ERP SAP Overview

IBM Global Services
ERP / SAP Overview
ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

IBM Global Services
Objectives
 The participants will be able to:

 Recognize the evolution of ERP solutions.
 Appraise the concept, benefit and use of ERP solution.
 Define the SAP R/3 Overview.
 Identify the different SAP R/3 Functional modules/areas.
 Distinguish the components of SAP R/3.
 Judge the use of ABAP programming language.
2 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

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ERP Overview
Enterprise Resource Planning

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... synchronization of Company functions...
Purchase
Manufacturing Finance
Sales

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… and extended to the complete value chain...
Tier I Component
Manufacturer
Vehicle OEM
Tier II Component
Supplier

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... delivering administrative and decision support with...
Decision support and

analysis
Processes monitoring &

feedback
Administrative
registration

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What is an ERP solution...?

…Integrated across the primary and support processes
Distribution
Manufacturing Marketing
Planning
Materials and Finance
Execution
Engineering Sales
Human Resources

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The ERP application

 An integrated suite of business applications, which..
 Closely links, monitors, and controls primary enterprise resources like manpower,
machine, material, methods, market and money.
 Enables corporates to readily change their processes to adapt to the ever changing
business scenario.
 Provides expertise in industry specific business processes.
 Entails
 Parameterization / Configuration
 Designing & Customization
 Testing and Implementation
 Training

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Why clients buy ERP?

 Corporate Initiatives
 Strategic initiatives
 A requisite capability in a competitive global business
 Operational initiative
 A foundation for performance and cost improvement
via integration
 Organizational initiative
 To initiate a major organizational change within the company
 Technology
 IT is making the transition from a supporting operational entity to becoming a strategic
competitive tool.
 Because others are buying it !!!

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Recent business trends favoring ERP growth

 Business Process Reengineering ( BPR )
 Most large companies are attempting to cut in-house development costs, improve
customer service, and speed products to market by reorganizing their existing
business processes.
 Software Pricing
 Licensing and pricing of mainframe based packaged applications are tied to the size of
mainframe system on which the applications run, but now customers are now
demanding user-based licensing options and major corporate applications like SAP
provide this instead of the conventional platform-based pricing technique.

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Recent business trends favoring ERP growth

 Globalization
 As businesses are becoming more global in scope, people are demanding packaged
corporate applications that are available in a variety of languages with support for
multiple currencies.
 Integration
 As more and more companies are going for BPR, there is increase in demand for
integrated solution e.g.. different applications sharing a common database and thus
enabling data definitions and business rules to be applied across an entire
organization with the facility of doing modifications at one location only.

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Business process benefits clients expect from an ERP project

 Global process/ Product management
 Integrated Supply Chain Management
 Leverage purchasing and vendor management
 Order cycle time/ customer service improvement
 Inventory reductions
 Reduced information systems costs on an ongoing basis
 Improved business management through worldwide integration and information
Vendors Inbound Manufacturing Transportation Distribution Delivery Customer Consumer

Logistics
Logistics and Distribution Sales & Customer Service

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Major ERP vendors

 SAP R/3
 Oracle ( Peoplesoft and JD Edwards were independent ERP venders earlier,
but are subsets of Oracle now )
 Peoplesoft
 JD Edwards
 Baan

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What results can be expected from an “ERP culture”?

 Reduced working capital requirements
 Improved customer service
 Improved direct labor productivity
 Reduced purchase costs
 Reduced obsolescence
 Reduced overtime
 Having the figures to make decisions
 Having accountability throughout the organization ERP
 Improved quality of life

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SAP R/3 Overview
 Systems Applications & Products

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SAP AG – At a Glance
 Founded in Germany in 1972
 Market Leader in Industrial Enterprise Application (IEA)

 About 56% market share in the ERP market
 Worldwide presence in over 50 countries

 18,000+ employees
 Trained consultants doubled since 1996 (40,000)
 About 20,000 companies in 120 countries

 Around 64,500 installations of SAP
 Strength lies in its high degree of integration, mainly for large, global corporate
enterprises
 Significant presence in Global Fortune 500 companies

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SAP R/1 , R/2
 The R/1 system

 Developed for ICI Chemical
 Released 1972
 Focused on Sales & Distribution and Materials Management
 Discontinued after release of R/2
 The R/2 system

 Reorganized as leading mainframe software for large multinational
R/2
corporations
Basis System  No sales effort planned – reactive only
 4,300 copies worldwide in 1993
 Mainframe-based to replace user legacy software;
co-existence and migration strategy underway for R/2 and R/3

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SAP R/3 : Latest Release

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SAP R/3 : Latest Release (Contd.)

