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CSCI 599 Computer Science Project

Section No: 1900
Fall 2010

Subject: Study and report the SAP Business suite

Software modules

Student Name: Parag Diapkkumar Dave

Student ID: 109-00-4129
Guide: Dr. Farzan Soroushi
(Hon. Chair IT Department)
University of Northern Virginia

Annandale, VA
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Acknowledgement:

“As I know those words can not express the filling which is my duty
but still I am left with them I would like to express my project guide.
Dr. Farzan Soroushi for valuable guidance, encouragement and
kind co-operation while completing a project a great success. ”

While no efforts have been spared to avoid errors, I will grateful to

all if such error or ambiguities in this report are pointed out.

By Parag Dave
Student Id:109-00-4129
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Preface:
SAP the company was founded in Germany in 1972 by five ex-IBM engineers. In case you’re
ever asked, SAP stands for Systeme, Andwendungen, Produkte in der Datenverarbeitung which -
translated to English - means Systems, Applications, Products in Data Processing.

Back in 1979 SAP released SAP R/2 (which runs on mainframes) into the German market. SAP
R/2 was the first integrated, enterprise wide package and was an immediate success. For years
SAP stayed within the German borders until it had penetrated practically every large German
company. Looking for more growth, SAP expanded into the remainder of Europe during the 80's.
Towards the end of the 80's, client-server architecture became popular and SAP responded with
the release of SAP R/3 (in 1992). This turned out to be a killer app for SAP, especially in the
North American region into which SAP expanded in 1988.

The success of SAP R/3 in North America has been nothing short of stunning. Within a 5 year
period, the North American market went from virtually zero to 44% of total SAP worldwide
sales. SAP America alone employs more than 5,000 people and has added the names of many of
the Fortune 500 to it’s customer list (8 of the top 10 semiconductor companies, 7 of the top 10
pharmaceutical companies etc). SAP today is available in 46 country-specific versions,
incorporating 28 languages including Kanji and other double-byte character languages.

SAP functionality included is truly enterprise wide including: Financial Accounting,

Management Accounting, Sales, Distribution, Manufacturing, Production Planning, Purchasing,
Human Resources, Payroll etc

SAP are maintaining and increasing their dominance over their competitors through a
combination of
- deepening the functionality on their industry solutions .
- launching business one - for the medium market.
- starting to embrace SOA with the Netweaver platform.

Index
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Introduction: What is SAP? Why companies select the SAP ? ..............................Page 6

Chapter 1. SAP Customer Relationship Management (CRM) …………………Page 8

1. What is Customer Relationship management? ……………………………….Page8

1.a How the Customer relationship management works. …………………………Page 8

1.b Applications of the CRM in the business world and it’s effect. ………………Page 9

1.c Example of the company that use the CRM in their business plan. ……………Page 10

1.d Interrelationship of the CRM with the other module of the business. …………Page 12

1.e Summary. ………………………………………………………………………Page 12

Chapter 2. SAP Enterprise Resource Planning(ERP) ……………………………Page 13

2. What is Enterprise Resource Planning? ………………………………………...Page 13

2.a How the Enterprise Resource Planning works. …………………………………Page 14

2.b Applications of the ERP in the business world and it’s effect. ………..………..Page 14

2.c Example of the company that use the ERP in their business plan. …..…………..Page 15

2.d Interrelationship of the ERP with the other module of the business.…………….Page 15

2.e Summary. ………………………………………………………………………...Page 16

Chapter 3. SAP Product Lifecycle Management (PLM) …………………….………Page 17

3. What is Product Lifecycle Management? ………………………………..………Page 17

3.a How the Product Lifecycle Management works. …………………………………Page 17

3.b Applications of the PLM in the business world and it’s effect. ………………….Page 18

3.c Example of the company that use the PLM in their business plan. ………………Page 19

3.d Interrelationship of the PLM with the other module of the business. ……………Page 20

3.e Summary. ………………………………………………………………………...Page 21

Chapter 4. SAP Supply Chain Management (SCM) ………………………………….Page 22

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4. What is Supply Chain Management? ……………………………………………Page 22

4.a How the Supply Chain Management works. …………………………………….Page 22

4.b Applications of the SCM in the business world and it’s effect. …………………Page 24

4.c Example of the company that use the SCM in their business plan. ………………Page 25

4.d Interrelationship of the SCM with the other module of the business. ……………Page 26

4.e Summary. ………………………………………………………………………...Page 27

Chapter 5. SAP Supplier Relationship Management (SRM) ………………………...Page 28

5. What is Supplier Relationship Management? ……………………………………Page 28

5.a How the Supplier Relationship Management works. ……………………………Page 28

5.b Applications of the SRM in the business world and it’s effect. ………………… Page 29

5.c Example of the company that use the SRM in their business plan. ………………Page 31

5.d Interrelationship of the SRM with the other module of the business. ……………Page 32

5.e Summary. ………………………………………………………………………...Page 32

Reference…………………………………………………………………………………Page 33

INTRODUCTION:

What is SAP (Systems, Applications, Products)? Why companies select the SAP?
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There are many reasons a company selects and implements SAP – some are good and some are
bad. The good ones include replacing an out-dated and inefficient IT Architecture, enabling
business process change, and to gain competitive advantage. The bad ones are too numerous to
go into here but would include the "why are we the only semiconductor company without SAP"
question. More on the good reasons follows:

1. Replacing an out-dated and inefficient IT Architecture: In the beginning, computer

systems were developed by individual departments to satisfy the requirements of that
particular department. When someone finally realized that benefits could be had by
linking these systems together, interface heaven was born. There are some companies
today with literally thousands of interfaces, each of which needs to be maintained.
Sweeping them away and replacing them with an integrated system such as SAP can save
much money in support.
2. Enabling business process change – From the start, SAP was built on a foundation of
process best practices. Although it sounds absurd, it is probably easier to change your
companies processes to adapt to SAP than the other way around. Many companies have
reported good success from combining a SAP implementation with a other project.
3. Competitive advantage – The CFO types around have heard this old saying from the CIO
types for many years now. The question still has to be asked … can you gain competitive
advantage from implementing SAP? The answer, of course, depends on the company. It
seems to us, however, that:

• Being able to accurately provide delivery promise dates for manufactured products.
• Being able to consolidate purchase decisions from around the globe and use that leverage
when negotiating with vendors has got help.
• Being able to place kiosks in stores where individual customers can enter their product
specifications and then feed this data directly into it’s production planning process is
pretty neat.

