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201 Cards in this Set

  • Front
  • Back
Purchase to Payment Cycle
-Create Purchase Requisition
-Create Purchase Order from Requisition
-Create a goods receipt
-Verify Material Receipt
-Create Invoice Receipt
-Post Outgoing Payment
Create Purchase Requisition
-purchase requisition is a request or instruction to Purchasing to procure a certain quantity of a material
-is a transaction in SAP
Data in Purchase Requisition
-Vendor Master - vendor number
-Organizational Data -client, company code, receiving plant, purchasing group
-Purchasing Info Records -Info record number, vendor number
-Material Master -Material description, material group, unit of measure, valuation price
-User Input -Item category,account assignment category, material number, quantity, dates, receiving plant
Purchase Order
-a formal request to a vendor for a specific material or service under the state conditions
Data in Purchase Order
-Transaction Documents - requisition, RFQ, Quotation
-Master Data - Material, vendor, conditions, contracts and agreements, purchasing info record
-User Input - Verify data
Goods Receipt
-document created to confirm we accept goods into the SAP system
Data in Goods Receipt
-Purchase order -PO number, materials ordered, quantity ordered
-Delivery Document - PO number, materials delivered, quantity delivered
-User Input - verification, needed changes, receiving plant, storage location, movement type
Verify Material Receipt
-Verify we have the material in inventory (current stock report)
-The stock report is assessed for a specific plant and material
Create an Invoice Receipt
-Incoming invoices are reference against a Purchase Order and a Goods Receipt to verify their content, prices, and arithmetic
-Task must follow the delivery of goods in the warehouse/plant
Data for Invoice Verification
-Purchase order - PO number, vendor number, materials ordered, quantity ordered, price
-Material Document - PO number, materials delivered, quantity delivered
-Invoice - Vendor Number, Date, quantity, amount
-User Input - Verify data
Post Outgoing Payment
-payment to vendor is performed once the previous steps are performed
-process will create a financial accounting document to record the transaction
Data needed for Vendor Payment
-Invoice - vendor number, date, amount
-Vendor Master - payment terms, payment method, payment address
-User input - verify data
Accounting and MM integration points
-Goods Receipt
-Debit Inventory
-Credit goods received and Invoice received (GR/IR)
-Invoice Receipt
-Debit GR/IR
-Credit AP
-Payment Program (A/P)
-Debit AP
-Credit Bank
SAP Reports basis
-Can be filtered based on requirement parameters
-Are also determined by security rights to see the data
-Used to get an overview of vendors and purchasing organizations
Types of SAP reports
-Process level reports
-Enterprise level reports
-Functional Analyst (buyers) reports
Process Level Reporting
-many reports available to support entire procurement process and provide visibility into current operations

Display-give details on a specific PO
List - will provide a list of purchase orders
Enterprise Reporting
-regular provisioning of info to decision-makers within an organization to support them in their work
-Metrics Management - view business performance through outcome-oriented metrics derived from operational data
Logistics Information System (LIS)
-contains info systems such as:
-purchasing info system
-inventory controlling
-sales info system
-shop floor info system
-LIS extracts data from operative applications

Located: Information Systems ->Logistics
Purchasing Information System
-aggregate transaction reports are available to support purchasing process
-Two specific reports relate to
-General Analyses
-Analysis of Order Value

