What is SAP and Definition of SAP ERP Software
What is SAP?
SAP stands for Systems Applications and Products in Data Processing.
SAP by definition is also named of the ERP (Enterprise Resource Planning) software as well the name of the company.
What is SAP and Definition of SAP ERP Software
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| What is SAP and Definition of SAP ERP Software |
SAP Software was Founded in 1972 by Wellenreuther, Hopp, Hector, Plattner and Tschira.
SAP system consists of a number of fully integrated modules, which covers virtually every aspect of the business management.
SAP is #1 in the ERP market. As of 2010, SAP has more than 140,000 installations worldwide, over 25 industry-specific business solutions and more than 75,000 customers in 120 countries
Other Competitive products of SAP Software in the market are Oracle, Microsoft Dynamics etc.
What is SAP? Definition of SAP ERP Software
Suppose a client approaches sales team asking for a particular product. The sales team contacts to inventory department to check the availability of the product. To their surprise, sales team found out that the product is out of stock. So next time this don’t happen, they have to introduce a SAP ERP tool.
Before we actually see in detail, what ERP is and how ERP can help in your business process, we will understand how different departments are involved in the whole business process, right from the ordering of the raw material – to manufacturing goods – to delivering final goods to the customer.
What is SAP? Definition of SAP ERP Software
Here is the whole process that is followed by any business unit.
Client contacts the sales team to check the availability of the product
Sales team approaches the Inventory department to check for the availability of the product
In case the product is out of stock, the sales team approaches the Production Planning Department to manufacture the product
The production planning team checks with inventory department for availability of raw material
If raw material is not available with inventory, the Production Planning team buys the raw material from the Vendors
Then Production Planning forwards the raw materials to the Shop Floor Execution for actual production
Once ready, the Shop Floor Team forwards the goods to the Sales Team
Sales Team who in turn deliver it to the client
The sales team updates the finance with revenue generated by the sale of the product. Production planning team update the finance with payments to be made to different vendors for raw materials.
All departments approach the HR for any Human Resource related issue.
That is a typical business process for any manufacturing company. Some key inferences one could derive from the scenario would be.
It has many departments or business units
These departments or business units continuously communicate and exchange data with each other
The success of any organization lies in effective communication, and data exchange, within these departments, as well as associated third party such as vendors, outsourcers, and customers.
Based on the manner in which communication and data exchanged is managed. Enterprise systems can be broadly classified as
1) Decentralized System
2) Centralized System which are also called as ERP.
Decentralized System
Let's look at Decentralized system first, in a company with Decentralized System of Data Management, there are two major problems –
Data is maintained locally at the individual departments
Departments do not have access to information or data of other departments
To identify problems arising due to decentralized Enterprise management system lets look at the same business process again. The customer approaches the sales team for a product, but this time around he needs the product, on an urgent basis.
What is SAP? Definition of SAP ERP Software
Since it is a decentralized process, the Sales Team do not have any real-time information access to the products availability. So they approach the Inventory department to check the availability of the product. This process takes time and customer chooses another vendor leading to loss of revenue and customer dissatisfaction.
What is SAP? Definition of SAP ERP Software
Now, suppose the product is out of stock and the Sales Team approaches the Production Planning team to manufacture the product for future use. Production Planning Team checks the availability of the raw materials required.
In a decentralized system, raw material information is separately stored by Production Planning as well as Inventory Department. Thus, data maintenance cost (in this case Raw Material) goes up.
What is SAP? Definition of SAP ERP Software
The raw material information is available in two different departments Inventory as well as Production Planning. When sales team check a particular raw material required to manufacture the product, it shows the raw material is available as per the inventory, but as per the database of the production planning team, the raw material is out of stock.
So, they go ahead and buy the raw material. Thus, material as well inventory cost goes up.
Once the raw material is available, the shop floor department suddenly realizes they are short of workers they approach the HR, who in turn hire temporary employees at higher than market rates. Thus LABOR Cost Increases.
The production planning department fails to update the finance department on the materials they have purchased. The finance department defaults the payment deadline set by the vendor causing the company loss of its reputation and even inviting a possible legal action.
