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MIDTERM NOTES Ch 1, 2, 4, 5
Ch 1 - Business Processes & Information Systems
Business processes
The sequence of tasks or activities that take a set of inputs and convert them into the desired output. They
are triggered by an event and produce an output. Tasks are part of the business process, these tasks are performed
daily within each department, ex. When accounting receives payments they receive payments in return for sales that have been
performed (goods that have been purchased). So every business process has a trigger that causes it to start, and the output is to
receive the goods and service ex. Sending the shipment and receiving payment

Key processes

● Procurement —> buying raw materials or buying services from outside the org. The trigger here may be
that you are low in your inventory, this means it has reached the reorder point or it can be a customer order
● Fulfillment —> selling goods or services to external entities. The trigger can be a customer order to
purchase the goods that you are selling ex. When Baladna gets a request from a grocery, Baladna may not
have ready boxes to send to the grocery therefore they’ll start production. So every business process has a
trigger that causes it to start
● Production —> manufacturing

Example:

Make skateboards

● What are some parts of a skateboard

Make is for producing a certain product, so if I don’t have enough skateboards to sell I may start production

Buy parts

● What are some steps in the buying process

● Who performs these steps

Buy: is when we don’t have enough raw material to make skateboards then we’ll buy these parts

Sell skateboards

● What are some steps in the selling process

● Who performs these steps

Sell: once we have the finished product then we sell the product

A Generic Business Process

When we have a procurement, the first step would be to

create a requisition which is a request to buy, if that
request to buy is approved, then we will create a purchase
order that we send to our vendor, and when the vendor
sends us the goods we receive a goods receipt.
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Key Business Processes

Other than make, buy and sell is hiring and training people to develop
new skills, they also have to evaluate their performance, and people
may retire or they get paychecks every month so running the paycheck is
another business process under human capital management.

Let’s say we sell products to. Customers, we may also provide services
such as maintainable to these products. When the customer requests
maintenance we’ll have to approve that after the approval we’ll provide
maintenance to the customer to solve the issue with the product

Inventory and Warehouse management: When we receive goods from a

supplier/vendor we have to store the goods in the warehouse and we
have to be able to retrieve those goods from the warehouse if they are
needed for production, or if we have already produced goods we have to
send them to the warehouse, so the warehouse is very well integrated
with the procurement, production, and fulfillment…why? Because when
I buy raw materials I need to store them in the warehouse, if I produce
finished goods I need to store them too. If I sell my product I have to
draw them from the warehouse.

Life cycle data management is about design, so I may have a concept/idea of a new product, so I have to go through concept
development and then I produce a prototype and I test it, and I start a marketing campaign for my new product and then I sell my
product to my customers and sometimes I may have to discontinue production.

Material planning is about planning how much material to buy or how much to produce so it is related to make (it can be raw
materials or finished goods or assembled parts), buy and sell. Because for us to determine how much we will produce depends on
the demand so we have to analyze our demand to know how much we need to produce. The process is forecasting (looking at
historical data and the current resources, what we can procure from outside, and current trends that we can procure from the
market)

All these business processes are integrated, which means they are connected, and they all affect financial and managerial
accounting, this is for the fact that cost is always involved when we sell or buy, or rent.

A Procurement Process

Procurement is buying either raw material or

goods from an external vendor (every process
starts with a trigger).

Warehouse: needing to buy a raw material

because your inventory is low (purchase
requisition/ requesting order (internal))

Purchasing: having an order to deliver certain products to customers therefore you’ll need to buy certain raw materials to
produce the goods and then sell it to the customer. (After the requisition is approved from accounting dep and IT dep, the
purchase order starts and is sent to the vendor)

When the vendor receives the purchase order they will send us the material, then we create goods received by the warehouse and
receive an invoice from the vendor which will both go to the accounting department, then they’ll approve and send the payment.
Then the output is increasing the inventory of your material

Both warehouse and purchasing (sales) are the triggers

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A Production Process

it's triggered by an order from a customer or it

can be material planning, you anticipate specific
demand and as a result, you start producing the
products to stock your warehouse so that when
orders come you can send them or fulfill (sell)
them quickly. So a production starts with a
request for production, if it is authorized which
requires checking how much we currently have in
inventory and if we have all the resources (raw
materials, humans, machines) to start production.
If everything is available we are going to issue the
raw materials from the warehouse, then the
production starts and when it's done we send it to the warehouse to stalk this material/product. The software helps in showing the
raw materials needed and the routing, which are the steps or tasks.

A Fulfillment Process

fulfillment is selling, so the trigger is an order from a

customer or it could start with an inquiry, ex. The
price. A customer sends us a purchase order and we
create a sales order, but before creating the sales
order we have to check if the customer paid the
previous balance if needed, and we also have to check
if we have enough inventory for the order or not. If it's
available then the warehouse would start picking and
packing and shipping the product. When we ship we
will also send an invoice to the customer and we will
wait to receive a payment.

An Asset Management Process

Assets/machines may experience problems and we may

need to maintain them, so when we have a problem with the
machine we’ll create a maintenance request. The trigger is
either preventative maintenance or routine maintenance
which is every couple of months. If it is routine
maintenance then the time is a trigger, and if it is
preventative maintenance then the problem that
occurs/maintenance request is the trigger. After having the
request we need to authorize the maintenance, we have to
check if we have the raw materials and the people to
maintain it. After performing maintenance, cost accounting
is involved due to fixing are using any new tools. The
outcome is delivering fixed/working assets.

A Customer Service Process

Customer service is the same as asset management but in that case,

it is triggered by a problem with the customer, and the accounting
depends on the agreement between the customer and the
maintenance department as there could be no payment (if the
product is in warranty) or payment is needed. Additionally, the
authorization depends on the meeting with the customer as the
customer could disagree with the payment then you would step the
authorization or agree with another payment.
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A Project Management Process.

its also a business process where we have to plan the scope

of the project, create a schedule, the budget. Once we start
executing we have to manage the sources and at the end, we
have a settlement (income and outcome), it could be either a
successful outcome or a failed project. The trigger could be
project management as part of the life cycle management
which is the design and production of a particular product,
but projects can be maintaining a specific system or adding
new tools to the system.

Functional organizational

All of these business processes involve more than one functional area. And each of these
departments performs specific tasks and not a process as a process involves more than
one department, when these departments work in silos (separately) there is a big
problem because they only focus on the task and not the big picture and as a result, a
problem would occur. Therefore they need to integrate, communicate and connect these
different functional areas

Functions vs. processes

When we procure we involve purchasing , information management and accounting. When

we sell inventory management is involved marketing and sales are involved and
accounting too. If we don’t have the product we need, production could also be involved.

These functional areas are coordinated and communicated, and there output could be the
input of other function.

The Silo effect

Communication and collaboration between functions output of one dep is the input of the other dep. each function
works silo, separately than others

Ex. Sales dep, order is the input of warehouse then the input of production dep and etc.

● What must be communicated?

● What information must be exchanged?
● How is this coordinated? —> making sure that the input is provided at a certain time so the output is
not delayed

Paper based processes —> when hard copies are used w have a lot of delays due to redundancy and inconsistency

Processes supported by functional systems —> system use by each department that are not connected (not integrated)
to each other and don’t exchange info causes delays. So they work with only one department, each dep has its own system
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Processes supported by enterprise systems —> better communication and better collaboration so no delays. All dep
share one system.

Paper-based process

Process using functional systems

High redundancy causes delay and high chances of inconsistency

Processes using Enterprise Systems

One system that shares all departments and

functions
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GBI Organizational Structure

If these two divisions use different systems there is no way for

them to see at any point in time where they stand because they’ll
need to look at two different systems the one in the US and the
one in Germany and they also need to convert the currency
which makes the process more difficult and inaccurate

Difference between Integrated and Silos

Silos is when we have a different system

for different functional areas or different
divisions

Enterprise resource planning brings all

the functional areas together and supports
information share and everything is in
just one place. So you don’t have
redundancy, you don’t have a reputation
and you don’t have inconsistency

Implementing an ERP

1. It is a …PREPACKAGED………………….. solution.
2. Organizations must Change their own business processes rather than changing the system
because changing the system is very expensive and comes with a lot of problems.