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SAP R3E and mySAP.com

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SAP NetWeaver
Existing Systems
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SAP R/3 : 3 Tier Architecture
The Presentation Layer

Those SAP R/3 software components that
specialize in interacting with end-users
form the Presentation Layer.
The Application Layer

specialize in processing business
applications form the Application Layer.
The Database Layer

specialize in the management , storage and
retrieval of data form the Database Layer

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Presentation Layer Application Layer Database Layer

components components components
reside in: reside in: reside in:
Presentation servers: Application servers: Database servers:

Systems capable of Specialized systems Specialized systems
providing a graphical multiple CPUs and with fast and large
interface. vast amounts of RAM. hard drives.

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Presentation Layer components are installed across many PCs
The Application Layer

components are installed
across one or more high-
end servers.
The Database Layer

components are installed on
high-end database server.

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SAP R/3 Overview
SD FI
Sales & Financial
Distribution Accounting
MM CO
Materials Controlling
Mgmt.
PP
R/3 TR
Product Treasury
Planning
Client/Server
QM ABAP/4 PS
Quality Project
Mgmt. System
PM WF
Plant Mainte- Workflow
nance
HR IS
Human Industry
Resources Solutions

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Integration
All business processes throughout the supply chain are executed in

one system sharing all information
SAP R/3 Workflow

S C
U U
P S
P Procurement Production Distribution T
L MM PP SD O
I M
E Finance and Accounting E
R FI CO R

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SD: Sales and Distribution
SAP
R/3
SD Sales & Distribution . . . . . . . .

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SD Overview
SD
Inquiry
Quotation Purchasing
Materials Planning
Production
Sales Order
Pricing
Delivery to Customer Picking

Goods Receipt
Packing
Goods Issue Customer Stock
Invoicing Transportation

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Process Chain: Sales Distribution

Sales/Distribution
Chain
Inbound Logistics
from Materials Outbound Logistics
Sales Order & Distribution to Customer
Management Process
Receive Payment
Support Customer Sales
FI
(Customer Info Analysis)
Create Invoice - Optional -
FI/CO/PA
- Create pick list
- Create trans-
Issue Goods Process Customer
portation
work list (Ship Product) Inquires
- Create loading
work list
FI - Optional -
MM
Provide Customer
(Documents) Create Delivery Note Quotations
- Check credit - Optional -
-Check product availability
- Determine pricing Create Sales Order
- Estimate delivery schedule FI/CO/PA Support Customer
- Determine conditions of MM Agreements
sale
(Activities) PP - Optional -

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Order Entry
PP
FI MM FI
Credit Management
Dynamic Availability Check
Cash Forecast
?
OK

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Delivery/Shipment Processing
FI MM
WM
MM
Ship to party: C100
Item Material Qty
10
20
30
6301
6412
1507
10
10
25
Credit Management
.
.
. Delivery
Static Availability Check
.
Note
Picking
List
Picking
Packing
Transportation
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Picking/Packing
Sales Order
Delivery
Picking without Picking Picking with Picking

Confirmation Confirmation
Picking
Print Picking List
Request
Confirm Picking Picking

Request Confirmation
Goods Issue

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Invoicing
CO
PA
CO
Profit Center Accounting/Profitability Analysis PCA FI
Accounts Receivable/General Ledger FI
Cash Forecast
Single Invoices
EDI
Collective Invoices
Invoice Lists
Credit/Debit Notes

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MM Overview
SAP
R/3
MM Materials Management . .