What is SAP? Definition of SAP ERP Software
These are just a few of many problems with decentralized systems.
Some Major problems with the decentralized system are –
Numerous disparate information system generates individually over time which are difficult to maintain
Integrating the data is time and money consuming
Inconsistencies and duplication of data
Lack of timely information leads to customer dissatisfaction , loss of revenue and reputation
High Inventory, material, and human resource cost.
These are some major drawbacks for which we need a solution. Well the Solution lies in Centralized Systems i.e. ERP.
Centralized System
In a company, with Centralized System of Information and Data Management.
1) Data is maintained at a central location and is shared with various Departments
2) Departments have access to information or data of other Departments
Let’s look at the same business process again to understand how a Centralized Enterprise System helps to overcome problems posed by a Decentralized Enterprise System.
What is SAP? Definition of SAP ERP Software
In this Case, all departments update a Central Information System.
When Customer approaches the sales team to buy a product on an urgent basis. The Sales Team has real-time information access to the products in inventory which is updated by the Inventory Department in the Centralized System
Sales Team respond to customer request on time leading to Increased Revenue and Customer Delight.
In case, manufacturing is required the Sales Team update the Centralized Database, so that all the department remain informed about the product status.
Production Planning Department is auto updated by the Centralized Database for requirements. Production Planning Team checks the availability of the raw materials required via Central Database, which is updated by the Inventory Department.
Thus, Data Duplication is avoided, and accurate data is made available. The Shop Floor Team update their Man Power Status regularly in the Central Database, which can be accessed by the HR department.
In case of shortage of workforce, HR team starts recruitment process with considerable lead time to hire a suitable candidate at market price.Thus labor cost goes down.
While vendors can directly submit their invoices to the Central Enterprise System, which can be accessed by the finance department. Thus, payments are made on time, and possible legal actions are avoided
SAP software is a type of Centralized System. SAP System is most popularly used ERP software.
Key benefits of the centralized system are:
It Eliminates the duplication, discontinuity and redundancy in data
Provides information across departments in real time.
SAP System is Provides control over various business processes
Increases productivity, better inventory management , promotes quality , reduced material cost, effective human resources management, reduced overheads boosts profits
Better customer interaction and increased throughput. It also improves customer service
Hence, a centralized enterprise management system is required.
SAP Software is a centralized enterprise management system also known as Enterprise Resource Planning.
SAP is a market leader in providing ERP (Enterprise Resource and Planning) solutions and services. In this chapter, we will try to understand more on ERP and where it should be used. In addition, we will learn the implementation techniques of ERP along with the ERP packages available in the market.
What is ERP?
Enterprise Resource Planning (ERP) is a software that is built to organizations belonging to different industrial sectors, regardless of their size and strength.
The ERP package is designed to support and integrate almost every functional area of a business process such as procurement of goods and services, sale and distribution, finance, accountings, human resource, manufacturing, production planning, logistics & warehouse management.
Planning and Executing
Business Process Integration
Every business, regardless of the industry they belong to, require connected systems with efficient information flow from one business process to another. Business Process Integration (BPI) plays an important role in overcoming integrating challenges that allows organizations to connect systems internally and externally.
Business Process Integration (BPI) allows −
automation of business processes,
integration of systems and services,
secure sharing of data across numerous applications, and
automation of management, operational, and supporting process.
The following illustration shows an overview of various business processes running in an enterprise and how they are integrated.
Business Process Integration
Evolution of ERP
During early phases of development, integrated solutions were designed for particular process areas such as −
Material Management − the integrated system was known as Material Requirement Planning (MRP)
Manufacturing − the integrated system was known as Manufacturing Resource Planning
However none of the integrated systems came with a complete solution for an organization covering major business process areas. In early 1990’s, the Gartner Group first used the acronym ERP. By mid–1990’s, ERP systems addressed all the core enterprise functions.
In the early stages, most of the ERP solutions were focused on automating back office functions that were not directly affecting customers or general public. Later, front office functions such as customer relationship management and e–business systems were integrated.