How come org agree to choose a system that they have to change to adapt to? The reason is that these
systems are built on…

3. Built on best practices, which means the customer if they follow the system as it is, they tend to follow the best
practices in the industry
4. Have a choice between configure and customize (change the actual software) and it is very expensive and it
requires highly talented and expert IT staff. Therefore most companies choose to just configure the system which is
choosing a specific feature within the system that already exists, this is for the fact because the system offers a variety
of features. So the configuration is choosing a specific feature from the options, while customization is customizing a
feature.

Prepackaged: is already built, the system is developed and you only enter your data

Benefits of ERP Systems

Explain how each benefit/characteristic is achieved

1) Improve effectiveness (error-free) and efficiency by reducing the time for finishing a process and the
resources required. Also, it will reduce the number of errors and improve customer service.
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2) Support multinational organizations –multi-language and multi-currency —> supports multiple languages
and you can choose a particular currency. The enterprise systems allow org to aggregate or consolidate data from multiple
countries and generate one report.it also helps in standardizing operations (using the same process).

3) Facilitate the integration of data to generate financial reports —> when you want to generate a financial
statement you can do it quickly from the central database

4) Enforce control to prevent fraud —> there is a lot of control so you're not able to do anything you want therefore it
controls fraud. You're able to detect fraud to prevent it. You also prevent it through IT control. How can an enterprise system
prevent fraud? Segregation of duty, access, and editing is role-based, IT controls within the system

5) Support transparency and segregation of duties —> even though you placed the order, other people can see what
you have created, so once you log in until you logout is captured in the audit trail. It’s all about checks and balances, so if I enter
a request someone else will validate, I can’t do both. You cannot combine roles that are conflicting with each other. If we do that
fraud will occur.

6) Support accountability through the audit trail —> it's a report that shows anything that you do within the system
and it is recorded. So they know which computer you used to log in at what time, what location, what did you click on, what have
they changed?

The system is role based, so it's not visible to the entire org but it's visible depending on your role

Support multinational organizations

Segregation of duties - prevents conflicting tasks, helps in preventing fraud

Information democracy - all info that you need to do your job is provided to you through the system

It’s one central database

Challenges of ERP Systems

1) Financially —>

2) technically —> In terms of maintaining the system as they are very large and complicated

3) organizationally —> before implementing an ERP system ‘em the manager would have all the power and control but this
changes after having the ERP system as you can’t access everything you have specific roles and specific things to view

4) culturally

You have to adapt to the system rather than the system adapting to the company as its complex in customizing it, it takes time and
requires a lot of resources

Purchasing

What processes are involved at Baladna, Hamad Hospital

What are the triggers for these processes

What are the steps

What are the outcomes

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Ch 2 - Introduction to Enterprise Systems

Enterprise Systems (ES)

Complex and powerful information systems —> .very large systems that span the whole org, and provides support for
every single area within the org. So the focus is on supporting the business process ex. The HR model starts with creating the
organizational structure (who is the top in dep, who manages, who are the employees) so one of the key elements of HR would be
creating organizational structures. Next, they create profiles for employees and it determines what kind of access they have (what
they see) and their roles (what they can do). Therefore ES is called role-based, meaning that depending on my role I get to see
specific features in the org, and based on my profile I’m allowed to see certain things and do certain things. That’s the key
advantage of ES, is that there are a lot of internal controls within the system that prevents fraud, and there is embedded
segregation of duties which the system already comes with. This means if your job is placing orders then you can receive the
orders or access the receiving orders, because if you have that kind of a role then you have a conflict as you’ll be able to commit
fraud. There is support for multiple currencies and languages.

SAP Enterprise Resource Planning (ERP) system is the world’s most popular —> .
Enterprise systems are like umbrella systems, they provide support for all functional areas within organizations and they look at
business processes, and they span several dep as it integrates across several business units. The way that enterprise systems do
this is through 1) the central database where all info is located, and thus it's easy to share knowledge across the org 2)these
systems focus on the business processes and not only at one functional area.

When we say business processes are cross-functional this means it integrates different functional areas therefore it needs an
enterprise system as it supports the whole org.
Architecture of Enterprise Systems (the components)

● Client-Server —> is what you see, it's also called the presentation layer, it allows scalability (getting big, so I can
add as many servers or clients as I need). They use a centrally administered server to share data, data storage space.
We have 3 layers. Client and you can have thousands of users/client
● Service-Oriented —> is where you group the ES and other systems connected to it by what we called third parties.
Picking and choosing from different vendors and have to be using the entire system from one vendor.
Three layers of the Client-Server Architecture

Database —> you can’t get physical access. If we have more than one
database we call it distributed database. Only the database manager
and database expertise could access it and not the entire IT dep

AS —> that’s where the logic and the steps are. Ex. When we sell to a
customer, it is the application server that defines, I first have to create
an inquiry and then copy to a quotation and then wait for the client's
approval and then create a sales order, and then send permission to the
warehouse to release the inventory, then send to packaging, then ship,
then charge customer, and lastly wait for payment. So the process of
what needs to be done first and next is in the application server. I could
have 1 or many application servers. When we have multiple servers we
call it distributed computing.

Presentation layer —> is what we see, the graphical user interface

Having these three layers enables us to have scaleability, meaning that

we can service more and more customers using these layers. Because I
have distributed the application among multiple services.
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Service-Oriented Architecture

● Web services - service from different suppliers and connecting them through a web service, they don’t have to make
an application, if they do they’ll become a composite application
● Used to expose ES (and other systems) functionality
● Standard interface – input and output. —> understanding each other as you talk the same language is
possible due to the standard interface
● Composite applications —> connecting multiple applications because they all use a standard interface
● Connect multiple applications via Web services —>that are provided by many vendors
● Build new capabilities without changing the underlying applications—> it increase capabilities
because they use a larger set of services and support processes that span across different organizations
This server emerged because of the need to add new features to the existing ES, so you want to integrate several client-server
systems. Ex. Integration CRM (customer relationship management) with ES. Inter-organizational is a system that supports
functional areas but also integrates with other systems. So it started treating the different models as services and they are
web-enabled, meaning that you can access this service over the internet.
Is Blackboard a client-server or web service?

Enterprise Resource Planning Systems

● Focus primarily on the internal operations of an organization —> where there is finance or accounting,
etc.
● Integrate functional and cross-functional business processes —> So a process that within a dep is
integrated and also processes that span different dep is supported and integrated by SAP.
● SAP is a fully integrated, global ERP system—> this means there is no separation and all units can talk
together. This is possible because of the application logic itself but also the central database plays a big role in there
● Supports multiple languages and currencies —> it's a global system
SAP ERP Modules

All models involve financial and accounting

PP: for manufacturing companies, it supports all steps of the company

MM: how to procure materials, sales and distribution, plant maintenance, project systems,

HR: due that many processes are conducted by employees

BI: it summarizes all transactions and provides support for executives at the top, so they
can support decision making. Additionally, it has predictive modeling and predictive analytics, where they determine what will
happen in the future.

Applications Platform

● Enterprise Operating System

● SAP NetWeaver (application platform) introduced in 2003
○ Integral part of SAP ERP and SAP Business Suite
○ Toolset for composite application and plug-in software
○ Integrates non-SAP applications
Think of it as the operating system, same thing as windows operating system. It integrates across different applications, so the
interface is done through windows, ex. Copying and pasting from excel to word is facilitated by windows. In SAP you want data
to be integrated and passed along from one model to another or a non SAP application, it is made possible by NetWeaver. So
NetWeaver enables that integration and you need to think of it as the operating system
What's the difference between application and platform? ERP is an application but net weaver is a platform. The difference is the
infrastructure, the platform is open you can add new features and components to it.
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Data in an Enterprise System

● Organizational data (levels, elements) —> they tell us which client we represent (which org we present). It
talks about the org structure (multinational or local or multi divisions)
ex. QU is a client and underneath the client, we have different company codes which are different colleges, so each college serves
as a different company code, and then underneath the company code, we have different plans. The plans represent different dep
or buildings.

