Introduction

Welcome to
SAP Overview

V.
 Speaker Introduction & Participant
Expectations

V.
Trainer Introduction
Mr. V. PRASAD (Age: 48 years, married with two kids)

 Graduate from IIT(Bombay)& PGDM(Finance) from

IIM(Calcutta)
Certified in SAP FI/CO since last 12 years

 Two SAP implementation projects with intl. clients:

Ethiopian Airlines & Mombasa Cements
(Kenya)

 Conducted 36 academy batches for SAP FI;

12 academy batches for SAP CO

 Also conducted training in Actual Costing –

Material Ledger & New G/L Accounting

 Corporate Clients for SAP End-user Training include:

Wipro, Mindtree, Cap Gemini, Bosch (India),
Hemaya (Qatar), Tamimi (Saudi), GE Caps, Surya Nepal,
SABIC(Saudi & India)
V.
What can you expect from this training?

 Learn to configure the SAP system so that

it is effectively tailored to meet the business
requirements of your client organisation

 Learn to function as an efficient end-user by

understanding and relating to all the advanced
transaction posting and reporting features in SAP

 Understand the integration aspects of FI & CO

with other modules of SAP – especially understand
how business processes run in SAP with smooth
transfer of data across several modules

V.
Agenda

What is ERP? Why is it required?
How did it all start?

 Why SAP?

 Basics of SAP R/3?

 Introduction to SAP org. elements

 Business Process Cycles in SAP

 Data Types

V.
ERP and its Evolution

Enterprise Resource Planning

Facilitates planning of resources at the enterprise-level

Facilitates enterprise-wide integration of information systems,

covering all functional areas

Performs core corporate activities efficiently thereby leading to

reduction in costs, faster business processes and better customer
service

V.
ERP and its Evolution


Materials Requirement Planning (MRP – 1970’s)


Manufacturing Resource Planning (MRPII – 1980’s)


Enterprise Resource Planning
[MRP-II + New Technologies] (ERP – 1990’s)


Beyond ERP - SCM, CRM, etc (2005 onwards)

V.
Prior to ERP – Information Islands

Quality
Finance
Human Resources
Sales

Material management

Production

Disadvantages:
Duplication of work
Information is scattered, difficult to obtain at the right time, and usually not accurate
Management control is very difficult
More working capital requirements leading to higher costs

V.
Post ERP Implementation – Integrated information

Quality
Finance
Human Resources
Sales

Material management

Production

Advantages:
Duplication of work is eliminated as data entered once can be re-used elsewhere
Information is available at the right time, at one place, and generally accurate
Better Management control
Lower costs through less working capital requirements

V.
Agenda

What is ERP? Why is it required?
How did it all start?

 Why SAP?

 Basics of SAP R/3

 Introduction to SAP org. elements

 Business Process Cycles in SAP

 Data Types

V.
SAP – A Brief

 Started in 1972 by five ex-IBM engineers

 Headquartered in Waldorf, Germany

 Today, it has a commanding 75% of ERP market world-wide as well

as in India

 With a turnover of over $ 25 billion, it is the third-largest independent

software vendor in the world

 No. of Customers: > 50,000

No. of Users: > 18 million
No. of Partners: > 1800

V.
Agenda

What is ERP? Why is it required?
How did it all start?

 Why SAP?

 Basics of SAP R/3

 Introduction to SAP org. elements

 Business Process Cycles in SAP

 Data Types

V.
What does SAP stand for?

SAP stands for:

Systems {H/w, O/s, DB, N/w}

Applications {Logistics, Accounting,

etc}
&
Products {ABAP S/w code}

in Data Processing

V.
What does R/3 mean?
 SAP R/3 is the former name of the ERP software produced by SAP

 Its new name is SAP ECC

(ECC stands for ERP Central Component)

 R Real-time
i.e. Immediate updating of data

 3 Three-tier System Architecture


Presentation Terminal (User Interface)

Application Server (Business Logic)

Database Server (Data Storage)

V.
R/3
f Client Server Configuration

Single Desk Top 2-Tier Configuration 3-Tier Configuration

Presentation
Presentation Processes

Application
Application Processes

Database

Flow of: Database, Application, Database and Database Services

Presentation Services Application Services

V.
Characteristics of SAP R/3

 SAP R/3 can be operated on multiple platforms and

operating systems such as MS Windows, Unix, etc

 It can also function on non-SAP Databases such as Oracle

11i, SQL DB, etc (provided they satisfy RDBMS principles)

 The business processes incorporated in SAP R/3 represent

Best Business Practices followed across some of the
largest business houses whom SAP has served over the
years

V.
Characteristics of SAP R/3

 SAP R/3 has been developed using SAP’s proprietary software

language called ABAP (Advanced Business Application
Programming)

 SAP R/3 also allows developers to modify existing R/3 code.

