SALES AND DISTRIBUTION IN ERP

Prepared By: Abhaya Singh.(19001) Arnab Chatterjee. (19008) Ashok Kumar. (19010) Praveen Narayanan. (19025) Sai Manoj. (19032) Vaishali Agarwal.(19045) Click to edit Master subtitle style

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Introduction

Efficient, integrated information systems are very important for companies to be competitive

An Enterprise Resource Planning (ERP) system can help integrate a companys operations

Acts as a company-wide computing environment Includes a database that is shared by all functional areas Can deliver consistent data across all business functions in real time

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The Evolution of Information Systems

Silos

Information systems configuration used until recently Companies had un-integrated information systems that supported only the activities of individual business functional areas

Current ERP systems evolved as a result of:

Advancement of hardware and software technology Development of a vision of integrated information systems Reengineering of companies to shift from a functional focus to a business process focus.

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WHY SAP

To keep pace with rapid changes in the business world, companies need an integrated and flexible enterprise system that supports all aspects of their business with state-of-the-art functionality. This innovative solution should upgrade effortlessly and interface easily with third-party applications as well as have the ability to incorporate existing systems while extending its reach to the Internet and e-commerce.

Here, increased efficiency in sales and distribution is a key factor to ensure that companies retain a competitive edge and improve both profit margins 4/14/12 and customer service. In helping business to 'beat

WHY SAP

ERP system is tightly integrated with the Sales and Distribution module. This integration enables the mapping and supply of singlesite or multi-site organizations. Developing precise logistics planning for just-in-time deliveries, this system can also generate replenishment orders by using defined warehouse requirements.

The following are the sales related business transactions: Sales queries, such as inquiries and quotations Sales orders Outline agreements, such as contracts and scheduling agreements Delivery/Shipment Invoicing/billing

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WHY SAP
During sales order-processing the following basic functions are carried out:

Inquiry handling Quotation preparation and processing Contracts and contact management (order management) Monitoring the sales transaction Checking for availability Transferring requirements to materials planning (MRP) Scheduling the delivery Calculating pricing and taxes
4/14/12 Checking

credit limits

WHY SAP

Depending on how your particular system is configured, these functions may be completely automated. The data that results from these basic functions is stored in the system where it can be displayed. ERPs Sales and Distribution module very actively interacts with the material management and financial accounting module for delivery and billing.

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EARLIER STAGES OF ERP

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New Directions in ERP

Late 1990s: Year 2000 (or Y2K) problem motivated many companies to move to ERP systems By 2000, SAP AG had 22,000 employees in 50 countries and 10 million users at 30,000 installations around the world By 2000, SAPs competition in the ERP market:
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Oracle

New Directions in ERP (contd.)

SAP ERP

Latest versions of ERP systems by SAP and other companies allow:

All business areas to access the same database Elimination of redundant data and communications lags Data to be entered once and then used throughout the organization

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New Directions in ERP (contd.)

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Customer Relationship Management

For accomplishing desired success, organizations continuously strive for increased sales performance, superior customer service and enhanced customer relationship management. To achieve these objectives you need solutions that provide rapid access to centralized customer information. You should also be able to access detailed and up-to-date communication history to foster customer and 4/14/12

Customer Relationship Management

Benefits at a glance

Interaction with other areas of the system, gives you a 'clear' view of the customer Maximizing opportunities and retaining high value customers enhances revenue and profit. Provides value-added services enable you to stay ahead of your competitors. Improves product development and service delivery processes Prepare your personnel with in-depth knowledge of the customer's needs

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Customer Relationship Management

Successful customer interaction

The ERP CRM module helps you know your customer better and includes many features such as activities, history, related contacts, addresses of your customers and their relations with your competitors. The flexible database structures enables 4/14/12 whatever information you would like to you

ERP VS CRM

For an entrepreneur who is planning to expand, these terms often trouble him. They seem to require a great deal of software knowledge which, I believe, majority of entrepreneurs (especially non-IT folks) wont have. More than entrepreneurs, students in B-Schools lose the bigger picture and take ERP as a painful punishment.