● Master data —> is data that is persistent within the org which means that you need it from one business cycle to the
next, it continues to exist from one business cycle to the next. You can’t do transaction data without master data. It’s
about an entity.
Ex. Info about customers or vendors, machines, employee, material, work center, and normally you use the same data,
Material Master —> semi-finished product, finished product, raw material

● Transaction data —> data is purged out of the database at the end of the business cycle (1 year), so at the end of
the year, you do not expect continuing or retrieving a purchase order or sales order that was created at the beginning
of the year. So it's transactional data that is only associated with the process steps itself, and this data is purged to
historical data in the data warehouse as it's illegal to completely delete data as you have to maintain records of all of
your processes ex. Sales order, invoice, quotation, transportation order, purchase order
○ Associated with process steps
Organizational Data

● Defines the structure of the enterprise in terms of legal or business

purposes. Examples include:
● Legal entities, plants, storage areas, sales organizations, profit centers
● Data rarely changes
The first type of data is organizational data, it caches information about the client and that’s the
whole inter price at the very top and underneath it, there are different company codes. It’s
important to rely that each company code is an independent legal activity, which means its
independently responsible for its financials and so on, also these codes state their own financial
statements and financial reports (balance sheets, income statements, etc.). Underneath it comes
the plants are facilities, SAP adapts a very flexible definition of a plant. The plant can be a warehouse, distribution center,
manufacturing, etc. the organizational data very rarely changes, you hardly see a company that is consistory adding new
company codes and so on, once you establish the structure you would expect to remain stable for 2 to 3 years. A plant could be
an office, distribution center, etc. and the plant is divided into a storage location.
Organizational Level-Client

Client:
Highest organizational level
Represents the enterprise; comprised of many companies
How about your project??
Organizational Level - Company Code

● Central organizational element in financial accounting

○ Books are maintained at this level for legal reporting
● Identifies legal entities in an enterprise (Client)
● Legally independent from other companies in the enterprise
● The client can have multiple company codes
○ Do you have many on your project??
● Company code must belong to only one client
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Organizational Level - Plant

● Performs multiple functions to a combination of things (ex, help is a production and other half is warehouse)
● Used by many processes
● Represents factory, warehouse, office, distribution center, etc.
● What is a plant on your project??
GBI Organizational Data

It's a multinational org that sells bikes. They have 2 main subsidiaries US and
Germany. Underneath each, there are different plants. Each lane is dodecahedron a
specific job

Master Data

● Long-term data that typically represent entities associated with various processes? Ex:
○ Customer
○ Vendor
○ Material
● Typically includes
○ General data (across company codes) —> customer info
○ Financial data (CC specific) —> specific data ex. Accounts receivable
○ Area-specific data (Sales, Purchasing, Plant) —> ex. Personal preferences
● What would be considered Master Data in your project??
Each has multiple views which means categorize of info that you collect from each one of them, so as a customer you’ll collect
general data, and this data is used all across the org, so people in purchasing, finance, sales dep, and so on.
Material Master

● Material master data is used in numerous processes

○ Procurement —> because you buy it from supply
○ Fulfillment —> you sell it
○ Production —> you produce it
○ Material planning —> you plan how much to produce
○ Asset management —> making sure that the material is used and kept correctly
○ Project systems —> sometimes the project you involve in uses some of the materials that you produce or
sell
○ Lifecycle data management
● Data are grouped based on views, these views are accessible based on the process. So if you are fulfillments
(selling) you’ll see specific views that are a little bit different from purchasing.
○ Process
○ Material type —> determines what do you get to see, so when we are looking at raw material you do not
see fulfillment because you do not sell raw materials
○ Organization element —> certain dep have access to certain views for
the material
Material Master Data
In financial only the FI and CO will view
In selling data then sales and distribution will get to see that view
Procurement, then the purchasing data is the view you’ll get to see

So its important to understand the type of the material, the process, and the organizational
element/unit as it determines what view I get to see
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Material Types

● Raw materials (ROH)

○ Purchased, not sold, used in production —> so you’ll see purchasing and production but not semi
production or final goods
○ Purchasing- and production-related views
○ No sales-related view
● Semi-finished goods (HALB)
○ Produced using other materials (ROH, HALB)
○ Used in the production of other materials (HALB, FERT)
○ Not purchased or sold
● Finished goods (FERT)
○ Produced using other materials (ROH, HALB)
○ Sold to customers
● Trading goods (HAWA)
○ Purchased and resold without additional processing
● Numerous other types

Transaction Data

● Data generated during the execution of process steps

● Requires
○ Organizational data
○ Master data
○ Situational data
● Example: Sales order creation
○ Organizational elements: Client, Company Code, Sales Area
○ Master Data: Customer, Material
○ Situational data: Date, Time, Person
● What would be an example of transaction data in your project???

When you create a sales order you have to refer to a client and you have to refer to the
company and then you have a who when where. So part of the organizational data and the
master data is in the transaction data, and what is in the transactional data is only a
reference (ex. Customer number, company code, set of items that I’m selling), so when I
purge that sales order, it will not have any effect on the original record in the org or master
data
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Documents (transaction document ex. Sales order document/ material document) these documents are connected ex. An
employee orders a computer from Lenovo and the person in Lenovo has received the goods receipt, then the financial dep should
check that the goods are received and are in good condition and then they can pay. So the documents are connected, related.

● Record of transactions
● Transaction documents
○ Requisition, purchase order, invoice, delivery document, etc.
● FI documents
○ Record the impact on financial accounting
● CO documents
○ Record the impact on management accounting
● Material documents
○ Record the impact on material status (value, location)
Cost of selling to a customer is under control department, then I ship and inventory is affected it's
under material document

Purchase Order—> This is a transactional document

Reporting

● Transactional system (OLTP) vs. informational system (OLAP) ex. SAP

● Types of reporting (options)
● Work lists in SAP ERP
● Online lists in SAP ERP
● Analytics in SAP ERP
● Analytics in SAP BW
At the end of a business cycle you need to purge the transaction data but you also need to analyze (statistical) them so you can
support decision making and analytics plays a huge role in it

Transactional vs. Informational

● OLTP (transactional)
○ Detailed, transactional data —> you can look at each transaction
● Data warehouse —> you have the storage of individual records, but usually to benefit and run an analysis of the
data, you need to aggregate (summarize), it could be qualitative or quantitative.
● Data aggregation and reduction using
■ Qualitative reduction by aggregating by time period —> Ex. You're trying to find on
average how satisfied are my customers.
■ Quantitative reduction by selecting key figures (KPI) —> Quantitative focusing on key
performance indicators ex sales or customer satisfaction. Statistical analytics to predict and
describe
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■ In ERP: Information structures

■ In BW: Infocubes, info providers, etc. —> BW; business warehouse, it's a very large data
warehouse.
● OLAP (informational) —> is multidimensional data
○ Various analysis tools
○ In ERP: Information systems (OLAP lite)
○ In BW: Various reporting tools

Reporting Options within SAP ERP

Create a report that lists all purchase order in a day and then has an average or group them
by suppliers. Then I can take this data and aggregate it and provide online analytics and here
I’m providing different views of key performance indicators.

Components of Information Structures

Online Lists - List Display for Documents

In SAP There are different lists that you can generate within the system. So you
can list all purchasing documents for a particular material. Ex. You want all
purchasing documents for touring bikes, then SAP will generate the list and the
list supports hyperlink, so if you double click on any number then the SAP will
open it and you’ll get a detailed view, this is also called roll up and drill down.
Roll up is a summary and the drill down is the detailed view of what you
double-clicked.

Report Using SAP List Viewer

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Online Lists - Report Using ALV Grid Control

Supports hyperlink

Functions of the List Viewers and Grid Control

In all these lists you can get a detailed

view and also you can filter ex. All
purchases that are more than 2000. You
can create a subtotal, so you can say show me the list but categorize by a supplier, and
you can get a total of all purchases. You can sort, descend, and ascend (sort by
document number, date, or customer name. You can also get to choose the layout, how
you present the info to the user

Reporting Using SAP BW

SAP Andes the SAP BW, the business analytics, and the business warehouse. The
advantage of this is that the BW is not only analyzing the transactional data, it's also
incorporating other information from external sources. So you see info coming from the
SCM and the CRM. You also have external data coming from the web or other non-SAP
systems all being aggregated and incorporated with the business warehouse to provide a
more complete view of the status of the org and when this system prescribes, meaning
advise on a course of action, it's taking into consideration, my suppliers and my
customers.

