SAP an overview
SAP is an ERP package, which is used in many
companies worldwide.
The full form for SAP is System Application
Products in Data Processing. The product is German in origin.
The full form of ERP is Enterprise Resources Planning. Previously
companies used to do MRP i.e. Material Resource Planning.
ERP is the up gradation of the same. The need for ERP arose
due to lack of proper / common database available for all
the functions in an organization.
For example, customer records as per sales
department may be showing a different balance /address in
comparison to the records maintained by the accounts department.
Stock balance and value as per Stores department could vary
vis-à-vis the values as recorded by the accounts
department. Also typically data / records of various departments
were maintained on different formats or on different platforms.
Certain departments of a company could be working in a computerized
environment and that too on different packages / operating
systems like Unix /oracle. Some other departments could
be maintaining their records manually.
The situation leads to improper data available
to the Management to plan and run their business. Therefore
a need was felt to have a package that has a Common database
and interconnects all departments / functions and also enables
ON LINE entry / access to data/ records. This consequently
led to the development of ERP packages worldwide like SAP
(the biggest player), BAAN, Peoplesoft and J.D.Edwards.
The features of SAP include various modules
and sub-modules. The main modules are financial accounting-FI,
Production planning-PP, Sales and Distribution-SD, Controlling
(costing)-CO, Materials management (MM) and Human Resources
(HR). There are various other modules like Plant maintenance,
Quality management etc.
The database is common for all modules and
avoids duplication of maintaining master records. For e.g.
the customer records will be maintained in SD module like
customer code, customer type, Credit/payment terms, address
etc. The same would be used by the FI module while perusing
the customer accounts or entering the receipt of payments.
Similarly the sales manager can view the customer balances
in the FI module for follow up with the customer. Another
example would be Vendor Master maintained in MM module which
can be accessed by the FI module user to check the purchase
order details, Delivery schedule, Payment terms etc. Also
one can access information on whether the material order
has been received by the stores department, whether the
same is under inspection or if there is any shortage or
rejection. Once the material has been accepted and entered,
the systems will automatically pick up the value of the
material from the purchase order. The accounts department
on receipt of the invoice can verify the same through' the
MM module and say whether the Goods Inward Notice is available
on the system and give credit to the Vendor's account for
the value of the material purchased.
A notable feature of SAP is, wherever a transaction
of a financial nature takes place, whichever module is in
use, the system generates an accounting entry, this is contrary
to the normal belief that—transaction takes place only
in the accounting department. For example, withdrawal of
material /item through an indent from the stores will not
only result into the physical stock being reduced but also
an accounting entry being generated whereby the material
consumed A/c (P/L expense /Revenue A/c) will be debited
and the stock account will be reduced (Balance sheet item).
This will lead to generation of an accounting document in
MM module itself. The value of the item drawn could depend
on the policy of the company whether it adopts FIFO, LIFO,
and standard cost method s of valuation of stock.
A natural question can arise -- whether the
non-financial personnel of a company can undertake accounting
transactions. Herein the initial mapping of the systems
and the processes will be done at the time of the SAP implementation
and the accounting impacts will be studied and built into
the Masters for automatic accounting effects for various
types of transactions. There is a Master called Chart of
Accounts, which is the backbone of SAP. It contains all
accounts with their code, nature linkages, Groupings etc.
Of course this master has to be built very carefully and
exhaustively.
The transaction-taking place in SAP will
be recorded with the user identification, time and date.
No transaction can be erased. Any erroneous transaction
can only be rectified or reversed. Each transaction being
recorded will lead to a specific document number being created
based on the transaction type and the number ranges as defined
in the document masters. The user by now can appreciate
that it is a system, which envisages lot of diligence and
security. Therefore only authorized personnel can deal with
the system in order to avoid malfunctioning and misuse of
the system. User identification is to be given only to key
personnel who are well trained and well aware of the impact
of the transactions to be undertaken by them. Authorizations
are given either for module based and /or screen based transactions.
For example, a user in MM module will not be allowed to
operate on FI module. However " view " authorizations
for certain personnel can be given on case-to-case basis.
Authorization and monitoring of users have to be done by
the System Administrator. This is a key function and it
is very important to avoid misuse/ malfunctioning of the
system. Large and fast servers should be made available
for quick access of data. Proper facilities of back up and
UPS should be provided. Care should be taken to avoid loss
of data.
SAP is a package with minimal customizations
and the company implementing the same may have to re-orient
its business processes to fall in line with SAP requirements.