Functions of ERP
An ERP system typically performs the following functions −
Supports the integrated business process inside the organization.
Improves capital planning and helps in executing organizational plans and strategies.
Helps speed up the decision-making process over the analysis of accurate data.
Helps extend the business network to wider domains, expanding the products and services to reach more customers, suppliers, and partners.
Identifies operational risks to improve governance.
Provides protection against organizational data breaches and security threats to leakage of information.
Makes the organization adaptable to the rapid changes in the business process according to the needs.
Gives long-term profit by providing means to increase the customer base.
Functional Areas
ERP is a business management software is usually a suite of integrated applications that a company can use to collect, store, manage, and interpret data from many functional areas including −
Financial Accounting − Deals with financial transactions and data.
Human Resource − Deals with information related to employee of an organization.
Customer Relationship Management − Deals with capturing and managing customer’s relationship, facilitating the use of customer experience to evaluate the knowledge database.
Sales and Distribution − Deals with order placement, delivery, shipment and invoicing.
Logistics and Warehouse Management − Deals with storage of products and shipment.
Manufacturing and Material Management − Deals with the production and production planning activities.
Supply Change Management − Deals with the movement of products, storing, managing, and controlling supplies.
Business Intelligence − Analyzes data and converts the same to information.
Advantages of ERP
By integrating the business processes, the ERP offers the following advantages −
Saves time and expenses.
Allows faster decision-making by the management, utilizing the data and reporting tools designed in the systems.
Single data source and sharing of data among all the units of an organization.
Helps in tracking every transaction that takes place in an organization, from starting till end.
Supplies real-time information whenever required.
Provides synchronized information transfer in between different functional areas such as sales, marketing, finance, manufacturing, human resource, logistics, etc.
Disadvantages of ERP
It is not always easy to incorporate ERP in an organization. ERP suffers from the following drawbacks −
Sometimes business processes critical to an organization are to be re-engineered to align them with an ERP solution.
Cost of complex integration can be very high.
Switching from one ERP solution to another increases the implementation cost even further.
End-users are to be trained for their daily operations.
Customization is not preferred.
ERP Packages
Many companies develop and implement various ERP packages according to their budget and requirements to help them meet their business needs and run their business efficiently.
The following link takes you to a page from Wikipedia where you can find a list of almost all the ERP packages designed worldwide.
http://en.wikipedia.org/wiki/List_of_ERP_software_packages
SAP solutions include a number of functional modules, which support transactions to execute key business processes, such as −
Financial Accounting (FI)
Financial Supply Chain Management (FSCM)
Controlling (CO)
Materials Management (MM)
Sales and Distribution (SD)
Logistics Execution (LE)
Production Planning (PP)
Quality Management (QM)
Plant Maintenance (PM)
Project System (PS)
Human Resources (HR)
Finance Control
Finance and Controlling (FICO)
SAP FICO is a combination of two ERP modules, i.e., Finance Accounting (FI) and Controlling (CO). Under Finance in SAP and at an enterprise level, the following modules take part −
FI − Finance
CO − Controlling
IM − Investment Management
TR − Treasury
EC − Enterprise Controlling
SAP FI (Financial Accounting) is accountable for tracking the flow of financial data across the organization in a controlled manner and integrating all the information for effective strategic decision-making.
Activities Involved in SAP FI
Creation of Organizational Structure (Defining Company, Company Codes, business Areas, Functional Areas, Credit Control, Assignment of Company Codes to Credit Controls)
Financial Accounting Global Settings (Maintenance of Fiscal Year, Posting Periods, defining Document types, posting keys, Number ranges for documents)
General Ledger Accounting (Creation of Chart of Accounts, Account groups, defining data transfer rules, creation of General Ledger Account)
Tax Configuration & Creation and Maintenance of House of Banks
Account Payables (Creation of Vendor Master data and vendor-related finance attributes like account groups and payment terms)
Account Receivables (Creation of Customer Master data and customer-related finance attributes like account groups and payment terms
Asset Accounting
Integration with SD and MM
SAP CO (Controlling) module facilitates coordinating, monitoring, and optimizing all the processes in an organization. It controls the business flow in an organization. This module helps in analyzing the actual figures with the planned data and in planning business strategies.
