Business Blueprint

Understanding the Business Process Reference Model

Thomas Curran & Gerhard Keller

with Andrew Ladd

MHOCHSCHULE
m
LIECHTENSTEIN
Bibliothek

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Contents

Foreword XI

Preface xiii
Copyright and Trademark A< xvii
Introduction xix
I.I What Is SAP? xxi
1.2 What Is R/3? xxi
1.3 What Is the R/3 Reference Model? xxii
1.4 Who Uses R/3? xxiii
1.5 How Do Customers View R/3? xxvii
1.6 Conclusion xxix

PART 1 BUSINESS ENGINEERING

1 Business Engineering and Enterprise Optimization 3

1.1 Significance of Business Engineering 4
1.2 Principles of Business Engineering 4
1.3 Objectives of Business Engineering 5
1.4 Benefits of Business Engineering 6
1.5 Business Engineering with Information Technology 7
1.6 Integration of Information Technology 9
1.7 Developments in Information Technology 10
1.8 Client/Server Technology 11
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1.9 Benefits of Client/Server Technology 12

1.10 SAP and Client/Server Technology 14
1.11 Conclusion 16
2 The Business Blueprint 19
2.1 Pros and Cons of Business Blueprints 20
2.2 General Design of the R/3 Blueprint 22
2.3 Focus of the R/3 Blueprint 23
2.4 Event-Driven Process Chain Methodology (EPC) 24
2.5 Describing Complex Business Processes 27
2.5.1 Ordering Toner 28
2.5.2 Recruiting a New Employee 28
2.5.3 Planning a Seminar 30
2.6 EPC Methodology and Viewpoints in the R/3 Reference Model 32
2.6.1 Reference Model Viewpoints—Car Dealership 34
2.6.2 The Component Model—What Happens? 34
2.6.3 The Organizational Model—Who Does What? 37
2.6.4 The Data Model—What Is Needed? 38
2.6.5 The Interaction Model—How Do Company Models
Interact? 40
2.7 Summary 42
3 Configure to Order 45
3.1 Standard Software Implementation Issues 47
3.2 Mapping with the Business Blueprint 48
3.3 Redlining the Blueprint 50
3.4 Extending the Business-Process Design 51
3.5 Implementation Case Studies 53
3.5.1 A Hypothetical Example 53
3.5.2 Real-Life Example: Schwarzkopf 54
3.5.3 Real-Life Example: Conoco Ltd. 56
3.6 Conclusion 57

PART 2 PROCESS DESIGN 59

4 Value Chain Thinking 61

4.1 The Value Chain Principle 62
4.2 R/3 and the Value Chain 64
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4.3 Overview of Part 2: Value Chain Thinking 64

4.3.1 Value Chain Example: Order-to-Delivery
of Copy Machines 65
4.3.2 Value Chain Example: Applied Micro Circuits
Corporation (AMCC), San Diego, California 66
5 Sales Logistics 69
5.1 Standard Order Handling Scenario 71
5.1.1 Mailing Campaign Processing 74
5.1.2 Sales Activity Processing 75
5.1.3 Customer RFQ Processing 76
5.1.4 Customer Quotation Processing 76
5.1.5 Standard Order Processing 78
5.1.6 Delivery Processing 80
5.1.7 Goods Issue Processing for Stock Material 81
5.1.8 Billing 82
5.2 Contract Handling 82
5.3 Third-Party Order Handling 84
5.4 Customer Consignment Stock Handling 85
5.5 Cash Order Handling 86
5.6 Rush Order Handling 87
5.7 Decentralized Shipping 88
5.8 Sales and Distribution Examples 89
5.8.1 Micrografix Corporation, Richardson, Texas 89
5.8.2 Jet Aviation, Palm Beach, Florida,
and Zurich, Switzerland 90
6 Production Logistics 93
6.1 Production by Lot Size 95
6.1.1 Processing of Sales and Operation Planning 98
6.1.2 Demand Management 99
6.1.3 Material Requirements Planning 99
6.1.4 Creation and Execution of Production Order 101
6.2 Repetitive Manufacturing 102
6.3 Make-to-Order Production 103
6.4 Process Manufacturing 104
6.5 Project-Related "Engineer to Order" 105
6.6 Quality Management for Goods Receipt from Production 106
6.7 Production Logistics Example: Autodesk Incorporated,
Sausalito, California 107
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7 Procurement Logistics 111

