ERP Implementation At XYZ Bicycle Information

Technology Essay
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Company XYZ is a medium-sized company that produces and sells bicycles. The company has two
models in its product range normal bike and geared bike. The company does not trade in spare parts
directly.
For a customer-centric company it is of paramount importance that they deliver what customers value.
Customers value all sorts of things, but generally can be put into three buckets:
products/services (what they buy; functional value),
experiences (how product/services are delivered and supported; emotional value)
price (what it costs to get the other two things).
The relationship with the customers are becoming intense and fruitful and with above mentioned
factors, such relationships are multi dimensional. ERP helps explore the new dimensions and help the
organization build relationships in a broader way than a CRM would.
A successful customer-centric business strategy is a plan to deliver customer value more effectively
than competitors, to drive profitable growth and other value to stakeholders.
Enterprise Resource Planning (ERP) is an integrated computer-based system used to manage internal
and external resources, including tangible assets, financial resources, materials, and human
resources. The aim of ERP is to advance and modernize inner business processes, which
characteristically requires reengineering of current business processes.
For any company be it big or small, it is important that there exist coherence among the various
departments of the organization in delivering maximum value to the customer in the most cost effective
manner. For a company like XYZ it is important that the core functions of Purchase / Planning /
Production / finance etc . have the same access point of information and there is transparency in the
life stage of any Order.
As XYZ is a customer centric business , the demand for the product can be erratic. An ERP system
based forecasting and procurement cycle can help the company mitigate some of those risks. At the
same time it ensures that all the material is available for the order , if not it procures the same and
making the accounting information available to the ranks of the organisation on a real time basis.
Apart from better integration of cross functional departments , it helps the company build relationships
with the supply side. Globalization, competition, need for faster response to the market place and the
pressure to contain costs and improve efficiencies are some of the reasons why companies of XYZ
scale are going for ERP implementations as well.
A very important facility of the ERP systems is that they increase the availability of the information,
helping companies to have information in real time to make decisions and accurate prognostics
regarding the organization. It is important to mention that ERP systems are a very powerful tool when it
comes to processing and organizing financial data. It improves the development of the commercial
activity in the short and long term.
The solution will help XYZ integrate its entire business across financials, sales, customer relationships,

inventory and operations.

Suitability of the solution

As per the available data, the business processes of XYZ Company map to the features available in
the R/3 system of SAP. This means that all the vendor and customer management and payroll related
operations can be managed without any major customizations. Less or no customization needs mean
that:
There is less complexity in the landscape.
Upgrades are easier
Easier Maintenance
There are clear and distinct advantages that XYZ inspite of being a small company should go for the
SAP implementation because Reengineering principles and concepts are ways of building and
rebuilding to facilitate growth. Small companies should be looking at this as a way to step-up.
Due to competitive environment, market pressure and complex business environment lets the small
and medium scale enterprises demands for extra functionality instead of basic features of accounting
and shows interest in buying a modern ERP suite that offers extra features and function such as
customer relationship management (CRM), supply chain and human resources. To take the full
advantage SMEs requires a powerful, integrated business solution that helps them improve every
aspect of their business and should have the following features
A complete solution fully integrated with Accounting.
Fast and low cost implementation
Easy to deploy
Low cost of ownership and maintenance
SAP R/3 is that it combines with a corporations previously existing computer system. R/3 uses the
ABAP/4 programming language and allows for the possibility of several computers of differing
manufacturers to conjoin into one solid working database, operating in the open system or client/server
environments. SAP R/3 is a Windows and Menus driven application containing graphical objects and
is easy to use for the employees of XYZ company.

Some other features include:

Automatic reordering of inventory stock ensures XYZ has just enough of the right supplies on hand at
the right time. In addition, authorized users in each department can now directly enter requisitions for
standard stock items, which are linked to already- established supply contracts.\
Computer-generated purchase orders and requisitions eliminate the need for hard-copy forms,
complementing the sustainability efforts.
Employees enter invoices into R/3, which compares them against the purchase orders and then
automatically generates payment by either check or electronic transfer.
Automatic reconciliation of subsidiary ledgers to the general ledger frees accounting employees from a
tedious, time-consuming task.
R/3's ability to generate asset entries when a transaction occurs saves employees from having to enter
such data into a separate system.

