SAP-ERP Term Report

2016
Introduction to SAPERP System

Applications
Term Report
SAP exercises completed throughout the session.
Submitted by: Sarah Yousuf (20151-19129)

Submitted to: Moin Uddin Ali Khan
4/21/2016
Term Report
Intro. To ERP-SAP System Applications

Sarah Yousuf - 19129
TABLE OF CONTENTS
1.
EXECUTIVE SUMMARY ..................................................................................................................... 3
2.
HISTORY OF ERP .............................................................................................................................. 3
3.
LITERATURE REVIEW ........................................................................................................................ 5
4.
MODULES & LEARNING OUTCOMES .............................................................................................. 11

Main Screen: Global Bikes Inc. ........................................................................................................... 11
MODULE: Sales and Distribution (SD) ................................................................................................. 13
LEARNING OUTCOMES....................................................................................................................... 18
MODULE: Material Management (MM) ............................................................................................. 20
MODULE: Production Planning (PP) ................................................................................................... 26
MODULE: Financial Accounting (FI) .................................................................................................... 33
MODULE: Human Capital Management (HCM) .................................................................................. 37
MODULE: Controlling (CO) ................................................................................................................. 40
MODULE: Warehouse Management (WM) ........................................................................................ 42
Glossary of Terms .................................................................................................................................. 55

References ............................................................................................................................................ 64
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1.

EXECUTIVE SUMMARY
The report highlights the learning outcomes of the course Introduction to ERP-SAP System
Applications, studied for duration of 4-months. The study mainly focused on an ERP system, namely,
System, Applications and Products in Data Processing (SAP). Enterprise Resource Planning (ERP) systems
are core software programs used by companies to integrate and coordinate information in every area of
the business. ERP (pronounced E-R-P) programs help organizations manage company-wide business
processes, using a common database and shared management reporting tools.
SAP consists of a number of modules out of which the following were exercised on MySAP: Sales &
Distribution (SD), Materials Management (MM), Production Planning (PP), Financial Accounting (FI),
Human Capital Management (HCM), Controlling (CO), and Warehouse Management (WM). Screenshots
of the exercises for each module are appended below along with the learning outcomes for each. A brief
history of ERP and evolution of SAP has also been presented, along with a literature review of the same.
The report is concluded with a glossary of terms to help understand some of the terms used in ERP.
2.
HISTORY OF ERP
Until recently, most companies had unintegrated information systems that supported only the activities
of individual business functional areas. Thus, a company would have a marketing information system, a
production information system, and so oneach with its own hardware, software, and methods of
processing data and information. Each department would have a silo of information that was
unconnected to the next silo.
Such unintegrated systems might work well within each individual functional area, but to be
competitive, a company must share data among all the functional areas. When a companys information
systems are not integrated, costly inefficiencies can result.
An integrated ERP system, however, is an incredibly complex hardware and software system that was
not feasible until the 1990s. Current ERP systems evolved as a result of three things: (1) the
advancement of the hardware and software technology (computing power, memory, and
communications) needed to support the system, (2) the development of a vision of integrated
information systems, and (3) the reengineering of companies to shift from a functional focus to a
business-process focus.
The concept of an integrated information system took shape on the factory floor. Manufacturing
software advanced during the 1960s and 1970s, evolving from simple inventory-tracking systems to
material requirements planning (MRP) software. MRP is a production-scheduling methodology that
determines the timing and quantity of production runs and purchase-order releases to meet a master
production schedule.
The basic functions of MRP could be handled by mainframe computers; however, the advent of
electronic data interchange (EDI)the direct computer-to-computer exchange of standard business
documentsallowed companies to handle the purchasing process electronically, avoiding the cost and
delays resulting from paper purchase order and invoice systems.
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In 1972, five former IBM systems analysts in Mannheim, GermanyDietmar Hopp, Claus Wellenreuther,
Hasso Plattner, Klaus Tschira, and Hans-Werner Hectorformed Systemanalyse und
Programmentwicklung (Systems Analysis and Program Development), or SAPpronounced S-A-P.
Later, the acronym was changed to Systeme, Anwendungen und Produkte in der Datenverarbeitung
(Systems, Applications and Products in Data Processing).
In the course of their work together, Plattner and Hopp began to consider the idea of leaving IBM to
form their own company so they would be free to pursue their own approach to software development.
They also asked Claus Wellenreuther, an expert in financial accounting who had just left IBM, to join
them, and on April 1, 1972, SAP was founded. To keep up with the ongoing development of mainframe
computer technology, in 1978 SAP began developing a more integrated version of its software products,
called the R/2 system. In 1982, after four years of development, SAP released its R/2 mainframe ERP
software package.
By 1988, SAP had established subsidiaries in numerous foreign countries, launched a joint venture with
consulting company Arthur Andersen, and sold its 1,000th system. SAP also became SAP AG, a publicly
traded company.
In 1988, SAP realized the potential of client-server hardware architecture and began development of its
R/3 system to take advantage of client-server technology. The first version of SAP R/3 was released in
1992. Each subsequent release of the SAP R/3 software contained new features and capabilities. The
client-server architecture used by SAP allowed R/3 to run on a variety of computer platforms, including
UNIX and Windows NT.
The SAP R/3 system was also designed using an open architecture approach. In open architecture, thirdparty software companies are encouraged to develop add-on software products that can be integrated
with existing software.
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3.