This can be for modifying existing functionalities, or for developing
our own functionalities in the form of new Reports or even completely
new transactional systems within the SAP framework

V.
Characteristics of SAP R/3

 SAP R/3 is arranged into distinct functional modules,

covering the typical functions performed in an organization

 The most widely used modules are Financial Accounting

and Controlling (FICO), Human Resources (HR), Materials
Management (MM), Sales & Distribution (SD), and Production
Planning (PP).

 In all there are about 20 modules

 Each module handles specific business tasks on its own,

but is also integrated with other modules
Ex: A Sale Invoice posted in SD will also appear in
A/R in FI

V.
Characteristics of SAP R/3

SAP can be tailored for

SD FI both large and small
Integrated and Sales &
Distribution
Financial organisations
Accounting
Complete MM
CO
Solutions Materials
Controlling
Mgmt.
PP AM
Production Fixed Assets
Planning Mgmt.

Open QM SAP R/3 PS

Systems
Quality Project Multi-Industry
Manage- System
ment PM WF
Plant Main- Workflow
tenance HR IS
Human Industry
Resources Solutions
Multi-
Currenc
y Multi-
National

V.
SAP R/3 Industry Solutions

 To meet the specialized requirements of certain

industries, SAP has recently come out with Industry
Solutions for industries such as Retail, Utilities, Banking,
etc

 Each Industry Solution incorporates additional

functionalities and changes made to standard SAP R/3 as per
the demands of that Industry

V.
SAP R/3 Industry Solutions

SAP High Tech & SAP Retail SAP Insurance

Electronics

SAP Consumer SAP Automotive SAP Banking

Products
SAP Utilities SAP Public Sector
SAP Chemicals

SAP Healthcare
SAP Pharmaceuticals
SAP Telecommunication
SAP Oil & Gas
SAP Aerospace & Defense
SAP Engineering &
Construction

V.
SAP ERP – Current Version

 SAP ERP is no longer called R/3

The latest version of SAP ERP is called ECC 6.0
{ECC refers to Enterprise Central Component}

 This version was released in 2005, and has been extremely

successful in the SAP market place
• Once every few years, SAP comes out with an Enhancement Package
(EhP) to ECC 6 that is provided free of cost to existing customers.
• The latest EhP available is EhP 7

 The most important feature of ECC 6.0 is the concept of

New General Ledger

V.
SAP R/3 – FI & CO Modules
 FI represents Financial Accounting
It is used for External Reporting
Ex: External Stakeholders such as Banks, Shareholders, etc

Reports such as P&L Statement, Balance Sheet, Cash Flow, Funds Flow, etc are
generated in FI

 CO represents Controlling or Management Accounting

It is used for Internal Reporting
Ex: Reporting to Internal Stakeholders (Internal Managers)

Confidential Reports such as Sales Break-up, Cost Break-up, Plans,

Budgets, Variance Analysis, etc are generated in CO.
These Reports are used for decision-making and monitoring efficiency

V.
Agenda

What is ERP? Why is it required?
How did it all start?

 Why SAP?

 Basics of SAP R/3

 Introduction to SAP org. elements

 Business Process Cycles in SAP

 Data Types

V.
SAP - Organization Elements
 Client
 Company Code
 Company
 Business Area
 Plant
 Storage Location
 Purchasing Organization
 Purchasing Group
 Sales Organization
 Division

V.
SAP - Organization Elements
Client
 A Client is a commercial, Organizational unit within the R/3 System, with its own
data, master records, and set of tables

 From a business perspective, it represents a Corporate Group

Client
 All real-time transaction data is posted to a Production Client.
Usually an Enterprise maintains only one Production Client

 All Reports are generated from the Production Client

 In addition, we may also make use of various other Clients for different purposes.
Ex: Testing Client, Training Client, etc

V.
SAP - Organization Elements
Company Code
 It is the smallest organizational unit for which you can have independent books of accounts in External Accounting.

