2What is ERP?An Enterprise Resource Planning system is a packaged business software system that allows a company to:Automate and integrate the majority of its business processesShare common data and practices across the entire enterpriseProduce and access information in a real-time environment
3What is S A P Introductions: Introductions of the lecturers Let all participants introduce themselvesName, officeSAP client and versionWhat do they want from the courseLecturer: write the participant objectives on a white board for all to see
4Systems Applications and Products What is S A PS A PStands forSystems Applications and Products
5About SAP S A P Founded in Walldorf, Germany in 1972 ystems, pplications,roducts...Founded in Walldorf, Germany in 1972SAP AG was founded in 1972 by 4 former IBM employees. The company headquarters are based in Walldorf, a small German town close to Heidelberg, where the university is a continuous source of employees at SAP. Many of the gurus behind this phenomenal system known as R/3 come from this university.The company name, SAP is a German acronym, but loosely translates in English to Systems, Applications, and Products in data processing. After the introduction of SAP R/3 in 1992, SAP AG has become the world’s leading vendor of standard application software.
6World Leader in enterprise business software SAP Facts & FiguresWorld Leader in enterprise business softwaresolutions4th largest independent software supplier in the worldLargest ERP vendorMore than 2,500,000 users in over 50 countriesOver 21,000 R/3 installations worldwideAn average of 25% of revenue invested in R&DHigh customer and employee satisfactionOne of the reasons for SAP’s success is that since it is a standard package, it can be configured in multiple areas and adapted to the specific needs of a company. To support those needs, SAP includes a large number of business functions, leaving room for further functionality and enhancements or adaptability to business practice changes. More and more, corporations are deciding to use standard software systems that are highly flexible and configurable and able to support most of their business practices and information needs.The maturity and solid experience of SAP in solving the information management problems of businesses around the globe has made its R/3 system the clear market leader in the development of standard applications.SAP is currently ranked fourth among independent software vendors and is making gains with annual growth rates of more than 40 percent in sales and profit and approximately 30 percent in headcount.With more than 6,000 companies relying on SAP for their most critical business needs, the number of productive users should easily surpass 300,000. SAP AG has become the top European software vendor. It has formed a considerable number of subsidiaries in more than 40 countries; SAP America is the largest one, with corporate headquarters in Wayne, Pennsylvania. It has also established a technology development center in Foster City, Ca, and sales and support offices throughout North America. The company is committed to further expand into new international markets and to gain multinational support. That is one of the reasons SAP has developed a Kanji version of the R/3 system for the Japanese market and a new Mandarin version for the Chinese and other languages.
7Why SAP is Unique Highly integrated Comprehensive functionality Complex data structuresAvailability of dataSingle point of entryOn-line data capture and real-time updateRequires strong application knowledgeCauses personnel and organizational structure changesCauses business process changesAn additional aspect of the software integration capability is real time. In fact, the R from R/3 originally is meant for real time. When new input is made into the system, the logical application links will concurrently update related modules so that the business can react to immediate information and changes. This type of updating reduces the overhead of manual processing and communication and enables companies to react quickly in the nonstop and complex business world, which makes SAP software systems a very valuable tool for executive planning and decision making.Comment: add audit reasons here:1. Common business processes (global)2. Integrated business processes3. Centralization4. Timely
8Logo and Implementation SAP Business PartnersBusinessDevelopmentPartnersLogo and ImplementationTechnologyPlatformRegular exchanges of experience and ideas are a vital element in the long-term partnership SAP is seeking to form with its customers. The company endeavors to strengthen this relationship by organizing conferences, participating in trade fairs and offering an extensive range of training courses. The continual development of its service offering allows it to keep up with the growing requirements of customers.SAP’s high-quality offering is complemented by a comprehensive partner concept. All major hardware vendors, without exception, are fully engaged to partner with SAP: currently, AT&T, Bull, Compaq, Data General, Digital, Hewlett-Packard, IBM, Pyramid, Sequent, Siemens-Nixdorf, and SUN have supported certified SAP R/3 platforms.The biggest consulting firms including the Big 6, numerous smaller ones, and most of the hardware vendors’ systems integration departments have built an impressive army of experts around SAP-related business. (Unlike Oracle, PeopleSoft and other software developers, SAP does not provide systems integration consulting services.) Additionally, SAP has a growing group of first-order technological partners including Microsoft, Informix, Oracle, Apple, Next, Adobe, iXOS, and software AG.SAP is constantly seeking to extend the range of software interfaces available for use with SAP systems.