LITERATURE REVIEW
An enterprise resource planning (ERP) is an enterprise-wide application software package that

integrates all necessary business functions into a single system with a common database. Enterprise
resource planning (ERP) systems integrate and streamline the business processes of an organization
across departmental and geographical borders.
In its basic definition, ERP is an enterprise-wide information system that integrates and controls all the
business processes in the entire organization. According to Nah and Lau (2001) ERP is a packaged
business software system that enables a company to manage the efficient and effective use of resources
(materials, human resources, finance, etc.) by providing a total, integrated solution for the
organizations information-processing needs. This software facilitates, if well-implemented, the
integration of all the functional information flows across the organization into a single package with a
common database. Therefore, it allows easy and immediate access to information regarding inventory,
product or customer data, and prior history information (Shehab et al., 2004) [1].
Today, many public and private organizations worldwide are implementing ERP systems in place of the
functional legacy systems that are not anymore well-compatible with modern business environment.
However, according to Kroenke (2008), the process of moving from functional applications to an ERP
system is difficult and challenging. Additionally, the switch to ERP system is expensive and it requires
development of new procedures, training and converting data (Zhang et al., 2005). Enterprise resource
planning systems, also called enterprise systems (ES) are among the most important business
information technologies that emerged during the last decade. While no two industries ERP systems
are the same, the basic concept of ERP systems is focused on standardization and synchronization of
information, and as a result, improved efficiency [1].
Nowadays one of the significant competitive advantages in business is to make the supply chain rapid
and fast. This can happen with a better strategic technology planning and often incorporation of
Information System (IS) to manage this process more effective and efficiently. Those IS are the roots of
todays Enterprise Resource Planning (ERP) systems. During the 90s ERP system was the major business
generators for the IT sector, while nowadays more companies are oriented towards off-the-shelf
solution.
In their research Soh, Kien and Tay-Yap (2000) [2] discuss the issues organization face then go for offthe-shelf solutions. Common problems are misfits an ERP system has related to certain business process.
These misfits resolution is tradeoffs between organizational changes and IS customization. They also
explain that an misfit analysis must be carried out early in the process. Moreover, comprehensive
understanding of the critical organizational processes and detailed knowledge of this complex software
are required.
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ERP Softwares:
Today, there are various software implementations of ERP systems. They can be categorized into four
tiers in terms of their high or low flexibility and functionality. The diagram below (Bititci, 2011) [3] gives
an example of ERP systems falling into the four tier categories.
SAP AG: Established in Germany in 1972, SAP AG, with 33 per cent market share, is the major
ERP package vendor for the Fortune 500 companies. With more than 20,000 employees and
estimated revenue of $8.1 billion in 2007 SAP is one of the largest software companies in the
world.
PeopleSoft was founded in 1987 and went public in 1992 (OLeary, 2000) [4]. PeopleSoft can be
scaled to accommodate from ten to 500 users. PeopleSoft dedicates its products (PeopleSoft) to
human resource and client/server technology. They continue to prove its value in enterprisewide applications and financial and supply chain applications.
Baan was founded in The Netherlands in 1978. Bann has approximately 3,000 clients in 5,000
sites worldwide (OLeary, 2000) [4]. It sells manufacturing software to companies that are wary
of SAP product.
Oracle is the second-largest supplier of software in the world. Oracle was founded in 1977 in the
USA (OLeary, 2000) [4]. It offers ERP applications designated to work with its database
software.
JD Edwards provides ERP applications (One World) for managing the enterprise and supply
chain. Their integrated applications give customers control over their front office,
manufacturing, logistics and distribution, human resources and finance processes.
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ERP Systems functionality:

The commercially available software packages promise seamless integration of all information flows in
the company --financial and accounting information, human resource information, supply chain
information, and customer information. For managers who have struggled, at great expense and with
great frustration, with incompatible information systems and inconsistent operating practices, the
promise of a quasi off-the-shelf solution to the problem of business integration is enticing.
The list shows some of the many functions supported by an ERP System [5].
Financials: Accounts receivable and payable, Asset accounting, Cash management and
forecasting, Cost-element and cost-center accounting, Executive information system, Financial
consolidation, General ledger, Product cost accounting, Profitability analysis, Profit-center
accounting, Standard and period-related costing.
Human Resources: Human-resource time accounting, Payroll, Personnel planning, Travel
expenses.
Operations and Logistics: Inventory management, Materials management, Plant maintenance,
Production planning, Project management, Purchasing, Quality management, Routing
management, Shipping, Vendor evaluation.
Sales and Marketing: Order management, Pricing, Sales management, Sales planning.
Although an ERP system is a pure software package, it embodies established ways of doing business.
Studies have illustrated that an ERP system is not just a pure software package to be tailored to an
organization but an organizational infrastructure that affects how people work and that it imposes its
own logic on a companys strategy, organization, and culture (Davenport, 1998). For example, SAP R/3,
as one of the major ERP vendors, currently stores over 1,000 predefined processes that represent
financial, logistics and human resources best practices in a repository called business engineer (Scott
and Kaindl, 2000) as shown below in figure:
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.
ERP Implementation:
ERP system implementation process is consisting of six phases: initiation, adoption, adaptation,
acceptance, routinizing, and infusion (Somers and Nelson, 2001) and companies have different approach
and reason for implementing it. A study for Deloitte & Touche Consulting (Computer Technology
Research Corporation, 1999) categorizes organization drive for ERP implementation into two categories:
technological and operational.
Technological motivation is connected to the Year 2000 (Y2K) compliance requirements, replacement
of disparate system, improvement of quality and visibility of information, integration of business
processes and systems, simplification of integration of business acquisitions into the existing technology
infrastructure, replacement of older, obsolete systems, and the acquirement of system that can support
business growth (Al-Mashari et al., 2003).
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Operational motivation aims at improving inadequate business performance, reducing high-cost

structures,improving responsiveness to customers, simplifying ineffective, complex business processes,
supporting new business strategies, expanding business globally, and standardising business process
throughout the enterprise (Al-Mashari et al., 2003).
Why implementation fails:
The reasons why ERP implementations fail can be placed into ten categories.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Strategic goals are not clearly defined.

