User:Droze123/sandbox

ERP

ERP is a fully integrated business management software system which includes integration of various modules including Logistics, Production, Materials Management, Human resources. The information flow and operations processes are organized to make optimum use of the resources available. ERP system promises ː- One database, One application, One user interface, for the entire enterprise where once multiple dissimilar systems were used. Thus, ERP is used to integrate data flow and business process within an organization and optimize the workflow by reducing data redundancy by using only a single database for the whole enterprise. Evolution of information systems ː-
1) Calculation systems
2) batch processing systems
3) Online transaction processing systems
4) Analytical processing
5) Decision support system
6) Executive information systems

SD Module

Sales module implements the function of order placement, order scheduling, shipping and invoicing. It is closely integrated with organizations' e-commerce websites. Many ERP vendors offer online store frontend as a part of their sales module.

Contents :- 1) Basic features of SD module
2) Sales order cycle
3) Sales documents
4) Organisational structure of SD module
5) Material master data
6) Customer master data

Sales order cycle

->pre sales activities -> sales order processing -> inventory sourcing -> delivery -> billing -> payment ->

Sales documents

Sales related business transactions are stored in the system as sales documents. They are classified as -

• Pre sales documents ː Inquiries and quotations
• Sales orders
• Outline agreements such as contracts, rental agreements and scheduling agreements
• Customer complaints -> leading to free of charge deliveries and credit memo requests

The sales documents may be generated automatically or may require manual processing. The data generated, eg. prices and discounts, shipping dates, etc, is stored in the sales document, and can be displayed or changed manually during further processing.

Organizational structure in SD module

Sales and distribution structure ː-

• Client
• Company code
• Sales area

 - Sales organization
 - Division 
 - Distribution channel

• Plant
• Shipping Point
• Loading Point

Internal sales structure ː-

• Sales offices
• Sales groups
• Salesperson

Client

• It is the highest level in a SAP ERP system.
• Has own set of ʽmaster recordsʼ and ʽconfiguration tablesʼ (A self contained unit)
• One ʽinstanceʽ can have multiple clients

 - training client -> used for training purposes
 - testing client  -> testing purposes
 - production client -> real time

Company Code

• Represents an independent legal accounting unit
• A balanced set of books as required by law, are prepared at this level
• One client may have multiple company codes ː -

 - USA 
 - India
 - France

Sales organization

• The topmost entity to which we need to sum sales figures
• Responsible for negotiation, terms and conditions and distribution of goods and services
• Atleast one sales org needed
• Belongs to only one CC, but one CC can have multiple sales orgs
• Basic org element in SD module. All sales docs are prepared for sales organization.

Distribution channel

• Define the ways goods reach the customer
• One dist channel can be assinged to multiple sales organizations
• Eg. Wholesale, sale to industrial customers, direct sales from a plant, etc.
• Allow for different constraints like minimal order quantity and pricing

Sales division

• If the product range is broad, one sales organization can be divided into multiple sales divisions
• Each division can have its differential pricing or partial delivery constraints added
• Atleast one division must be defined
• One divison can be assigned to more than one sales org
• They restrict access to materials, so care should be taken while defining divisions
• Eg. Motorcycle, accessories

Sales area

• A sales area is a combination of sales organization, dist channel and division
• One sales area belongs only to one company code
• One sales and distribution document is assigned to only one sales area. This assignment can't be changed.
• During s and d document generation, it accesses various master data, eg. customer master data, material master data, prices and discounts
• Customer master data and sales documents are linked in sales area

Plant

• Physical or logical site where value is added
• Maybe a production facility(factory), warehouse, distribution vehicle
• Storage location is a subdivison of a plant where inventory is managed

Shipping point

• Integrated module of the S and D processing.
• Highest level org unit of shipping
• Controls all outbound deliveries
• Can be a rail depot or a mail depot or a loading ramp or even a group of people responsible for urgent delivery
• Should be near to the plant
• One plant can have multiple shipping points
• Also one shipping pt can be assigned to several plants. Useful when multiple plants in proximity
• Route is the path followed from shipping pt to destination
• Delivery dates are based on lead times( picking and packing time) associated with a shipping pt

