Topic 1 Introduction To ERP

Objectives
• Introduction to MRP, MRP II, ERP
Topic 1 • Functional vs. Process View of Business
• Introduction to SAP
• Organization units, master data and
Introduction to ERP transaction data
• Introduction to ERP using Global Bike
1 2
Bill of Material
Motorcycle
Material Requirements Planning
Manufacturing Resource Planning Power Train Chassis
Enterprise Resource Planning (ERP)
Motor Gear Exhaust Front Rear Frame Brake

Wheel Wheel
Enterprise Resource Management
(ERP II, Enterprise suite,
Source: Travis Anderegg, CPIM, CIRM
© SAP SE
Enterprise Systems) 3 4
Bill of Material Material Requirements Planning
• MRP was built around a Bill of Materials
A BOM is a comprehensive, formally Processor and the advantage was the ability to
structured list of the components that make explode the components required to build the
up a product or assembly. The list contains a finished items and to summarize and time the
description and object number for each need for individual components across the
component, together with the quantity and total volume of orders.
unit of measure. • Not practical without a computer
Koh et al (2011)
5 6
Material Requirements Planning Information needed for MRP‐I
• A computerized program for manufacturing
• Demand for all finished goods
companies to determine the requirements and
timing of each material. • Lead times for all finished goods, components,
parts and raw materials
• Requires the use of data from bill of materials,
inventory, and master production schedule, etc. • Lot‐sizing policies for all finished goods,
components, parts and raw materials
• It determines the requirements in terms of the
assemblies, individual parts, and raw materials for • Opening inventory levels
fulfilling the agreed demand program. • Safety stock requirements
• It also defines the required quantity and the • Open order quantities
requirements date.
7 8
Disadvantages of MRP
• In the first generation of MRP systems, only
the quantities and deadlines for materials
were planned.
• There was no resource allocation.
• No capacity consideration.
manufacturing resource planning
MRP‐II
9 10
MRP‐II
MRP‐II
• MRP‐II is a method to plan all resources for a manufacturer.
• Later on, the MRP systems were enhanced to • A major purpose of MRP‐II is to integrate primary functions
handle capacity requirements planning and (i.e. production, marketing and finance) and other
they provided information feedback that led functions such as personnel, engineering and purchasing
to the capability of plan adjustments and into the planning process.
regeneration. • A variety of business functions are tied into MRP‐II systems
to include order processing as in MRP, business planning,
• MRP II was renamed ‘‘Manufacturing sales and operations planning, production plans, master
Resource Planning’’ to fully cover the new production scheduling, capacity requirements planning,
functionality. and capacity planning.
11 12
MRP‐II MRP‐II
• With MRP‐II, the material requirements are planned in • The individual planning steps were carried out
the first step (material requirements planning) and then sequentially: First sales planning, then
the capacity requirements are calculated. material requirement planning, and finally
• The results are a capacity load profile of the resources. capacity requirements planning.
• Furthermore, the planner will determine that several
resources are overloaded (bottleneck). • This led not only to long processing times in
• In the second step of planning, an attempt is made to planning, but also did not allow for a uniform
minimize or completely resolve these capacity and coordinated planning.
bottlenecks.
13 14
Disadvantages of MRP‐II ERP
• ERP systems are large computer systems that
• Long planning duration due to sequential integrate application programs in accounting, sales,
execution of planning steps manufacturing, and the other functions in the firm.
• The integration is accomplished through a database
• Outdated planning results due to long shared by all the application programs.
planning cycles • ERP employs proven business processes for decision
• Planning and scheduling with unlimited making.
resource availability • ERP systems work in real‐time, meaning that the
exact status of everything is always available.
• Many of these systems are global. They can work in
multiple languages and currencies.
- why ERP? Jacobs 2000
15 16
The problem? Departments are in isolation… Disadvantages of Traditional Approach before ERP
•Program‐data dependence
– All programs must maintain metadata (data about data) for
each file they use
– Any change to file structure requires changes to all
programs that access the file
Service Credit Engineering
•Data redundancy
– Any data changes in one file could cause inconsistency,
compromising data integrity
•Limited data sharing and no centralized control of data is
possible
•Lengthy development time
Billing Distribution Production
•Excessive program maintenance
© SAP SE 17 18
The solution? ERP links departments together…