Things that drove change with SAP

SAP is on-premise meaning the software is in my laptop and my company. But a cloud means another company is hosting the
application and making it available to my company (third party), we have to pay for the number of users. I could have sop parts
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on the cloud and some on the on-premise. Ex. Health care, customer data should be on-premise, this is government law. Allowing
people to access the software from mobile wasn’t possible ten years ago but now they allow it. Big data is artificial intelligence.
IoT, internet of things, things that are connected to the internet, and its controllable and sending info about location or if it needs
maintenance. Research, statistics, how I can do stimulation, how I can do forecasting. Also, I can track or fix minor things that I
can handle.

When should you use on-premise and when on cloud?

On-premise when you want privacy and full control however it's very expensive and it takes time. But on the cloud, there is
automatic update and maintenance over SAP and it is employed on the cloud we don’t need to download any software. In the
cloud, you can’t customize but you can do configuration (selecting).

S/4HANA

In-memory databases make software faster, it allows analytics to be run in real time. I don't have to take the data then put it in the
database etc., not any computer could run S/4HANA, it has to be a powerful machine. The whole design of the interphase is
changed. Fiord means software that is used to develop the front end. OLTP is business processes and OLAP is an analytics and
now every single model has both OLAP and OLTP. The traditional database was normalized which reduces redundancy.

Ch 4 - The Procurement Process

A Basic Procurement Process

It starts with a dep expressing the need for a good or service and
creating a purchase requisition which is a request to purchase. If the
requisitions value is above a certain limit ex. 5000qr, then you will
need different approvals not just one and you’ll need to provide a
different quotation from different vendors. Once all of this is done then
you can copy the requisition or the quotation into a purchase order,
then you’ll send it to the supplier asking for the purchase order (the
price has already been approved previously. As a company you don’t see what’s happening on the supplier's side you only receive
and this is when you create goods receive and you also receive an invoice and the system allow you a tolerance limit between the
invoice and purchase order this is in terms of price if there is a huge difference the system won’t allow or accept it. You can
receive goods in two shipments and you'll need to create two goods receive, two invoices.

The Organizational Structure of Purchasing

● Client —> .every company belongs to a client (enterprise)

● Company code (CC) —> .a company could have multiple company code
● Plant —> .each company code has one plant
● Storage location (S Loc) —> .at least one storage location ex. If you are a law firm you need a storage location
for storing the files
 17

● Purchasing organization (P Org) —> .an upper entity within the org responsible for negotiating with suppliers
and signing the contract
● Purchasing group —> .responsible for daily purchasing activities so they create the requisition, they create the
purchase order

Plant

● Many definitions or uses. A location

○ That holds valuated stock (for distribution)
○ Where production planning is carried out —> .so you are actually manufacturing in it
○ Where products and services are created
● That contains service or maintenance facilities
● Factory, warehouse, distribution center —> . it can be multiple things at the same time
● Can be assigned to one CC only
● A CC can have many plants

Storage Location —> .underneath or within the plant

● A place, within a plant, where materials are stored

○ Areas designated for different types of material (raw material,
work-in-process/semi-finished goods, finished goods, packaging,)
○ More sophisticated divisions including storage bins, cabinets, trays
○ Track the quantity rather than value —> .more concerned about quantity
● A plant must have at least one storage location —> .usually its assigned to only one plant, as SAP allows
you to assign a storage location to only one plant
● A storage location can belong to only one plant
● What if a location is used for all returns of two or more CC?? —> .any return that is sent from a
customer is sent to a particular location which is central, which means throughout a country, all locations are sent to
this storage location

Purchasing Organization

● Identify and select vendors

● Negotiate general conditions of purchase and contracts for one or more plants or companies.
● Determine pricing conditions
● Typically three models for Purchasing Organization
○ Enterprise-Level —> .
 18

○ Company-Level
○ Plant-Level

Enterprise-Level Purchasing Organization

● Also known as cross-company code model

● One Purchasing Organization assigned to all CC in a client
● Purchasing for all plants across all CC it's better it gives you a
negotiation power in terms of price
● Highly centralized – corporate Purchasing Org

Serving the whole enterprise its a cross the different company goods.

Company-Level Purchasing Organization

● Also known as cross-plant model

● Different Purchasing Organizations are assigned to each CC
● Purchasing for all plants in one or more CC

Here you rely that different countries have different taxes and laws. So because you are
handling specific requirements in different countries, it makes sense to create a
purchasing org for each of these countries or each of these company codes. The adv is
that it's closer to my company and closer to the suppliers. A lot of times you’ll see that you need both, centralized purchasing org
and a company level purchasing org, and the beauty of SAP is that it always you to create multiple purchasing orgs with different
modules, that’s what we call a high bridge.

Plant-Level Purchasing Organization

● Also known as plant-specific model

● Each plant has its own Purchasing Organization
● Highly decentralized
More decentralized model which is creating a purchasing model for every plant. The plants
perform different functions, so for an office plant my needs and suppliers are different from the
manufacturing plant. So plants are highly specialized and the products that they order are highly
specialized so they need expert purchasing org.

Reference Purchasing Organization

● One centralized Purchase Org for high-level decisions across the enterprise
● Multiple CC-specific and plant-specific Purchase Org
 19

SAP is very flexible so it allows a high bridge model where we have multiple purchasing org and some are highly centralized and some highly
decentralized, so I may create one for the whole enterprise and I could create one for each of the plants, that’s what we call a reference
purchasing org

Purchasing Group

● A buyer or group of buyers responsible for certain materials or groups of materials

● Can be internal to the company or external
○ Decide to purchase land, but use a realtor (external purchasing group) to execute the
purchase
● Not assigned to or related to purchasing org

Responsible for creating requisition & purchasing, receiving goods, distributing them to different dep. it also can be an external org (outsourced)
ex. Cleaning supplies, there is no competition so you can hire an external entity to check on the cleanliness of the offices, etc. and they check if all
cleaning facilities are in stock (tissue paper, etc.). Sometime you hire them for a specialized service

Master Data —> . Persistent data/ continues to exist within the database from one business cycle to the next

● Material Master
● Vendor Master
● Purchasing info record—> . Every time we create a purchase order, there are some data that are master date
● Conditions

Material Master —> . Record for material. You need it in order to conduct transactions. And fillin info about materials
requires several records (views), some are filled by purchasing dep, some by accounting dep or finance (price),

● Data needed to execute transactions related to materials (along with org data)
● Data are grouped by different user areas (views)
● Data are specific to (defined for) for different organizational level

Material Master - Views

● Basic data —> . General data

○ Description, unit of measure, weight, material group (material group is individual that is
responsible for day to day purchases processes of this material)
● Accounting —> . Anything related to money
○ Currency, valuation class (link to G/L), price control (moving price, standard price, future
price)
● Purchasing
○ Purchasing group, GR processing time, delivery (under / over) tolerances
● Plant / Storage
○ Storage requirements (hazard, temperature, etc.)
 20

○ Shelf life —>. Expiry, etc.

○ Weight, volume

Vendor Master —>. Is it a vendor that we can do business with and carry on the transactions

● Data needed to do business with vendors

● Data needed to execute transactions related to vendors (along with org data)
● Data are specific to (defined for) different organizational levels. The three segments are:
○ Client level data (General data)
○ Company code level data (Accounting) —>. Every cc has its own balance sheet and financial data.
So ways of paying vendors may change based on cc as different cc may have different taxes, and are using
different charts of accounts, etc.
○ Purchasing organization-level data (Purchasing) —>. involves info about how prices will be
determined, is there a blanket agreement, or are we using a specific method or we have a contractor is the
price so fluctuating and depending on the marketing price.

