MATERIAL MANAGEMENT ON SAP AT USHA MARTIN LTD

SUMMER INTERNSHIP PROJECT REPORT

Submitted to Department of MBA

Cambridge Institute of Technology

In partial fulfillment for award of the degree

Of

MASTER IN BUSINESS ADMINISTRATION

By

Shilpi Kumari

Reg. no. - 06

CAMBRIDGE INSTITUTE OF TECHNOLOGY

Corporate Guide: Faculty Guide:

Name- Nagendra Kumar giri Name- Mrs. Salini Singh

Designation – Manager(purchase dept.) HOD (Dept. of MBA)

1
 TO WHOM IT MAY CONCERN

This is to certify that Ms. Shilpi Kumari of Cambridge Institute of Technology

has undergone project training in our organization from 04.06.2018 to
13.07.2018.

During this period, she was assigned a project titled “SAP MM Modules at
Usha Martin Limited”. It is a bonfire work carried out by Ms. Shilpi Kumari
under my guidance and supervision.

I wish all success in his future career.

Name of the Guide: Mr. Nagendra Kumar Giri

Signature:

Date:

2
 DECLARATION

I hereby declare that the project entitled Material Management on SAP

submitted for the M.B.A. Degree is my original work and the project report
has not formed the basis for the award of any degree, fellowship or any other
similar titles.

Place:

Date:

Signature of the Student

3
 CERTIFICATE FROM INTERNAL GUIDE

Certified that Shilpi Kumari & Univ. No. ___________ has carried out the
project work presented in this project report entitled “Material Management
on SAP for the award of Master in Business Administration from
Cambridge Institute of Technology, Tatisilwai under my supervision. The
project report embodies results of original work and studies carried out by
student himself and the contents of the project report do not form the basis
for the award of any other degree to the candidate or to anybody else.

(Name of the Guide)

PROJECT GUIDE

Designation:

Date:

SEAL OF THE INSTITUTE

4
 ACKNOWLEDGEMENT

The success and final outcome of this project work required a lot of guidance
and assistance from many people and I am extremely fortunate to have got
this all along the completion of my project work on SAP MM Modules in Usha
Martin Ltd. Whatever I have done is only due to such guidance and assistance
and I would not forget to thank them. I respect and thank Mr. Arvind Kumar
(HOD HRD) for giving me an opportunity to do this project work and providing
me support and guidance which made me complete the project work on time.
I am extremely grateful to him for providing such a nice support and guidance.

I am really grateful because I managed to complete this project work within

the time given by Mr. Nagendra Kumar Giri. This project work cannot be
completed without the effort and co-operation from him.

I extend my gratitude to Usha Martin Ltd., Ranchi for conscientious guidance

and encouragement to accomplish this project work.

I also acknowledge with a deep sense of reverence, my gratitude towards my

parents and member of my family, who has always supported me morally as
well as economically.

Last but not least, I would like to express my gratitude to my friends and
respondents for support and willingness to spend some time with me.

Any omission in this brief acknowledgement does not mean lack of gratitude.

Thanking You,

Shilpi Kumari

5
Table of Contents

Chapter 1: Introduction..................................................................................................... 8
1.1. Introduction ................................................................................................................ 8
1.2. Scope of the Report ..................................................................................................... 8
1.3. Statement of the problem ............................................................................................ 8
1.4. Objectives of the study ................................................................................................ 9
1.5. Research methodology................................................................................................. 9

Chapter 2: Profile ........................................................................................................... 10

2.1. Introduction of Company ................................................................................................. 10
2.1. Finished Product.............................................................................................................. 11
2.1.1. Fine Code........................................................................................................................................... 11
2.1.2. Aerial Rope ........................................................................................................................................ 13

Chapter 3: Literature Survey ........................................................................................... 16

3.1. Conceptual and theoretical review of SAP Modules .......................................................... 16
3.1.1. SAP Controlling (CO) .......................................................................................................................... 16
3.1.2. SAP Sales and Distribution (SD) ......................................................................................................... 17
3.1.3. SAP Production Planning (PP) ........................................................................................................... 17
3.1.4. SAP Materials Management (MM) ................................................................................................... 17
3.1.4. SAP Quality Management (QM) ........................................................................................................ 17
3.1.5. SAP Human Capital Management (HCM) .......................................................................................... 17

3.2. Research review .............................................................................................................. 18

3.2.1. Features of SAP MM.......................................................................................................................... 18
3.2.2. Functions of Material Management ................................................................................................. 18
3.2.3. Primary Functions ............................................................................................................................. 18
3.2.4. Secondary Functions. ........................................................................................................................ 19
3.2.5. SAP Structure in Materials Management .......................................................................................... 19
3.2.6. SAP MM Cycle ................................................................................................................................... 19
3.2.7. List of Transaction Code Required for MM in SAP ............................................................................ 20
3.2.7. Movement Types for MM ................................................................................................................. 20

Chapter 4: Data Analysis and Interpretation ................................................................... 21

4.1. Introduction .................................................................................................................... 21
4.1.1. Sizing and blueprinting ...................................................................................................................... 21
4.1.2. Identify high availability and disaster recovery requirements .......................................................... 21
4.1.3. Engage SAP solution stack vendors ................................................................................................... 21
4.1.4. Staff TSO ............................................................................................................................................ 21
4.1.5. Training ............................................................................................................................................. 22
4.1.5. Prepare for cutover ........................................................................................................................... 23

6
 4.2. An Overview of SAP MM Software System ....................................................................... 23
4.2.1. Login Screen ...................................................................................................................................... 24
4.2.2. Standard Tool-bar Icon ...................................................................................................................... 25
4.2.3. Standard Exit Keys ............................................................................................................................. 26
4.2.4. New Session Icon .............................................................................................................................. 27
4.2.5. Log Off ............................................................................................................................................... 27

Chapter 5: (Project Part) ................................................................................................. 28

5.1. Benefits of Implementing SAP MM Software System ........................................................ 28
5.1.1. Inventory Management: ................................................................................................................... 28
5.1.2. Offering More Products to Customers .............................................................................................. 29
5.1.3. Accounts Payable .............................................................................................................................. 30
5.1.4. Budgeting .......................................................................................................................................... 31
5.1.5. Control .............................................................................................................................................. 31
5.1.6. Reporting ........................................................................................................................................... 32
5.1.7. Costing............................................................................................................................................... 32
5.1.8. Security.............................................................................................................................................. 33

5.2. SAP MM – Master Table .................................................................................................. 33

5.2.1. Material Master Data ........................................................................................................................ 33
5.2.2. Vendor Master Data .......................................................................................................................... 34
5.2.3. Vendor account groups ..................................................................................................................... 34
5.2.4. Material Types................................................................................................................................... 37
5.2.5. Material Groups ................................................................................................................................ 38
5.2.6. MM Flow Chart ................................................................................................................................. 39

5.3 SAP MM - Purchase Requisition ........................................................................................ 41

5.3.1. Type of Purchase Order..................................................................................................................... 44
5.3.2. SAP Security ...................................................................................................................................... 48

SAP MM - Transaction Codes .................................................................................................. 48

Chapter 6: Advantages, Disadvantages and Challenges Of SAP ERP................................. 52

6.1. SAP ERP Advantages ........................................................................................................ 52
6.2. SAP ERP Disadvantages.................................................................................................... 53
6.3. SAP ERP Challenges ......................................................................................................... 54

Chapter 7: Conclusion ..................................................................................................... 55

BIBLIOGRAPHY....................................................................................................................... 56
Website ....................................................................................................................................................... 56
Personal Interview ...................................................................................................................................... 56
Usha Martin Departments .......................................................................................................................... 56

7
Chapter 1: Introduction

1.1. Introduction
SAP Materials Management (MM) is an ERP solution that ensures organized and structured
process associated with materials management.

