Introduction to SAP by SCT

Introduction to Enterprise Resource Planning (ERP) Software

There are a growing number of software suites that can help companies maximize efficiencies in their supply chain. There are specific software packages that can be implemented for purchasing or planning, but there is a software product, called Enterprise resource planning, that can be implemented across the company incorporating all aspects of the enterprise.

ERP for the Supply Chain

Enterprise resource planning (ERP) software has been implemented by a large number of Fortune 500 companies in the last twenty years. The common database and real-time processing has allowed companies to benefit from reacting to situations in the supply chain that would not have been possible without ERP software. The market leader in ERP software is the German company, SAP.

History of SAP

The company was founded in 1972 and is now a market and technology leader in client/server enterprise resource planning software. They provide a set of comprehensive solutions for companies of all sizes and all industry sectors. At the present time, SAP is now the third largest software supplier in the world and delivers scalable solutions that enable its customers to implement industry best practices. The company's emphasis is constantly developing new products that allow their customers to respond to dynamic market conditions and help them maintain competitive advantage.
In 1979, SAP released its mainframe product called R/2. SAP dominated the German market, and in the 1980s SAP developed a broader market in the rest of Europe. In 1992, SAP developed the client/server application we all know now as R/3. This allowed SAP to bring the software to the U.S. market and within a few years SAP became the gold standard for ERP software.

Integrating Business Components

When businesses chose SAP as their enterprise application software, they identified the integration of the business components as a key advantage. Many other software companies used a best-of-breed approach and developed highly complex interfaces to integrate the separate software packages. Supporting and maintaining just one system rather than several systems with different hardware platforms has yielded a significant cost saving for companies.

SAP for Small and Medium Sized Businesses

SAP was originally developed as an enterprise application-software package that was attractive to very large manufacturing companies. As the number of companies adopting SAP began to grow, a number of smaller companies in many different industries came to believe that SAP was the product that could give them a competitive advantage. Many of these companies required just the core SAP functionality. That usually comprises of finance, production planning, sales and distribution and materials management. Often companies would start their implementations with this core functionality and then on the second and third phases of their implementations they would introduce functionality such as product costing, warehouse management, human resources, plant maintenance and quality management.

Current Releases of SAP

The latest release of the SAP software, rolled out at the end of 2005, is called ERP Central Component (ECC) 6.0. With this release SAP announced its plan for future releases dubbed “innovation without disruption," whereby the upgrade cycles are minimized but a number of enhancement packages will be released over the lifecycle of the product. SAP’s roadmap calls for the next major release of ECC to be mid-2010. However, SAP has indicated that mainstream maintenance for ECC 6.0 will continue until March 2012 and extended maintenance to expire in March 2015.
In addition to the core SAP software, the company has introduced specific software for processes such as Customer Relationship Management, Supply Chain Management, Product Lifestyle Management and Supplier Relationship Management.

SAP Supplier Relationship Management


SAP has a product that allows a company to manage its relationships with its vendors more successfully. The SAP Supplier Relationship Management (SRM) application can connect a company with its supply base which allows multiple levels of suppliers, partners, and manufacturers to work together, while you reduce the cost of goods sold. There are a number of functions that are found in the SAP SRM application including procure to pay, catalog management, and supplier evaluation.

Procure to Pay

This function is used to enforce procure to pay best practices that will reduce procurement costs. This is achieved by improving supplier communications, streamlining procurement operations, and improving cost management. In this function it is possible to cut process costs and speed cycle times by automating procurement and leveraging workflow. You can also improve supplier relationships by assisting electronic transactions and collaboration. Companies can use the procure to pay data to create strategies with vendors.

Catalog Management

This function is used to manage the catalogs that are supplied by the vendors and used by a company's staff to purchase items. The catalog data has to be synchronized with the SAP master data and the data should be checked for quality to ensure that it is correct for users. The catalog data should be maintained so that the data can be cleansed, loaded, aggregated, and in a position where the data can be searchable. The catalog function in SAP SRM also provides companies with the ability to add images to the catalogs they use as well as internet and print publishing.

Operational Sourcing

This function allows a company to look across the enterprise to gain visibility even when a company is using a variety of purchasing solutions. The functionality gives the purchasing department a view of the demand for goods across the company, even non-SAP applications so that they can combine the total spend and improve the negotiation process with vendors. The purchasing department can work with the data in the application to co-operate with vendors to improve overall savings.

Contract Management

Centralized contracts with vendors allows a company to use their total spend across a number of locations to help negotiate better prices. The SAP SRM application gives a purchasing department the tools to track the spend and ensure that employees are purchasing the correct items for the prices negotiated with the vendor.

Self Service Procurement

This functionality gives employees of a company the opportunity to purchase items they need from vendors via an internet portal. This allows employees who do not normally purchase items, to be able to purchase items through the catalogs that are available to them. By developing a set of business rules for the employees, they can purchase items which can trigger an approval workflow so the items are received in a timely fashion.


The SAP SRM application contains operational reporting that allows a company to monitor purchasing activities, measure contract compliance, and review organization wide spending and sourcing needs. The reports can use data from the SAP SRM and SAP ERP systems.

Current Release

The current release of the SAP Supplier Relationship Management is version 7.0, which was released in 2009. The first SAP e-procurement solution was offered in 1999, and over the years, the solution has grown from a Web-based catalog requisitioning solution aimed at operational excellence to the solution today that offers complete supply management. SAP SRM is based on a number of best practices that come from proven business and industry expertise. It also provides a wide range of pre-configured business scenarios that companies can quickly implement and benefit from with improved efficiency in their business processes.