What is ERP (Enterprise Resource Planning) and CRM (Customer Relationship Management) and how are they different? Is there any relation between them? How are they useful to my business and should I implement them?

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when you send a courier through any logistics company like DHL, FedEx, DTDC etc they give you a receipt with an alphanumeric

ERP VS CRM
ERP (Enterprise Resource Planning)

Plans the resources of an organization and hence is Organization-oriented. This is a software tool to keep a track of various departments of an organization at a central database. With expansion of a business, an owners biggest concern is to manage the chaos happening around and this gives a complete picture of whats happening. Its a multi-module tool that maintains information about finance, accounting, procurement, inventory, payments, delivery, support, payroll, human resource, and the list is endless. You handover the parcel to the shop owner, he enters the details into his ERP-UI at his desktop along with the tracking 4/14/12 The moment parcels of the day are loaded on to the code.

ERP VS CRM

Information about the payment received from customer goes to the finance department, which also captures other information like cost to company, salaries due and other operations costs. If its a manufacturing company, information of procurement and production are also captured by respective departments. For the time being, you may call this, capturing of this information at all levels and analyzing it later for business benefits, as Analytics. CRM (Customer Relationship Management)

CRM is Customer-oriented and managed by marketing and sales department which often represents organization to the world. Just like ERP manages information inside organization, CRM manages information about existing and potential customers so as to build better relations with them.

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The objective of CRM is to make marketing and sales department capture maximum information about customers to offer them better

ERP VS CRM

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ERP VS CRM
Is there a connection between the two? Definitely yes
They do have a little overlap in the operations. Moreover, a CRM can be clubbed with ERP at the central database level and both can interact easily. Maintaining leads via website is an integral part of CRM. An online store of any product needs to interact with inventory management module of ERP to check the availability of a product before it is displayed on the website. Along with this, the supply chain module should interact with CRM so that customers can be promised a specific delivery date and time.

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ERP VS CRM

Not every B2C business model can keep detailed information about its customers. Therefore, a provision is made where you enter your courier code through website; it interacts with concerned ERP module and gives you desired information about delivery status of parcel. To bring a smile on customers face, CRM can shoot mails to customers informing them about confirmed delivery along with name of the person who received it.

With time, CRM is becoming a vital part of ERP, which was not true until early years of this decade. However, the requirements and possibilities of implementation depend from business to business. If you (or your IT department) are smart enough, you can tweak the model of the combination favoring your business.

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SAP ARCHITECURE
SAP based the architecture of R/3 on a three-tier client/server

Presentation Server(GUI) Application Server Database Server SAP allows the IT supported processing of a multitude of tasks, accruing in a typical company or bank. SAP ERP is differing from R/3 mainly because it is based on SAP Net Weaver, core components can be implemented in Java and new functional areas are mostly no longer created as part of the previous ERP system, with closely interconnected constituents, but as selfcontained components or even systems.
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SAP ARCHITECURE
Application Server

An application server is a collection of executable s that collectively interpret the ABAP/4 (Advanced Business Application Programming / 4th Generation) programs and manage the input and output for them. When an application server is started, these executables all start at the same time. When an application server is stopped,

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SAP ARCHITECURE

The Application layer consists of one or more application servers and a message server. Each application server contains a set of services used to run the R/3 system. Not practical, only one application server is needed to run an R/3 system. But in practice, the services are distributed across more than one application server. This means that not all application servers will provide the full 4/14/12

SAP ARCHITECURE
Database Server

The database server handles the user's request for addition, retrieval and modifications in the data.

Security

Server-to-server communications can be 4/14/12 encrypted with the SAP cryptographic library.

SAP METHODOLOGY
Five Phases of ASAP methodology.

