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SAP Explained

This chapter is from the book

SAP Business Applications or Components

From a business applications software perspective, SAP is nearly all things to nearly all businesses. SAP's application software foundation is built on the concepts of specialization and integration. Each software component or application within the SAP family of products and services meets a particular need, facilitating day-to-day financial and resource management (SAP Enterprise Resource Planning, or ERP), addressing product lifecycle planning requirements (SAP Product Lifecycle Management, or PLM), supporting internal company procurement (SAP Supplier Relationship Management, or SRM), interconnecting different systems to ease integration headaches (SAP NetWeaver Process Integration, or SAP NetWeaver PI), enabling customer relationship management (SAP Customer Relationship Management, or CRM), and so on. Divided by SAP into the SAP Business Suite (comprising all the business applications) and SAP NetWeaver (components of which essentially enable the SAP Business Suite, like a portal product, development tools, and business intelligence tools), all of these products and more are explained in subsequent hours of this book; suffice it to say here that there are many SAP applications or components, many products, and therefore many potential SAP solutions that can be assembled and customized for most any business.

SAP Components, Modules, and Transactions

Before we get too far along, it's important to understand the differences between SAP components, modules, and transactions. SAP uses the term components interchangeably with the term business application, and most of the time this latter term is shortened to application. On the other hand, SAP modules provide specific functionality within a component. The Finance module, Production Planning module, and the Materials Management module are good self-explanatory examples. These individual SAP modules combine to create the SAP ERP component. It is within a particular module that a company's business processes are configured and put together.

Business processes are also called business scenarios. A good example is order-to-cash. It comprises many different transactions, from writing up sales orders in the system to managing purchase requisitions and purchase orders, "picking" inventory to be sold, creating a delivery, and invoicing the customer for the order. Each transaction is like a step in a process (step one, step two, and so on). When all these transactions are executed in the right order, a business process like order-to-cash is completed. Many times, these transactions are all part of the same module. In other cases, a business process might require transactions to be run in several different modules, maybe even from several different components (see Figure 1.1).

Figure 1.1

Figure 1.1 SAP components are made up of modules, which in turn comprise transactions used to execute business processes.

Cross-Application Business Processes

The fact that SAP's transactions can be combined helps create broad and capable platforms for conducting business. In this way, SAP allows companies to obtain greater visibility into their sales, supply chain, and manufacturing trends, or to allow new methods of entering or tracking such trends (to maximize revenue and profit) by extending business processes in several different directions. A good example again is order-to-cash, which is essentially a "back office" accounting process. By combining multiple SAP applications, a company can create a more capable extended version of this business process, something called a cross-application process, mega process, or extended business process.

Our simple order-to-cash process can become much more powerful in this way. For example, we might initiate our process through SAP's Enterprise Portal, which allows a broad base of a company's users or even its partners and suppliers to access the company's SAP system using a simple browser. Once in the system, the user might "punch through" to SAP ERP to actually place an order. Through the business logic enabled at the business process level, control might be passed to the SAP CRM application to determine a particular customer's buying preferences or history. CRM's business logic might then direct or influence the business process in a particular way, perhaps to help the salesperson increase the customer's order size or affect the order's gross margin. Next, SAP's Supply Chain Management (SCM) system might be accessed to revise a supply chain planning process for a set of potential orders, looking to optimize profitability as the system seeks to balance the needs of many different customers with the organization's access to materials, people, and other resources. SAP NetWeaver Business Warehouse might next be queried to pull historical data related to the customer's credit history, financial terms, and sales patterns within a particular geography or during a particular season. After these details are analyzed, the extended business process might turn control over to SAP's Crystal Solutions to create company-internal reports. Simultaneously, SAP ERP or SAP NetWeaver Portal might be used to drive and track the pick-list process, order fulfillment and shipping process, and finally the accounts receivables processes to conclude the overall business process.

SAP Industry Solutions

Beyond enabling broad-based business processes, SAP is also well known for reflecting industry best practices in their software. By adopting SAP best practices rather than inventing their own, companies can more efficiently and effectively serve their customers, constituents, and other stakeholders. This is a big reason why SAP has been so successful: SAP stays abreast of many different industries, making it easy for companies in those industries to not only adopt SAP's software but that industry's best practices as well.

SAP's industry solutions were historically (and today are still loosely) divided into three areas: Manufacturing, Service Industries, and Financial/Public Services. There are actually 24 different groups of industries, such as Aerospace & Defense, Automotive, Banking, Chemicals, Consumer Products, Engineering, Construction, & Operations, Healthcare, Higher Education & Research, High Tech, Insurance, Media, Mill Products, Mining, Public Sector, Retail, Telecommunications, Utilities, and more. These groups in turn are represented by 40 specific industries. For the complete list, point your browser to www.sap.com/usa/sme/whysap/industries/index.epx or just search "SAP industry solutions" from your favorite search engine. One of the nice things about these industry solutions is that they are simply "installed" atop SAP's other products; the Oil & Gas industry solution, for example, is installed on top of SAP ERP.

Connecting the Dots

As touched on earlier, applications such as SAP ERP can be broken down into many different modules. A module's discrete functionality addresses a specific business function (which again is composed of many specific business transactions). Individually, each module is used to manage a business area or functional area for which a particular department may be responsible. Prior to extending a line of credit, for instance, a company's Accounts Receivables group may run a business transaction using the Finance module of SAP ERP to check a customer's credit and on-time payment history. Likewise, the Shipping department will regularly run a business transaction in the Materials Management module to check inventories at a particular warehouse. Other departments may be responsible for managing payables, real estate, sales estimates, budgeting, and so on. Together, all the various departments in the company work together to do the business of the company, using SAP across the board. In this way, the company benefits from a great amount of consistency between departments while giving the company's management the high-level visibility it needs to make all the strategic decisions necessary to keep the business in good shape.

Do you see a common thread? SAP's products are used to satisfy the needs of enterprises, big and small, enabling them to tend to the business of running the business. SAP's software products are all about the "big picture"—about conducting business by connecting people, resources, and processes around the globe. SAP and its enterprise application competitors—Oracle, Microsoft, NetSuite, and several others—enable this capability on a grand scale, integrating many otherwise discrete functions under a single umbrella.

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