Management Information Systems /

Enterprise Systems
Processes in ERP
Dr Oliver Mller

Agenda

Introduction to MIS/ES

Foundations of ERP

SAP ERP
> Key concepts and terms
> Guided tour

INTRODUCTION TO MIS/ES

What is an Information System?

Interrelated components working together to collect, process, store, and
disseminate information to support decision making, coordination, control, and
analysis in an organization

Source: Laudon & Laudon, 2014

Information Systems as Socio-Technical Systems (STS)

Source: Bostrom & Heinen, 1977

Example: Disney Operational Command Center

FOUNDATIONS OF ERP

Enterprise Architecture

also known as
Business Intelligence (BI)

also known as
Enterprise Systems (ES)

Source: Laudon & Laudon, 2014

Enterprise Systems
Enterprise applications (or systems) are designed to
integrate computer systems that run all phases of an
enterprises operations to facilitate cooperation and
coordination of work across the enterprise. The intent
is to integrate core business processes (e.g., sales,
accounting, finance, human resources, inventory and
manufacturing). The ideal enterprise system could
control all major business processes in real time via a
single software architecture on a client/server
platform. Enterprise software is expanding its scope to
link the enterprise with suppliers, business partners
and customers.

ERP
CRM
SRM
SCM
BI
ECM

Source: http://www.gartner.com/it-glossary/enterprise-applications

10

Enterprise Resource Planning (ERP) Systems

Enterprise resource planning (ERP) systems share a common process and data model,
covering broad and deep operational end-to-end processes, such as those found in
finance, HR, distribution, manufacturing, service and the supply chain.

Source: http://www.gartner.com/it-glossary/enterprise-resource-planning-erp/

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Common Processes in ERP: Order Fulfillment Process

Source: Laudon & Laudon, 2014

12

Common Data in ERP: Order Fulfillment Process

Source: Laudon & Laudon, 2014

13

History of ERP

1960s:
Inventory
Control
Packages

1970s:
Material
Requirements
Planning
(MRP)

1980s:
Manufacturing
Resources
Planning
(MRP II)

1990s:
Enterprise
Resource
Planning
(ERP)

2000s:
Extended ERP

14

Transaction Processing vs. Analytical Processing

Analytical
Systems
(OLAP)
Transactional
Systems
(OLTP)

Business
Intelligence System
Document

Table

ERP System

Source: Laudon & Laudon, 2014

15

What is Business Intelligence?

Business Intelligence (BI) is an umbrella term introduced by Howard Dresner of

the Gartner Group in 1989 to describe a set of concepts and methods to improve
business decision making by using fact-based support systems.

Business Intelligence (BI) unites data, technology, analytics, and human knowledge
to optimize business decisions and ultimately drive an enterprises success. BI
programs usually combine an enterprise data warehouse and other BI tools to
transform data into usable, actionable business information. (Source: TDWI)

16

Data Warehouse

A data warehouse is a collection of subject-oriented,

integrated, non-volatile, time-variant information in support
of managements decision making process. (Inmon 2005)
> Subject-oriented
Data is structured according to multiple, aggregated
management views (e.g., regions, product groups)
> Integrated
Consolidates data from other sources (e.g., ERP,
CRM)
Harmonizes data structures and meta-data
> Time-variant
Time series of business facts (e.g., sales data from
the last 10 years)
> Non-volatile
Read-only data access

17

Evolution of BI

BI 3.0
BI 2.0

BI 1.0
Relational Databases
Structured Data
OLAP, Dashboards,
Data Mining

Web
Unstructured Data
Text Mining,
Sentiment Analysis,
Social Network
Analytics

Source: Chen et al. (2013)

Mobile Devices
Sensor Networks
Location-/Person/Context-aware
Analytics

18

19

Summit Electric Lights Up with a New ERP System

Questions
1. What problems did Summit have with its old
systems?
2. How did Summits new ERP system improve
operational efficiency and decision making?
3. How do Summits customers benefit from the
new ERP system?

Source: Laudon & Laudon, 2014

20

SAP ERP

KEY CONCEPTS AND TERMS

SAP ERP

SAP

Systeme, Anwendungen und Produkte in der Datenverarbeitung

(English: Systems, Applications, and Products in Data Processing)

Global group with many companies

-

SAP AG
SAP America
SAP UK etc.

