What is SAP?.doc


Published on

  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

What is SAP?.doc

  1. 1. BUSINESS ENGINEERING Reshapes corporate structures around business processes. Main objective of BE is to optimize business processes. A business process is a set of logically related tasks performed to achieve a defined business outcome. (overhead 1) Supply Chain Management Enables the integration of all business processes and areas into coherent and well structured supply chain management. Involves the planning and control of all tasks along the business value chain—from production planning to capital asset management. Goals: 1. Reduce inventory levels 2. Lower costs 3. Hasten time to market 4. Provide better customer satisfaction Enterprise Resource Planning (ERP) A set of applications that automate/integrate finance, manufacturing, distribution, and human resource departments and help manufacturers handle jobs such as order processing and production scheduling. Handles the majority of an enterprise’s information systems requirements Sits on a common database (overhead 2) Finance:
  2. 2. • General ledger—chart of accounts and corporate financial balances • Accounts Receivable—tracks payments due from customers • Accounts payable—schedules bill payments • Fixed assets--depreciation • Treasury management--cash holdings • Cost control—costs related to overhead, products and manufacturing costs Human Resources: • Human resources administration—recruitment, travel, vacation • Payroll—salaries, wages, bonuses Manufacturing and logistics: • Production planning—production schedules • Materials management—purchases of raw materials, manages inventory stocks • Order entry and processing—automates entry of customer orders and tracks them • Warehouse management—processes movement of products through warehouses • Transportation management—schedules and monitors delivery of products • Project management—monitors costs and work schedules on project-by-project • Plant maintenance Integrating Backward: Extending the supply chain Value is created in an enterprise through the production process and external logistics process of a good or service. In the production process, value is add through the effective management of the
  3. 3. enterprises internal supply chain. The external logistics process adds value through the efficient management of the supply chains external to the enterprise. The typical supply chain involves the following: 1. The acquisition of raw materials, supplies, and services for the production process (procurement). 2. The conversion of those items into a good or service (production). 3. The internal distribution and storage of the final good or service (materials management). 4. The distribution to and ultimate consumption of the good or service by the customer (order fulfillment). So applying the concept of internal and external supply chains, the internal supply chain includes the production and materials management processes and the external supply chain includes the procurement and order fulfillment processes. However, the supply chain is more than just flows of materials, supplies, and services. It also involves the flow of information, both logistical and financial. It is the efficient coordination of these two flows. (physical and informational) that provide the enterprise a competitive advantage. An example of this is Wal-Mart and the process through which it replenishes some of its store shelf stock. When an item is sold at the cash register that information is then relayed to the supplier so that they have real-time information on sales of the products at Wal-Mart. The supplier then uses that information to determine what and how much stock to ship to Wal-Mart. The supplier of the product also uses the information to determine how much, when, and where to procure raw materials to produce the
  4. 4. product they supply to Wal-Mart. So the flow of information impacts the flow of physical goods, and the coordination of these two flows leads to cost savings over the entire supply chain. This process is called supply chain management. Supply chain management is the application of methodologies and techniques to integrate to processes of vendors, producer, distributors, and sellers. Through the application of these methodologies and techniques the right product, at the right time, in the right quantity, and the right quality is delivered to the right place. The goal and challenge of supply chain management is to achieve this at the lowest “total system” cost. Build-to-Order Dell Computers is best known for its application of the build- to-order supply chain model. In this model products are built after they are ordered, and in a just-in-time fashion. The concept is to almost immediately begin assembly of the customer’s order upon receipt of the order. This requires careful management of the component inventories and supply chain. One of the primary benefits to this type of supply chain model is the perception that each customer is receiving a custom product. In addition, they are receiving it rapidly. This type of supply chain model supports the idea of mass customization. Channel Assembly A slight modification to the build-to-order supply chain model is channel assembly. In this model the product is assembled as it moves through the distribution channel. This is accomplished by
  5. 5. strategic alliances with third party logistics (3PL) firms. Companies like Federal Express and UPS provide 3PL services to customers. These services sometimes involve physical assembly of a product at a 3PL facility or collection of finished components for delivery to the customer. For example, a computer company would have items such as the monitor shipped directly from their vendor to a 3PL facility. The customer’s order would only come together then once all items were placed on a vehicle for delivery. New Rules for the New Game: e-Commerce E-commerce is the hottest game in town right now. Companies are spending large amounts of money to get “online.” People with e- commerce technology experience are in high demand and demanding large salaries and often a piece of the action. The dot.com stories of instant millionaires are fueling the fire, but the pile of failures is growing as fast if not faster than the pile of successes. How does one make sense of all this commotion? Let us first examine the different levels of e-commerce. Some describe the “six levels of e-commerce development.” The six levels are: Level 1: Minimal Online Presence – This is the “corporate website.” An organization takes this first step because they feel that have to be on the “net.” This is a low risk step. Small and medium size firms may wish to stay at this level for a long period of time. The reasons for this are varied. The firm may believe that it is too expensive to move to the next level. There may be conflicts internally