SAP provides majority of enterprise applications that includes:

1. SAP Knowledge Warehouse (KW)

2. Product Lifecycle Management (PLM)
3. Human Resource Management Systems (HRMS)
4. Supplier Relationship Management (SRM)
5. Supply Chain Management (SCM)
6. Customer Relationship Management (CRM)
7. Advanced Planner and Optimizer (APO)
8. Business Information Warehouse (BW)

Here in this Project report I discussed the five of them as listed below:
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1) SAP Customer Relationship Management (CRM)

2) SAP Enterprise Resource Planning(ERP
3) SAP Product Lifecycle Management (PLM)
4) SAP Supply Chain Management (SCM)
5) SAP Supplier Relationship Management (SRM)

Chapter 1. SAP Customer Relationship Management (CRM)

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What is Customer Relationship management?

Customer relationship management is creating a team relationship among sales, marketing, and
customer support activities within an organization. Another narrow, yet relevant, viewpoint is to
consider CRM only as customer retention in which a variety of after marketing tactics is used for
customer bonding or staying in touch after the sale is made.
Shani and Chalasani define relationship marketing as “an integrated effort to identify, maintain,
and build up a network with individual consumers and to continuously strengthen the network
for mutual benefit of both sides, through interactive, individualized and value-added contacts
over a period of time”. The core theme of all CRM and relationship marketing perspectives is its
focus on co-operative and collaborative relationships between the firm and its customers, and/or
other marketing factors. CRM is based on the premise that, by having a better understanding of
the customers’ needs and desires we can keep them longer and sell more to them.
Growth Strategies International (GSI) performed a statistical analysis of Customer satisfaction
data encompassing the findings of over 20,000 customer surveys conducted in 40 countries
by Info quest.

The conclusions of the study were:

• A Totally Satisfied Customer contributes 2.6 times more revenue to a company as a
Somewhat Satisfied Customer.
• A Totally Satisfied Customer contributes 17 times as much revenue as a Some what
dissatisfied Customer.
• A Totally Dissatisfied customer decreases revenue at a rate equal to 1.8 times what a totally
satisfied customer contributes to a business.
• By reducing customer defection (by as little as 5%) will result in increase in profits by 25%
to 85% depending from industry to industry

1.a) How the Customer relationship management works:

An important fact of CRM is “customer selectivity”. As several research studies have shown not
all customers are equally profitable (In fact in some cases 80% of the sales come through20% of
the customers). The company must therefore be selective and tailor its program and marketing
efforts by segmenting and selecting appropriate customers for individual marketing programs. In
some cases, it could even lead to “outsourcing of some customers” so that a company better
utilize its resources on those customers it can serve better and create mutual value. However, the
objective of a company is not to really prune its customer base but to identify appropriate
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customer programs and methods that would be profitable and create value for the firm and the
customer. Hence, CRM is defined as: Customer Relationship management is a comprehensive
strategy and process of acquiring, retaining and partnering with selective customers to create
superior value for the company and the customer.

As is implicit in the above definition, the purpose of CRM is to improve marketing productivity.
Marketing productivity is achieved by increasing marketing efficiency and by enhancing
marketing effectiveness. In CRM, marketing efficiency is achieved because cooperative and
collaborative processes help in reducing transaction costs and overall development costs for the
company. Two important processes for CRM include proactive customer business development
and building partnering relationship with most important customers. These lead to superior value
creation.
1.b) Applications of the CRM in the business world and it’s effect:
The basic concept is that the customer is not someone outside the organization, he is a part of the
organization.
Differentiate Customers: All customers are not equal; recognize and reward best customers
disproportionately. Understanding each customer becomes particularly important. And the same
customers’ reaction to a cellular company operator may be quite different as compared to a car
dealer. Besides for the same product or the service not all customers can be treated alike and
CRM needs to differentiate between a high value customer and a low value customer.
• What CRM needs to understand while differentiating customers is?
 Sensitivities, Tastes, Preferences and Personalities
 Lifestyle and age
 Culture Background and education
 Physical and psychological characteristics
• Differentiating Offerings
 Low value customer requiring high value customer offerings
 Low value customer with potential to become high value in near future
 High value customer requiring high value service
 High value customer requiring low value service

• Keeping Existing Customers

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Grading customers from very satisfied to very disappoint should help the organization in
improving its customer satisfaction levels and scores. As the satisfaction level for each customer
improve so shall the customer retention with the organization.
• Maximizing Life time value
Exploit up-selling and cross-selling potential. By identifying life stage and life event trigger
points by customer, marketers can maximize share of purchase potential. Thus the single adults
shall require a new car stereo and as he grows into a married couple his needs grow
into appliances
• Increase Loyalty
Loyal customers are more profitable. Any company will like its mind share status to improve
from being a suspect to being an advocate. Company has to invest in terms of its product and
service offerings to its customers. It has to innovate and meet the very needs of its
clients/customers so that they remain as advocates on the loyalty curve. Referral sales invariably
are low cost high margin sales

1.c) Example of the company that use the CRM in their business plan:

An easy answer to that question would be to say “Any business with customers would use
CRM” - but it is not always straightforward as that. Here are the type of businesses that could
stand to benefit from using customer relationship management.

• Any businesses that have a sales team - as customer relationship management can help
salespeople to identify various trends in their customers behavior it can assist them when
selling products.