Standard analyses available
-Purchasing Group - aggregate data for the group (total spend, biggest vendor, etc)
-Vendor - aggregate data for vendors (Material order history, current invoices, etc)
-Material Group or material -Aggregate data for material(s) (order status, number of orders, etc)
-Vendor Evaluation - Aggregate evaluation data (quantity reliability, on-time delivery performance, defects, etc)
General Analysis - PO Report
-can run analyses of certain purchasing documents and create various sum totals to assist aggregate analysis
-Can compare several plants, purchasing groups, or vendors with each other
Analysis of Order Value
-Focus on analysis of purchase order values
-Many options available
-ABC analysis - classifying vendors or materials by order value
-Analysis using comparison periods - detect changes in purchasing activities over time
-Frequency analysis- frequency of purchase value, useful for vendor negotiations
Data Warehouse Reports
-Allows reporting by characteristics and key figures
-Allows for standard and flexible analysis of purchasing metrics
Functional Analyst Reports
-Buyers requirements
-Stock simulation
-Stock versus plan
-Price increases
-Open purchase orders
-Outstanding orders
-Weekly requirements
-Vendor evaluations
Purchasing Organizations
-Identify and select vendors
-Negotiate General conditions of purchase and contracts for one or more plants or companies
-Determine pricing conditions
-Analyze spend and inventory
-Evaluate vendors -quality, delivery performance
Defining Organizational Structures
-The operating structure of the purchasing dept must be mapped to data elements in SAP
-More than one structure is used in the real world and it changes with time
- Three models for purchasing
-Enterprise-Level
-Company - Level
-Plant-Level
Enterprise-Level Purchasing Organization
-Also known as cross-company code model
-One Purchasing organization assigned to all CC in a client
-Purchasing for all plants across all CC
-Highly centralized - Corporate Purchasing
Company - Level Purchasing Organization
-Also known as cross-plant model
-Different Purchasing Organizations are assigned to each CC
-Purchasing for all plants in one or more CC
Plant- Level Purchasing Organization
-Also known as plant-specific model
-Each plant has its own Purchasing Organization
-Highly decentralized
Master Data Definition
-Define vendors and material master (both initially and ongoing)
-Key issues:
-Determine who can modify and/or create either of the above
-Determine procedure for review when no longer relevant
Material Master List
-contains all info company needs to manage a material
-Materials are either recurring or purchased one time
Vendor Master List
-Data needed to do business with vendors (different view of the data)
Vendor Evaluation
-Company needs to perform a review of their vendors to determine the quality of the relationship
Business Process Support
-Map business process to SAP data and transactions
-done through configuration and might require modification to ERP system
-key questions relate to what is done automatically and if/when any approval is needed
-Might require EDI exchange with vendor's computers
Price Determiniation
-Conditioned on a number of variables
-Variables include
-Customs
- Variable Taxes (country, state, local)
-Value added taxes
-Volume price breaks
Outline Agreements - Contracts
-Contracts are longer-term agreements with a vendor, set for a period of time
-In SAP concerned with data definition out of a contract (quantity, price, duration of contract, delivery terms)
Payment Authorizations
-Are based on a hierarchy of approval levels
-To speed process small amounts most buyers can approve (varies by company)
-For large dollar amounts some higher authority needs to approve
(bigger deal after Sarbanes-Oxley)
Audits of Payments
-Procurement deals with the process of paying out money
-A high level of auditing takes place in this process
Vendor Master Data Issues
-In order to get paid the vendor needs to exist in the system
-to expedite the process multiple entries tend to get created
Purchasing Organizations
-Identify and select vendors
-Negotiate general conditions of purchase and contracts for one or more plants or companies
-Determine pricing conditions
-Analyze spend and inventory
-Evaluate vendors - quality, delivery perofrmance
System Development Life Cycle (SDLC)
-systematic process of planning, designing, and creating an information system for organizations
-Structured methodology used to avoid mishaps and coordinate the design and development tasks properly among the members of a large systems development team
System Development Life Cycle (SDLC) : Systems Approach
-Systems approach - complex problems are broken up into smaller manageable problems (separation of tasks and assignment of responsibility)
-A systems' hierarchy (stages) are then separated and solutions are developed for each problem within the hierarchy
Traditional SDLC Methodology
->Investigate ->Analyze ->Design -> Implementation -> Maintain
->investigate (all in a circle)
SDLC Phases - Investigation
- Need or opportunity identified
-Scope determined
-Thorough analysis of costs and benefits
SDLC Phases - Analysis Phase
-Determine the user requirements of the new system focusing on the problems of the current system
-Breakdown what needs to be created and engage user to define needs
SDLC Phases - Design Phase
-Process diagrams and business rules are documented
-Focus is on the new system's architecture, user interface, and reporting requirements
-blueprint of technical specifications of the new system using detailed feature lists and screen layouts
SDLC Phases - Implementation Phase
-Acquisition of hardware, software, development of custom applications, new system testing, training, and data conversion
SDLC Phases - Maintenance Phase
-Ongoing changes implemented
-Updates to serves or programming standards
-Training for new users or support resource
Complementary Software Development Methods
Software prototyping -Incomplete versions of programs evaluated and changed

Rapid application development (RAD) - minimal planning and rapid prototypes

Joint applications development (JAD) - End users and programmers meet and program together