Top management is not committed to the system.
Implementation project management is poor.
The organization is not committed to change.
A great implementation team is not selected.
Inadequate education and training results in users that are unable to satisfactorily run the
system.
Data accuracy is not ensured.
Performance measures are not adopted to ensure that the organization changes.
Multi-site issues are not properly resolved.
Technical difficulties can lead to implementation failures
Critical factors for successful ERP implementation:

Implementing an ERP system is not an inexpensive or risk-free venture. In fact, 65% of executives
believe that ERP systems have at least a moderate chance of hurting their businesses because of the
potential for implementation problems [6]. It is therefore worthwhile to examine the factors that, to a
great extent, determine whether the implementation will be successful. Numerous authors have
identified a variety of factors that can be considered to be critical to the success of an ERP
implementation. The most prominent of these are described below.
1.
2.
3.
4.
5.
6.
7.
8.
9.
Clear understanding of strategic goals

Commitment by top management
Excellent project management
Organizational change management
A great implementation team
Data accuracy
Extensive education and training
Focused performance measures
Multi-site issues
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Figure 1: Flowchart for an ERP system implementation process
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4.

MODULES & LEARNING OUTCOMES
Main Screen: Global Bikes Inc.
Logistics drop-down menu:
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Accounting drop-down menu:
HRM drop-down menu:
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MODULE: Sales and Distribution (SD)

Exercise SD1: Display Customer Master Record
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Exercise SD2: Create Sales Order
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Exercise SD 3: Create Delivery Note for Sales Order
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Exercise SD 4: Pick Materials on Delivery Note
Exercise SD 5: Post Goods Issue
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Exercise SD 6: Create Billing Document for Customer
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LEARNING OUTCOMES
Exercise SD1: Display Customer Master Record
Global Bike Inc. has many customers including one for the US (Philly Bikes) and one for Germany
(NeckaRad).
Company codes list customers according to country.
By entering individual company code for each customer and selecting the customer through the
customer field, general master data is displayed for each customer, including title, name, street address,
country, time zone, region, tax jurisdiction etc.
Exercise SD2: Create Sales Order

Order type is selected as standard order in the Create Sales Order screen. Organizational data such as
sales organization, Distribution channel, and division is entered. Customer number is entered in the
Sold-to party and dates are entered for the day that sales order is generated and customers required
delivery date. Sales material is selected by description and quantity is selected. Customer details are
automatically updated. A standard Order is generated displaying item and material number, order
quantity, description, delivery and order date, plant, currency, and net price. The pricing icon shows the
actual costs and profits of GBI.
Exercise SD 3: Create Delivery Note for Sales Order

The outbound delivery order is a document containing all the data required for triggering and
monitoring the complete outbound delivery process. This process starts with the first planning activities
for the outbound delivery and continues until the finished goods have been loaded and sent.
You either use the outbound delivery order to preview the planning of pending warehouse activities or
to execute the actions required to create the delivery.
You can use the outbound delivery order to execute the following actions:
Creating the delivery and therefore creating an outbound delivery
Picking/cancelling the delivery
Loading/cancelling the delivery
Setting the status Leave Yard
Adjusting the delivery quantity to the picked quantity
Posting/cancelling a goods movement
Creating/deleting items
Shipping points, shipping date and sales order number is entered to create an outbound delivery
document. Data from sales order is copied such as item and material number, quantity, description,
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delivery date, shipping weight etc. in creating the delivery document, SAP system performs a material
availability check to make sure that required delivery date can be met.
Once the delivery document has been created, material management personnel in the warehouse can
start picking, packing and shipping.
Exercise SD 4: Pick Materials on Delivery Note

Picking materials is the next step in the delivery process. It involves recording the picking of the material
in the delivery document. Material is picked from its storage location and moved to a packing area. A
change is made to the delivery document.
In the outbound delivery change screen, picking tab is chosen to enter picked quantity. Select finished
goods storage in the storage location. Enter picked quantity and save to enter picking information.
Exercise SD 5: Post Goods Issue

Posting goods is an inventory control function. Posting the issued goods reduces the unrestricted stock
i.e. material available to sell to customers, and reflects the inventory shipped. Legal ownership of goods
changes to FOB shipping point when the goods leave the plant, and to FOB destination when the goods
are received by the customer. Inventory and cost of goods are also affected. The system shows that
these goods are no longer available.
Exercise SD 6: Create Billing Document for Customer

This exercise creates an invoice for the customer so that payment can be received against the shipping.
Specifying the sales organization, customer number as the sold to party, a billing due list is created.
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MODULE: Material Management (MM)

Exercise MM1: Create Purchase Order
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Exercise MM2: Create Good Receipt for Purchase Order
Exercise MM3: Create Invoice Receipt from Vendor
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Exercise MM4: Post Payment to Vendor
Exercise MM5: Display Vendor Line Items
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LEARNING OUTCOMES
Exercise MM 1: Create Purchase Order
Procurement starts with creating purchase order that is a formal document given to vendors and it
include list of goods and materials that are to be procured. So, accordingly purchase order can be
created for different types of procurement. When received and accepted by the vendor, the PO creates
a legally binding contract between the two parties.
In this exercise, the purchase order displays information such as PO type, vendor, document date,
purchase organization, purchase group, company code, item and material number, short text, PO
quantity, delivery date, net price, currency, material group, plant, etc.
Exercise MM 2: Create Good Receipt for Purchase Order