  6. 6. on what should be the next, so going slow appears to be the best alternative to upper management. However, in the long run the survival of the firm may depend on moving to the next level. Level 2: Online Catalog – At this level the firm is often responding to requests from customers for more online information. The reasons for moving to this level include better customer service, a chance for increased revenues, a method to reduce costs of handling customer inquiries, and higher productivity. The amount of information on the firm’s website at this level expands to include detailed product and service information. This allows customers to view the product and service offerings of the firm before initiating the buying process. In addition, customers can locate after-sales support information quickly and more efficiently. The technology requires for this level at not much greater than level 1. The biggest issue here is maintaining current and accurate information on the website. The next step is to allow online ordering of products and services. However, if the firm does not have the information technology backbone to process online orders, they may remain stuck at Level 2 Level 3: Online Order Entry – This level allows the customer to not only view product and service information, but to order those products and services online. Features included at this level are customer accounts, order tracking, shipping information, and return processing. The primary issue at this level is order fulfillment. Firms have discovered that they need to integrate their online order fulfillment process with their back office information system (ERP). This integration is critical if the firm is going to be able to provide real-time information to the customer on product availability, shipping
  7. 7. status, and financial data. The time and cost of implementing the required back office systems (ERP) and integrating them with the online sales process can be significant Level 4: Automated Value Chain – The firm now has the online order entry process fully integrated with the ERP system. Things are running as smoothly as one can expect until the next requirement surfaces. This requirement involves integrating with the external supply chains (value chain). To continually reduce cycle times in the supply chain, real-time information needs to be shared with suppliers so they can more effectively support the supply chain. This requires integration across the entire supply chain. When an order is received online or offline, processes in other parts of the supply chain receive this real-time information so that these processes are updated. For example, an online order for a product signals manufacturing that product needs to be scheduled for production. A signal then goes to purchasing that a production order has been created and raw materials are needed to support the production order. The next step is signaling the supplier that raw materials are needed. At this point the supplier’s information system takes over and potentially follows the same process. This process can be automated to whatever level the firm desires. However, initially top management needs to assure all parties that the process functions properly, it is secure (privacy), channel conflict can be managed (online versus offline systems), and the information is accurate and timely. Level 5: Market Site – At this level a third party has integrated the automated value chains of competitors. The customer can now view and compare products across a particular market. The value here
  8. 8. is that customers don’t have to spend all their time accessing multiple web sites for online ordering. However, the issue becomes on of how can a firm differentiate itself. The customer can now view the firm’s products and services in direct comparison to other firms’ products and services. Data at the core of the enterprise ERP systems represent, in software, the business processes and state of an enterprise. The programs define and implement the processes, but processes without data are empty shells Obviously, it requires a great deal of data to describe all of the ongoing processes in even a small enterprise. The ERP must be capable of manipulating immense quantities of data in an efficient and timely manner. Of all of the technologies that needed to reach maturity in order to enable ERPs, data management technology is arguably the most important. A proper understanding of Database Management Systems (DBMS) requires at least a semester course. An adequate understanding of ERP systems, however, requires exposure to the main DBMS characteristics and capabilities. ERPs create new challenges for database administrators. As we shall see, the size of an ERP database is overwhelming, orders of magnitude larger than has been seen before. The sheer volume of data requires that Data Base Administrators (DBAs) develop new administration techniques to control the database. Database as foundation for ERP
  9. 9. It can be argued that a database management system is the single most necessary component in creating an ERP system. The DBMS must support a data model that is expressive enough to represent all of the transactions that a business enterprise must participate in. The model must be flexible enough to span the boundaries of functional areas, and to be able to correctly reflect the consequences of a transaction in one functional area within a totally distinct functional area. Innovation in Distribution Moving the product to the end customer (retailer, another manufacturer, or consumer) is part of the distribution function of the supply chain. There are a variety of distribution strategies available to the supply chain. These include: a. Private Warehousing – warehouses owned by the producer that keeps stock and provides it when requested by the end customer. Often used in a supply chain strategy of having regional distribution centers. b. Retail Distribution Centers – similar to supplier private warehouse but often owned by the customer in retail operation. c. Public Warehouse – warehouse owned by a third party that keep stock from a variety of manufacturers and distributes the stock to the end customer. Can be combined with logistic services. These firms are known as third party logistics (3PL) operations. d. Direct Shipment – items are shipped directly to the end customer. This supply chain distribution strategy is used for make-to-order and assemble-to-order items. This can also include many Internet and mail order companies. e. Cross-docking – a techniques used extensively in the retail industry where product arrives into a end customers warehouse/distribution center and is quickly processed (often less than 8 hours) and shipped to a retail store. This distribution
  10. 10. strategy, made famous by Wal-Mart, allows the retailer to combine products from a variety of suppliers and make single full load truck shipments to the stores. Online Retailing One of the most widely known uses of the Internet is online retailing. While business to consumer (B2C) represents only 10% of the total e-business market, it is the one that gets a lot of attention. Almost everyone in America has heard of Amazon. However, many of these B2C online retailing businesses make little if any profits. The current trend appears to be the brick-and-mortar retailers moving online. This will create an interesting dynamic since the online retailing business is different is many aspects than the store in the mall. For example, many bookstores that sell books to customers both through the Web and through retail stores do not allow a customer who purchased a book online to return it to their stores. The end result may be losing that customer from both. The solution to this and other issues in online retailing is the development of an integrated supply chain strategy that allows access to information anywhere and anytime. This supply chain strategy for online retailing must focus on the order fulfillment process and integrating with the back-end ERP system. Key Issues for e-Business There are a large number of key issues in the e-business area at any given time. The issues range from transaction security to web site design. In the supply chain management area some of the more important issues include order fulfillment, back-end integration, and real-time inventory.