Customer order cycle

Sales order cycle is often also known as customer order cycle. Let us now discuss each step in the cycle ː-

Pre sales activities

• 2 basic types of pre sale activities are sales support and pre sales documents.
• Sales support includes contacting the customer and tracking him through phone calls, emails, etc. An integrated CRM system.
• Pre sales documents include inquiries and quotations
• Inquiry documents request customers for info
• Quotations are generated based on inquiries. They are binding over the customer in a way that specific quantity of material is offered at special price if accepted within a specified period
• Both are starting points to create customer orders

Sales order processing

• Orders are placed by a customer service representative who then creates a document with

- Customer
- Materials ordered and their quantity
- Pricing conditions
- Scheduling conditions
- Delivery info
- Billing info 

• Also info is pulled from master data so as to minimize data entry errors

Inventory Sourcing

• Once an order is created inventory sourcing is to be done
• It determines

* If a product is available
* How will the product be supplied
 - From stock on hand
 - From ʽproduction or purchase ordersʼ that should be available
 - From make on order
 - From external supplier 
 - Shipped from antother plant or warehouse

• Thus, IS is done when an order is created, changed or when ʽdelivery documentʼ is created

Delivery

• Creating delivery documents
• creating ʽtransfer ordersʼ for material picking
• Supplying packing info if req.
• Issueing goods, Updating accounts and inventory data
• Can be created for each sales order
• One order can have multiple deliveries (if low availa.)
• One deli. can process multiple orders
• COmbined sales orders must have something in common such as shipping point, etc. so as to increase efficieny

Picking process

                                           |->  Order complete (quantity available)

delivery -> transfer order -> print TO -> confirm TO

                                           |-> Order incomplete (quantity not available) so process diffs. -> create TO for variance quantities

Billing

• Billing document created by copying info from sales order and delivery document
• Used to create invoice
• Creating billing doc automatically debits customers account and credits the revenue account
• Invoice can be split, say, diff invoices for materials and services
• One invoice for multiple orders to reduce paperwork

Payment

• Final step in customer order cycle
• Includes payment posting or reconciling differences
• The cycle always doesnt go as planned, eg. material not in stock, defective material, but SAP has options to deal with all possibilities
• Customer may send one checkto cover multiple invoices
• He may even send a partial check. Partial payment to invoices is allowed by SAP
• Payment posting performed by accounts recievable department

Document flow

• Each step in the customer order cycle results in generation of a document.
• SAP also provides documents which keep track of changes to the principal documents.
• Eg. of document flow

order 900
.delivery 24234
..ʽWMOʼ transfer order 234234
..'GD' goods issue 234
.. Invoice 234234
...accounting document 234234

Master Data

• Centrally stored data shared across application modules
• Processed to eliminate data redunduncy
• When creating a business order (eg sales order) SAP copies from the master data
• Three kinds to master data ː customer (shared with FI/CO), material (shared with MM PP), gen. ledger, pricing

Customer Master

• Contains all customer related data needed to process orders, create invoices, delivers, payments
• All relevant data regarding business partners ː ship-to party, sold-to party, bill-to party, payer

Material master ̟

• All data regarding a particular material
• Intgrated data from MM, PP, SD, FI AND CO, etc
• Each user has a different ʽviewʽ to material master

General Ledger

• A book of accounts and their respective balances
• All finance related data contained in it
• Primary record for FI
• Contains complete record of all acceptable business transactions

Pricing

• Pricing carried out automatically based on predefined prices, discounts and surcharges
• Highly customizable within SAP R/3

Materials Management

Basic features of MM module

The purchasing module streamlines procurement of required raw materials. It automates the process of identifying potential sellers, negotiating price, awarding order to the seller and bill processes. Purchase module is tightly integrated with PP and inventory control modules. Also with supply chain module.

