Material Management

 Introduction to SAP ERP

SAP stands for Systems Applications and Products in Data Processing.

It was founded in 1972 by Wellenreuther, Hopp, Hector, Plattner and Tschira.
SAP by definition is also name of the ERP (Enterprise Resource Planning) software as well the name of the company.
SAP system comprises of a number of fully integrated modules, which covers virtually every aspect of the business management.
Other Competitive products in the market are Oracle, Microsoft Dynamics, and Baan etc.

 What is a SAP- ERP? Why it is required?

The success of any organization lies in effective communication, and data exchange, within these departments, as well as associated third party
such as vendors, outsourcers, and customers.
Based on the manner in which communication and data exchanged is managed.
Enterprise systems can be broadly classified as

1) Decentralized System

2) Centralized System which are also called as ERP.

Decentralized System
Let's look at Decentralized system first, in a company with Decentralized System of Data Management, there are two major problems –

Data is maintained locally at the individual departments

Departments do not have access to information or data of other departments
To identify problems arising due to decentralized Enterprise management system lets look at the same business process again. The customer
approaches the sales team for a product, but this time around he needs the product, on an urgent basis.
Since it is a decentralized process, the Sales Team do not have any real-time information access to the products availability. So they approach
the Inventory department to check the availability of the product. This process takes time and customer chooses another vendor leading to loss
of revenue and customer dissatisfaction.
Now, suppose the product is out of stock and the Sales Team approaches the Production Planning team to manufacture the product for future
use. Production Planning Team checks the availability of the raw materials required.
In a decentralized system, raw material information is separately stored by Production Planning as well as Inventory Department. Thus data
maintenance cost (in this case Raw Material) goes up.
The raw material information is available in two different departments Inventory as well as Production Planning. When sales team check a
particular raw material required manufacturing the product, it shows the raw material is available as per the inventory, but as per the database
of the production planning team, the raw material is out of stock.
So, they go ahead and buy the raw material. Thus, material as well inventory cost goes up.
Once the raw material is available, the shop floor department suddenly realizes they are short of workers they approach the HR, who in turn
hire temporary employees at higher than market rates. Thus LABOR Cost Increases.
The production planning department fails to update the finance department on the materials they have purchased. The finance department
defaults the payment deadline set by the vendor causing the company loss of its reputation and even inviting a possible legal action.
These are just a few of many problems with decentralized systems.

Some Major problems with the decentralized system are –

Numerous disparate information systems generates individually over time which are difficult to maintain
Integrating the data is time and money consuming
Inconsistencies and duplication of data
Lack of timely information leads to customer dissatisfaction, loss of revenue and reputation
High Inventory, material, and human resource cost.
These are some major drawbacks for which we need a solution. Well the Solution lies in Centralized Systems i.e. ERP.

Centralized System
In a company, with Centralized System of Information and Data Management.
1) Data is maintained at a central location and is shared with various Departments
2) Departments have access to information or data of other Departments

Let’s look at the same business process again to understand how a Centralized Enterprise System helps overcoming problems posed by a
Decentralized Enterprise System.
In this Case, all departments update a Central Information System.
When Customer approaches the sales team to buy a product on an urgent basis. The Sales Team has real-time information access to the
products in inventory which is updated by the Inventory Department in the Centralized System
Sales Team respond to customer request on time leading to Increased Revenue and Customer Delight.
In case, manufacturing is required the Sales Team update the Centralized Database, so that all the department remain informed about the
product status.
Production Planning Department is auto updated by the Centralized Database for requirements. Production Planning Team checks the
availability of the raw materials required via Central Database, which is updated by the Inventory Department.
Thus, Data Duplication is avoided, and accurate data is made available. The Shop Floor Team update their Man Power Status regularly in the
Central Database, which can be accessed by the HR department.

While vendors can directly submit their invoices to the Central Enterprise System, which can be accessed by the finance department. Thus,
payments are made on time, and possible legal actions are avoided

Key benefits of the centralized system are:

It eliminates the duplication, discontinuity and redundancy in data

Provides information across departments in real time.
Provides control over various business processes
Increases productivity, better inventory management, promotes quality, reduced material cost, effective human resources management,
reduced overheads boosts profits
Better customer interaction and increased throughput. It also improves customer service
Hence, a centralized enterprise management system is required.
SAP is a centralized enterprise management system also known as Enterprise Resource Planning.
Most people relate SAP with its ERP offering. But SAP now offers variety of products to address varied needs of an organization. Let’s have a
look at them -

Enterprise Resource Planning:- A sound foundation is necessary to compete and win in the global marketplace. The SAP ERP application
supports the essential functions of your business processes and operations efficiently and is tailored to specific needs of your industry like SAP
ERP Financials, SAP ERP Human capital management, SAP ERP Operations, SAP ERP corporate services.
SAP Environment, Health, and Safety Management: - It supports environmental, occupational and product safety processes, regulatory
compliance, and corporate responsibility. This is accomplished by embedding corporate policies, compliance, and environmental, health and
safety capabilities with global business processes for human resources, logistics, production and finance.
SAP Global Batch Traceability: - It allows you to completely trace tracked objects, for example, a batch, across both SAP systems and non-SAP
systems. In the event of a recall or withdrawal, SAP GBT ensures the timely compliance with legal reporting timelines. Furthermore, it helps you
to minimize cost and corporate risk exposure. You can also analyze multiple objects, for example, batches, in one run.
Following is the list of module available in SAP system.