Phase 1: Project Preparation - The purpose of this phase is to provide initial planning and preparation for your SAP project. Phase 2: Business Blueprint - The purpose of this phase is to achieve a common understanding of how the company intends to run its business within the SAP System. The result is the Business Blueprint, a detailed documentation of the results gathered during requirements workshops. The Business Blueprint 4/14/12 document represents the business process requirements

SAP METHODOLOGY

Phase 3: Realization - The purpose of this phase is to

implement all the business process requirements based on the Business Blueprint. The system configuration methodology is provided in two work packages: Baseline (major scope); and Final configuration (remaining scope).

to complete the final preparation (including testing, end user training, system management and cutover activities) to finalize your readiness to go live. The Final Preparation phase also serves to resolve all critical open issues. On successful completion of this phase, you are ready to run your business in your live SAP System.
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Phase 4: Final Preparation - The purpose of this phase is

SAP METHODOLOGY
Some additional Information on ASAP methodology, Phase 1 - Project Preparation
Change Charter - Goals and objectives of Organization Project Plan - This is a first cut focusing on milestones and Work Packages, details to come. Scope - Sets the initial definition of then project; input from sales cycle. Project Team Organization - Sets the whole of the project: Standards & Procedures - Sets the why and how of the project.

SAP Reference Structure item and defined using CI Templates. Business Blueprint - This is the output is the key document for 4/14/12 Phase 3.

Phase 2 - Business Blueprint - Requirements reviewed for each

SAP METHODOLOGY

Phase 3 - Realization - Master Lists - Define business scenarios

and R/3 transactions to be realized in the system. BPP - Business Process Procedures representing R/3 transactions; used for unit testing & documentation. Planning - Defines how the configuration will be done and how it will be tested. Development Programs Provides details of the external programming requirements. EU Training Material - End User training material and process documentation.

Phase 4 - Final Preparation Stress & Volume Tests - Plans for

confirming the production hardware's capabilities Cutover Plan - The details of how to move to the production environment and go live Conduct End User Training - Delivery of the necessary levels of R/3 End User training prior to going live
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SAP METHODOLOGY

Phase 5 - Go Live & Support: Ensuring system performance through SAP monitoring and feedback.

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PROCESS
Customer Order Process:

A customer inquires about the goods or services it intends to purchase from the Supplying Company by raising a RFQ (Request for Quotation).On receipt of RFQ the supplying company submits the quotation. If all the terms and conditions are agreed upon by both the companies, the ordering company would raise Purchase Order to the supplying plant based on which a Sales Order is created by the Supplying Plant.

Once the order is ready for delivery, the goods are shipped to the ordering company(Ship TO Party), and invoice is sent to bill to party.

On receiving of the goods the customer would do the quality check and if found ok would accept them. The payer would pay the 4/14/12 amount to the supplying company. invoiced

PROCESS
Rush Order:

The customer picks up the goods immediately, or you deliver them on the same day as when the order was created. When you save the rush order, a delivery is automatically created in the standard system. Billing the rush order takes place as normal, after the delivery. In the standard system, sales document type RO is saved for rush orders with immediate delivery type LF. Once the goods have been removed from storage, the goods are picked, and goods issue is posted.

Once the billing documents are created (for example, in collective processing), invoice papers are printed and sent to the customer.
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PROCESS
Cash sales:

We can process an order for when the customer orders the goods, picks them up, and pays for them immediately. The delivery is processed at the same time as when the order is created and a cash invoice is printed immediately: billing is therefore related to the order, unlike rush and standard orders. Receivables are not created for the customer, as they are for rush and standard orders because the amount in the invoice is immediately posted to a cash account. In the standard system, sales document type BV (CS) is saved for cash sales with immediate delivery. When the sales employee creates a cash sale, the system automatically proposes the current date as the date for delivery and billing. Once the order has been posted, a delivery
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PROCESS
. Make-to-order Process

Make-to-order production is a process in which a product is individually manufactured for a particular customer. In contrast to mass production for an unspecified market where a material is manufactured many times, in make-toorder production a material is created only once though the same or a similar 4/14/12 production process might be repeated at a

PROCESS

a) Make to order using sales order (b) Make to order using project system (not relevant for SD application For make to order production using the sales order, all costs and revenues involved for an order item are held collectively at that item. A particular rule is used that can be changed manually to transfer costs to profitability analysis. Make to order production is largely a production planning configuration. It is also controlled by the requirements type. Make-to-order production is controlled by the requirements type. The requirements type is determined on the basis of the MRP group (MRP1) and the strategy group (MRP3) in the material master record. In addition, a plant must be assigned 4/14/12 for make-to-order items in the sales order.