Organizational data

• A hierarchy in which organizational units in the enterprise are arranged according to tasks and functions
• Is static. Rarely changes
• The definition of an organizational unit is fundamental in developing the overall structure of the company

Organizational structure

The core structure necessary to conduct MM transactions is ː

• Client
• Company code
• Valuation area
• Plant
• Storage locations
• Purchasing groups / orgs

Client

• In SAP ERP, client is a self contained unit in both legal and organizational terms with seperate master data and independant set of records.
• From a business perspective, the client represents a corporate group
• Client ː 3 numerical digits

Company and Company code

• A company code is the smallest org unit of ʽexternal accountingʼ for which a complete bookkeeping system can be ʽreplicatedʼ.
• A company code represents an independant unit which produces its own balance sheet
• Company code ː 4 characters
• Plant is a org unit within a company.
• It is assinged to one and only one company
• But one CC can have > 1 plants

Valuation Area

• Establishes the level at which material stocks are to be valuated for the whole client. Valuation can be done at plant level or company code level
• Plant level valuation is needed when , for eg. , production planning or costing is implemented or the company is using the SAP retail system. Once determined. a valuation should not be changed
• Once a valuation area has been established, it is possible to assign a plant to a companuy code
• Having the valuation area as plant facilitates plant level material requirement planning
• SAP allows valuation area to be plant or company code but recommends plant level
• This allows prices to be assinged at plant level

Plant

• Definition of a plant depends on its use
• From a MM pov, plant is a location to store valuated stock
• From PP pov, plant is a org unit central to PP
• Can also be defined as a location that contains service or maintenance facilities, depending on needs of customer
• In logistics, plant is defined as the unit which divides enterprise according to production, procurement, mantainenece and materials planning.
• Lowest valuation area
• MRP done at plant level
• Can be a physical or logical unit
• Generally is a warehouse, a production facility or a distribution center
• Requirements for a plant : Factory calender, country code, region codes

Storage Location

• The area in a plant where stock is physically stored.
• A plant has atleast one storage location defined.
• Material quantity and not value is managed at storage location. Value at plant level.
• One plant can have multiple storeage locations.
• Can be called as a subdivision of a plant
• Inventory management done here :-

- Raw materials - MRO - Manufacture, repair and others - Finished products

• May be a physical or a logical unit

Purchasing organizations / Groups

• It procures materials, goods, etc., negotiates with vendors, and bears responsibility for the same
• It also bears legal responsibility for procurements
• It subdivides the enterprise according to purchasing requirements
• A purchasing organization is again divided into purchasing groups
• A group denotes a person, or number of people responsible for procurement of certain materials
• One group can act for several POs

Transactions followed in MM module

1) Create Vendor
2) Create Material Master
3) Create purchase requisition
4) Request for Quotations
5) Create Purchase Order
6) Posint an order entry goods receipt)
7) Create Invoice
8) Invoice verification

Basic data

Master record includes informatino about :-
1) Vendor
2) Meterials and services to be procured
3) Relation between 1 and 2 (eg. prices / terns and conditions)
BOM for :-

• Production planning
• Purchasing
• Sales and distribution
• withdrawk of material

Material master data

• Contains data to completely define and manage materials
• Has data integrated from PP, SD, Accounting and other modules of SAP
• Material master used as a source of data during the procurement procedure of a transaction

Vendor master

Divided into 3 types :-
1) General data : Contains general information about the vendor, eg. contact no. name, etc. Is valid for the whole client.
2) Purchasing data : It is valid for a purchasing organization. COntains data about the PO currency , tax info of the vendor, etc.
3) Accounting data : Valid for a company code. COntains dta about the PO currency, tax info, incoterms, payment methods for automated payment systems.

The SAP system authorization concept can be used to define how the maintenance of the vendor data is to be done.

Purchasing info record

Source of information for purchasing. Some data from Material master and some data about vendor is contained in a PIR. Thus data from :- material master, vendor master, purchase order, outline agreement and quotations is included in a PIR.

PUrchase requisition

Document created by a user department or storeroom personnel to notify the purchasing department of goods required, quantity and timeframe. May also contain authorization to proceed with purchase.

RFQ

Request for quotations ( Invitation for bids ) is a standard business process in which suppliers are invited to bid on certain services and products.

Purhase order

A document generated by buyer. It contains the description, quantity, prices and discounts, payment terms, dates, shipment information, associated terms and conditions, etc. and identifies a particular seller.

