SAP stands for “Systems, Applications, and Products in Data Processing”. The SAP R/3 system provides a client/server business application solution for companies of all sizes and all industry sectors. It consists of several application modules that support all of a company's business transactions. Examples of application modules include Financial Accounting, Human Resources, Production Planning, and Plant Maintenance.
SAP has designed an R/3 application module for business functionality in every business area in a company. R/3 application modules are integrated. So when a change is made to one application module, R/3 automatically updates the corresponding data in the other application modules. The automatic update of information in R/3 occurs as soon as data is entered into the system. This is referred to as “real-time” processing.
The application modules are integrated into a work flow business events and processes across department and financial areas. Any business that wants to fully integrate its business processes must use on source for customer, product, and supplier data. R/3 allows for this by providing a set of master records for the enterprise. This means that an entire company can share the same customer or material information that is entered in the R/3 master records.
The integration of application modules in real-time allows all the employees in your company to see the most up-to-date information in real-time at their desktops. It also reduces data redundancy. Globalization is one of the biggest challenges facing any organization seeking to integrate its business processes. A business system must be capable of supporting all of an organization's offices, across the globe. The R/3 system has no organizational or geographical boundaries. It is designed for international use and supports multiple languages, currencies, and taxation systems.
To examine what application modules do and how they connect to each other in more detail, let's take a look at the following application modules:
- Sales and Distribution (SD)
- Materials Management (MM)
- Financial Accounting (FI)
- Production Planning (PP)
Let's say a customer has ordered 100 motors from your company XYZ. You use the Sales and Distribution (SD) application module to enter the customer's request for the motors into R/3. This is done by creating a sales order. Once a sales order has been created, the Sales and Distribution module generates a delivery document, which contains information needed to ship the motors.
For example, the delivery document informs warehouse managers which motors to collect from stock. Once the motors have been shipped, an invoice is created to bill the customer. Materials Management (MM) application module is now used for procurement and inventory management. Elements of this application module include:
- Invoice verification
- Material valuation
- Vendor evaluation
The Financial Accounting (FI) application module manages and reports on sub ledger accounts using a chart of accounts that is defined by your company. Examples of these sub ledger accounts include:
- The General Ledger
- Accounts Receivable
- Accounts Payable
The Production Planning (PP) module is used to plan and control the manufacturing activities of a company. Some of the elements of the Production Planning module are:
- Bills of materials
- Sales and operations planning
- Material requirements planning
- Production orders
Let's look at R/3 integration by examining how the Sales and Distribution application module integrates with other application modules when you create a sales order.
- When a sales order is created, integration occurs between the Sales and Distribution module and the Financial Accounting modules. This is because R/3 checks the customer's credit limit, which is stored in Financial Accounting. Another reason is that the creation of the sales order updates your company's cash forecast, which is also stored in the Financial accounting module.
- When you create a sales order, Sales and Distribution integrates with the Materials Management module. This is to verify that the ordered material will be available on the requested delivery date.
- Sales and Distribution integrates with the Production Planning module when materials entered on sales orders use a planning strategy, such as make-to-order. When this happens, R/3 automatically creates a production order in the Production Planning module.
Application modules share a common user interface and architecture. They are also navigated in the same way. So in addition to being integrated technically, they have an integrated look and feel.
Other R/3 application modules include:
- Controlling (CO)
- Fixed Asset Management (AM)
- Project System (PS)
- Work flow (WF)
- Industry Solutions (IS)
- Human Resources (HR)
- Plant Maintenance (PM)
- Quality Management (QM)
- Enterprise Controlling (EC)
- Investment Management (IM)
- Treasury (TR)
- Service Management (SM)
When R/3 is first installed, each application module will need to be customized to suit a company's business needs. The groups of employees from a company who implement and configure R/3 are commonly called the project team or the implementation team. Sometimes companies implement a core group of R/3 application modules, and then add additional modules or functionality over time.