PROCESS
Text Determination

In Sales process (quotation, contracts, sales order for example) , sometimes we need to maintain instructions or information about the process, like, terms of payment, warranties, header notes, delivery instructions, shipping instructions .

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SAP Sales and Distribution (SAP SD)

The Sales and Distribution (SAP SD) consists of all master data, system configuration, and transactions to complete the Order to Cash process. It includes the following information and processes:

Customer Master and Material Master data Sales Orders Deliveries Pricing Billing
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Credit Management

SAP Sales and Distribution (SAP SD)

Order to Cash business process associated with the SAP SD module:

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SAP Sales and Distribution (SAP SD)

Subcomponents of the SAP Sales and Distribution (SAP SD) Module:

Master Data Sales Support Pendulum List Indirect Sales Sales Shipping and Transportation

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Sales and Distribution Management

This Module comprises of Contact Management and Sales Order Processing Management. It is an integrated solution comprising of marketing and sales activities. Organization can act immediately to improve sales, service and marketing effectiveness by using this Module. Sales Management module is all about retaining customers, improving customer loyalty and gaining customer insight.

This module also help to you getting your customer order management easier day by day. Whether it is maintaining customer information, quickly creating a quote or migrating them to sales order or being responsive to your customers, we provide you right solution and efficient flow of information.
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Sales and Distribution Management

Sales Territory Sales Forecast Partner Program Sales Targets Customer Item Relation Feedback Recording Service Call Support Sales Order Confirmation of Order Export Invoice Warranty Reminders Bill of Lading Barcode based retail sales Marketing Script Price List Contact Management Campaign Recurring Order Inquiry Order Tracking ATP Dates Credit Check Excise Invoice SLA Service Agreements Customer Self Service Field Salesmen Self Service Customer information Sales Channel Salesmen Sales Person Management Call Plan Sales Reporting Quotation-PO Stock Transfer PO Acknowledgement Domestic Invoice Warranty Order

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Sales and Distribution Management REPORTS

Customer Reports Sales Enquiry Report Sales Enquiry Conversion Report Ship To Report Price Matrix Report Sales Contract Report

Excise Report

Customer Item Report Sales Variance Report

Sales Person Analysis Report SO Gross Profit Report

Target V/s Actual Sales Achieved Report

Sales Order History Report

Export Sales Report

Local Sales Report

Sales Register

Sales Commission Report

Sales Order by Customer

Sales Analysis Report Commission Payable Report

Invoices Shipment Overdue Report

Sales Order by Item Report

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Sales and Distribution Management Sales Promotion Campaign

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Advantages of the SAP Approach

Architecture

SAP SEM is built on state-of-the-art computing technologies based on the Business Framework architecture - capable of processing huge volumes of information and supporting rapid decision-making. Unlike other solutions on the market, SAPs implementation offers high levels of data integration by ensuring synchronization of information between SAP SEM and the underlying business execution systems. This open connectivity allows business components to interact with multiple business systems.

Componentization

As with 4/14/12 other SAP solutions, the Business Framework architecture lets you deploy SAP SEM components incrementally, as you need them.

Advantages of the SAP Approach

Functionality

Building on existing SAP R/3 functionality, SAP SEM includes functionality for advanced Business Consolidation and Business Information Collection, which links internal information with automated collection of relevant external information through the Internet. SAP SEM also supports advanced Business Planning and Simulation, based on both internal and external information - allowing you to model risks and rewards, and more effectively manage the uncertainties of the future. The Corporate Performance Monitor, including the Management. And the Stakeholder Relationship Management component facilitates communication with investors and other key stakeholder groups.
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Advantages of the SAP

Approach
Improve alignment of strategies and operations

Run your enterprise in accordance with strategy and plans, accessing the right information in real time to identify concerns early. Pursue opportunities proactively. Achieve corporate objectives by aligning workforce and organizational objectives.