9Support & Services User Groups Competence Centers SAP Employees over 18,330worldwideHotline( 24 hours a day7 days a week )OSSOnlineServiceSystemRemoteSupportCCMSComputing CenterManagement SystemEarly WatchLogo/Implementation Partnersover 10,000 consultantstrained in SAP worldwideTrainingover 400 differentSAP training coursesSAP is continually expanding the level of its services through the use of future-oriented technology. One of SAP’s main objectives is to ensure that its powerful services are available around the world 24 hours a day for each phase of the R/3 System lifecycle:Problem-solving services for the quick resolution of system-related problemsRemote support services for error prevention, system optimization, and consultingInformation Services providing current information tailored to customer needsCustomer support services as a central contact point for receiving and answering questions about the R/3 System and R/3 ServicesThe On-line Service System (OSS) offers a Hot News service, assures fast and easy information retrieval, and makes ordering documents easyProduct design services for integrating development requests in future production functionalityCertification and audit service to ensure a uniform quality standard for services from SAP and its partnersEarly Watch service for increased system availability through preventative analyses that assure early recognition and avoidance of problemsSAP supplements its own services with services from partners. The quality of SAP’s services and those of its partners is monitored, certified, and optimized at regular intervals to ensure a consistent high level.
10Industries Served By SAP 01 Raw Materials, Mining Agriculture02 Oil and Gas03 Chemical04 Pharmaceutical05 Building Materials, Clay, Glass06 Building and Heavy Construction07 Primary Metal, Metal Products, Steel08 Industrial and Commercial Machinery09 Automotive10 Ship, Aerospace & Train Construction11 Transportation Services, Tourism12 Electronic/Optic Equip., Common Devices13 Wood and Paper14 Furniture15 Consumer Packaged Goods - Food16 Consumer Packaged Goods - Non-Food17 Clothing and Textiles18 Retail and Wholesale19 Communication Services, Media20 Storage, Distribution, Shipping21 Utilities22 Financial Services, Banks and Insurance23 Government, Public Admin. and Services24 Museums and Associations25 Healthcare and Hospitals26 Educational Institutions, Unis, Research27 Consulting, Software28 ServicesIn addition to manufacturing, the R/3 System can be used in a number of other industries. To meet the requirements of specific economic sectors, SAP is developing industry-specific enhancements to the R/3 standard. Industry solutions for banks, insurance companies, publishers, hospitals, retailers, public utilities, the oil industry, and the public sector are either already on the market or are under development.Banks: risk management, statutory reporting, controllingInsurance companies: securities, loans and real estatePublishers: subscription management, advertising managementHospitals: patient administration and accounting, hospital controllingRetail: product structure, distribution logistics, point-of-sales systemsUtilities: device management, house connections, meter readings processing, billingOil industry: exploration, transport, distributionPublic sector: financial budget planning and management
11SAP - The ProductOriginal product was SAP R/2 on the mainframe introduced in 1972SAP R/3 introduced for smaller platforms in 1992Developed using a fourth generation proprietary language developed by SAP called ABAP/4Major SAP versions:2.2h3.0d, 3.0e, 3.0f , 3.1g, 3.1h, 3,1i4.0b, 4.5b, 4.6b, 4.6c, 4.75.0, 6.0
13SAP - Client/Server Environment – Software/hardware combination that can make a request for services from acentral repository of resources• Server– Software/hardware combination that can provide services to a group of clients ina controlled environment
14SAP - Three-Tier SAP Structure • GUI – Graphical User Interface or Web Interface• Application server (one or many)• Database server (one single location)
15SAP ComponentsSAP R/3 is comprised of modules categorized in three core functional areas:FinancialHuman ResourcesLogisticsSpecial software packages on top of R/3, targeted to specialized vertical industries:Industry Solutions (IS)Special set of modules positioned between the technical and functional areas of the system:Cross Application (CA) ModulesWorkflow (WF)
