designed for automated management and external reporting of general ledger, accounts receivable, accounts payable and other sub-ledger accounts with a user defined chart of accounts. As entries are made relating to sales production and payments journal entries are automatically posted. This connection means that the "books" are designed to reflect the real situation.
• CO Controlling--represents the company's flow of cost and revenue. It is a management instrument for organizational decisions. It too is automatically updated as events occur.
• AM Asset Management--designed to manage and supervise individual aspects of fixed assets including purchase and sale of assets, depreciation and investment management.
• PS Project System--is designed to support the planning, control and monitoring of long-term, highly complex projects with defined goals.
• WF Workflow--links the integrated SAP application modules with cross-application technologies, tools and services
• IS Industry Solutions--combine the SAP application modules and additional industry-specific functionality. Special techniques have been developed for industries such as banking, oil and gas, pharmaceuticals, etc.
• HR Human Resources--is a complete integrated system for supporting the planning and control of personnel activities.
• PM Plant Maintenance--In a complex manufacturing process maintenance means more than sweeping the floors. Equipment must be services and rebuilt. These tasks affect the production plans.
• MM Materials Management--supports the procurement and inventory functions occurring in day-to-day business operations such as purchasing, inventory management, reorder point processing, etc.
• QM Quality Management--is a quality control and information system supporting quality planning, inspection, and control for manufacturing and procurement.
• PP Production Planning--is used to plan and control the manufacturing activities of a company. This module includes; bills of material, routings, work centers, sales and operations planning, master production scheduling, material requirements planning, shop floor control, production orders, product costing, etc.
• SD Sales and Distribution--helps to optimize all the tasks and activities carried out in sales, delivery and billing. Key elements are; pre-sales support, inquiry processing, quotation processing, sales order processing, delivery processing, billing and sales information system.

SAP R/3 Application Modules

Each of these Modules may have sub-modules designed for specific tasks as detailed below.

System-Wide Features

SAP uses certain system wide features that should be understood at the outset. These are used to logically, safely and flexibly organize the data in a business enterprise.

• Customizing-- is the configuring of the system to represent your organization's legal structure, reporting requirements and business processes. Internal reporting is a managerial tool in the daily operations. External reporting is required by governmental units controlling the legal structure of the corporation.
• Organizational Elements
• Financial--
• client is a legal and organizationally independent unit at the highest level in SAP
• company is an independent legal entity within a client
• business areas are used to produce profit and loss statements and balanced sheets across marketing lines
• Materials Management
• Purchasing units
• Plants
• Sales and Distribution
• Sales Organization
• Distribution channel
• Division
• Master Data is records that remain in the database over an extended period of time. Examples:
• Customer Master
• Vendor Master
• Material master
• Account Master

This structure eliminates redundant data and is shared by all SAP Modules. It is a critical aspect of the robustness of the system.

• Employee Self Service--your employees have access to the own HR records over the Internet.
• Classification is the assignment of objects to a class. Each class has standard characteristics.
• Matchcodes are query tools used to find specific information using search methods.
• Security is administered for objects, profiles and authorizations. Users are only authorized to see or change the parts of the system required by their job responsibilities.

Business Processes and SAP Functionality

In order to understand a system like SAP a thorough understanding of the events and relationships that take place in a business is required. It is not enough to just realize the Sales, Production, Finance and Accounting have jobs to do in a business. The exact details of each action, the timing of that action and its interrelationships with every other process must be understood. In many large operations there may be no person that has a complete grasp of the situation. Before an operation can be automated or computerized a thorough study of the business must be undertaken. This task is called Business Process Engineering.

Sequential Walk Through

• Sales
• Pre-sales activity--planning and availability support for the sales personnel
• Sales Order--The actual entry of the sales order into the system done by the salesperson at the point of sales perhaps using a PC and Internet connections.
• Determining where the most efficient source of the ordered product is in inventory and shipping it.
• Delivery
• Customer Billing
• Customer Payment
• Production
• Sales and Operations Planning SOP where the sales forecasts are used in a production planning model to check feasibility.
• Master Production Scheduling MPS--The actual plan for the whole production process
• Material Requirements Planning MRP--Where the production plan is actually converted into raw materials input requirements.
• Planned Order--When materials are available and capacity exists this plan is created and then converted into a
• Production Order.
• Shop Floor Control where the actual production takes place and is registered into the system as finished goods.
• Purchasing
• Requisition--Once the Production manager plans to manufacture something a requisition for the raw materials required but not on hand must be prepared.
• Vendor Selection--made by the purchasing department
• Purchase order sent
• Goods receipt increasing inventory
• Invoice verification as it is received from vendor
• Payment to vendor.
• Finance and Accounting
• Sales events must be captured at the proper time into the ledger system
• Inventory must be adjusted to match goods shipped
• Inventory must be adjusted to match raw materials received
• Inventory must be adjusted to move value from raw materials to work in process
• Inventory must be adjusted to increase finished goods when they are produced
• Accounts Payable must be set up for purchases
• Accounts Receivable must reflect goods billed but not yet paid for

Business Process Engineering must not only identify all these steps but must also find the most efficient way to minimize redundant actions. For example, when sales are made, inventory and manufacturing plans should be automatically updated. When manufacturing plans are updated raw materials should be automatically ordered from vendors. When finished goods are shipped customers should be automatically billed at the same instant. Real situations are far more complex than the simple explanation above.