Find the best people and leverage their talent in the right job at the right time.

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Reduce costs through increased

Disadvantages of the SAP Approach

Expensive

This entails software, hardware, implementation, consultants, training, etc. Or you can hire a programmer or two as an employee and only buy business consulting from an outside source, do all customization and end-user training inside. That can be cost-effective.

Not very flexible

It depends. SAP can be configured to almost anything. In Navision one can develop almost anything in days. Other software may not be flexible.
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Advantages of CRM System

Provide Better Customer Service CRM systems give businesses many strategic advantages such as the ability to personalize relationships with customers regardless of which employee is service them. CRM also helps the organization to easily adjust the level of service to reflect the customer's importance or status. Using CRM data, marketing campaigns can be co-ordinate more effectively by ensuring that promotions do not target customers who have already purchased that particular products. CRM systems facilitate cross-selling (offering customers complimentary products based on their previous purchases) and upselling (offering customers premium products in the same category). Help Sales Staff Close Deals Faster
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The Disadvantages of CRM Systems

Record Loss

Some CRM applications use remote Internet connections to save customer records. Sales force is a popular CRM application provided through an Internet connection on the company's domain. The disadvantage of this type of CRM is that the company does not have control of the data, and if the remote CRM system has an outage, the company is unable to retrieve records. If the company chooses a small CRM application that is not stable, it can mean several thousands of dollars in lost revenue. When using a remote CRM application hosted by another company, use local backups to avoid record loss.

Training
If the company is small, training issues may be a small disadvantage. Large corporations need to roll out 4/14/12 training schedules for all their employees. For large

GAIL (India) Limited

GAIL (India) Limited (Company) was incorporated in 1984 as a principal gas transmission and marketing company of India and has since expanded its activities into gas processing, petrochemicals, and telecommunications.

The computerization in the Company began in 1986 with the installation of minicomputers and implementation of in-house developed payroll and financial accounting systems. As recommended by the consultant M/s Arthur Anderson (presently known as M/s Accenture) SAP was found to be the best ERP to meet the Companys requirements. The Board of Directors (Board), however, after a lapse of four years approved SAP-ERP project in 2002 with revalidated recommendation from the same consultant at an estimated cost of Rs.55 crore. The SAP implementation work was awarded to M/s IBM in November 2003 with a scheduled completion by December 2005.The project was completed in August 4/14/12 at a cost of Rs.63.98 crore. 2005

The implementation of ERP aimed to

Enable GAIL to leverage information for competitive advantage in a deregulated and highly competitive market scenario. Move up the value chain. Achieve higher customer service and satisfaction; Improve operational efficiency and productivity; and

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Non-mapping and non-usage of available functionalities

Sales & Distribution module:
Two of the three business activities namely

Natural Gas and Telecommunication businesses of the Company were not fully mapped in SAP. The module was being used only for invoice generation for the two business segments. The Company was using Gas Management System (GMS), a stand-alone package for capturing information relating to supply of
Natural Gas.

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Sales and distribution module

The module is primarily meant for monitoring market demand of the products of the Company, to keep record of the Company clientele, their credit worthiness and keeping track of orders and deliveries, and planning, controlling and monitoring sales and related activities/transactions. Audit analysis revealed the following deficiencies in customizing and input and validation controls in the module.

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Non- Customization of the

system

Customization of the system was insufficient and could not meet the following business requirements.

The Marketing offices of the Company communicate potential demand of polymers to Petrochemical Marketing Group (PMG), which after considering reasonableness of demands and material availability allocates the material to marketing office. The Marketing office based on the allocated material, confirm indents of consignment stockiest/customers as sales orders. A review of this sales process revealed that.

The basis (source data) of projection of product-wise potential demand was not captured and maintained in the system.

