MN2104

Business Processes
Management
Logistics

ACCOUNTING PROGRAM
Overview
• Provide an overview of the various logistics
processes covered by the mySAP Business Suite.
Objectives
After completing this unit, you’ll be able to:
• Discuss the various key operational processes
• Illustrate the integration between the key operational
processes
• Outline the tasks associated within the procurement cycle
• Explain how SAP within mySAP ERP supports the key
processes in procurement
• Outline the tasks associated with sales order management
• Explain how SAP within mySAP ERP supports the key
processes in sales order management
• Outline the tasks associated with production planning and
manufacturing execution
• Explain how mySAP ERP supports key processes in production
Contents
• Logistics Overview
• Procurement
• Sales Order Management
• Production
Logistics Overview
Key Operational Activities
• The basic logistics process comprises procurement of materials,
manufacturing items using these materials, and then sale of the
manufactured products.
• The procurement process is composed of purchasing, inventory management,
and invoice verification.
• Production comprises of planning and manufacturing.
• Sales order management includes creation of the sales order, delivery by the
vendor, and billing.
• Procurement, sales, and production are different key operational
processes often handled in different functional departments, but
each of these key processes triggers activities in the other processes.
• As an example, production might be started by a sales orders or by an
independent demand plan; procurement needs are triggered by a need from
production planning or due to the sell of stocked products.
• These processes can happen independently of each other or as a
group
Key Operational Activities
• Depending on a company's requirements, their products, and their
processes, certain operational activities may play very different roles
with very different priorities.
• For example, in addition, several accompanying process Quality Management,
more important than an actual sales process.
• All of these processes needed by a company are part of the mySAP
ERP solution.
• Procurement, Sales, and Production are considered to be the primary operational
activities. Secondary activities might include Quality Management, Plant
Maintenance, Customer Service, and Warehouse Management.
• The process importance is determined by a company’s needs.
• All of the key operational processes integrate with each other and
can be running within one central ERP system.
• They also integrate with mySAP ERP Financials and mySAP ERP Human Capital
Management.
Key Operational Activities
Enhancing Processes with
mySAP Business Suite
• The operational processes delivered through
mySAP ERP can be extended with the solutions
included in mySAP Business Suite.
• For example:
• Optimize and centralize company’s production
planning processes by using mySAP SCM.
• Expand company’s marketing and sales capabilities
by using mySAP CRM.
SCM Extends Production
• The company may
optimize and centralize
its production using
mySAP SCM.
• It includes features such
as advanced planning
systems and covers
functions of sales order
management.
CRM Extends Sales Order
Management
• mySAP CRM is a
comprehensive solution
for managing business
relationships with
customers.
• It supports all customer-
focused business areas,
from marketing to sales
and service, as well as
customer interaction
channels such as
interaction center,
internet, and mobile
clients.
SRM Extends Procurement
• mySAP SRM manages the
business relationship with the
supplier.
• It provides strategic value
through sustainable cost
savings, contract compliance,
and instant assessment, with
tools to drive superior results
through end-to-end source-
to-pay process.
• Activities such as spend
analysis, category
management, requisitioning,
sourcing, operational
contracts, invoicing, and
supplier management are
part of an integrated platform.
Procurement
Procurement Process Overview
• Procurement in mySAP ERP covers processes such as
requisitioning, purchase order management, and invoice
verification, and also catalog-based self-service requisitioning
for maintenance, repair, and operations (MRO) materials and
services.
• Procurement in mySAP ERP improves procurement processes
• Facilitates plan-driven and ad hoc purchasing, complete inventory
management, and intelligent reporting on all procurement activities.
• Enables supplier selection and qualification, contract negotiations, bid
invitations, and vendor evaluation.
• Support for process variant optimization allows individual categories
of material or services to be procured in the most appropriate way
• For example, the subcontracting process supports the delivery of components
required by outsourced manufacturing steps, and procurement through invoicing
plans helps improve rental and leasing processes.
Basic Procurement (Purchase to
Pay) Cycle
Basic Procurement (Purchase to
Pay) Cycle
1) Determination of Requirements
• Purchase requisitions (PRs) can be created manually or generated
automatically by the materials planning and control system.
