SAP stands for “systems, applications, and products in data processing”. The SAP R/3 system provides a client/server business application solution for companies of all sizes and all industry sectors. It consists of several application modules that support all of a company’s business transactions. Examples of application modules include Financial Accounting, Human Resources, Production Planning, and Plant Maintenance.
SAP has designed an R/3 application module for business functionality in every business area in a company. R/3 application modules are integrated. So when a change is made to one application module, R/3 automatically updates the corresponding data in the other application modules. The automatic update of information in R/3 occurs as soon as data is entered into the system. This is referred to as “real-time” processing.
The application modules are integrated into a workflow business events and processes across department and financial areas. Any business that wants to fully integrate its business processes must use on source for customer, product, and supplier data. R/3 allows for this by providing a set of master records for the enterprise. This means that an entire company can share the same customer or material information that is entered in the R/3 master records.
The integration of application modules in real-time allows all the employees in your company to see the most up-to-date information in real-time at their desktops. It also reduces data redundancy. Globalization is one of the biggest challenges facing any organization seeking to integrate its business processes. A business system must be capable of supporting all of an organization's offices, across the globe. The R/3 system has no organizational or geographical boundaries. It is designed for international use and supports multiple languages, currencies, and taxation systems.
To examine what application modules do and how they connect to each other in more detail, let's take a look at the following application modules:
· Sales and Distribution (SD)
· Materials Management (MM)
· Financial Accounting (FI)
· Production Planning (PP)
Let’s say a customer has ordered 100 motors from your company XYZ. You use the Sales and Distribution (SD) application module to enter the customer’s request for the motors into R/3. This is done by creating a sales order. Once a sales order has been created, the Sales and Distribution module generates a delivery document, which contains information needed to ship the motors. For example, the delivery document informs warehouse managers which motors to collect from stock. Once the motors have been shipped, an invoice is created to bill the customer. Materials Management (MM) application module is now used for procurement and inventory management. Elements of this application module include:
Invoice verification
Material valuation
Vendor evaluation
The Financial Accounting (FI) application module manages and reports on sub ledger accounts using a chart of accounts that is defined by your company. Examples of these sub ledger accounts include
The General Ledger
Accounts Receivable
Accounts Payable
The Production Planning (PP) module is used to plan and control the manufacturing activities of a company. Some of the elements of the Production Planning module are
Bills of materials
Sales and operations planning
Material requirements planning
Production orders
Let's look at R/3 integration by examining how the Sales and Distribution application module integrates with other application modules when you create a sales order.
When a sales order is created, integration occurs between the Sales and Distribution module and the Financial Accounting modules. This is because R/3 checks the customer's credit limit, which is stored in Financial Accounting. Another reason is that the creation of the sales order updates your company's cash forecast, which is also stored in the Financial accounting module.
When you create a sales order, Sales and Distribution integrates with the Materials Management module. This is to verify that the ordered material will be available on the requested delivery date.
Sales and Distribution integrates with the Production Planning module when materials entered on sales orders use a planning strategy, such as make-to-order. When this happens, R/3 automatically creates a production order in the Production Planning module.
Application modules share a common user interface and architecture. They are also navigated in the same way. So in addition to being integrated technically, they have an integrated look and feel.
Other R/3 application modules include:
Controlling (CO)
Fixed Asset Management (AM)
Project System (PS)
Workflow (WF)
Industry Solutions (IS)
Human Resources (HR)
Plant Maintenance (PM)
Quality Management (QM)
Enterprise Controlling (EC)
Investment Management (IM)
Treasury (TR)
Service Management (SM)
When R/3 is first installed, each application module will need to be customized to suit a company’s business needs. The groups of employees from a company who implement and configure R/3 are commonly called the project team or the implementation team. Sometimes companies implement a core group of R/3 application modules, and then add additional modules or functionality over time.
Project teams can customize R/3 tables, reports, and interfaces. R/3 project teams configure the application modules to increase the efficiency of a company's business processes. R/3 can process and generate information in several ways.