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Non- Customization of the

system

There was no reporting on actual demands of consignment stockiest made through indents and their comparison with actual sales order and dispatched quantity.

There was no report available to compare the actual sales order quantities raised by the Marketing offices and actual dispatches there against to assess the performance of Marketing offices.

Further, no records were maintained relating to cancellation/modification of the unexecuted/ partially delivered sales orders by the supplying plant in the event of price revision, production or logistics constraints.

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Non- Customization of the

system

Thus, it was evident that the system did not capture complete sequence of events from indenting to dispatch of material in absence of which the potential demand for polymers, loss of business due to cancellation/modification of sales orders and the business secured could not be ascertained in the system.

The Management while accepting the Audit observation (August 2007) added that dispatched quantity indicated performance of Marketing offices and the Plant. It may be stated however, that the dispatched quantity is indicative of performance of the plant whereas the performance of Marketing office depends on the sales orders confirmed by them.

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Non- Customization of the

system

The customers are to be charged interest for delayed payments. However, interest calculation on delayed payments was not mapped in the system and the same was done manually indicating under utilization of the system. The Management accepted the audit finding and stated (July 2007) that due to staggered rate of interest, the controls were not inbuilt in the system. The reply was not convincing as the interest could be calculated through a conditional table in the system.

The Company maintained credit data of its customers including credit limit prescribed and actual credit extended there against, in the system. Review of credit data available revealed that.

The central credit data was not available for 4788 customers out of 9865 4/14/12 customers. There was an outstanding balance of Rs.459.36 crore as on 9 July 2007 against 376 customers for whom central

Non- Customization of the

system

The credit limit for 5103 customers out of 5121 customers was defined as zero. Despite a zero credit limit, 156 customers were extended credit of Rs.140.03 crore (9 July 2007) and one customer was extended credit of Rs.0.23 crore against a credit limit of Rs.0.20 crore.

Lack of validation controls resulted in credit sales exceeding the the defined credit limits.

The Management accepted the audit observation and stated (August 2007) that credit data was not maintained in respect of customers receiving material through consignment stockiest and for Natural Gas customers. It further added that the system was configured to disallow any excess credit. The reply was not acceptable as credits in excess of limit were allowed by the system. 4/14/12

Deficient problem solving mechanism

The SAP solution has a centralized helpdesk in place to redress the problems faced by users in SAP environment. Review of complaints/requests handled by the helpdesk during April 2006 to April 2007 revealed that out of 7385 issues raised by the users, 5529 took three to 199 days to be resolved. Further, out of 35 unresolved issues, 29 issues were pending for a period more than three days to up to 161 days. It is evident that control mechanism has not been defined to resolve the problems of users at the earliest.

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Conclusion

Non-mapping of certain vital business requirements and functionalities, lack of customization and lack of utilization of all available features led to underutilization of the ERP SAP solution. The system further suffered from lack of input controls and validation checks. These inadequacies resulted in incompatibility of the system to meet all business requirements, created risk of defective/ delayed MIS reporting and decision-making leading to manual intervention and thus making database unreliable. The underutilization of the system compromised the basic objectives of leveraging information for competitive advantage in the market, improving operational efficiency, productivity, achieving higher customer service and satisfaction.
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Recommendation
The Management should consider the following measures for implementation to optimize the benefits from the ERP system.

Ensure customization and usage of the ERP solution as per business requirement, statutory requirements and guidelines of the Government and policies of the Company. A time bound review of all the modules should be conducted to ensure compliance with applicable business rules.

All the available functionalities of the ERP system should be customized to the meet the business requirements. To derive optimal benefits from the ERP system, different modules should be integrated.
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Recommendation

Ensure that input controls and validation checks are inbuilt in the system and are applied to data entered in the system to strengthen internal control procedures The Master Data needs to be revisited/reviewed periodically for ensuring veracity of the data and authorization thereof. In the areas of input control and business continuity plan, the Company should evolve suitable security policies with clearly defined procedures and responsibilities.
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