• This can cover both the demand-based and material requirement
planning (MRP) approach to inventory control. The regular checking of
stock levels of materials defined by master records, use of the order-point
method, and forecasting on the basis of past usage are important aspects of
inventory control.
2) Source Determination
• Requests for quotation (RFQs) can be created manually or by referring to
PR, after PR approval.
• mySAP ERP helps identifying potential sources of supply based on past
orders and existing longer-term purchase agreements.
• This speeds the process of creating RFQ, which can be sent to vendors
electronically via EDI, if desired.
Basic Procurement (Purchase to
Pay) Cycle
3) Vendor Selection and Comparison of Quotations
• mySAP ERP is capable of simulating pricing scenarios, allowing user to
compare a number of different quotations. Rejection letters can be sent
automatically.
4) Purchase Order Creation
• Purchase order (PO) can be created with reference to PR, RFQ, contract,
and material record; by user or automatically by system.
5) Purchase Order Follow-Up
• The status about the delivery date and quantity to be delivered can be
monitored.
• After issuing PO to the vendor, the system will check the reminder periods
specified before and, if necessary, automatically print reminders or
expediter at the predefined intervals, also provide an up-to-date status of all
PRs, quotations, and POs.
Basic Procurement (Purchase to
Pay) Cycle
6) Goods Receiving and Inventory Management
• Goods receipt (GR) can be confirmed simply by entering the PO number
(PO status will be updated). Goods can be received without the PO.
• GR will create material document.
• By specifying permissible tolerances, buyers can limit over- and under-
deliveries of ordered goods.
7) Invoice Verification
• Invoice can be posted before or after GR.
• SAP use goodreceipt/invoice receipt (GR/IR) clearing account

• The system supports the checking and matching of invoices. The accounts
payable (AP) clerk is notified of quantity and price variances because the
system has access to PO and GR data. This speeds the process of auditing and
clearing invoices for payment.
Purchase Orders
• PO is a formal request to a vendor to supply certain goods or services
under the stated conditions.
• PO can be created without reference, or with reference to a PR, a
RFQ, or another PO.
• When entering the purchase order data, the system suggests default
values. For examples:
• The system suggests the ordering address, terms of payment, and freight
(incoterms) from the vendor master record, as well as the material short text,
the material group, and unit of measure from the material master.
• If a purchasing info record already exists in the system, the system copies a
price proposal to the PO.
• Procurement staff can either send the PO to a vendor or carry out
a stock transport order in another plant. In both cases, user can
include the associated freight costs in the purchase order.
Purchase Order
• While creating a purchase order, procurement staff have to enter the
company code, purchasing organization, purchasing group, and also
plant.
Purchasing Organization &
Purchasing Group
• A purchasing organization is the unit within an enterprise that
performs strategic activities related to purchasing for one or more
plants.
• It evaluates and identifies vendors, negotiates contracts and agreements, pricing,
and other terms. An enterprise may have one or more purchasing organizations.
• Typically, there are three models of purchasing organizations: enterprise level,
company level, and plant level.
• A purchasing group is an individual or a group of individuals who
are responsible for purchasing activities for a material or a group of
materials.
• Whereas purchasing organizations are responsible for the strategic aspects of
purchasing, such as negotiating contracts with vendors, purchasing groups carry
out the day-to-day purchasing activities.
• These activities include planning, creating PRs, requesting quotations from
vendors, and creating and monitoring POs.
• The purchasing group also serves as the main point of contact with vendors.
Self-Service Procurement
• Self-service requisitioning means purchasing non-strategic goods,
that is, goods not directly linked to the value chain (often called MRO
items), like: office materials, work clothes, and IT equipment.
• The self-service procurement (SSP)
empowers employees to easily
procure needed materials using
a Web-based shopping cart.
• This shopping cart enforces
compliance with corporate
purchasing policies.

• SSP reduce administrative burden of purchasing professionals (the

procurement process will be faster and more responsive) and allow
them to focus on managing relationships instead of working
exclusively on transaction
Inventory Management
• GR is the next step after issuing
PO to the vendor
• During GR, the staff need to check
various things, such as the right
material has been delivered or not,
whether the right quantity has
been delivered or whether there
has been over or under delivery,
whether perishable goods are within their minimum shelf life.
• Several GR items can be entered against a PO item in one operation.