An integrated Executive Information System puts report data at managers' fingertips when they need it.
Configuring R/3's thousands of tables to reflect a company's business procedures is usually a complex
job, best conducted by SAP experts. A new set of graphical tools called Business Engineering
Workbench, however, promises to speed up and simplify the process.

Business @ XYZ
XYZ is a medium sized company whose operations are confined to a single plant. The plant works in a
push mode wherein the company first manufactures the bikes and then store them (made to stock) .
The bikes are later shipped against customer specific orders.
The demand for the company is generated by the sales department on a quarterly basis after which the
MRP run should calculate the materials to be procured on the basis of Bill of Materials.
At all stages proper accounting documentation should be available for the company.
As the company is small, in order to remain profitable they should look to reduce redundancy wherever
possible. As and when orders are received by the customers , the company should be able to fulfill
them with delay and if there is a delay then company should be able to precisely foresee the time it
takes to procure and then assemble the bicycle completely.
It is very important for small business owners to understand how their various costs respond to
changes in the volume of goods or services produced. The breakdown of a company's underlying
expenses determines the profitable price level for its products or services, as well as many aspects of
its overall business strategy. At XYZ this analysis is therefore very important. Therefore the cost
centers are created with the primary cost elements for the company to keep an eye on the most critical
cost aspects.
Other aspects for XYZ include the profitability analysis and the markup design on the product family,
and bulk discounts that are given from time to time to boost sales.

Business Blueprint
ERP Implementation Methodology at XYZ Bicycle
For small manufacturer like XYZ that has limited resources, a different method of Implementing ERP
software must be utilized. The limited resources of smaller Companies make the relationship between
the software vendor (or its representative) and the client crucial. The software vendor representative
should be more involved in the entire process than in larger organizations. Time and budget
constraints will probably eliminate the possibility of a full-time implementation team, making it
imperative that an experienced representative from software vendor is there to pick up the slack. The
implementation of the software should be viewed as the beginning of a long-term partnership with the
software vendor. The working relationship between the person representing the software vendor and
the leader(s) of the implementation team can determine the success or failure of the implementation
project. While XYZ has already made the choice for SAP as the vendor , the success of the project will
depend on how far can the business processes of XYZ can be mapped in the core product of SAP and
what is the percentage of customization that would be required in future.
The main approaches present for XYZ are :
Big Bang
Phased
Composite

Big Bang
The big bang approach refers to a complete changeover to the new system at a specific point in time.
This approach has a significant impact on the client's business processes.

Smaller companies usually favor this approach.

Most big bang projects have fast and intense implementation periods, with more downtime during the
implementation.
The big bang approach is easier to implement but requires more preparation, planning and human
resources than the phased approach.
The big bang approach is generally more expensive than the phased approach.
XYZ must have a clear mandate from top management, an experienced project manager, a proven
implementation methodology and thorough user training for a successful big bang implementation.
The Big bang approach is favored in single site companies which is true of XYZ.
Big Bang approach is better for companies with single line of business as in the case of XYZ

We conclude that while Big Bang works for XYZ in the short run.
A big bang approach can be used to implement must have functionality within the core ERP modules,
followed up with a phased implementation of nice to have functionality and the implementation of noncore modules such as document management, business intelligence and maintenance management.
Therefore it is the composite or the mixed strategy that we recommend for XYZ which has big bang
implementation strategy for the core functions and phased rollout for the noncore nice to have features.