SAP Business Suite

-

SAP Enterprise Resource Planning (SAP ERP)

SAP Supplier Relationship Management (SAP SRM)
SAP Customer Relationship Planning (SAP CRM)
SAP Supply Chain Management (SAP SCM)
SAP Product Lifecycle Management (SAP PLM) etc.

SAP Business ByDesign

SAP NetWeaver

SAP AG

Page 1-23

SAP ERP

Integrated Business Solution Vendors

SAP
- SAP Business Suite, SAP Business ByDesign,

Oracle Applications
- Oracle, JD Edwards, PeopleSoft, Siebel, Retek

Microsoft Business Solutions

- Dynamics: Great Plains, Navision, Axapta, Soloman

The Sage Group

- Sage Software Accpac ERP, PeachTree

SSA Global Technologies

- BAAN

SAP AG

Page 1-24

SAP Customers
74% of the worlds transaction
revenue touches an SAP system

SAP Customers
courier more than 50% of
the worlds packages

SAP Customers
Brew more than 77% of the worldwide
beer production

SAP Customers
Produce more than 86% of all
running shoes

The Value Chain

Source: Laudon & Laudon, 2014

29

SAP Business Suite

30

SAP ERP (formerly known as R/3)

Core Applications (logically related modules):

> Logistics
> Finance
> Human Capital Management
>
SD

Modules (logically related transactions):

> MM (Buy)
> PP (Make)
> SD (Sell)
> FI & CO (Track)
> HR (People)
>

FI

MM

CO

PP

AM

SAP R/3
QM
PM

Client/Server
ABAP
Basis
HR

PS
WF

IS

31

End-to-End Process Integration: Order-to-Cash Process

32

End-to-End Process Integration: Procure-to-Cash Process

33

Organizational Structures

34

Master Data: Material Master

Master data represents long-term business objects which are agreed on and
shared across business processes.

35

Transactions

Transactions are programs that execute steps of business processes in the SAP ERP
system.
Transactions reference to master data records and organizational units.
When a transaction is executed and saved, one or more documents are created.
This document, a data record of the transaction, contains all of the relevant
predefined data from the master data records and organizational units.

36

GUIDED TOUR

SAP ERP

Course Overview

Introduction to SAP
Navigation
Introduction to GBI
Sales & Distribution
Materials Management
Production Planning
Financial Accounting
Controlling
Human Capital Management
Warehouse Management
Project System
SAP AG

Page 1-39

SAP University Alliances

Version
Author

2.11

Stefan Weidner

Product
SAP Business Suite 7.0

Level
Beginner

Navigation

Abstract
This material explains how to navigate in SAP systems. It is aimed at
students at universities, universities of applied sciences and other
educational institutions with no previous experience of SAP software. It
can be used in the classroom or for self-study.

Focus
SAP ERP 6.0 EhP4
On completion of the course, students will be able to navigate through the
user interface to deal with business processes and case studies.

SAP AG

SAP ERP

SAP AG

Log on to an SAP system

Page 1-41

SAP ERP

SAP AG

SAP Easy Access Menu

Page 1-42

SAP ERP

SAP AG

SAP Easy Access Menu (cont.)

Page 1-43

SAP ERP

Screen Design

Header data

Position overview

Position
details

SAP AG

Page 1-44

SAP ERP

Help Functions

F1: Description of input fields

F4: Value list

SAP AG

Page 1-45

SAP ERP

SAP Help Portal

http://help.sap.com
SAP AG

Page 1-46

SAP ERP

SAP AG

Favorites

Page 1-47

SAP ERP

SAP AG

Transaction Codes

Page 1-48

SAP ERP

SAP AG

Transaction SEARCH_SAP_MENU

Page 1-49

SAP ERP

SAP AG

SAP Navigation Exercise

Page 1-50

SAP ERP

Course Overview

Introduction to SAP
Navigation
Introduction to GBI
Sales & Distribution
Materials Management
Production Planning
Financial Accounting
Controlling
Human Capital Management
Warehouse Management
Project System
SAP AG

Page 8-51

SAP University Alliances

Version

2.11

Authors Bret Wagner

Stefan Weidner

Controlling (CO)

Product
SAP ERP 6.0 EhP4
Global Bike Inc.