Inventory Management
Advantages of posting a GR to stock with reference to a PO:
• The goods receiving point can check whether the delivery is the same as the
PO data, that is, whether the goods that were ordered have been delivered.
• The system suggests data from the PO when user enter the GR (e.g., items
and quantities). This makes it easier to enter the GR and check over- or
under-deliveries when goods arrive.
• The PO history is automatically updated as a result of the deliveries. The
purchasing department can send a reminder about late deliveries.
• When user post a GR to the warehouse, the system creates a material
document containing information such as the material delivered and the
quantity delivered. The system also records the storage location for the
materials user place into stock in the plant.
• In transactions relevant for material valuation, the system creates at least
one accounting document that records the effects of the goods movement on
the value of the stock.
Invoice Verification
• The procurement process is concluded by the invoice verification
process, during which invoices and credit memos are entered and
the contents and prices are checked for accuracy.
• Note that payment and evaluation of invoices is not involved in this process. The
actual payment is handled by the accounting department.
• Invoice verification creates a link between Procurement and Accounting.
• When user enter an invoice with reference to a PO, the system
suggests data from the PO and the GR for the PO (for example,
vendor, material, quantity still to be invoiced, terms of payment, and
so on).
• If there are discrepancies between the PO or GR and the invoice, the
system warns the user and, depending on the system configuration,
blocks the invoice for payment.
Invoice Verification
• The posting of the invoice completes the invoice verification process.
The system updates the PO history and Financial Accounting initiates
payment for the open invoice items.
Messages

• All purchasing documents can be issued as messages.

• Each time user create an RFQ, PO, contract, or scheduling agreement, the system can
create a message from the document affected. This message is then placed in the
message queue.
• Two options to issue the message (by printing, e-mail, fax, or EDI) :
• Issue immediately: Issue the messages directly from the queue.
• Issue later: Either schedule a background job that processes the message queue in
determined intervals, or start the issue directly from the purchasing menu.
• For the message issue, user can specify which header texts and item-
based texts the system issues.
• The header text is printed at the top of the PO and contains general information.
• Item texts describe a PO item in more detail.
• User can also include and issue standard texts.
Sales Order
Management
Sales Order Process Overview
• mySAP ERP provides superior insight into sales back-office
processes, including: inquiries, quotations, order generation,
contract, and billing cycle management.
• Businesses benefit from a complete overview of the customer life
cycle, including: order status, billing, payment, and credit
management.
• mySAP ERP also supports Internet sales, sales entered through
mobile devices such as handhelds, and basic call center functionality.
• The Sales Order Processing (or Order to Cash) scenario describes the
complete process, starting with pre-sales activities, moving to the
creation of the sales order (SO), continuing with the SO fulfillment,
and ending with the invoicing of the SO and the parallel process of
the creation of the posting in financial accounting.
Sales Order Processing Cycle
Sales Order Processing Cycle
Pre-Sales Activities
• Pre-sales activities can be inquiries or quotations entered in the
system. These can then be used as reference during the creation of a SO.
Sales Order Creation and Availability Check
• The SO can adopt information from the pre-sales documents.
• Sales scheduling agreements or sales contracts (long-term sales
agreements) can also be created with reference to a SO and are
supported by the sales process steps.
• During the SO creation, the availability of the material can be
checked to confirm the customer's requested delivery date.
• If the materials are N/A, system will determine the earliest possible delivery date.
• The system can be configured to calculate availability based on current stock levels as
well as planned receipts of material from either procurement or production.
Sales Order Processing Cycle
Delivery and Goods Issue
• An outbound delivery (OD) is the basis for a process when the
goods are physically moved as well as for the posting of the goods
issue (GI).
• Picking can be fulfilled through the use of the Warehouse
Management system and transportation can be planned and carried
out.
Billing
• As the final step in the sales process, an invoice is issued, which
must also be reflected in accounting.
Sales Order
• During SO creation, the system can carry out basic functions:
• Monitoring sales transaction
• Checking for availability
• Transferring requirements to material requirements planning (MRP)
• Scheduling delivery
• Calculating pricing and taxes
• Checking credit limits
• Creating printed or electronically transmitted documents
• These basic functions may be completely automated or may require
some manual processing.
• The data resulting from these basic functions (for example, shipping
dates, confirmed quantities, prices, and discounts) is stored in the
sales document.