End-User development - users are trained to develop their own applications
Rapid SDLC Approaches: Prototyping
-this approach does not go through analysis and design phase
-implements a skeleton or prototypes of the actual system with a focus on data input and output
-Idea is to demonstrate the system functionality
-feedback incorporated into system
ERP implementation plan approaches
-Comprehensive
-Involves implementation of the full functionality of the ERP software in addition to industry- specific module
-Requires a high level business process re-engineering
-Middle-of-the-road
-Involves some changes in the core ERP modules and a significant amount of business process re-engineering
-Vanilla
-Utilizes core ERP functionality and exploits the best practice business processes built into the software
-Business process re-engineering is eliminated
Types of ERP Implementation Methodology
-Traditional ERP life cycle
-Rapid ERP life cycle (used to sell services)
Rapid ERP Life Cycle
-once a company commits to the implementation, employees are empowered to make the decisions to keep the project moving forward
-Stages are less clear as are reporting relationships
-Hard to track progress
Traditional ERP Life Cycle
-Accomplishes one stage at a time and requires formal milestone approvals prior to next stage
-Less focus on development and more on mapping existing ERP functionality to a business process
-Still requirements driven but some business processes must change to match the packaged software
Traditional ERP Life Cycle Stages
-Scope and commitment stage
-Analysis and design stage
-Acquisition and development stage
-Implementation Stage
-Operation Stage
Traditional ERP Life Cycle Stages: Scope and Commitment Stage
-Characteristics of ERP implementation are defined
-Conducting feasibility study, scope of ERP implementation is developed within resource and time constraints
-Develop a long-term vision for the new system
-Short-term implementation plan
-Top management's commitment
-Vendor selection
Traditional ERP Life Cycle Stages: Analysis and Design Stage
-Analysis of user requirements
-Continue gap analysis - map differences between current business process and the embedded process in the ERP software
-Design a change management plan, a list of embedded processes, user interface screens, and customizable reports in the ERP softwre
-Data and system conversion are mapped
-Training - end user and IT support staff
Traditional ERP Life Cycle Stages: Acquisition & Development Stage
-Purchase the license and build the dev, test, and production version of the software to be made available to the end-users
-The tasks identified in the gap analysis are executed at this stage
-entire platform is configured and built
-Change management team works with end-users on implementing the changes in business processes
-Data team similarly works on migrating data from the old system to the new system
-ERP system needs to be configured with proper security
Traditional ERP Life Cycle Stages: Implementation Stages
Phased
Pilot
Parallel
Direct Cut or big bang
Traditional ERP Life Cycle Stages: Operation Stage
-handover or knowledge transfer is the major activity as support for the new system is migrated to the help desk and support staff
-Training of new users to the system as ERP modules are released
-Managing of new releases of the software, installation of patches and upgrades
-Managing the software contract with the ERP vendor
Change Management Defined
1. Defining and installing new values, attitudes, norms, and behaviors within an organization that support new ways of doing work and overcome resistance to change
2. Building consensus among customers and stakeholders on specific changes designed to better meet their needs
3. Planning, testing, and implementing all aspects of the transition from one organizational structure or business process to another
Role of Change Management
-maximize collective efforts of all people involved in the change and to minimize the risk of failure of implementing the changes related to the ERP implementation
-Happens at every stage of the implementation
-communication and top management support important
-Document all potential changes and address them
Methodologies Used in ERP implementation: Total solutions
Value Proposition
Reality Check
Aligned Approach
Success Dimension
Delivery Value
Methodologies Used in ERP implementation: Fast Track
Scoping and Planning
Visioning and Targeting
Redesign
Configuration
Testing and Delivery
Project Management
IT Architecture
Process and Systems Integrity
Change Leadership
Training and Documentation
Methodologies Used in ERP implementation: Accelerated SAP (ASAP)
Project Preparation
Business Blueprint
Realization
Final Preparation
Go-Live and Support
Business Integration Methodology (BIM): Accenture
Planning phase
Delivering Phase
Managing Phase
Operating Phase
SDLC : Goal, Analysis, Design, Implementation, Consultant Role, Management Role, End-user role, operations
Goal: Develop a new system to support the organization requirements
Analysis: Evaluate user needs through observations and interviews and create system specifications
Design: Develop new system architecture, user interface, and reporting tools
Implementation: Acquire Hardware, software, develop applications, installation, testing, training, and conversion
Consultant Role: Technical support mainly during design and implementation
Management Role: Some oversight and support
End-User Role: Focus group providing input during various stages with most involvement during Implementation stage
Operations: Maintains, updates, and provides technical support
ERPLC: Goal, Analysis, Design, Implementation, Consultant Role, Management Role, End-user role, operations
Goal: Implement a packaged system to support the organization requirements
Analysis: Vendor analysis and evaluation of business process changes due to the implementation
Design: Installation and customization plan of ERP software, data conversion, and change management strategies
Implementation: "Go-Live" conversion or releasing the system to the users, training, and support
Consultant Role: Change management, process change, and technical support from beginning to end
Management Role: Significant Oversight and involvement especially in change management
End-User Role: Multiple groups such as SMEs, advance users, and self-service users are part of implementation team with continuous involvement
Operations: Maintains, updates, upgrades, monitors change management strategy
Project Magement
A clear project plan and reporting structure will better ensure that the project receives the attention and accountability needed to be successful.
The project owners, a project steering committee, and project executive must develop the hierarchy and determine responsibilities.
Many businesses now have a project management organization within IT to provide the project management necessary for company projects.
The functional, technical, and change management staff for the project will likely consist of existing staff from the business, new hires, and consultants.
Scope and Gap Analysis
-Scope - Decide which modules to implement and where
-Gap - Evaluation of the functions provided by the ERP system compared with the operational processes necessary to run your business
Process Model
-Any abstract representation of a processs
-provide way of simple explaination

Advantages
-Graphical representations easier to understand
-Provide good starting point for analyzing a process
-Document the business process
Flow charting Process Models
Flowchart - any graphical representation of the movement or flow of concrete or abstract items

Process Mapping - (often interchangeable with flowcharting) specifically refers to activities occurring within an EXISTING business process
Flowcharting symbols
-oval thins - beginning or end of process
-Rectangle- Operation
-Diamond - decision
-Arrow - Direction of logic
-Circle with number inside - connector
Hierarchical Modelings
-ability to flexibly describe a business process in greater or less detail
Deployment Flowcharting
(Swimlane flowchart)
-Depicts team members across the tops
-Each step is aligned vertically under the appropriate employee or team
-Clearly identifies each person’s tasks in the process
-These are used to define security roles in the system that will be assigned to functional analysts in the future
Event process Chain (EPC)
-enforces an event-function-event structure
-standardized naming convention for functions and events
-Three types of branching connectors (AND, OR, and Exclusive OR (XOR)
event- state or status in the process
Functions: part of the process where change occurs
Process Improvement
Value Analysis - each activity in the process is analyzed for the value it adds to the product or service
-value added determined from perspective customer
-Real Value: value for which the customer is willing to pay
-Business Value: Value that helps the company run its business
-No value: an activity that should be eliminated
Dynamic Process Modeling
-takes a basic process flowchart and puts it into motion
-Uses computer simulation techniques to facilitate the evaluation of proposed process changes
-predict performance of the actual system
Business Process Reengineering (BPR)
-look at business processes from "clean slate" perspective and determine how best to construct these processes to improve how they conduct business
-Discards the existing process and incorporates value analysis
Types of Production Processes
-Discrete manufacturing
-Repetitive manufacturing
-Process manufacturing
Discrete Manufacturing
-Production of tangible material
-Each unit is discrete – it is unique, different from the other units
-Raw material components from which it is made are identifiable
-Produces different material over time, often in batches
-Lower volume production, longer time to produce
Repetitive Manufacturing
-Production of tangible material
-Items produced can not be differentiated
-Raw material components from which it is made are identifiable
-Same material is produced repetitively over a period of time at a relatively constant rate
-High volume production, shorter production times
Process Manufacturing
-Items not produced in individual units
-Often produced in bulk
-Examples are paint, chemicals and beverages
-Raw materials can not be identified uniquely
Productions Two primary Business processes
1. Production planning