SAP MM module as the term suggests manages materials required, processed and produced
in enterprises. Different types of procurement processes are managed with this system. Some
of the popular sub-components in SAP MM module are vendor master data, consumption-
based planning, purchasing, inventory management, invoice verification and so on.

One of the most important SAP Modules where MM is Materials Management - underpins
the supply chain, including Requisitions, Purchase orders, Goods receipts, Accounts payable,
Inventory management, BOM's, Master raw materials, finished goods etc.

The Materials Management module (SAP MM) consists of all master data, system
configuration, and transactions to complete the Procure to Pay process. This process map
spans from MRP generated procurement proposals through final invoice receipt and
verification.

1.2. Scope of the Report

This report is made only for academic purpose and to fulfill the requirement for internship.
This report has covered the direct and indirect aspects of SAP MM software system,
including the benefits and challenges. In addition, the report is focused only on Usha Martin
Limited and the modules of SAP MM that are being currently implemented by them. Any
more modules of SAP implementation that may take place at Usha Martin Limited in future
has not been included in this report.

1.3. Statement of the problem

During my internship at Usha Martin Limited, I heard that they were going to implement the
new SAP MM software system. The top management at Usha Martin thought that by
implementing the new SAP MM software system, it would be a turning point for Usha
Martin Limited. The SAP software system would allow them to provide better services,
defend their position, analyze their competitors and provide other benefits. Because the
implementation of SAP software is quite interesting and it does not take place often. I
thought that it would be quite interesting if I did a report on “Benefits of implementing SAP
MM at Usha Martin Limited” and would give us an insight. The report is an integral part of
my internship and I have tried my level best to collect all the direct and indirect data in order
to provide a complete overview. I have put my best efforts to be able to focus strongly on the
topic so that the benefits of implementing SAP software system could be clear to us. I am
grateful to my academic supervisor for allowing me the work on the topic.

8
1.4. Objectives of the study

The main or broad objective of the report is to find and describe the benefits of implementing
SAP MM software system at Usha Martin Limited. Because SAP implementation is a big
decision for any organization, we want to know about the benefits wanted by Usha Martin.

Specific Objectives:

Besides the main or broad objective, the report has some specific objectives, which are given
in the following:

To know about the problems faced by Usha Martin Limited with the old system.

To know how these problems are solved by implementing SAP system.

1.5. Research methodology

For this report, information has been gathered from both primary and secondary sources.

Primary Sources:

For primary data, several face-to-face interviews have been conducted with officials from
different departments. Information provided by them has been very important for this report.

Mohammad Mohibul Islam, Senior Officer- Finance and Accounts, Usha Martin Limited

Mohammad Zane Alam, Senior Officer- Finance and Accounts, Usha Martin Limited

Secondary Sources:

To understand SAP MM software system, data has been gathered from the internet and
different articles, and their sources have been given in the references part.

9
Chapter 2: Profile

2.1. Introduction of Company

The ISO 9001-certified 100,000 MT / annum-manufacturing facilities at Ranchi (Eastern
India) is 2nd largest producer of ropes in the world. Since its inception, the division has
continuously developed and expanded its range of product offerings and is considered a
pioneer in certain classes of products in India. Steel wire ropes manufactured by the division
find wide applications in oil exploration, mining, elevators, Crane, fishing, construction, load
transportation and general engineering sectors. It finds varied use in different parts of the
world known for their excellent quality, long life and low maintenance, and are the preferred
choice of customers across nations.

Ropes, ranging from 2 mm to 100 mm diameter find varied applications. The wide ranges of
products are used in underground mining, surface mining, mooring, onshore and offshore
drilling, fishing, elevators, cranes, aerial haulage and track installations besides various
general engineering applications. Pre-stretched ropes, locked coil wire ropes and spiral
strands made in Usha Martin are used in suspension bridges, antenna masts etc.

Backed by a strong international distribution network our ropes have found a place in
different corners of the world.

OTHER PARTICULRS

Location Chotanagpur Plateau

Plant Area 112 Acres

Nearest Town Ranchi (13 Km)

Nearest Railway Station Tatisilwai (1 Km)

Nearest Airport Ranchi (17 Km)

Nearest Highway N H-33 (8 Km)

Nearest Port Kolkata (412 km)

Power Contracted demand 8000 KVA

Water 2400-3200 m3/day

Sources Subernekha River

10
2.1. Finished Product

2.1.1. Fine Code

Usha Martin, extended vast experience in rope making technology towards manufacturing of
Fine Cords. Usha Martin Fine Cords find application as the inner element for the Automotive
Control Cables and also in boring applications and as Pull Cord cables for laying of
Television cables.

Size Range

The size range for overall diameter of finished cords is 1.20mm to 6.00mm.

Construction

We can provide fine cords in the following constructions:

 7x7
 7/19
 1/7
 1/19

11
Low Relaxation Prestressed Concrete (LRPC) Strands

In keeping with the demands of the international market, we have introduced Low
Relaxation Prestressed Concrete (LRPC) Strands for the construction industry in 2001. A
steel member that is prestressed and embedded in concrete, loses the initially applied stress
exponentially with the passage of time. The single most important factor attributing to this
loss in stress relaxation property of the steel itself. By treating the steel through a thermo
mechanical process known as stabilizing, the propensity of the steel to "relax” under a
stressed condition is controlled to a great extent. Some of the main advantages
that our customers derive by using low relaxation strands are listed below

 Up to 10% reduction in steel requirement possible

 Saving in number of anchorages, ducts, sheathings, wedges and labor resulting in
overall reduction of project cost.
 Reduction in concrete requirement due to reduced size of structural members
 Hot stretch process used during the manufacture of LRPC strands produces a nearly
straight strand, thereby eliminating necessity for extra post straightening treatment.

Applications

Pre-stressed concrete girders for road, river & railway bridges and flyovers, pre-stressed
concrete domes, slabs, silos, hangars, aqueducts, viaducts & railway sleepers.

Patenting and Galvanizing Facility

 50ft electrically fired furnace with inline cleaning, coating, galvanizing facilities.
 30ft propane fired LeFour furnace with inline cleaning, coating, and galvanizing
facilities.
 30ft propane fired rod DSW patenting furnace
 Galvanizing plants of different capacities
 Stress relieving facilities for wires and strands
 Annealing furnaces (bell type)
 Vacuum annealing furnace
 PLC driven automatic pickling plant
 Manually operated pickling plant

Quality & Testing

Wires and Strands hold a premier position in the domestic market and are also exported to
different part of the world. Used for different purposes across a gamut of industries, our wires
and strands are continuously put through rigorous and demanding conditions. To ensure that
our offerings match the international standards, we have set high internal quality standards.

12
Plant located at Ranchi has been awarded ISO 9001 due to our emphasis on maintaining
global quality standards.

Wires confirm to various specifications such as

 IS Specifications
 JIS Specifications
 British Specifications
 ASTM Specifications
 DIN Specifications


Tested using the best modern facilities our wires are produced to ensure that they match the
quality for which we are renowned.

2.1.2. Aerial Rope

We are the undisputed leaders in the domestic Aerial Rope sector. Our product offerings
include Aerial haulage ropes, material handling ropes, rope for passenger ropeways and other
track ropes. Our ropes are renowned for their low maintenance, long life, excellent quality
and strength.