SAP Sales and Distribution


The sales and distribution (SD) function of SAP is part of the logistics area and contains the processes that help a company integrate with their customers. These processes include providing quotations to customers, receiving sales orders via phone, internet or EDI, shipping the finished goods, and finally billing the customer for the goods that they have received.

Sales Organizational Structure

Within SAP there is an organizational structure that exists for the sales and distribution module. The highest level of this is the sales organization, which is responsible for the sale and distribution of goods and services. The sales organization is a legal entity and is associated with one company code, but a company code can have a number of sales organizations assigned to it. On the logistics side, a sales organization can sell products for more than one plant, and a plant can have more than one sales organization selling its products. It can be subdivided into a number of distribution channels which helps a sales force on getting the right products to the right customers at the right price.
The distribution channel that can be defined will depend on the products that a company sells, for example you can have channels that represent wholesalers, distributors, or direct sales. A good distribution channel strategy will help your company to increase sales, improve sales and marketing coverage, and reduce your costs across the sales function.
For each sales organization there can be one or many sales divisions. The role of the sales division is to structure the sales resources within the sales organization. The resources in a sales division are focused on a single customer or group of similar customers.

Sales Documents

In SAP there are a number of documents that are used in the sales and distribution process include customer inquiries, quotations, sales orders, sales order contracts, credit memos, and returns. A customer inquiry is given to a customer or potential customer for an item. After the inquiry has been received by the sales office associated with the customer, the team can work on a response. The resulting sales document is a quotation that is sent back to the customer with the best price and conditions offered by a company.
A sales order is an agreement between a company and a customer. The sales document specifies the items to be delivered, the quantity, and the date of delivery of the items to the customer.
A sales scheduling agreement is similar to the sales order in the sense that the customer orders a range of items, price and conditions are agreed upon, and a delivery is arranged. The agreement schedules a number of deliveries to the customer over a period of time.
A sales contract is an agreement between a company and a customer for goods or services over a specified period of time. There are a number of contracts that can be created such as a quantity contract that specifies the total of the items to be sold to the customer over a period of time. A contact can also be based on value so that items are sold to a customer over a period of time up to a total amount.
On occasion a customer will want to return items. This may be because they are the wrong items, the items failed inspection, or they are not required. Depending on a company's return policy, it may require the customer to obtain a return merchandise authorization (RMA) number or it may allow customers to return items without an RMA. When the returns are processed, a credit is issued to the customer in the form of a sales document called a credit memo. Credit memos can also be processed if the customer has been charged a price that is in excess of the agreed amount, if a discount has not been applied or if they have been charged for freight when the order included free shipping.
The opposite of a credit memo is a debit memo and this can be created if a sales department has undercharged a customer for items on the sales order.

SAP Customer Service

Introduction to SAP Customer Service

SAP Customer Service functionality contains the processes that a company requires to deliver the services are offered to customers. These services can be for warranties that are offered with products or warranties that are purchased by customers. Providing service to customers for either for warranties or repairs is important for a number of reasons. Primarily providing excellent customer service will help to develop customer loyalty. Customers are more likely to purchase from companies who have a high level of customer satisfaction. In turn this makes a company more competitive and leads to increased sales. Unless a company manufacturers a unique product or provides a unique service, there will always be competition from other firms. A business needs to ensure that it can distinguish itself from the competition. Excellent customer satisfaction is vital to beating out the competition and world class customer service is an important factor in keeping customers satisfied.

Service Agreements

Service agreements are made by a customer just in the same way that they make orders. The service agreement is a commitment by a company to service items either at a customer's facility or they can ship the items to the supplier for repair. Service agreements can either be long-term or short-term. Long-term agreements are in the form of maintenance contracts and warranties, while short-term agreements are made for one-off service needs. Service agreements can be beneficial for a company as it ensures that the customer is not purchasing services from a competitor. It also gives a company the chance to keep customer satisfactionat a high level, even if the item has caused a problem. But this can also turn into a negative if the customer has to wait a long time for a repair or is not given regular updates.

Service Processing

When customers call with requests for service or warranty claims a service department has a number of processes that can be used. These include the service notification, service order and repair order.
  • Service Notification - if there is an issues with a piece of equipment at the customer's site that can result in call to the vendor. This can be directly entered into the SAP system as a service order or a repair order. However, if the issue is not clear to the customer, then a service notification can be created that contains all the information that service technicians need to perform an investigation.
  • Activity Report - this is created to collect information for maintenance or service that has been performed and no further processing is required. These actions will be purely service tasks that are not a result of damage or failure of the equipment.
  • Service Order - the tasks that need to be performed for the service of a piece of equipment may require parts and resources. The service order will contain the parts and labor needed to perform the service tasks. The service order can be created from a service notification is one already exists.
  • Repair Order - this type of order is created when your customers send in items for repair because it is faulty or due to damage. Initially the service technician will examine the item to decide whether it can be repaired. If it cannot then it may be returned to your customer. If the customer does not want the item because it cost of sending it back to the customer, then it may be scrapped. If the item can be repaired, the customer is informed of the cost of the repair. If the cost is more than the customer is willing to pay then the item can be sent back or scrapped if the customer does not want it returned

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