Various masters created - PP/MM/FICO/SD (As per the allotted modules)

For PP the following masters were created
Material master ( Tcode :mm01)
The following Material are made

Material
Material Description
Type
GP14BEARING
BEARING
Raw Material
GP14BRAKELEVER
BRAKE LEVER
Raw Material

GP14BRAKEUNIT
BRAKE UNIT
Raw Material
GP14GEAR
GEAR SHIFT INCL SELECTOR
Raw Material
GP14GEAREDBIKE
GEARED BIKE
Finished Product
GP14BRKSYS
BRAKE SYSTEM
Semi Finished Product
GP14SHIFTASSY
SHIFT ASSEMBLY
Semi Finished Product
GP14STDEQP
STANDARD EQUIPMENT
Semi Finished Product
GP14NORMALBIKE
NORMAL BIKE
Finished Product
GP14PFRAME
PAINTED FRAME
Raw Material
GP14PEDALS
PEDALS
Raw Material
GP14SADDLE
SADDLE
Raw Material
GP14WHEELS

WHEELS
Raw Material
Sample screen shots for : GP14PFRAME
Sample screen shots for : GP14SHIFTASSY

Menu Options Selected

Basic Data 1
General Data
Base unit of measure
PC

MRP 1
MRP Procedure
MRP Type
pd
MRP Controller
002
Lot Size Data
Lot Size
ex

MRP 2
Scheduling
SchedMargin Key
000
Plnd delivery time
2

Accounting 1
Current Valuation
Valuation Class
3000
Price Control
V

Costing 2
Valuation Data
Price Control
V

BOM ( Tcode :CS01)

Sub assembies are prepared for the following
Material
Material Description
Type
GP14GEAREDBIKE
GEARED BIKE
Finished Product
GP14NORMALBIKE
NORMAL BIKE
Finished Product
GP14BRKSYS
BRAKE SYSTEM
Semi Finished Product
GP14SHIFTASSY
SHIFT ASSEMBLY
Semi Finished Product
GP14STDEQP
STANDARD EQUIPMENT
Semi Finished Product

BOM ( CS11)
Normal Bike Geared Bike
Sample screen shots for : GP14SHIFTASSY

Workcenter Masters ( T Code: CR01)

Work ctr Short description

GP14_GB Assembly Line - Geared Bike

GP14_NB Assembly Line - Normal Bike
GP14_PA Pre Assembly - Brake and Shift Assy

Sample screen shots for : GP14_NB

For FICO the following masters were created
ACCOUNT master ( Tcode :FS01)
Account Number
Account Name
Account Type
140001
GP 14 Account Payables
AP
140002
GP 14 Account Receivables
AR
140003
GP 14 Goods Received/Invoice Received
GR/IR
140004
GP14 Bank Account
BANK/Liquid Cash
140005
GP 14 Vendor Recon Accounts
AP
140006
GP 14 Customer Reconciliation account
AR

Cost Center ( Tcode :KS01)

Cost Center Name

GP14_CC Group 14

Intra function - PPM/MM/FICO/SD (As per the alloted modules)

Routing Masters ( T Code: CA01)
Three Routing masters were created for
Material
Material description
GP14NORMALBIKE
NORMAL BIKE
GP14GEAREDBIKE
GEARED BIKE
GP14BRKSYS
GP14BRKSYS
GP14SHIFTASSY
GP14SHIFTASSY

Sample screen shots for : GP14NORMALBIKE

FICO:
There were 6 accounts created as above . These were the AP/AR / Reconciliation and Bank accounts.
With a vendor there were vendor reconciliation account attached which is linked to corporate AR
account. Also the similar way there is a customer reconciliation account that is linked to the corporate
AP account. In this way all the transactions performed for the vendor/customer were listed into the
reconciliation account and posted in to the AR/AP account. The liquid cash account here referred to as
bank is where eventually the transactions could be seen.
Balace Sheet :Transaction( F.01)

Inter function - PP/MM/FICO/SD (As per the allotted modules)

* will require screenshots of respective modules as well
The Role of FICO occurs at following places :
Post Payment to the vendor
Transaction in use : F-53
Posting the payment from bank to vendor reconciliation account . On clicking the open items , the
payments can be processed.
Post Customer payment
Transaction In use : F-28

Posting the payment from the customer account to the bank. On clicking the Process open items , the
items that are pending for clearing will be displayed and can be cleared selectively or together.
Display balances:
Transaction In use (FS10N)
Bank account with debit and credit details as per the orders and the payments
Balance for Vendor account Balance for customer account

Other Interfunctional details for FICO:

The recon accounts are maintained in MM for Vendor and and SD for Customer
Some of the other transactions that can be used are :

