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Chapter 1
Overview
McGraw-Hill/Irwin
©2007 The McGraw-Hill Companies, All Rights Reserved
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What is Enterprise Software?
• Enterprise software is integrated software that
facilitates the flow of information among all the main
processes of a business.
• It provides a holistic view of a business within a
single information system (IS) technology
architecture.
• All the processes of an organization’s supply chain
and value chain activities are included.
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What is Enterprise Software?
INFORMATION FLOWS
Transfer
Supplier
Transfer
Manufacturing
Transfer
Distribution
Transfer
Retail Outlet
Consumer
CASH FLOWS
Supply
ChaIn
Integrated software that supports the information flows
among the processes in the supply chain.
SAP R/3 is Enterprise Software.
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What is ERP?
• Enterprise resource planning (ERP) is frequently
viewed as the software that support its related
business functionality.
• ERP software grew with the advances in
computing power.
• In the 1960’s, many software packages used by
business included an inventory control (IC)
capability.
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What is ERP?
• Material Requirement Planning (MRP) systems
during the 1970’s used a master production
schedule and bill of material to manufacture each
product.
• MRPII (“MRP-two”) systems in the 1980’s added
more functional features from financial accounting
and other manufacturing and material
management systems so that everyone in the
organization is working with the same data.
• The 1990’s brought about ERP systems to provide
seamless integration of all information flows in a
company.
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What is ERP?
• Enterprise Systems of the 2000’s added more
features, functions, and better integration to
support the entire value chain of business
operations from customer order until the payment
is received.
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Figure 1. Timeline of integrated software generation
development
IC
MRP MRPII ERP
ES
??
1960 1970 1980 1990 2000 2010
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What is SAP R/3
• SAP R/3 integrates and encompasses the primary
aspect of supply chain processing.
• SAP R/3 consists of a series of integrated core
business applications modules for transaction
processing.

These modules contain a set of functions that
implement best business practices for supply chain
management (SCM) activities.
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Best Business Practices
• Best Business Practices are ready-made business
processes that reflect the experiences,
suggestions, and requirements of leading
companies in a host of industries.
• They make up the SAP R/3 system to allow
organizations to benefit from this wealth of
business knowledge.
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Who is SAP?
• SAP (Systems, Applications, and Products in Data
Processing) AG was founded in 1972 in Waldorf,
Germany by five former IBM employees.
• SAP is the world’s leading business application
software company.
• SAP markets its products all over the world to
almost every industry, as well as government,
educational institutions, and hospitals
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Application Modules
• Applications modules are a high level means of
thinking about the available business process.
• Application modules support all of a company’s
business transactions and are integrated
interactively.

