Business Processes (SD, MM, PP)

andOrganizational Structure

Agenda

• Value chain and business process integration

• Organizational elements• Business processes and R/3

functionality• Motor Sports International• R/3 System walkthrough of major

transaction events

• Integration and Sharing of Information:

-Order Information–> Shipping, Billing & Cash Processing

-Customer Master -> Order & Billing & Delivery

-Shipping –> Inventory & General ledger Adjustment

-Billing & Cash Processing –> General ledger Adjustment

The four business processes of the value chain are implemented in R/3 through the application modules.

MSI: The Company specialized in Motor Cycle Mfg

Organizational Elements • A mechanism for hierarchically representing company’s

organizational structure in the SAP R/3 system. These definitions are critical to an implementation. Organizational elements can belong to one or more applications: For example, a company code belongs to the FI, MM, HR, SD, and other applications.

• The financial examples for Motor Sports International, Inc. - US include: – A client which represents a legally and organizationally

independent unit at the highest level of the SAP R/3 System (e.g., SS group). (Note: This is a different client than the SAPGUI client of the three tier architecture)

– Business areas can be used to produce internal balance sheets and profit/loss statement. Cross-company business area reporting is supported. MSI is divided into the motorcycles (02) and accessories (90) business areas

– A company which is an independent legal entity within a client. Motor Sports International has two legal entities, Motor Sports International, Inc. US (3000) and Canada (4000).

Organizational Elements - MM • A purchasing organization is a unit that negotiates

general conditions of purchase for one or more plants.

• MSI’s purchasing organization in the US is 3000. • A plant is an organizational unit within a company

corresponding to a location, facility, or branch. Plants are used by all Logistics applications.

• MSI has two manufacturing locations, plant 3000 located in New York, and plant 3400 located in Seattle.

• Both plants have been assigned to purchasing organization 3000.

• Plants use storage locations to distinguish areas within the plant for inventory use.

Organizational Elements - SD

• A sales organization is responsible for negotiating sales conditions and distributing materials and services.

• MSI has one sales organization for the U.S. • A distribution channel is an organizational unit

that determines how materials reach a customer.

• Retail sales is distribution channel 03. • A division is an organizational unit that serves

two purposes: – Logistically, a division manages customer-specific

arrangements such as partial deliveries and pricing. – Financially, once products are sold, a division monitors

product line profitability by mapping the division/plant combination to a business area.

– MSI’s divisions are motorcycles (02) and accessories (90).

The SAP R/3 System Organization Diagram generically represents organizational units and their connections. The arrows indicate one-to-one, one-to-many, and many-to-many relationships. This example shows the sales view.

This diagram is part of the Business Navigator (component view). Refer to Business Navigator for all system models.

•Customer/Vendor/Material/Account Master ,

•One customer master record for a sales order, delivery, invoice, payment, etc.

•Master data has an organizational aspect. A customer master record has client, company, and sales area data.

•A typical task in R/3 is to add a record to master data such as the Material Master.

Adding a Material Master :

Select Logistics >>> Materials management >>> Material master.

Select Material >>> Create special >>> Finished product.

Four main business processes:•Customer Order Management (Selling)

•Manufacturing Planning and Execution (Making)

•Procurement (Buying)

•Financial/Management Accounting and Reporting (Accounting)

•Customer order management refers to the process of taking orders, checking availability, delivering goods, invoicing customers, and receiving payment.

•Application Modules that support this process are:

Sales and Distribution (SD) Financial Accounting (FI) Materials Management (MM) Production Planning (PP) Controlling (CO)

•Functions included are:Pre-sales activity Sales order processing Inventory sourcing Delivery Billing Customer payment Customer support (question resolution) Sales Information System (SIS)

•Manufacturing Planning and Execution refers to the process of recognizing demand, netting requirements, planning for the production or procurement of materials, and identifying the capacity to satisfy demand.

•The SAP R/3 application modules that support this process are:

Materials Management (MM) Financial Accounting (FI) Sales and Distribution (SD) Production Planning (PP) Controlling (CO) Human resources (HR)

•The SAP R/3 Functions included are: Sales and operations planning (SOP) Demand management Master production scheduling (MPS) Material requirements planning (MRP) Shop floor control Production order (Execution, Management, Processing) Logistics information system (LIS) Product costing Capacity requirements planning (CRP) Bills of material (BOM) Routing Work centers

demand forecast activity, closed-loop planning phase, control of production activities through inventory valuation, order settlement, product costing

•Procurement refers to the process of requisitioning, vendor sourcing, purchasing, receiving, and paying for materials and services.

•The SAP R/3 application modules that support this process are: (MM)(FI)(PP)(CO)(PM)•Functions are:

•Reorder point planning •Requisitions •Source determination •Request for quotation processing •Contracts/scheduling agreements (Blanket PO) •Purchasing •Receiving •Inventory update •Invoice verification •Payment •Purchasing Information System (PurchIS)

•Encompasses the purchasing of goods and services from recognition of the requirement through final vendor payment for the goods or services received. •The five major functions related to this process are: Purchasing requisition, Purchase order processing,Goods receipt, Invoice receipt/verification, Payment

•Each of the 3 previous business processes have links to the Financial/Management Accounting and Reporting process.