• The resulting data can be displayed by a user and, in some cases
during subsequent processing, manually changed by the user.
Sales Order
• The SO is a document that records what goods have been sold and to
whom, the price, the company code and the name of the sales
organization, and similar details. The relevant information is drawn
from the customer master record and the material master record.
Delivery

• Shipping is an important part of the logistics chain.

• In shipping processing, all delivery procedure decisions can be made
at the start of the process by:
• Taking into account general business agreements with customer
• Recording special material requests
• Defining shipping conditions in the SO
• The result is an efficient and largely automatic shipping process in
which manual changes are necessary only under certain
circumstances.
Shipping Functions
• Deadline monitoring for reference documents due for shipment (SOs
and POs, for instance)
• Creating and processing ODs
• Packing deliveries
• Information support for transportation planning
• Supporting foreign trade requirements
• Printing and transmitting shipping documents
• Processing GI (goods Issue)
• Deliveries currently in process
• Activities that are still to be carried out
• Identifying possible bottlenecks
Outbound Delivery
• The most commonly used document used to support delivery
processed is the OD document.
• In its role as central object of the GI process, OD supports all
shipping activities, including picking, packing, transportation, and
GI. During the OD process, shipping-planning information is
recorded, status of shipping activities is monitored, and data
accumulated during shipping processing is documented.
• When the OD is created, the shipping activities, such as picking or
delivery scheduling, are initiated, and data that is generated during
shipping processing is included in the delivery.
Outbound Delivery
• An OD can be created as follows:
• With reference to a SO
• With reference to a stock transport order
• With reference to a subcontract order
• With reference to a project
• Without any reference
• User can create ODs automatically or manually using worklists.
• User can make agreements with customers for complete and partial
deliveries and for order combinations. ODs can be combined to form
a single group of deliveries.
• A variety of warehouse and sales overview reports allow user to
monitor created ODs and outstanding sales activities.
Picking the Delivery
• Picking means taking goods from a storage location and staging the goods in
a picking area where the goods will be prepared for shipping.
• System settings will allow picking to be carried out:
• Automatically (during OD creation)
• Routinely (at certain times)
• Manually (via an employee request)
• A picking status is recorded in each delivery item for the purpose of
scheduling and monitoring. This status indicates where the item is in the
picking procedure.
• In the system standard settings, it is a prerequisite for a GI to be posted, that
the items that are relevant, have been picked.
• Therefore, a delivery quantity must equal a picking quantity in the OD.
• The Warehouse Management system (WM) is fully integrated in the
Logistics Execution System (LES).
• User can create a WM transfer order directly from the OD. The current status of the WM
process can also be monitored from the delivery or from the SO.
Goods Issue Posting Functions
• The OD forms the basis of GI posting. The data
required for GI posting is copied from the OD
into the GI document, which cannot be changed
manually.
• Any changes must be made in the OD itself.
• After GI is posted for an OD, the scope for changing
the delivery document becomes very limited. This
prevents any discrepancies between the GI document
and the OD.
• In this way, user can be sure that the GI
document is an accurate reflection of the OD.
Goods Issue Posting Functions
• When user post GI for an OD, the following functions are carried out:
• Warehouse stock of the material is reduced by the delivery quantity
• Value changes are posted to the balance sheet account in inventory accounting
• Requirements are reduced by the delivery quantity
• The serial number status is updated
• GI posting is automatically recorded in the document flow
• Stock determination is executed for the vendor's consignment stock
• A worklist for the proof of delivery is generated
• Multiple ways to post GI :
• Automatically (during OD creation)
• Routinely (at certain times)
• Manually (via an employee request)
Billing
• Billing represents the final processing stage for a business transaction in SO
processing. Information on billing is available at every stage of order
processing and delivery processing.
• Billing functions include:
• Creation of invoices based on deliveries or services
• Issue of credit and debit memos and pro forma invoices
• Cancelling billing transactions
• Comprehensive pricing functions
• Issue rebates
• Transfer billing data to financial accounting

• Like all parts of SO processing in mySAP ERP, billing is integrated into the
organizational structures. Thus, user can assign the billing transactions a
specific sales organization, a distribution channel, and a division.
• Because billing has an interface to financial accounting, the organizational structures of the
accounting department (the company codes as well as the sales organizations assigned to
the company codes) are important.