Level
Beginner

Focus
Cross-functional integration
Controlling

SAP AG

SAP ERP

Unit Overview

CO Organizational Structure
CO Master Data
CO Processes

SAP AG

Page 8-53

SAP ERP

Goal of Controlling (CO)

Managerial Accounting also termed Controlling is designed to

collect transactional data that provides a foundation for
preparing internal reports that support decision-making within
the enterprise.
These reports are exclusively for use within the enterprise and
include:
-

Cost center performance

Profit center performance
Budgets analyses
Profitability analyses

Target audience
SAP AG

Executives
Senior Management
Department Managers
Controllers
Cost Accountants
Page 8-54

SAP ERP

CO Organizational Structure

Represents the legal and/or organizational views of an enterprise

Permits the accurate and organized collection of business
information
Supports the development and presentation of relevant information
in order to enable and support business decisions

SAP AG

Page 8-55

SAP ERP

Client
-

CO Organizational Structure

An independent environment in the system

Company Code
-

Represents an independent legal accounting unit

Balanced set of books, as required by law, are prepared at this level.
A client may have more than one company code

United States
Germany
United Kingdom
Australia

Assets

SAP AG

Liabilities &
Owners Equity

Page 8-56

SAP ERP

Controlling Area
-

CO Organizational Structure

A self-contained, organizational unit for which the management of revenues

and expenses can be performed
May include one or more company codes; therefore, an enterprise can perform
management accounting analyses and reports across several companies
A way to identify and track where revenues and costs are incurred for
evaluation purposes

Operating Concern
-

SAP AG

Represents a part of an organization for which the sales market is structured in

a uniform manner
A operating profit for the individual market segments can be calculated.
Multiple controlling areas can be assigned to one operating concern.

Page 8-57

SAP ERP

GBI 2.0 Structure for Controlling

Client

Global Bike

Operating
Concern

Global Concern

Controlling
North America

Controlling
Europe

Controlling
Area

Global Bike Inc.

Global Bike Germany GmbH

Company
Code

SAP AG

Page 8-58

SAP ERP

Business Area
(see FI unit)

GBI 2.0 Enterprise Structure in SAP ERP (Accounting)

Business Area Bikes BI00

CC US00

Company
Code

CC DE00

Chart of Accounts (global) GL00

Credit Control
Area

Credit Control Area (global) GL00

CA North Am. NA00

CA Europe EU00

(see FI unit)

CA Asia AS00

Controlling Area

Operating Concern (global) GL00

Client GBI
SAP AG

Page 8-59

SAP ERP

Profit Center
-

Responsible for revenue generation and cost containment

Evaluated on profit or return on investment
Enterprises are commonly divided into profit centers based on

CO Master Data

Region
Function
Product

Cost Center
-

Responsible for cost containment, not responsible for revenue generation

One or more value-added activities are performed within each cost center.
Unit that is distinguished, for example, by area of responsibility, location, or type of activity

Copy center
Security department
Maintenance department

Internal Order
-

Temporary cost center responsible for cost containment, not responsible for revenue
generation
It is used to plan, collect, and monitor the costs associated with a distinct short-term
event, activity, or project

SAP AG

Company picnic
Trade show/Fair
Recruiting campaign
Page 8-60

SAP ERP

Revenue Element
-

CO Master Data

A one-to-one linkage (mapping) between General Ledger revenue accounts

and CO revenue elements is established to permit the transfer of FI revenue
information to CO.
Posting in FI that impact revenue accounts lead to a posting in CO to a
revenue element.
In other words, revenue account = revenue element just different words
depending on whether FI object or CO object.

