Baseline Solution Scope V1605 en US

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EhP 5 for SAP ECC6.0

March 2011

English

SAP Best PracticesBaseline Package (U.S.)

SAP AGDietmar-Hopp-Allee 1669190 Walldorf

Solution Scope



Germany

© SAP AG Page 2 of 68



SAP Best Practices SAP Best Practices Baseline Package: Solution Scope

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Contents

SAP Best Practices Baseline Package – Solution Scope ...................................................................6

1 Purpose ..................................................................................................................................... .......6

2 Functional Scope – Supported Business Processes or Scenarios ............................................... ....6

2.1 External Financial Accounting ....................................................................................................6

2.2 Asset Accounting ......................................................................................................................12

2.3 Planning ...................................................................................................................................15

2.4 Period End Closing and Actual Postings ..................................................................................23

2.5 Sales and Distribution ........................................................................................................ ......29

2.6 Materials Management.............................................................................................................33

2.7 Production Planning & Control.................................................................................................38

2.8 Logistics General / QM / PLM .......................................................................................... ........42

2.9 Service .....................................................................................................................................442.10 Master Data Generation Descriptions and Reporting .............................................................48

3 Functional Scope – Functions .........................................................................................................53

3.1 Financials ................................................................................................................................ .54

3.2 Analytics ...................................................................................................................................56

3.3 Human Capital Management....................................................................................................57

3.4 Procurement and Logistics Execution ................................................................................... ...57

3.5 Product Manufacturing .............................................................................................................61

3.6 Sales and Service ....................................................................................................................63

3.7 Corporate Services ...................................................................................................................66





SAP Best Practices Baseline Package – SolutionScope

1 PurposeThis solution scope provides an overview of the processes and functions covered by the SAP Best Practices Baseline Package for U.S. It describes the functions and explains their business purposes.

In the section Functional Scope – Supported Business Processes or Scenarios, you find a scenario-based view of the functions. In the section Functional Scope – Functions, you find a view arrangedaccording to groups of functions and based on the relevant SAP Solution Map.

The solution scope does not provide technical explanations of how to use the functions.

For details on this topic, see the Business Process Documentation.

2 Functional Scope – Supported BusinessProcesses or Scenarios

2.1 External Financial Accounting

2.1.1 General Ledger

PurposeThe central task of G/L accounting is to provide a comprehensive picture of external accounting andaccounts. Recording all business transactions (primary postings as well as settlements from internalaccounting) in a software system that is fully integrated with all the other operational areas of acompany ensures that the accounting data is always complete and accurate.

The SAP FI General Ledger Accountant has the following features:

• Free choice of level: corporate group or company

• Automatic and simultaneous posting of all subledger items in the appropriate GeneralLedger Accountant accounts (reconciliation accounts)

• Simultaneous updating of General Ledger Accountant and cost accounting areas

• Real-time evaluation of and reporting on current accounting data, in the form of accountdisplays, financial statements with different financial statement versions and additionalanalyses.

The General Ledger Accountant serves as a complete record of all business transactions. It is thecentralized, up-to-date reference for the rendering of accounts. Actual individual transactions can bechecked at any time in real-time processing by displaying the original documents, line items, andtransaction figures at various levels such as:

• Account information





• Journals

• Totals/transaction figures

• Balance sheet/profit and loss evaluations

Process Flow

• Posting General Ledger Account Documents

• Displaying the Document Journal

• Displaying G/L Balances (List)

• Carrying Out Recurring Entries

• Account Maintenance: Automatic and Manual Clearing

Key Points

• Provides a comprehensive picture of external accounting and accounts

•

Records all business transactions in a software system that is fully integrated• Ensures that the accounting data is always complete and accurate

• Automatic and simultaneous posting of all subledger items in the appropriate general ledger accounts (reconciliation accounts)

• Simultaneous updating of general ledger and cost accounting areas

• Real-time evaluation of and reporting on current accounting data

• Financial statements with different versions and additional analyses

• Actual individual transactions can be checked at any time in real-time processing

2.1.2 Accounts Receivable

Purpose

This component deals with posting accounting data for customers in Accounts Receivable. Fromthere, the data is sorted by customer and made available to other areas such as the Sales andDistribution system. When posting data in Accounts Receivable, the system creates a document andpasses the data entered to the general ledger. General ledger (Profit and Loss) accounts andcustomer accounts are then updated according to the transaction concerned (receivable, downpayment, credit memo, and so on) customer payment activities. All business transactions are postedto and managed by means of accounts and for this a customer master records are created. Onetime Customers are used for avoiding building up of huge master data volume.

Business Process Accounts Receivable focuses on the following activities:

• Post down payment request

• Post down payment manually

• Post customer invoice

• Post a credit note with invoice reference

• Posting Payments Using the Payment Program

• Posting Manual Payment





• Automatic Clearing of open items in customer accounts

• Manual Clearing of open items in customer accounts

• Manual Bank Statement Processing

• Reprocessing an Account Statement

• Dunning

• Account Balance Interest Calculation

• One-Time-Accounts Postings

• Setting a Credit Limit

• Credit Control Reporting

General Business Processes: In this document, you can find some transactions that cover thefollowing general business processes

• Displaying an accounting document.

• Displaying and Changing Line Items

• Displaying Balances

• Reversing a Document

• Reversing a Document – Individual Reversal

• Reversing a Document – Mass Reversal

Process Flow

• Post down payment request/ manually

• Posting customer invoice and

• Post a credit note with invoice reference

• Posting payments using the payment program

• Posting manual payment

• Automatic clearing of open items in customer accounts

• Manual clearing of open items in customer accounts

• Manual bank statement processing

• Reprocessing an account statement

• Dunning

• Account balance interest calculation

• One-Time-Accounts postings

• Setting a credit limit and credit control reporting

Key Points

• When posting data in Accounts Receivable, the system creates a document and passes thedata to the general ledger





• Profit, Loss and customer accounts are updated according to the transaction concernedcustomer payment activities

• All business transactions are posted to accounts

• All business transactions are managed by means of accounts and for this customer master records are created

• One time Customers are used for avoiding building up of huge master data volume

2.1.3 Accounts Payable

Purpose

This scenario deals with posting accounting data for vendors in Accounts Payable. From there, thedata is sorted by vendor and made available to other areas such as the purchasing system. Whenposting data in Accounts Payable, the system creates a document and passes the data entered tothe general ledger. General ledger accounts and vendor accounts are then updated according to thetransaction concerned (payable, down payment, credit memo, and so on) vendor payment activities.All business transactions are posted to and managed by means of accounts and for this a vendor master records are created.

• Business Process Accounts Payable focuses on the following activities:

• Down payment request / clearing

• Post down payments using the payment program

• Post vendor invoice

• Enter vendor credit memo

• Review and Release Blocked Invoices

• Select invoices to be Paid

• Review and block invoices for payment as needed

• Post payment using the payment programCreation of payment media using Payment Media Workbench (Alternative 1)Creation of payment media using Classical Payment Medium program( Alternative 2)

• Manual payment

• Manual bank statement processing

• Display of posted documents

Process Flow

• Post Accounts Payable Documents

•

Manual and automatic clearing of open items• Post down payments using the payment program

• Post manual and automatic outgoing payments.

Key Points

• When posting data in Accounts Receivable, the system creates a document and passes thedata to the general ledger





• Profit, Loss and customer accounts are updated according to the transaction concernedcustomer payment activities

• All business transactions are posted to accounts

• All business transactions are managed by means of accounts and for this customer master records are created

• One time Customers are used for avoiding building up of huge master data volume

2.1.4 Cash Management

Purpose

Cash Management in SAP ERP Financials provides three basic functions:

• Quickly and reliably transfers all cash-relevant information from internal and externalsources into the cash management system (inbound data)

• Performs analysis and reporting of current and future cash flows to help you make cashmanagement decisions (analysis and decision)

• Communicates with banks and other business partners based on the results of the decisionprocess (outbound data)

The cash position overview provides information on the current financial state of the bank accounts.It is the starting point for cash concentration in which the balances from various bank accounts areconcentrated in one target account, taking minimum balances and payment optimization intoconsideration.

Process Flow

• Cash Management Status Analysis

• Cash Concentration

Key Points

• Posting of a vendor invoice in local and foreign currency.

• Posting of a customer invoice in local currency (from a sales order).

• Posting of planning items and memo records.

• Execution of the report showing cash position and the liquidity forecast.

• After posting a manual bank statement, the flow between the planning levels isdemonstrated.

• Automatically archiving memo records

• The cash concentration function identifies the relevant amount and transfers them from oneaccount to another.

• Period End Closing Activities

o Cash Position & Liquidity Forecast

2.1.5 Cost of Sales Accounting

Purpose





Cost of sales accounting compares the sales revenue for an accounting period with themanufacturing costs of the activity. The expenses are allocated to the commercial functional areas(manufacturing, sales and distribution, administration, and so on). Expenses and revenues thatcannot be assigned to the functional areas are reported in further profit and loss items, sortedaccording to expense and revenue type.

With this type of grouping, cost of sales accounting identifies where costs originate in a company. It

therefore portrays the commercial purpose of the expense.

Process Flow

• Functional area in chart of accounts

• Functional area in posting key

• Cost center categories

• Line item reporting (Cost object reassignment)

• Balance Sheets and P&L Statements

• Cost of Sales Accounting – P&L Statements.

Key Points

• Compares the sales revenue for an accounting period with the manufacturing costs of theactivity

• Cost of sales accounting identifies where costs originate in a company

• Cost of sales accounting portrays the commercial purpose of the expense

• The expenses are allocated to the commercial functional areas (manufacturing, sales anddistribution, administration, and so on).

• Expenses/revenues that cannot be assigned to functional areas are reported in further profitand loss items


o Reposting of unassigned Functional area

2.1.6 Segment Reporting

Purpose

The purpose of segment reporting is to make the profit and risk situation of individual enterpriseareas (segments) transparent.

Process Flow

• Posting G/L Account Documents with different segments

• Allocation of un-allocable segment at the period end

• Balance Sheets and P&L Statements

• Cost of Sales Accounting – P&L Statements

• Receivables and Payables by segment.

Key Points





• In accordance with IAS/IFRS, segment reporting is required for product-related enterpriseareas.

• Making the profit and risk situation of individual enterprise areas transparent.

2.1.7 Activate Document Splitting

Purpose

Document splitting enables a complex display of documents. It ensures that you can draw upcomplete financial statements for the selected dimensions at any time.

Using the document splitting procedure, you can also create a segmented display of a (partial)balance sheet, according to a legal requirement (for example, IAS), or according to areas of responsibility.

The Segment field is a standard field in the totals table for New General Ledger Accounting(FAGLFLEXT) New FI drilldown reporting functions let you create segment financial statements.Document splitting is only relevant for the general ledger; it does not need to be visible from withinthe sub ledgers.

Process Flow

The following functions are provided to support this building block:

• Passive split: During clearing (during a payment, for example), the account assignments of the items to clear are inherited to the clearing line item[s] (such as payables line item[s]).

• Active (rule-based) split: The system splits documents on the basis of (delivered or custom)document splitting rules. Document splitting rules can be configured.

• Clearing lines or zero balance formation: the system creates clearing lines automatically toobtain a split. You can control this process with the zero balance indicator .

Key Points

• Extensibility and flexibility – to add new fields, you can create management reports,supplementary balance sheets, and profit–and–loss statement for industry–specific andenterprise–specific purposes.

• Increased data quality – the results of the document split are visible in the document itself.This eliminates the need for additional check steps in alternative lists, and improves dataquality.

• Accelerated closing – The elimination of additional periodic splitting programs significantlyspeeds up the closing process.

2.2 Asset Accounting

2.2.1 Asset Accounting

Purpose

The functions for Tangible Asset Handling enable illustration and documentation of the developmentof fixed assets for accounting purposes.

Asset accounting is a subsidiary ledger of the general ledger and is used to manage and documentin detail fixed asset transactions. In general ledger accounting, it is possible to update depreciation





and changes to asset balance sheet values in asset accounting. It is also possible also make variousaccount assignments to cost accounting for these transactions.

As a result of the integration in SAP ERP, Asset Accounting (FI-AA) transfers data directly to andfrom other SAP ECC components, for example posting from the Material Management (MM)component directly to FI-AA. When purchasing an asset or produce an asset in-house, directlyposting the invoice receipt or goods receipt is possible, or the withdrawal from the warehouse to

assets in the Asset Accounting component. At the same time, you can pass on depreciation andinterest directly to the Financial Accounting (FI) and Cost Accounting (CO) components. From thePlant Maintenance (PM) component, maintenance activities that require capitalization to assets areavailable.

To handle tangible assets, the business functions of the following system components areaccessible:

Component Functions

Financial Accounting(FI)

Integration with the general ledger and other subsidiary ledgers

Asset Accounting (FI-AA) Valuation of fixed assets and settlement of assets under construction

Cost Accounting (CO) Posting cost-accounting depreciation

Process Flow

• Acquisition from purchase with vendor

• Acquisition with Automatic Offsetting Entry

• Retirement with revenue

• Asset Sale without customer

• Post-Capitalization

• Write-Ups

• Settlement Assets Under Construction

• Down Payment Request for Assets under Construction

• Depreciation Posting Run

• Posting Acquisition and Production Costs Values

• Depreciation Simulation/Primary Cost Planning

Key Points• Entire lifetime of the asset from purchase order or the initial acquisition (possibly managed

as an asset under construction) through its retirement

• Calculate values for depreciation and interest

• Depreciation forecast





2.2.2 Asset Acquisition through Direct Capitalization

Purpose

To purchase asset investments that do not have an asset under construction (AuC) phase, it isnecessary to capitalize the asset directly in Asset Accounting. The need for a new asset is requested

and approved by the cost center manager, purchased through the purchasing department, and thecosts associated with the purchase order are capitalized when the Vendor invoice is processed.