MM-> FI
OBYC
OMJJ
OMWB

SD--> FI
vkoa-> Transaction
SD Integration points with other modules

Customer Master ( T Code: XD01)

Vendor Master ( TCode : MK01)
SD module is highly integrated with the other modules in SAP.
Sales Order
Integration Points
Availability Check
Credit Check
Costing
Tax Determination
Transfer of Requirements

Delivery & Goods Issue

Integration Points
Availability Check

Credit Check
Reduces stock
Reduces Inventory
Requirement Eliminated

Billing
Integration Points
Debit A/R
Credit Revenue
Updates G/ L
(Tax, discounts, surcharges, etc.)
Milestone Billing

Return Delivery & Credit Memo

Integration Points
Increases Inventory
Updates G/L
Credit Memo
Adjustment to A/R
Reduces Revenue

The link between SD and MM

When you create sales order in SD, all the details of the items are copied from Material master of MM.
MRP and availability check related data is also taken from MM although you control this data in SD
also.
While you create inbound/outbound delivery with reference to a sales order, the shipping point
determination takes place with the help of the loading group, plant data, shipping conditions etc. This
also refers to Material Master.
The material which you are entering in a sales order must be extended to the sales area of your sales
order/customer otherwise you cannot transact with this material.
There are many such links between SD and MM.

Now the link between SD and FI

Whenever you create a delivery with reference to a sales order, goods movement takes place in the
background. eg. In case of standard sales order, you create an outbound goods delivery to the
customer.

Here movement 601 takes place. This movement is configured in MM. Also, this movement hits some
G/L account in FI. Every such movement of good s hits some G/L account.
The accounts posting in FI is done with reference to the billing documents (invoice, debit note, credit
note etc) created in SD. Thus this is a link between SD and FI . Tax determination: In case of a tax
determination also, there is a direct link between SD and MM

PP module is highly integrated with the other modules in SAP.

PP-SD
Availability Check
MTO Scenario-MRP Run, Requirement Types
Variant Configuration - Selection/requirements of BOM Components and operation

PP-MM
Goods movements - Backflush, Auto Goods Receipt
STO, Reservation created for Production Order/Planning
Creation of Purchase Requisitions, Purchase orders with MRP Run
Quota arrangements/info record usage for sub-contracting/to choose the right vendor

PP-CO
Price update in material master
Assigning price to activity type for the specific period in the fiscal year.
Activity Type in the Cost center assigned in the WorkCenter
Order Type - Settlement Profile, Costing & Valuation Variants
Product cost Collector
Standard Cost Estimate
WIP & Variance Calculation
Costing Sheets for overheads

PP-FI
Account posting entries for each Goods movement related to PP with Valuation Class, Material Type &
Movement Type

In all we can summarize that for PP module to function

The 1st step is the demand generated for the product to be produced thru demand management. It
calculated the quantities to produce and the time for the final assembly. This data in the next step is
transferred to the MRP . At this point MRP checks for the availability of the material across the BOM
stages and raises planned order and purchase requisition for the production of components/
procurement as the case be.

Subsequently the planned orders are converted to production orders by planner and purchase requests
into PO by the purchaser ( thru MM).
The production in carried out converting the planned order into the production order and carries the
production activities upon the release of order for production. (this step takes care of the routing thru
the work centers mentioned for each of the operations). Upon completion of the production the
production order confirmation is done and good movement / delivery to warehouse takes place.