  11. 11. The issue of order fulfillment was in the spotlight during the Christmas period of 1999. Many customers were extremely unhappy with the fact that items they had ordered were not going to reach them in time to be “put under the tree.” Instead many received notices of back ordered products or late shipment. The faster a company can process an order, the more likely that customer will order again. In addition, the accuracy of the order and order fulfillment schedules promised to the customer are just as important. Companies have spent billions on developing sexy web sites and marketing, but forgot about the nuts and bolts of the operation until it was too late for some. The problems of Christmas 1999 have caused many online retailers to rethink their approach to order fulfillment. They are the lucky ones, since some won’t have the opportunity to rethink this issue. Back-end integration of a company’s e-business implementation to their ERP system is critical for an efficient supply chain. “Some 85 percent of CIO respondents to a survey conducted by Collaborative Research pointed to back-end integration as their greatest implementation challenge.” (CIO, 1999) Companies struggle with integration of their ERP systems into their e-business implementations. However, they learn that this integration is essential if your e-business initiative is going to be successful. When these systems are not integrated customers cannot view real-time order status, product availability information, and account information. This lack of integration creates an environment of multiple databases rather than a single source of real-time, complete and consistent customer and operational knowledge.
  12. 12. Another key issue in the e-business supply chain area is the ability to know and communicate real-time inventory information. Customers want to know if the item listed on your web site is available now or when. There is nothing more frustrating than ordering an item with the expectation of receiving it in several days, but instead receiving an email stating that the item is not available and your order has been cancelled. This ability to display real-time inventory information is related to the second issue of back-end ERP system, your customers will never receive accurate inventory information. One company, Streamline an online grocery and household items retailer, checked inventory only after the order was placed. If the item was not in stock an employee would select a substitute was selected. Many times these substitutes were not acceptable to the customer, the result was unhappy customers. These unhappy customers complain or leave, which ultimately cost Streamline money. The solution was to actually reserve a product when the customer placed an order. This was accomplished through the building real-time links between the website and the company’s ERP system (SAP R/3). The company used the functionality of the SAP R/ 3 system to link receiving, picking and other warehouse functions with the inventory control system, and SAP’s online store module, which interfaces with order management, accounting and inventory control. The result is satisfied customers who can trust the company when they say an item is in stock and when it will be delivered. The need to move the company’s ERP system to the web and information from the web to the ERP system is critical. Unfortunately
  13. 13. the information from the back end ERP system doesn’t find its way into the web and vice versa. Often an organization ends up with a separate web and ERP applications with no integration. Information that would allow the organization to more effectively manage the supply change is not shared. What is SAP? Founded in 1972 in Waldorf Germany. Commands a significant share of the worldwide client/server enterprise application software market #1 vendor of standard business application software Fourth largest independent software supplied in the world. Client/Server Client—software that can request a service Server—software that can provide a service (overhead 3) Three-Tier design of client/server software (overhead 4) Presentation server—allows human-to-computer interaction by means of keyboard, mouse, and monitor. Systems users deal directly with this first level only. The software includes a GUI that takes requests from the user and passes them to the application server. Application server—The second tier. Using UNIX® or Windows NT®. Can run on one or more computers. Prepares, formats and processes incoming data. May connect with databases or on-line services to provide information that users request to make changes to the database. Database server—Stores information servers can use. Controls processing.
  14. 14. Hides the complexity of the system from users. If networked, allows many different people in different locations to see and edit the same information in real time. SAP’s R/s system is designed to integrate all business functions of an enterprise. What is R/3 An integrated enterprise software system that runs in open system environments. A three-tier client/server Database server Application server Presentation server Expandable in stages, thus adaptable to the specific requirements of individual businesses. mySAP.com For Cisco systems, roughly 90% of orders come to the company without ever being touched by human hands. 52% of them are fulfilled without a Cisco employee being involved. Internet volume by 2002 estimated to be approximately $327,000,000,000 Graphical User Interfaces (GUIs)—the user friendly pictures and tools an the computer screen