Process Flow

• Create quote for make-to-stock item

• Convert quote to order

• Pick and ship items

• Invoice customer

• Receive payment

Key Points

• Purchasing an asset investment that does not have an asset under construction phasethrough capitalizing the asset directly

• The need for a new asset is requested and approved by the cost center manager

• Asset purchased through the purchasing department

• The costs associated with the purchase order are capitalized when the vendor invoice isprocessed


o Order Settlement (Asset Under Construction)

o Depreciation Simulation /Run

o Posting Acquisition and Product Cost Values

o Open and Close FI Period Asset

o Recalculating Values

o Fiscal Year Change

o Account Reconciliation

o Year-end closing Asset Accounting

2.2.3 Asset Acquisition for Constructed Assets

Purpose

Assets under construction (AUC) are a special form of tangible assets. They are displayed as aseparate balance sheet item and therefore require a separate account determination and their ownasset classes. During the construction phase of an asset, all actual postings are assigned to theAUC. Once the asset is completed, a transfer is made to the final fixed asset.

The recommendation of using Investment orders to capture the costs of AUC assets during theperiod and month-end processing settle the costs from the Investment order to the AUC. This is





done so that budget information can be entered for the AUC and tracking of the actual-to-budget canbe performed. Once the AUC is completed, the final asset is created in the appropriate asset class,and the Investment order is set to ‘complete’ so that the next settlement transfers the AUC assetvalue to the completed asset.

Process Flow

• Create Investment order with asset under construction

• Create Budget for asset

• Release Investment order

• Post invoice to Investment order

• Monitor order

• Asset under Construction settlement

• Complete order

Key Points

• Transparent view of an asset for acquisition

• Automated efficient processing

2.3 Planning

2.3.1 Revenue Planning

Purpose

A manufacturer of many product groups runs an SAP system in one sales organization. Theorganization has one central Controlling department that calculates and plans the sales quantitiesand the revenues.

Process Flow

• Revenue planning on basis of historical data

• Cost calculation

• Transfer to SOP

Key Point

• Integration to Sales, Financials, Controlling, and Production

• Use of automated functionality for planning

• Data could be planned in Spreadsheet

2.3.2 SOP through Long Term Planning Transfer toLIS/PIS/Capacity

Purpose





Businesses typically have an annual planning exercise known as Annual Operating Planning (AOP).In this planning all aspects of the business are planned, namely: revenue, production, directprocurement, and indirect procurement, capacity, and product/overhead costs.

The AOP planning is also sometimes referred to as the Annual budget. The plan is prepared for thenext fiscal year and data collection for the plan / budget usually starts in the last quarter of thecurrent fiscal year.

The AOP exercise begins with forecasting the sales quantities and revenue for the coming fiscalyear.

The sales mangers review and adjust the sales quantities based on their information and judgment.The revised sales quantity plans are loaded into CO-PA. The sales quantities are again reviewed,adjusted manually if necessary and then valuated. This results in valuated sales revenue and cost of sales for the planned sales quantities.

The current business process description deals with the process steps starting from this point of theAOP process.

The accepted sales quantities are then transferred to Sales and Operations Planning (SOP). In SOPrough cut capacity planning of the budget sales quantities occurs to verify whether the goods to besold can run through the company’s bottleneck resources that are needed to produce these goods.

After the production plan has been roughly proven feasible by SOP, it is transferred to a planningscenario in Long Term Planning module (LTP) by creating planned independent requirements (PIR),which reflect the production plan generated by SOP.

Based on these PIRs Materials requirements planning (MRP) is run in a simulated mode to createand review planned requirements for all the materials (components, raw materials) and all resourcesrequired to execute the production plan created in SOP. Simulation of MRP also allows review of capacities of the plants. Capacity leveling can then be carried out to smooth out the bottlenecks inthe capacities.

After having run MRP as described above, the prerequisites are given to carry out one of the keyobjectives of the logistics part of AOP: to calculate the total utilization of the activity types assignedto the manufacturing work centers that are allocated by the production plan. The utilization is basedon the consumption of activity types being defined in the routings of the (semi finished and finished)

products being derived from the production plan.

The aggregated utilization of the work center’s activity types is the basis for the budgeting process of the manufacturing cost centers.

Process Flow

• Create sales plan and transfer to SOP (Sales and Operations Planning)

• Rough matching of budgeted sales quantities and production resources in SOP

• Create planning scenario in Long Term Planning to simulate production planning for thebudgeted sales quantities

• Based on simulated production and operative production data (bills of material,routings),work center capacity and material requirements are calculated

• Use material requirements for AOP – purchase material price planning

• Use work centers capacity in AOP – general cost center planning

Key Points

• Forecasting the sales quantities and revenue





• Sales mangers review and adjust the sales quantities

• Sales quantity plans are loaded into CO-PA are then transferred to Sales and OperationsPlanning

• Rough matching of budgeted sales quantities and production resources in SOP

• Creating planned independent requirements

• Based on PIRs, Materials Requirements Planning is simulated to create and review plannedrequirements for materials and resources

• Calculating the total utilization of the activity types assigned to the manufacturing workcenters needed to produce the budgeted sales quantities

2.3.3 Purchased Material Price Planning

Purpose

Standard costs for purchased materials need to be periodically reviewed and updated, if necessary,to match the current market conditions and negotiated prices.

The process begins with transferring the quantities of materials required from long term planning anddownloading the latest purchase prices. The material requirements valuated with the latest purchaseprices are reviewed by the buyers to compare with the current standards.

The buyers update the spreadsheet with the prices that they determine should be the new standard.The updated prices are then uploaded as the new planned prices. These planned prices are used bythe product costing run to value the semifinished and finished goods to come up with the standardcost of goods sold for the final products.

Process Flow

• Transfer long term planning scenario to purchase information system

• Download purchased materials for budget purchase price update

• Review data and negotiate with vendors

• Change materials planned price1 (material master)

Key Points

• Transferring the quantities of materials required from long term planning

• Downloading the latest purchase prices

• Material requirements valuated with the latest purchase prices

• Planned prices used by product costing run to valuate the goods to come up with thestandard cost

• Standard costs are used as the new planned prices

2.3.4 General Cost Center Planning

Purpose

During the annual budgeting process, the managers of nonoperational cost centers such as sales,marketing, administrative, research and development, and so on, plan the costs for various cost





types/elements for their respective cost centers. The usual starting point for development of theseplans is the actual data for the current/previous year.

In this process, the previous year’s actual expenses for these cost centers are copied into an AOP(annual operative planning) budget version in cost center accounting. As an alternative the previousyear’s budget data can also be used as a starting point for the exercise. The data in this version isdownloaded into spreadsheets by each cost element and cost center. The respective cost center

managers review and update the budget values according to their requirements and plans. Thenthese plans are uploaded back into SAP. The plans in SAP are reviewed and finalized.

The planned depreciation on fixed assets is transferred separately to the cost center plan version.The system calculates the planned depreciation on assets by cost center based on the asset valuesposted on the cost centers. In the case of cost centers having machinery, the depreciation isplanned based on cost center and activity type.

Process Flow

• Copy previous year’s actuals or budget as a basis for planning

• Transfer planned depreciation from assets

•

Download cost elements to spreadsheet for income/expense budget• Update budget values for income and expense excluding operations

• Upload cost elements for income and expense excluding operations

• Plan accrual costs, statistical key figures, assessments

• Confirm nonoperating cost center budget

• Copy AOP version to actual version 0 and lock both versions for planning

Key Points

• Copying the previous year’s actual expenses for the cost centers into an AOP budgetversion

• Changing copied data

• Depreciation transferred separately into AOP

• Downloading data to spreadsheets by each cost element and cost center

• Uploading the adjusted data into SAP

• The cost center planning in SAP is reviewed and finalized (accrued costs, statistical keyfigures, assessments)

• Activating the planned data of the AOP version

2.3.5 Manufacturing Cost Center Planning

Purpose

During the annual budgeting process, the managers of manufacturing cost centers plan the costs for various cost types/elements for their respective cost centers. The usual starting point for development of these plans is the actual data for the current/previous year.

In this process, the previous year’s actual expenses for these cost centers are copied into an AOP(annual operative planning) budget version in cost center accounting. As an alternative the previousyear’s budget data can also be used as a starting point for the exercise. The data in this version is





downloaded into spreadsheets by each cost element and cost center. The respective cost center managers review and update the budget values according to their requirements and plans. Thenthese plans are uploaded back into the system. The plans in the system are reviewed and finalized.

The planned depreciation on fixed assets is transferred separately to the cost center plan version.The system calculates the planned depreciation on assets by cost center based on the asset valuesposted on the cost centers. In the case of cost centers having machinery, the depreciation is

planned based on cost center and activity type.

The resource requirements in the form of planned activity quantities are transferred from Sales andOperations planning to the cost centers as planned activity consumption. Plan reconciliationbetween the SOP activity requirements and manually planned requirements on the operational costcenters is carried out. Once the activity quantities and budget amounts are finalized, planned activityprices are calculated in the system.

Process Flow

• Download of cost center budget into spreadsheets, revision by cost center managers,upload of revised data

• Transfer of planned activity requirements from production (SOP)

• Manual completion of planned data

• Calculation of planned activity prices (input for AOP Standard Cost Calculation)

Key Points

• Copying the previous year’s actual expenses for the cost centers into an AOP budgetversion

• Changing copied data

• Depreciation transferred separately into AOP

• Downloading data to spreadsheets by each cost element and cost center

• Uploading the adjusted data into SAP

• The cost center planning in SAP is reviewed and finalized (accrued costs, statistical keyfigures, assessments)

• Activating the planned data of the AOP version

2.3.6 Internal Order R&D Planning

Purpose

Various internal projects consume resources and incur costs or expenses. Usually the purpose of these projects is the future development of products. The product lines are generally determinablefor such projects. The costs of these projects need to be tracked for various purposes such as costcontrol, return on investment calculations, tax reporting, and so on.

This process makes use of SAP’s internal order functionality to track costs and status. For everyproject undertaken, an internal order is created using the R&D order type (Y100). Cost planning iscarried out on this order. When the project is approved, the order is released. Costs incurred for theproject can then be posted on the order. Periodically, the costs collected on the order are settled tothe assigned R&D cost center or to CO-PA (if CO-PA is activated). When the project is complete,and fully settled, the order is then closed by setting the appropriate status.





Process Flow

• R&D internal order

• Set planner profile

• Plan costs for R&D internal order

• Settle planned costs for R&D internal order

• Confirm correct settlement

• Reporting

Key Points

• For every project an internal order is created

• Cost planning is carried out on this order

• The planned costs can also be settled to the assigned R&D cost center or to CO-PA

2.3.7 Internal Order for Marketing and Other Overhead Planning

Purpose


This process makes use of SAP’s internal order functionality to track costs and status.

In case of marketing projects an internal order is created by using the marketing order type.Marketing orders are created as statistical orders. This means that costs are posted to the assignedcost center and additionally as statistical costs to the internal order. The order does not needsettlement since the real costs are assigned to the cost center.

In case of other overhead projects internal orders can be created by using the overhead order type.In this case a responsible cost center is assigned. The internal orders are to be settled to this costcenter.

Process Flow

• Creation of internal orders

• Cost element planning on internal orders

• Settlement of internal orders (planned costs)

Key Points

• After creating the internal order, you set a planner profile and plan costs at cost elementlevel. Revenues can also be planned if the order is with revenues.

• It is also possible to assign budgets to an internal order. Budgets are lump sums that are notbroken down in cost elements.

• After checking the settlement rules, you execute the settlement of planned costs to thereceivers.





• You can use standard reports to confirm correct settlement and the budgets assigned to theorders.

• The planned and actual costs of these projects can be tracked for various purposes such ascost control, return on investment calculations, tax reporting, and so on.

2.3.8 Standard Cost Calculation

Purpose

Annually, the standard costs for products are updated as part of the annual operations planning(AOP). This is necessary to reflect the changes in the prices of purchased parts, change in labor andoverhead costs and change in bills of materials and operations needed to manufacture thesemifinished and finished goods.

Once the planned prices for purchased parts are updated and planned activity prices are calculated,a costing run is done to calculate the new standard planned prices of the materials. The calculatedstandards are checked. The responsible persons are asked to make necessary corrections, for example in master data. Once the calculations are considered to be correct, the prices are updatedas future planned costs in the respective material master records.

When the current year is closed, the marked cost estimates are released. This results in arevaluation of existing inventory to the new standard prices.

Process Flow

• Create and execute costing run

• Analyze proposed standard prices

• Repeat annual operating plan scenarios

• Edit cost run and execute

• AOP – revenue cost of sales transfer

• Create frozen costing run / Execute costing run

• Mark as future planned price

• Release standard cost estimate and revalue stock at start of new fiscal year

Key Points

• Standard costs for products are updated as part of the annual operations planning

• Costing run is done to calculate the new standard planned prices of the materials

• Responsible persons are asked to make necessary corrections

• Prices are updated as future planned costs in material master records

• Once the current year is closed, the marked cost estimates are released

• Revaluation of existing inventory to the new standard prices


o Costing Run





2.3.9 Quarterly Plan – Sales Quantity Forecast with CO-PA

Purpose

A manufacturer of many product groups runs an SAP system in one sales organization. Theorganization has one central Controlling department that calculates and plans the sales quantities

and the revenues.

Process Flow

• Sales quantity planning on basis of actual data

• Transfer to SOP





2.3.10 Reference and Simulation Costing

Purpose

Reference and Simulation Costing is a tool for planning costs and setting prices, with which youmanually enter the costing items in spreadsheet form in a unit cost estimate.

With this component, you can create base planning objects. A base planning object is a referenceobject of Product Cost Planning, which you create in Reference and Simulation Costing to plan costsfor a new product or service and simulate changes to existing cost estimates. If you plan a newproduct for which there is no master data in the SAP ERP, you can perform initial planning and costprojections by creating a Base Planning Object using Reference and Simulation Costing. Using thismethod, you manually plan the costs for an item.

When the first material master data is created in the SAP ERP, you can use the Material CostEstimate without Quantity Structure to manually plan the cost of goods manufactured and the cost of goods sold for the product. You can use the base object cost estimate as a reference for this. Twomethods are available for material cost estimate planning without quantity structure, multilevel unitcosting and single-level unit costing. Multilevel unit costing enables you to plan cost at the assemblylevel without requiring production bills of material.

Process Flow

• Create and cost Base Planning Object

• Analyze Results

• Change Base Planning Object

• Report from Information System

Key Points

• Reference and Simulation Costing

• Base Planning Object

o After creation and costing, the base planning object can be monitored and analyzed.