2. Production execution
Production Planning
Identification of how limited production resources will be used to meet demand
Production Execution
Implementation of production process to meet demand
Principles for Production Planning
1. Work from sales forecast and current inventory levels to create an “aggregate” (“combined”) production plan for all products
2. Break down aggregate plan into more specific production plans for individual products and smaller time intervals
3. Use production plan to determine raw material requirements
Production Planning Strategies
-Make-To-Stock (MTS): Driven by inventory levels
-Make-To-Order (MTO): Driven by sales orders
-Configurable materials: Mass customization of one
-Assembly orders
Make-To-Stock Planning
-Production is triggered by need to increase inventory
- Sales are covered by make-to-stock inventory
- Inventory is stored in a warehouse(s)
Make-to-Order Planning
- Make-to-order planning: produced to fill specific customer orders, production is triggered when an order is placed
-No more production until received sales order
-Very close customer-vendor relationship
Configurable Materials Planning
- A configurable material is a material for which different variants are possible (Complete customization)
-The strategies for configurable materials allow you to plan products with an almost unlimited number of possible combinations of characteristics and combination value keys.
Assemble-to-Order Planning
- An assemble-to-order environment is one in which the product or service is assembled on receipt of the sales order.
- Key components are planned or stocked in anticipation of the sales order.
- Assemble-to-order is useful where a large number of finished products can be assembled from common components.
Forecasting
-the foundation of a reliable SOP
-Accurate forecasts are essential in the manufacturing sector
-Overstocked & understocked warehouses result in the same thing: a loss in profits.
-Forecasts are ALWAYS WRONG
Forecasting the Supply Chain
-Matching supply and demand is an important goal for most firms and is at the heart of operational planning.
-Since most production systems can’t respond to consumer demand instantaneously, some estimate, or forecast, of future demand is required so that the efficient and effective operational plans can be made.
Sales and Operations Planning
-Flexible forecasting and planning tool with which sales, production, and other supply chain targets can be set on the basis of historical, existing, and estimated future data.
Demand Management
-Demand management is the aggregate of all demand for multiple items for multiple customers
-Link between Strategic Planning (SOP) & Detailed Planning (MPS/MRP)
-Aggregating forecasts across multiple items reduces forecasting errors.
Demand Management
-handle this by forecasting from the bottom up, from the top down , or they start in middle and work both up and down
-The “top down” forecast essentially estimates total sales demand and then divides those sales dollars level by level until the stock keeping unit (SKU) is reached.
-The “bottom up” method, as one might expect, starts with forecasts at the SKU level and then aggregates those demand estimates level by level to reach a company–level forecast.
-Another method, one might call the “in-between” method, starts forecasts at the category level (like men’s dress shirts), and then works up to determine store sales and works down to divide up the forecast into styles, colors and SKUs.
Planning Procedures
-Scheduling production -MPS
-Estimating Materials for production - MRP
Master Production Scheduling (MPS)
-MPS allows a company to distinguish planning methods between materials that have a strong influence on profit or use critical resources and those that do not
- Using MPS you can carefully plan important parts or bottleneck parts in a separate planning run at the highest material level before the planning results have an effect on all of the production levels.
Material Requirement Planning (MRP)
-In MRP, the system calculates the net requirements while considering available warehouse stock and scheduled receipts from purchasing and production
-The output of MRP is a detailed production and/or purchasing plan
-Planning level outputs
-Primary Functions
-Monitor inventory stocks
-Determine Material needs (quantity, timing)
-Generate purchase or production orders
-MRP is used to ensure the availability of materials based on the need generated by MPS or the Demand Program
-Logical Steps
-Net Requirements Calculation
-Lot Size Calculation
-Procurement Type
-Scheduling
Lot Sizing
Static: based on fixed values in the Material Master
Periodic: Groups Net requirements together form multiple periods
Optimum: Calculated the optimum lot size for several periods of net requirements
Procurement Type
External Procurement
-Purchase Requisition
-Purchase Order
-Schedule Line
Internal Procurement
-Planned Order
-Production Order
-Process Order
Material Requirement Planning (MRP)
The central role of MRP is to monitor stocks and in particular, to automatically create procurement proposals for purchasing and production (planned orders, purchase requisitions or delivery schedules).
Consumption-Based
Consumption-based planning is based on past consumption values and uses the forecast or other statistical procedures to determine future requirements.
Outcome of Production Planning
Production Proposal – A plan to meet projected production goals

Capacity Planning – Plan to use production resources to the fullest extent

Schedule and Release
PO orders
-Planned Order (planning)
-A request created in the planning run for a material in the future (converts to either a production or purchase order)
-Production Order (execution)
-A request or instruction internally to produce a specific product at a specific time
-Purchase Order (execution)
-A request or instruction to a vendor for a material or service at a specific time
Production Execution Process
-Production Proposal (planning/other)
-Capacity planning
-Schedule and Release
-Shop floor documents
-Goods issue
-Completion confirmation
-Goods receipt
-Order Settlement
Production Schedule
- Calculates the production dates and capacity requirements for all operations within an order
-Determines a Routing
-Material Mater
-Work Center (formulas)
Production Release
-Two release processes