A goods receipt document creates a reference to the purchase order so that a check is performed
whether the delivery actually corresponds to the order. The delivery is marked in the purchase order
history. This allows the Purchasing department to monitor the purchase order history and initiate
reminder procedures in the event of a late delivery. The vendor invoice is checked against the ordered
quantity and the delivered quantity. The goods receipt is evaluated on the basis of the purchase order
price or the invoice price.
Movement type is set to GR goods, PO number is entered and storage location is entered as Trading
Goods. The document is then saved to create a good receipt document.
Exercise MM 3: Create Invoice Receipt from Vendor

The invoice received associated with the PO and Goods receipt, is entered in this exercise. The invoice is
posted to an existing G/L expense account in the Charts of Accounts, and saved as a Accounts Payable. It
will be settled later by issuing a cheque.
The invoice receipt contains position, G/L account number, vendor, amount, currency, PO number, item
number, tax code, jurisdiction code etc.
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Exercise MM 4: Post Payment to Vendor

A payment is issued to clear the accounts payable. A journal entry is made to accounts payable for
Olympic Gear and to the bank checking account in the G/L.
An outgoing payment is posted according to account number and amount, document date, company
code and currency.
Exercise MM 5: Display Vendor Line Items

In any Sales Order or Purchase Order we may order for different products in the same Purchase Order or
Sales Order. In the Sales / Purchase Order all the items ordered are listed one after the other.
Each item and its details are called the line item of the Sales/Purchase Order.
The exercise displays to change or confirm two line items: Invoice Line and Vendor Payment line. A
credit and debit posting can be seen indicating the receipt of the invoice and the issuance of a payment
to settle this balance.
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MODULE: Production Planning (PP)

Exercise PP 1: Display Stock Requirements List
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Exercise PP 2: Display Bill of Material
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Exercise PP 3: Display Multi-Level Bill of Materials
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Exercise PP 4: Display Routing
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Exercise PP 5: Display Routing/BOM in Engineering Workbench
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LEARNING OUTCOMES
Exercise PP 1: Display Stock Requirements List
This exercise helps review the material status of the finished good Deluxe Touring bike. The
Stock/Requirements list contains up-to-date information on the current status of the inventory on hand,
requirements and receipts. Changes can be made to material status.
Search according to part of the description, Finished Product as the material type and three-digit code
for the unique material number. The search result will give a list of all finished goods whose name starts
with the description provided and material number ends with the three digit code. A list is displayed
showing the available quantity of the product selected.
Exercise PP 2: Display Bill of Material

A Bill of Material (BOM) lists down the components that are needed to create a given product. It
contains description, quantity, and unit of measure.
SAP helps list down components of materials according to according to plant and material number. The
assembly indicator indicates such components that have a BOM of their own.
Exercise PP 3: Display Multi-Level Bill of Materials

SAP provides options to view BOM in multi-levels of hierarchy. The display field can be changed to
Variable list which lists down different levels of BOM. Hierarchy can also be viewed in graphic mode.
Exercise PP 4: Display Routing

A routing is a series of sequential operations carried out to produce an end product. It contains
information on where work is to be performed, steps that need to be completed, and time lines
assigned for each operation.
Display routing displays the list of operations. It can also be viewed in graphic mode. Operations can also
be viewed in Gantt chart mode, with different time units.
Exercise PP 5: Display Routing/BOM in Engineering Workbench

The Engineering Workbench (EWB) provides an environment where you have the ability to create,
change and delete BOM and routings. It gives ability to create work lists and work on specific parts of a
BOM or routing without locking the entire object.
Two types of sub trees comprise the entire BOM and the other lists all routing operations. Double click
on a certain operation to call up information that can be changed if necessary.
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MODULE: Financial Accounting (FI)

Exercise FI 1: Display Chart of Accounts
Exercise FI 2: Display Chart of Account II
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Exercise FI 3: Display General Ledger Account
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LEARNING OUTCOMES
Exercise FI 1: Display Chart of Accounts
The chart of accounts (COA) in SAP is a list of GL accounts master records that are used by the
organization. The master chart of accounts must be assigned to each company code. Chart of Accounts
is defined at client level. There can be only one primary chart of account per company code in SAP.
According to this exercise, a list of accounts is displayed by selecting the company.
G/L Account Number
100000
200100
300000
310000
600000
700000
720300
740300
741500
770000
G/L Account Name

Bank Account
Inventory Finished Goods
Payables- Trade Accounts
Goods Receipt/ Invoice Receipt Account
Sales Revenue
Labor
Semi-Finished Consumption Expense
Rent Expense
Utilities (Electricity & Phone)
Research & Development
Exercise FI 2: Display Chart of Account II

This exercise is about reviewing a list of general ledger (G/L) accounts that are a part of your charts of
accounts and that have been made operative for your company code. Each operative G/L account has
both company code and chart of account specific information. In this way, a chart of account may be
used by several company codes, with each having their own unique information and settings.
How does this information differ from the information in Exercise FI 1? What are the company codes
this chart of accounts is assigned to?
The previous exercise displayed each chart of account in the General Ledger that can be used with any
company code. This exercise displays general ledger accounts differentiated on basis of chart of
accounts and is company specific. This exercise displays A/C number, company code, company code
name and further details.
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Exercise FI 3: Display General Ledger Account