MM MODULE IS HIGHLY INTEGRATED WITH THE OTHER MODULES IN

SAP
MM module is one of the core SAP and is highly integrated into other modules namely FICO, SD, PP (
covered in the project ) and to PS, WM , QM and PM
MM covers key areas such as:
Enterprise structure
Master Data (vendor and material)
Purchasing /procurement
Materials planning (MRP and CBP)
Inventory Management and Physical Inventory Management
Material valuation and Account determination
Invoice verification
As noted earlier a sales order / demand for a finished product from SD is the requirement / entry point
for MM
In a event of finished product available in warehouse the same can be delivered to customer against
the SO by an outbound delivery thru a goods issue (GI)
Alternatively if the finished product is not available or is less in quantity the material planning process is
triggered in MM. This can automatically create procurement proposals, such as planned order. Which
is then converted into:
PR for externally procured product . or
A Production order in PP, for a product to be manufactured. This then triggers the PP process as
explained in PP integration section
In addition, the materials planning also can create purchase requisition directly as a procurement
proposal (without a planned order availability).
The Purchase requisition will be subsequently processed by the purchasing and procurement dept
using the MM module and prepare a PO. Once done the vendor delivers the material/service
requested thru the PO. Upon receiving a GR (Good Receipt) transaction is done. For the raw material,
we issue it against the production order to be used by manufacturing for production of the finished
product with GI to production order transaction. As indicated in PP that once the finished product is
available we perform the GR to production order transaction in inventory management. This is then
delivered to the customer against the SO by performing GI transaction.
In parallel the vendor who delivered the material against the PO, sends his invoice to the company and
the Invoice Receipt (IR) transaction is processed in MM. Once done the finance team will do the

payments in FI module.
Upon posting of the GR transaction, an inspection of the material received can be performed. Also the
GR and GI transactions will trigger the accounting journals in FI module( which in turn will reflect the
updates into company financial reports such as Balance Sheet and PnL Statement.)
[MM-Integration-with-SD-PM-PS-WM-QM-FI.jpg]

Implementation problems/issues/ trouble shooting details

Any ERP implementation has its challenges, which range from financial over functional to technical
issues. During any implementation, problems can appear at all levels of the project. These can be
business problems, financial problems, ERP systems functionality issues as well as conflicts between
project team members. Combined these problems can make the management of the project a true
nightmare.
It is important to have a defined project scope. The project scope is necessary to keep the entire
project focused on delivering the implementation with its agreed upon functionality. Usually projects
start with a scope definition based on business functionality. Organizations usually put together a
document specifying its requirements based on its current business model. This document is used to
identify the proper ERP Solution. After selecting the ERP Solution of its choice this document is then
used as project scope, meaning the attempt is made to make the ERP Solution to fit the existing
business model. Again, here comes the reluctance to change in place.
For any SAP Project, it is recommended and better to define the scope by SAP functionality. SAP has
been developed using standard business rules. A SAP implementation may require a change in current
business rules in order to adapt easier to SAP and be able to stay as close as possible to the standard.
Staying as close as possible to the standard will allow also for easier compatibility with future SAP
releases and make any upgrade easier and less costly. Staying with the standard and following SAP
project scope will help also to avoid ambiguity within the project team in regards to what SAP
functionality is within the scope and what functionality is out of scope.
It may be difficult to manage the scope. During an implementation the implementation team will
discover and learn more about the SAP functionality and the business itself, which may make it
necessary to change the project scope periodically.

Potential Resource and Management Problems during an SAP

Implementation
The following categories are all part of the overall project resources:
Infrastructure, which entails: Hardware and software components required to run SAP
Project Teams: The resource "Project Teams", which may consist of internal and external team
members who are participating in the SAP implementation project.
Support Personnel: the employees needed to support SAP during the implementation and after the
going-live phase.
Internal resources are usually the so-called key-users that participate in the SAP implementation. A
key-user is a employee that is intimately familiar with all business processes and requirements as it
pertains to their job function and/or department. Problems may arise if such key-user is selected on
seniority or workload within a department rather than on their individual knowledge and familiarity of
the various business processes. Since these key-users know the internal business processes as it
relates to the current infrastructure but have no or only very little SAP experience, it is imperative that
these key-user learn the SAP functionality before start of the project.

Keep in mind that these resources are responsible of how a company transacts business in the future.
These key-users must learn the functionality and configuration possibilities in enough detail in order to
make intelligent implementation decisions. Key-users usually also train employees and act as first level
support within their area of expertise.
There for it is important that the project team is staffed with the right employees.
Many companies today feel that they do not have the internal full-time resources available to participate
in the system implementation. Companies that are already operating on a bare minimum staffing, due
to downsizing or rightsizing, think that there are just not enough people left within a department to
support the day-to-day business and support a SAP roll-out. Here companies have to become creative.
It could mean retrain some of the staff that is not actively participating in the roll-out project to take over
some of the functions a key-user would not be able to fulfill during the roll-out project participation.
Sometimes it seems those internal resources, that seem to be able to balance the act between their
day-to-day work and the SAP roll-out project responsibilities will eventually burn themselves out.
This could be also be a point where careful budget planning can come in handy. Options could include
retraining existing staff to take on the responsibilities of the key-users and additional temporary staff
could be hired to do some low level work. Using interns to replace key-users could be another option.