• Any businesses that use any form of marketing - when using a good CRM solution
businesses can use sales information from customers records to finely tune their
marketing campaigns. Statistics have shown that targeted marketing is much more
profitable than flooding as many markets as possible with marketing campaigns. Doing
this not only wastes money, but it is also ineffective and inefficient.

• Any businesses that create quotes and invoices - having an inbuilt courting and invoicing
tool on a software program that is used daily can really speed up the quality and invoicing
process. Using just one software program to do everything in a business can increase
productivity dramatically. No more switching between programs to complete tasks -
everything can be done from one program.

• Any businesses that want to show their customers that they are a priority - customers like
to feel as though they are wanted, and using CRM can do this. For example, even if a
customer telephones a business and get through to the wrong department the person they
speak to, can use their CRM program, find that customers details and transfer them
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through to the correct department in moments. This cuts down on customer frustration
and make the customer feel as though that business really values them. It might seem like
something small to a business, but when it happens in reality to customer it will stick
with them and give them a better customer experience.

• Any businesses that want to increase efficiency - using just one CRM software program
means that a great deal of time is saved each day.

As you can see there are number of reasons why any business would choose to use customer
relationship management, and there are more. Using CRM provides numerous benefits to
both businesses and customers.

Here I described one of the example of the company that uses the SAP CRM for their
successfully rolled out SAP CRM in a Big Bang of global implementation to over 23000
users. The company is NetApp.

NetApp have products like Storage Systems, Platform OS, Protocols, Software (Protection,
on command management) They uses the SAP CRM module to provide the services as below
to make their marketing and after sales service batter.

 Customer service and support: Access complete customer data such as service history,
warranty and SLA information, and accounts receivable information; maintain a
problem-resolution database; and manage incoming service requests efficiently and
effectively. Manage installed-base assets and associated configurations.

 Field service: Automate the process of dispatching field technicians to perform services
in remote locations. Keep field service professionals connected through laptops or
ruggedized handheld devices.

 E-service: Coordinate e-service activities -- including e-mail, service-ticket routing, and

lead routing. From one central point of command. Manage large volumes of incoming e-
mail using features such as auto-reply and auto-suggest, and enable comprehensive Web-
based customer self-service.

 Service sales and marketing: Drive the sale of services and service-related products
through the service department with full sales and marketing support, from targeted
marketing to lead qualification and contract management.

 Service-contract management: Confirm a customer's entitlement to service before

providing service, meet service-level agreements (SLAs), and drive contract renewals by
alerting service agents when a customer's contracts are about to expire.

 Warranty and claims management: Manage the entire warranty and claims process,
from return materials authorization (RMA) to receipt and inspection. Coordinate with
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third-party logistics providers to ensure timely customer credits and avoid unnecessary
goodwill allowances.

 Depot repair: Automate the entire in-house repair process, from creating the RMA to
billing and shipping repaired products to customers. Issue and track loaner units as
necessary.

 Channel service: Manage third-party service relationships, and reduce the cost of
channel service by delivering service and problem-resolution capabilities to the partners.

 Service analytics: Identify problems and trends and take corrective action. Compare the
effectiveness of service territories, and see how actual values compare with target values.

1.d) Interrelationship of the CRM with the other module of the business :

(Photo courtesy University of Petrosani )

Here the Integration of the CRM with the other module like ERP and the PLM even the SCM are
effective depends upon the business logic, product type, type of the user, and number of the user.
As shown in the figure each module overlapping each other in more or less way.

We can say CRM is the start and end point of any business that business cycle. Business’s prime
goal is to sale maximum products to create the demand in the market and that make other’s life
easier. To gain this goal company should provide best before and after sales service. Proper
customer support, Analysis of the need and production rate and psychology of the group of the
customer. Where to fulfill this criteria CRM uses and passes the resource to the other module
such ERP, PLM and SCM.

1.e) Summary:

Customer relationship management is the one of the key point of the business lifecycle. Effect
of the service and relation depends upon the products, demands, and area where the particular
product will use. We can divide the CRM in the five parts Marketing, Sales, Service, E-
Commerce, Interaction center and operation management and channel management.
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Chapter 2. SAP Enterprise Resource Planning(ERP):

What is the ERP:

Enterprise resource planning software, or ERP, doesn’t live up to its acronym. Enterprise is
ERP’s true ambition. It attempts to integrate all departments and functions across a company
onto a single computer system that can serve all those different departments’ particular needs.

That is a tall order, building a single software program that serves the needs of people in finance
as well as it does the people in human resources and in the warehouse. Each of those departments
typically has its own computer system optimized for the particular ways that the department does
its work. But ERP combines them all together into a single, integrated software program that
runs off a single database so that the various departments can more easily share information and
communicate with each other.

2.a) How the Enterprise Resource Planning works:

As mentioned before SAP is an acronym for "System Application & Products" which creates a
common centralized database for all the applications running in an organization. The application
has been assembled in such a versatile way that it handles all the functional department within an
organization. Today major companies including Microsoft and IBM are using SAP's Products to
run their own businesses. Here is the architecture of the SAP ERP.
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(Courtesy: O’Brien, James. Introduction to Information Systems, 12e, 2005)

Take a customer order, for example. Typically, when a customer places an order, that order
begins a mostly paper-based journey from in-basket to in-basket around the company, often
being keyed and rekeyed into different departments’ computer systems along the way. All that
lounging around in in-baskets causes delays and lost orders, and all the keying into different
computer systems invites errors. Meanwhile, no one in the company truly knows what the status
of the order is at any given point because there is no way for the finance department, for
example, to get into the warehouse’s computer system to see whether the item has been shipped.
"You’ll have to call the warehouse" is the familiar refrain heard by frustrated customers.

ERP vanquishes the old standalone computer systems in finance, HR, manufacturing and the
warehouse, and replaces them with a single unified software program divided into software
modules that roughly approximate the old standalone systems. Finance, manufacturing and the
warehouse all still get their own software, except now the software is linked together so that
someone in finance can look into the warehouse software to see if an order has been shipped.