Objectives
• Functional vs. Process View of Business
Service Credit Engineering • Introduction to SAP
ERP transaction data
Billing Distribution Production

19 20
© SAP SE
Functional vs. Process View of
Business Functional View of Business
• Basic business functions: Sales Engineering Purchasing Production Accounting Logistics
– Marketing and sales
– Production and
materials management
– Accounting and finance
– Human resources
 While functional areas are organized separately,
major business processes involve activities that cut
across functional lines
21 (With vertical management structure) 22
Process View of Business Business processes in organizations
• The focus on customers and business processes has
never been higher. With the increasing recognition of
Sales Engineering Purchasing Production Accounting Logistics business processes as critical corporate assets,
developing “process orientation” and “process view”
New product Needs analysis Component design Process design
development Market research Product testing Prototype production to its employees has become an imperative for
Sales order Sales order Production order Accounts Outbound modern business organizations (Kohlbacher, 2008).
management processing planning/control receivable logistics
• Many of the world’s leading business organizations
Purchases order Purchases order Accounts Inbound
management processing MRP payable logistics such as CISCO, Texas, Dell and Amazon have
embraced “process‐centered thinking” or “process
Process XXX
view” and changed their organizational structures,
Process YYY
strategies, and models and trained their employees
(Davenport, 2005).
(With horizontal management structure) 23 24
Who is SAP?
Objectives
• Introduction to MRP, MRP II, ERP  The acronym SAP stands for Systems, Applications, and Products in data
processing. The SAP acronym was derived from the original German name, which
• Functional vs. Process View of Business was Systemanalyse und Programmentwicklung.
• Introduction to SAP  In 2014 SAP converted from a German “AG” corporation to an “SE” European
company. A designated “European Company” (Societas Europaea, abbreviated as
SE) is a supranational legal form under European law for commercial enterprises
• Organization units, master data and within the territory of the European Union.
transaction data  SAP is the world leader in enterprise applications in terms of software and software-
• Introduction to ERP using Global Bike related service revenue. Based on market capitalization, we are the world’s third
largest independent software manufacturer. Browse SAP facts and information
below.
25
© 2017 SAP SE / SAP UCC Magdeburg. All rights reserved. 26
SAP SE 2017
SAP SE 2017
29 SAP SE 2017 30
Cloud Computing Cloud and Software Revenue
• Cloud Computing is a generic term for flexible, • Revenue from cloud subscriptions and support refers
IT‐related services available through, or to the income earned from contracts that permit the
customer to access specific software solutions hosted
hosted on, the Internet for consumers and by SAP during the term of its contract with SAP.
business, including storage, computing power,
• Software licenses revenue results from the fees earned
software development environments, and from selling or licensing software to customers.
applications, combined with service delivery. • Support revenue represents fees earned from
Accessed as needed “in the cloud,” these providing technical support services and unspecified
services eliminate the need for in‐house IT software upgrades, updates, and enhancements to
resources. customers.
SAP SE 2017 31 SAP SE 2017 32

SAP Portfolio Strength
Services Revenue
 World-wide usage
• Services revenue combines revenue from
professional services, premium support services,  Designed to satisfy the information needs for all business sizes (small local
to large all international)
training services, messaging services and payment • Multi-lingual
services. • Multi-currency
• Multi-balance (parallel G/L Accounting)
• Professional services primarily relate to the
installation and configuration of our cloud  Designed to satisfy the information needs for all industries, e.g.
subscriptions and on‐premise software products. • Automotive
• Banking
• Our premium support offering consists of high‐end • Retail
support services tailored to customer requirements. • Public Sector
• Higher Education and Research etc.
SAP SE 2017 33
SAP Enterprise Resource Planning (SAP ERP) SAP Architecture
 Enables a company to support and optimize its business processes  Client/Server Environment
• Client – hardware/software environment that can make a request for services for a
 Ties together disparate business functions (integrated business solution) central repository of resources
such as • Server – hardware/software combination that can provide services to a group of
• Finance (Financial Accounting, Managerial Accounting, Treasury, …) clients in a controlled environment
• Logistics (Sales, Procurement, Production, Fulfillment, …)
• Human Resources etc.  Three – Tier Structure
• User Interface
 Helps the organization run smoothly  Graphical User Interface or Web Interface
• Application Server
 Real-time environment  One or more, help distribute work load
• Database Server
 Scalable and flexible  One single data repository
© 2017 SAP SE / SAP UCC Magdeburg. All rights reserved. 35 © 2017 SAP SE / SAP UCC Magdeburg. All rights reserved. 36
SAP Business Suite
Database Approach to Managing Data
Application
Database Interface Programs Users SAP PLM
Payroll
Program Reports
SAP SAP ERP SAP