Size Range

 The size range generally preferred for such ropes is

19mm to 38mm

Specifications

Our Aerial ropes cater to the following specifications

 IS 10891/84 Part I
 IS 10892 / 84 Part IV

Steel Code for Conveyer Belts

Conveyor belts - one of the most popular means for bulk material handling - finds widespread
application in mines, cement and coal industries, ports & terminals, power stations etc. When
reinforced with steel cord these belts last longer, allow higher operating speeds and offer
better shock and rupture resistance than conventional fiber reinforced belts. In addition, very

13
low elongation and absence of creep, makes steel cord the ideal reinforcement for long haul,
high strength belts (from 500 to 2000 N per mm of belt width).

In March 2003, the US $ 300 million Usha Martin Group, entered into a Joint Venture
with Gustav Wolf, Germany for production of Steel Cords for Conveyor Belts at a special
facility set-up adjacent to the main Wire & Wire Rope plant at Ranchi and known as Gustav
Wolf Specialty Cords Limited. Gustav Wolf, Germany is one of the global pioneers in
producing Steel Cord for Conveyor belts with decades of experience behind them and with
all major Conveyor Belt manufacturers on their customer list. Through effective synergy of
years of conveyor belt experience of Gustav Wolf with rope making expertise of Usha
Martin, we have become the pioneer and the only producer of Steel Cords for Conveyor Belts
in this country. With state-of-art machinery and latest technology from Gustav Wolf, our
cords provide an optimized high tensile yet flexible reinforcement to the Conveyor Belts and
enables reliable and high capacity Conveyor Systems to be used. Our flexibility to supply in
ready-to-fit spools as well as in giant master spools, gives our customers the option to
procure in exact lengths, thus reducing operational cost and downtime.

Corporate and Social Responsibility

Social Commitment through Krishi Gram Vikas Kendra (KGVK)

Management commitment and support since 1977

"In every village where hunger persists, human being must be empowered to discover

Their own vision expresses their own leadership, create their own solutions
and work together to achieve their own success"

KGVK Activities

 Augmenting water resources through watershed management

 Sustainable income generation through cottage industries & livestock management
 Capacity building through "agivika research & training center"
 Health & family welfare programs
 Women empowerment thru "swashakti" program

14
KGVK projects

In partnership with grass root civic society, corporate and government

 India Canada environment facility (icef)project - for water resources conservation &
conjunctive utilization for environmental restoration (project cost rs 10.0 cr)
 ICICI - cini project - for primary health services at the grass root level project cost rs.
2.0 cr)
 Project with us aid along with cepda - for training barefoot workers in villages for
making them 1st point of contact in village health services
 Projects with govt of India for water shed, women empowerment, education etc.
 Total projects worth Rs.18 cr in hand

15
Chapter 3: Literature Survey

3.1. Conceptual and theoretical review of SAP Modules

Enterprise Resource Planning (ERP) that allows an enterprise to manage databases for
different processes from a single unified system. ERP system was developed initially for
inventory control, however over the years; different software was developed for different
processes in an enterprise for better data management and work flow. In today’s world, there
are many leading market providers of ERP system and SAP is one of the markets and
technology leaders in building business software towards structured work and data
management in organizations. SAP AG is originally German multinational software who
deals in software development for business management and improved customer relations in
enterprises. System Analysis and Program Development (SAP) was founded in June, 1972
and since then, many SAP ERP operations modules has emerged that are designed focusing
on various different processes including SAP ERP sales and service, sales and distribution,
customer relationship, financial management, business intelligence and more. An overview of
few of the SAP development modules: -.

 SAP Financial Accounting (FI)

 SAP Controlling (CO)
 SAP Sales and Distribution (SD)
 SAP Production Planning (PP)
 SAP Materials Management (MM)
 SAP Quality Management (QM)
 SAP Human Capital Management (HCM)
 SAP Financial Accounting (FI)

SAP FI module as the term suggests deals in managing financial transactions within
enterprises. This financial accounting module helps employees to manage data involved in
any financial and business transactions in a unified system. This module functions very well
for reporting requirements. The SAP FI module is very flexible and functions well in any
type of economic situation. Be it a smaller organization or a larger organization, SAP
implementation helps in consolidating data for diverse business transactions and legal
requirements. Financial Accounting module helps one to get real-time financial position of an
enterprise in the market. SAP FI incorporates with other SAP modules such as SAP SD, SAP
MM, SAP PP, Payroll and more for better work results.

3.1.1. SAP Controlling (CO)

SAP CO module is another important SAP module offered to enterprises. The controlling
module supports in the process works of planning, reporting and monitoring operations of

16
businesses. It involves methods to view and organize costs that are required for financial
reporting. Controlling module enables one to plan, track, perform and report about costs.
Controlling includes managing and configuring master data that covers cost elements, cost
centers, profit centers, internal orders, and functional area and so on.

3.1.2. SAP Sales and Distribution (SD)

SAP SD modules deal in managing all transactions ranging from enquiries, proposals,
quotations, pricing and more. The sales and distribution module help greatly in inventory
control and management. SAP SD module consists of master data, system configuration and
transactions. Some of the sub-components of SAP SD module are: master data, sales
support, sales, shipping and transportation, billing, credit management, sales information
system and so on.

3.1.3. SAP Production Planning (PP)

SAP PP module is another important module that includes software designed specifically for
production planning and management. This module also consists of master data, system
configuration and transactions in order to accomplish plan procedure for production. SAP PP
module collaborate with master data, sales and operations planning, distribution resource
planning, material requirements planning, Kanban, product cost planning and so on while
working towards production management in enterprises.

3.1.4. SAP Materials Management (MM)

SAP MM module as the term suggests manages materials required, processed and produced
in enterprises. Different types of procurement processes are managed with this system. Some
of the popular sub-components in SAP MM module are vendor master data, consumption-
based planning, purchasing, inventory management, invoice verification and so on.

3.1.4. SAP Quality Management (QM)

SAP QM module helps in management of quality in productions across processes in an
organization. This quality management module helps an organization to accelerate their
business by adopting a structured and functional way of managing quality in different
processes. SAP QM module collaborates in procurement and sales, production, planning,
inspection, notification, control, audit management and so on.

3.1.5. SAP Human Capital Management (HCM)

SAP HCM module enhances the work process and data management within HR department
of enterprises. Right from hiring a person to evaluating one’s performance, managing
promotions, compensations, handling payroll and other related activities of an HR is

17
processed using this module. The task of managing the details and task flow of the most
important resource i.e. human resource is managed using this SAP ERP HCM module.

3.2. Research review

SAP MM is known as SAP Material Management system. SAP MM role in business process
is as follows:

 A business process in SAP is termed as “Module”.

 SAP Materials Management (MM) is a part of Logistics area and helps to manage the
procurement activity of an organization from procurement.
 It supports all aspects of material management (planning, control etc.).
 It is the backbone of the Logistics area which incorporates modules like Sales and
Distribution, Production Planning, Plant Maintenance, Project Systems, Warehouse
Management which are extremely obsessed on Materials Management module.
3.2.1. Features of SAP MM
The features of SAP MM system are as follows:

 SAP MM is one of the modules of SAP that deals with material management and
inventory management.
 Material Management process ensures that there is never a shortage of materials or
any gaps in the supply chain process of the organization. SAP MM speeds up the
procurement and material management activities making the business run smoother
with complete time and cost efficiency.
 It deals with managing the materials (products and or services) resources of an
organization with the aim of accelerating productivity, reducing costs and increase
improvement and at a similar time be versatile to accommodate changes in day to
day life.
 It deals with the Procurement Process, Master Data (Material, Service & Vendor
Master), Account Determination & Valuation of Material, Inventory Management,
Invoice Verification, Material Requirement Planning etc.
3.2.2. Functions of Material Management
3.2.3. Primary Functions

 Materials Requirements Planning.