Header Level
-Entire order and all operations are released for processing, order is given a REL status

Operation Level
- Individual operations within an order are released
-Order is given a PREL status
- Not until the last operation is released does the order obtains a REL status
Availability Check
-Automatic check to determine whether the component, production resource tools, or capacities in an order are available (can be automatic or manually executed)
-Generates an availability log
Shop Floor Documents
-Shop Floor Documents are printed upon release of the Production Order
Shop Floor Documents - Lists
-The type of list can contain information about operations or production resources and tools, for example.
-The lists that the system generates and prints refer to all operations, sub-operations, components, and production tool and resources contained in a production order.
Material Withdrawal
-When a production order is created it references a BOM to determine the necessary components to produce the material.
-reservation is updated
-inventory is updated
-Costs are assigned to the order as actual costs
Confirmations
-Confirmations are used to monitor and track the progression of an order through its production cycle
(can be done at operation or order level)
Goods Receipt Effects
-Acceptance of the confirmed quantity of output from the production order into stock

Effects
-Updates stock quantity
-Updates Stock value
-Price stored for future valuation changes
-Production order is updated
Three documents are created
-Material Document
-Accounting document
-Controlling document
Order Settlement
-Consists of settling the actual costs incurred in the order to one or more receiver cost objects

Parameters for Order Settlement
- Settlement Profile: Specifics the receivers, distributions rules and method
-Settlement Structure: Determines how the debit cost elements are assigned to the settlement cost elements

Settlement Rule - Automatically assigned on creation of order, the parameters are used to define this rule
Settling a Production Order to Stock
-Debt posting is made to the Production Order with the value of the material
- Difference between the debt posting and credit posting is posted to a price difference account
Order Settlement Profit determined by costs
-Since production costs were higher than planned, the additional expenditure negatively affects the operating profit.
-This means that the profit decreases by the amount by which the actual costs charged to the production order exceed the standard price.
-The actual costs charged to the production order affect net income just as the posting of the inventory change at the time of the goods receipt.
Order Settlement Costs Analyzed
Primary -materials, external processing

Secondary - Production, material, administrative overhead

Cost Analysis Reporting
-Calculate and analyze planned costs, target costs, and actual costs of the production order.
Order Settlement- Calculation
-Calculate and analyze planned costs, target costs, and actual costs of production orders and process orders
- Calculate or update the work-in-process inventory and the finished goods inventory
-Calculate and analyze variances
- Transfer data to Financial Accounting (FI)
- Transfer data to Profitability Analysis (CO-PA)
- Transfer data to Profit Center Accounting (EC-PCA)
- Transfer data to Actual Costing / Material Ledger (CO-PC-ACT)
PP Organizational Structure
-Client: An independent environment in the system
-Company Code: Smallest org unit for which you can maintain a legal set of books
-Plant : Operating area or branch within a company
-Storage Location: An organizational unit allowing differentiation between the various stocks of a material in a plant
-Work Center Locations: An organizational unit that defines where and when an operation is performed
Material Type
-Used to classify materials
-Defines material attributes like:
-Valuation (value of material as market changes)
- Procurement (internal, external or both)
-Controls screen sequence and number assignment
-A number of material types are pre-defined (some are german)
- Users can create their own material types
Material Types in Exercises
ROH: Raw Material

HALB: Semifinished product

FERT: finished product
Who/What is a work center
-people or groups of people
-machines or groups of machines
-assembly lines
Product Routings Contain
What, where, when, how
Routings Help with
Routings enable you to plan the production of materials (products)
- Routings are used as a template for production orders and run schedules
- Routing are also used as a basis for product costing
In a routing you plan
-the operations- steps to be carried out during production
-The activities to be performed in the operations as a basis for determining dates, capacity requirements, and costs
-The use of materials during production
- The use of work centers
- The quality checks to be carried out during production
Elements in Production
Setup - time required to configure work center