Batch input is R/3's standard method for entering a large number of records from legacy systems or routine interfaces. The R/3 business workflow links company-specific work processes to the business processes of R/3. The business workflow processing capability is a way an R/3 event can trigger one or a number of other events. Workflow applications control the flow of information and documents from one work center to another.
Let's see how the business workflow applies to handling a customer order. When a user is processing a sales order for a customer who has exceeded their credit limit, a supervisor might need to approve the acceptance of the order. As a result of R/3's business workflow, a message is then sent to the supervisor's inbox. The message informs the supervisor that a sales order is waiting for credit approval (Each user on R/3 has an inbox that is part of the R/3 mail system. This mail system handles internal and external mail, system notifications, and workflow items).
R/3 records business transactions and activities by creating documents for them.
This is called the document principle. R/3 uses the document principle to record information for the business activities your company carries out.
A key feature of successful business integration is that information should be entered only once. R/3 facilitates this requirement by rolling information down the business process. Rolling information means that the system copies or transfers data from one document into another, thereby reducing data entry and making problem resolution easier. For example, during the customer order management process, information in the sales order, such as the customer name, materials or services requested, and so on, is copied into the delivery document. And all the information from the sales and delivery document is copied into the invoice.
The management of a company needs to be able to retrace the steps of a business process in order to see what caused a situation. They can do this because all R/3 documents are linked and because R/3 has drill-down capability. Using drill-down capability, one can establish the document numbers of all documents connected to a sales order.
The chain of documents in R/3 is called the document flow. The document flow provides the history and status of related documents in R/3. The output processing capability allows to exchange information between a company's business partners and employees. One way you can use the output processing capability is to send confirmation of an order to a customer. Another way you can use it is to bill a customer for a delivery.
R/3 provides several ways to send and receive information. R/3 provides several ways to send and receive information. These include
Print
Fax
E-mail
EDI (EDI is the acronym for Electronic Data Interchange. It is a standard for the transfer of data between companies using networks such as the Internet).
The information that is sent to business partners using R/3 defaults from the electronic documents contained in the R/3 system. For example, much of the information entered on the sales and delivery document is transferred to the invoice.
The conditions processing capability allows a company to decide how R/3 will calculate the values of company-specific data or process a document in the system. Conditions are used to determine prices, discounts, surcharges, requisition release strategies, and workflow output.
Let's say your company manufactures engines and has created a condition to price them. Suppose a customer would like to order engines from your company and that you must create the sales order. Because a condition has been created to price engines, the price of the engines will default into the sales order. This saves you from having to enter a price manually.
The reporting tools in R/3 are flexible and meet internal and external reporting requirements. Reporting tools are useful for analyzing your company's performance so you can develop future business plans. R/3 includes two types of reporting - Standard reporting and Information Systems reporting. Standard reporting allows users to view transaction level data in each R/3 application. Information Systems reporting allows users to view summary-level statistical data from R/3 applications and external applications. This means a single report can display information from different application modules.
One can import data or export R/3 reports to external systems. One can import or export reporting data to and from Microsoft Access, Microsoft Word, Microsoft Excel, and many other applications. One can run reports for the whole of your company or for sections of it. It is possible to create a report for a section of your company by specifying which organizational unit you want to report on. Organizational units identify the hierarchical structure of an organization.
Let's say your company has divisions in the USA, Canada, and the United Kingdom. Each division forms an organizational unit called a "company". A company is an SAP term for an independent legal entity. A company can be further defined into smaller organizational units, such as plants and purchasing organizations.
R/3 provides a number of standard reports. However, one can also define your own reports to display information in a way that suits your company's needs. The archiving capability allows you to transfer information from R/3 onto storage media. To do this, one can use the ArchiveLink application. ArchiveLink is a communications interface between the R/3 system and an optical archive system. This allows you to store R/3 documents on optical disks that can't be overwritten.