•Financial Accounting (FI):

General Ledger, Accounts Receivable/Payable

Fixed Assets, Consolidation, Special Ledger, Treasury

•Controlling (CO)

Cost Center Accounting, Internal Order Acctg

Product Cost Accounting, Profit Center Accounting

Project Cost Controlling, Activity-Based Costing

Profitability Analysis

•Each of the three previous business processes have links to the Financial/Management Accounting and Reporting process.

•The major functions related to this process for our scenario are: General ledger accounting

Legal and management reporting

Processes, Functions, Transactions all related.

business scenario :•Receive an order for our 1200cc motorcycles from our wholesale customer, Cycle Concepts Inc in Philadelphia, with a request for delivery in one month.

•MPS had been reviewed and approved for our motorcycle plant located in NY. We plan to produce approximately 30 MSI 1200cc motorcycles per month.

•By running MRP, we determine how many and which components we needed for this production plan. The motorcycle is composed of sub-assemblies and purchased parts.

•In order to produce the motorcycles, we procure the mirrors from the Eastern Supply Corporation. They bill us and we send a payment. Per their instructions, we send an invoice to their head office.

•According to the terms on the invoice, we receive payment for the delivered motorcycles within the discount period.

•The production manager responsible for the production cost center analyzes the labor costs for production.

•Main business processes and their functions are:

Customer Order Management:Customer Order, Delivery, Billing,Cash Receipt

ProcessingManufacturing Planning and Execution:

Sales and Operation Planning (SOP), MPS, MRP Planned Order Processing, Production Order, Production Order Receipt, Purchasing Requisition

Procurement:

Purchase Order, Payment, Order Confirmation,

Goods Issue, Goods Receipt, Invoice Receipt and Verification

Financial/Management: Accounting and Reporting

•The sales order contains: Material data, Pricing information, Order quantity,Customer data, Delivery data

•In our business scenario: the sales order is created after Cycle Concepts, Inc. of Philadelphia makes a request to purchase 1200cc MSI Motorcycles with delivery in a month.

•MPS contains: Demand management parameters

Time planning parameters

Quantity planning parameters

Planning Time Fence (PTF)

Available To Promise (ATP)

•In our business scenario: Motor Sports International creates a plan for a four-month build schedule. The shop calendar and stock on hand are taken into consideration when demand on production is calculated.

•Motor Sports International runs MPS.

•The customer order is an independent requirement within manufacturing.

•Material Requirements Planning (MRP) is a planning system of gross to net calculation of the material plan.

•Generates dependent requirements through bill of material (BOM) explosion.

•MRP contains: Net change or regenerative planning

Time planning parameters

Quantity planning parameters

Demand management parameters

•In our business scenario: MRP plans matched sets of parts for all components required to build the planned number of motorcycles per month as determined from MPS.

•The sales order contains: Material data, Pricing information, Order quantity, Customer data, Delivery data.

•In our business scenario: The sales order is created after Cycle Concepts, Inc. of Philadelphia makes a request to purchase 1200cc MSI Motorcycles with delivery in a month.

•The basic purchase order contains: Vendor, Material or service to be purchased, Order quantity, Delivery and payment data, Pricing information

•In our business scenario: The requisition for mirrors is converted into a purchase order to be sent to our vendor, Eastern Supply.

•The goods receipt contains: Quantity and materials received against a purchase order or production order.

•In our business scenario: MSI receives the mirrors from Eastern Supply.

•The New York Warehouse perpetual inventory is updated.

•A financial document, which updates the inventory account and an accrued liability account, is created.

•The invoice receipt and verification contains: Price of the goods received, Quantity of the goods to be paid for.

•In our business scenario: The invoice receipt and verification process verifies the agreed upon mirror part number, price, and quantity, and creates the corresponding financial transaction.

•Payment contains: Vendor master data, Payment terms, Bank master data, Amount due.

•In our business scenario: After the vendor invoice is posted, MSI issues a check for payment of the mirrors received based on payment terms.

•Planned order processing contains: Quantities, Dates, Components,

•In our business scenario: The planned order addresses the requirement for the manufactured final assembly - the MSI 1200cc motorcycle.

The production order contains: Operations, Material components, Costing data, Dates

In our business scenario: MSI releases the production order to the shop floor.

•A goods issue contains: A reference to a production order, The release of inventory, The creation of a financial document

•In our business scenario: Motor Sports International issues to the production order all components that are necessary to make the motorcycles.

•Records actual production results: actual amount of product completed at a specific operation, actual amount of time spent per operation.

•Determines who carried out the operation, amount of yield and scrap produced.

•The production order receipt contains: Date, Quantity received

•In our business scenario: The motorcycles from the production order are received into inventory.

•The quantity of motorcycles is updated. This process affects the value of inventory on the balance sheet.

•The billing process contains: Invoice to the customer., Pricing information from the order, Shipped quantity from the deliveries, Creation of the financial document.

•In our business scenario: After the goods are delivered, the billing document is created and the invoice is sent to the Cycle Concepts, Inc. head office in Seattle based on the requested billing schedule.

•Cash receipts processing contains: Payment amount, Payment terms, Discount amount, Invoice number

•In our business scenario: Based on the payment terms, MSI receives payment from Cycle Concepts, Inc. for the MSI 1200cc motorcycles.

• Financial accounting, Cost accounting, Legal reporting, Management reporting. Financial/Management Accounting and Reporting occurs when a journal entry is posted, and departmental expenses are reviewed and analyzed.