This exercise displays a particular G/L account by entering chart of accounts code and then the G/L
account code. Under the Type/description tab, it displays the account group to which the account is
assigned e.g. liquid asset. It also shows the account type such as profit and loss statement account or a
balance sheet account. The Control data tab displays the currency, exchange rate difference, tax
category etc.
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MODULE: Human Capital Management (HCM)

Exercise HCM 4: Display Organizational Plan
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Exercise HCM 5: Create Personnel Master Record
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LEARNING OUTCOMES
Exercise HCM 4: Display Organizational Plan
The Organizational Structure is composed of the Enterprise structure, the Personnel structure, and the
Organizational plan. This structure integrates employees. The Enterprise structure represents formal
and financial structures in a company and is basically composed of the company code, the personnel
area, and the personnel subarea. The Personnel structure displays the relationship between employees
and assigns them to certain employee groups and subgroups. The Organizational plan illustrates the
structural and personnel company model.
This exercise displays the organizational plan for Global Bike Group. It allows viewing of all departments
and positions by expanding the organizational plan, a rectangular icon represents organizational units
e.g. Administration, financial, etc. Positions such as head of department and regular staff are displayed
by a single-person icon and a two-person icon respectively.
Exercise HCM 5: Create Personnel Master Record

This exercise helps create a personnel master data record of a person working in the Global Bike group.
This job belongs to the HR department. Personnel area depicts the region where the employee is hired;
employee group defines employee as active, and employee subgroup marks employee as salaried.
In the Create Personnel data screen, write down personnel number, name, date of birth, social security
number. Organizational Assignment helps assign subarea such as finance. The Create basic pay tab
allows defining Pay Scale type, area, and group, working hours/period, annual salary etc.
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MODULE: Controlling (CO)

Exercise CO 2: Display Cost Elements
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LEARNING OUTCOMES
Exercise CO 2: Display Cost Elements
Primary cost elements have a one-to-one relationship with expense accounts activated for a chart of
accounts. They serve to establish postings between FI and CO, permitting sharing of information
between financial and managerial accountants. Costs that are entered into an expense account that has
been associated with a primary cost element will be posted to both the financial and managerial
accounting system concurrently. Secondary cost elements are exclusive to managerial accounting. They
assign costs to responsible parties exclusively within the managerial accounting system.
The exercise displays a list of all primary cost elements defined in the GBI North America controlling
area. By clicking on a particular cost element such as Labor, a basic screen is displayed showing Cost
element code and name, Controlling area, valid from and to dates, cost element category e.g. Primary
cost/cost-reducing revenues, functional area, etc.
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MODULE: Warehouse Management (WM)

Exercise WM 1: Create Purchase Order
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Exercise WM 2: Display Material Inventory
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Exercise WM 3: Display Material Inventory Value
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Exercise WM 4: Receive Goods
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Exercise WM 7: Run Bin Status Report
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Exercise WM 8: Create Transfer Order
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Exercise WM 9: Confirm Transfer Order
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LEARNING OUTCOMES
Exercise WM 1: Create Purchase Order
Procurement starts with creating purchase order that is a formal document given to vendors and it
include list of goods and materials that are to be procured. So, accordingly purchase order can be
created for different types of procurement. When received and accepted by the vendor, the PO creates
a legally binding contract between the two parties.
This exercise creates an immediate purchase order for materials from a vendor, i.e. to start the
procurement process without having created a purchase requisition before. A standard purchase order
is created and details are filled for Purchase organization, purchase group and company code. The item
overview displays the material number, short text, PO quantity, delivery date, net price, currency,
material group, plant, storage location etc.

This exercise displays the stock list denoting the inventory of material available. In the stock overview
screen, entering the Material number and type displays a basic list. It shows a quantity of 50 as the onorder stock.

This exercise displays warehouse stocks of material and its value, which is currently zero for both Knee
pads and Elbow pads.
Exercise WM 4: Receive Goods

This exercise creates a goods receipt which documents the receiving of your materials in San Diego. The
goods receipt can be created by checking the OK boxed when PO data comes up, selecting stock type to
Unrestricted Use, Movement type to 101 (Good Receipt for PO into warehouse/store), the storage
location and quantity is also entered.

This exercise displays material inventory again. Since the amount was material was set to unrestricted
use in the previous exercise, the On-Order stock balance is zero now.

This exercise displays material inventory value again and a value for 50 units of Elbow and Knee pads has
been added to San Diego distribution centre.
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The storage bin is the smallest available unit of space in a warehouse. The storage bin therefore
describes the position in the warehouse where the goods are or can be stored.
Bin status report displays a detailed report of each storage bin within the specified warehouse. For each
warehouse and classified search according to last three digits, a list of all storage bins for the entire
warehouse in San Diego is available. In this exercise all bins are empty.
Exercise WM 8: Create Transfer Order

Transfer order is a handoff from inventory management to warehouse management. The system
recognizes that goods have been received but need to be put away. The exercise creates a transfer
order to place your goods into the storage bin.
The Transfer Requirements for Material screen is opened by defining warehouse number, material
number and plant. In the next screen, destination bin code is entered as well as selection of Type as
Shelf Storage. Confirm quantity and save.
Exercise WM 9: Confirm Transfer Order

This exercise confirms the transfer order created previously. It confirms that the goods are physically in
the storage bin indicated in the transfer order.
Enter the Transfer Order number and warehouse number. In the Confirm Transfer Order: Overview of
Transfer Order Items screen, review the details of the transfer order created previously and then
confirm.