SRM CRM
Invoicing
Payroll Data Program Reports
Database
Invoice Data
Management
System SAP SCM
Inventory
Data Inventory
Program Reports
Shipping
Data SAP NetWeaver
Other Data
Shipping
Program Reports
© SAP AG 37
Basic Concepts of Relational Database Relational Database Example
• Tables
– Consists of columns and rows Relationship
– Hold data about all instances of an entity – something
which we want to keep data on Cust# Name District ActBal
7245 Olen W5 3491.10
• Columns (attribute, field) 2864 John S2 1637.60
– Show characteristics or attributes for each entity 2982 Elias S2 6737.50
Attribute (Column or Field)
– Primary Key column – unique identifier 4453 Danny E3 8229.90
• Rows (tuple, record) Customer Table Order# Cust# Date Amount
– Hold data about a single instance of an entity 302117 7245 3/3/05 570.00
– Each row or record is unique – identified by the Tuple (Row or Record) 184525 1885 12/8/05 2980.50
primary key 134057 6387 4/10/05 900.00
169433 8254 5/7/05 1550.60
39 Sales Order Table 40

© SAP SE
Some Companies that Use SAP Some Local Companies that Use SAP
 ACE Plastics, BASF East Asia Regional Ltd., Bayer Polymers, bigboXX.com, CCT
Tech International, Celestica, CITIC Ka Wah Bank, CLP Power, Compaq Computer
(HK), Compress Digital Technology, Crystal Group, Eastern Asia Technology (HK)
 Henkel Asia Pacific, Hewlett-Packard (HK), Hong Kong Aero Engine Services, Hong
Kong and China Gas, Hong Kong Futures Exchange, Hilti Group, IDT International,
Kao (HK)
 Kowloon Motor Bus, Lee Kum Kee, Leica Microsystems, Mekim, Moulin
International, Philips (HK), Rhodia (HK), PLC Group
 Samsung Electronics (HK), San Miguel Brewery, Sanyo Electric (HK), Seiko
Instruments (HK), Sharp-Roxy (HK), Siber Hegner, Sony International (HK), Taiyo
Yuden (HK)
41
SAP AND THE INTRODUCTORY MANAGEMENT
INFORMATION SYSTEMS COURSE
• Over the years there has been an increased effort
to include more coverage of enterprise resource
planning (ERP) systems in the business school.
• This is in large part due to the increased demand
from businesses for graduates with ERP
experience. In order to meet this demand there is
a noticeable trend away from the traditional “silo”
style of teaching, where each functional area
discusses topics related to their particular area
and not how it impacts others.
43
SAP AND THE INTRODUCTORY MANAGEMENT SAP AND THE INTRODUCTORY MANAGEMENT
INFORMATION SYSTEMS COURSE INFORMATION SYSTEMS COURSE
• With the support from the Dean and chairs in • These ERP systems will give the student
the college we decided to provide students exposure to the concept of an enterprise
hands‐ on experience to an ERP package. system. The faculty decided that SAP would be
• There are many benefits to hands‐on learning, most advantageous for the student. The ERP
such as, greater retention of the material and application most widely used in the workplace
the increased development of critical thinking is SAP. As of 2011, SAP had the largest market
skills. share based on revenue at 25.5%. This is with
a 13.2% growth from 2010 (Gartner, 2012).
• One of the primary goals in this course is to
familiarize the students with the SAP GUI and
to get them accustomed to navigating through
the SAP menu. Another primary goal is to
emphasize the importance of ERP as a cross
functional system. This is accomplished by
having the students work through the process
of “Materials Management,” whereby in SAP,
they perform the following tasks:
• create a new vendor
• create a new trading material
• request quotes from various vendors
• accept a quote
• create a purchase order based on the quote
• post the goods receipt
• verify physical receipt in stock
• post payment to the vendor
• review the G/L accounts
To further reinforce the concepts, a second case dealing
with “Sales and Distribution” is done.
50
Objectives
transaction data
51 52
Introduction to SAP SAP ERP Business Modules
Curriculum: Introduction to ERP using Global Bike