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MM Overview (Contd.)
MM
Material requirement
planning
External procurement Internal procurement

Purchasing Production
Invoice Goods Master data

verification Warehouse
receipt management Material
Batch
Inventory
Vendor
management
Customer
Goods Transfer G/L
issue posting
Storage bins
Internal and external accounting Sales and distribution

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MM Overview (Contd.)
MM
Material requirement
planning
External procurement Internal procurement

Purchasing Production
Invoice Goods Master data

verification Warehouse
receipt management Material
Batch
Inventory
Vendor
management
Customer
Goods Transfer G/L
issue posting
Storage bins
Internal and external accounting Sales and distribution

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Material - Central Master “Record” for Logistic
456
Inventory
Purchasing
Desc:---------------------
123
Inventory Raw Material - 456
Quality
Sales Information
Production Information
Desc:---------------------
Product - 123

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Data in the Vendor Master
Maintenance Level
Client Purchase Organization Company Code

• Mandatory maintenance at the
Purchasing Organization Level
• Optional Maintenance at the Plant
Level, the Vendor Sub-Range
Level or a combination of the two
General Data Purchasing Data Account Data
Address Terms of Payment Payment Terms

Phone and Fax Contact Person Minimum Payment Method
No. Order Value Accounting Clerk
Control Data

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External Procurement Environment

Requirement
Determination RFQ
Source List Purchase

Requisition Quotation
Quota
Arrangement
Source
Outline Determination Price History
Agreement Vendor Purchasing Data
Selection
Info Record
Purchase Invoice
Order Receipt
Goods Receipt

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Goods Movement
Ad hoc.
Goods
Receipt
Delivery Production
Inventory Inventory
Transfer
Posting
Goods Goods
Issue Issue
Consumption Samples Sales Order

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Invoice Verification
CO FI
Orders / Projects /Cost centers
G/L accounts / Accounts payable Payment
Vendor
Vendor
Vendor
Vendor 3 invoiceinvoice Tolerance Check?
OK !
Blocked Invoice
e.g...
Invoice Release of
Verification Blocked Invoice
Delivery Invoice
Preliminary Posting
Automatic Price Update

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PP Overview
SAP
R/3
PP Production Planning . .

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Production Planning Cycle PP
Sales and Operations Planning

Master Data
Material Master
Master Production Scheduling
Bill of Materials
Work Centers
Routings
Sales & Distribution Demand Management PRT
Materials Management MRP Capacity Planning
MRP List Plant Maintenance
Production Order Cycle or

Costing Purchase Order Cycle

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Production : Process Chain
Production Chain
Inbound Logistics from Manufacturing Outbound Logistics to Materials
Procurement or Production Chain Process Management or Sales Chain
Archive/Delete Order
Determine Production Requirements
via MRP Output or Manually)
Settle Production Order
FI
CO Create production order
(via conversion of planned order
to production order or manually)
Transfer Produced Goods to Inventory
FI Check material availability
(Automatic)
Confirm production of
goods is completed Release Production Order
Produce Goods Print shop floor papers

(actual work orders)
Withdraw materials from

inventory (automatic/manual)
MM
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Production Planning
 Production Planning Functionality
 Master Data
 Sales and Operations Planning &
 Demand Management
 MRP
 Production Order & Capacity Planning

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Material Requirements Planning
Demands
Quantity:
12.000
Stochastic
Deterministic Planning
Bill of
Material
Demands Explosion
3. Qrt 4. Qrt
Capacity Planning
Lot Sizing Procedure
Net Change

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MRP - Planning Procedures
Planning
Procedures
Deterministic Consumption-Based
MRP Planning
Forecast-Based Reorder Point

Planning Planning
Automatic Manual
Reorder Point Reorder Point

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Production Control
MM
FI CO
Goods Issue
Costs
Open Production Order
Release Production Order
Planned Orders

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QM Overview
SAP
R/3
QM Quality Management . .

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QM Overview QM
 The QM application module is a quality

SD control andFinancial FI
information system supporting
Sales &
Accounting
Distribution
quality planning, inspection, and control for
MM CO
manufacturing Controlling
and procurement
R/3
Materials
Mgmt.
PP AM
Product Fixed Assets
Planning Mgmt.
QM PS
Quality Project
Mgmt. System
PM WF
Plant Mainte- Workflow
nance
HR IS
Human Industry
Resources Solutions

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QM in Logistics
Goods receipt
History-dependent intensity of quality inspections
Production
Inspection during production

Defects recording in QM
Control charts
Goods issue
Quality management in SD (certifies quality)

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PM Overview
SAP
R/3
PM Plant Maintenance . .

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Plant Maintenance - Overview

PM
Pre-defined External
work steps Services Material
Parts/Supplies Requisitions Reporting
Notifications
Create
Work Planned Schedule Close and
Orders Work Orders WO’s Settle WO
Emergencies
Labor
Special Shop
Tools Papers
Preventive/Predictive
Maint. WO’s

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FI Overview
SAP
R/3
FI Finance . .