This exercise checks status of bins again. Entering the warehouse number and classifying search for
storage bins with last three digits, open the Bin Status Report: Initial Screen. It shows that one of the
storage bins has been stored with 50 of the goods.
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Term Report

Glossary of Terms
1. Business Scenario:
Grouping of business processes in a specific organizational unit that share some similar goals in the
enterprise, such as purchasing, services, balance sheet preparation, production, personnel
administration, and so on.
2. Organizational Units:
An organization unit represents any type of organizational entity found within a company, for example,
subsidiaries, divisions, departments, or special project teams. These organizational units need to be
mapped in the SAP system as they are the locations where the various Business Scenarios occur.
3. Master Data:
Business Scenarios involve various objects such as customer, vendors, products, employees etc. Data
which describes these objects is referred to as Master Data. This data describes the various objects
stored within the SAP system. This data usually remains unchanged over an extended period of time.
4. Transactions:
Transactions are application programs which execute business processes in the ERP System. They
usually result in the changing of one or more master data objects such as creating a customer order,
posting an incoming payment, or approving a leave request. The majority of processing the SAP system
is related to transactions. For example the diagram below illustrates a Transaction the interaction
between the Master Data objects of Customer and Material in the creation of a sales document.
5. Document:
A data record that is generated when a transaction is carried out and contains all the predefined
information such as sales document, order, pay slip etc.
6. Company code:
It is an independent accounting unit. Balance sheets and Profit & Loss Statements, required by law, are
created at the company code level.
7. Sales organization:
The sales organization is an organizational unit within logistics that structures the company according to
its sales requirements. A sales organization is responsible for the sale and distribution of goods and
services. Each business transaction is processed within a sales organization. It is responsible for
distributing goods and services, negotiating conditions of a sale. It is the level to which you sum up sales
figures
for
reporting
and
analysis.
Distribution channel:
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The distribution channel represents the channel through which sold materials or services reach
customers. Typical distribution channels include wholesale, retail and direct sales.
8. Division:
It is used to represent a product line. In SD, the division allows you to make customer-specific
agreements such as: partial deliveries, pricing agreements, special payment terms. At least one Division
must be defined in the SD module.
9. Sales area:
A specific combination of sales organization, distribution channel, and division.
10.
Plant:
A manufacturing facility, distribution center, or office. A location that stores inventory or renders
services.
11.
It
allows
12.
Storage location:
the
differentiation
of
material
stocks
within
plant.
Warehouse:
Organizational divisions of a plant for the purpose of maintaining materials that are stored in different
places.
13.
Shipping point:
A fixed location that carries out shipping activities. Each delivery is processed by only one shipping
point.
14.
Customer Master:
Data on customers is important for both the accounting department and the sales and distribution
department. In order to avoid data redundancy, accounting data and sales and distribution data is
stored in one master record, the customer master record.
15.
Material Master:
You are already familiar with the Material Master and the data that is stored from a production planning
and materials management view. In Sales and distribution the material master is grouped into several
views: Basic data, sales and distribution data, purchasing data, and various further data for
engineering/design, accounting, costing, warehouse management, and so on.
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16.

Customer Material Information:
The customer-material information is used to record data for a combination of certain customers and
materials. It stores default data when a customer orders a certain material.
17.
Output Master
The Output Master is information that is sent to the customer using various media, such as mail, EDI, or
fax. Examples include: the printout of a quotation or an order confirmation, order confirmations using
EDI, or invoices by fax. The output can be sent for various sales and distribution documents (order,
delivery, billing document)
18.
Incompletion Log
Each sales and distribution document contains data required for the document and for further
processing until the process is completed. The system determines which fields are displayed in the
incompletion log when the user does not fill them during sales order processing. The incompletion log
functions are available in the sales order and in the delivery.
SALES AND DISTRIBUTION:

19.
Sales Order Processing
A sales order is an electronic document that records your customer's request for goods or services. The
sales order contains all information to process the customer's request during sales order processing.
Standard orders normally contain:
Customer information
Shipping information
Pricing for each item
Item quantities
Billing information
20.
Sales Order Structure
A sales document is grouped into three levels: header, item and schedule line. Data is distributed on
these levels as follows:
Sales document header:
The data in the document header is valid for the entire document. This includes, for example,
customer-related data.
Sales document items:
Each item in the sales document contains its own data. This includes, for example, data about the
material and quantities ordered. Each sales document can have several items, while individual
items can be controlled differently. Examples include material item, service item, free-of-charge
item or text item.
Item schedule lines:
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Schedule lines contain delivery quantities and delivery dates and are unique to each item. Every
item that has a subsequent outbound delivery in the sales and distribution process must have at
least a schedule line.
21.
Inventory Sourcing (Procurement)
In this process step in Sales and Distribution you can check the availability of the ordered goods and
publish the demand in materials planning. Materials Management (MM) organizes and monitors the
actual procurement process. This includes products that are:
In-house produced or/and