• Reporting from Information System

o Monitoring the base planning object

2.4 Period End Closing and Actual Postings

2.4.1 Period End Closing General Plant

PurposeThe Plant/Central closing process is done to make sure that all financial postings are made torepresent the plant activity for the period. Daily activity in the plant is posting various financialdocuments into the general ledger and cost-controlling module. This process ensures that all activityin the plant is shown correctly, and that no financial postings are missing. Some data (total stockvalue, total stock, valuation class, price control indicator, and price unit) are managed by period. For these values, and goods movements, to be posted to the correct period, the period must be setwhenever a new period starts. Management reporting needs to receive plant information withreference to variances, WIP, and scrap to allow for the correct reporting of these figures. Theproduction/process orders that are no longer active need to be flagged as closed so that future





postings are not allowed. This process ends by flowing into the Central Closing process that finishesthe financial reporting of the company.

Period end closing “general” Plant covers the closing for product cost controlling by period andproduct cost controlling by order. The procedures for Product Cost by Order are the same regardlessof whether a manufacturer uses process orders or production orders

Process Flow

• Run assessment cycle for quality costs

• Ensure goods movements and production transactions are complete

• Open new MM period

• Period-end closing for production orders (overheads, WIP calculation, variances calculation,settlement of production orders)

• Close completed production orders

• Data collection for summarization hierarchy (reporting)

• Run actual assessment of all cost center costs to profitability analysis (COPA)

• Run profitability report

Key Points

• Run assessment cycle for quality costs

• Ensure goods movements and production transactions are complete

• Open new MM period

• Period-end closing for production orders (overheads, WIP calculation, variances calculation,settlement of production orders)

• Close completed production orders

• Data collection for summarization hierarchy (reporting)

• Run actual assessment of all cost center costs to profitability analysis (COPA)

• Run profitability report





2.4.2 Inventory Valuation for Year End Closing

Purpose

This component encircles the process of inventory valuation – balance sheet valuation at the end of the year. This provides users with an example process description that they can use as a templatefor their own valuation processes.

The business process documentations include the following process steps:

• Stock valuation, using lowest value principle for raw materials, packaging materials andtrading goods.

• Additional devaluations by movement rate

• Inventory costing for finished and semifinished products, in accordance with the lowestpossible value principle

• Stock value reporting in the form of a comparison analysis

• Manual stock value adjustment posting in the Financial Accounting component

These Business Process Documentations can be used by all companies that are running an SAPERP system that integrates the Materials Management (MM), Production Planning (PP), FinancialAccounting (FI), and Controlling (CO) components.

The inventory cost estimate calculates tax-based or commercial prices for semifinished and finishedproducts. After the inventory is costed, the costing results are transferred to the material master astax-based and commercial prices.

Inventory valuation is carried out in accordance with local legislation (such as the GermanCommercial Code), including settings for the overhead structure, valuation variant, and stockvaluation with devaluation on the basis of movement rate.

Process Flow

• Stock valuation, using lowest value principle for raw materials, packaging materials andtrading goods.

• Additional devaluations by movement rate.

• Inventory costing for finished and semifinished products, in accordance with the lowestpossible value principle.

• Stock value reporting in the form of a comparison analysis.

• Manual stock value adjustment posting in the Financial Accounting component.

Key Points

• Stock valuation for raw materials, packaging materials and trading goods on base of lowest

possible value

• Inventory valuation for semifinished and finished materials on base of local requirements for valuation approaches

• Stock value adjustment





2.4.3 Overhead Cost Controlling Actual

Purpose

This part describes the transaction-based actual postings that are used in Overhead CostControlling.

For an explanation of the activities that are performed at the end of the period, refer to the Period-End Closing section.

Process Flow

• Actual posting for a cost center

o For primary costs the related cost center is posted

o Cost center update with the correct values

o Posting of statistical key figures

• Periodic and year end activities

o Comparison between the actual and the planned costs for the cost center

o Allocation of primary and secondary costs using an assessment cost element

o Posting of accruals for payroll fringe costs on a monthly basis

o Maintaining the controlling version

o Lock period

Key Points

• Process a G/L document for various purposes

• Necessary steps for preparation of periodic and year end activities

2.4.4 Internal Order R&D Actual

Purpose


This process makes use of SAP’s internal order functionality to track costs and status. For everyproject undertaken, an internal order is created using the R&D order type (Y100). Cost planning iscarried out on this order. When the project is approved, the order is released. Costs incurred for theproject can then be posted on the order. Periodically, the costs collected on the order are settled tothe assigned R&D cost center or to CO-PA (if CO-PA is activated). When the project is complete,and fully settled, the order is then closed by setting the appropriate status.

Process Flow

• Create R&D internal order

• Consumable purchasing

• Post goods issues to R&D internal order





• Settle internal order

Key Points

• Transparent view of outstanding orders, shipments, and inventory

• Automated efficient processing

2.4.5 Internal Order for Marketing and Other Overhead Actual

Purpose


This process makes use of SAP’s internal order functionality to track costs and status.

In case of marketing projects an internal order is created by using the marketing order type.Marketing orders are created as statistical orders. This means that costs are posted to the assigned

cost center and additionally as statistical costs to the internal order. The order does not needsettlement since the real costs are assigned to the cost center.

In case of other overhead projects internal orders can be created by using the overhead order type.In this case a responsible cost center is assigned. The internal orders are to be settled to this costcenter.

Process Flow

• Create internal order

• Post general ledger account

• Check settlement rule

• Check settlement

• Check actual budget

Key Points

• This process makes use of SAP’s internal order functionality to track costs and status.

• It gives a transparent view of an internal order

• It allows automated efficient processing

2.4.6 Period End Closing Financial Accounting

Purpose

Closing operations are periodic tasks and can be subdivided in FI as follows:

• Day-end closing

• Month-end closing

• Year-end closing





The closing operations component helps preparing and carrying out the activities required for day-end, month-end, and year-end closing. For this purpose, the system provides a series of standardreports that can be used to generate evaluations and analyses directly from all of the posted accountbalance. The system helps carrying out the following:

• Creating the balance sheets and P&L statements

•

Document the posting dataNo additional postings are required for day-end closing.

Using the following evaluations for day-end closing and for documenting the posting data is possible:

• Compact-Document journal

• Evaluation of the documents that have not been posted

To carry out the closing operations in G/L accounting, it is necessary to carry out the closingoperations in the subledger accounting areas you are using. These include:

• Accounts receivable and accounts payable accounting

• Inventory accounting

• Asset accounting

Year-end closing is split into two phases:

• At the beginning of the new fiscal year, you open new posting periods and carry forward thebalances from the previous year

• You then prepare and create the financial statements and document the businesstransactions using the balance audit trail

The SAP system offers a range of reports, which can carry forward balances into the new fiscal year.During this process, the profit and loss accounts are carried forward to one or more retainedearnings accounts. The balances of the balance sheet accounts are simply carried forward into thenew fiscal year. It is not necessary to create special opening financial statements.

Any postings done in the old fiscal year automatically adjust the relevant carry-forward balance.Closing the old fiscal year and carrying out the closing postings before opening the new fiscal year isnot necessary.

As with month-end closing, you can create all the external reports required, document the postingdata, and carry out the internal evaluations.

Process Flow

• day-end closing

• month-end closing

• year-end closing

Key Points

• Updating Exchange Rates

• Gaps in Document Number Assignment

• Invoice Numbers Allocated Twice

• Displaying the compact document journal





2.5 Sales and Distribution

2.5.1 Sales Processing using Third Party (w. ShippingNotification)

In third-party order processing, your company does not deliver the items requested by a customer.

Instead, you pass the order along to a third-party vendor who then ships the goods directly to thecustomer and bills you. The standard sales order automatically creates a purchase requisition for thematerials to be delivered by the third-party vendor.

In this scenario, the vendor sends a shipping notification. After that a statistical goods receipt isposted. The incoming invoice from the vendor updates the billing quantity, so that the customer-billing document can only be created after entering the invoice from the vendor.

.

2.5.2 Credit Management

A credit limit check can be carried out when sales documents are created or changed. The check iscarried out by the system within one credit control area. If you change quantities or values in a

document, the check is repeated. A credit control area consists of one or more company codes. Asales document belongs to one credit control area depending on the allocation of the salesorganization to a company code. The SAP System checks the credit limit that was granted to thecustomer in this credit control area. The credit control areas and the credit limit of a customer aredefined in financial accounting and entered in the customer master record. During the check, theSAP System totals the receivables, the open items, and the net value of the sales order for everyitem of a sales document. The open items take into account obligations bound by contract that arenot recorded for accounting purposes but involve expenses through diverse business transactions.After that, it compares the total with the credit limit. If the limit is exceeded, the system responds inthe way defined by you in the configuration menu.

We are using automatic credit control in this solution. During the automatic credit control, youcan configure a system reaction ('A' warning, 'B' error, 'C' like A, + value by which the credit limit isexceeded. and ‘D’ - like B, + value by which the credit limit is exceeded) when the credit limit is

exceeded, we have chosen to use option ‘C’ (warning + value by which the credit limit is exceeded).

The system provides a transaction to list all sales documents that have been blocked for delivery,with information about what has caused the block. The customer’s current credit situation ismanually reviewed by the credit department, and when the sales order is approved, the deliveryblock is removed from the sales order. You can jump directly from the list to an individual document.

2.5.3 Sales Order Processing: Sale from Stock

This scenario describes the entire process sequence for a standard sales process (sale from stock)with a customer. The business process encompasses all steps from creating an order to the clearingof a customer account after payment is received.

The process starts with the creation of a customer's standard sales order. Depending on the

customer and the material, various special events take place during the order entry, such ascustomer/material pricing, insertion of applicable discounts, checking the availability of the materials,and checking the customer‘s credit history.

It is checked whether enough material exists in the required storage location. If not, a stockmovement takes place. Then, the picking slips are generated to the warehouse clerks to stage theproduct for shipment to the customer.

Once picked, the physically shipped quantity has to be registered in the system to ensure that thereare no differences between the sales order and the delivery document. In the case of actualdifferences, this can also be documented and ensures correct postings.





After the completion of picking, the warehouse clerk has to systematically relieve the inventory. Thisrelief of inventory is the actual recording of the physical quantity that is being shipped to thecustomer. These results in the recording of the cost of goods sold in financial accounting.

Once the inventory has been relieved, the delivery can be invoiced and the revenue together withthe cost of goods sold is recorded in management accounting. This step signifies the end of thebusiness transaction in Sales and Distribution.

2.5.4 Free of Charge Delivery

This scenario describes the process of providing goods to a customer at no cost. A unique salesorder type is created that is non-billing relevant. The order is confirmed based on the availability of goods. A delivery is then created; the goods are subsequently picked, confirmed, and delivered tothe customer.

2.5.5 Returns and Complaints

This scenario describes sales order returns processing. The process starts a return sales order withreference to the original invoice for the goods. An RMA document is printed, and forwarded to thecustomer to be attached to the incoming goods. The goods are shipped back, a return delivery iscreated with reference to the RMA, and the material is received into return stock. The return stock

location is set to be non-MRP relevant. The goods are inspected, resulting in a disposition to either return them to stock, or scrap. A credit memo is created from the billing run, and posted to thecustomers account.

2.5.6 Sales Quotation

This scenario describes the process for a standard sales quotation. The process starts when arequest for quotation (RFQ) is received from a customer. In response to the customer’s RFQ, aquotation is created in the SAP system. After that the customer can either accept the quotation or reject it.

2.5.7 Sales Order Processing for Prospect

In this scenario, you process sales order documents without first looking up the customer’sinformation.

A dummy customer is used when your sales order processors need to investigate an order withoutfirst looking up the customer’s account number. The sales order can be saved but remainsincomplete until a valid customer account number has been entered in the sales order. This functionis particularly useful for companies that take phone orders. For example, a customer calls andrequests pricing and information on a catalog item. The order processor can build the entire order without needing the customer’s account number until the end. Once the customer’s account number has been entered, all of the customer-specific information is transferred from the customer master and other customer-specific records.

2.5.8 Sales Processing Using Third Party (Without ShippingNotification)

In third-party order processing, your company does not deliver the items requested by a customer.Instead, you pass the order along to a third-party vendor who then ships the goods directly to thecustomer and bills you. The standard sales order automatically creates a purchase requisition for thematerials to be delivered by the third-party vendor.

The incoming invoice from the vendor updates the billing quantity, so that the customer-billingdocument can only be created after entering the invoice from the vendor.





2.5.9 Sales of Nonstock Item with Order Specific Procurement

In this scenario a customer orders a material that is currently not in stock. The material is thereforeprocured from an external supplier. Example:

Customer 100003 orders 100 PC of material H14 at the sales organization 1000.

The material is not in stock and must be procured through an external supplier.

When you create the sales order, a purchase requisition is generated. In the next step, the purchaserequisition is converted into a purchase order for the supplier 300000.

The goods receipt is created on a customer’s special stock for the customer 100003. The deliveryand the invoice follow from here. Finally the invoice verification for the goods receipt is created.

For the customer 100003 credit management is activated.

2.5.10 Debit Memo Processing

The Debit Memo process is used for applying a debit to a customer account once a determinationhas been made that a customer has been undercharged as a result of a pricing or sales tax rate

error. An Invoice Increase Request is then created with the amount to be debited, and placed on abilling block for review. It must then be released to become billing-relevant, and to appear on thebilling due list. Periodic billing process creates a debit memo to be sent to the customer, and postsan accounting document.

2.5.11 Serial Number Management

This component helps to identify and differentiate between individual items of material. Thiscomponent therefore ideally supplements the material master record, which may contain all data for describing and managing a piece of material, but which does not enable you to differentiate betweenindividual items of that material.

You can use serial numbers when working with the following business procedures and objects:

Production Orders

Inventory Management and Physical Inventory

Sales and Distribution

Plant Maintenance and Service Processing

2.5.12 Foreign Trade Export Processing

With markets becoming increasingly global and business structures more complex, the need for accuracy in handling the foreign trade needs of a business is gaining rapidly in importance. SAP’sForeign Trade/Customs application (FT) provides the tools that you need to compete effectively intoday’s fast-paced market. It is designed to help you meet the rapidly changing foreign traderequirements of your business.