7.1 Processing Stock Material Scenario 112
7.1.1 Material Requirement Planning 114
7.1.2 Requisition Processing to Stock Material 116
7.1.3 Processing of RFQ Issued to Vendor 118
7.1.4 Vendor Quotation Processing 118
7.1.5 Purchase Order Processing for Stock Material 118
7.1.6 Goods Receipt Processing 119
7.2 Processing of Consumable Material 120
7.3 Management of Consignment Stocks 122
7.4 Subcontract Order Processing 124
7.5 Stock Transfer Processing 125
7.6 External Services Management 126
7.7 Materials Management Examples 127
7.7.1 Chevron Corporation, Tulsa, Oklahoma 127
7.7.2 Westcoast Energy, Inc., Vancouver, British Columbia 129
8 External Accounting 131
8.1 Vendor Processing 133
8.1.1 Vendor Master Record Processing 135
8.1.2 Vendor Invoice Processing 136
8.1.3 Down Payment Release 137
8.1.4 Automatic Payment 137
8.1.5 Manual Payment 138
8.2 Customer Processing 139
8.3 OTA Vendor Processing 141
8.4 Creditor Subsidiary /Head-Office Processing 141
8.5 General Ledger Processing 142
8.6 Special-Purpose Ledgers Processing 143
8.7 Consolidation 144
8.8 Customer Example: Syntex Corporation, Palo Alto, California,
and Maidenhead, England 146
9 Organization and Human Resource Management 149
9.1 Personnel Management 151
9.1.1 Organizational Plan Processing 152
9.1.2 Job Description 154
9.1.3 Processing of Employee Status for Planning
and Development 154
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9.1.4 Staffing 155

9.1.5 Personnel Cost Planning 156
9.2 Business Event Processing 156
9.3 Travel Expense Processing 158
9.4 Time Management Processing 158
9.5 Payroll Processing 159
9.6 Salary Administration 161
9.7 Benefits Administration 162
9.8 Customer Example: The Wellmann Group, Enger, Germany 163
10 Business Planning and Controlling 165
10.1 Cost Object Controlling 167
10.1.1 Production Order Preliminary Costing 169
10.1.2 Production Order Simultaneous Costing 170
10.1.3 Period-End Closing and Final Costing 171
10.2 Profitability Analysis 172
10.3 Profit Center Accounting 174
10.4 Overhead Cost Management 176
10.5 Customer Example: Convex Computer Corporation,
Richardson, Texas 177
11 Capital Asset Management 179
11.1 Planned Plant Maintenance 180
11.1.1 Maintenance Plan Processing 181
11.1.2 Maintenance Plan Scheduling 183
11.1.3 Maintenance Call Processing 183
11.1.4 Maintenance Order Creation and Processing 184
11.1.5 Maintenance Order Release . 184
11.1.6 Maintenance Order Execution 184
11.1.7 Maintenance Order Completion Confirmation 185
11.1.8 Maintenance Order Settlement 186
11.2 Plant Maintenance Due to Damage 186
11.3 Project-Related Plant Maintenance 187
11.4 Cash Management 188
11.5 Budgeting 189
11.6 Fixed Asset Processing 191
11.7 Leased Asset Processing 192
11.8 Customer Example: Chevron Products Company, U.S.A. 193
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PART 3 ARCHITECTURE, FRAMEWORK, AND TOOLS 195

12 Architecture of the R/3 System 197

12.1 R/3 and the Distributed Environment 198
12.2 The Three-Tier Client/Server R/3 Architecture 200
12.3 Benefits of the R/3 Three-Tier Client/Server 202
12.4 Interprogram Communication 204
12.5 Middleware Transaction Management 205
12.6 Rationale for Distributed Business-Process Integration 208
12.7 Capabilities of Application Distribution in R/3 211
12.8 Tools for Application Distribution 213
12.8.1 Model-based Application Distribution 214
12.8.2 Distribution Reference Model 214
12.8.3 Business Blueprint 215
12.9 Conclusion 216

13 R/3 Framework and Infrastructure 219

13.1 Background of Business Integration 220
13.2 SAP Business Framework 222
13.2.1 Configuration of Enterprise Applications 223
13.2.2 Rationale for the Business Framework 224
13.3 Repository as Integrating Factor 224
13.3.1 Business Processes 227
13.3.2 Business Objects 228
13.3.3 Data Models 229
13.3.4 Object-Oriented Interfaces 230
13.3.5 Business Components 231
13.4 Enterprise Application Development 232
13.4.1 ABAP/4 Development Workbench 233
13.4.2 Development Workbench Features 234
13.5 Conclusion 237
14 Business Engineering in R/3 239
14.1 R/3 Business Engineer Overview 240
14.2 Benefits of the R/3 Business Enginefer 242
14.3 Modeling and Configuring the Enterprise 244
14.3.1 Application Components 245
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14.3.2 Session Manager 246

14.3.3 Enterprise Organization 248
14.4 Using the R/3 Reference Model 249
14.4.1 Business Object Model 250
14.4.2 Object-Oriented Data Model 251
14.4.3 Business Process Model 253
14.4.4 Workflow Model 255
14.5 Guideline for Implementing R/3 258
14.6 Project Management 259
14.7 Workflow and Personnel Organization 260
14.8 Open Repository Interface 261
14.9 Business Engineer: Future Vision 265
15 New Age Enterprise 267
15.1 Electronic Commerce 270
15.2 New Age Application Components 271
15.3 R/3 Internet Application Scenarios 272
15.4 The Industry Reference Model, Process Configuration,
and Vertical Markets 274
15.5 Autonomous Software Agents 275
15.6 Conclusion 278
Index 280