Collections of logically related transactions within identifiable
business functions
• MM (“Buy”)
• PP (“Make”)
• SD (“Sell”)
• FI and CO (“Track”)
• HCM (“People”)
• WM (“Store”)
• EAM (“Maintain”)
• CS (“Service”)
SAP ERP Core Applications Data Types in ERP Systems
 Logistics  Human Capital

• Sales & Distribution Management
• Materials • Personnel ? ? ?
Management Management
• Production Planning • Benefits
• Plant Maintenance • Payroll
• Quality Management
 Finance
• Financial Accounting … … …
• Managerial
Accounting
• Asset Management
• Treasury
Data Types in ERP Systems Organizational Data
 Define the enterprise structure by means of legal or respectively business usage
 Task is to adopt some functions inside of an enterprise and execute them
Organizational Master Data Transaction Data  Juridical entities, plants, storage locations, sales organizations, profit center
Data
Company Code Person Purchase Order  Examples:
• Client
Plant Material Invoice
 Highest organizational unit
Storage Location Customer Quotation  Represents the enterprise which consists out of several parts
Distribution Vendor Sales Order

Channel • Company Code
 Represents judicial entities in an enterprise
Purchase Condition Transportation  Central organizational unit in external accounting
Organization Order
… … … • Sales organization
 An organizational unit that executes the sale and distribution of products
and offers services
Organizational Unit Master Data
SAP  Long term data that represent data

Terminology: sets mostly
Enterprise
Client
 Examples:
Company Code
• Sales and Distribution:
Company Subsidiary  Customer Master
 Material Master
Plant  Condition Master
Plant
Sales Organization Sales Organization

Sales
Organization
Department Division Business Area Division
Storage Location Storage

Location
Example: Material Master - Views Example: Material Master
General Data apply for the whole company:
Name
Sales Data Weight
Unit of
Measure Client XXX
General Data Purchasing
Data
Mat. Plan. Data
Distribution Specific Information: Storage Location Specific Information:

Forecast Data
Material Master
Delivering
Storage Data Plant Stock
Sales Organization A Loading Group Storage Location 1

Quantity
Legal Control Quality Data
Data
Accounting Data Sales Organization B Storage Location 2
Transaction Data Documents
 Process related data that is short-lived and dedicated to certain master data
 Data sets that are generated if a business transaction was executed
 Master data of a vendor can be assigned to transaction data that concern the sales volume development
 Is a record of the business transaction
 Include:
• Organizational level
 Includes all relevant predefined information from the master data and organizational entities
• Master data
• Situational data  Example:
• Sales Document
 Example: customer order
• Purchasing Document
• Organizational level :
• Material Document
client, company code,
sales organization • Accounting Document
• Master data: customer
master, material master
• Situational data: date,
time, person, amount
Document Flow
Objectives
 The document flow as well as the order status allow the setting of the status at any point in time
 SAP revises the status at every time a change in a document takes place
transaction data
66
Global Bike Teaching material - Information
Curriculum: Introduction to ERP using Global Bike
i Teaching material - Version
 3.1 (July 2017)
 Software used
• SAP ERP 6.08
 Model
• Global Bike
 Prerequisites
• No Prerequisites needed

Module Information Module Information
Authors Learning Objectives
 Simha Magal You are able to