2.b) Applications of the ERP in the business world and it’s effect:

ERP’s best hope for demonstrating value is as a sort of battering ram for improving the way your
company takes a customer order and processes it into an invoice and revenue—otherwise known
as the order fulfillment process. That is why ERP is often referred to as back-office software. It
doesn’t handle the up-front selling process rather, ERP takes a customer order and provides a
software road map for automating the different steps along the path to fulfilling it. When a
customer service representative enters a customer order into an ERP system, he has all the
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information necessary to complete the order (the customer’s credit rating and order history from
the finance module, the company’s inventory levels from the warehouse module and the shipping
dock’s trucking schedule from the logistics module, for example).

People in these different departments all see the same information and can update it. When one
department finishes with the order it is automatically routed via the ERP system to the next
department. To find out where the order is at any point, you need only log in to the ERP system
and track it down. With luck, the order process moves like a bolt of lightning through the
organization, and customers get their orders faster and with fewer errors than before.

There are five major reasons why companies undertake ERP.

1. Integrate financial information—As the management tries to understand the company’s

overall performance, they may find many different versions of the truth. Finance has its
own set of revenue numbers, sales has another version, and the different business units
may each have their own version of how much they contributed to revenues. ERP creates
a single version of the truth that cannot be questioned because everyone is using the same
system.
2. Integrate customer order information—ERP systems can become the place where the
customer order lives from the time a customer service representative receives it until the
loading dock ships the merchandise and finance sends an invoice. By having this
information in one software system, rather than scattered among many different systems
that can’t communicate with one another, companies can keep track of orders more
easily, and coordinate manufacturing, inventory and shipping among many different
locations at the same time.
3. Standardize and speed up manufacturing processes—Manufacturing companies—
especially those with an appetite for mergers and acquisitions—often find that multiple
business units across the company make the same widget using different methods and
computer systems. ERP systems come with standard methods for automating some of the
steps of a manufacturing process. Standardizing those processes and using a single,
integrated computer system can save time, increase productivity and reduce head count.
4. Reduce inventory—ERP helps the manufacturing process flow more smoothly, and it
improves visibility of the order fulfillment process inside the company. That can lead to
reduced inventories of the stuff used to make products (work-in-progress inventory), and
it can help users better plan deliveries to customers, reducing the finished good inventory
at the warehouses and shipping docks. To really improve the flow of your supply chain,
you need supply chain software, but ERP helps too.
5. Standardize HR information—Especially in companies with multiple business units,
HR may not have a unified, simple method for tracking employees’ time and
communicating with them about benefits and services. ERP can fix that.

2.c) Example of the company that use the ERP in their business plan:

The IMC Group is a global financial organization with a presence in Amsterdam, New York,
Chicago, Hong Kong, Sydney, and Zurich. In the last 15 years, IMC, a global financial
organization, has expanded its derivative trading houses business from Europe to Hong Kong,
Australia and USA. In 2005, the chief financial officer found the existing information systems of
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the organization lagged behind the fast growth of the organization and were inflexible and unable
to process international business.
The implemented SAP ERP system has been very beneficial to the company. The integrated
XLCubed reporting solution is quite flexible allowing managers to analyze business information
easily. The database of the system can be accessed from anywhere globally allowing managers to
view the information they need for decision support in real time.

Benefits of the ERP:

 Quality and efficiency

 Decreased costs
 Decision support
 Enterprise agility

2.d) Interrelationship of the ERP with the other module of the business :

The integration of PLM and ERP significantly improves the productivity and effectiveness of
users and organizations working with product and plant related information. These two
enterprise domains encompass many of the critical functions required to develop, test,
manufacture, deliver, use, and support a product throughout its life, and integration of PLM and
ERP can deliver significant benefits for companies of all sizes. IBM offers SMARTEAM as the
foundation for the PLM ‘tower’ and IBM Web Sphere as the ‘span’ that connects SMARTEAM
to multiple ERP towers. Also, Siemens SIS will address opportunities for enhanced integration
of ERP; manufacturing execution systems (MES); and product life-cycle management (PLM).

The business motivations for integrating PLM and ERP, factors that should be considered, and
various approaches and methods that can be used to perform the integration. Initial PLM and
ERP integrations occurred in larger companies because they had the resources needed to support
such projects. But all companies, regardless of size, face similar problems and have the same
needs for integrating PLM and ERP. Most companies, particularly small to medium enterprises
(SME s) within the supply chains, are working to add more value to their products and services
and not just provide commodity components. Other companies that compete on pricing need the
efficiencies that PLM and ERP integration delivers.
ERP and PLM solutions address different business needs and processes.

Another relation between the ERP and CRM. Here is the schematic diagram shows the transition
phase of the ERP to the CRM. It changes the information capacity of the customer service
representative to represent the company to the customer. They have all information from order to
dispatch that’s how the CRM integrate with the ERP and provide best performance in the less
time to the customer with minimum errors and maximum satisfaction.
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2.e) Summary:

Enterprise resource planning is the one of the other key point of the business lifecycle. Effect of
the service and relation depends upon the products, demands, production rate, product revenue in
the market and the inventory over hade capability. We can divide the ERP in the five parts
Demand, Manufacturing, Logistic, Distribution, and Order Entry.
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Chapter 3. SAP Product Lifecycle Management (PLM):

What is the Product Lifecycle Management :

To achieve product and service leadership, companies must be able to improve profitability
through integrated development capabilities that support fast time-to-market and high quality.
Integrated product development (IPD) represents a reference implementation of an end-to-end
business scenario that bridges functional silos to enable collaborative development, efficient
sourcing, and synchronized design to manufacturing. This session examines several key
capabilities required to support a comprehensive IPD business value scenario, including:

• Product design

• Material and task sourcing

• Ramp-up to production

3.a) How the Product Lifecycle Management works:

PLM concepts were first introduced where safety and control have been extremely important,
notably the aerospace, medical device, military and nuclear industries. These industries
originated the discipline of configuration management (CM), which evolved into electronic data
management systems (EDMS), which then further evolved to product data management (PDM).