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Components of FI
FI
General Ledger
FI-GL
Special Ledger
FI-SL
Accounts Receivable
FI-AR
Legal Consolidation
FI-LC
Accounts Payable
FI-AP
Asset Accounting
FI-AA

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Corporate Structure
Financial Financial Financial
Management Management Management
Area Area Area Corp. Group Level
Company Code (Company)

Legal Entity
Controlling Controlling Controlling Controlling

Area Area Area Area
Controlling Level
Plant Cost Centers

Management Units
Work Material
Place/Job Product

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The Elements of Financial Accounting
Foreign Exchange Business

Management Analysis
Finance Information System

Executive Information System
G/L Information System Cash Management
and Forecast
Multiledger
Bank Accounts
Accounts Accounts
Payable Payables Receivables Receivable
General Ledger
Extended General Ledger
Invoice Credit
Verification Management
Consolidation
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The Components of FI
Configuration Functionality
Organizational Structures Documents/Transactions Fiscal Year
Company Codes Posting Adjustments
Business Area Payment Terms Balance Sheets/Income Statements
Organization of Accounting Foreign Currency Closings
Ledger/Sub-ledger Taxes On-Line Display
Special G/L Transactions Interest Calculation
Chart of Accounts Planning Correspondence
Credit Control Payment Program Fixed Assets
Setting Credit Limits Reporting Analysis
Master Records Legal Consolidations
G/L Accounts
Customers
Vendors Modules
Banks
General Ledger Special Ledger
Chart of Depreciation
Accounts Payable Legal Consolidations
Depreciation Areas
Accounts Receivable Credit Management
Assets
Asset Accounting Cash Management and Forecast
Extended General Ledger Treasury

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CO Overview
SAP
R/3
Controlling. .
CO

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Components of CO CO
CO Configuration CO Modules
Organization Structures • Cost Center Accounting • Profit Center Acctg.
• Order and Project Acctg. • Product Costing
Master Data
• Transaction-Based • Activity-Based Costing
Postings
Planning Setup • Product Costing
• Periodic Allocations
• Budgeting
Criteria and Values
• Profitability Analysis
Valuation • Business Planning
& Control
Functionality
• Settlement • Planning
• Internal Orders • Transaction-Based
Posting
• Open Item Management
• Periodic Allocations
• Profitability Analysis
• Monitoring Actual
• Overhead Management
Activities vs. Planned

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The Elements of Managerial Accounting
Overhead Cost Overhead Cost Profitability Report

Controlling Controlling Analysis
Structure:
Cost PA Market
Centers Segment
Region
Division
Cost of Sales
PCA
Cost of Period
Report
Structure:
Controlling Profit
Center, GL
Accounts

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Integration within FI/CO
FI Chart of Accounts CO
Financial Accounting Management Accounting
Asset Asset Overhead Cost Product & Sales &

Accounting Accounting Controlling Production Profitability
Controlling Controlling
Asset Gen. Ledger Cost Center
Accounting Accounting Controlling Mass Cost of Sales
Production Accounting
Investment Accounts Actual
Controlling Receivable Costing Continuous Period
Static Flow Prod. Accounting
Plant Accounts
Standard Batch
Maintenance Payable
Costing Production
Account Cash Flexible
Revenue Management Standard Make to Central
Costing Order Prod. Line Items
Order
Project Central
Central Controlling Totals
Documents Controlling
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Integration Planned
Requirement PP SD
Customer
MRP Order
MM
Requirement on
component Planned Shipping
level Order
Purchase
Order Production Invoicing
Order
Goods
Receipt Account
Production Receivable
completed
Invoice FI
Verification CO
FI Order
Settlement
Accounts Which modules are
Payable involved?