 Usually, it also represents an independent legal entity

Ex: A company within a Corporate Group

Company
 It is used for consolidating the financial statements of multiple company codes belonging to the
same country.

 The relevant Company Codes have to be assigned to the Company Ex: A holding
company within a Corporate Group

V.
SAP - Organization Elements
Business Area
 Each Business Area represents a separate Line of Business or Industry. It may even represent a separate Geographical Area

 If required, you can draw up financial statements at the Business Area level, in addition to Company Code and Company-level
Ex: Textiles Business Area, Foods Business Area, etc

 Imp.: A given Business Area is not restricted to any one Company or Company Code. Therefore it is defined at the Client level.

V.
SAP - Organization Elements
Profit Center
 It is an area of responsibility which earns revenues as well as incurs costs
Ex: Sales Branch

 Profit Centers can also be defined along functional lines or product lines

 Profit Centers are defined at Controlling Area level

 In New GL, Profit Centers are as much a part of FI as CO

V.
SAP - Organization Elements
Segment

V.
SAP - Organization Elements
Segment

V.
SAP - Organization Elements
Plant
 A Plant is an organizational unit in Logistics that structures the
enterprise from the perspective of production, procurement, plant
maintenance, and materials planning.
 A Plant represents a manufacturing facility (factory) or a warehousePlant
 All materials are valuated at Plant level

Storage Location
 The Storage Location is an organizational unit that allows the
differentiation of material stocks within a plant.
Ex: Raw Materials godown, Finished Goods godown

Storage location
 Physical inventory is maintained at the Storage Location level.
 Every Storage Location is defined with reference to a Plant

V.
SAP - Organization Elements

Purchasing Organization
 It is an organizational level that negotiates conditions of
purchase with vendors for one or more plants. It is legally
responsible for completing purchasing contracts.

Purchasing Group
 It represents a buyer or a group of specialist buyers responsible for
purchasing certain select materials.
Ex: Yarn Purchasing Group

V.
SAP - Organization Elements
Client

Company Company
P Org 3
Code 1 Code 2

P Org 1
P Org 2

Plant 1 Plant 2
Plant 3
SLOC 1
SLOC 2 SLOC 1 SLOC 1
Gray Box- Plant Specific Purchase Organization
Green Box- Cross Plant Purchase Organization
Orange Box- Cross Company Code Purchase Organization

V.
SAP - Organization Elements
 Sales Organization

It is the legal selling unit responsible for negotiating
the terms of a sale, product liability, and resolving
customer complaints.
Ex: Domestic Sales Org., Export Sales Org.,
etc


Assigned to only one company code.

 Distribution Channel

It represents a channel for supplying saleable products
to your customers
Ex: Retail Sales, Institutional Sales, Wholesale,
etc


Assigned to one or multiple Sales Organizations
V.
SAP - Organization Elements
 Division

It represents a product line or a group of products that
are closely related from a marketing point of view.
Ex: Toiletries, Fabric Care products, etc


Assigned to one or multiple Sales Organizations.

 Sales Area

It represents a combination of Sales Organization,
Distribution Channel and Division.

It defines which materials are sold using which
distribution channels under which Sales Organization.

V.
Sales Organization & Plant assignment to
Co. Code
Client

Company Code 1 Company Code 2

1 2
Sales Sales Sales 3
Organization Organization Organization

Plant 1 Plant 2 Plant 3 Plant 4

V.
Agenda

What is ERP? Why is it required?
How did it all start?

 Why SAP?

 Basics of SAP R/3

 Introduction to SAP org. elements

 Business Process Cycles in SAP

 Data Types

V.
SD Cycle
Sales/Distribution
Chain
Inbound Logistics
Outbound Logistics
from Materials Sales Order & Distribution
to Customer
Management Process
Receive Payment
FI
Support Customer Sales
(Customer Info Analysis)
Create Invoice - Optional -
FI/CO/PA
- Create pick list
- Create trans- Issue Goods Process Customer
portation
work list
(Ship Product) Inquires
- Create loading FI - Optional -
work list MM

Provide Customer
Create Delivery Note Quotations
(Documents) - Optional -
- Check credit
- Check product availability Create Sales Order
- Determine pricing
- Estimate delivery schedule FI/CO/PA Support Customer
- Determine conditions of
MM Agreements
sale
PP - Optional -

V.
How does MRP work?

Forecast
Material Requirement
Stocks Planning Demand
What ? Where ?
Requirement
How much ? When ?