Billing
• During a billing processing it is possible to
create, change, and delete billing documents.
Billing
• It is possible to create billing documents:
• With reference to a SO document
• With reference to a delivery document
• With reference to external transactions
• By having the system automatically process a billing due list as a background
task
• By manually processing from a worklist
• By creating a billing document explicitly
• By combining several SO documents into a collective billing document
• By billing one or more SO documents with several billing documents (this is
called an invoice split)
• By creating an individual billing document for every sales document
Billing and Financial Accounting
• The system automatically posts the amounts to the appropriate
accounts by means of account determination.
• Costs and revenue can be posted to the following accounts:
• Customer accounts receivable
• General ledger (for example, a cash clearing account)
• Revenue
• Sales deductions
• Accruals (for rebate agreements)
• Accrual account
• Accrual clearing account
Document Flow
• The sales documents are individual documents, but they can also
form part of a chain of interrelated documents.
• For example, user may record a customer’s telephone inquiry in the system. The
customer next requests a quotation, which user then create by referring to the
inquiry. The customer later places an order on the basis of the quotation and
user create a SO with reference to the quotation. User ship the goods and bill the
customer. After delivery of the goods, the customer claims credit for some
damaged goods and user create a free-of-charge delivery with reference to the
SO.
• The entire chain of documents (the inquiry, the quotation, the SO, the
delivery, the invoice, and the subsequent delivery free of charge)
creates a document flow, or history. The flow of data from one
document into another reduces manual activity and makes problem
resolution easier.
Document Flow in Sales Process
Production
Production
• mySAP ERP helps enterprises manage the full range of manufacturing
activities, from planning to execution and analysis, in a single, end-to-end
system.
• mySAP ERP delivers all elements of a customer-oriented manufacturing
management system and is fully compatible with Just-in-Time (JIT) and
Kanban methodologies.
• By combining information from a variety of business processes (including
planning, cost accounting, Human Capital Management, materials
management, WM, plant maintenance, and quality management), mySAP
ERP supports the development and execution of efficient production plans
and ensures that accurate, comprehensive information is available at any
time to those who need it.
• Businesses can share manufacturing information across the enterprise and
supply network to coordinate production processes and promote
cooperation.
Production
• Manufacturing and production in mySAP ERP, in cooperation with all
other integrated SAP applications, does not only facilitate efficient
production, but also establishes critical links between sales,
production planning, and the factory floor.
• SAP integrates supply chain processes to make the enterprise as
competitive as possible. It integrates seamless with external real-
time process control and laboratory information systems. This
represents a significant advancement for information systems in the
repetitive manufacturing and process industries.
• SAP offers full integration between its project planning, material
requirements planning (MRP), and shop floor control system
modules. Standard interfaces link SAP to external CAD, product data
management, and plant data collection systems. Therefore, mySAP
ERP is also the state-of-the-art manufacturing system for discrete
manufacturers and engineering-to-order companies.
Production Cycle
Production Cycle
• Production planning: planning the various aspects involved in
manufacturing of a particular material.
• Planned order can be created manually or triggered by another process, such as:
sales order (make-to-order strategy), materials planning (make-to-stock
strategy), or project systems
• Order creation: create a production order as authorization.
• Order release: release production order
• Order printing: taking a printout of the released order.
• Material staging: carrying out all the goods movement for the order
and get then ready for execution.
• Order execution: executing the production.
• Confirmation and GR are the final stage of production where the
manufactured products are confirmed and moved to warehouse with
receipt.
Planning Process Overview
• Production planning involves the acquisition and allocation of
limited resources to production activities to satisfy the customer
demand over a specified time horizon.
• Multiple forecasting models and strategies in mySAP ERP can assist
user in making the best choice.
• User can incorporate the impact of events, such as: marketing promotions and
seasonal influences, into the forecasts.
• User can even override individual values of past demands and forecasts. Full
integration within mySAP ERP makes periodic forecast revisions easy.
• User can break down forecast demands from the planning level to the level of the
individual product.
• Rough-cut capacity planning at the planning level provides a reality check of
resource bottlenecks.
• Forecasts are easily transferred to Demand Management and Master Production
Scheduling (MPS), where they can be offset by incoming SOs.
• User can also add unexpected demands any time.