Purchasing Info Record

● Relates vendors and materials. —>. Interaction between them so we'll create a purchasing info record for every
combination of vendor and material. Ex. You have a grocery store and you need to buy oats, you could have multiple
vendors providing it, so you’ll need to create one purchasing info record for every vendor
● One info record per combination of vendor and material (or material group)
○ General data—> . Name of material, name of vendor
○ Conditions: pricing, discounts, free goods (current and future)
○ Vendor data —> . Info from the vendor, who handles shipping, who pays. So its info transferred from the
vendor's master record to the purchasing info record.
○ Texts (notes)

Conditions

● Pricing Conditions
○ Gross price—> . Put average gross price of all vendors providing the same material, and see currrent
situation and if the vendor will improve the conditions for you
○ Discounts and surcharges
○ Freight / shipping
● Obtained from
○ Purchasing info records
○ Contracts and agreements
○ Other sources
 21

A Basic Procurement Process

Key Concepts

● Item categories
● Account determination
● Stock type/status
● Goods movement

Item Categories

● Defines the process used to procure the item

● Categories
● Standard
● Subcontracting
○ Components provided; finished product received
● Consignment
○ Liability only when withdrawn from stock
● Service
● Stock transfer
● Third-party order
○ Ship to third party; bill to us (drop shipment)

Account Determination

● Which GL account to assign to PO?

○ Defined in material master (valuation class)
● Account assignment categories
○ Used when purchasing material without material master
○ Assets, Production Order, Cost Center, Sales, Order, Project
○ Automatic GL account determination based on category
 22

Stock Types/ Status

● Based on usability of material

○ Unrestricted use
○ In quality inspection
○ Blocked stock (damaged, unusable; wrong delivery)
○ Stock in transit

Goods Movements

● Goods Receipt
○ From vendor or production process
○ Increase in quantity and value of stock
● Goods Issue
○ To sales order or internal consumption
○ Decrease in warehouse stock
● Stock Transfer
○ Physical movement of material between storage locations
■ Sloc to Sloc
■ Plant to Plant
■ CC to CC
● Transfer Posting
○ Results in a change in material status
■ In-quality inspection/ blocked/ unrestricted use
■ One material type to another
● May or may not include a change in location (Sloc, plant)

A Detailed Procurement Process

Start with need for material, it could be from an internal source

and in the plant it only needs to be transferred or it may need to
be procured from an external source. If the need is fulfilled from
an external source and I don’t have a specific supplier/vendor,
then we need to request the vendors to send the quotations, and
then evaluate them before copying them to a purchase order.
Then I create a purchase order to the vendor or the internal
storage. We wait for acceptance from the vendor, and we receive
the order and invoice. When we receive the goods we have to
 23

create goods and receive an invoice. The goods received must match the purchase order and must match the material and it must
match the price that we had on the purchase order, after verifying we proceed with the payment

Purchase Requisition

● Trigger —>. You need certain material for manufacturing

○ Other processes —>. For Production, the purchase requisition is done
automatically
○ Manually —>. Sometimes it's done manually for non-stock products ex.
Computer
● Data
○ User input: Dates, materials, quantities
○ Master data: Material master, Vendor, Info record
○ Organizational data: Client, CC, P Group
● Task details: none
● Output
○ Document: Purchase requisition
● Subsequent steps
○ Purchase Order
○ RFQ
Request quotations and you can accept one or more than one. When the vendor replies or sends back the quotation you
update the RFQ which was a request for quotation. This is for the fact that the request and when you receive it they
both carry the same number on SAP

Purchase Order

● Creation
○ Manually or automatically
○ With or without reference to other documents
● Data
○ Documents: Purchase requisition, Purchase order, RFQ, Quotation
○ Master data:
■ Material (characteristics)
■ Vendor (terms)
■ Info record (pricing)
■ Conditions (pricing) —>. When you enter a selling order the conditions would appear
in 3 different ways:
1. Start with purchase requisition and copy it if approved to a purchase order right away
2. I can have purchase requisition but I don’t know the supplier so I will request for quotation and wait for it to be
received and accept a quotation and copy it into a purchase order
3. I can avoid creating the quotation in case of an RFQ that is verbal and I can copy it to a purchase order

Or you can buy without a requisition so you can purchase order right away
● Tasks
○ Data automatically included from input sources
○ Source determination using info records, agreements, and contracts, and source lists
● Outcomes
○ Purchase order
○ Purchase requisition history – PO added (maintain and update the purchase requisition)
○ Communicate
 24

○ with vendor (external procurement) using messages: fax, EDI, print

○ Plant (internal procurement) using transfer orders
The Structure of a Purchase Order

Info in the header applies to all of the items you are ordering.

Purchase Requisition to Purchase Order

Sometimes you can combine several purchase requisitions into one purchase order
because they are from the same vendor ex. Computer and printer

Communicating with Vendors

When you get a purchase order the system will allow you to send it in
many different ways to the vendor, either through email or through
fax or web services. And the vendor would send an acknowledgment.
But when will I have a rejection notice?

Purchase Order Processing Options

1. Start with purchase requisition and copy it if approved to a purchase order right
away
2. I can have a purchase requestion but I don’t know the supplier so I will request for
quotation and wait for it to be received and accept a quotation and copy it into a purchase
order
3. I can avoid creating the quotation in case of an RFQ that is verbal and I can copy it
to a purchase order
 25

Goods Receipt

● Data
○ Documents: PO, Delivery document (packing list)
○ Master data
● Task
○ Verify materials receipt
○ Create GR document
● Outcomes
○ Material documents
■ Header: Document number, date, reference
■ Details (items): Material, quantity, location, movement type
○ Financial Accounting documents
■ Header: Document number, date, reference, currency
■ Details (Items): GL accounts, description, amount
● Outcomes
○ Notifications
○ Material master: stock and value
○ GL accounts (Stock/Consumption, GR/IR)
○ PO history – Material document added
○ Quality management
■ Quality inspection lot
■ Warehouse management

Financial Impacts of Goods Receipt

Material and Accounting Documents from a Goods Receipt

Invoice Verification

● Data
 26

○ Vendor invoice
○ Purchase order
○ Material document
● Tasks
○ Three-way match
● Outcomes
○ Financial Accounting documents

Invoice Verification

● Outcomes
○ GL: vendor account, A/P, GR/IR
○ PO history - invoice document added
○ Material master :
■ Stock value,
■ Moving average price (if using moving price vs. standard price)

Financial Impact of Invoice Verification

Payment Processing

● Creation: manually or via automatic payment program

● Data
○ Three-way match (or other process)
○ Payment method, account, items to pay,
● Tasks
○ Calculate payment amount (discounts)
○ Post payment document (accounting document)
 27

● Outcomes
○ Financial Accounting Documents
○ Payments (checks, EFT, notifications)
○ Updates
■ GL accounts
■ Material master :Moving average price (if using moving price vs. standard price)

Financial Impact of Vendor Payment

Integration with Other Processes

Reporting

● Source of data
● Instance level reporting (status)
● Process level reporting
○ Lists and reports
 28

○ Purchasing Information System

Reporting - Source

● Organizational data
● Master data
● Transaction data (documents)
○ Purchasing documents
○ Material documents
○ Accounting documents
○ Invoice documents

List of Invoices

Work List - List of Requisitions

Reporting - Logistics Information System

● Components
○ Purchasing Information System
○ Sales Information System
○ Quality Management Information System
 29

○ Inventory Control
○ Transportation Information System
○ Shop Floor Information System
○ Plant Maintenance Information System
● Information Structures
○ Special tables of statistics from various modules that is constantly updated
● Selection criteria (types of information)
○ Key figures: variables of interest
■ Quantitative values on measurable facts
■ Numbers (of orders, deliveries)
■ Quantities (of material)
■ Cost, delivery time
● Characteristics: used to organize key figures
○ Vendors, material, organizational levels
● Timeframe: day, week, month, etc.

Standard Analysis
 30

SAP Lecture 1 Notes

When you enter an invoice you should ship before, therefore an error appears

Dynamic means you can change status, statics means you can only view.

GL general ledger is a book that has all accounts ex. (Pay salary, pay for travel) every account has its own budget. Also, every
vendor has its own accounts (shown in accounts of payable), and every customer has an account (shown in accounts receivable).
The GL Account lists all accounts.

You can create a tile yourself, ex. It can say all orders.