Processing – machine time required to do production

Labor time – human time required to do the work

Can be fixed or variable
Production Resource Tools (PRT)
PRTs are movable resources shared among different work centers
Production Orders
- A production order defines which material is to be processed, at which location, at what time and how much work is required.
- It also defines which resources are to be used and how the order costs are to be settled.
- Production orders are used to control production operations and associated costs
Master Data- Bill of material
-BOMs are represented as single-level relationships between a material and its components and sub-assemblies
Create Production Order
Planed orders are converted into production orders
Material Level Reports
Used to give information of target against actual lead times associated with specific materials
Inventory Analysis
These are either concerned with current inventory situation or the long-term needs of the company
Production Operations Analysis
-The order information system is a tool for shop floor control with a reporting function for production orders and planned orders.
- These reports are used to extract the information of operation quantity, scrap quantity, lead time, target lead time, how often used, costs of use, etc.
High Level ERP Purchase Process
1) Vendor research and information gathering
2) High-level vendor demonstrations and evaluation
3) Needs and requirements assessment
4) Development of request for bid or proposal
5) Release request for bid to vendors
6) Analysis and selection
7) Vendor(s) negotiation
8) Purchase system
Vendor Research
- Vendor Research is the process of gathering information on the software market/industry to make an informed decision for the company
-Identifying and researching all aspects of a vendor package will assist companies in determining the total cost of ownership.
Vendor Research – Data Sources
Web search engines
Company websites
Third party information – Gartner!
Popular press – Be careful
Consultants
Peers
References
Lawsuit searches
Short List of ERP Vendors
-SAP —Solutions are for all types of industries and for every major market. Its products include SAP Business Suite, SAP NetWeaver, and solutions for small and midsize companies (e.g., SAP Business One and SAP All-in-One).
- Oracle/PeopleSoft — (Acquired PeopleSoft in 2004) Provides solutions divided by industry category. Also JD Edwards solution suite.
- Microsoft Dynamics (initially Great Plains) — is a line of enterprise resource planning (ERP) and customer relationship management (CRM) software applications developed by Microsoft.
- Lawson — Provides industry tailored software solutions, multiple products and .Net based.
- Epicor — Focuses on enterprise software solutions for mid-market companies.
- Infor Global Solutions (Infor Visual in book) — privately held company that specializes in enterprise software ranging from financial systems and resource planning (ERP) to supply chain and customer relationships, many industries from aerospace to biomedical, capital equipment, precision tools etc.
- Plex Online — Plex Online provides a full suite of enterprise resource planning, manufacturing execution system, and supply chain management solutions
-SSA Global —(Acquired Baan in 2004.) Claim to offer solutions that accomplish specific goals in shorter time frames. Now defunct July 2006
Request for Bids (RFB)
( Request for Proposals (RFP) )
RFB should always include.
-Type of ERP system the company wants with specific functionality
-Specified hardware and software infrastructure
-Training requirements
-Any specific contract issues required by the company
total cost of ownership (TCO)
The final elimination decision should center around a cost to benefits analysis.
- This includes long-term and on-going costs of using the ERP system
Costs of ERP Implementation
Hard Costs
-Software licensing fees
-Consultants' and analysts' fees
-Hardware and Technology infrastructure
-Training
Soft Costs
-Project Team member time
-Employee training (time and money)
-Productivity losses
Company expect ERP return on investment
- ERP eliminates redundant efforts and duplicated data; can generate savings in operations expense
- ERP system can help produce goods and services more quickly
- Smoothly running ERP system can save a company’s personnel, suppliers, distributors, and customers much frustration
- ERP systems provide real-time data
-Cost savings and increased revenues occur over many years
- ERP implementations take time
Return on investment (ROI)
assessment of an investment project’s value

Failures of ROI caused by:
-blind hope in software
-not enough analysis during planning and implementation phase
-skimping on employee education and training
Implications for Management
- Management must play a role in choosing the right system that will meet the company’s needs and requirements.
- Management must allocate enough time to evaluate the system, observe a complete and comprehensive demonstration, and communicate to references and others using the system.
- Discussions with the vendor about future improvements and direction must be scheduled.
- Negotiating with two vendors is time-consuming, but it will yield a better purchase price.
Sales Order Process Cycle of Events
Pre-sales activities
Sales order processing
Inventory sourcing
Delivery
Billing
Payment
Pre-Sale Activity
-Sales Support
-Pre-sales documents
Pre-Sales Activities – Sales Support
- Sales Support is a component of SD that assists in the sales, distribution, and marketing of a companies products and services to its customers.
- It contains the following functionality:
- Creating and tracking customer contacts and communications (sales activity)
Pre-Sales Activities - Pre-sales Documents
- An inquiry documents a customer’s request to a company for information in respect to their products or services without obligation to purchase.
- Quotations are legally binding documents to a customer offering a specific quantity of material at a specific price if accepted within a specific period
Sales Order Processing
Critical steps in sales order processing:
-Recording the items to be purchased
-Determining the selling price
-Recording the order quantities
Inventory Sourcing
From stock on hand.
From production or purchase orders that should be available.
From make-to-order production.
Shipped from an external supplier.
Shipped from another plant or warehouse.


-Inventory sourcing occurs when:
-An order is created.
-An order is changed.
-When the delivery document is created.

Available-to-Promise (ATP) check
Delivery
Delivery in SAP ERP system:
-Releasing the documents that the warehouse uses to pick, pack, and ship orders
Delivery Activities
Creating delivery documents
Creating transfer orders for material picking
Provide packing information (if required)
Goods issue (updating accounting and inventory data)
Billing
SAP ERP system creates an invoice by copying sales order data into the invoice document
- Creating a Billing Document will automatically debit the customer’s accounts receivable account and credits the revenue account.
Payment
Payment is the final step in the order to collection process

Final payment includes:
-Posting payments against invoices.
-Reconciling differences, if necessary.
Division
-Divisions are used as a way of grouping materials, products, or services
-Used to
-Differentiate distribution strategies or approaches
-Wholesale sales, retail sales, internet sales
-Different pricing, responsibilities, statistics, plants
Sales Area
- A Sales Area is a valid combination of Sales organization, Distribution Channel and Division.
- Determines conditions (i.e. pricing) for sales activities
Credit Control Area
An organizational entity which grants and monitors a credit limit for customers.
- It can include one or more company codes
Credit Control Area - Approaches
-Centralized
-Once credit control area for all company codes in the enterprise
-All customers in all company codes managed by one credit control area