Production Planning
• Planning is generally divided into several steps. These
steps may be executed independent of each other, or they
may collaborate.
Production Planning
Sales and Operations Planning (SOP)
• SOP generates sales plans and production plans using forecast values and
requirements from the Sales Information System and costing/profitability
analysis as inputs for determining requirements.
Demand Management
• Demand Management connects forecasting functionality with production
scheduling. Requirement quantities and dates for finished products and
assemblies based on the plans from SOP are determined.
Master Production Scheduling (MPS) - optional
• MPS allows for critical resources or top-level items to be planned with extra
attention. This procedure ensures that the instabilities in planning are kept
to a minimum.
Material Requirements Planning (MRP)
• MRP is the detailed planning of replenishment schedules for required
components. The output of MRP is either a planned order or a PR.
Execution
• The production order is the central data object in shop floor control
and manufacturing execution.
• The production order contains all data relevant to production
objectives, material components, required resources, and costs.
• Covers the demand for either a single material or product or multiple products.
• May specify external operations that are to be processed in an outside workshop.
• User can create a separate rework order that is directly assigned to the primary
production order or insert specific rework operations into an existing order.
• Production orders are usually generated automatically or manually
by converting it from planned orders. The complete process includes
several steps:
• Creation and release of a production order
• Goods issues of components
• Confirmation of production activity
• Goods receipts of the finished goods
Execution
• User must release a production order before process it. If the order
status set to Released, then print shop floor papers, issue materials
from stock, and confirm operations.
• Before release a production order, make sure that sufficient manufacturing
capacity is available (use the Graphic Planning Table)
• When releasing a production order, user can set up the system to
check the availability of components and production resources or
tools.
• User can even specify the type of availability check to be carried out (Available-
to-Promise (ATP) calculation) per order type.
• User can either release production orders individually, order by
order, or release them as a group, when the order start dates reach
the release horizon.
Production Order
Order Completion Confirmation
• User confirm production order operations to deliver feedback to
sales order processing and shop floor planning.
• A confirmation can reduce capacity on the work center, update costs,
and/or automatically trigger the GR of the manufactured goods.
• Completion confirmations clear capacity loads and collect data for production
cost controlling. Confirmed labor can be transferred to mySAP ERP Human
Capital Management.
• Production order confirmations record the following:
• Quantity produced
• Scrap
• Personnel
• Production times
• Completion dates
• Goods movements
• Amount of activity (i.e. labor hours)
Types of Completion
Confirmations
Milestone completion confirmations
• The system confirms all preceding operations, including sub-operations, up to the previous
milestone. mySAP ERP bases confirmations on reported quantities (yield plus scrap) and
standard times.
Standard completion confirmations
• The operations are confirmed using target values.
Normal completion confirmations
• User conduct individual completion confirmations, seeing target values as defaults. The
system allows user to overwrite all input values so user can report variances in the
production process.
Collective completion confirmations
• The system displays a fast entry screen where user can enter multiple operations to
confirm.
Completion confirmations at order header level
• Orders can be confirmed at order header level, which can drive the automatic backflush of
material consumption for all operations, if user so choose.
Goods Receipt
• Goods receipts to stock can be automatically posted when user
confirm the last operation (or any other operation specified) in a
production order. Alternatively, user can report them in a separate
transaction.
• User can process goods receipts for partial deliveries from
production by posting them directly to available stock or to quality
inspection stock.
• User can also process goods receipts from co-products and by-
products.
Settlement
• Settlement of a production order means:
• The actual costs incurred for the order are settled (posted) to one or more receiver
cost-objects
• Clearing the differences between the actual costs incurred and the credits that the
order received from goods receipts.
• Order settlement demonstrates the close integration between
Production and Management Accounting in mySAP ERP.
• A production order is settled when it is completed or before month-end
closing.
• During settlement, user can post cost variances to one or more cost objects.
• For example, user can post variances due to excessive scrap to a scrap cost collector,
and variances due to poor performance to a productivity problem cost collector.
Alternatively, user can simply post the entire variance to inventory. The system posts
an entry to the G/L price variance account when user work with standard costing.
• The full power and flexibility of mySAP ERP Financials is available for
analyzing production costs.
Settlement
References
• SAP01 – SAP Overview Participant Handbook,
Course Version: 2006 Q2.