 Purchasing.
 Inventory Planning and Control.
 Ascertaining and Maintaining the Flow and Supply of Materials.
 Quality Control of Materials.
 Departmental Efficiency.

18
3.2.4. Secondary Functions.

 Standardization and Simplification.

 Make and Buy Decisions.
 Coding and Classification of Materials.
 Forecasting and Planning.
3.2.5. SAP Structure in Materials Management
The Organizational Structure in MM is made up of following Organizational Levels:

 Client: Represents a grouping or combination of legal, organizational, business and

or administrative units with a common purpose.
 Company Code: Company Code represents an independent accounting unit within a
client. Each company code has its own balance sheet and its own profit and loss
statement.
 Plant: Operational unit within a company code.
 Storage Location: This level contains the data specific to a storage location. Stock
levels are an example of the data maintained for each storage
 Purchasing Organization: An organizational unit responsible for procuring materials
or services for one or more plants and for negotiating general conditions of purchase
with vendors. The purchasing organization assumes legal responsibility for all
external purchase transactions.
 Purchasing Group: The purchasing organization is further subdivided into purchasing
groups (buyer groups), which are responsible for day-to-day buying activities. A
purchasing group can also act for several purchasing organizations.

3.2.6. SAP MM Cycle

 Purchase Requisition (PR)
 Purchase Order (PO)
 Goods Receipt (GRN)
 Store Stock
 Material Issue Slips (GI)
 Inventory Stock

19
3.2.7. List of Transaction Code Required for MM in SAP
 ME51N – Create Purchase Requisition
 ME5A – Purchase Requisition List Display
 ME23N - Display Purchase Order
 ME2N – Purchase order by PO no.
 MIGO – Goods Movement.
 MB1A – Goods Withdrawal
 MB25 – Reservation List
 CJ20N – Project Builder
 MB52 – List of Warehouse stock on Hand
 ZMM_INV – Inventory Report
3.2.7. Movement Types for MM
 103 – Gate Entry
 101 – Goods Receipt
 106 – Goods Receipt Reverse
 541 – Material Transferred to Contractors Stock
 542 – Material Reverse from Contractors Stock
 281 – Goods Withdrawal (Consumption)
 282 – Consumption Reverse
 301 – Stock Transfer from Plant to Plant

20
Chapter 4: Data Analysis and Interpretation

4.1. Introduction

The implement of SAP software, such as SAP R/3 is almost always a massive operation that
brings a lot of changes in the organization. The whole process can take up to several years.
Virtually every person in the organization is involved, whether they are part of the SAP
technical support organization (TSO) or the actual end-users of the SAP software. It is
therefore important that the implementation process is planned and executed using a solid
method. There are various SAP implementation methods.

4.1.1. Sizing and blueprinting

The next phase is often referred to as the sizing and blueprinting phase and forms the main
chunk of the implementation process. This phase starts with performing a total cost of
ownership analysis (TCO analysis) to determine how to get the best business solution at the
lowest costs. This means to compare SAP solution stack options and alternatives and then
determine what costs each part of the stack will bring and when these costs will be, where
only the differences between solutions (stacks) are identified and analyzed. The image at the
right depicts the essence of a delta analysis.

4.1.2. Identify high availability and disaster recovery requirements

The next step is identifying the high availability requirements and the more serious disaster
recovery requirements. This is to plan what to do with later downtime of the SAP system,
caused by e.g. hardware failures, application failures or power outages. It should be noted
that it is very important to calculate the cost of downtime, so that an organization has a good
idea of its actual availability requirements.

4.1.3. Engage SAP solution stack vendors

A true sizing process is to engage the SAP solution stack vendors, which is the next step.
This means selecting the best SAP hardware and software technology partners for all layers
and components of the solution stack, based on a side-by-side sizing comparison. The most
important factors that are of influence here are the estimated numbers of (concurrent) users
and batch sizes.

4.1.4. Staff TSO

The TSO (Technical Support Organization) is the most important resource for an
organization that is implementing SAP, so staffing the TSO is a vital job which can consume
a lot of time Examples are: data center experts, network infrastructure experts, security
specialists and database administration experts.

21
4.1.5. Training
One of the most vital stages of the implementation process is training. Few people within an
organization are SAP experts or even have worked with SAP software. It is therefore
important to train the end users but especially the SAP TSO: the people who design and
implement the solution.). The organization’s key users must be involved in the
implementation project and testing of the system. Many people within the TSO need all kinds
of training. Some examples of these positions:

 SAP Network Specialists

 SAP Database Administrators
 SAP Security specialists
 Documentation specialists
 Et cetera
 Setup SAP data center
The next step is to set up the SAP data center. This means either building a new data center
facility or transforming the current data center into a foundation capable of supporting the
SAP solution stack, i.e. all of the technology layers and components (SAP software products)
in a productive SAP installation. The high availability and disaster recovery requirements
which should have been defined earlier, give a good idea of the required data center
requirements to host the SAP software. Data center requirements can be a:

 Physical requirement like power requirements

 Rack requirement
 Network infrastructure requirement or
 Requirement to the network server.
 Perform installations
The following step is to install the required SAP software parts which are called components
and technological foundations like a web application server or enterprise portals, to a state
ready for business process configuration. The most vital sub steps are to prepare your OS,
prepare the database server and then start installing SAP software. Here it is important to use
installation guides, which are published for each SAP component or technology solution by
SAP SE. Examples of SAP components are:

 R/3 Enterprise — Transaction Processing

 SAP BI — Business Information Warehouse
 SAP CRM — Customer Relationship Management
 SAP KW — Knowledge Warehouse
 SAP PLM — Product Lifecycle Management
 SAP SCM — Supply Chain Management
 SAP SEM — Strategic Enterprise Management
 SAP SRM — Supplier Relationship Management
 Address change management

22
The next challenge for an organization is all about change management / change control,
which means to develop a planned approach to the changes the organization faces. The
objective here is to maximize the collective efforts of all people involved in the change and to
minimize the risk of failure of implementing the changes related to the SAP implementation.
This team should be prepared to handle the many change issues that come from various
sources like:

 End-user requests
 End-User regular activities
 Operations
 Data center team
 DBA group
 Systems management
 Functional, integration and regression testing
Testing is important before going live with any system. Before going live with an SAP
system, it is vital to do many different kinds of testing, since there is often a large, complex
infrastructure of hardware and software involved. Both requirements as well as quality
parameters are to be tested. Important types of testing are:

 Functional testing: to test using functional use cases, i.e. a set of conditions or
variables under which a tester will determine if a certain business process works
 Integration testing
 Regression testing
 Final preparation

4.1.5. Prepare for cutover

The final phase before going live with SAP is often referred to as the cutover phase, which is
the process of transitioning from one system to a new one. The organization needs to plan,
prepare and execute the cutover, by creating a cutover plan that describes all cutover tasks
that have to be performed before the actual go-live. Examples of cutover tasks are:

 Assign ownership of SAP’s functional processes to individuals

 Let SAP SE do a Going Live check, to get their blessing to go live with the system
 Lock down the system, i.e. do not make any more changes to the SAP system
 Go live & Support
All of the previously described phases all lead towards this final moment: the go-live. Go-live
means to turn on the SAP system for the end-users and to obtain feedback on the solution and
to monitor the solution. It is also the moment where product software adoption comes into
play.