SAP FI Module- FI stands for Financial Accounting

SAP CO Module- CO stands for Controlling
SAP PS Module - and PS is Project Systems
SAP HR Module - HR stands for Human Resources
SAP PM Module - where Plant Maintenance is the PM
SAP MM Module - MM is Materials Management -
SAP QM Module - QM stands for Quality Management
SAP PP Module - PP is Production Planning

Client/Server Environment
Client – hardware/software environment that can make a request for
Services for a central repository of resources
Server – hardware/software combination that can provide services to a
Group of clients in a controlled environment
ƒ
Three – Tier Structure
- GUI
• Graphical User Interface or Web Interface
- Application Server
• One or more, help distribute work load
- Database Server
• One single data repository

Collections of logically related transactions within identifiable

business functions
- MM (“Buy”)
- PP (“Make”)
- SD (“Sell”)
- FI and CO (“Track”)
2.Basic understanding on ASAP Methodology for beginners
1- What is ASAP Methodology?
2- Phases of ASAP Methodology
3- Brief explanation of each phase
 

1-      What is ASAP Methodology?

 
  ASAP stands for Accelerated SAP.       
  Its purpose is to help design SAP implementation in the most efficient manner possible.
  Its goal is to effectively optimize time, people, quality and other resources, using a proven methodology to implementation.
 
1-      Phase of ASAP Methodology
 
ASAP focuses on tools and training, wrapped up in a five-phase process oriented road map for guiding implementation.

The road map is composed of five well-known consecutive phases

•        Phase 1 Project Preparation

•        Phase 2 Business Blueprint
•        Phase 3 Realization
•        Phase 4 Final Preparation
•        Phase 5 Go-Live and support
 
Brief explanation of each phase
 
 
ASAP Methodology  - Phase 1 : Project Preparation
 
 
Phase-1 initiates with a retrieval of information and resources. It is an important time to assemble the necessary components for the
implementation. Some important milestones that need to be accomplished for phase 1 include
 
 
•        Obtaining senior-level management/stakeholder support
•        Identifying clear project objectives
•        Architect an efficient decision-making process
•        Creating an environment suitable for change and re-engineering
•        Building a qualified and capable project team.
 
 
ASAP Methodology - Phase 2- Business Blueprint
 
 
 
SAP has defined a business blueprint phase to help extract pertinent information about your company that is necessary for implementation.
These blueprints are in the form of questionnaires that are designed to probe for information that uncovers how your company does business.
As such, they also serve to document the implementation.
 
Each business blueprint document essentially outlines your future business processes and business requirements. The kinds of questions asked
are germane to the particular business function, as seen in the following sample questions:
 
 
1)     1)  What information do you capture on a purchase order?
 
2)     2)  What information is required to complete a purchase order?
 
 
ASAP Methodology - Phase- 3 - Realization
 
 
With the completion of the business in phase 2, "functional" experts are now ready to begin configuring SAP.
The Realization phase is broken in to two parts.
 
 
1)   1)  Your SAP consulting team helps you configure your baseline system, called the baseline configuration.
 
1)   2) Your implementation project team fine-tunes that system to meet all your business and process requirements as part of the fine tuning
configuration.
 
 
The initial configuration completed during the base line configuration is based on the information that you provided in your blueprint
document. The remaining approximately 20% of your configuration that was not tackled during the baseline configuration is completed during
the fine tuning configuration.
 
Fine tuning usually deals with the exceptions that are not covered in baseline configuration. This final bit of tweaking represents the work
necessary to fit your special needs.
 
 
Configuration Testing-
With the help of your SAP consulting team, you segregate your business processes into cycles of related business flows. The cycles serve as
independent units that enable you to test specific parts of the business process. You can also work through configuring the SAP implementation
guide (IMG). A tool used to assist you in configuring your SAP system in a step by step manner.
 
 
Knowledge Transfer-
As the configuration phase comes to a close, it becomes necessary for the Project team to be self-sufficient in their knowledge of the
configuration of your SAP system.
Knowledge transfer to the configuration team tasked with system maintenance (that is, maintenance of the business processes after Go-live)
needs to be completed at this time. In addition, the end users tasked with actually using the system for day-to-day business purposes must be
trained.
 
 
ASAP Methodology - Phase 4 - Final Preparation
 
 
As phase 3 merges into phase 4, you should find yourselves not only in the midst of SAP training, but also in the midst of rigorous functional and
stress testing.
 
Phase 4 also concentrates on the fine tuning of your configuration before Go-live and more importantly, the migration of data from your old
system or systems to SAP.
 
 
Workload testing (including peak volume, daily load, and other forms of stress testing), and integration or functional testing are conducted to
ensure the accuracy of your data and thestability of your SAP system. Because you should have begun testing back in phase 2, you do not have
too far to go until Go-live.
 
Now is an important time to perform preventative maintenance checks to ensure optimal performance at your SAP system. At the conclusion of
phase 4, take time to plan and document a Go-live strategy. Preparation for Go-live means preparing for your end-users questions as they start
actively working on the new SAP system.
 
 
ASAP Methodology - Phase 5 - Go-live and Support
 
 
The Go-live milestone is itself is easy to achieve; a smooth and uneventful Go-live is another matter altogether. Preparation is the key, including
attention to what-if scenarios related not only to the individual business processes deployed but also to the functioning of technology
underpinning these business processes and preparation for ongoing support, including maintenance contracts and documented processes and
procedures are essential.