Let’s say we want to display the supplier balance. You’ll search for your supplier and it should have your number (*###)

S/4hana Presentation

What is SAP S/4HANA

https://www.youtube.com/watch?v=w6aotCw8d0A

https://www.youtube.com/watch?v=wsFOqgz7tTA

HANA In memory Database

https://www.youtube.com/watch?v=p94hK5FcsKc

One of the most important reasons to introduce it is to target medium and small corporations (small - 50 employees, medium -
100 to 1000) as the old one was only for big corporations as it was very expensive and to reduce the cost they moved to the cloud.
It’s also on-premise which means it's on the cloud but private only for one company. S/4hana creates their own database, own
hardware, and software as their software is very very heavy. They deal with this challenge by building their own database. The
database is the HANA which is SAP’s own database, and they developed it with Ph.D. students. It’s a platform, I can log on and
add a third-party application.

Why is it important to change? If it was left out without the cloud solution they would lose their market share.

It's still complex software and it requires the company’s process. It’s a complete project which means they could have some
mistakes and errors and trying to correct them is very difficult and takes time with the client.

Row base I’ll search for info row by row. S/4HANA is Column based structure that is easier in retrieving info and it's compact it
doesn’t take much space as the older version

Aggregates = summary (total revenue, total expenses, most profitable product, etc.)

Ch 5 - The Fulfillment Process

This chapter talks about sales and distribution. How a company actually sells. Whether a customer starts by inquiring, asking a
question about a product, the company will respond by creating a quotation for them, and then the customer can accept or reject
the quotation. If they accept it then you create the sales order, at that point, you are checking if I have inventory, is this a good
 31

customer that I should accept their sales order. If you do not have an inventory then you have to start production. The third
question that you want to ask is will I be able to deliver on time or not. Let’s say you already have the product in storage, the next
thing that you’ll do is reserve the quantity for the customer, and say I can't sell this quantity it is just for the customer. So at this
time what is in storage is different from what is available to promise, I can have 200 in storage but I can only promise 150
because 50 are already reserved for the customer. So you reserve to the customer then you permit the warehouse to release the
products, release them to packaging, they start packaging and they are ready to ship, and when they ship the ownership is
transferred to the customer. That affects the accounts receivable, and you have to wait until you receive the payment and reflect
that on your revenue as well as the accounts receivable.

A Basic Fulfillment Process

Before you create the sales order you have to receive something
from the customer and that's their purchase order. So on the
customer side, they should have already gotten permission to
buy, created a purchase order, and send us the purchase order,
we copy it into a sales order. Then the second part is 3 things in
SAP, to permit the warehouse to move the material out of the
warehouse and go to packaging, to actually package and then ship. Once we ship that transfers payment, as we ship the system
will automatically create an invoice and charge accounts receivable and we’ll wait for the payment to be received.

What is the Architecture of Sales and Distribution?

● What are the main functions (4) within SD? —>.the main functions in sales and distribution is we have a
presale before actually selling, and that's responding to questions that the customer may have, sending a quotation.
After the sale is creating the sales order (before you save the sales order you’ll check the inventory and after saving we
reserve it and tell the inventory to release it which is called pick release), packaging, shipping (we document “goods
issue” with shipping), and then the last part is the accounting part that's invoicing and receiving payment.
● What other modules are integrated with SD —>.the modules that are involved in sales and distribution are
customer relationship management, accounting, sales and distribution, and inventory. So all 4 are part of the process.

Why do we use inventory management? So you know if the material is in stock, and so they reserve, and pick and release

Customer relationship management? Ex. If a customer always pays late and exceeded their limit, and whats their behavior
regarding credit and payment and their profile

Sales and distribution? Is everything related to sale

Inventory? Putting goods inside the storage and putting it outside the storage

Accounting? Important for creating invoices and when someone pays you would reduce the accounts payable

As you can see we have info coming about the customer, we also have a customer
relationship. We have sales, which is creating the sales order, shipping, receiving.
We have the shipping and the billing which affects the financial accounting. What
 32

is material management, what do we have under it? Inventory, when here we don’t have purchasing we may purchase if we don’t
have enough material to sell to the customer and we have to start production

Organizational Data —>.another term is organizational structure

● Client
● Company code
● Sales organization —>.we should have at least one. It is the unit that is responsible for creating the sales
agreement with the customer. So negotiating with the customer, anything that has to do with the customer is the
responsibility of the sales organization. Then we have different units under the sales organization, these are the
distribution channels. Think of it as a store, it is by geographical locations
● Distribution channel —>.am I selling retail or wholesale, am I selling through the internet. Every one of these
channels will have its own unit. Process, price, condition, the packaging is different among the 3 distribution channels
● Division —>.if I sell different types of products. Ex. I am a computer manufacturer, I have a division for the
processor, I have a division for the screens, and I have a division for accessories.
● Sales area —>.it a combination of several things together which are the sales organization, the distribution channel
and the division. All of them will make a sales area, and the 3 will determine the price. Ex. Selling natural gas in a
specific regional area and whether we are selling it wholesale or retail
● Shipping point —>.should I have one shipping point? NO. The shipping point depends on how you are going to
ship the material to a customer, it can be close to an airport, close to a port, or close to a shipping company that will
ship by car. If you are one plant, it can have 2 shipping points, regular shipping, and expedited shipping. A plant can’t
have no shipping point but they can share shipping points. Two types: multiple shipping points and shared shipping
point
● Credit control area —>.is responsible for defining the credit limits for each customer. You should be profiling the
customer, so you don’t deal with customers individually, you create a profile for the customer. So if this is your first
interaction you may say “no credit”, this means I don’t know you and I don’t know whether you pay or not, or you may
assess my creditworthiness, see how I dealt with other vendors, do I pay at a time or not. In the US that info is reported
so everyone can look at it, the companies also have a credit score, countries also have a credit score. So every
customer will have a particular credit score what we call their creditworthiness and based on it we determine if we
should allow them credit or not, so if it is paid immediately we don’t allow them credit, if it's paid within 30 days there
is some credit, paid within 60 days or paid within 90 days. So they can either pay right away as soon as they get the
invoice or after 30 days or after 90 days, depending on the creditworthiness. Usually, you group customers together
which means if you belong to group A, you have to pay right away, and if you belong to group B you have to pay within
30 days, and if you belong to group C you have to pay within 90 days. So it is a standard, you don’t want to treat every
customer differently but if they belong to the group that is how they would pay.
● Plant (shipping plant) —>.we may have different types of plants which are manufacturing plant (you
manufacture), distribution plant (you distribute), storage or shipping plant (you store and ship). When you are in sales
you are either a distribution plant or warehouse.
● Storage location —>.any warehouse is divided into storage locations. The different storage locations that depend
on the material, so if its a raw material its. In a separate storage location, then the finish goods, the trading goods. So
 33

every warehouse is divided into locations, the north the east the south the west, and every location will have a specific
type of material, whether it is raw or finished goods or semi finished goods or trading goods.
Underlined: Only pertains to Sales & Distribution

Sales Organization

● Responsible for
○ Distributing goods and services
○ Negotiating sales conditions —>.negotiating the sales with the customer, especially when you are
buying very expensive products we have to have negotiation
○ Product liability and rights of recourse
● Used to divide the market based on geographic regions —>.The sales organization will focus on specific
geographic areas. Why do we need a sales org in each geographic area? It’s to understand that market, so I may be
selling worldwide but I have one for the Middle East because it’s so different from the Far East. If I sell to China and
Korea it's different from selling to the Middle East and it's also different from selling to the Europeans. So you must
create different sales organizations for a better understanding of customer needs.
● Highest level of aggregation in sales-related reporting —>.when we report the sales we report at the sales
org level, so your report says your sales in North America, your sales in Europe, your sales in China or the Far East,
etc. so reporting your sales is by geographic location which is by sales organizations
● A company code must have at least one sales organization and a sales organization belong to only
one Company code.

GBI Sales Organization

This is a representation of the sales organization, there are 4. 2 in the US and 2 in

Germany

Distribution Channel —>. It’s the path that the product goes through from
where its originated to the customer. So to reach the customer what is the path that that product takes? Whole sale, retail or
through the internet? Why do we create them separately? Because each will have its own policies, there own shipping, there own
pricing so you have to have different distribution channels.