16Financial Applications. . . . . . . . Financial AccountingFIGeneral LedgerAccounts ReceivableAccounts PayableTax and Financial ReportsSpecial Purpose LedgerLegal ConsolidationsThe SAP Financial Accounting system is a multi-ledger system. Accounts payable, accounts receivable and the general ledger are nevertheless viewed as a single block.The SAP Financial Accounting system is tightly integrated into the logistical chain which begins with procurement and ends in sales and distribution.The user can define the chart of accounts. Business transactions are entered and stored on the data base in the form of documents. The FI system supports account allocation and real-time posting for the other applications.Accounts Receivable and A/PA/R is closely integrated with the sales component and provides the data required for effective credit management.A/P records and administers the accounting data for all vendors. It is an integral part of the purchasing system. The relevant postings for deliveries and invoices in the FI component are carried out automatically in response to these transactions.Both the A/P and A/R components are fully integrated with the G/L. All postings in A/R and A/P are also recorded directly in the appropriate G/L reconciliation account. However the reconciliation flag needs to be set. The G/L accounts posted to depend on the transaction involved (for example, payables, receivables, down payments, bills of exchange). No amounts need be transferred from the subledger accounts to the general ledger before creating the balance sheet. the A/P component supplies the Cash Management and Forecast component with the figures from invoices necessary to optimize liquidity planning.AA - Asset AccountingThe AA module contains all the necessary functions for accounting for and managing assets. This includes the ability to calculate separate depreciation for external reporting, tax reporting and cost accounting purposes.Enterprise controlling includes:Profit Center AccountingAnalyze internal profit and loss for profit centersDesignate regions or products as profit centersApply both actual data and plan data to the profit center structureFinancial Applications
17Financial Applications. . . . . . . . ControllingCOCost Center AccountingProfit Center AccountingProduct Cost ControllingProfitability AnalysisActivity Cost ManagementInternal OrdersActivity Based CostingMost of the information from traditional cost center accounting, i.e., the Cost Center Accounting module (CO-CCA), remains critical for effective cost controlling. The Activity-Based Costing module (CO-ABC) is used to enhance the cost center and activity calculations, resulting in a comprehensive, efficient cost accounting system.Overhead Cost ControllingUsed to plan, allocate, control and monitor overhead costs; assign collected overhead costs to the cost centers where they occurred or to the activity that led to their occurrence; assign indirect overhead to cost objects and compare planned to actual costsProduct Cost ControllingUsed to plan the costs of materials and other cost accounting objects; calculate the costs of goods manufactured and the costs of goods sold for each product unit; establish prices for materials and assign the costs incurred by a company to units within the company, such as products, product groups, or ordersProfitability AnalysisUsed to evaluate market segments with respect to the company's profit or contribution margin; classify segments based on products, customers, orders or strategic business units; provide sales, marketing, product management and corporate planning departments with information to support internal accounting and decision-makingFinancial Applications
18Fixed Asset Management AMDepreciationProperty ValuesInsurance PoliciesCapital Investment GrantsFor managing and supervising fixed assetsIs a subsidiary ledger to the GLProvides detailed information on asset transactionsConsists of:Traditional Asset Accounting (from acquisition to retirement)Leased Assets and Assets Under ConstructionInformation System (a freely definable hierarchical structure called a report tree that allows users to determine which reports are wanted)In older versions this was a separate sub module that had to be manually reconciled with the GL. From version 4.6 onwards, it is optional to automatically reconcile to GL:Financial Applications
19Financial Applications. . . . . . . . Project SystemProject TrackingWork Breakdown StructureBudget ManagementCost and Revenue PlanningNetworks and ResourcesPSPS - Project SystemThe Project System is a tool for structuring a project so it can be successfully planned, monitored and controlled. It facilitates defining a work breakdown structure, identifying project activities and dependencies, assigning costs and dates, determining the project budget and tracking actual activities.Financial Applications
20Sales and Distribution SDComputer Aided SalesQuotationsSales Order ManagementPricingDeliveryInvoicingSD - Sales and DistributionThe SD module performs all functions for sales, distribution, transportation, pricing, invoicing and foreign exchange requirements. It automates the administrative work involved from the time a quotation is made through to distribution and invoicing. This improves the capability to deliver products on a timely basis.Logistics Applications