This scenario describes the steps involved in receiving customs forms and how the system performsincompleteness checks to make sure that all essential information is in the system.

The document explains how easy reporting is with Intrastat and Extrastat, once you have maintainedthe necessary settings and master data.

2.5.13 Customer Consignment Processing

This scenario describes how finished products and trading goods are handled within a consignmentprocess. The products shipped to the customer are still owned by the company until they are sold bythe customer to a third party. The materials, which are usually stored in the customer’s store or





warehouse, are posted in a stock (consignment stock) that is assigned to the correspondingcustomer. This allows the customer’s current stock to be viewed at any time.

2.5.14 Returnables Processing

Standard pallets belong to the manufacturer and are handled either as returnable goods or aspackaging material. This scenario shows the shipment of standard pallets and their returns.

This scenario uses the pallet L001 with material type LEIH, which is handled as returnable material.

2.5.15 Cross-Company Sales Order Processing*

This scenario shows how sales are processed across company codes.

A customer orders goods from their vendor’s sales organization. The vendor has a production /warehouse plant that belongs to a different company code. The goods are produced / containedhere and delivered from the production/warehouse plant directly to the customer.

Focus:

• Delivering plant belongs to a different company code

• Direct delivery from delivering plant to customer

• Customer invoice and intercompany billing document

• Internal transfer prices

Customer 100009 sends a purchase order to their vendor’s sales organization. A standard order iscreated here with the production/warehouse plant from a different company code as a deliveringplant.

The goods are delivered from the production/warehouse plant directly to the customer.

The delivery is billed twice: once to create the customer invoice and again to carry out intercompanybilling.

The customer pays their invoice by transferring the amount to the bank account. A manual accountstatement is posted, and the open item on the customer’s account is cleared.

2.5.16 Sales Order Processing with Customer Down Payment

In business, especially in a make-to-order environment, customers are often required to pay someamount in advance before delivery of goods. This process is used to create requests for downpayment, record the receipt of the down payment, create a final invoice after the deduction of thedown payment received and a receipt of the final amount due on the invoice.

The process makes use of the billing plan functionality. The integrated process allows for a proper document flow to be maintained between the sales and financial transactions.

2.5.17 Sales: Period End Closing Operations

This scenario describes the collection of periodic activities in Sales & Distribution such as day

ending activities or legal requirements like Intrastat and Extrastat reporting.

2.5.18 Credit Memo Processing

The Credit Memo process is used to apply a credit to a customer account once you have determinedthat a customer has been overcharged as a result of a pricing or sales tax rate error. An InvoiceCorrection Request is then created with the amount to be credited, and placed on a billing block for review. It must then be released to become billing relevant, and appear on the billing due list. Theperiodic billing process creates a credit memo to be sent to the customer, and posts an accountingdocument.





2.5.19 Rebate Processing: Free Goods

This scenario describes the entire process sequence for a standard sales process (sale from stock)with a customer including free goods. The free goods are inclusive, which means that the customer receives the ordered quantity but only has to pay for a part of the ordered quantity. The businessprocess encompasses all steps from creating an order to the clearing of a customer account after payment is received.

The process starts with the creation of a customer's standard sales order. A free goods conditionrecord has been created for the used material. So the customer receives a certain amount of freegoods depending on the ordered quantity.

It is checked whether enough material exists in the required storage location. If not, a stockmovement takes place. Then, the picking slips are generated to the warehouse clerks to stage theproduct for shipment to the customer.

Once picked, the physically shipped quantity has to be registered in the system to ensure that thereare no differences between the sales order and the delivery document. In the case of actualdifferences, this can also be documented and ensures correct postings.

After the completion of picking, the warehouse clerk has to systematically relieve the inventory. Thisrelief of inventory is the actual recording of the physical quantity that is being shipped to thecustomer. These results in the recording of the cost of goods sold in financial accounting.

Once the inventory has been relieved, the delivery can be invoiced and the revenue together withthe cost of goods sold is recorded in management accounting. This step signifies the end of thebusiness transaction in Sales and Distribution.

2.5.20 Sales Order Processing with Collective Billing

This scenario describes how to use the standard sales processing (sale from stock) for mass-processing.

The process starts with the creation of some standard sales orders.

In periodical intervals all sales orders due to deliver and with availability of the material are selectedand deliveries are created. For optimization of shipping costs all sales orders, which are delivered tothe same customer, are packed into one delivery document. For lean-WM-storage locations WM-transport orders and picking documents for picking are automatically created.

The materials are picked and the actual amount of picking is noted in the delivery. The goodsreceipts are booked and delivery notes are created. In the background the goods usage is booked toaccounting. The materials can leave the company.

In periodical intervals all deliveries are selected for billing. For cost-optimization all deliveries due toinvoice to the same customer are packed into one invoice-document. In the background the revenueis posted to accounting.

2.6 Materials Management

2.6.1 Lean Warehouse ManagementLean Warehouse Management is used to have a picking document in the shipping process.

A picking document is printed when a delivery is created for a storage location which is assigned toa warehouse. This is done automatically. There is no need for a user to deal with transport ordersfrom the warehouse management.





2.6.2 Quotation for Procurement

The request for quotation (RFQ) process starts with a request for material from vendors. The RFQprocess includes a price comparison for the selection of the best source. The buyer evaluates thevendor responses to determine the best source of supply. The accepted quotation is converted intoa purchase order and a rejection letter is sent to the vendors whose quotations were rejected.

Material-specific information including vendor pricing and lead-time from the quotation are capturedwithin ERP master data records.

2.6.3 Consumable Purchasing

This scenario deals with purchase order creation activities during the procurement process.Furthermore it describes the additional process steps of a purchase order approval, goods receipt of consumables, approval of service entry sheets and invoice receipts by line item. The process alsocovers the related processing of outgoing payments and period-end plant and period-end closing.

Consumable items (goods or services) are entered without material number but rather a short textdescription as the main identifiable characteristic. The purchase order is subject to approval basedon predefined parameters prior to being issued to a vendor.

For consumable goods, there is no inventory in the system. By posting a goods receipt the value of the goods is expensed to a cost center or another cost element.

When the invoices are received from the vendor, they are entered with reference to a purchaseorder and item, providing a three way match of purchase order value, goods receipt value, andinvoice value. If there are any variances between invoice and purchase order value, the invoice isblocked and forwarded to the Buyer for approval. Checks to vendors are generated based on the netterm condition reflected on the invoice, derived from the vendor master. Variances due to deviationsfrom standard price are collected in the purchasing cost center and allocated to product line levelbased on a predefined percentage.

Procurement of a consumable service follows the same general process. The difference is that theconsumable service is not posted by means of a goods receipt, but with a service entry sheet. Theinvoice follows the same rules in both cases.





2.6.4 Procurement without QM

The purchasing process may start with a request for quotation by which a purchasing organizationemployee requests a quotation for the supply of materials from a vendor. The RFQ process includesoffer comparisons to select the best source. The buyer evaluates the responses from the vendor anddetermines the best source of supply. The agreed material cost is captured on the material master and forms part of inventory valuation, based upon a released standard cost. To work withQuotations, run the Business Process Documentation Quotation for Procurement (128).

Material-specific information including vendor pricing and lead-time from the quotation is capturedwithin SAP master data records, namely info records, and can be linked to transactional requisitionsand purchase orders via an SAP lookup called a source list. Info records and source lists can haveone or more vendors associated with the material; however, one vendor is designated as the primarysource for the material.

A purchase requisition is either generated via the material requirements planning process or manually by a requestor. A buyer validates the accuracy of the purchase requisition and converts thepurchase requisition into a purchase order. The purchase order is subject to approval, based on apredefined amount prior to being issued to a vendor.

Goods are shipped from the vendor and received to the purchase order referenced on the document

from the vendor. Inventory is received into a location based on fixed parameters proposed from thematerial master that can be changed at the time of the transactional data capture that is purchaseorder creation or goods receipt.

The invoice is received from the vendor. Invoices are entered with reference to a purchase order anditem, providing a three way match, purchase order value, goods receipt value, and invoice value. If there are any variances between invoice and purchase order value, the invoice is blocked andforwarded to the buyer for approval. Checks to vendors are generated based on the net termcondition reflected on the invoice, defaulted from the vendor master. Variances due to deviationsfrom standard price are collected in the purchasing cost center and allocated to product line levelbased on a predefined percentage as determined by the business.

2.6.5 Stock Handling: Scrap and Blocked Stock, Devalue

This scenario is triggered by the following different processes:• Returns from Customer

• Rework from production

• Other logistic processes and reasons

• Devalue material to another material number and then rework the devaluated material

2.6.6 Procurement Contract

The process to create a contract begins with the need to secure a large number of supplies as wellas reducing procurement costs. The creation of a contract can start if the following issues have beenclarified:

• Number/amount of material or services

• Validity start / validity end

• Payment terms

• Quantity of each contract material/service,

• Price of each position in the contract

• Location to where the goods/services are delivered.





A contract is signed by a purchasing manager or a buyer.

After the creation of a contract, purchase requisitions and purchase orders can be performed withrelation to the contract.

2.6.7 Stock Transfer with Delivery

The stock transfer process begins with a requirement to transfer material from one plant to another within the same company code. This request, in form of a stock transfer requisition, may be createdin the procuring plant automatically by MRP or manually by a buyer.

Nevertheless, the process also works without MRP. In that case the buyer creates the stocktransport order directly.

There are no master data requirements beyond the material master to support the stock transfer process. The material master must exist in both the procuring (receiving) plant and the providing(issuing) plant. Stock transfer purchase orders are not subject to approval like other purchaseorders.

A buyer validates the accuracy of the stock transfer purchase requisition and convert it into a stocktransfer purchase order. Or, without MRP, the buyer creates the stock transfer purchase order directly.

A warehouse clerk at the issuing plant monitors the materials due to be shipped and createsdeliveries as necessary. Once a delivery is created, a pick list is generated for the materials. Awarehouse clerk gathers the materials and confirms the picked quantities. Once the delivery iscomplete, the delivery quantities are issued, appropriate documentation is generated, and theshipment is sent, ending the process for the issuing plant.

Goods are received at the receiving plant referencing the delivery number on the shippingdocuments. Inventory is received into a location based on fixed parameters proposed from thematerial master which can be changed at time of transactional data capture that is, Purchase Order creation or goods receipt.

A stock transfer process is designed from plant A to plant B, but works as well in the oppositedirection.

2.6.8 Stock Transfer without Delivery

This configuration guide provides the information you need to set up the configuration of this buildingblock manually.

If you do not want to configure manually and prefer an automated installation process using BC Setsand other tools, refer to the installation guide of this building block.

2.6.9 Return to Vendor

The return to vendor process begins with a requirement to return an item to a vendor. The initialactivity is to request a Returns Material Authorization (RMA) from the vendor. This is a manual stepand the RMA number is entered into a text field in the return purchase order. The buyer then createsa return purchase order in the system. The return purchase order is similar to a standard purchase

order except for the return flag which sets up the return delivery to enable shipment of the itemsback to the vendor.

The return purchase order confirmation goes to the vendor and the return Delivery is sent to theshipping department where the items are picked and shipped back along with a delivery note. Whenthe shipping department creates the delivery the items are relieved from inventory. A credit memo isgenerated which relieves the liability to the vendor.





2.6.10 Physical Inventory / Inventory Count and Adjustment

This scenario covers the periodic process making necessary adjustments to stock on hand after aphysical count.

The process begins with the generation of the inventory count sheets. Furthermore, materials can beblocked here for posting during the physical inventory. Once the inventory sheets are printed out, the

actual physical inventory count occurs for the given materials. Next, the count is entered in thesystem and then any discrepancies against the system quantities are reviewed. The inventory maybe recounted until final counts are accepted and inventory differences are posted.

2.6.11 Subcontracting

The MM Subcontracting process involves sending raw components to a vendor for specificmanufacturing processes and receiving the value-added finished material back into inventory.

A Subcontract Purchase Requisition is either generated via the Material Requirements Planningprocess or manually by a requestor. A Buyer validates the accuracy of the Purchase Requisition andconvert it into a Purchase Order. The purchase order is subject to approval based on predefinedparameters prior to being issued to a vendor.

The consumption of sent components is recorded upon receipt of the value-added finished material.The vendor sends the invoice for the services provided which is paid during the normal paymentcycle.

A customer orders goods from the specified vendor (3000XX) as a subcontractor based on a specificProduction Plan as Make to Stock process or based on a Material Requirements Planning Scenario(MRP-Scenario).

On goods delivery,

The scenario focuses on the following activities:

• Create purchase order based on a scheduled purchase requisition created by last MRP-run.

• Optional: Create purchase order manually.

•

Approve purchase order (if needed)• Create Outbound Delivery document.

• Post goods issue for delivery and shipping to subcontractor.

On goods receipt, the scenario focuses on the following activities:

• Goods receipt based on purchase order delivered by subcontractor.

• Posting of component reservations and consumption of component quantities as provision of material.

• Invoice receipt by line item

• Invoice verification and validation of tax expenses.

• Process of outgoing payment.

2.6.12 Procurement & Consumption of Consigned Inventory

In consignment processing, the vendor provides materials and stores them on your premises. Thevendor remains the legal owner of the material until you withdraw materials from the consignmentstores. Only then the vendor requires payment. The invoice is due at set periods of time, for example, monthly. In addition, you can also arrange with the vendor that you take over ownership of the remaining consignment material after a certain period of time.





The daily MRP run creates purchase requisitions with item category ‘K’ for parts that are to beprocured on a consignment basis.

2.6.13 Internal Procurement: Cross-Company Stock Transfer

This section describes the stock transfer between two plants with different company codes. Theprocess uses a Purchase Order with a Supplying Plant as a Vendor. In the Purchase Order, you can

fix the Price and Conditions for the vendor (Supplying Plant).

The materials required are located in the stock available at the supplying plant. The stock quantityfor material RAW20(R20) in the supplying plant (production PLANT1(1000)) and storage location(1030) is created by a simple MM posting (transaction MB1C, movement type 501 or 561).