● Responsible for getting materials to customers

● Used to
○ Differentiate distribution strategies or approaches
○ Different pricing, responsibilities
 34

○ Wholesale sales, retail sales, Internet sales

○ Statistics and reporting at the DC level
● A sales organization must have at least one distribution channel —> .there is no way a company that
sells doesn’t have a distribution channel. Why? Let’s say we are selling services (hospital), what would be the
distribution channel? It would be retail. Let’s say a company teaches students over the internet then your only
distribution channel is the internet

GBI US Distribution Channels

You can see that the distribution channel here are wholesale and internet, and
we are creating 3 under US and 3 under Germany

Division —>focuses on a specific type of a product, so I have a specific product and I created the division for it because its
so different from the other products that I’m dealing with and again pricing is different, the agreement itself and policies are
different. So the division is for a specific product line

● Used to consolidate materials with similar characteristics

○ Different sales strategies, pricing agreements
○ Statistics and reporting at the DC level —>. Sales organization for a different geographical location
the division is for a different product line and the distribution channel is for a different delivery path
○ Associated with product lines
● A sales organization must have at least one division
● Can be assigned to multiple sales organizations

GBI US Divisions

Again we have a bicycle and accessories are two division under both the US and
Germany
 35

Sales Area —>.combination of sales organization, distribution channel, and division. You report your sales by sales area.

● Made up of three other organizational elements

○ Sales organization
○ Distribution channel
○ Division

GBI Sales Areas

Here it shows you the sales organization, distribution channel, and the division. So a
particular product that I’m selling to a specific geographical location using a specific
distribution channel.

Plant

● Plant —>.it can be either a:

○ Manufacturing facility
○ Warehouse (storage)
○ Office (ex. Hospital, Agencies)
● A company code must have at least one plant defined in a company code. —> .so if I and a company I
should have at least one plant and it could be just an office, but I cannot have no plants, it's not possible.
● A plant must be uniquely assigned to a company code. —> .in SAP each plant is for one company code but
in reality sometimes if I have storage you can use the storage for two different company codes if it exists under the
same client. Ex. Almeera and it has two companies underneath it, os almeera is the client and I have 2 branches
underneath it, and let's say these branches use the same storage location, the SAP will not allow you to do that, but
what you do in reality is you give two different plants the same address. So as the software will not allow you, you could
create 2 plants and give them the same address
● A plant can be assigned to deliver products or services for multiple distribution chains.

Plants and Distribution Chains

Plant 1 is selling through distribution chain 1

Plant 2 is sending to all 3 distribution chains

Plant 3 is sending to distribution chain 3

 36

The answer to the question: is plan 2, it is a manufacturing facility, it produces goods and that's why it's giving to all distribution
chains. Plant 1 is most probably just a warehouse. plant 3 can be just an office. It is plant 2 that produce the goods and it has to
send to all three distribution chains

Shipping Point

● A physical location from which outbound deliveries are sent, it can be:
○ Loading dock
○ Close to an airport
○ Mail room
○ Rail road
○ Group of employees (to handle expedited orders) —>.that will take the things ex. FedEx. So it
can be an office. Let’s say I have a parcel I want to send it, I'll just go and give it to that person and they’ll
take it to a mailing company
● A plant must have at least one shipping point.

How about an office? —>.so you are selling services, at least you’ll have a mail room (sending and receiving invoices),
also you’ll have supplies such as pen pencils and papers that will be delivered to you

● Does a shipping point have to be physically located within a plant? —>. No, we can only have
individuals that will take outside of the plant

Shared Shipping Point

Here I have a plant that has a shipping point but other plants don’t have
anything. All these plants are sent to one shipping point.

Multiple Shipping Point

A plant may have a shipping facility or it may not have a shipping facility. Ex. If you
are sending by normal mail, you will use plant one, if you are sending Express then you
will use plant 3.
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Shipping Point Example

Credit Control Area

● Responsible for customer credit —>.responsible for determining the credit for every customer. You don’t do
that for the individual customer, you try to categorize the customer into a group so they belong to group A or B or C,
because it is against the law to give different treatment to different customers who have the same quality. Ex. The credit
score for client A is 700 and client B is 670 which is very close, therefore they should be treated the same way.
● Centralized —>.most companies prefer a centralized control area, so at the client level the credit is determined for
everyone, one credit area for all company codes because they have one policy, one standard so they apply it to
everyone
○ One credit control area for all company codes in the enterprise
○ All customers in all company codes are managed by one credit control area
● Decentralized —>. This also means one at the company code level. It is for different geographical areas,
specifically different countries that are far away and have different policies. So different economic conditions because
of different countries will result in creating a decentralized credit control area. You have to be sure that you have
standard processes, this means you apply the same to everyone that is the same, every category, every group has the
same treatment.
○ More than one credit control area in the enterprise
○ Each credit control area manages credit for one or more company codes
○ Good practice to set standard credit limits.

Centralized Credit Control Area

So here you have a centralized control are right under the enterprise
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Decentralized Credit Control Area

A decentralized, every company code will have its own credit control
area. Why is it in this case that I have one control area for 3
company codes? It's still decentralized as you have one for North
America and one for Europe. Canada and Mexico are very close to
each other and they have the same policies therefore I don’t need to
duplicate, I’m gonna treat the customers the same way in all three
countries

If I give you a scenario of a company and then ask you what the
sales organization is? What is the organization of the sales module within that organization? One thing you need to look at in the
question is if they are operating in different geographic locations or not. Different geographic locations = different sales
organizations. The second thing you need to look at is the distribution channel, are they selling only through retail or retail,
wholesale, and the internet. The third is the division, do they have one product line or different product lines. As all three make
up a sales organization. Then we have a plant and at least we should have one plant per company code. If we say this is a
multinational company, it would have at least one company code, and if I say this is a manufacturing company I would have at
least 2 plants, one for manufacturing and one is for the distribution (warehouse). After the plant we have the credit control area

Master Data —>.its data that continues to reside within the system from one business cycle to the next, this means if Ill start
a new year the data will continue to be in the system. What continues to exist:

● Material master (what views?) —>.this is what I’m selling

● Customer master (what segments?) —>.customer has several segments and several views because different
departments deal with the customer. Accounting will deal with the customer, sales will deal with the customer, customer
relationship management that tracks the interaction also looks at the customer,
● Customer-material info record —>.do you remember from purchasing we have vendor material info record and
we said that's the combination of the vendor and the material and it shows the last time the vendor sold us the material.
So the same thing with the customer the last time the customer bought that particular material from you is in a record
called the customer-material info record. For every material that the customer buys from us, we have a record for it.
Let’s say you are a customer you have bought 10 items from us then we will have 10 different material info record just
for you, and for every material, we find out what color you choose and the size you got and if you got a discount or not,
did you have a repeated sale (you ordered it several times or not)
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● Conditions —>.we have certain conditions, the conditions for payment, the conditions for shipment, who pays for
the shipping, when are you, spouse, to pay, do you get a discount or not. All of these are conditions that control our
interaction with the customer.
● Output master data —>.it's just like for printing (in the recording she said just ignore that 🤷🏻‍♀️
)

● Credit management master record —>. the central area that is responsible for the central management
controls how much credit each customer will get. Do we actually define it for every individual customer? No, we group
them, we create a profile so as soon as you create a new customer you have to assign that customer a profile and that
profile determines the credit management

Material Master Data —>.any master data will have several views because several departments handed that particular
master data. So the material master data will have basic data and the sales organization.

● Basic Data
● Sales: Sales Organization —>.focuses on a specific geographical location because of that you have to say what
are the distribution channels available in that location and specify if there is a designated delivery plant which plant
will deliver to the customers in that area.
● Includes data specific to a combination of sales organization and distribution channels
○ Examples include: delivering plant, sales units (unit of measure), minimum quantities
(order, delivery)
● Sales: General/Plant —>.sales view, part of the sales view is packaging, how do we package that material, it may
be a material that's easily broken so you need special packaging. You also have to specify how the material will be
shipped, some material because of size can not be shipped by air.
● Includes data specific to a plant (how the material will be shipped)
○ Examples include: handling requirements (refrigeration), loading (hand cart, forklift)
How many versions of a material will you create if you are selling from Doha WH, RE, and IN ?
So if we have a material that you are selling in Doha and you have a wholesale distribution channel, a retail distribution
channel, and an internet distribution channel, how many versions will you create for the material. I'll have to create three
because the handling may be different, the shipping may be different and the pricing may be different therefore we’ll need to
create 3 different versions.