-Decentralized
-More than one credit control area in the enterprise, each managing credit for one or more company codes
Sales Area data (Sales)
Partner functions: multiple roles
-Sold-to-party, Ship-to-party, Bill-to-party, Payer
Sales Documents
These are grouped into four categories:
-Pre-sales documents: inquiries and quotations
-Sales orders
-Outline agreements, such as contracts and scheduling agreements
-Customer problems and complaints, leading to free-of-charge deliveries and credit memo requests
Document Flow in Sales
The entire chain of documents – the inquiry, the quotation, the sales order, the delivery, the invoice, and the payment– creates a document flow or history.
Picking the Order
-The picking process involves taking goods from a storage location and staging the right quantity in a picking area where the goods will be prepared for shipping.
-Picking Status is recorded in each delivery item for the purpose of scheduling and monitoring the picking process.
-This status indicates where the item is in the picking procedure (picking has started for item A but not for B, for instance).
Packing the Order
-Packing is part of delivery and shipment processing.
-When you process a delivery, you can select delivery items for packing and assign them to handling units (HUs)
-You could pack delivery items in boxes, pack the boxes on pallets for delivery to the customer, and load the pallets onto a truck.
- you might not pack anything depending on the size of the object (large cars, engines, etc.)
Billing
-The billing document is created by coping data from the sales order and/or delivery document.
-The billing process is used to generate the customer invoice and update the customer’s credit status.
-Billing represents the final processing stage for a business transaction in Sales and Distribution. Information on billing is available at every stage of order processing and delivery processing.
-It is at this point that the sales process is passed over to Financial Accounting to await payment.
Work lists
A summary of objects which meet certain criteria and require further processing
Cross Selling and Up-Selling
-Cross-selling is the practice of selling an additional product or service to an existing customer.

-Up-selling is a sales technique whereby a sales person induces the customer to purchase more expensive items, upgrades, or other add-ons in an attempt to make a more profitable sale.

In practice this is typically combined into a sales process (triggered event)
ERP Implementation Components
Hardware
Software
People
ERP Components – Hardware
-Hardware
-An ERP system will require a powerful set of servers for development, testing, and production environments (system landscape).

Key Resources
-Servers. High-end multiprocessor systems, several gigabytes of main memory and several terabytes of secondary storage
-Clients. People accessing ERP systems (e.g., end-users, IT support staff, and developers), typically PCs but might be different (what else?)
-Peripherals. Print servers, printers, back-up power supply equipment, and networking hardware
ERP Components – Software
Software
-A set of operating instructions and logic called programs that control and direct the computer hardware to perform its functions.

Key Components
-System Software. Operating system platform (e.g., Microsoft Windows Server, Linux, and Sun Solaris
- Database Management System (DBMS).
(SAP/R3 works with IBM-DB2, Oracle, Microsoft SQL)
- Application Software. Project management software, development software, remote access software, and automated software for monitoring system traffic, virus protection, etc.
ERP Components - People
-End-users. Employees, clients, vendors, and others who will ultimately use the system.

- IT specialists. Database administrators, IT operations support, developers, change management, trainers, and others in the IT group

- Project manager. Puts together a harmonious team, works with top management in getting support and resources for the project, and champion the system and its benefits to the end-users
ERP and Virtualization
A virtual machine (VM) server technology can be described as providing a “technique to run multiple and isolated virtual servers on a single physical device, thus optimizing hardware usage.”

-The two more common models used for mission critical application are known as
-Hardware virtualization
-Paravirtualization
Benefits of Virtualization
Enhanced hardware utilization allowing an organization to consolidate underutilized servers
- Makes provisioning and deploying more agile.
Drawbacks of Virtualization
- Tendency to try to squeeze more performance out of a physical server by creating too many virtual machines leading to significant concerns when the server is operating at peak loads

- Security- If a hacker compromises the security of the hypervisor, he or she might get access to all virtual machines running on the host server
Third Party Products
Middleware
-Assists with the development of reporting databases that use extract translate and load (ETL) tools
-Holding location to act as a go-between for multiple systems (needs a standard)

Support
-The biggest need for support is for upgrades and product fixes to the third party products (or ERP migrations)
ERP Implementation Governance Components
Technical development
Hardware and software installation
Functional components
Communications and reporting
Change management
Project management
Project owners and sponsors
Budget management
Roles and Responsibilities
- Owners – Determine overall policy, budget, and scope of the project

- Project Executive—Oversees project activities, provides broad project oversight, resolves policy level issues, and ensures that the project stays within scope.

- Steering Committee—Oversee the project’s efforts and ensure appropriate leadership.

- Application Steward—Works with the other business owners to develop an overall business direction of the system, developing consensus, and resolving functional issues raised to the steering committee.

- Chairperson—Oversee the activities of the steering committee, ensuring that the committee functions in accordance with the overall project oversight.

- Project Management Office—Consists of the project executive, business and technical project manager(s), and the implementation partner.

- Project Teams—Provide direction and ERP application knowledge with respect to business process design, configuration, conversion, testing, training, reporting, and implementation.

-The following teams will exist:
Cross-functional component team
Functional component teams
Technical Infrastructure team
Development team
Change management team
Conversion team
Reporting team

- Project Team Leads—Provide leadership and overall direction for the implementation, ensuring the quality of deliverables and adherence to the project plan and milestones.

- Cross Functional Team—The integration team will consist of the module or project team leads from the business modules and the development leads.
Implementation Methodology
-Decisions around the hardware, software, governance, methodology, and level of modifications need to be based on the goals set out for the purchase of the ERP system.
-Two initial management decisions
-Use of an implementation methodology
-Whether or not to modify the system
-Management must decide on whether or not to customize prior to the start of the implementation process and it must be communicated to all on the project.
Vanilla Implementation
A vanilla implementation is when the company chooses not to modify or customize the system, but instead to change business practices to fit the system.
Modifying an ERP
Benefits
-A single-system instance is easier to maintain and support.
-Assessing organizational change along with modifying the system to meet the needs of the business will help to minimize risk.