Production Purchasing
(Internal Procurement) (External Procurement)

Invoice
Inventory Management
Invoice
Goods Receipt
Verification
Warehouse
Management
Goods Transfer
Issue Posting

Accounting
Sales and Distribution

V.
Production Execution Cycle

V.
MM Procurement Cycle
Purchase
requisition

Handling of payment 12 1 Purchase Requisition

Purchase Inventory
Purchasing
Invoice 10 Desc:--------------
? order Raw Material
20
1 234 567 890
Invoice Verification 11
2 Material Master– Purchasing
Inspn. Plan
10
20 Request for
30
Quotation
Quality Inspection 10
3 Request for quotation &
Procurement Cycle compilation

Goods receipt 9
4 Vendor Master-
Purchasing Org. Data
Purchase
10
10 order
20 Inventory
Purchasing
20 30 Desc:--------------
Vendor,
30
Material, Plant
Purchase order 8
5 Source List
Inventory
Purchasing
Desc:--------------
Vendor,
Material, Plant Inventory
Purchasing
Desc:--------------
Vendor,
6
Info Record 7
Material, Plant
Quota arrangement

V.
MM Procurement Cycle
 Source List

It specifies the possible sources of supply for a
material at a given Plant over a given period of time.


A Source List is maintained at Plant level for a certain
material and it contains the allowed, preferred and/or
blocked sources of supply for a material that are valid
for a predefined period

 Quota Arrangement

If a material can be obtained from various sources of
supply, each individual source of supply can be
allocated a quota.


The Quota Arrangement specifies exactly how the
material requirements are to be distributed amongst
each source of supply.
V.
MM Procurement Cycle
 Info Record

It is maintained as a source of information for
Purchasing.


A separate Info Record is maintained for each material-
vendor combination.


Some of the information maintained in an Info Record:
- Prices and Conditions with validity period
- Planned Delivery Time
- Applicable Tax Code
- Vendor Evaluation data
- The availability period during which the vendor can
supply the material

V.
Financial Processes

Cash and Bank

Accounts Payable Accounts Receivable

External Reporting
Balance sheet

... ...

Inventory

Asset Accounting

V.
Controlling Processes

Profit Center Accounting

Product Cost Inventory

Report
Controlling Structure

Market Valuation
Profitability segment,
region,
division ...
Analysis
Cost of sales
Report
Structure

Profit center:
Internal GL accounts
Reporting
Cost of Period

Overheads Management

V.
Controlling Data Flow
FI G/L Expenses
MM Purchase Orders
SD Billing
PP Production Cost
AM Asset Management

HR Personnel Cost

CO Controlling
Controlling

CCA PC PA OPA
Cost
Cost Center
Center Product
Product Profitability
Profitability Order
Order &&
Accounting
Accounting Costing
Costing Analysis
Analysis Project
Project A/c
A/c

V.
SAP - Business Process Integration
Agenda

What is ERP? Why is it required?
How did it all start?

 Why SAP?

 Basics of SAP R/3

 Introduction to SAP org. elements

 Business Process Cycles in SAP

 Data Types

V.
Types of Data

Customization Data

It represents data which is customized according to the needs of

the organization.

This data can be defined only by the implementation team

members (consultants) as a one-time activity.

Ex: Defining a new Company, Sales Org, Purchasing Org,

etc

V.
Types of Data

Master Data

This data explains the characteristics and attributes.

This data is a prerequisite for any transaction to be successfully

recorded.
It is defined by consultants and regularly updated by end-users.

Ex: Creation of Material Master, G/L A/c, Vendor Master, etc

V.
Types of Data

Transaction Data

It records the execution of business processes in the form of

transactions.

This data is recorded in the system by end-users as a routine

activity.

Ex: Recording a Sales Order, Goods Receipt, Payment to

Vendor

V.
Think About it !

No matter how good is the technology being used,

its success depends on the people who will use it.

The make and break of the system depends

on the people who use the system !!!

V.