 Stefan Weidner  describe the story of the Global Bike Group.
 Jeff Word  draft the organizational structure of the Global Bike Group.
 describe the essential characteristics of the products and business partners of the
Global Bike Group.
 name the business processes of the Global Bike Group.
Target Audience
 Beginner
Agenda Global Bike Group
 Global Bike Group  Background:

• Global concern using full ERP capabilities
 Organizational Structure • Consists of two companies located in the US and in Germany
 Products
 History:
 Business Partners • John Davis won numerous mountain bike championships in the US
• In 1990, started his own mountain bike company (Frankenstein Bikes)
 Business Processes • Peter Schwarz grew up on road bikes in the Black Forest, Germany
• As a student, he engineered ultra-light composite frames
• In 1993, started his own bike frame company (Heidelberg Composites)
• Both met in 2000
• In 2001, merged to form Global Bike Inc.
Global Bike Group Agenda
 Strategy:
• John and Peter are Co-CEOs  Global Bike Group
• John is responsible for (in terms of reporting)  Organizational Structure

 Sales, Marketing, Service and Support, IT, Finance, and Human Resources
 sells products and brings in money  Products
• Peter is responsible for  Business Partners

 Research, Design, Procurement, and Manufacturing Groups
 builds products and spends money  Business Processes
• World-class bicycle company serving both the professional and “prosumer” in touring and
off-road racing.
• Focus on:
 Quality
 Toughness
 Performance
Organizational Structure (Overview) Agenda
Global Bike Group Concern

 Global Bike Group
 Organizational Structure
Co-CEO John Davis
 Products
Co-CEO Peter Schwarz
 Business Partners
 Business Processes
Global Bike Inc. Global Bike Germany GmbH Companies
Dallas Miami San Diego Heidelberg Hamburg Locations
Products Products
 Semi-Finished Goods
 Trading Goods  Raw Materials
• Accessories
 Safety Gear
 Other
 Finished Goods
• Touring Bikes (Deluxe, Professional) in three colors
• Off-Road Bikes (Men, Women)
Agenda Business Partners
 Global Bike Group  Customers (US and Germany)
 Products
Vendors (US and Germany) Agenda
 Vendors (US and Germany)  Global Bike Group
 Products
Business Processes Cross-functional Integration
 Sell – Fulfillment  People – Human Capital Management
 Buy – Procurement  Store – Inventory and Warehouse

Management
 Make – Production
 Maintain – Enterprise Asset
 Track – Financial Accounting Management
 Track – Controlling  Service – Customer Service
 Project – Project Management
Process Integration (example) Process Integration (example)
 Procure-to-Cash Process  Order-to-Cash Process

