Find SAP Materials

SAP ERP Overview - Presentation Transcript

SAP ERP Overview

 

 

 

     

5.Purchase 6.Purchase
Requlsilions Orders
10.|nvenlorize
'”"°""'9 ’ Finished
P’°"'"9 Product
I
x  xampm 0! other modules
13.3!!! to 8.lnvoice from
12.DoIlvoty ~ Customer FIIC0 WM PM Vendor
_ , .  U g/s 0.
HR CRM Cs Many more

NAZRIN RIZAL PUBLICATIONS January 31,2012

1. Demand

Before a manufacturer produces any of its products, there must be a demand for it. A demand can come from a Sales Order, or a Forecast among
others. A simple example would be a tailor, who only makes custom clothing when a customer requests for it. This would represent a type of Sales
Order demand. Another would be clothes that you find in any department stores. This would be a type of Forecasting demand.

2. MRP

Once you have a demand, the next step would be MRP, Materials Requirements Planning. By referring to a BOM (Bill of Materials) for the
Finished Product with a demand, SAP would know what are the components needed to produce that finished product, and the respective
quantities. It would also know whether the components are produced In-house or externally from a Vendor.

3. Planned Orders
Let's use a Shirt as an example for a Finished Product. The BOM for this Finished Product would look something like this:
1 Finished Product - Shirt

- 10 Buttons

- 5 Meters of Cotton

- 1 Roll of Black Thread
So, once MRP Run is executed, SAP would know whether we have sufficient materials available in our warehouse to produce the X amount of
Shirts. If the Sales Order quantity is 20 Shirts, all SAP will have to do is multiply each of the components in BOM by 20. For components that are
insufficient in stock, SAP will generate a Planned Order. For components with enough stocks, they will be "reserved" for the production for this
Sales Order. SAP will also generate a Planned Order for the Finished Product, only if there is insufficient stock for the Finished Product.

4. Stock Available
As discussed earlier in point 3, Planned Orders will be generated for components that are insufficient in stock. Lets assume that currently, we have
enough Cotton and Black Thread in stock, but we do not have enough buttons.

5. Purchase Requisition

In order to top up the amount of buttons that we have in stock, we would either need to produce them, or purchase them from an external vendor.
In this case, we would be purchasing them from an external vendor. This is determined in SAP automatically. It is defined in the Material Master
Data that the material is procured externally.

“a2'*“'*2a'-b'°85P°*-C°"‘

NAZRIN RIZAL PUBLICATIONS January 31,2012

6. Purchase Order

The next step would be to convert the Purchase Requisition which is an internal document to a Purchase Order which would then be submitted to
the external vendor. The Purchase Order can be submitted to vendor via E-mail, Fax, or EDI (Electronic Data Interchange). If this material is being
procured for the first time, it is also possible to convert the Purchase Requisition to a Request for Quotation first. By doing this, you can get
quotations from a few vendors to determine which one provides the best price. Once this has been established you can then convert the Quotation
with the best price to a Purchase Order.

7. Goods Receipt

Upon receiving the Purchase Order, Vendor will then supply the goods to the customer on the requested delivery date. The delivery date here is
usually an agreed date depending on the Vendor's lead time. The delivery date is also one of the factors of Vendor Evaluation whether they are
able to send it on that agreed delivery date, or not. With Quality Management module implemented, the stocks from vendor will first be kept in a
‘'Quality Inspection" location. Only after the stocks have passed the Quality checks, then the stocks will be moved to the designated warehouse
location. This is a very important feature for some industries such as Pharmaceutical where they need to inspect the Raw Materials purchased
from Vendors before using them in Production of Medicines. It is also linked with Vendor Evaluation as to whether the vendor is constantly
providing goods with good quality or not. Another important aspect of performing a Goods Receipt is, integration with Fl/CO where when stock
level rises, the Inventory account in Balance sheet increases.

8. Invoice from Vendor

Once the goods are delivered, the next step for the vendor is to send an Invoice. Payment terms between customer and vendor would also be
included. Integration with Fl/CO happens here as well, where our Accounts Payable increases by the Invoice amount. SAP offers a three way
matching system where during Invoice Verification, it will automatically compare the Purchase Order price/quantity against the Goods Receipt
price/quantity. This would prevent us from keying in the wrong entry during this step.

9. Production Orders
When all the components are available, Production of the Finished Product can now commence.

10. lnventorize Finished Products

Once the production is completed, we then perform a Goods Receipt from Production Order. This is when the Finished Goods quantity will
increase, and the component quantities decrease simultaneously. A common term used here is "Backf|ushing". In our example, the Finished
Product, Shirt quantities will increase, and the components such as Buttons, Cottons, and Threads will decrease in quantity. Along with the
quantities increase and decrease are the effect on Balance Sheet. The Finished Goods stock account would increase in value and Components

“a2'*“'*2a'-b'°85P°*-C°"‘

NAZRIN RIZAL PUBLICATIONS January 31,2012

stock account would decrease in value. If you have Quality Management implemented, you could also do a Quality Check first before storing the
goods in the actual storage location / warehouse.

1 1. Pick I Pack
Now, since enough Finished Products are available in the storage location /warehouse, we can then pickthe desired quantities from the storage
and then subsequently pack them. The goods now are ready to be shipped / delivered to the customer.

12. Delivery
Next would be delivery of goods to the customer. At this point in time, our Finished Products (shirts) quantity will reduce.

13. Bill to customer
Once we have delivered the goods, we then bill the customer with the agreed amount. Upon performing this step, our Accounts Receivables will
increase and the customer is liable to pay us the agreed amount according to the terms specified.

This is just a simple scenario involving some of the major modules in SAP such as MM, PP, SD, QM and FICO. There are many other modules
which I have not covered and play an equivalently important role to certain industries. It also depends on the customer on which modules they
would like to implement.

“a"‘“'*2a'-b'°85P°*-C°m :