Two kinds of elements are managed in CO −
Cost elements
Revenue elements
These elements are stored in the FI module.
Activities Involved in SAP CO
Cost Element Accounting (Overview of the costs and revenues that occur in an organization)
Cost Center Accounting
Activity-Based-Accounting (Analyzes cross-departmental business processes)
Internal Orders
Product Cost Controlling (Calculates the costs that occur during the manufacture of a product or provision of a service)
Profitability Analysis (Analyzes the profit or loss of an organization by individual market segments)
Profit Center Accounting (Evaluates the profit or loss of individual, independent areas within an organization)
Activities in SAP CO
Sales & Distribution Management (SD)
SAP SD is one of the most important modules in SAP. It has a high level of integration complexity. SAP SD is used by organizations to support sales and distribution activities of products and services, starting from enquiry to order and then ending with delivery.
SAP SD can monitor a plethora of activities that take place in an organization such as products enquires, quotation (pre-sales activities), placing order, pricing, scheduling deliveries (sales activity), picking, packing, goods issue, shipment of products to customers, delivery of products and billings.
In all these processes, multiple modules are involved such as FI (Finance Accounting), CO (Controlling), MM (Material Management), PP (Production Planning), LE (Logistics Execution), etc., which shows the complexity of the integration involved.
Activities Involved in SAP SD
Setting up Organization Structure (creation of new company, company codes, sales organization, distribution channels, divisions, business area, plants, sales area, maintaining sales offices, storage location)
Assigning Organizational Units (Assignment of individual components created in the above activities with each other according to design like company code to company, sales organization to company code, distribution channel to sales organization, etc.)
Defining Pricing Components (Defining condition tables, condition types, condition sequences)
Setting up sales document types, billing types, and tax-related components
Setting up Customer master data records and configuration
Material Management (MM)
Material Management deals with movement of materials via other modules like logistics, supply chain management, sales and delivery, warehouse management, production and planning.
Material Management
Logistic Execution (LE)
Logistic Execution can be divided into two sub-modules, i.e., shipment of goods (purchase to procurement process) and warehouse management (storage of goods). These two modules are integrated with sale and distribution, material management, and production and planning.
Logistics Excution
Supplier Relationship Management (SRM)
As the name SRM suggests, this module deals with the effective and efficient transition of products and services between an organization and its suppliers. The main process covered in this section is procurement of products like direct materials, indirect materials, and services. This module can effectively integrate with planning, accounting, and inventory system.
Supplier Relationship Management
End-to-End Procurement Cycle
Procurement process with SAP Enterprise Buyer comprises of the following major steps −
Shopping Carts
Approval of Shopping Cart
Sourcing of Requirements
Purchase Orders
Purchase Order Approval
Confirm Goods/Services
Confirmation Approval
Process Invoice
Invoice Approval
Customer Relationship Management (CRM)
CRM deals with end-to-end customer related processes. CRM is designed to centralize the data related to all the customers associated with an organization. It helps an organization −
Maintain its sales, services, and build marketing strategies according the market demand and customer data analysis.
Remain focused on its customers and via information analysis, help the business to know more about its customers.
Improve sales and services and building better relationships with customers.
Customer Relationship Management
Human Resource (HR)
The most important objective of master data administration in Human Resources is to enter employee-related data for administrative, time-recording, and payroll purposes.
A new employee can be hired without using Recruitment. Instead you can hire someone by running a personnel action in Personnel Administration, thereby creating the necessary data for the employee to be hired.
Employee data must be kept current. After an employee is hired, circumstances can always arise which necessitate either the entry of new data or the correction of current data. For instance −
An employee moves to his or her new address must be stored in the system.
An employee gets a pay hike at the start of the year. The new salary must be stored for the relevant date.
An employee changes jobs within the organization. His or her organizational assignment, working time, and salary also change.
Data can be stored for the past, present, or future.
Note − Entering payroll-relevant data in the past triggers retroactive accounting.