Need for customization/enhancements

Reports
Number of Transactions per Day: Provides information about number of procurement transactions per
day limits.
Top Merchant Category- Lists the Vendor categories based on the volume during the reporting period
for the selected Plants.
PO Detail Listing by PO Date: Provides detailed purchase order information sorted by purchase order
date.
PO Status by Material: Provides purchase order status information sorted by item.
Standard Purchase Variance : Provides purchase price variance at Goods receipt

Workflows:
E-mail notifications should be triggered in case a Purchase Order or a Requisition requires approvals.
There should be flexibility to set limits for amounts and workflow routings. In case amount is above a
certain Level, the number of approvals should be increases.

Quick Entry Events:

Entry events are shorthand codes that are assigned to a transaction's distribution lines and they can
enable posting accounting entries to the FICO module with minimal end-user input saving an
operators time.

Entry Events for Requisitions and Purchase Order

If there is a default entry event code set up for the Purchasing Organization, then this default should
automatically populate on the Requisition/Purchase Order distribution lines. Obviously Users can
override the default value at any of these levels.

Spreadsheet Journal Import

The Spreadsheet Journal workbook functionality is needed so that journals can be entered offline using
Microsoft Excel and then can be imported into the FICO Module.

Vendor Rebate agreement for Purchase Orders

The flexibility needed to process Vendor Rebate Agreements is that while creating a purchase order
online, the system should automatically assign a vendor rebate agreement to the purchase order line if
a vendor rebate agreement is applicable for the vendor and Material, Material category, or any ad hoc
Material on the purchase order line. The Vendor Rebate Agreement should be configurable in the SAP
system and while a PO is created the Prices should be updated accordingly. This is different from the
Pricing flexibility that we get by setting Info Records because Info record gives the flexibility of
changing price for a Vendor-Material combination. Whereas a Vendor Rebate agreement is configured
for a Vendor, irrespective of the Material.

E-Supplier Management
In todays business world, relationships between a firm and its suppliers are closer and more critical.
Clear communication with suppliers about what the firm needs and when it needs it is a basic business
requirement. An integrated e-Supplier Connection should make strategic information from SAP
systems available to suppliers, thus improving business collaboration, supplier response capability, and
employee productivity. This internet-enabled collaboration enables buyers and sellers to work
interactively, sharing the same view of data across the Internet. The benefits include faster and more
accurate decisions, which result in improved customer service from suppliers, lower inventory in the
supply chain, and total cost optimization.
Suppliers should be give options to choose the e-Supplier Connections self-service web applications to
view and modify their own business information (company address, phone, and contact data) at their
convenience. They can change or add office locations and change or add information about the
individuals in their organization that handles your business relationship.
e-Supplier Connection should also enables the suppliers to review schedule, invoice, payment, order,
and receipt activity as well as view their account balances and the invoices related to those balances.
Suppliers can also provide you with transactional information, online and in real-time, by responding to
request for quotes, creating Purchase Order Acknowledgments and entering Advance Shipping
Notices.
Before suppliers can use the self-service transactions, they need access to the system. Hence selfservice security for suppliers enables suppliers to give their own employees access to vendor selfservice transactions, and frees the administrators from this task. At the same time, the employees
retain the power to maintain vendor employees if necessary. The system should also give flexibility to
the firm to decide which suppliers have access to the SAP site, and which data they can view and
change.
Thus one of the Customizations needed is a supplier-based internet application that is both simple and
easy to understand for the casual user and integrated with SAP (inbound and Outbound).

Scope for improvements

Implementation point of view- Jasmine
Product features point of view - Jasmine

Learnings - Jasmine
Conclusions