21Logistics Applications . . . . . . . . Materials ManagementMMProcurementInventory ManagementVendor EvaluationInvoice VerificationWarehouse ManagementMM - Materials ManagementThe MM module controls various functions related to materials including the purchase and receipt of goods, inventory management and valuation, warehouse management and quality management.Logistics Applications
22Logistics Applications . . . . . . . . Production PlanningSales & Operations PlanningDemand ManagementMaterial Requirements PlanningProduction Activity ControlCapacity PlanningPPPP - Production PlanningThe PP module controls various functions related to production planning and processing. It tracks the purchase, storage and transfer of materials and intermediate products. Important PP components are work centers, bills of material and routings.Logistics Applications
23Logistics Applications . . . . . . . . Quality ManagementQuality CertificatesInspection ProcessingPlanning ToolsQuality ControlQuality NotificationsQMQM - Quality ManagementThe QM Information System provides information needed for achieving quality products and a high level of productivity, selecting competent vendors and increasing market share. It is a tool for collecting and consolidating data from inspection processes, entering planning data and analyzing and comparing planning and actual data.Logistics Applications
24Logistics Applications . . . . . . . . Plant MaintenancePlant MaintenanceEquipment and Technical ObjectsPreventive MaintenanceService ManagementMaintenance Order ManagementPMPM - Plant MaintenanceThe PM module controls and analyzes various plant maintenance activities in order to ensure the continued availability of the production plant. This includes the processing of maintenance requests and maintenance orders for parts and equipment. It has the ability to track maintenance history for equipment and to schedule routine maintenance.Logistics Applications
25HR Human Resources Human Resources. . . . . . . . Personnel AdministrationPayroll, BenefitsTime ManagementPlanning and DevelopmentOrganization ManagementHRHR - Human ResourcesThe HR module group includes the traditional payroll accounting, personnel administration and management functions. These three functions share data and are highly interrelated. HR also has functions which address time management, travel expense management, applicant data administration and room reservation planning.The R/3 Human Resources (HR) system provides the tools needed to handle all aspects of human resource management, from personnel planning to recruitment, from personnel and salary administration to payroll and personnel development.The Personnel Administration (HR-PA) module covers the areas of payroll, time management, employee benefits, employee management, time management, incentive wages and travel expenses.The Personnel Planning and Development (HR-PD) module covers the areas of personnel development, organizational management, room reservations planning, seminar and convention management and the new area of workforce planning. This new area integrates workforce planning with the R/3 production, project planning and budgeting systems. Workforce planning can be based on real-time data from sales orders and sales forecasting as well as workforce requirements that derive from enterprise-wide resource planning.The advantages of the Human Resource system include:Fast and trouble-free processing of human resource dataDate stamping of all records, providing both a history capability as well as the ability to record future eventsSupport for executing payroll runs in on-line operationSupport for external time collection systemsGeneration of internal and external statementsSimple and direct processing of travel expensesReduced dependence on the programming departmentOn-line input validationStep-by-step modular upgradingHuman Resources
26IS Industry Solutions Industry Solutions. . . . . . . . Banks HospitalsOil CompaniesPublishing SectorTelecommunicationsRetailUtilitiesOthersISThe Industry Solutions packages are targeted at vertical industries. These packages are fully integrated with all other SAP applicationsThrough this section, the market is increased and share growth is increasedIndustry Solutions packages are a set of specific processes (transactions, programs, documentation, screens) that can be installed and will work directly with the SAP applicationsIndustry Solutions
27Audit Cycles Revenue Expenditure Inventory Management Fixed Assets TreasuryPayroll/PersonnelBusiness ProcessesOr: audits specified by your organizatione.g. Cross functional, OperationalAdded financial reporting because it is a cycle that should be audited every year.Discussion here about the types of audits generally actioned in the organizations represented in the class and how this can be mapped to SAP.