4.2. An Overview of SAP MM Software System

23
4.2.1. Login Screen
Log on to SAP ERP server. SAP login screen will prompt for User ID and Password. Provide
the valid user ID and Password and press enter. The user id and password are provided by
system administrator. Following is the login screen:

24
4.2.2. Standard Tool-bar Icon
SAP screens tool-bar are shown in the following image:

SAP screen tool-bars are briefly described as:

 Menu Bar - Menu bar is the top line of dialog window in the SAP system.
 Standard Toolbar - Standard functions like save, top of page, end of page, page up,
page down, print, etc. are available in toolbar.
 Title Bar - Title Bar displays the name of the application/business process you are
currently in.
 Application Toolbar - Application specific menu options are available on this toolbar.
 Command Field - To start a business application without navigating through the
menu transaction, some logical codes are assigned to the business processes.
Transaction codes are entered in the command field to directly start the application.

25
4.2.3. Standard Exit Keys
Exit keys are used to exit the module or to log off. They are used to go back to the last
accessed screen. Following are the standard exit keys used in SAP:

26
4.2.4. New Session Icon
For creating a new session, we use the following keys shown in the below image:

4.2.5. Log Off

It is a good practice to log off from the SAP system when you finish your work. There are
several ways of login off from the system but it can be done using following instructions as
shown in image:

27
Chapter 5: (Project Part)

5.1. Benefits of Implementing SAP MM Software System

Usha Martin Limited started its operations using the Flexiv Retail Software system. With the
help of this system, they could keep track of their inventory and monitor financial activity as
well. However, this was not a fully integrated system. Flexiv software did allow tracking the
inventory adequately but for financial activities, there were some problems. The system could
only record the transactions that had happened and all the calculations had to be calculated
manually using Microsoft Excel. In addition, reports could not be generated by using this
system. So often, the peoples at the Finance and Accounting department had a big workload
on them. After Usha Martin began to offer more products and opened new shops. Then more
problems began to appear. More transactions were taking place every day and it was getting
very difficult for the Finance and Accounting department to prepare reports. In addition,
inventory and accounts receivable information was getting in late, so payments to the
suppliers were taking much more time now. Because more volume of goods was now
transacted, maintaining proper stock of goods at different outlets was getting more difficult.
Often, products at one shop were sold out and there was a big stock at other shop.

Usha Martin Limited also faced a critical problem with the Flexiv Software system. The old
system had a limitation of recording different types of products. This meant that information
of only a certain number of products could be recorded on the system and not more than that.
Therefore, Usha Martin could not offer new products or increase the product line at all with
the old system. It was the main reason behind why Usha Martin could not offer newer
products of the market to the customers. In order to expand their business, offer newer
products, streamline business operations ensure ease of reporting Usha Martin decided to
implement SAP.

USHA MARTIN LTD

With the implementation of the SAP Software System, Usha Martin hopes that now decisions
would be taken much quickly, offer more products according to customer’s demand. This
would increase the profitability and help maintain the market position of Usha Martin
Limited.

5.1.1. Inventory Management:

At inventory management, SAP implementation will have a big impact. Because SAP is an
integrated system, the demand for a product could be easily calculated by monitoring the
stock of that product. If a product is needed to be purchased, supply chain would be notified
quickly. For products that have been purchased before, data like purchasing amount, the time
of purchase, unit price, VAT calculations, requirements etc. will be provided by SAP system.
Because of these purchase orders could be made easily. SAP can also connect with its other

28
modules so there will be no need to do functions separately. Therefore, the purchase ordering
could be completed within less time and stock outs could be avoided.

With the help of SAP system, employees can easily manage the warehouse. Employees can
monitor the total quantity and calculate the total value of inventory in stock, perform physical
inventory etc. Most importantly, there are options to track inventories and see if the stock in
hand is less than the required amount as calculated. Therefore, SAP can help replenish stocks
that are needed immediately.

Using the SAP system, users can create a list of items that could be suggested to customers as
an alternative if their choices of products are not available. The substitute items are based on
similarity of the products, unit price and quality. In addition, SAP system can create a report,
in which different supplier’s products are compared to each other.

Using the SAP system, users can create an unlimited number of price lists for products that
have been entered in the SAP software system. These price lists could be newly created or be
based on an existing price list. SAP also automatically includes all the items those have been
entered in the system. Price lists can also be grouped together and different users can have
access to different pricelists. With the SAP system, all the price lists can be updated by users,
except for the last purchase price and last calculated price lists. SAP automatically updates
these price lists by the transactions made and by inventory valuation. Users can also create
special price lists for customers and they can be updated accordingly.

 SAP system can provide a detailed report of the company’s inventory.

 According to criteria defined by the user, a full list of items, enlisted in the SAP can
 be generated.
 The last purchasing and sales price of an item can be generated.
 Some of the items in inventory take some time to be sold. Users can define such
items
 as inactive and set different times for them. SAP will display the list of such items.
 If any specific item is selected then details of that item will be provided.
 Information of stock in hand, quantity ordered etc. of any specific products are
shown.
 Information of stock at different shops of any specific products is shown.
 Users can hide the transactions, which have effects on cost of products but not on
 their quantity.
 With SAP system, users can use it to evaluate all of or part of the inventory, at a
 selected date by using specific calculation method.
5.1.2. Offering More Products to Customers
Usha Martin Limited wanted to increase its product line for the customers. This meant newer
products would be available and there would be more variety of products. Introducing new
products is a very good way to attract new customers and gain market share. However, Usha
Martin faced a big problem; with their old system, they did not have the capacity to introduce

29
any new products. Because their old Flexiv software was operating at its maximum capacity
and no more products could be entered in the system. If the item is not entered in the system
then it is not possible to sell the item at the shop.

With the SAP software system, there would be the capacity to enter newer products in the
system. This would enable Usha Martin to increase their product line, which they have
wanted to do for a long time, because they were losing customers to their competitors and
other big shops. Usha Martin also planned to open new shops in every major city and this
expansion could not be supported with their old system. In addition, for continuing smooth
business operation with increasing number of shops, a more advanced software system would
be needed. Therefore, with these reasons, Usha Martin decided to implement SAP software
system.

Most of the shops at the neighborhood do not use a software system, focuses on some
specific types of products but they easily start selling newer products because they keep all
the records manually. However, for Usha Martin, which already has a large number of
products to sell, introducing new products is not very easy at times. At first the supplier or
importer will be enlisted; the item will be approved by quality assurance; the item will be
given a code and then the product will be sold at shops.

5.1.3. Accounts Payable

Usha Martin Limited generally paid its suppliers within 30 days of supplying products.
Information about inventory like, number of products, unit price, purchase date etc. was
maintained by Flexiv software system. However, information on purchase orders and returns
especially for fresh produces had to be processed manually and high numbers of transactions
were causing much stress on the employees.

With SAP system, no calculations would have to be done manually because it is integrated
software. Information regarding purchase and purchase returns would be instantly available
and any quality approval reports would be updated. SAP will monitor purchase orders,
returns and quality approval reports automatically and generate accounts payable
automatically. With SAP, the entries will be more accurate, maintain international accounting
standards. These will help the accounts payable process to be efficient.

The Accounts Payable Process:

30
Purchase Order Goods Receipt Invoice Receipt Quality Approved Payment Made

5.1.4. Budgeting
At Usha Martin Limited, they used Flexiv software system for mainly the accounting purpose
only and had no other software for budgeting. Therefore, for making budget information had
to be gathered from all the departments like, marketing, supply chain and data about sales
target had to be known. For budgeting, overhead expenses of administration, marketing and
distribution, and sales target had to be known. Nevertheless, it was a lengthy process and
meant huge workload for the employees. However, the prepared budget was not very
effective and management wanted budget that would give better results. With SAP software
system, an effective budget could be made. Because with SAP there is already an Income
Statement formant, and as SAP is integrated system, information on marketing and
distribution, administration overhead, which have already occurred are updated and entered
in the system. Only the sales information will be needed to make the budget and it will be
much easier for the employees to prepare the budget.

