Pennsylvania State University



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Unit Purpose

The purpose of this unit is to expand on the introduction of the SAP R/3 System by explaining how it supports business processes.

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Unit Topics

This unit consists of the following main topics:

1. Business Processes

2. SAP R/3 Functionality

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Business Processes and SAP R/3 Functionality

There are four main business processes in most businesses:

3. Manufacturing Planning and Execution

4. Procurement

5. Customer Order Management

6. Financial/Management Accounting and Reporting

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Business Processes and SAP R/3 Functionality

SOP: Sales Operation Planning (Forecast)

MPS: Master Production Scheduling

MPS uses sales information (forecast and actual) to generate production plans.

Production plans specify “We need X amount of Y by date T1.”

MRP: Material Requirement Planning

MRP uses sales plan and production plan to generate raw material requirements.

(“Z amount of material W is needed by date T2.”)

Planned Order: Production requests forecast.

Production Order: Actual production requests

The complete integration of the SAP R/3 System makes it possible to represent business processes in the system irrespective of the application.

Industrial enterprises focus on value-added chains that may affect the logistic process chains Sales, Manufacturing and Purchasing/Procurement.

The figure shows that planning, controlling, reporting and information management is possible along the logistic value-added chains. Controlling can be executed for different business functions such as Procurement, Manufacturing, Sales, etc.

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Business Process and SAP R/3 Functionality

Manufacturing Planning and Execution Process

7. Manufacturing Planning and Execution refers to the process of recognizing demand, netting requirements, planning for the production and/or procurement of materials, and capacity to satisfy the demand.

8. The SAP R/3 application modules that support this process are:

1. Materials Management (MM)

2. Financial Accounting (FI)

3. Sales and Distribution (SD)

4. Production Planning (PP)

5. Controlling (CO)

6. Human resources (HR)

9. Its functionality includes the following:

7. Sales and Operations Planning (SOP)

8. Master Production Scheduling (MPS)

9. Material Requirements Planning (MRP)

10. Shop floor control

11. Production Order (Execution, Management, Processing)

12. Logistics Information System (LIS)

13. Product costing

14. Capacity Requirements Planning (CRP)

15. Bills of Material (BOM)

16. Routing

17. Work centers

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Business Process Overview

Manufacturing Planning and Execution

1. The Manufacturing Planning and Execution process encompasses the forecasting of demand; the closed loop planning phase; and the control of the production activities through inventory valuation, order settlement, and product costing.

2. For our scenario in the following unit, the major functions that are related to this process are:

1. Master Production Scheduling (MPS)

2. Materials Requirements Planning (MRP)

3. Planned Order Processing

4. Production Order

5. Goods Issue

6. Production Order Receipt

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Business Processes and SAP R/3 Functionality

Procurement Process

3. Procurement refers to the process of requisitioning, vendor sourcing, purchasing, receiving, and paying for materials and services to be used throughout the organization.

4. The SAP R/3 application modules that support this process are:

7. Materials Management (MM)

8. Financial Accounting (FI)

9. Production Planning (PP)

10. Controlling (CO)

11. Plant Maintenance (PM)

5. Its functionality includes the following:

12. Reorder point planning

13. Requisitions

14. Source determination

15. Request for quotation processing

16. Contracts/scheduling agreements (Blanket PO)

17. Purchasing

18. Receiving

19. Inventory update

20. Invoice verification

21. Payment

22. Purchasing Information System (PurchIS)

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Business Process Overview

Procurement

6. The Procurement process encompasses the purchasing of goods and services from recognition of the requirement through final vendor payment for the goods or services received.

7. For our scenario in the following unit, the five major functions that are related to this process are:

23. Purchasing requisition

24. Purchase order processing

25. Goods receipt

26. Invoice receipt/verification

27. Payment

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Business Processes and SAP R/3 Functionality

Customer Order Management Process

8. Customer order management refers to the process of taking orders, checking availability, delivering goods, invoicing customers, and receiving payment.

9. The SAP R/3 application modules that support this process are:

28. Sales and Distribution (SD)

29. Financial Accounting (FI)

30. Materials Management (MM)

31. Production Planning (PP)

32. Controlling (CO)

10. Its functionality includes the following:

33. Pre-sales activity

34. Sales order processing

35. Inventory sourcing

36. Delivery

37. Billing

38. Customer payment

39. Customer support (question resolution)

40. Sales Information System (SIS)

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Business Process Overview

Pre-Sales Activities: Request for quotes

Inventory Sourcing: Decide to produce or purchase what customer needs.

Customer Order Management

11. The Customer Order Management process encompasses order handling from the first customer contact in marketing through receiving final payment for goods and services delivered.

12. For our scenario in the following unit, the four major functions that are related to this process are:

41. Sales order processing

42. Customer delivery

43. Customer billing

44. Customer payment

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Business Processes and SAP R/3 Functionality

Financial/Management Accounting and Reporting Process

13. Financial/Management Accounting and Reporting refers to the process of planning, recording, and monitoring business events by report and analysis.

14. The SAP R/3 application modules that support this process are:

45. Financial Accounting (FI)

46. Controlling (CO)

15. Its functionality includes the following components:

47. General ledger

48. Special purpose ledger

49. Cost center accounting

50. Profit center accounting

51. Profitability analysis

52. Internal order accounting

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Business Process Overview

Period Processing is conducted at the end of each month, and at the end of a year.

Financial/Management Accounting and Reporting

16. The Financial/Management Accounting and Reporting process encompasses the planning, recording, and monitoring of business events.

17. Each of the three previous business processes have links to the Financial/Management Accounting and Reporting process.

18. The major functions related to this process for our scenario in the following unit are:

53. General ledger accounting

54. Legal and management reporting

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