Externally produced.
22.
Shipping
The Shipping processing in Sales and Distribution begins when you create the delivery document. The
delivery document controls, supports and monitors all sub processes of shipping processing, such as
picking and confirming (transfer orders),

packing,
planning and monitoring of transport (shipment document) and
Posting goods issue (goods issue documents).
23.
Picking:
You now need to create a transfer request as a basis for goods movement in the warehouse and to print
the picking list. The picking lists include all relevant orders and can be organised by storage bin and
material. This can relieve the work for the picker. Before the materials leave the plant, and before the
goods issue has been posted, you need to check the stock again.
24.
Billing:
When you create a billing document, data is copied from the sales order and the delivery document to
the billing document. Delivery items as well as order items (for example services) can be references for
the billing document.
The billing document serves several important functions:
It is the sales and distribution document that helps you to generate invoices.
The billing document serves as a data source for financial accounting (FI) to help you to
monitor and process customer payments.
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MATERIALS MANAGEMENT:
25.
Material Master:
The Material Master record is the main source of material-specific data in an enterprise. It is used by all
Logistic modules. The integration of all material data in a single database object prevents the problem of
data redundancy. Every area, such as purchasing, inventory management, materials planning, and
invoice verification can use the data stored.
26.
Vendor Master:
The Vendor Master record contains information about a vendor from a Purchasing and Accounting
perspective. Data in the vendor master record is structured by organizational considerations:
General data is valid for the whole corporate group (client). This includes the vendor
communication data, for example.
Accounting data is stored at company code level (company) and with the general data.
Purchasing data on the vendor is managed separately for each purchasing organization, for
example, payment conditions. General data is also relevant to Purchasing, for example, address
data.
In Accounting, the vendor is regarded as the companys crediting business partner. The vendor master
record is therefore maintained by Accounting and Purchasing.
PRODUCTION PLANNING:
27.
Master Data:
Production Planning involves a number of Master data records. These include:

Material Master
Bill of Materials (BOM): Bills of material (BOMs) contain essential master data for integrated
materials management, production control and product costing. The BOM shows all the subassemblies and raw materials that are required to make one unit of the finished product. The
number in brackets specifies how many units are required at each level.
Work Center: A work center is where an operation or activity is carried out within a plant. It can
represent a geographical location or a particular machine in a dept. Examples : Lathe 2, Line A, Group
12. Work centres are used in routings, costing calculations, and scheduling.
Routing: A routing contains the operations to be performed, their sequence and the various work
centers involved to manufacture an item.
Cost Center: The cost center accounting component (CO-OM-CCA) tracks where costs occur in your
organization. The cost center is an organizational unit in a controlling area. Cost centers can be defined
according to several different design approaches. A typical approach could be for an enterprise to
define a cost center for each low-level organizational unit that has responsibility for managing costs. As
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Term Report

costs are incurred, they are assigned or posted to the appropriate cost center. These costs could include
payroll costs, rent and utility costs, or any other costs relevant to a given cost center.
Production Resource and Tools
28.
FINANCIAL ACCOUNTING (FI):
The function of accounting is to provide financial documentation and information for an enterprise and
other interested parties that are associated with it. There are basically two types of accounting:
External accounting is oriented more towards satisfying the information requirements of external
parties. This is referred to as Financial Accounting (FI).
Internal accounting meets the reporting demands of internal enterprise groups. This is referred to
as Cost Accounting (CO).
The payment of vendor invoices and the receipt of customer payments is handled by the Financial
Accounting (FI) module. The major components of this module are the general ledger (G/L) and sub
ledger accounting (accounts payable, accounts receivable, and asset accounting), and consolidation.
Accounts Payable records all accounting transactions for dealings with suppliers. Much of its data is
obtained from procurement (Materials Management).
Accounts Receivable records all accounting transactions for dealings with customers. Much of its
data is obtained from Sales and Distribution.
Asset Accounting records all accounting transactions relating to the management of assets.
Travel Management manages and calculates travel costs and supports travel planning and travel
expenses
Bank ledger supports the posting of cash flows.
29.
General Ledger Master Records
G/L account master records contain the data that is always needed by the general ledger to determine
the account's function. The G/L account master records control the posting of accounting transactions to
G/L accounts and the processing of the posting data. Before you can make postings to a G/L account,
you have to create a master record in the system for that account.
30.
Chart of accounts area
The chart of accounts area contains the data that is valid for all company codes, such as the account
number. It is a list of all G/L account master records which are used in one or several company codes.
For every G/L account master record, the chart of accounts contains the account number, the account
name and controlling information.
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31.

Company code specific area
The company code specific area contains data that may vary from one company code to another, such
as the currency in which the account may be posted.
32.
General Ledger Master Data
The following objects play a central role in the creation and management of master records:
Chart of Accounts List

Chart of accounts
Account group
33.
Six Sigma:
Quality improvement program, utilizing a structured approach (DMAIC) with a payback threshold
established, usually accomplished through a project team
34.
Purchase Order:
Commercial document making a legal offer to buy products or services ,issued by a buyer to a seller,
indicating types, quantities, prices, and other terms and conditions
35.
Outsource:
The purchase of an item or service.
36.
Master Production Schedule:
Statement in terms of specific products of what is to be produced and when.
37.
Material Requirement Planning:
Computerized information system developed specifically to help manufacturers manage dependent

demand inventory and schedule replenishment orders.
38.
Lean:
Philosophy based on eliminating waste, which shortens the timeline between the customer order and
the delivery of a service or shipment of a product.
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39.