2.7 Production Planning & Control

2.7.1 Logistics Planning

The purpose of logistics planning is to make sure that future demand can be satisfied by your company’s available resources and to point out situations where demand cannot be met in time or inthe desired quantities.

This process sometimes is called Sales and Operations Planning . The process takes place in asimulative mode and at an aggregated (usually product group) level. Once a feasible production planis found that satisfies demand it can be used as the basis for operational production planning (MRPand Detailed Capacity Scheduling).

The Best Practice scenarios in this section cover the following planning workflow:

• Planning/forecasting of future demand

• Aggregated production planning including capacity check, to check at product group level if demand can be satisfied (using the SOP functionality)

• Transfer of results to Long Term Planning (using the LTP module) to enable simulation of material requirements, based on the production plans

• Planning takes place in separate (simulative) planning versions within LTP

• Review and adjustments of planned requirements as needed

• Once the simulated requirements are accepted, the demand (independent requirements) isthen transferred to active demand management for detailed MRP and Production Planning /Scheduling in the active version.

2.7.2 Make-to-Stock Production – Discrete Industry

The scenario Make-to-Stock (MTS) Production focuses on:

• Sales-order-independent production using MTS (Make-to-stock) production / productionorder processing.

• Planned independent requirements

• Production triggered by a production plan

• Make-to-stock production - Two-level-production for subassembly and finished part

• Use of production versions

• Optional enhancement: Serial number for finish product

• Optional enhancement: External processing





• Optional enhancement: Batch management processing

• References to different procurement scenarios for raw materials

The product manufactured anonymously and delivered to the warehouse is a Finished Good MTS.

2.7.3 Make-to-Stock Production – Process Industry

The scenario Make-to-Stock Production – Process Industry focuses on:

• Sales-order-independent production using MTS (Make-to-stock) production / process order processing.

• MRP planning with planned independent requirements gives planned orders for productionas well as purchase requisitions for raw materials.

• Planned orders are converted into process orders.

• Components are staged to the shop floor location.

• Batch-management components are issued at production start immediately, semifinishedand finished products produced, in conjunction with batch management.

•Backflushing is used for the packaging material (without batch management) at finishedproduct confirmation.

• Process order confirmation triggers order controlling and settlement.

• Planned Independent Requirements Creation

The process can be started with two different starting points:

o start with SOP (Sales Operation Planning) → proceed Scenario XXX (AOP – SOP

LTP) and XXX (Logistics Planning) and start XXX (Make to Stock – ProcessIndustry) with the second step: Material Requirements Planning (MRP)

o start with creating Independent Requirements manually → proceed XXX (Make to

Stock – Process Industry) with the first step

Irrespective of the starting point you choose, the result is independent requirements for your BOM header material, which are then used as input for MRP planning.

• Material Requirements Planning (MRP)

The daily MRP run generates replenishment elements at each low-level code. The systemautomatically generates purchase requisitions for purchased parts within the 3-month openingperiod for the planned order. The system uses planned orders to implement receipt elements,which are also required.

The system also creates planned orders for parts that are produced internally. When theplanned opening date has been reached, these planned orders are converted to productionorders by the production planner. As a result, the system reserves all of the requiredcomponents.

Capacity requirements have been created for planned orders and process orders, allowingcapacity evaluation for the required resources at each level. Order schedules may be changed incase of capacity overload, requiring MRP run again to reschedule dependent materialrequirements.

Some materials (for example, the Raw Material Batch 3 (R30)) are planned on a consumptionbasis. Since these materials do not have storage restrictions due to shelf-life-management,larger quantities of this material can be stored in the warehouse. Replenishment orders aretriggered as soon as a specified reorder point is reached.

• Make-to-stock production for semifinished and finished products





The production planner converts the planned orders with selection of start date. It is assumedthat material availability at the plant is assured due to prior MRP planning. The components arestored at the general warehouse location, and staged to the shop floor level as requested for daily production.

To ensure data consistency (batch-managed components such as ingredients are issued withthe same batch number as physically used), goods issue with order reference is posted at

production start. Backflushing can be used for non-batch-managed components such aspackaging materials.

While the semifinished material production still is running, it is already handed over to the nextline as input material for the finished product. Therefore the goods receipt postings are done for partial quantities already, allowing their immediate consumption for the next production step andalso ensuring batch traceability.

Once the daily production run for the semifinished product is finished, the sum of the producedquantity (as well as the additional scrap quantity) is transferred into the final order confirmation.Generally, only the last operation phase is confirmed, confirming prior operation phases viamilestone confirmation. Only in case of exceptions such as unplanned scrap earlier operationphases may be confirmed step by step.

Final confirmation updates process order status automatically, then triggering productioncontrolling. Variance analysis and order settlement may be performed distinctively for everyfinished order, or as part of period end closing, dependent on reporting requirements.

2.7.4 Make-to-Order Production with Variant Configuration

The MTO - Sales Order Processing with Variant Configuration scenario demonstrates sales order processing with materials with preselected characteristic values (material variants) and componentsthat are produced according to sales quantities planned for these variants. If the sales order configuration is not available as a material variant, then customer service can configure the materialon the order by choosing the required characteristic values. A sales order cost estimate is createdon saving the order, which is subsequently used to valuate the cost of goods sold.

The process is triggered when an order for a configurable material is received from the customer.The customer order is recognized in the MRP run resulting in planned order for production of thematerial. If insufficient warehouse stock is available, purchase requisitions are created for the rawmaterials required.

When the production order is created, target costs are calculated for the order lot size (preliminarycosting). During the production process, costs incurred are updated on the order, which enables youto keep track of and compare target costs and actual costs at any time.

Period-end-closing activities are applied to the order. This includes Work In Progress calculation andvariance calculation. After this, Work in Progress is settled to financial accounting and productionvariances are settled to management and financial accounting. Production variances are settled toprofitability analysis with the sales order as one of the characteristics.

2.7.5 Make-to-Order Production w/o Variant Configuration

This scenario describes the entire process sequence for a standard sales process (Make-to-Order)with a customer. The business process encompasses all steps from the customer quotation to theclearing of a customer account after payment is received.

Quotation processing is the first stage of the production process. The scenario starts with anincoming request for quotation. A quotation is then created in the SAP system in response to thecustomer's RFQ. The customer requests a change to the quotation and a follow-on quotation iscreated. Finally, the customer accepts the second quotation and a referenced sales order is created.An order confirmation is sent to the customer and production process is started. Now, the customer





requests a technical change. Sales order and bill of material are therefore recalculated. The processends with the delivery and the billing of the produced goods.

The process can be enhanced individually by executing optional steps, like serial number creation,subcontracting, QM in production, credit management, and plant- and company closing.

2.7.6 Repetitive Manufacturing

Repetitive Manufacturing is commonly used when a production process meets the following criteria:The same or similar products are produced over a lengthy period of time. The products produced arenot manufactured in individually defined lots. Instead, total quantity is produced over a certain periodat a certain rate per part-period. The products produced always follow the same sequence throughthe machines and work centers in production. Routings tend to be simple and do not vary much.

2.7.7 Production Subcontracting (External Processing)

During the Manufacturing process when a Planned Order for Production is converted to a ProductionOrder, the system checks to see if there are any routing/work-center operations that require externalprocessing. External processing means that you have individual Production steps (operations or suboperations) that are performed outside of your company by a vendor. This type of processing isparticularly important for subcontracting. It can also provide a company with a feasible alternative to

in-house processing, if capacity bottlenecks occur.

When a Production Order is scheduled, external operations need to be taken into account. Theduration of an external operation is calculated either by using the planned delivery time or using thestandard values. The system automatically creates a Purchase Requisition for the operation or suboperation that requires external processing. The Production scheduler should inform the buyer they need to check the workload for Requisitions that require external processing.

When data is maintained for an external activity, a cost element is specified. The cost elementdetermines how the external activity is to be valuated. A decision needs to be made as to whether an operation or suboperation is processed externally via its control key. In the control key it isdetermined whether externally processed operations are scheduled on the basis of their standardvalues or the planned delivery time. This information is needed to settle externally processedoperations and suboperations that have been marked as relevant for costing in their control keys

Purchasing should not convert the Purchase Requisition until the external processing is required.The reason for this is that any quantity changes on the Production Order automatically update theRequisition.

Once the Purchase Order is created it is printed and sent to the vendor. The Purchase Order informsthe vendor which service is required.

In the SAP standard, the output of the subcontracting order via printer / EDI is performed by thepurchasing department. Since the production process for the finished product is ongoing (not stockrelevant), a material provision by the warehouse manager via delivery note or goods movement isnot possible in the standard system.

If it is necessary to have a delivery note in addition to the subcontracting order, the Buyer / Planner /Scheduler creates a manual shipping document. The planner provides the shipping department with

information on what components need to be gathered for the external processing and ships thecomponents to the vendor.

Another alternative (not part of this scenario) is that you can customize an additional output type witha special output form only for operations within the operation control key for external processing inproduction orders. In the output form, designed as delivery note for the external processedoperation, it is useful to put the number of the purchase order and the production order.

When the vendor has completed the external processing the material is shipped back. Thewarehouse clerk receives the externally processed goods back into the warehouse. The vendor





service is reflected on the Production Order via an operation confirmation. The Purchase Order andthe Production Order show the quantity received.

2.7.8 Rework Processing (Stock-Manufactured Material)

This process focuses on rework activities and material postings after production execution for theoriginal material (including goods receipt of the product), with an additional rework production order.

In real business case issues with the produced material are dealt with after it has been posted intoinventory. For realization of this process there are several possibilities:

After execution of a material transfer posting from the original product onto a dedicated reworkmaterial, a new production order is raised. The rework material is then used as a component, theproduct again is the original material. Material valuation of the rework material should reflect thefinished product value minus rework costs. Costs are collected within the new production order andsettled into controlling as production variances. Additionally the financial posting triggered from thematerial transfer posting covers the average rework costs.

Since material transfer posting is not always accepted, it is not part of this scenario.

In this scenario the rework process of stock manufactured material is realized with creating a newproduction order, using the material that has to be reworked as input and getting the same material

again as output. Costs are collected within the new production order and settled into controlling asproduction variances. Input component and product have the same material number.

2.7.9 Rework Processing (Work-in-Process)

This scenario focuses on a rework process within production. All required rework activities arerelated to the parent production order. For this reason errors are recognized and corrections initiatedsuch as insertion of a rework operation within the same production order. The additional reworkoperation is confirmed and settled within the original production order, causing production varianceswithin controlling and price differences for the dedicated product.

2.8 Logistics General / QM / PLM

2.8.1 Batch Management

If materials are handled in batches it might be necessary to change batch master data or to find outwhere a batch was used, for example, to perform a batch recall or report to government.

2.8.2 Batch Recall

In this scenario, a defect batch is identified and must be recalled from customers and prospects whohave received the batch.

A program is executed to identify all customers who received a defect batch. The user then choosesthe addresses of the appropriate contact persons, and the system prints a standard letter to eachcustomer to inform them of the recall. The subsequent activities for each customer are stored in thesystem. Return deliveries are also entered and documented, if necessary.

To ensure that you contact all customers affected by a defect batch, you must identify if subsequentbatches are affected by the defect batch. For this purpose, you can use the standard systemfunction Batch where-used list that is described in detail in the standard SAP ERP documentation.This scenario recalls a batch from a finished product or wholesale product. Therefore you can simplyfind all customers who received these products. However, a vendor could report that a raw,semifinished, trading, or other material used in your production, does not meet quality standards. Inthis case, you must determine which finished or trading materials were produced with these defectbatches.





2.8.3 Quality Management for Procurement with vendor Evaluation

This scenario deals with quality inspection activities during the procurement process.

A customer orders goods from specified vendor 300001. On goods receipt, an inspection lot isgenerated according to the defined material specification. A usage decision is then made as towhether to accept or reject the material, based on the inspection result (in this scenario, the rejectionis made). Subsequent processes such as quality notification and vendor evaluation then follow.

The scenario focuses on the following activities:

• Goods Receipt based on Purchase Order

• Inspection Defects Recording

• Usage Decision after inspection

• Quality Notification creation and completion

• Goods return to vendor and return delivery creation

• Vendor Evaluation process

2.8.4 Internal Product Development (with PS)

In this scenario, the company wants to design a new product requested by the internal marketingdepartment in the form of a product specification. The internal design department sets up a designproposal for the new product.

This scenario also introduces the merging of document management in SAP ERP and also SAPEasy Document Management.

The company uses the project management function to collect all costs and documents for productdevelopment. The project provides a central structure for cost collection and documentationmanagement.

The new material master and material BOM are created in the back-end system. Later, the

production scheduling department creates routing as a basis for production and calculation of theproduct.

To check the price level specified from the marketing department for the new product, the productionscheduling department calculates material costs using the BOM and routing. Since the estimatedprice exceeds the specified price limit, a component of the new product BOM is exchanged for a lessexpensive component using change management. The design department issues an engineeringchange master to collect and document all changes according the specification document.

Following a second costing run (cost estimate), the price meets the budget. Now the developmentstatus of the new product can be fixed by assigning a revision level.

At the end of the scenario, the internal design department records the activities it executed duringthe project, and finally closes the project.

The manufacturer creates a production BOM (by copying the engineering BOM (usage type 2) to theproduction BOM (usage type 1).

• Document Management (Easy Document Management)

o Assign a document (KPR) to the material masters of the finished product

• Project Management

o Create a project based on a template

• Product Data Management with ECM





o Create a change number for the design project

o Display the BOM of the new product

o Redisplay the BOM (effects of change number)

o BOM status management

o Assign revision level to the material master of the new product

• Product Cost Controlling

o Material cost estimate for the new product before and after BOM changes (effects of

change on price is shown)

o Material calculation

• Project Closing

o Record development (engineering) activities

2.9 Service

2.9.1 Period End Closing Service Orders

This scenario covers the closing operations for service orders and helps you prepare and carry outthe activities required.

2.9.2 Travel Management

The purpose of this process is to provide fully integrated management of all incurred travel expenses – from the planning/approval stage right through to the point at which the travel expenses are postedto Financial Accounting and allocated on a cause basis in Cost Accounting.

2.9.3 Internal Maintenance

The business scenario deals with the internal maintenance of the piece of equipment triggered by anemployee.