5.1.5. Control
With the old Flexiv system, Usha Martin had no option to control costs, like if there was an
increase in any overhead expense, it could not be controlled. However, with SAP users could
set limit for different expenses. Like if, travel expenses were set at TK 12000 and if the
expenses exceeded the limit, then SAP would not take an entry. Rather it will show where the
cost has increased and after the budget has been adjusted accordingly, only then SAP will
take the entry. Therefore, with SAP, there are options to monitor and control costs; it helps to
follow the budget and there is transparency in the costs incurred.

31
5.1.6. Reporting
With the old system of Usha Martin Limited, reports could not be prepared. As a result, the
employees had to manually perform the calculations and make the reports. Often, making
reports would be stressful and take a long time, because so many information regarding, total
sales, profit percentage, unit price etc. would be needed and had to be consolidated. However,
SAP is enabled with Business Intelligence and very suitable for report preparation.
Management reports by SAP are very organized and allow the management to see the current
position of their company clearly. In addition, management can have access to different
modules of SAP and look at the summary of transactions for themselves.

5.1.7. Costing
Usha Martin Limited is not a manufacturing company; it is an intermediary that brings
product to the customers. However, costing is still involved here and very important for the
company. For costing, add the purchasing cost of items with other costs, and finally add the
profit margin. For pricing its items, Usha Martin had to know its competitors’ price also.
However, the old Flexiv system could not perform these calculations and they had to be done
manually. The SAP software can easily perform these calculations, because the functions
needed for costing are given along with a format in the SAP. Users just have to give the
entries and SAP will perform the calculations and connect to other modules automatically.
So, the process of costing becomes quicker and accurate.

The Costing Process:

Purchasing Price Packaging Cost Other Costs Profit Margin Selling Price

32
5.1.8. Security
Flexiv system used by Usha Martin had less security, it did have passwords but anyone
knowing the password could access the entire system. Any small mistakes like a wrong entry
in purchasing quantity or accounts payable could have significant effect. However, it would
be very tough to find out who did the mistakes. SAP is very secure and for different modules,
there are different passwords and each module can be accessed by specified employees only.

5.2. SAP MM – Master Table

SAP R/3 works on real time data that is there is no time lag between data entry and data
availability. The important thing while creating any data is to maintain data integrity. SAP
R/3 data is categorized into two:

 Master data - Data that is created centrally and it is valid for all applications. It
remains constant over the time but we need to update it on regular basis. For
Example: Vendor is a type of master data that is used for creating purchase orders or
contracts.
 Transactional data - Data that is associated with processing of business transaction
is Transactional data.
SAP Master Data is of following two types:

 Material Master Data

 Vendor Master Data

5.2.1. Material Master Data

The key points about material master are as follows:

 This is the enterprise main source of material specific data. This data will include
information on the materials that a company can procure, or produce, or store or
sell.
 Since there are different departments in an enterprise and each department works
on some specific material. So, they will enter different information regarding their
material. So, each user department has its own view of material master record.
 So, the data screens that are used to create material master can be divided into two
categories:
Main Data: This will include basic data (base unit of measure, weight), purchasing

33
 data (over tolerance and under tolerance), accounting data (standard price, moving
price).
Additional Data: This will include additional information like short description about
material, currency etc.
Material master has the four characteristics which will be discussing one by one in below
context.

5.2.2. Vendor Master Data

The key points about vendor master are as follows:

 Vendor Master Data is the enterprise main source of vendor-specific data. It includes
information on vendors from which a company can procure, or can sell.
 A vendor master record contains information such as vendor's name, address, etc.
 Data in a vendor master record is divided into three categories:
 General Data: General data is maintained at the client level and it is valid for all
organizational levels.
 Accounting Data: Accounting data is maintained at the company level and it is valid
for all plants belonging to that company.
 Purchasing Data: Purchasing data is maintained at the purchasing organization level.
5.2.3. Vendor account groups

Let configure the below vendor account groups

Group Name

A001 Domestic Vendors

A002 Import Vendors

A003 One Time Vendors

Steps to create vendor account groups: -

IMG Menu Path: - IMG > Financial accounting –> Accounts Receivable and Accounts
Payable –> Vendor

Accounts –>Master data –> preparation for creating vendor master data –> Define Account
Groups with

Screen Layout (Vendors)

Transaction code: – OBD3

34
5.2.4. Vendor master data

SAP Menu Path: – SAP Menu >> Logistics >>Material Management >> Purchasing >>
Master Data >> Vendor >> Central

Transaction code: – XK01

Step 1-Enter transaction code XK01 in the sap command field and press enter

Step 2-Enter the following data

 Company code: - Enter company code

 Purchasing Organization: - Enter Purchasing Organization
 Account group: – Enter account group

Step 3-Press enter to input the details of the vendor

 Title: – Select Company, Dr., Mr., Ms.

 Name: – Enter the name of the vendor
 Search: – enter the search term
 Street Address: – Enter the street #, postal code city, Country, Region, City
 Language: – Enter the language

35
Step 4-Enter the VAT Reg No of the vendor

Step 5-Enter the bank details of the vendor

Account data: – Enter the appropriate Reconciliation accounts, sort key

Payment transactions: -

 Enter the appropriate payment terms

 Select the Chk double inv.
Enter the appropriate payment methods such as cheque payment, Bank transfer, Online
transfer

36
Step 6-Purchasing Organization Data: -

 Enter the order currency, terms of payment and incoterms.

 Enter the appropriate schema group, vendor
 Select GR-based Inv. Verification if invoice verification is done after GR
 Select Srv. Based inv. verf if invoice verification after service entry
 Enter the partners for the appropriate partner functions

Press save icon to save the vendor master and vendor code in SAP is automatically generated.
The vendor code is generated for respective purchasing organization and company code.

5.2.4. Material Types

Materials with some common attributes are grouped together and they are assigned to a
material type. This will differentiate materials and allow organization to manage different
materials in systematic manner in accordance to company’s requirement. For example: Raw
Material, Finished Products are some of the material types. Material type can be created by
following the below steps.

Path to create material type:

IMG >= Logistics General >= Material Master >= Basic Settings >= Material Types >=

37
Define Attributes of Material Types
TCode: OMS2

On display IMG screen select Define Attributes of Material Types execute icon by following
the above path.

5.2.5. Material Groups

Material group is a wider range of material type. Materials with some common attributes are
taken together and they are assigned to material group. For Example: Suppose we have some
materials which need packaging, so their material type can be electrical or food products but
we can group these material types and put them in packaged material group. Material Group
can be created by following below steps:

Path to Create Material Group:

IMG => Logistic General => Material Master => Settings for Key Fields => Define Material
Groups
TCode: OMSF

38
On display IMG screen select Define Material Groups execute icon by following the above
path.

5.2.6. MM Flow Chart

39
40
5.3 SAP MM - Purchase Requisition
Procurement in every organization starts with gathering requirements. Once requirements are
gathered we need to inform the purchasing organization. Purchase Requisition is a document
that will contain list of requirements. The key points about purchase requisition are as
follows:

 Purchase requisition is a request that is made to purchasing organization to certain

list of material.
 Purchase requisition is an internal document; specifically, it remains within the
organization.
 Purchase requisition needs approval from purchasing organization.
 If purchase requisition is approved then changes are possible only to limited extent.
 Purchase requisition can be created for the following procurement types:
Standard: Getting finished material from vendor.
Subcontracting: Providing raw material to vendor and getting finished material.
Consignment: Procuring material that is kept in company’s premises and paying to
vendor for that.
Stock transfer: Getting material from within the organization.
External service: Getting services like maintenance from third party vendor.