PLM can be thought of as both (a) a repository for all information that affects a product, and (b)
a communication process between product stakeholders: principally marketing, engineering,
manufacturing and field service. The PLM system is the first place where all product information
from marketing and design comes together, and where it leaves in a form suitable for production
and support.

Here in the diagram I showed the different steps of the PLM process work to achieve final
production rate and enhance the revenue of the company and the service as well.
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(Courtesy KPIT Cummins)

3.b) Applications of the PLM in the business world and it’s effect:

A few analysts use "PLM" as an umbrella term that includes engineering CAD (for "information
authoring"). But product information creation tools include word processors; spreadsheet and
graphics programs; requirements analysis and market assessment tools; field trouble reports; and
even emails or other correspondence. In our view, a PLM tool focuses exclusively on managing
data that covers the breadth of a product's lifecycle, without regard to how that data is developed.
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The essential elements of PLM:

Increase product quality: Ensuring affected users consistently review product changes;
automatically notifying users about new & revised documentation; tracking that obsolete data is
promptly removed from production areas; checking that as-built products match approved design
and process documentation. Monitoring change-related defects; periodically auditing production
floor documentation; performing periodic audits of as-built product

Manage increased product complexity: Encouraging on-going collaboration and review of

product design and process files; providing consistent structure to your bill of material
management; enforcing product change review using defined workflow. Categorizing reasons for
changes.

Reduce product unit costs: Encouraging part re-use by easier searches, and thereby increasing
purchase volume. Tracking reductions in new part numbers that are issued for each new product.

Reduce time-to-market: Reducing number of items designed through re-use; reducing design
iterations via concurrent review; speeding the design release process though automated workflow
and notifications. Measuring average project development time; monitoring defect frequency
immediately after new product launch.

Reduce change-related administrative overhead: Eliminating manual change processing, and

carrying physical change packages from one approver to the next; automating materials
declarations for environmental compliance. Demonstrating change in staff throughput, such as
number of changes processed per unit time; eliminating manual processes such as copying,
faxing, shipping, "walking changes through system"

Reduce production rework and inventory scrap: Speeding changes through the review and
approval cycle; automatically calculating cost impact of changes based on item-by-item
disposition expense. Monitoring rework and scrap expenses; tracking total cost impact of
changes.

Improve customer satisfaction and enhance loyalty: Executing quickly, consistently and
predictably Asking customers and sales staff for feedback.

Plug gaps in current business processes: Encouraging business process designers and users to
seek more efficient methods, and capture these methods in well-defined PLM attributes and
workflow Assessing employee satisfaction; eliminating tedious activities.

Enhance cooperation with your supply chain partners: Encouraging early review of
requirements; exchanging design, procurement, production, and service information. Tracking
rework charges and non-recurring tooling and setup costs

3.c) Example of the company that use the PLM in their business plan:

Kraft Foods: “MRO” is a common term defined as “Maintenance, Repair and Overhaul” or
“Maintenance Repairs and Operational Supplies”. It is used to describe the materials and/or
services used to keep an asset performing its required function and hopefully, at its best
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operational efficiency. In all cases, the concept is the same where asset or service reliability
influences performance as the ready access to spare parts or supplies is very important and in
many cases critical. MRO materials can account for up to 60% of an operation’s maintenance
costs. This is a substantial impact on the cost of an operation’s maintenance and, in many cases,
a major contributor to considerable and unnecessary costs. This holds especially true where
superficial management of MRO materials occurs and a general unfamiliarity exists for materials
management best practices. A comprehensive engagement of materials management best
practices in any organization can and will provide an immediate and sustainable return on
investment. In this session, attendees will enjoy a broad overview of MRO materials
management in support of their plant maintenance functions.

3.d) Interrelationship of the PLM with the other module of the business :

It’s a familiar and common scenario: To accomplish numerous day-to-day business functions, a
manufacturing company creates several separate departments, such as purchasing, manufacturing
and sales, and then in turn, each department implements its own individual business applications.

Typically, the primary area of investment for business applications has been Enterprise Resource
Planning (ERP) to manage the tangible resources used in product manufacture and distribution –
such as purchase orders, shop floor procedures, inventory and finances. In parallel, as product
development has become more complex, manufacturers have also tended to invest in Product
Lifecycle Management (PLM) to optimize the management of product concept and design, and
engineering data and processes.

To make successful business decisions, manufacturers need to ‘bridge’ the divide that separates
these two business-critical systems. This will facilitate enterprise-wide collaboration and enable
processes that access, combine and exploit the knowledge of each. The result? A company
achieving its maximum potential. Uniting business-critical systems. Addressing strategic
business challenges.

When the applications, people, processes and information a company relies upon to run its
business efficiently are disconnected, problems can grow quickly:
 Data maintained in multiple places must be synchronized using a mix of manual and
batch processes
 Users are frustrated at having to input redundant data using multiple user interfaces,
resulting in lost time and input errors
 Information is not timely due to cumbersome information retrieval from multiple
applications
 Decision-making is slow and faulty, based on incorrect, or out-of-date, information.

At its simplest level, bridging between an ERP and PLM system aligns business processes and
facilitates the sharing of data. By helping to eliminate the typical data errors, redundancies and
process bottlenecks caused by disconnected systems, significant operational efficiencies can be
realized, improving a company’s responsiveness to marketplace demands.

3.e) Summary:
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Product Lifecycle Management is the one of the other key point of the business lifecycle. Effect
of the productivity and relations with other module can Create higher quality products, Launch
new products in less time, at a lower cost, Understand what change really costs in terms of time
and money, Control production processes—and not let process control you, Increase profits and
market share.