Financial accounting module

Financial accounting module is designed to collect data needed to support the preparation of financial statements for an external user. Components of FI module :

• General ledger
• Special purpose ledger
• Accounts recievable
• Accounts payable
• Banks

General Ledger

• Contains complete record of all acceptable business activities from the viewpoint of an accountant
• An acceptable business transaction has foll. traits :-

- Affects financial position of the company - Can be measured in a currency - Affects atleast 2 accounts

Chart of accounts

• Foundation of general ledger
• Contains a list of all the accounts utilized in the general ledger
• Financial accounting reports are prepared using the balances in the chart of accounts
• 5 types of accoutns are mentioned in the chart of accounts :-

- Assets
- Liabilities
- Equity
- Revenues
- Expenses

• Mainly 2 statements are prepared using chart of accounts : Balance sheet and statement of income

Balance Sheet

• Assets : Contains all the things of value that the company owns which the accountant has agreed to measure on monetary terms. Eg. Cash, acc. recievable, inventory, plant and equipments
• Liabilities : Contains all the things of value that the company owes to others , whcih the accountant -------==------- Eg. Accounts payable, Notes payable, bonds payable
• equity : The mathematical difference between assets and liabilities. Includes the monetary amounts collected with respect to preferred stock transactions, aggregate net income since the org of the company and the reduction of dividend for stock holders.

Income statement

• Revenue : The monetary amount paid to our company by our customers in exchange of goods from our company or services of our firms in the current fiscal year.
• Expenses : The monetary amount paid by our company to our vendors in exchange of goods bought by us or services rendered to our firm in the current fiscal year.

Rules for recording transactions

• For personal accounts :- Debit the reciever, credit the giver
• For real accounts :- Debit what comes in, credit what goes out
• For nominal accounts :- Debit all expenses and losses, credit all revenues and gains

Organizational structure

Hierarchy in which different org units are arranged acc. to tasks and functions. Are static data and rarely changed. Defn of org units is a fundamental factor in how the company will be structured.

Client

• Highest level org unit in SAP ERP
• Contains its own database records (a self contained entity)
• master records created at client level.

Company

• A financial org unit. Consolidated (of all parent companies and also subsidiaries) financial statments created at this level.
• A company can have multiple company codes.
• All companies must use the same chart of accounts and fiscal year.
• The definition of a company is optional in the structure of an enterprise.

Company code

• A legal org unit of a company
• One company has multiple company codes
• All financial statements are generated at this level (balance sheet and income statements)
• All business transactions occur at this level
• Accounting is also done at CC level

Chart of accounts

• Contains a list of all accounts (assets, liabilities, equity, revenues, expenses) present in the general ledger
• Used to prepare balance sheets and income statements
• One chart of accounts can be used by multiple company codes
• A COA must be assinged to a CC in order to create general ledger for the company

Fiscal year variant

• The accounting fiscal year for reporting purposes
• Special periods can be generated for quarterly or year end adjusting process completed prior to financial statements generation
• Each company code has a single fiscal year variant

Credit control area

• The org unit or area of responsibility used to control customer credit limits
• One org has one and only ne cca
• But one CCA can belong to multiple orgs

Production Planning Module

Materials planning and execution

• Sales Info : Contains information about sales orders obtained, pending sales orders, incoming sales orders ; region wise, company wise, product wise, etc
• Forecasting : Predicting sales figures from previous history of consumption of a product. A statistical forecasting algorithm is used for this.
• CO/PA : Projections are done from company's future projections of profitability analysis and costing
• Sales operations planning : Higher level planning, i.e. overall planning at company level. Yearly / Half yearly / Quarterly
• Demands management : Management of requirements. Can be done from sales forecasts or sales orders.

• MPS : Planning of those items which influence the company's profit greatly or consume a lot of resources, dominate production processes. After planning of these, the other components are taken up.
• MRP : Final step in production planning. Planning of all components required taking into consideration their stocks and existing requirements. Creation of purchase requisitions, production orders, etc.

• Order settlement ː Costs accrued are debited to one or several allocation recievers belonging to a financial or manegerial accounting.