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SAP R/3 : Components
Master Data
Application
Transaction Data
ABAP
Programs
Organization Structure
Configuration Key Data Elements
Functionality Configurations

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What is Customization ?
 Customization
 The adaptation of application software to customer-specific needs is
accomplished in two ways :
 Coding
 Programming customer-specific code that replaces or complements
components of the application
 Configuration
 Rendering the application appropriate to a specific customer by specifying
data on which the application operates

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Organizational Structures in R/3
Organizational Units
Cost Accounting Client
External Logistics Controlling Areas
Accounting Company Codes
Sales Purchasing
Organizations Organizations
Internal Logistics Valuation Areas
(MRP/Production)
Plants
Inventory Management Storage Locations/Batches/Special Stocks

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Organizational Structure in SAP R/3

Production Planning Financial Accounting
Company
Plant
Code
Controlling Human Resources

Client
Controlling Personnel
Area Area
Sales and Distribution Materials Management
Sales Purchasing
Area Organization

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ABAP Programming
 SAP R/3 applications are written in the ABAP programming language, and
run within the application layer of the R/3 System.
 ABAP programs communicate with the database management system of the
central relational database (RDBMS), and with the graphical user interface
(SAP GUI) at presentation level.

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Why do we need ABAP Development ?
SAP R/3 scope

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SAP Solution
Specific company
requirements
SAP R/3 scope

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SAP Solution
Specific company
requirements
SAP R/3 scope
New Functionality
Development
Non SAP
applications

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Summary
 Materials Requirement Planning (MRP-I) began as a technique for developing
enterprise-wide business solutions by providing automated tools for forecasting
demands and planning according to the forecast.
 ERP is an integrated suite of Applications to meet corporate needs.
 Some major ERP vendors are : SAP R/3, Peoplesoft, Oracle, Baan and JD
Edwards.
 SAP AG was founded in Germany in 1972 and it is a Market Leader in Industrial
Enterprise Application (IEA).
 The latest SAP R3E Enterprise Architecture, have separate release numbers and
release cycles for each of the 3 layers. There is no R3E release number as a
whole.
 SAP Web Application Server (6.20)
 SAP R/3 Enterprise Core (4.7)
 SAP R/3 Enterprise Extension Set (1.10)
 SAP NetWeaver is a vision, or paradigm, of total integration of :
 People
 Information
 Business Processes
 Applications

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Summary (Contd.)
 SAP has a 3 tier architecture comprising of the Presentation layer, Application
layer and the Database layer.
 The SAP solution is divided in different areas or Functional Modules like SD, MM,
PP, QM, PM, FI, CO etc.
 R/3 applications are written in the ABAP programming language, and run within
the application layer of the R/3 System.

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Questions
 What is MRP ?
 What is ERP ?
 When was SAP AG founded ?
 What are the 3 layers of the SAP R/3 ?
 What is SAP Netweaver ?
 What is the latest version of SAP ?
 What are the different functional modules of SAP ?
 What programming language is used for SAP applications ?
 Why do we need ABAP developments ?

ERP SAP Overview

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ERP / SAP Overview

ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

 The participants will be able to:

2 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

Enterprise Resource Planning

3 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

Enterprise Resource Planning

4 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

Enterprise Resource Planning

5 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

Enterprise Resource Planning

Decision support and

Processes monitoring &

6 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

What is an ERP solution...?

7 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

The ERP application

8 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

Why clients buy ERP?

9 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

Recent business trends favoring ERP growth

10 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

Recent business trends favoring ERP growth

11 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

Business process benefits clients expect from an ERP project

Vendors Inbound Manufacturing Transportation Distribution Delivery Customer Consumer

Logistics and Distribution Sales & Customer Service

12 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

Major ERP vendors

13 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

What results can be expected from an “ERP culture”?

14 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

SAP R/3 Overview

 Systems Applications & Products

15 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

 Market Leader in Industrial Enterprise Application (IEA)

 Worldwide presence in over 50 countries

 About 20,000 companies in 120 countries

 Significant presence in Global Fortune 500 companies

16 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

SAP R/1 , R/2

 The R/1 system

 The R/2 system

17 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

SAP R/3 : Latest Release

18 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

SAP R/3 : Latest Release (Contd.)

19 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

SAP R3E and mySAP.com

20 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

SAP R/3 : 3 Tier Architecture

The Presentation Layer

The Application Layer

The Database Layer

Those SAP R/3 software components that

22 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

SAP R/3 : 3 Tier Architecture

Presentation Layer Application Layer Database Layer

reside in: reside in: reside in:

Presentation servers: Application servers: Database servers:

23 ERP / SAP Overview | 1.01 March-2005 © 2005 IBM Corporation

SAP R/3 : 3 Tier Architecture

Presentation Layer components are installed across many PCs