Human Resource
The HR module is comprised of major areas of functionality known as sub-modules. The HR module is a true demonstration of the strength of the SAP product in Enterprise Resource Planning.
The HR system has very strong integration points (where data is passed back and forth without human intervention) with just about all of the other SAP modules. In addition, there is very tight integration amongst the HR sub-modules.
The above illustration highlights some of the basic SAP HR terms as listed below.
Business trip management
Recruitment
Payroll
Personal development
Organizational Management
Time Management
Workforce Planning
ESS
MSS
Training and event management
CATS
Benefits
Compensation management
Personal Administration
SAP : Three-Tier Architecture
With SAP R/3, SAP ushers in a new generation of enterprise software — from mainframe computing (client-server architecture) to the three-tier architecture of database, application, and user interface.
Three Tier Architecture
Three-Tier Architecture of SAP R/3
Presentation Servers
Presentation servers contain systems capable of providing a graphical interface.
Presentation Layer is also known as client Layer
Presentation Layer is a user interaction
In SAP-User interaction purpose we use GUI
GUI stands for Graphical user interface
Example − Desktop, Mobile Devices, laptops
Presentation Server
Application Servers
Application servers include specialized systems with multiple CPUs and a vast amount of RAM.
Application Layer is also known as Kernel Layer and Basic Layer.
SAP application programs are executed in Application Layer.
Application Layer serves as a purpose of a communicator between Presentation and Database Layer.
Application server is where the dispatcher distributes the work load to the different work processes makes the job done.
Application servers
Database Servers
Database servers contain specialized systems with fast and large hard-drives.
Database layer stores the data
Data store can be Business data, SAP system data, SAP tables, Programs.
Examples − Oracle, Microsoft SQL Server, IBM DB/2, Siebel, Sybase, etc.
Database ServersThree Tier
Three-Tier Architecture
What is a Client?
A client is a logical portion of an SAP R/3 physical database. From a business standpoint, a client can be interpreted as a logical group of companies.
Client
Points to Remember −
All customizing (configuration) and development (ABAP) work in SAP R/3 is performed in a client.
However, the data from both customizing and development work may be stored within an individual client (client dependent data) or among all clients (client independent data) in the system.
Client-Dependent vs. Client-Independent
The data in each client may be separate from that of the other clients. There are basically two types of data in an SAP R/3 system − Client-dependent and Client-independent data.
Client-dependent data is defined as data specific to an individual client. Examples of client-dependent data include number ranges, ABAP variants, and user masters as well as the data that is created or updated through SAP R/3 transactions.
Client-independent data can be defined as data contained across all clients in the system. Examples of client-independent data include data dictionary objects (tables, views), ABAP source code, screens, and menus.
Clients
Data resides in tables. To determine if a particular table is client-dependent or client-independent, the table structure needs to be reviewed. The table structure can be viewed by the data dictionary (SE11). If MANDT (client in German) is the first key field of the table, then the table is client-dependent; otherwise, the table is client-independent.
For example, the TSTC table is client-independent; however, the USR01 table is client-dependent.
SAP R/3 Delivered Clients
Every SAP R/3 system contains the three clients 000, 001, and 066. Let’s review these clients and examine what they contain.
These clients provide different features and must not be deleted.
Client 000 performs special functions. In particular, it is given extended functionality during upgrades.
Client 001 is basically a copy of 000 and can be used as a basis for a new customizing client.
Client 066 is a special client which is provided for operational system monitoring. It is used by SAP R/3’s Early Watch Service to provide performance recommendations.
Delivered Clients
In releases prior to 3.0, client 000 contained a model company. As of Release 4.0 clients, 000 and 001 are identical. Client 000 no longer contains a model company. Either client can be used as the basis for configuration through a client copy. Typically, most projects start with a copy of client 000 to begin building configuration. Customer work should never take place in the three delivered clients.
Now we should learn how to install SAP R3 on our systems.