Total cost of ownership (TCO):
It is a financial estimate intended to help buyers and owners determine the direct and indirect costs of a
product or system. It is a management accounting concept that can be used in full cost accounting or
even ecological economics where it includes social costs.
40.
INCO terms (International Commercial Terms):
Series of pre-defined commercial terms published by the international chambers of commerce(ICC)

widely used in international commercial transactions.
41.
Economic Order Quantity:
Lot size that minimizes total annual inventory holding and ordering/Set up costs
42.
Forecasting:
The art and science of making projections about future demand and conditions.
43.
DMAIC (Define-Measure-Analyze-Improve-Control):
Six Sigma structured approach
44.
Bill of Material:
List of components, ingredients and materials needed to make products.
45.
Accounts Payable (AP):
Accounts payable is the money owed by a company to its creditors. This module provides the
functionality to enter, monitor, maintain and process for payment of invoices and credit notes that the
organization received from its vendors.
46.
Accounts Receivable (AR):
Accounts receivable is the money owed to a company by its debtors. This module helps in tracking all
the invoices that is awaiting payment from customers.
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47.

General Ledger:
The General Ledger (GL) module is the heart of finance package of an ERP system. Through integration
with logistics, business processes as well as with accounting sub ledgers of other finance modules such
as accounts payable, accounts receivable, cash management, GL provides a central pool of accounting
data required for finance reporting (including statutory reports) and other purpose. One of the
important functions of GL is to real time update of sub ledger, thus eliminating the time consuming
reconciliation. GL also provides summarized data for use in planning, control and reporting.
48.
Cost Variance:
Cost Variance analysis is control system that is developed by organizations to detect and correct
variance from expected level in Inventory costs. Variance analysis is usually associated with derived
difference between actual cost and the standard cost defined by organization for good output.
49.
Managerial Accounting:
Managerial accounting deals with determining the costs and profitability of a companys activities. The
goal is to provide managers detailed information so they can make informed decisions, create budgets,
determine profitability etc.
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References
1. Vijay M. Khaparde, Barriers of ERP while implementing ERP: a Literature Review, IOSR Journal of
Mechanical and Civil Engineering (IOSR-JMCE), (2012).
2. Soh, C., Kien, S. S., Tay-Yap, J. (2000) Enterprise resource planning: cultural fits and misfits: is
ERP a universal solution Commun. ACM, Issue 43, 4 April 2000, pp.47-51
3. Bititci, U. (2011) ERP course slides, DMEM, Strathclyde University of Glasgow
4. Daniel E. OLeary, Enterprise Resource Planning (ERP) Systems: An Empirical Analysis of Benefits,
Journal of Emerging Technologies in Accounting, Vol. 1, 2004, pp. 63-72.
5. C. Dillon, Stretching toward enterprise flexibility with ERP, APICSThe Performance Advantage
(October)(1999)3843.
6. S. Cliffe, ERP implementation, Harvard Business Review 77 (1) (1999)1617.
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Introduction to SAPERP System

Submitted by: Sarah Yousuf (20151-19129)

Intro. To ERP-SAP System Applications

EXECUTIVE SUMMARY ..................................................................................................................... 3

HISTORY OF ERP .............................................................................................................................. 3

LITERATURE REVIEW ........................................................................................................................ 5

MODULES & LEARNING OUTCOMES .............................................................................................. 11

Glossary of Terms .................................................................................................................................. 55

Intro. To ERP-SAP System Applications

Intro. To ERP-SAP System Applications

Intro. To ERP-SAP System Applications

An enterprise resource planning (ERP) is an enterprise-wide application software package that

Intro. To ERP-SAP System Applications

Intro. To ERP-SAP System Applications

ERP Systems functionality:

Intro. To ERP-SAP System Applications

Intro. To ERP-SAP System Applications

Operational motivation aims at improving inadequate business performance, reducing high-cost

Strategic goals are not clearly defined.

Critical factors for successful ERP implementation:

Clear understanding of strategic goals

Intro. To ERP-SAP System Applications

Figure 1: Flowchart for an ERP system implementation process

Intro. To ERP-SAP System Applications

MODULES & LEARNING OUTCOMES

Main Screen: Global Bikes Inc.

Logistics drop-down menu:

Intro. To ERP-SAP System Applications

Accounting drop-down menu:

HRM drop-down menu:

Intro. To ERP-SAP System Applications

MODULE: Sales and Distribution (SD)

Intro. To ERP-SAP System Applications

Exercise SD2: Create Sales Order

Intro. To ERP-SAP System Applications

Exercise SD 3: Create Delivery Note for Sales Order

Intro. To ERP-SAP System Applications

Exercise SD 4: Pick Materials on Delivery Note

Exercise SD 5: Post Goods Issue

Intro. To ERP-SAP System Applications

Exercise SD 6: Create Billing Document for Customer

Intro. To ERP-SAP System Applications

Exercise SD2: Create Sales Order

Exercise SD 3: Create Delivery Note for Sales Order

Intro. To ERP-SAP System Applications

Exercise SD 4: Pick Materials on Delivery Note

Exercise SD 5: Post Goods Issue

Exercise SD 6: Create Billing Document for Customer

Intro. To ERP-SAP System Applications

MODULE: Material Management (MM)

Intro. To ERP-SAP System Applications

Exercise MM2: Create Good Receipt for Purchase Order

Exercise MM3: Create Invoice Receipt from Vendor

Intro. To ERP-SAP System Applications

Exercise MM4: Post Payment to Vendor

Exercise MM5: Display Vendor Line Items

Intro. To ERP-SAP System Applications

Intro. To ERP-SAP System Applications

Exercise MM 2: Create Good Receipt for Purchase Order

Exercise MM 3: Create Invoice Receipt from Vendor

Intro. To ERP-SAP System Applications

Exercise MM 4: Post Payment to Vendor

Exercise MM 5: Display Vendor Line Items