Standard production planning reports

1) Stock / Requirements list ː Lists the current stock / req. list of a material in the plant, i.e. planned orders, production orders, etc.
2) Production plan ː Monthly plantwise / material wise prod plan
3) Orders ː Orders pending completed material / work center wise
4) Quantity produced ː Quantity produced in given period of time
5) Consumption ː Quatn consumed in given period of time
6) Work center load ː available capacities, required capacities, avail. req. capacities and percent load for work center
7) missing parts ː lists the missing part req for prod of a material
8) backlogs ː lists the backlogs of load in work center

Organizational data (Yet againǃ)

Client

An independant environment in the company

Company Code ̟

• The smallest org unit at which a complete set of accounting books is generated
• Everything financial, legal regarding a transaction is to be posted
• Creation of legal and financial statements like balance sheet and profit and loss statements

Plant

• The org unit where production occurs or goods or services are provided
• A plant is subdivided according to procurement, maintenance, etc
• Valuation occurs here. This means valuation can differ from plant to plant.
• Assigned to one company code. This divides stock and stock valuation areas.

Storage Locations

• An org unit used to facilitate differentiation between different materials in a plant
• Created with reference to a plant

Work center locations

• Places where some activity is done
• Defines when and where a operation is doneg
• Has a defined capacity
• Charge rates decided by costing centers and type of activity
• Can be craftsmen, machines, etc.

Master data

Master data in PP ː Material master, BOM, routing, work center, production version

Material master

• Information about all the material company produces, stores and sells. A number identifies a particular material master record
• Materials with same basic attributes are grouped togethor, eg. finished, raw material
• Used for ː-

1) Purchasing material
2) Creating goods issue
3) Creating invoice <bɾ 4) In S and D for sale order fulfillment <bɾ 5) In PP for MRP, scheduling, etc <bɾ

BOM

• A complete formally structured list of components and their quantities required to produce or assemble a product of assembly
• Is used for MRP and product costing
• 99 different BOMs can be created for a single product
• If a product has different variants, we can create a super BOM. A super BOM contains all the components required to produce all the possible variants. Then based on the condition in the order, the particular component can be selected.
• Eg. Product cycle can contain all kinds of frames with different colours and sizes, so a particular frame can be selected based on colour and size.
• The BOM is a hierarchical structure of the materials needed to produce a finished goods or semi finished goods.
• BOM in SAP are defined single level but can be constructed as multi level by using nesting
• Nesting implies a BOM contians its own BOM
• BOM is created as a single or multil level relationship between a parent material and a sub component material
• Variant BOm : When multiple products have high number of similar components
• BOM is used in MRP to determine product requirements
• It is used by controlling to determine product costings
• It is also used by PP for proper quantities of components used in production

Work center

• Machine or group of machines where actual production work takes place
• Work centers are used in routing (task listing)
• They contain information for scheduling, capacity and costing
• Location where ʽvalue added workʼ needed for production of a material is done
• Can be a machine, group of machines, a complete production line, a person or a group of people responsible for carrying out the operations
• CAN BE used for variety of purposes and multiple processes
• Used for defining capacities ː Labor, material, output, emissions

̈* Capacities used in Capacity requirement planning

• Also used for detailed scheduling and costing. Can be assigned as a cost center.
• Can be allocated with HRs. Qualifications, positions, people are the criteria for it.
• Multiple views of ː- Basic data, default values, capacity overview, scheduling, cost center assignment, technical data
• When assigned as a cost center, a work center acts as a container for accumulation of costs. The costs associated with the operations are calculated based on the formulas that utilize the costs and default values assinged to each activity, eg., setup, labor, machine
• Available capacity determines how much work can be done in the work center. Work center can include multiple resources and capacities, eg. labor and machine
• Scheduling basis determines the specific capacity to be used for production

Routing

• Routing is nothing but the sequence of operations performed at the work center. Machine time, labor time, etc. are also provided in routing.
• Routing is helpful in sequencing of operations and costing for the production material.
• A list of operations that must be completed in order to convert a meterial to a part or produce.
• It is the detail of the manufacturing process.
• Used as template for production scheduling as well as basis for production costing.
• Useful to determine operations, work center, material components, production resources and tools, quality checks.
• Also useful for scheduling, costing, capacity planning, production orders

Production version

• Combination of BOM and routing data for production. It is a linkage between BOM and routing to determine the manufacturing process
• Can be multiple production versions based on different manufacturing methods to produce the product.