2.9.4 Spot Consulting with Fixed Price Billing

This business scenario addresses a spot consulting engagement with fixed price billing. The salesorder is the focal point of the process as it formalizes the customer's requirements, collects labor andtravel costs and serves as a basis for fixed price billing. This scenario would typically apply to aconsulting arrangement of short duration where detailed work planning and execution are notnecessary.

The scenario starts with the creation of a sales order.

After the employees involved in the consulting arrangement have carried out their work, they recordthe hours worked and their trip costs, whereas the sales order is the receiving cost object. Finally the

customer is billed on a fixed price basis. On a periodic basis, a results analysis is carried out on thesales order, after which the accrued data is being settled to CO-PA and FI.

2.9.5 Sales Order with Fixed Price and T&M Billing

This business scenario addresses a project cycle from quotation to completion where one part of thebilling is agreed on a fix price basis. The other part is billed based on the actual work performed. Thesales document in form of a sales order is the focal point of the process as it formalizes thecustomer’s requirements, collects labor costs, and generates billing time and material. This scenario





would typically apply to a consulting arrangement where detailed work planning and execution arenot necessary.

2.9.6 Project with Fixed Price and T&M Billing

This business scenario addresses the typical business processes of an engineering or industrialdesign company. An agreement with a customer for a design project requires a down payment and

billing based on performance of defined milestones. The design company sets up a project structureand assigns employees to specific activities based on skill sets and availability. The project isautomatically created from the sales order using a predefined project structure template.

2.9.7 Internal Project

In any professional service firm a considerable amount of time is spent with internal work, such asproposal work, or training or development of new service offerings. It is desirable to capture thetimes and expenses incurred on such tasks with the same tools as used for external work.

The setup of codes for internal projects might be different as no sales order is required. The datacapture should follow the same logic as for external work. Subsequent treatment in accounting andreporting is then different, but should result in an overall complete picture.

The process described here covers:• Creating the code to collect costs

• Capturing costs (time, expense, purchases)

• Periodic processing

• Closing the code for further postings

Sundry billing from internal projects to recover overheads is also possible but not covered here.

2.9.8 Service with Time & Material based Billing

Documenting a customer request for quotation (RFQ) for services, a notification is created in thesystem to document and classify the required work. An optional activity lets the service responsible

call the customer again to complete the information required to prepare the quotation.

The quotation is created in referring to the service portfolio offered by the service provider. This isrepresented through a range of service products. The prices being offered to the customer for thequoted services are based on time and material. The negotiation process leads to changes in thefinal price. The final informative quotation is sent to the customer for approval.

If the quotation is rejected, a reason for rejection is set in the sales document to proceed to itscancellation and the process concludes. In case the customer accepts the quotation, a sales order iscreated and automatically a service order. The service order contains the resources, time, andmaterial, included in the quoted services.

The sales order is billed one or more times during the execution of the service. The amount billed isdetermined on a time and materials basis, the billing method used is resource-related billing. Theactual revenue in this case is given by the work actually performed and can be different to thequotation estimate.

In this scenario, settlement to Profitability Analysis takes place independently from the service order (actual costs) and from the sales order (actual revenues). Analysis for service profitability is carriedout in CO-PA reporting.

This situation describes the case of small or quoted services (typically those that conform a servicecatalog) and that do not need to be individually analyzed in terms of profit and loss. Actual cost andrevenues meet only in CO-PA, and the analysis takes place in bulk according to characteristics such





as time period, customer, sales area, supplier cost center, service or service type provided, and soon.

2.9.9 Service Contract with Periodic Billing

A service provider has a service contract with a customer.

The business process starts with a notification and a service order.The costs (fee, spare parts, and travel expenses) resulting from the service order are accountassigned to the service order and billed to the customer by Contract Periodic Billing. The servicesprovided are represented in the sales order per units of service, so the service can be divided andbilled into discrete units.

The price of the service unit is not calculated by the system in this example, but updated manually inthe sales order by the service provider after negotiating it with the customer.

If necessary, spare parts are ordered and purchased.

2.9.10 Service with Fixed Price Billing

Documenting a customer RFQ for services, a notification is created in the system to document and

classify the required work.The quotation is created in referring to the service portfolio offered by the service provider. This isrepresented through a range of service products. The prices being offered to the customer consider fixed prices for the quoted services. The negotiation process leads to changes in the final price. Thefinal informative quotation is sent to the customer for approval.

If the quotation is rejected, a reason for rejection is set in the sales document to proceed to itscancellation and the process concludes. In case the customer accepts the quotation, a sales order iscreated and automatically a service order. The service order contains the resources, time, andmaterial, included in the quoted services.

The sales order is billed one time at the final delivery of the services by the total amount accepted inthe binding quotation.

In this scenario, settlement to Profitability Analysis takes place independently from the service order (actual costs) and from the sales order (actual revenues). Analysis for service profitability is carriedout in CO-PA reporting.

This situation describes the case of small or quoted services (typically those that conform a servicecatalog) and that do not need to be individually analyzed in terms of profit and loss. Actual cost andrevenues meet only in CO-PA, and the analysis takes place in bulk according to characteristics suchas time period, customer, sales area, supplier cost center, service or service type provided, and soon.

2.9.11 Period End Closing Projects

This scenario covers the closing operations for projects and helps you prepare and carry out theactivities required.

2.9.12 Procurement of Third-party resources

The service provider is in need of a service from a third party.

The business process starts with a purchase order. It is possible to create a purchase order withoutreference or with reference to a purchase requisition.

The goods receipt is booked with the incoming delivery. The invoice is booked with reference to thepurchase order.





2.9.13 External Procurement of Services

The service provider is in need of a service from a third party.

The business process starts with a purchase order. It is possible to create a purchase order withoutreference or with reference to a purchase requisition.

The service entry is booked to confirm the service performed. The invoice is booked with referenceto the purchase order.

2.9.14 HCM / Time Recording

The Cross-Application Time Sheet (CATS) is the tool used for recording time worked by anemployee on a certain assignment. Working time can be recorded on a sales order, internal order,service order, or a project. Additionally you can switch over to travel management for reimbursementand posting of travel expenses.

2.9.15 Sales of Planned Services

A customer has signed a long-term contract with a service provider. The service provider carries outservices on a frequent basis. Typically, such contracts are service level agreements between the

service provider and the customer.The business process starts with a customer who requests frequent or permanent services from aservice provider. Therefore, a maintenance plan is created, subsequently a service order isgenerated automatically, and the necessary material parts are ordered.

The costs (fee, spare parts, and travel expenses) resulting from the service order are entered to theservice order and billed to the customer resource-related, according to the corresponding effort andexpenses.

2.9.16 Depot Repair

This scenario covers the processing of a service case from the initial reporting of the problem by thecustomer up to billing the customer, when service activities are carried out at plant.

The business process starts with a customer reporting a problem with a notebook. A service agentcreates a service notification in the system. The service notification number is used as a returnmaterial authorization (RMA) number in the remainder of the repair process. The service agentcarries out a warranty check on the service notification and then creates a service contract. Theservice center informs the customer that they must send the notebook to the central service center.The service notification number (RMA) must be specified on the shipping documents; otherwise thenotebook is rejected by the service center. If the necessary spare parts are not in stock, they have tobe ordered. A repair order is then created from the service notification so that the entire repair process can be controlled and settled. In the repair order, the damaged notebook is automaticallyassigned by the returns items created. A service order is automatically generated using an itemproposal to enable the repairs to be carried out. Once the repairs have been carried out, the costs(for hourly fees and spare parts) are confirmed to the service order. The repaired notebook isdelivered to the customer and the final repair status can be displayed. The service center creates abilling request. This appears in the repair order as an additional item and is not a separate document(unlike the billing request in the on-site service process). Subsequently, the repair order is billed. Ona periodic basis the costs and revenues incurred on the service order are being settled to the repair order, where they can be evaluated.





2.10 Master Data Generation Descriptions and Reporting

2.10.1 Master Data Generation Descriptions

The SAP Best Practices Baseline Package covers various descriptions on how to create master data.

These descriptions are:

• Create Accounts and Account Groups

• Create Assets

• Segments and Profit Center Maintenance

• Functional Areas Maintenance

• Create Cost Center and Cost Center Group

• Maintain Cost Center Hierarchy

• Create Cost Element and Cost Element Group

• Create Cost Collector

• Maintain Assessment Cycles

• Create Standard Cost for Individual Material

• Create Activity Type / Groups

• Create Internal Order

• Maintain Vendor Evaluation

• Create Vendor Master

• Create Purchasing Info Record

• Create Source List

• Create Purchasing Contract

• Create Customer Master

• Create Sales Price Condition

• Maintain Capacity

• Create Work Center

• Maintain Work Center Hierarchy

• Create Resources for Process Industry

• Create Product Group

• Create Raw (ROH) Material

• Create Semifinished Good (HALB) Material

• Create Trading Good (HAWA) Material

• Create Finished Good (FERT) Material (non configurable)

• Create Finished Good (FERT) Material (configurable)

• Create Configurable Material Variant





• Create Engineering Change Number

• Create Production Version

• Maintain Material Plant Extension

• Maintain Material Storage Location Extension

• Create Serial/Equipment Number

• Maintain Material Sales Organization Extension

• Create New Bill of Material

• Maintain Bill of Material - Configurable Material Link

• Create Routing

• Create Reference Operation Set

• Maintain Material Scheduling via Routing

• Create Master Recipe

•

Attach Material Variants Routing to Parent Material Routing• Create Configuration Profile

• Create Variant Classification

• Load BOM Dependencies

• Create Standard Work Breakdown Structure (WBS)

• Create Standard Network

• Maintain Network Parameters for Sales Order

• Create Output Conditions SD

• Create Tax Conditions SD

• Create Material determination info record

• Create Free Good determination info record

• Maintain Catalogs – Create Code Groups and Codes

• Maintain Catalogs – Create Selected Sets and Selected Set Codes

• Create Master Inspection Characteristic

• Maintain Material Specification

• Create Batch Classification

• Maintain Material Master Extensions

• Create Employee

• Create Sales Representative

• Create Task List

• Create Service Master

• Create Service Product

• Create Warranty





• Create Service (DIEN) Material

2.10.2 SAP ERP Reporting

In SAP ERP various reports can be used to monitor and control your company processes. SAP BestPractices focuses on the following reports:

General Ledger

• Recurring Entry Documents

• G/L Account Statements

• Financial Statement

• Financial Statement: Actual/Actual Comparison

• Compact Document Journal

• Line Item Journal

• Recurring Entry Documents

• EC Sales List

• Advance Return for Tax Sales/Purchases

• Chart of Accounts

Fixed Asset

• Fixed Asset Reporting by Cost Center

• Fixed Asset Reporting by Asset Class

• Asset Balances

• Asset Transactions

• Asset Acquisitions

• Asset Retirements

Cost Element Accounting

• Controlling Documents: Actual Costs

• Internal Orders: Master Data Report

Cost Center Accounting

• Cost Centers: Actual/Plan/Variance

• Range: Cost Centers

• Range: Cost Elements

• Cost Centers: Planning Overview

• Range: Actual/Budget Commitments

• Cost Centers: Activity Prices

Internal Orders

• Orders: Actual Line Items

• Orders: Commitment Line Items





• List: Orders

• Orders: Actual/Plan Variance

• Order: Planning Overview

• List: Budget/Actual/Commitments

Product Costing

• Multilevel BOM: Value / Amount / Status

• Cost Component

• Itemization

• Cost Elements

• Analyze/Compare Material Cost Estimates

• Analyze Product Cost Collector

• Analyze Product Order

Profitability Analysis

• Execute Report

Information System

• Costs/Revenues/Expenditures/Receipts

• Actual Costs/Revenues

General Logistic

• MRP List

• List Display of Purchase Requisitions

• Stock Overview

• Outbound delivery monitor

Sales and Distribution

• List of Sales Orders

• Sales Order Selection

• Analyze Sales Orders

• Actual Cost Line Items for Sales Documents

• List Billing Documents

• Release Billing Documents for Accounting

• Incomplete SD Documents

• SD Documents blocked for Delivery

• SD Incomplete Documents

• Purchase Requisition per Account Assignment

• Purchase Orders by Account Assignment

• Quotation List





• Expiring Quotations

• Expired Quotations

• Completed Quotations

• Credit Overview

• Customers With Missing Credit Data

• Credit Memos

• License: Assigned documents

• Check of Customer Master Regarding Legal Control

• Backorders

• Sales Support Monitor

• Returns

Materials Management and Procurement

• General Analyses: Purchase Orders, Contracts, and Scheduling Agreements, Quotation

• List of Notifications

• Analysis of Purchase Order Values

• Purchase Order by Material

• Purchase Order by Vendor

• Purchase Order by Document Number

• Purchasing Group Analysis

• Release Purchasing Documents

• Assign and Process Purchase Requisitions

• Stock Requirement List

• SC Stock Monitoring for Vendor

• Vendor Analysis

• Mass Activation of Planned Changes for Vendor

• Material Document List

• Display Warehouse Stocks of Material

• Accounting Documents for Material

• Material Documents with Reason for Movement

• Batch Analysis

• Availability Overview

• Plant Analysis

• Material Analysis

• Consignment and Pipeline Settlement

• Collective Conversion





Service

• Service Notifications

• Service and Maintenance Orders

• Equipment list

• Cost Analysis

• Scheduling Overview

Production

• Production Order Information System

• Missing Parts Info System

• Capacity Planning

• Long-Term Capacity Planning

• Long-Term Planning: MRP List

• Change Plan

• Evaluation of Product Group Planning

• Selection: Plan/Actual/Variance

• Costs/Revenues/Expenditures/Receipts

• Actual/Plan/Variance Absolute/ Variance %

• Order Progress Report

• Display Production Order Confirmation

2.10.3 Reporting with SAP Business Explorer

The SAP Business Explorer Analyzer is the analysis and reporting tool of the SAP Business Explorer that is embedded in Microsoft Excel. Using the SAP NetWeaver Business Client you have thepossibility to show lists with the SAP Business Explorer Analyzer.