Customer Master Data

● General Data —>.data common to all views, basic info. So the material name, material description, the weight for
that material. It doesn't matter whether you are selling retail or wholesale
○ Specific to a client
○ Valid across company code and sales area
○ What attributes will you store under this view?
● Financial/ Accounting data —> .
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○ Specific to a company code —>.why is accounting specific to a company code? Because the company
codes are totally different companies and they may operate in different counties so the currency would be
different.
● Sales Area data
○ Specific to a sales area —>.The sales area is under one company code, why do we have different views
for different sales areas? So if I have 2 sales areas I will have 2 specific information for each sales area.
What do I mean by that? What we find under the sales is that makes me want to create 2 different views? It is
geographic and it is the distribution channel and it is the division. So if it's the same material and whether
I’m selling wholesale or retail, I should have different views. Because under wholesale the price would be
lower, and the geographic the prices are different ex. Near the pearl, the price is higher in comparison to a
small neighborhood

Segments of Customer Master Data

The combination of customer data and material data is called the customer material
information record. It is the record that tells us what is the material that each customer
ordered, when did they last ordered, and what conditions did we give them (discount or
not).

This is just showing you the different views of the customer if I’m accounting department I
have to see the accounting view, if I’m sales department I would look at the sales view, and
part of the view is common between them both and this is the general, basic info.

Customer Master Data

● General data
○ Account number
○ Address
○ Communication
● Company code data (FI) —>.financials. Can a customer exist under two different company codes? Yes, the
customer from me here in Doha and also buys from the US, but each one has its own accounts receivable. So if I have a
customer under two company codes the customer will have two accounts receivable under two accounts, one under
each company code, and the payment will be different as every company will determine what to give you.

If I have one customer and the customer exists under two different company codes, he will have two accounts, the payment terms
could be the same, so what is the requirement that we must have to have the same payment terms?

If we have one central credit management organization, if it's the same one credit management then they have to have one
payment terms, the same in both company codes
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○ Reconciliation account (account receivables)

○ Payment terms (within 30 days, 90 days)
● Sales Area data (Sales) —> .the customer can be under the same company code but occurs under two different
sales areas, so the customer can sometimes buy wholesale and sometimes can buy retail, and the pricing will be
different.
○ Sales related
■ Sales area, pricing, currency
○ Shipping —>.the shipping under customer will say which plant will deliver to me
■ Delivering plant, priorities, methods, tolerances (ex. A company gives you free shipping
if you purchase more than 100$, you could set the tolerance up to 3% so 97$, so the tolerance
could accept some flexibility), partial delivery
○ Billing —> billing has to do with the general ledger (gl)
■ Terms , tax-related, —>. When should you get the bill, is it at the end of the month or as soon
as shipping goes, when should you pay how much taxes should you be charged
○ Partner functions: multiple roles —>. Every customer has several partner functions, what do we
mean? If you are a customer and you are a company yourself, you have several plants, the plant can be an
office, manufacturing, warehouse. You can designate which plant will be the sold-to-party, which will be
responsible for payment, which plant will be the ship-to-party that will receive the goods, or I can be the
payer so I pay for the whole company, all plants can order and only one is responsible for paying, or I can be
the bill-to-party if I am an office, I am the financial office that all invoices will come to me.
■ Sold-to-party, ship-to-party, bill-to-party, payer
● A customer can be served by multiple sales areas

Multiple Definitions of a Customer

A customer can have multiple definitions because a customer operates in two different
countries or in two geographical locations, or sometimes you operate under wholesale
and sometimes under retail. So 3 reasons why:

- because the customer exists under 2 different company codes

- The customer operates under two different sales areas. The sales area are 2
things, either geographic location or distribution channel (whole sale or retail)

Customer - Material Information Record

● Intersection data for one customer and one material

○ Data specific to the combination of customer and material
● Supersedes data in customer master and material master
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● Examples of data
○ Cross references customer material numbers, descriptions
○ Specific terms (e.g., shipping, tolerances, partial deliveries, delivering plant)
○ Alternate delivery plant, shipping terms/methods, tolerances, partial deliveries (e.g. not
accepted for this material)

RMB and GBI Material Numbers

Pricing Conditions

● Prices
○ Material price
○ Customer specific price
● Freight
○ InCoTerms
● Surcharges and discounts
○ For customer, material, or combination
● Taxes

Credit Management Master Record

● Extension of the customer master record

● General data (client level)
○ Address, communication, total credit at the enterprise level
● Credit control area data (credit control area level)
○ Credit limit for the credit control area
○ Risk category
● Overview (key data from other areas)

Fulfillment Process Steps

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GBI Scenario

● Customer: RMB, Denver, CO.

● Silver Deluxe Touring bikes: 40
○ Delivery 30 by May 10, 10 by June 10
● T-shirts: 100 (qualifies for 10% disc)
○ Delivery all by May 10
● Deliver to racing location in Colorado Springs

Selling price Cost price

Silver deluxe touring bike $2,800 $1,400

T-shirt $30 $15

Pre-sales Activity

● CRM light – establishing and maintaining customer relationships

● Activities include
○ Creating and tracking customer contacts
○ Mailing campaigns
○ Responding to customer inquiries and request for quotation
○ Quotations
○ Outline agreements
■ Contracts
■ Scheduling agreements

Reference Documents for Quotation

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Elements of a Sale Order

Sales Order Processing

● Typical data in a sales order

○ Customer and material data
○ Delivery dates and quantities
○ Pricing conditions
○ Shipping information
○ Billing information
● Source of data
○ Customer order
○ Master data
○ Contracts

Relationship between Quotations and Sales Orders

Backward Scheduling
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Shipping

● Create outbound deliveries

● Picking (optional)
● Packing (optional)
● Transfer requirement (if WM is enabled)
● Post goods issue —> billing happens after it

Elements of the Shipping Step

Relationship between Schedule Lines and Delivery Items

Deliveries

● One order >> multiple deliveries

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● Multiple orders >> one delivery

● Constraints?
○ Same customer
○ Same shipping point
○ Same delivery date
○ Same ship-to-address

Relationship between Sales Order and Deliveries

Relationship between Delivery Documents and Transfer

Requirements

Impact of Post Goods Issue

● A material document is created

● GL accounts - Stock accounts and cost of goods sold account - are updated, and an accounting
document is created
● A controlling document is created
○ Fulfillment provides COGS data to profitability analysis in controlling
● The billing due list is updated
● Sales documents are updated (status)

Outcomes of Shipping (Goods Issue)

FI Impact of the Shipping Step

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Billing

● Create invoices
● Create credit and debit memos
● Many deliveries >> one billing document
○ Same payer, billing date and destination country
● One delivery >> many billing documents

Relationship between Deliveries and Billing

Impacts of a Billing Document

● GL accounts are updated and an FI document is created

○ Customer account > AR reconciliation account
○ Sales revenue account
● A controlling document is created
○ Fulfillment provides revenue data to the profitability analysis process
● Sales documents are updated (status)

Outcomes of the Billing Step

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FI Impact of the Billing Step

Payment

● Post incoming payment

● GL accounts are updated and an FI document is created
○ Cash/Bank account
○ Customer account -> AR reconciliation account

FI Impact of the Payment Step

Customer Payment with Discount

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Processing Customer Payment

Credit Management Process

● Used to determine if credit should be granted to a customer (i.e.,

should process continue?)
● Credit is checked when:
○ Sales order is created or changed
○ Delivery is created or changed
○ Post goods issue
● Approval based on
○ Credit exposure = sum of open orders, deliveries, open invoices, and current order value
● Outcomes: warn & continue, error & terminate, block delivery

Integration with Other Processes

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