Create Purchase Requisition

Purchase Requisition can be created by following below steps:

Path to Create Purchase requisition:

Logistics => Materials Management => Purchasing => Purchasing Requisition => Create
TCode: ME51N

On SAP Menu screen select Create execute icon by following the above path.

41
Fill in all required details like name of material, quantity, delivery date, material group, plant.
Click on save. A new Purchase Requisition will be created.

42
After creating purchase requisition, we need to send our requirements to vendor.
Requirements to vendor are sent through a document that is known as purchase order.
Purchase order can be directly created from purchase requisition.

43
5.3.1. Type of Purchase Order

For different procurement types, there are four types of purchase order which are as follows:

 Subcontracting Purchase Order

 Consignment Purchase Order
 Stock Transfer Purchase Order
 Service Purchase Order

Subcontracting Purchase Order

In subcontracting the vendor (the subcontractor) receives components from the ordering party
with the help of which it produces a product. The product is ordered by your company
through a purchase order. The components required by the vendor (seller) to manufacture the
ordered product are listed in the purchase order and provided to the subcontractor.
Subcontracting purchase order can be created by following the below step.

TCode to create Purchase Order: ME21N

Subcontracting Item Category: L

5.3.5. Consignment Purchase Order

In consignment material is available at organization store premises, however it still belongs

to the vendor (seller)/Owner of the material. If you utilize the material from consignment
stocks, then you have to pay to the vendor. So, consignment purchase order can be created by
following the below step.

TCode to create Purchase Order: ME21N

Consignment Item Category: K

5.3.6. Stock Transfer Purchase Order

In stock transfer goods are procured and supplied within a company. One plant orders the
goods internally from another plant (receiving plant/issuing plant). The goods are procured
with a special type of purchase order - the stock transport order. So, stock transfer purchase
order can be created by following the below step.

44
TCode to create Purchase Order: ME21N
Stock Transfer Item Category: U

Service Purchase Order

In service third party will provide the services to company. These services will include
maintenance like electricity, oiling of machines. So, service purchase order can be created by
following the below step.

TCode to create Purchase Order: ME21N

Service Item Category: D

Creating Purchase Order from Purchase Requisition

Purchase Order from purchase requisition can be created by following below steps:

TCode: ME21N

Enter TCode to go to purchase order home screen. Select Purchase requisition as shown in
below image.

Provide purchase requisition number for which you want to create purchase order. Then
select execute icon.

45
Drag the standard reference Purchase requisition to the cart next to NB Standard PO.

46
Verify the details of purchase order and do the necessary changes as per requirement. Click
on save. Purchase order from purchase requisition will be created.

47
5.3.2. SAP Security
SAP Security is required to protect SAP Systems and Critical Information from Unauthorized
Access in a Distributed Environment while accessing the system locally or remotely. It
covers various Authentication Methods, Database Security, Network and Communication
Security and protecting standard users and other best practices that should be followed in
maintaining your SAP Environment. In an SAP Distributed Environment, there is always a
need that you protect your critical information and data from unauthorized access. Human
Errors, Incorrect Access Provisioning shouldn’t allow unauthorized access to system and
there is a need to maintain and review the profile policies and system security policies in your
SAP environment.

SAP Security Solutions

SAP security cannot be an afterthought for SAP product implementations. The security
considerations and security planning should be done at the initial design stage. There are
three underlying aspects to all security infrastructure layers – data integrity, user access, and
user authorization. It is important for the company implementing SAP products to determine
which users can log in securely, how should the log in process be, what are the data the user
can view, what the user can do with the data after access is granted, how are the data secured
and protected, and how will the data exchange occur back into SAP.

SAP MM - Transaction Codes

48
In SAP MM some short-cut codes are provided to save time and effort. These are known as
transaction codes. Transaction codes are the short-cut codes that will directly take us to the
screen desired. This will help in eliminating long path that we go through implementation
guide to reach a desired screen. These codes are provided in command field. Some of
important transaction codes are as follows.