3 Functional Scope – FunctionsSAP Best Practices are the easiest way to set up a business solution that provides unlimitedscalability, best-of-breed functionality, complete integration, and easy collaboration for everybusiness. With SAP Best Practices you can reap business benefits quickly and eliminate as muchrisk as possible. It provides you with the combined benefits of a powerful solution and provenbusiness expertise that stems from collaborative efforts between SAP and its partners.

SAP Best Practices Baseline Package (U.S.) quickly turns your SAP software into a live system that

handles all your specific business requirements. Preconfigured business scenarios help you rapidlyrealize business benefits without extensive configuration. Use it to evaluate your specific businesssolution. And use it to implement this solution so that you can realize all its benefits faster, with lesseffort, and less expensively than ever before.

SAP Best Practices can be used by midsized enterprises that need rapid implementation or by largecompanies that need to create a corporate template for their subsidiaries. It can be easily applied toexisting customer solutions.

SAP Best Practices are built in a way that customers can easily use them. Three differentcomponents are included:





o Detailed, step-by-step implementation procedure including automated activities.

o Extensive reusable documentation that you can use for self-study, evaluation, and for

project team and user training.

o Complete preconfiguration settings that give you everything you need to run integrated key

processes out of the box with reduced installation effort. The configuration is fully

documented including preconfigured business processes, training material, and user roles. Itis built using the latest technology, so you can adapt it quickly and easily.

3.1 Financials

3.1.1 Financial Accounting

The Financial Accounting component supports the valuation and reporting of your inventoryaccording to different regulations.

The Material Ledger component enables you to carry inventory values in two additionalcurrencies/valuations. Therefore, all goods movements in the Material Ledger are performed in up tothree currencies or valuations. Currency amounts are translated into foreign currencies at historical

exchange rates at the time of posting.Actual Costing supports the determination of actual costs (compared to standard costs) for externallyprocured materials and materials produced in-house. This can be used to valuate materialinventories, such as raw materials as well as semifinished and finished products, accordingly.

The following business goals and objectives can be achieved through the implementation of theseprocesses:

• A reduction in operating costs and an increase in efficiency.

• A reduction in administration, and an improvement in the business processes

3.1.1.1 General Ledger

This function provides a comprehensive picture for external accounting and accounts. It records allbusiness transactions (primary postings as well as settlements from internal accounting) in asoftware system that is fully integrated with all the other operational areas of a company. Thisensures that the accounting data is always complete and accurate.

3.1.1.2 Accounts Receivable

Records and manages customer accounting data via the Accounts Receivable (AR) component. Thefunction connects AR directly to the G/L using a special reconciliation account.

3.1.1.3 Accounts Payable

Records and manages vendor accounting data via the Accounts Payable (AP) component. Thefunction connects AP directly to the G/L using a special reconciliation account.

3.1.1.4 Fixed Assets Accounting

Maintains and analyzes fixed assets according to generally accepted rules in the company's country.Delivers country templates with the system.

3.1.1.5 Inventory Accounting

Supports the valuation and reporting of inventory according to different regulations. Carries inventoryvalues in two additional currencies/valuations via the Ledger component. Performs all goodsmovements in the Material Ledger in up to three currencies or valuations. Translates currency





amounts into foreign currencies at historical exchange rates at the time of posting. Supports thedetermination of actual costs (compared to standard costs) for externally procured materials andmaterials produced in-house via Actual Costing. Valuates material inventories, such as raw materialsas well as semifinished and finished products, accordingly.

3.1.1.6 Tax Accounting

Supports the calculation and reporting of taxes on sales and purchases and withholding tax.

3.1.1.7 Financial Statements

As part of the period or year-end closing, individual companies create financial statements accordingto country-specific regulations.

3.1.2 Management Accounting

The Management accounting component provides valuation and recording of financial data as thebasis for all cost- and revenue-related reporting.

The following business goals and objectives can be achieved through the implementation of theseprocesses:

• An increase in revenue

o Maximization of profitability by customer

• A reduction in operating costs and an increase in efficiency

o A reduction in the cost-of-goods-sold (COGS)

o An improvement in inventory visibility

3.1.2.1 Cost Center and Internal Order Accounting

Records costs incurred during the company operations by assigning them to cost centers (assignedto managers or organizational units). Plans, records, and then analyzes costs against the plan. Usesinternal orders to plan, collect, and settle the costs of internal jobs and tasks. Monitors internalorders throughout their entire lifecycle using the SAP system, from initial creation, through theplanning and posting of all the actual costs, to the final settlement and archiving.

3.1.2.2 Project Accounting

Monitors precise planning of the detailed activities involved in both large scale projects, such asbuilding a factory, and small scale projects, such as organizing a trade fair. Helps the projectmanager ensure that the project is executed efficiently, on time, and within budget - which he or sheachieves by ensuring that the required resources and funds are available as and when needed.

3.1.2.3 Product Cost Accounting

Helps a company know the costs incurred by its products to successfully manage the product

portfolio. Calculates cost of goods manufactured (COGM) or cost of goods sold (COGS) brokendown by each step of the production process. Uses cost information gathered about the productautomatically in other SAP applications.

3.1.2.4 Profitability Accounting

Records costs and revenues by market segment to calculate the contribution margin for each marketsegment. Market segments can be products and product groups, customers and customer groups,orders, or any combination of these or strategic business units, such as sales organizations or business areas.





3.1.2.5 Transfer Pricing

Manages transfer prices, which support organizations that divide tasks among differentorganizational units by valuating the goods and services exchanged between these units. Aidsparticularly large corporations that are divided into a number of independently operating divisions or companies that exchange large quantities of goods and services with one another. Lets transfer prices be used for controlling corporate units as the division of labor between internationallyoperating units increases, value-added chains become more complex and responsibilities becomemore decentralized. Valuates the exchange of goods and services using transfer prices, tosignificantly influence the actual success of corporate divisions or profit centers. Helps today'saccounting systems provide decision support that represents operational results from different pointsof views and using different currencies.

3.2 Analytics

SAP™ ERP is a complete, integrated solution for analytics and business intelligence, includingstrategic enterprise management and financial, operational, and workforce analytics. It enablescompanies to clearly understand profit drivers of their business, tightly link strategic plans tooperational performance, and support a single analytical platform for their enterprise.

Key functions include the following:

Financial analytics enable you to define financial targets, develop a realistic business plan,and monitor costs and revenue during execution.

Operational analytics enable you to compile detailed operations reports and supportinformed operational decision making.

Workforce analytics support human capital management policy development and decisionmaking.

3.2.1 Operations AnalyticsSAP ERP provides operational analytics that facilitate the compilation of detailed operations reportsand support informed operational decision making - giving management and employees theinformation they need to increase insight into business processes. In addition sales planning canallow organizations to generate a complete picture of the entire supply chain, including the impact of sales on operations.

3.2.1.1 Sales Planning

Sales Planning is a planning application for translating company targets into concrete, concertedmarketing, sales, and service strategies. This application is based on a reconciled top-down andbottom-up sales planning process helping to increase visibility resulting in improved decision-makingand profitability.

3.2.1.2 Procurement Analytics

This function

• Monitors purchasing operations (for example, how many goods have been received for purchase orders for the last month) using various standard analyses and reports.

• Facilitates the detailed analysis of the purchasing activities and procurement processestaking place within your enterprise (for example, ranking your suppliers according topurchasing values).





3.2.1.3 Inventory and Warehouse Management Analytics

Inventory controlling provides different standard analyses and reports display actual stock situationaccording to quantity-based and value-based criteria. Other reports are available for monitoringcharacteristics on a periodic basis.

3.2.1.4 Manufacturing AnalyticsProvides various standard analyses and reports to visualize production-related information.

3.2.1.5 Sales Analytics

Enables salespeople to quickly and easily understand the actual status and overall effectiveness of the sales organization. Helps obtain the data necessary to proactively address trends and measuresuccess and revenue shortfalls.

3.2.1.6 Customer Service Analytics

Provides organizations with a comprehensive view of key figures of all service-related scenarios.

3.2.2 End-User Service Delivery: SAP Roles

SAP ERP End-User Service Delivery enables the delivery of ERP services together with businesscontent to the entire organization and beyond at low costs. It gives the users multiple options toaccess ERP services depending on their situation, their preferences, and the business context. Bystandardizing and automating business processes, companies can implement efficient sharedservice strategies, establish service excellence and foster innovation and growth.

SAP Best Practices provides several predefined roles to be used in the SAP NetWeaver BusinessClient (NMBC) to ensure an efficient system access for users. These can be used out of the box or otherwise be easily adapted to company-specific needs.

3.3 Human Capital Management

To meet the demands of today's knowledge-based economy, companies must maximize thepotential and productivity of their employees. Maximizing the investment in the organization’s humancapital is crucial to business success. SAP Best Practices delivers preconfiguration for selectedareas of the workforce process management: Employee Administration and Time & AttendanceManagement.

3.3.1 Employee Administration

SAP offers advanced features for Employee Administration, such as Maintenance or EmployeeStatus Change.

3.3.2 Time and Attendance

SAP optimizes processes for planning, managing, and evaluating the working times and activities of

internal employees via the Time Management capabilities.

3.4 Procurement and Logistics Execution

With SAP ERP Operations, you can manage end-to-end logistics for complete business cycles. Thesolution enables a wide range of activities, from self-service requisitioning to flexible paymentprocessing, including management of material flows.





3.4.1 Procurement

Procurement – SAP ERP supports not only traditional processes such as requisitioning, purchaseorder management, and invoice verification, but also catalog-based self-service requisitioning for MRO material and services. Catalog integration has been expanded to maintenance operations andproject management.

3.4.1.1 Requisitioning

A purchase request is a request or instruction to purchasing to procure a certain quantity of amaterial or a service so that it is available at a certain point in time.

Manual creation of Shopping Carts

Empowers employees to create and manage their own requisitions for products or services. Itrelieves your purchasing department of this administrative burden while making the procurementprocess both faster and more responsive. Providing catalogs of the most frequently orderedmaterials ensures that employees can easily manage their own purchase orders in accordance withyour organization's rules.

When employees have filled their shopping cart, they can either place an order straight away or holdit for subsequent completion. Users can check the status of their shopping at any time in a graphicalview.

Approval

When a shopping cart is released for ordering, the system checks whether approval is necessary. If one or more managers need to approve the shopping cart for example, because it exceeds a certainvalue the system automatically submits it to the respective inbox(es).

3.4.1.2 Purchase Request Processing

The purchasing department works with the purchasing request, decides on whether the requirementof products can be covered from stock or needs to be procured externally considering optimizationissues.

Source of Supply Assignment

Conversion of Demands to Purchase Orders

The requirements that have been created and released for procurement (for example, demands for spare parts coming from plant maintenance, demands for raw materials determined in a planningrun, or requests for office supplies entered by an employee) are transferred to purchasing aspurchase requisitions. They are presented to the buyer in worklists that support him or her inconverting the requisitions into purchase orders. Release procedures are available to control criticalprocurement processes.

3.4.1.3 Purchase Order Processing

When a purchase order has been created a number of checks and validations make sure that theright contract, discount, price, and so on, is referenced correctly. Purchase Order Processing alsodeals with the communication of the purchase order to the supplier.

When a purchase order has been created a number of checks and validations make sure that theright contract, discount, price, and so on, is referenced correctly.





3.4.1.4 Receiving

Receiving deals with the actual shipping of goods or performing of services by a supplier, therecording of the goods receipt or service entry in the system and with the follow-on activities thatcorrespond to these, such as returns handling.

Goods Receipt

The confirmation of the quantity received is created centrally and forms the basis of the informationflow to the planning and purchasing departments. These departments can consider the new stock or requirement situation and see the receipt in the order history. If the receipt is relevant for warehousemanagement, the receipt confirmation is linked to physical inbound processing. The receiptconfirmation automatically triggers the material valuation and creation of documents for accounting.Documents for controlling are also created if necessary.

Returns handling

Should the delivered goods turn out to be faulty or damaged, you can return either the entire or partial quantity to the supplier. In the case of an existing confirmation, you can return either parts of single items or all items to the vendor.

3.4.2 Inventory and Warehouse Management

Processes in the area of Inventory Management address the recording and tracking of materials ona quantity and value basis. This includes planning, entry, and documentation of stock movementssuch as goods receipts, goods issues, physical stock transfers, and transfer postings as well as theperformance of physical inventory (stocktaking). Warehouse Management Processes cover warehouse-internal movements and storage of materials.

3.4.2.1 Warehousing and Storage

Processes warehouse-internal movements and storage of materials.

Inventory Management

Manages the stocks of a company in quantities and values. It is integrated with supply chainaccounting and is responsible for:

• Goods receipts and goods issues

• Managing different stock categories (available, blocked stock, in quality assurance, and soon)

• Special stocks (including consignment stock, project stock, and so on).

Enables a summarized visibility of stocks in the supply chain.

Production Supply

The material supply of storage bins in production can be handled with SAP WarehouseManagement. Picking for work orders is supported by advanced strategies and combined withhandling unit management. It is possible to pack for a specific work order.

Storage and Stock Management





Serial Numbers

Batch Management: This includes the handling of batches and batch determination for delivery picking, for production supply, or in internal warehouse processes.

3.4.2.2 Physical Inventory

Manages physical inventory for your organization's own stocks or for special stocks in your warehouse.

Planning Phase of Physical Inventory

The physical inventory process can plan which material has to be counted at which storage locationon which date. Stocks can be blocked for goods movements before the beginning of counting,measuring, and weighing.

Counting Phase of Physical Inventory

After the counting results have been entered, you can monitor the differences and trigger a recount if necessary. If you post quantity differences for your locations, an update of the material valuation andfinancial accounting is triggered automatically.

Monitoring of the Physical Inventory Activities

Detailed functions for monitoring the completeness of the physical inventory, the status of open andcompleted physical inventory activities, and the results of historical physical inventory activities areavailable. You can monitor the activities on material or location level.

3.4.3 Inbound and Outbound Logistics

The Inbound process comprises all the steps of an external procurement process that occur whenthe goods are received; the outbound part covers the necessary activities for preparation andshipping of goods to their destination.

3.4.3.1 Inbound Processing

Goods Receipt

Is a follow-on activity to a purchase order. It forms the basis for updating the financials andinventory records and can trigger warehouse management and quality management processes.