Chapter 4. SAP Supply Chain Management (SCM) :

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What is the Supply Chain Management:

All facilities, functions, activities, associated with flow and transformation of goods and services
from raw materials to customer, as well as the associated information flows. An integrated
group of processes to “source,” “make,” and “deliver” products. Managing flow of information
through supply chain in order to attain the level of synchronization that will make it more
responsive to customer needs while lowering costs.

 Keys to effective SCM

 information
 communication
 cooperation
 trust

4.a) How the Supply chain management works:

Supply chain management (SCM) is a process used by companies to ensure that their
supply chain is efficient and cost-effective. A supply chain is the collection of steps that a
company takes to transform raw components into the final product. Typically, supply chain
management is comprised of five stages: plan, develop, make, deliver, and return.

The first stage in supply chain management is known as plan. A plan or strategy must be
developed to address how a given good or service will meet the needs of the customers. A
significant portion of the strategy should focus on planning a profitable supply chain.

Develop is the next stage in supply chain management. It involves building a strong relationship
with supplier of the raw materials needed in making the product the company delivers. This
phase involves not only identifying reliable suppliers but also planning methods for shipping,
delivery, and payment.
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At the third stage, make, the product is manufactured, tested, packaged, and scheduled for
delivery. Then, at the logistics phase, customer orders are received and delivery of the goods is
planned. This fourth stage of supply chain management stage is aptly named deliver.

The final stage of supply chain management is called return. As the name suggests, during this
stage, customers may return defective products. The company will also address customer
questions in this stage.

The organizations that make up the supply chain are “linked” together through physical flows
and information flows. Physical flows involve the transformation, movement, and storage of
goods and materials. They are the most visible piece of the supply chain. But just as important
are information flows. Information flows allow the various supply chain partners to coordinate
their long-term plans, and to control the day-to-day flow of goods and material up and down the
supply chain.

4.b) Applications of the SCM in the business world and it’s effect:
For Direct or Indirect Materials, companies can look to Vertical Portals or Vertical B2B
marketplaces. This Portals are tailored to specific industries. While selecting foreign suppliers
business need to make sure your exchange rate fluctuations, customs import duty & delivery
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time matches your production schedules. But a high degree of price, delivery time, credit
comparison is required for selecting suppliers from these Portals.

PR Generation: A PR (Purchase Requisition) is generated automatically by MRP in case of

Direct Material used in Production or Planning Department generates PR for all Indirect Material
based on Re-order point planning or Employees generates PR for all Indirect Material, Office
Supplies or Services via e-Procurement manual PR System. In manual PR employees select from
approved list of suppliers, while in DM or IDM suppliers are automatically selected as per their
business allocation pre-configured in the system.

PR Approval: Department Head first approves PR. Then depending on PR Amount PR goes to
either FM, GM, COO or CEO for approval. Then PR goes to final approval by Purchase
Manager.

Inquiry Generation: PR will appear as inquiry on Supplier Portal. Authorized suppliers can see
it & quote price and delivery dates to it. Purchase Manager negotiates, compares quotations and
approves bid from various suppliers.

PO Generation: Approved Inquiries generates Purchase Order in formats specified by

Suppliers. Wide variety of formats supported right from Paper Printout to Email to online
Webpage to XML based.

PO Approval: PO is send for Approval to Purchase Manager & FM or GM or COO or CEO

based on PO Amount. After PO Approval PO is finally published in that Suppliers Portal or send
to supplier via physical media.

PO Acknowledgment: Supplier Acknowledge PO through Supplier Portal.

PO Tracking: PO History and Execution is tracked by Purchase & Planning Departments.

Supplier Stocks: Supplier updates their stock levels from time to time through Supplier Portal to
indicate planner future trends of supply. Supplier also refers to published Supplier Forecast
published by customer to plan their inventory requirements.

Supplier Performance Analysis: This modules allows Purchase Department to evaluate

suppliers performance based on certain criteria's. Action of continuing or discontinuing supplier
is based on this performance evaluation.

Supplier Evaluation & Registration: New Suppliers are evaluated and registered with the help
of this module.

SCM Deliverables includes following:

Supplier Portal: This will allow supplier to quote/bid to Inquiries. It will also allow supplier to
key-in their stock levels. It will also allow supplier to key-in PO Acknowledgment and Delivery
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Dates. Suppliers Invoices are submitted online along with online DOs. Payment
Acknowledgement & Account Statements settlements are also done online through this portal.

Purchase Dept. Employee Portal: This will allow Purchase Dept. Employees to Register
Supplier, Approve PR, Maintain Pricelist, Generate Inquiries, Select Suppliers, generate
electronic Purchase Orders & track deliveries online.

Employee e-Procurement Portal: e-Procurement distributes controlled buying power

throughout the company. An employee can generate PR through this portal. Then he can see his
PR Status - Approved or Disapproved. If Approved then he gets date & details of product he is
going to get.

4.c) Example of the company that use the SCM in their business plan:
Levi Strauss is a company that was once highly successful and highly competitive in the denim
jeans market. Like many companies, as times changed, Levi Strauss found that its success levels
were rapidly declining. In 1996 Levi’s sales reached their peak at $7.1 billion. In 2002, their
sales had declined to a low of $4.1 billion (Girard, 2003). The company’s market share followed
the same trend decreasing from 18.7 percent in 1987 to 12 percent in 2002 (Girard, 2003). This
decline in the market is not unlike what has happened to many other companies that have not
adapted as times have changed. This is especially related to the increase in competition in the
market. This gives consumers more choices and unless a company can provide a certain benefit
more effectively and at a lower cost than the competition, business is almost certain to begin to
decline.

Levi Strauss recognized their problems and began to take action. The first step involved
responding to market needs and providing a less expensive product in a more convenient
location. Based on this idea, Levi Strauss introduced their Signature jeans line, a new line with a
more basic jean product for a lower price. The new product also required a change in
distribution, with Levi Strauss recognizing that the product had to be more accessible and more
suited to the way the target market shops. Based on this, Levi Strauss teamed up with Wal-Mart,
who will stock their product to provide customers with easy access to the product, while
providing Levi Strauss with the volume of customers they need.