A change of data in one application module will result in
an automatic update of data in all other application
modules that use that data.
• All application modules have a common
architecture and user interface.
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Figure 2. Application Modules identify functional
business area processing
Sales &
Distribution
Financial
Accounting
Material
Management
Production
Planning
Quality
Management
SD
MM
CO
PP
AM
R/3
Client / Server
Human
Resources
PS
QM
PM
Plant
Maintenance
Controlling
FI
WF
HR
IS
Fixed Asset
Management
Project
System
Workflow
Industry
Solutions
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Application Modules
• Workflow and Industry Solutions are known as
the Common Systems.
• The remaining modules are known as primary
application modules, and Workflow integrates the
functionality of these modules.
• Industry Solutions provides the functionality for
the integration of add-ons to the R/3 system that
are developed to meet the specific processing
needs of a particular industry.
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Business Processes Procedures
• Business Process Procedures (BPPs) are the
steps that the application modules carry out for
performing business functions.
• BPPs are built upon best practices.
• An example of a BBP is the processing of a
customer’s order for a product or service.
• Each application module is a lower-level
coordinated collection of related BPPs to support
a particular application module’s function
business area.
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Business Process Reengineering
• Business Process Reengineering (BPR) is the
creation of entirely new and more effective
business processes, without regard for what has
gone before.
• BPR is primarily cross-functional in its focus.
• BPR involves questioning assumptions.
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Event-Driven Transaction Processing
• An EVENT is a condition that has business
relevance:
 Receipt of a customer order
 Issuance of a production order
 Receipt of a customer payment
• Events trigger processing actions.
• Events are fundamental activities in processing
business transactions.
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Process Integration
• SAP R/3 Enterprise software integrates the core
business processes found in an organization.
• This is accomplished via a very comprehensive
set of BPPs available within the various
application modules.
• Key business processes can be used to illustrate
the arrangements of the SCM processes, which
follow the customer order to cash cycle of a
business.
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Figure 3. Integrated business processes for SCM
CUSTOMER
SALES
PRODUCTION
ACCOUNTING
PURCHASING
WAREHOUSE
VENDOR
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Core Business Processes
Customer
Request
Sales
Order
Shipping
Billing
Cash
Processing
Analysis
Satisfied
Customer
SAP Reference Structure
Logistics
Logistics
Enter
Master
Data
Customer
Master
Material
Master
+
+
+
+
+
+
+
Organization
General Settings
Master Data
Business Processes
Cross-Application
Train and Document
Basis
Accounting
Accounting
Vendor
Master
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Sales Process Steps
Sale Order Entry
Accounts Receivable
Delivery Document
Billing
Issue pick, pack, &
document ship
Delivery Confirmation
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Production Process Steps
Create transfer
T
order
Create good receipt
to place finish product
into warehouse
Create, release &
stage production
Confirm transfer order
and goods issue from
warehouse to production
Confirm production
order
Create & run
Production order
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Warehouse Management Process Steps
Create goods
receipt
Issue transfer
order
Create control Confirm transfer
cycle record
order
Receive transfer Confirm transfer Create transfer Create goods receipt
finished product
order
order
order
Post goods issued
with reference to delivery document
Confirm transfer
order
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Purchasing Process Steps
Create PR
Issue RFQ
Receive RFQs
Select vendor
Issue PO to
vendor
Verify vendor’s &
produce accounting
document
Issue goods receipt with
accounting & material
document
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SAP R/3 Three-Tier Client/Server Architecture
DBMS
System
Clients
Application Servers
Database Server
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Client/Server Architecture
• SAP R/3 is a three-tier client/server architecture
that is organized as a database server, an
application server, and a client.
• The client is a desktop component that runs on
the computer of each end user.
• The database server stores:



All the data for the business transactions.
The data that specifies the configuration of the R/3
systems.
All the program code that implements the best
business practices
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Client/Server Architecture
• The application server is where the business
processes are actually executed using data from the
database server and from the client of each end user.
• An application server is capable of running any of the
application modules.
• The three tier architecture makes the R/3 a flexible
system.
• Scalability allows the system to grow as more end
users are added.
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SAP Database Organization
• All transaction data
• All code objects



Screens
Reports
Functions
R/3 Repository
Business
Transaction
Data
Business
Processing
Functions
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Customization
SAP Reference Structure
+
+
+
+
+
+
+
Organization
General Settings
Master Data
Business Processes
Cross-Application
Train and Document
Basis
Redesign with the
SAP Reference
Structure
FI
Company Code
C
Controlling Area
O
S
HQ
HQ
Real World
Organization
C
Sales
Cost Center
D
EO
OrganizationS
Profit Center
M
C
Storage
S
Distribution
SalesDArea
Location
D
Channel
M
PurchasingM
S
M
Plant
C
Division
D Business Area Organization
O
M
M
SAP Organizational
Structure
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Customization
• Customization is the process of configuring the
R/3 application modules to match the available
SAP business processes within an organization’s
workflow processes.
• The application modules are set up to meet the
transaction processing requirements of a specific
business enterprise.
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Customization
• The Reference Model contains a complete
description of the business function BPPs
contained in the R/3 application modules.
• The SAP Reference IMG (Implementation Guide)
is a built-in tool that is included to support these
configuration activities and the reference model.
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Quick Check
1.
2.
3.
4.
5.
True or false: Enterprise software is comprised of
standalone modules that handle the transaction
processing requirements of individual business units.
____ software is the generation of integrated business
software that preceded today’s more integrated enterprise
software.
____ is the creation of entirely new and more efficient
business processes, without regard for what has gone
before.
SAP R/3 is ___ transaction processing software that
supports an organization’s value chain.
True or false: The R/3 application modules are integrated
interactively.
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Quick Check
6.
7.
8.
9.
The ___ business processes are implemented with
transaction processing systems that are most
concerned with the day-to-day needs of conducting
the affairs of a business.
The three tier client/server architecture is important
in providing which three features of the R/3
System?
True or false: An R/3 application module is the
same as an R/3 application server.
___ is the process of configuring the R/3
application modules.
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