With the warehouse management system, you can control the goods receipt and goods issueprocesses at a physical level. Goods receipts are possible from purchase order, inbound deliveries(advanced shipping notice), stock transport orders, or from production orders. Goods receipt beginsthe putaway process, which is supported by different advanced strategies.

Determination of External Demands





Determines the data describing a demand for a material that is procured externally. This dataincludes the quantity that is required, the release-to-supplier date of the demand, the goods receiptdate for the delivery, and the location to which the material has to be shipped.

Shipping Notification

Comes from the vendor and contains the exact materials, quantities, and the delivery date withreference to a purchase order. This document becomes the Inbound Delivery in the receipt process.

3.4.3.2 Outbound Processing

Goods Issue

The outbound delivery forms the basis for goods issue posting. The data required for goods issueposting is copied from the outbound delivery into the goods issue document. When you post goodsissue for an outbound delivery, the following functions are carried out on the basis of the goods issuedocument:

Warehouse stock 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.

The goods issue 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.

After goods issue is posted for an outbound delivery, the scope for changing the delivery document

becomes very limited. This prevents discrepancies between the goods issue document and theoutbound delivery.

Delivery Processing & Distribution

Controls the actual fulfillment of sales orders and purchase orders as well as stock transport orders.The execution of logistics tasks is handled here. With delivery processing, the goods are shippedand relevant documents are printed out. The sales requirements can be distributed to alternativelocations. The delivery might be shipped to the customer directly from the fulfilling locations (morethan one delivery), or consolidation may occur at one location before one complete shipment istransported to the end customer.

3.5 Product Manufacturing

With SAP ERP Operations, you can manage engineering and design, create relevant product data,and plan and execute your manufacturing operations. The solution enables connectivity to shop-floor systems, adherence to quality requirements, and compliance with relevant regulations andstandards.





3.5.1 Production Planning

SAP ERP uses MRP techniques to create un-constraint production plans in form of productionorders or planned orders.

3.5.2 Manufacturing Execution

Supports the process of capturing actual production information from the shop floor to supportproduction control and costing processes.

Make-to-Order

Supports customer-order-specific planning and production and is industry-specific. Supportsassembly processes for (non-) configurable products in a repetitive manufacturing environment or the production of (non-) configured products with production orders. For both processes, the visibilityof the customer order is key. This is achieved by using dynamic alerts and order pegging structuresduring planning and execution.

Repetitive Manufacturing

Is a rate-based, lean production control system. Based on production and assembly lines, the takttimes are used for scheduling. An optimizer and heuristics are available for model mix planning andline balancing. Continuous input and output are considered during scheduling. The production runswithout any orders for run schedule quantities and production versions. Backflush of labor andmaterial at reporting points support the lean execution process.

Process Manufacturing

Supports the plant as a multiprocess facility. Resource and recipe management forms the basis for

planning and sequencing batches or production lots. The solver schedules the process order sequence to avoid costs such as cleanout or changeover. This can be achieved with productioncampaigns, block planning, or detailed scheduling with a focus on critical resources. Process ordersare used for scheduling, execution, and costing. Process management coordinates the dataexchange between the SAP execution system and connected process control systems. Theseprocesses can be documented and evaluated. The seamless integration with quality managementensures process control and stability.

Batch Management

Batch management fulfills the requirements for managing and tracking batches or production lotsacross the whole production process. In various industry sectors, particularly the process industry,you have to work with homogeneous partial quantities of a material or product throughout the entire

quantity and value chain. In the SAP system, a batch is the quantity or partial quantity of a particular material or product that is manufactured according to the same recipe. There are various reasons for this:

Legal requirements, for example, guidelines on good manufacturing practice (GMP), or regulations on hazardous materials.

Defect tracing, recall activities, and recourse requirement.





The requirement for differentiated quantity-based and value-based inventory management,for example, through heterogeneous yield/result quantities or unequal constituents inproduction.

Usability differences and the monitoring thereof in materials planning, sales and distribution,and production.

Production or technical requirements, for example, material quantity calculations on thebasis of different batch specifications.

3.5.2.1 Document Management

SAP Easy Document Management

Enables you to use document management as a virtual drive in the Microsoft® Explorer (for example, using drag & drop to check documents in and out). You can also check documents in andout directly from all office applications, search for documents and add them to a worklist, maintainclassification data, and create objects links.

3.6 Sales and Service

The Sales & Service area addresses the customer focusing processes like selling products andservices and providing aftermarket services. It enables sales organizations to manage the salescycle, sales, and service orders and the subsequent activities.

3.6.1 Sales Order Management

Provides capabilities that companies can use to create inquiries and quotations, acquire and enter orders, configure products, determine pricing, check product availability, track and manage, and billorders.

3.6.1.1 Account Processing

Enables companies to provide a detailed view on customers and prospects. Captures, monitors, andtracks information such as master data, and an overview of critical relationships.

3.6.1.2 Quotation Processing

Allows you to create and process orders, including pricing and scheduling order for fulfillment. SAPERP supports many process variants, for example:

• Ship-to-order

• Make-to-order

• Returnables (pallets)

•

Batch processing• Serial number processing

• Third-party delivery processing

• Complaint handling

• Returns





3.6.1.3 Sales Order Processing

The order management capabilities allow sales reps to easily configure, price, and create salesorders for customers. In addition, order management provides the ability to perform productdetermination and substitution, explode structured products in a business transaction to carry outpricing, availability checks, transferring those requirements to production or purchasing for either theheader product or for the components of the product, and to perform incompleteness checks.

3.6.1.4 Contract Processing

Quantity Contracts

Monitors agreements that a customer orders a specific quantity of releasable products during aspecified period. The following functions are covered:

• Creating a basic agreement (quantity contract)

• Creating a purchase requisition

• Assigning requisition and creating purchase order

•Approval of purchase orders

• Contract monitoring

• Goods receipt

• Invoice receipt by line item

• Outgoing payment

3.6.1.5 Billing

Is the final processing stage of a business transaction in sales and distribution. Information on billingis available at each stage of order processing and delivery processing.

Billing documents such as invoices, credit, or debit memos, can be created based on order information only or based on order and delivery information, where, for example, the quantity to beinvoiced is derived from the delivery note.

During billing processing, you create, change, and delete billing documents such as invoices, creditmemos, and debit memos. Flexible calculation of rebates is integrated.

Integration with financial accounting consists of forwarding billing data in invoices, credit, and debitmemos to financial accounting. The system posts offsetting entries to the appropriate accounts (withthe help of account assignment ) and makes sure that FI can recognize all billing documentsbelonging to one business transaction (for example, a credit memo to an invoice). Integration withcontrolling consists of assigning costs and revenues to the appropriate subledgers.

3.6.1.6 Returnable Packaging ManagementReturnable packaging consists of materials that are stored at the customer location but which remainthe property of the seller. The customer is only required to pay for the returnable packaging if it is notreturned by a specified time.

3.6.1.7 Consignment

Consignment goods are goods that are stored at the customer location but which are owned by your company. Customers store the consignment goods at their own warehouses. The customer is not





obliged to pay for these goods until they remove them from consignment stock. Otherwise, thecustomer can usually return consignment goods that are not required.

3.6.1.8 Service Contract Management

Create and manage service contracts with related billing plans, price agreements andconditions. Service contracts can be referenced in subsequent service processes. Service plans

enable contractual preventive maintenance strategies based on time and/or performance.

3.6.1.9 Customer Service and Support

Manage incoming service and support requests and identify customers with their respective installedbase. Based on this information relevant warranties and service contracts are identified. Tasks toresolve the service issues can be planned with the necessary labor and service parts resources.

Returns Processing determines, tracks, and credits returns of products within a service, including thefeatures warranty check, return reason recognitions, and quantity checks.

Billing documents such as invoices, credit, or debit memos, can be created based on servicesrendered and/or resources consumed.

3.6.1.10 Warranty & Claims ManagementWarranty Claim Processing fulfills the needs both of manufacturers, importers or vendors of complexproducts and their suppliers. Warranty Claim Processing offers a solution that can deal with a largenumber of warranty claims and, as far as possible, automatically. Only those claims that producenegative results in the automatic checks are included in manual processing.

Product and Warranty Registration: You can create warranties and assign technical objects to thosewarranties.

3.6.2 Professional-Service Delivery

Provides a comprehensive set of capabilities designed for selling, planning, delivering, and billingproject-based services. Projects have to be created, structured, and staffed with the appropriateresources, complex services are delivered and the associated projects have to be executed within agiven timeframe, with a satisfying quality and according to contractual agreements. Changes inproject timelines, scope, and staffing have to be handled. An integrated project controlling is thebracket for many other scenarios. Engagement Management processes accompany servicedelivery: contracts have to be set up according to customer agreements, times and expenses arerecorded and are priced and billed to the customer in various ways.

3.6.2.1 Quotation Processing

With this business process, you can assure your business partners that you deliver a certain productconfiguration and quantity of products at a specific time and price. During sales order processing,the sales employee can make use of a variety of sales functions and special quotation functions.

3.6.2.2 Sales Order Processing

This business process makes it possible for you to deliver a specific product configuration andquantity, or to provide a service at a specific time. During sales order processing, a salesorganization accepts the sales order and is responsible for fulfilling the sales order

3.6.2.3 Project Execution

Executing a project based on the project plan including creation of documents, simulation of alternative project structures and analytics.





3.6.2.4 Time and Attendance

Optimizes processes for planning, managing, and evaluating the working times and activities of internal and external employees via the Time Management capabilities of SAP ERP HCM. Providesintuitive, user-oriented interfaces that support centralized or decentralized time management.

3.6.2.5 Managing Employee Time and AttendanceOptimizes processes for planning, managing, and evaluating the working times and activities of internal and external employees via Time Management in SAP ERP.

3.6.2.6 Project Accounting

Monitors precise planning of the detailed activities involved in both large scale projects, such asbuilding a factory, and small scale projects, such as organizing a trade fair. Helps the projectmanager ensure that the project is executed efficiently, on time, and within budget - which he or sheachieves by ensuring that the required resources and funds are available as and when needed.

3.6.2.7 Resource-Related Billing

Times and all kind of expenses (for example, travel expenses, 3rd party expenses) can be billed to acustomer using several rules. It is possible to filter times and expenses and/or to reject or postponebilling items.

3.6.2.8 Billing

Is the final processing stage of a business transaction in sales and distribution. Information on billingis available at each stage of order processing and delivery processing.

Billing documents such as invoices, credit, or debit memos, can be created based on order information only or based on order and delivery information, where, for example, the quantity to beinvoiced is derived from the delivery note.

During billing processing, you create, change, and delete billing documents such as invoices, creditmemos, and debit memos.

Integration with financial accounting consists of forwarding billing data in invoices, credit, and debitmemos to financial accounting. The system posts offsetting entries to the appropriate accounts (withthe help of account assignment) and makes sure that FI can recognize all billing documentsbelonging to one business transaction (for example, a credit memo to an invoice). Integration withcontrolling consists of assigning costs and revenues to the appropriate subledgers.

3.7 Corporate Services

SAP ERP Corporate Services supports and streamlines the administrative processes that arestandard to most businesses -- those business-critical support processes that you must execute withmaximum efficiency and control.

You can tailor SAP ERP Corporate Services to meet your requirements for transparency and control,

as well as reduced financial and environmental risk, in the following areas:

Travel management -- SAP ERP Corporate Services helps you reduce costs, streamlinetravel administration processes, monitor compliance with travel policies, and managechanges in compensation and pricing models from suppliers, global distribution systems,and travel agencies.





Quality management -- SAP ERP Corporate Services enables a unified approach to totalquality management, delivering efficiencies that result from fewer product returns, andimproved asset utilization.

3.7.1 Project Accounting

Monitors precise planning of the detailed activities involved in projects. Helps the project manager ensure that the project is executed efficiently, on time, and within budget.

Integrated Planning and Tracking

Detailed integration brings SAP ERP Financials capabilities to the project world, including budgeting,cost planning and actual costs confirmations and commitments from various sources.

Settle Financial Data

Transfers costs and revenues to ERP Financial Accounting (FI) , Asset Accounting (AA), Profitabilityand Sales Analysis (CO-PA), and Controlling (CO)

3.7.2 Travel Management

Travel management provides fully integrated management of all incurred travel expenses – from theplanning/approval stage right through to the point at which the travel expenses are posted toFinancial Accounting and allocated on a cause basis in Cost Accounting.

3.7.3 Quality Management

Quality management is the comprehensive solution that supports the company throughout theproduct lifecycle and along the supply chain. It offers a wide range of functions and collaborativeservices, which are fully integrated into SAP ERP, for assuring and managing the quality of products.It also focuses on prevention and continuous process improvement through collaboration andsustained quality control.

3.7.3.1 Quality Engineering

Inspection Planning

Identifies the inspection characteristics (tests) and inspection methods (procedures) and assigns it tovarious inspection operations of an inspections plan or material specification. SAP ERP offersadvanced tools for inspection planning and the management of standard operation procedures. Thisincludes the planning of multiple specifications for one inspection characteristic dependent ondefined criteria, such as country, customer, or legal tolerances.

Supplier Management

Ensures that the products of the supplier is fit for use with minimal corrective action and inspection.SAP ERP supports:

• Definition of requirements for product and program quality

• Evaluation, selection, certification, and rating of suppliers

• Joint quality planning

• Communication with supplier during contract execution





• Proof of conformance to requirements

• Quality improvement program

3.7.3.2 Quality Assurance / Control

Quality InspectionMeasures, examines, tests, and gages one or more characteristics of a product or service andcompares the results with specified requirements to determine whether conformity is achieved for each characteristic. Includes inspection lots of various origins. Provides results recording anddefects recording (also Web-enabled). Includes usage decision and release of the stock from beingin quality inspection. Follow-up actions include batch classification and quality scoring.

Batch Management and Traceability

Required if products may vary in quality or if they originate from different production runs. SAP ERPcan provide identification, classification, and inventory management for different batches of a

material. Bottom-up as well as top-down analyses are offered to show into which final products abatch of raw material has flown or which batches of raw materials have flown into a final product. Itmight even be necessary to show the lifecycle of individual items. In this case, traceability isachieved via serial numbers. Moreover, process data can be stored in an order record and in anoptical archive (electronic batch record).