• Materials Management (MM) • Sales and Distribution (SD)
• Financial Accounting (FI) • Materials Management (MM)
• Financial Accounting (FI)
Global Settings
• Countries
• Currencies
SAP Configuration • Units of Measurement
• Factory Calendar
© SAP AG 87 88
Country Settings Maintaining and Assigning Factory Calendars
• All countries must be defined • Maintain public holidays
– Countries in which plants are located – Definition of public holiday 1
– Countries where both customers and vendors reside
– Definition of public holiday ..
– Definition of public holiday n
• Maintain public holiday calendar
• Maintain factory calendar
• Assign factory calendar
89 90
Company Code
Valuation Area
• The information determined at company code level • The valuation area by deciding at which level you want to valuate your
stocks of materials
includes: • Valuation area = Company code
– Company address – The ERP System creates the valuation data for a material for each
company code. The price control used and the price of a material
– Chart of accounts apply for each company code. This means that the material is
– Balance sheet currency valuated uniformly across all plants belonging to a particular
company code
– Fiscal year variant • Valuation area = Plant
– Controlling area – The ERP System creates the valuation data for a material for each
plant. The price control used and the price of a material apply for
– Business area balance sheet active each plant. This allows you to valuate the same material in different
ways in different plants
91 92
Reference Reference
• G Kohers (2015) SAP and the introductory management information systems course,
Academy of Educational Leadership Journal Volume 19, Number 1, p. 65 – 70. • M Hooshang, M Beheshtia and C M Beheshti (2010) Improving productivity and firm
• M Chudy, L Castedo, R Lopez 2015 Sales and Distribution in SAP ERP — Practical performance with enterprise resource Planning Enterprise Information Systems, Vol. 4, No.
Guide, SAP Press 4, p. 445–472.
• M Chudy, L Castedo 2014 Purchasing with SAP MM—Practical Guide, SAP Press • D Olson, S Kesharwani 2010 Enterprise Information Systems. World Scientific
• Ewa Kulińska , Joanna Rut, Dariusz Stosz (2014), Improvement of functionality of logistics • M Murray 2009 Discover Logistics with SAP ERP. SAP Press
processes in a selected public road transport company, 1st International Conference Green • R E McGaughey, A Gunasekaran (2007) Enterprise resource Planning (ERP): Past, Present
Cities 2014 – Green Logistics for Greener Cities. and future, International Journal of Enterprise Information Systems, Volume 3, Issue 3, p. 23
• M Murray 2013 Material Management in SAP ERP, SAP Press – 35.
• A Kanellou, C Spathis (2013) Accounting benefits and satisfaction in an ERP environment, • I Ignatiadis, J Nandhakumar (2007) The Impact of Enterprise Systems on organizational
International Journal of Accounting Information Systems 14, p. 209–234. control and drift: A human‐Machine Agency Perspective, International Journal of Enterprise
• D P Goyal 2011 Enterprise Resource Planning A Managerial Perspective. McGraw Hill. Information Systems, Volume 3, Issue 3, p. 36 – 51.
• O Schulz 2011 Using SAP: A Guide for Beginners and End Users. SAP Press • V Aronld, S G Suttoen (2007) The Impact of enterprise Systems on Business and audit
Practice and the Implications for University accounting education, International Journal of
Enterprise Information Systems ,Volume 3, Issue 4, p. 1 – 21.
93 94

Topic 1 Introduction To ERP

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Objectives

Manufacturing Resource Planning Power Train Chassis

Motor Gear Exhaust Front Rear Frame Brake

The solution? ERP links departments together…

Billing Distribution Production

21 (With vertical management structure) 22

SAP SE 2017 31 SAP SE 2017 32

SAP Enterprise Resource Planning (SAP ERP) SAP Architecture

SAP SAP ERP SAP

39 Sales Order Table 40

Curriculum: Introduction to ERP using Global Bike

© 2017 SAP SE / SAP UCC Magdeburg. All rights reserved. 54

SAP ERP Core Applications Data Types in ERP Systems

 Logistics  Human Capital

 Define the enterprise structure by means of legal or respectively business usage

 Task is to adopt some functions inside of an enterprise and execute them

Distribution Vendor Sales Order

Organizational Unit Master Data

SAP  Long term data that represent data

Sales Organization Sales Organization

Department Division Business Area Division

Storage Location Storage

General Data apply for the whole company:

Distribution Specific Information: Storage Location Specific Information:

Sales Organization A Loading Group Storage Location 1

Transaction Data Documents

Global Bike Teaching material - Information

Curriculum: Introduction to ERP using Global Bike

i Teaching material - Version

 3.1 (July 2017)

© 2017 SAP SE / SAP UCC Magdeburg. All rights reserved. 68

Authors Learning Objectives

 Simha Magal You are able to

Agenda Global Bike Group

 Global Bike Group  Background:

• John is responsible for (in terms of reporting)  Organizational Structure

• Peter is responsible for  Business Partners

Organizational Structure (Overview) Agenda

Global Bike Group Concern

Dallas Miami San Diego Heidelberg Hamburg Locations

Agenda Business Partners

 Global Bike Group  Customers (US and Germany)

 Vendors (US and Germany)  Global Bike Group

Business Processes Cross-functional Integration

 Sell – Fulfillment  People – Human Capital Management

 Buy – Procurement  Store – Inventory and Warehouse

 Track – Controlling  Service – Customer Service

 Project – Project Management

 Procure-to-Cash Process  Order-to-Cash Process

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