Minimum System Requirements
To install the latest SAP GUI 730 version, MSU machines must meet the following minimum system requirements −
Windows-based PC running Windows 7, Vista, or Windows XP with Service Pack 3
Apple Mac with Virtual Machine software (VMWare, Fusion, Parallels) running Windows 7, Vista, or XP (Service Pack 3)
System Memory (RAM)
Windows XP − Minimum of 1 GB; 2 GB recommended
Windows 7 − Minimum of 2 GB; 4 GB recommended
Mac with Virtual Windows Environment − Minimum of 2 GB; 4 GB recommended
Disk Space
145 MB of available disk space for the SAP GUI installer program
250 MB of available disk space for the fully-installed application
Required Software Downloads
Download Java Platform, Enterprise Edition 7 SDK License Agreement
SAP GUI 7.30
SAP IDES 4.7 Installation files
MS Loopback Network Adaptor
NetWeaver is a combination of the underlying SAP Kernel (also known as the SAP OS layer, basically the WEB AS) and any SAP software tool for business enablement.
NetWeaver at a Glance
SAP NetWeaver describes all the software and services used for 'Business Enablement'. The SAP Business suite, such as ECC or SRM, contains the software components for that specific business solution.
SAP NetWeaver is an open technology platform that offers a comprehensive set of technologies for running mission-critical business applications and integrating people, processes, and information.
SAP NetWeaver is a web-based, open integration, application platform that serves as the foundation for enterprise service-oriented architecture (enterprise SOA) and allows the integration and alignment of people, information, and business processes across business and technology boundaries.
It utilizes open standards to enable integration with information and applications from almost any source or technology.
SAP NetWeaver is the foundation of SAP Business Suite and SAP Business by Design. It also powers partner solutions and customer custom-built applications.
NetWeaver
SAP NetWeaver Components
SAP NetWeaver includes a comprehensive set of components, applications, and tools.
SAP NetWeaver Application Server
It supports platform-independent web services, business applications, and standards-based development, enabling you to leverage existing technology assets for Web-services-oriented solutions.
SAP NetWeaver Business Warehouse
It enables you to integrate data from across the enterprise and transform it into practical, timely business information to drive sound decision making.
SAP NetWeaver Gateway
It enables developers to create applications that link business users to SAP software from any environment and through any device.
SAP NetWeaver Master Data Management
It ensures cross-system data consistency and helps integrate business processes across the extended value chain.
SAP NetWeaver Process Orchestration
It helps improve processes, from simple workflows to integrated processes that span applications and organizational boundaries. It includes capabilities for business process management, business rules management, and process integration.
SAP NetWeaver Portal
It unifies critical information and applications to give users role-based views that span the enterprise, enabling you to take full advantage of your information resources.
SAP Auto-ID Infrastructure
It gives you all the capabilities you need to integrate all automated sensing devices including RFID readers and printers, Bluetooth devices, embedded systems, and barcode devices.
SAP NetWeaver Identity Management
It addresses access and provisioning issues facing a typical enterprise. It creates a new opportunity for integrating business processes, and helps you to integrate systems in a heterogeneous IT environment.
SAP NetWeaver Information Lifecycle Management
It allows you to archive data in a readily accessible format according to regulatory retention rules that you define.
SAP NetWeaver Tools
SAP NetWeaver includes the following tools −
Adaptive Computing Controller
It provides a central point of control for assigning computing resources and optimizing their use.
SAP NetWeaver Composition Environment
It provides a robust environment for design, deployment, and running of composite applications that comply with a service-oriented architecture.
SAP NetWeaver Developer Studio
It offers a convenient user interface and rich functionality for developing J2EE applications.
SAP NetWeaver Visual Composer
It simplifies the creation of portal content and analytics applications, enabling business analysts to build or customize applications using a visual user interface rather than manual coding.
SAP Solution Manager
It facilitates technical support for distributed systems with functionality that covers all key aspects of solution deployment, operation, and continuous improvement.
SAP NetWeaver Applications
SAP NetWeaver includes the following applications −
SAP NetWeaver Enterprise Search
It provides a simple and secure gateway to enterprise objects and transactions.
SAP NetWeaver Single Sign-On
It offers a comprehensive single sign-on solution, enabling reuse of a person's initial authentication for subsequent log-ins to all applications.