Drawbacks
-If a system is modified, each modification will need to be analyzed in light of the upgrade to see if it needs to be incorporated in the upgrade or removed.
-An upgrade can sometimes turn into a re-implementation, which requires more resources and time.
ERP Platform Issues
-Servers – scalability
-Servers that make up the infrastructure will need to grow as the system grows and expands with enough storage to ensure data is quickly retrievable.
-Network – performance
-Businesses need a reliable and secure network in place.
-Security – protection
-Several components must be installed and implemented to ensure that the ERP system is secure from unauthorized access.
-Disaster Recovery and Business Continuity
-Planning for a disaster and providing business continuity is a part of every ERP implementation.
System Landscape Concept
SAP recommends a system landscape for implementation

Three completely separate SAP systems:
-Development (DEV)
-Quality Assurance (QAS)
-Production (PROD)
-Transport directory: special data file location on DEV server
System Landscape Concept
-Development (DEV) system used to develop configuration settings and special enhancements using ABAP code
-Changes recorded in transport directory
-Changes imported into QAS system
QAS system: changes are tested
-All settings, programs, and changes that pass testing are transported to PROD system
-PROD system: used by company to run its business processes
Problems associated with unintegrated systems
Data sharing usually did not occur in real time

Accounting personnel had to do significant research

In traditional accounting, company’s accounts are kept in a record called a general ledger
Using ERP for Accounting Information
-In the SAP ERP system, input to general ledger occurs simultaneously with business transactions
-Many SAP ERP modules cause transaction data to be entered into general ledger, including:
Sales and Distribution (SD)
Materials Management (MM)
Financial Accounting (FI)
Controlling (CO)
Human Resources (HR)
Asset Management (AM)
Accounting Activities
Financial accounting (FI) - Documenting all transactions of a company that have an impact on the financial state of the firm

Management accounting (CO) - Contains information for management decision-making related to internal needs. It facilitates coordination, monitoring, optimization, and planning of all processes in an organization.
Income statement
Profit and loss (P&L) statement
-Shows company’s sales, cost of sales, and profit or loss for a period of time (typically a quarter or year)

Managerial accounting: determining costs and profitability of company’s activities
G/L Accounts
-In the SAP R/3 system, each transaction that has a financial impact is recorded in a general ledger (G/L) account or sub-ledger accounts that are posted to the G/L via reconciliation accounts.

-The central task of G/L accounting is to provide a comprehensive picture for external accounting and accounts.
G/L Accounts Features
-Automatic and simultaneous posting of all sub-ledger items in the appropriate general ledger accounts (reconciliation accounts)

-Simultaneous updating of general ledger and cost accounting areas

-Real-time evaluation of and reporting on current accounting data, in the form of account displays, financial statements with different financial statement versions and additional analyses.
Accounting Organizational Levels
Client
Company code - Highest organizational level for financial reporting (external, legal reporting)
Chart of Accounts
Credit Control Area
Business area
Controlling Area
Operating Concern
Master and Transaction Data
Transaction data is data that is used for relatively short periods of time, usually to record business transactions (sales orders, purchase orders, production orders, payroll amounts)
- Transaction data is regularly removed from the system in a process known as archiving.
Balance Sheet Accounts
Assets : What the firm owns, in various levels of liquidity:

Liabilities: What the firm owes

Equity: The difference between total assets and total liabilities
Automatic Account Determination
Transaction Keys:
BSX: Inventory Postings
GBB: Offsetting Entry for Inventory Postings
DIF: Materials Management Small Differences
PRD: Cost (price) differences
WRX: Goods receipt / inv. receipt clearing acct

Valuation Class
3000: Raw Materials
7900: Semi-finished
7920: Finished
CO Vs. FI
Controlling
Internal Accounting
Cost Accounting
Managerial Accounting
Management Accounting

Flexible – Non-standard


Financial Accounting
External Accounting
Financial Statements
Legal Requirements

Standard
Cost Elements
Primary Cost Elements
-Expenses in FI that are relevant to cost accounting are recorded in CO using primary cost element.

Secondary Cost Elements
-Secondary cost elements can be used in transferring costs from one cost center to other cost centers. Primary costs are grouped together and transferred to receiver cost centers using a secondary cost element.
General FI/CO Master Data
-G/L accounts - provide a comprehensive picture for external accounting and accounts by recording all business transactions and their financial impact
-Cost Centers – controlling structure used to plan and allocate costs to the location in which they occur
-Cost Elements – data structure to allocate and report individual debits and credits, some do not impact the G/L (internal transfers)
Cost Allocation
A number of costs are planned and do not occur based on activity (# produced) but are tied to a time (or other) occurrence
- These are described as period-based allocations, which occur at period end
- Statistical Key Figures - Provide the foundation for accurate and effective cost allocations between cost objects
Asset Accounting
Assets can be categorized as tangible, intangible, and financial

-Tangible assets can be further categorized as:
Fixed assets
Leased assets
Assets under construction
Asset Depreciation
-Asset depreciation is concerned with the decrease in the value of an asset over time
-Depreciation can be planned or unplanned
-Depreciation methods are used
-Straight line
-Double declining balance

- Involves
Useful life
Residual value
Depreciation areas
Book value
Asset Retirement
Retirement may be:
-Revenue generating (sold)
-Non-revenue generating (scrapped)
Reporting
Financial reporting is broadly divided into two categories:
-Displaying account information
-Generating financial statements
Account Information
-Account information can be displayed at three levels:
Balance
Line item
FI document