28Management Challenges SAP ModulesThree Main Functional CategoriesMultitude of ModulesMultitude of Sub-ModulesSAP Business Processes1000+ ProcessesMany Audit cyclesAuditors will determine how all these components interrelate in order to audit effectivelyManagement should have continuous monitoring processes in placeSAP Business Processes:Within SAP, a common set of business process structures are linked in an integrated manner. These structures can be used without modification. However, to optimize the functionality of SAP, the standard SAP processes can be customized to each client or organization, i.e. unwanted functionality is excluded.SAP Module Groups:All SAP Modules are grouped into 5 different module groups. The 3 core module groups are: Financial Accounting, Logistics and Human Resources. In addition, 1 of the other module groups, Cross Applications, cross over all module groups. Another module group, Industry Solutions, deals with industry specific functionalitySAP Modules:Also sometimes called SAP Applications. Each module is a set of programs designed to perform a specific type of business data processing. Each module consists of various business functions. Examples of each of these modules will be provided in the detailed section of each module.SAP Components:Components are the sub-processes of each module. Component functions can be either mandatory or optional. This allows each component to be customized to fit the client’s environment. Some components are dependent on other components (e.g. the Controlling component is dependent on the Financial Component)Audit processes: Six cycles as defined in the audit approach:Expenditure, Treasury, Fixed Assets, Revenue, Inventory Management, Payroll and Personnel Development
29Business/SAP/Audit Process Views Audit CyclesSAP ModulesBusinessProcessesApplication Level -Client EnvironmentModel Level - SAPProcess ModelOrganizations’ Audit - Business CyclesImplementation Level - SAP Software ModelThe R/3 Process Model is, as the illustration shows, a bridge from the business perspective to the technical implementation perspective of the R/3 System.Interpretation of this slide:Audit: (Account Balance reviews as they associate with business processes)Based on the SAP module components that are implemented at the client, the associated audit account balances can be identifiedThe account balances are crucial in determining the scope of the financial audit.The account balances that are audited, are linked to the defined business cycles.Since we are auditing according to business cycles, the related account balances are associated with the business cycles.business cycles should be able to be linked to the business processes which are based on the industryNote that these mappings are complicated and may provide a high level overview onlyAlso, due to the interrelation of factors such as business object links and data entry issues, the controls over certain business account balances, may not be in the associated SAP module componentTherefore, if the above mapping is done (certainly not a prerequisite to do an audit), it should be for informational purposes only and should be considered an overview only
30Relationship of Audit to SAP SAP Module Functional Categories, Modules and ComponentsBusiness Cycles Audits and SAP ModulesSAPComponentsAuditSAP ProcessesModulesAccount Balances(FinancialAccounting)(A/R)(Revenue)The previous slides already demonstrated the relationship between the Audit processes and the SAP processes. However, how do we get from the SAP Processes or SAP Module Groups to knowing what to audit?Based on the SAP processes as determined at implementation or through changes in the environment, the relevant SAP module groups are identified. Based on the specifications of the organization, only the relevant SAP modules within the SAP module groups and the appropriate module components are implemented.It is only at the SAP Component level that the exact relationship between SAP and Account Balances is obvious, e.g. Refer to the example of Revenue through A/R - note the example in the slide in brackets) there is a component and an Account Balance called “Accounts Receivable”.
31Linking Audit Cycles to SAP Modules ExpenditureFixed AssetsInventoryManagementPayroll andPersonnelRevenueTreasuryFinancial ApplicationsLogistics ApplicationsHuman ResourcesCross ApplicationsIndustry SolutionsAudit Business CyclesBasis ComponentSAP Module Functional CategoryThis graph demonstrates a loose relationship between the Audit Business Processes and the SAP Module Groups. However, note that all the Audit Business Processes will impact SAP at the Financial Application level-not shown on the slide.The Cross Applications and the Industry Solutions Module Groups do not relate to the individual Audit Business Processes. Rather, they cross function over all the business processes. When we go into the module groups in detail, this will become apparent.The other function that crosses over all Audit Business Processes is the Basis component of SAP.BOTTOMLINE: When auditing SAP, one should not be concerned so much with which modules or sub-modules they are dealing with. What matters is what functionality is supported by the system and what system functionality we need to audit.
32BOTTOMLINE: When auditing SAP, one should not be concerned so much with which modules or sub-modules they are dealing with. What matters is what functionality is supported by the system and what system functionality we need to audit.