This business decision then had a major impact on Levi Strauss’s supply chain. Before the
decision to sell their products via Wal-Mart, Levi Strauss stocked via the smaller department
stores such as Macy’s and J.C. Penney. While there are over 200 Macy’s stores and over 1000
J.C. Penney stores, this is small compared to the number of Wal-Mart stores, which is over
3400. The mass market stores such as Wal-Mart also have different requirements than the
smaller retail stores, making the supply chain even more essential to Levi Strauss’s success. The
focus on the supply chain began with a whole new approach to supply chain management. As
Girard (2003) notes, “Being a supplier to Wal-Mart demands a certain level of performance –
and cost control. Wal-Mart drives you to work with your supply chain to put the same
requirements on your suppliers that Wal-Mart puts on you.” This approach was not something
Levi Strauss was familiar with and required a major rethinking.

Control was one of the major issues. As Girard (2003) notes, “At Levi’s, executives couldn’t
track where its product was moving in the pipeline – how many pairs of jeans were being
manufactured in which factories and how many were sitting in trucks or in distribution centers.”
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This represents a major control issue, since a company cannot control the distribution process if
it does not have the information required to know what is occurring. This lack of information and
control resulted in a poor performance, with only 65 percent of Levi Strauss’s products reaching
the customers on time.

4.d) Interrelationship of the SCM with the other module of the business:
The fundamental task of any company executive is to increase the value of the enterprise by
reducing cost and increasing revenue. To accomplish this goal, many companies have launched
SCM initiatives to streamline production and delivery (cost reduction) and CRM initiative to
identify and optimize customer demand (revenue generation). Independent SCM and CRM
initiatives have seen success. But in today’s era of intense competition and growing customer
demand for individualized treatment, executives must combine SCM and CRM initiative
profitably and efficiently. In doing so, supply chain management and customer relationship
management can exploit their intrinsic interrelation and bring both to a new level of
performance.

The internal supply chain of the focal manufacturing company includes sourcing, production,
and distribution. Sourcing or purchasing of the company is responsible for selecting suppliers,
negotiating contracts, formulating purchasing process, and processing order. Production is
responsible for transforming raw materials, parts or components to a product. Distribution is
responsible for managing the flow of material and finished goods inventory from the
manufacturer to customer. Enterprise Resource Planning systems (ERP) integrate the entire
company’s information system, process and store data, cut across functional areas, business
units, and product lines to assist managers make business decisions. As an IT infrastructure, ERP
influences the way companies manage their daily operations and facilitates the flow of
information among all supply chain processes of a firm.
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4.e) Summary:

Supply Chain Management is the one of the other key point of the business lifecycle. Effect of
the supply chain and relations with other module can Create higher quality distribution,
distribution in the less time, at a lower cost, Understand what change really costs in terms of time
and money, Control production processes, timely distribution and very high customer
satisfaction

Chapter 5. SAP Supplier Relationship Management (SRM):

What is the Supplier Relationship Management:

In today’s competitive marketplace, companies must focus scarce resources on the strategies
most likely to yield success to their organization. Supplier relationships have become
increasingly important in ensuring this success. At a time when many organizations are turning
to outsourcing to save money, the quality of your relationships with these suppliers can have a
critical impact on the success of your company. Supplier Relationship Management (SRM), a
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subset of supply chain management, is concerned with understanding who your most important
suppliers are and how you can focus your time and energy on creating and maintaining more
effective strategic relationships with them.

5.a) How the Supplier Relationship Management works:

An effective SRM solution is an information system that provides Supplier Intelligence through
an enterprise-wide, integrated view of a company’s relationships with its suppliers and the
commodities or services they provide. It enables you to collect, analyze and leverage all aspects
of your supplier data and purchasing history, giving you vital insight into your supply base and
purchasing history. An effective SRM solution contains essential components such as ranking,
rating and optimization that allow you to reduce your supply base and reduce your overall costs.
Ultimately, an effective SRM solution gives your organization a competitive edge by allowing
you to:

 Reduce direct and indirect costs and improve bottom-line profitability.

 Understand what you are buying and from whom.
 Minimize the risk of supply chain disruptions.
 Select the best suppliers to gain advantage over competitors.
 Streamline the supply-chain management process by collaborating with business
units across the enterprise.
 Assure that your organization's resources are prioritized on the most critical
suppliers.

Through an integrated set of data management and analytical applications, SRM helps to
leverage the investment you've already made in operational systems and applications by adding a
layer of intelligence you can't get anywhere else. This Supplier Intelligence helps your
organization turn existing purchasing data that is often difficult to access into meaningful
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information you can use strategically in procurement activities. With Supplier Intelligence, you
will begin to understand that not all supplier relationships are the same and that you need to look
at both current and historical information to navigate future trends. Some suppliers are tactical
and may require you to streamline your method of interacting with them. Other suppliers are
more strategic. Understanding and monitoring strategic suppliers provides a greater positive
impact on your supply chain and lets you maximize profitability, minimize risk and achieve a
competitive advantage.

5.b) Applications of the SRM in the business world and it’s effect:

Relationships among key stakeholders is what drives a business, other business assets are a result
of the relationship transactions. While businesses make considerable investment in automating
other areas of business, much less attention is paid to in using automation to improve
productivity and quality of relationships - probably because they do not directly generate
revenue. However, over the last few years, businesses have recognized the need for investment
in CRM and SRM systems to improve revenue and reduce cost.