Cost Element
-

SAP AG

A one-to-one linkage (mapping) between General Ledger expense accounts

and CO cost elements is established to permit the transfer of FI expense
information to CO.
Postings in FI that impact cost accounts lead to a posting in CO to a cost
element.
In other words, expense account = cost element just different words
depending on whether FI object or CO object.
Page 8-61

SAP ERP

Primary Cost Element

-

CO Master Data

Originate in the General Ledger within FI and are automatically transferred to

CO when an FI transaction is recorded in the General Ledger

Secondary Cost Element

-

SAP AG

Used exclusively in CO for allocations and settlements between and amongst

cost centers

Page 8-62

SAP ERP

Integration between FI and CO (Expenses-Costs)

Managerial
Accounting
(CO)

Financial
Accounting
(FI)

Aggregated Cost Elements

General Ledger Accounts

Income
Statement

Secondary Cost
Elements

Primary Cost
Elements

Balance
Sheet

Expense
Accounts
Revenue
Accounts

SAP AG

Page 8-63

SAP ERP

CO Master Data

Statistical Key Figures

-

Provide the foundation for accurate and effective cost allocations between cost
objects
Utilized to support internal cost allocations involving allocations, assessments,
and distributions
Examples:
number of employees
square footage
minutes of computer usage

Copy
Center
Activity
(20 Hours)

SAP AG

6 Hours

Executive Offices

10 Hours

Maintenance
Department

4 Hours

IT Department
Page 8-64

SAP ERP

SAP AG

CO Processes

Page 8-65

SAP ERP

CO Processes

Posting Primary Cost Element

Financial Accounting (FI)
Supplies Expense
Debit

Credit

Cash
Debit

Credit
1,500

1,500

Managerial Accounting (CO)

Cost Center
A

SAP AG

Primary Cost Element

Page 8-66

SAP ERP

CO Processes

Posting Primary Cost Element

Financial Accounting (FI)
(FI) Transaction
Document
Amount
G/L Account #
Cost Center
1900012432
(CO) Transaction
Document
Cost Center
Cost Element
20000657

SAP AG

Supplies Expense
Debit Credit

Cash
Debit Credit

1,500

1,500

Managerial Accounting (CO)

Cost Center
1,500

Page 8-67

SAP ERP

CO Processes

Posting Secondary Cost Element

Financial Accounting (FI)
Supplies Expense
Debit

Cash

Credit

Debit

Credit
1,500

1,500

Managerial Accounting (CO)

Cost Center
A

SAP AG

CC 1
CC 2

Secondary Cost
Element

Page 8-68

SAP ERP

CO Processes

Posting Secondary Cost Element

Executive Offices

Rent Expense

Debit

Credit

Copy
Center

1,500

Supplies Expense

Debit

1,800

Credit

2,500

Maintenance
Department

1,500
2,500

Sec. Cost Element

3,000

2,000
Information Services

Labor Expense

Debit Credit
2,000
SAP AG

1,200
Page 8-69

SAP ERP

SAP AG

SAP Controlling Exercise

Page 8-70

SAP ERP

SAP AG

CO Processes

Page 8-71

SAP ERP

SAP AG

Aggregation in CO-PA

Page 8-72

SAP ERP

SAP AG

Profitability Segments

Page 8-73

SAP ERP

Multi-Dimensional Data Warehouse Cubes

Page 8-74

SAP AG
Source: Surma (2011)

SAP ERP

Rotating

Page 8-75

SAP AG
Source: Surma (2011)

SAP ERP

Drill-down

Page 8-76

SAP AG
Source: Surma (2011)

SAP ERP

Slicing/Dicing

Page 8-77

SAP AG
Source: Surma (2011)

SAP ERP

Snowflake Schema

A data model for data warehouse cubes

Consists of
-

Fact table
-

One fact table

Multiple dimension tables

Stores facts (i.e., measurements) about business events (e.g., sales)

Facts are always related to dimensions

Dimension tables
-

SAP AG

Represent the basic dimensions of the business (e.g., products, regions, time)
Dimensions can be structured in hierarchies

Page 8-78

SAP ERP

SAP AG

Example: Sales Data

Page 8-79

Source: http://upload.wikimedia.org/wikipedia/en/thumb/7/73/Snowflake-schema-example.png/300px-Snowflake-schema-example.png

References

Laudon, K. and Laudon, J. (2014): Management Information Systems. Pearson.

Bostrom, R. P. & Heinen, J. S. (1977 September). MIS Problems and Failures: A
Socio-Technical Perspective. Part I: The Causes, MIS Quarterly, pp. 17-32.
Inmon, W. H. (2005): Building the Data Warehouse. John Wiley & Sons.
Surma, J. (2011): Business Intelligence: Making Decision Through Data Analytics.
Business Expert Press.

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