T-Code Description

OX15 Create Company

OX02 Create Company Code

OX10 Create Plant

OX09 Create Storage Location

OX08 Create Purchasing Organization

OME4 Create Purchasing Group

OX18 Assign Plant to Company Code

OX01 Assign Purchasing Organization to Company Code

OX17 Assign Purchasing Organization to Plant

MM01 Create Material

MM02 Change Material

MM03 Display Material

MB51 Material Document List

MMDE Delete All Materials

MMNR Define Material Master Number Ranges

XK01 Create Vendor

XK02 Change Vendor

XK03 Display Vendor

00ML33 Create Vendor Conditions

ME11 Maintain Purchasing Info Record

ME01 Maintain Source List

49
ME51N Create Purchase Requisition

ME52N Change Purchase Requisition

ME53N Display Purchase Requisition

ME41 Create RFQ/Quotation

ME42 Change RFQ/Quotation

ME43 Display RFQ/Quotation

ME31L Create Scheduling Agreement

ME32L Change Scheduling Agreement

ME33L Display Scheduling Agreement

MEQ1 Create Quota Arrangement

MEQ2 Change Quota Arrangement

MEQ3 Display Quota Arrangement

ME21N Create Purchase Order

ME22N Change Purchase Order

ME23N Display Purchase Order

ME29N Release Purchase Order

ME59N Automatic generation of Purchase Order

MIGO Post Goods Movement

MB1A Goods Withdrawal

MB1B Transfer Posting

MB1C Post Other Goods Receipts

MB01 Post Goods Receipt for Purchase Order

OMJJ Customizing: Define New Movement Types

MIRO Enter Incoming Invoice

MIRA Fast Invoice Entry

50
MR8M Cancel Invoice Document

MRBR Release Blocked Invoices

OMR6 Tolerance limits: Invoice Verification

MIR5 Display List of Invoice Documents

MIR6 Invoice Overview

MIR7 Park Invoice

MRIS Settle Invoicing Plan

AC02 Service Master

ML81N Create Service Entry Sheet

MRRL Evaluated Receipt Settlement

MMB1 Create Semi Finished Product

MMF1 Create Finished Product

MMG1 Create Returnable Packaging

MMH1 Create Trading Goods

MMI1 Create Operating Supplies

MMK1 Create Configurable Material

MMN1 Create Non-Stock Material

MMBE Stock Overview

MB52 List of Warehouse Stocks on Hand

MB21 Create Reservation

MBST Cancel Material Document

MB5T Stock in Transit

51
Chapter 6: Advantages, Disadvantages and Challenges of SAP
ERP

6.1. SAP ERP Advantages

 Market share leadership—SAP is marquee brand that is arguably the ERP software
market share leader. For reference, Oracle would take that argument and would
point to different criterion to measure market share.
 Corporate viability—With over 65,00 employees, 232,000 customers, €16,22 billion
in revenues and an impressive four-decade history, the company shows no signs of
going away anytime soon.
 Software scope—The application breadth of SAP ERP, and even wider scope when
considered within the SAP Business Suite, provides a central and enterprise-wide
system for the largest of companies while delivering some consistent benefits, such
as streamlined business processes, more accessible information and a reduction of
interfaces among disparate applications.
 A global solution—SAP supports global functionality with 45 standard country
versions and eight add-on country editions. The application is also scalable to
support thousands of concurrent users across multiple locations.
 Expandability—SAP business applications can be procured modularly for individual
functions such as CRM or SCM, or customers can acquire the SAP Business Suite to
integrate all or most of their business processes. Similarly, the financial applications
can be operated stand-alone or as a part of a broader suite.
 Industry expertise—Deep industry and vertical market solutions within its six
industry sectors of discrete industries, process industries, consumer industries,
service industries, financial services and public sector bring focus, domain knowledge
and supporting ecosystems of ISV software products and services to these markets.
 Business Intelligence—With its Business Objects acquisition, SAP has excelled in
bringing tightly integrated Business Intelligence (BI) to ERP systems. Challenges
remain in embedding BI into role-based workflow routines, so that users are
delivered BI in context of their normal processes and responsibilities, and not
required to navigate to separate BI destinations, but SAP is clearly ahead of most in
this area.
 More analytics—HANA is a highly touted in-memory columnar database that uses
low cost main memory (RAM), scalable multi-core processors and fast data access
from solid-state drives (instead of to traditional hard drives) for accelerated data
processing and improved business intelligence delivery.
 Mobility—The 2010 acquisition of Sybase reinvigorated SAP’s vision, technology and
commitment to enterprise mobility. The acquisition promoted the SAPPHIRE NOW
2010 slogan of “On premise, on demand, on device” and the company firmly
believes mobile is becoming the new desktop. Co-CEO Bill McDermott.

52
  Enterprise Tools—Enterprise grade tools such as SAP PLM (Product Lifecycle
Management, an information center for developers with document and code
management and collaborative.

6.2. SAP ERP Disadvantages

 Complex pricing—SAP pricing is unnecessarily complex and lacks transparency which

facilitates sales gamesmanship. Further, new SAP software maintenance models
have been very controversial with the customer base.
 Very high TCO—It’s no secret that SAP comes with a very high Total Cost of
Ownership (TCO), consisting of high acquisition costs, very high deployment costs,
reasonably priced but recurring maintenance costs and very high internal support
costs.
 Deployment risk—Continuing one of the prior points a step further, ERP buyers
must recognize SAP ERP software is broad, deep and complex, thereby rendering the
conditions for a perfect storm and a very challenging and costly deployment.
 Recurring upgrades—Also adding to TCO and budget considerations are the
recurring nature of new version releases. As is typical of complex on-premise ERP
systems, new version releases are regarded as Fork Lift upgrades with deployment
costs that often exceed the purchase price of the original ERP software
 Rigid—SAP ERP software has earned a reputation of being very rigid. While
configuration is pervasive throughout the application, configuration options are
limited and seldom extend beyond the original design intent and software
architecture constructs.
 Technology implications—SAP has a reputation among many of being antiquated
technology. Putting the technology purists aside, this may or may not be a fair
accusation. It is true that SAP ERP technology traces back to the 1992 R/3 release,
and has been progressively updated through continuous iterations as opposed to a
complete rewrite in a more modern technology.
 MDM—SAP’s Master Data Management (MDM) strategy still lacks clarity, and SAP
customers are left to procure and implement up to three MDM tools to achieve their
objectives, including SAP NetWeaver MDM (for mixed application environments).
 Lack of innovation—Many would argue that the last market winning innovation
delivered by SAP was with the release of SAP R/3, the company’s first client/server
technology solution, in 1992. The company has launched other technology releases
such as NetWeaver in 2003, but nothing that’s achieved a leadership position.
 No viable Cloud strategy—Despite massive investments, SAP has been unsuccessful
in keeping up with the industry in delivering disruptive technologies such as cloud
ERP solutions, and minimally successful in responding to increased demands for
technology that supports business strategies such as social CRM and Customer
Experience (CX).

53
  User Experience—The application is intuitive and usability is straight-forward, but
the User Experience (UX) lacks when compared to more modern user interfaces
which take advantage of rich presentations, social paradigms and consumer
technologies.
 Workflow design—Business Process Automation is an increasing demand by
organizations seeking to reduce labor, shorten cycle times and deliver more process
consistency.
 High exit barriers—There are very high barriers to switching ERP solutions. SaaS and
cloud ERP solutions are dramatically reducing exit barriers for ERP software
customers. Unfortunately, as SAP ERP software is not available in a SaaS delivery
model, the prospect to change your ERP solution is extremely limited.

6.3. SAP ERP Challenges

SAP is challenged in the two primary areas of innovation and net new customer acquisitions.
For example, as highlighted, the company has been unable to respond to the market demand
for cloud solutions which has resulted in not just lost opportunity, but the erosion of their
own install base by more innovative competitors. Companies such as Salesforce.com have
displaced SAP’s CRM software within SAP’s own customer base. Gartner projects
Salesforce.com will overtake SAP’s leadership position in the CRM market this year.
Companies such as Microsoft and NetSuite are winning Tier 2 ERP deals within the SAP
install base. For a decade, SAP has argued that its enterprise install base isn’t looking for
cloud solutions, which is partially true, however, is clearly changing with each passing day.

Similarly, SAPs slow growth of net new customer acquisitions is limiting its upside potential.
SAP holds a near dominating ERP software market position among the Global 2000, which is
great, except for the fact that there are only 2000 of these customers and once they become
saturated business growth becomes limited. For SAP and the ERP software market at large to
grow, enterprise ERP software publishers must consider new market opportunities such as the
cloud ERP market and the midmarket; two overlapping sectors but not necessarily the same.
SAP does effectively compete in the midmarket ERP space with its Business All-in-One and
Business One solutions, however, these solutions are not market share leaders and need
technology refresh and overall innovation infusion. If the company were to improve
midmarket vision and clarity, and grow their investment in the Business All-in-One and
Business One solutions, it’s quite probable they would compete more favorably with the
market share leaders (Microsoft Dynamics and Sage), however, at this point these solutions
don’t seem to be high on the priority list.

54
Chapter 7: Conclusion

Materials Management module in SAP consists of several components and sub-components.

The most prominent and widely used are Master Data, Purchasing and Inventory. SAP MM is
one of the critical components in SAP ECC. Part of SAP ECC's logistics function, SAP MM
plays a vital role in a manufacturer's supply chain and integrates with other ECC components
like Production Planning (PP), Sales and Distribution (SD), Plant Maintenance (PM), Quality
Management (QM), Finance (FI), Controlling (CO), and Human Capital Management
(HCM).

All of these components have their subcomponents that are essential in specific business
processes, and all of the processes are executed by using transactions.

Transaction (in SAP) means processing of certain information in order to complete business
process requirement. For example, if you have purchased 10 pieces of litter buckets, you can
perform particular transaction code (t-code) that will reflect those changes in SAP. Most of
the business processes involve multiple SAP transactions to be accomplished and are spread
over one, two or more modules.

The primary goal of MM is to make sure that materials are always kept in proper quantities
and without shortages or gaps in the organization’s supply chain. It also helps organizations
to complete the purchasing of goods in a timely and cost-effective way, and to be able to deal
with day-to-day changes in these processes.

55
BIBLIOGRAPHY

Website
 SAP. SAP. Retrieved from https://www.sap.com/index.html (Accessed on 5 June
2018)
 SAP SE. Wikipedia: The free encyclopedia. Retrieved from
https://en.wikipedia.org/wiki/SAP_SE (Accessed on 5 June, 2018)
 Saponlinetutorials.com(Accessed on 8 June, 2018)

Personal Interview
 Giri, K. N. (2018, June 4). Personal Interview.
 Kumar, A. (2018, June 4). Personal Interview.

Usha Martin Departments

 Human Resource Development Department (HRD)
 Purchase Department

56