As a complement to other two key information assets, Transaction and BI, relationship
applications represent a significant area of opportunity to improve financial performance. Some
obvious areas are as follows:

 B2Customer/Consumer applications can improve revenue and reduce lost sales

 B2S applications can reduce cost and improve quality
 B2I applications can ensure that business has adequate capital available
 B2E applications can reduce cost, improve collaboration and therefore improve quality of
business decisions
 B2P applications can improve competitiveness through collaboration
 Develop better communication channels
 Ensures supply costs are contained and that opportunities for improving the cost
effectiveness of services are regularly explored and progressed
 Improved delivery times and faster response times
 Better quality assurance/warranties
 Opportunity to reduce waste, simplify processes and improve productivity
 Achieve greater cash flow and better cash management
 Ensures supplier capacity is matched efficiently with demand
 Ensures suppliers continue to improve their own products and services
 Ensures service-level agreements are met
 Opportunity to create a competitive advantage through deeper relationship
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The Gartner Group gives the following definition of a SRM: “the practices needed to establish
the business rules, and the understanding needed for interacting with suppliers of products and
services of varied criticality to the profitability of the enterprise”. Other summarizes SRM as the
next generation of e-procurement or more specifically an integrated solution “that bridges
product development, sourcing, supply planning, and procurement across the value chain”. In our
approach, identifying the internal components that needs to be linked is not our priority. We
want to focus on services that have to be offered to the suppliers and the company employees.
We will therefore use the same three pillars, adapted to a procurement perspective: marketing,
suppliers services and purchase. In this case, marketing has to be understood as the mean to
attract, filter suppliers, and promote the company needs. As for the CRM, SRM needs to support
the company-supplier relationship during its entire lifecycle, meaning:
• Attract new suppliers: in a knowledge economy where goods can be produced anywhere
around the world, finding the “best” supplier is becoming a complex task;
• Acquire new suppliers by doing business with them;
• Suppliers retention and development: retaining the best suppliers is the best warranty to
maintain a competitive edge;
• End of relationship by rejection or termination of contract: ending a contract with “bad”
suppliers is a necessary safeguard for the company and understanding why “good” suppliers are
leaving is valuable information.

5.c) Example of the company that use the SCM in their business plan:
All successful companies build strong relationships with their suppliers. Companies are not
isolated entities that simply purchase goods and services from individuals who happen to be able
to supply them at that particular time. Companies typically make larger purchases. In reality,
successful companies recognize the need to build bridges between their organization and the
vendors that they work with by establishing strong buyer/seller relationships.

Supplier relationships are different from simple purchasing transactions in several ways. First,
there can be a sense of commitment to the supplier. For example, if a vendor sells light bulbs, he
can feel confident that the buyer will come to him the next time the company he represents
requires a new shipment of light bulbs. Another element of these supplier relationships is
advanced planning. Buyers don't just communicate with suppliers when a procurement need
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arises; they also contact them in order to discuss their future needs and to determine how best to
satisfy those needs by working together. Here is the example: Little is known about the impact of
SRM on health care organizations since its implementation is still in the fledgling stages.
Therefore the case study at hand simply presents a first field report. Nevertheless, it can help to
get a better understanding of the importance of SRM in day-to-day business of a health care
organization.

With an average of 31.000 inpatient and 161.000 outpatient treatments and about 4.800
employees the subject under study is one of the largest hospitals in Switzerland. Every day, the
purchasing department handled 950 orders either by phone or per fax. Therefore the great part of
a buying agent’s labor time was used to (manually) process these orders. In 2006, the purchasing
department manager decided to introduce the concept of SRM as an organizational and technical
response to the actual drawbacks. Thereby two major objectives should be attained:
1. Cost of supplies (approximately 93 million Euros annual material costs a year) should be
reduced,
2. Procurement and logistical processes should be optimized across the different clinics (from
ordering to inhouse delivery).

In the past, the purchasing department of the surveyed hospital was concentrated on the
independent optimization of cost structures and relationships to its major suppliers. Relationships
to other hospitals and suppliers were informal, unclear, and inefficient. As price margins for a
single hospital are constantly declining, a purchasing association with three other hospitals,
comparable in size and maturity level.

The supply managers of the four hospitals decided to center on the procurement of therapeutic
and diagnostic equipment in a first step To have a better basis for negotiation, the information
needs with reference to products, prices, and suppliers were defined. However, in order to
facilitate comparison for the conjoint determination and pooling of the demand, a common
material and supplier classification was needed. After that implementation of the SRM that will
enhancement in the overall logistic support an interface with the material management system.
That raises the performance of the hospitals and very good control on the inventory and services.

5.d) Interrelationship of the SRM with the other module of the business:
The SAP SRM solution integrates seamlessly with enterprise resource planning (ERP), product
life-cycle management (PLM), and supply chain management(SCM) applications to ensure an
effective implementation of cross application business processes.
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As given case study of the hospital we seen that the hospitals that uses the SRM they have
improvement in the service. But the improvement also strictly depends on the other module.
As further detail in the case study all the incoming material (inward inventory) are added to the
ERP. So if any other hospital of that group required that material then they can share the resource
and no single hospital needs to handle the separate inventory. Also SRM also indirectly related to
the SCM, PLM, CRM.
As there is less overstocked inventory so it give batter performance in the PLM. It boosts the
SCM efficiency because of the multiple supplier integration. And because of the better service
there is the better performance for the service given to the customer, which boosts the effective
work for the CRM.

5.e) Summary:
Supplier Relationship Management is the one of the other key point of the business lifecycle.
Effect of the supplier chain and relations with other module can Create higher quality Priced
effectiveness, better quality, better after sales service, at a lower cost, reduce waste, simplify
processes and improve productivity, better cash management, Control production processes.

References:

Mastering the SAP business information warehouse

McDonald, Kevin.

SAP : inside the secret software power

Meissner, Gerd.

SAP ImplementationUnleashed: A Business andTechnical Roadmap toDeploying SAP

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George W. Anderson; Charles D. Nilson Jr.; Tim Rhodes; Andreas Jenzer; Sachin Kakade; Jeff
Davis; Dr. Parag Doshi; Heather Hillary; Veeru Mehta; Bryan King

SAP Planning: Best Practices in Implementation

By: George W. Anderson

http://www.sas.com

http://www.worldscibooks.com

http://www.epiqtech.com

http://help.sap.com