Q1: SAP ERP (Enterprise Resource Planning) is commercial software that will

integrate all information altogether in a single software considering various factors

like time and cost. Organizations can easily meet their business demands with the
help of SAP.

SAP Business Process

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.
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 & Vendor
Master), Account Determination & Valuation of Material, Inventory
Management, Invoice Verification, Material Requirement Planning etc.
 Use of SAP Material Management 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.
Benefits:

 SAP-MM’s fully integration with Financial Accounting, Quality Management,

Sales Distribution, Logistic Execution, Plant Maintenance and Project System
provides subsequently default data for the purchasing documents and other
following documents.
 SAP-MM integration with other modules leads to reduce data entry and user errors.
 Business flow integration in Material Management function facilitates purchasing
process and monitoring followed documents from creating purchase requisition
document till invoice verification.
 Ability to post Goods receipt with reference to inbound delivery to achieve
common language between procurement and warehouse departments.
 Ability to manage material in GR-blocked stock, specially for foreign purchasing
applying different Incoterms.
 Ability to dynamically access to logistic information system.
 Updating the price of materials with moving average price as price control based
upon purchasing documents and MM&CO integration.
 Ability to determine different release strategy for several purchasing documents
based on various criterias, i.e. price, vendor, payment terms, and etc.
 Ability to correct vendors’ invoice verification which leads to update material
price.
 Ability to carry out external service procurement, and then enter & accept services
performed by service entry sheet as well as a goods receipt posting when procuring
materials.
 Ability to carry out Free of Charge procurement.
 To control and execute efficiently Inventory Management and logistic execution
and invoice verification processes.
 To forecast the future month requirements applying sales and production program.
 Ability to represent various reports based on its database.
 To carry out report transactions rapidly and efficiently based on the structure of
Logistic Information System.
 To record purchasing information record as a source of information for
procurement on a specific material and a vendor supplying the material.
 To automatically create Purchasing Order for specific vendors based on the stock
level.
 To archive historical data.
 To track the important processes of the Su
 To support inventory management with Non Valuated Stock.
 To carry out procurement procedure of materials without stock.

Q: Procurement Lifecycle
Most modern organizations procurement follow some sequential steps which are
described below:
Requirement and Information Gathering
Procurement process starts with gathering information about product and its
quantity. Then for required products and services, it is necessary to look for
suppliers who can satisfy the requirements.
Supplier Contact
After gathering requirements one will look for the suppliers who can fulfill the
requirements. Based on that quotation request or information request can be made
to suppliers or direct contact can be made with them.
Background Review
Once the supplier is known product/service quality is checked, and any necessities
for services such as installation, warranty and its maintenance are investigated.
Some samples of the products can be obtained for quality examination.
Negotiation
Some negotiations with suppliers is made regarding price, availability and delivery
schedule of the products/services. After this a contract is signed that is a binding
legal document between supplier and ordering party. A contract will include all
necessary information like price and quantity of material, delivery date, etc.
Order fulfillment
Ordered material will be shipped, delivered to the ordering party and supplier is
paid accordingly. Training and Installation of product or services may also be
included.
Consumption, Maintenance and Disposal
As the products/service is consumed the performance of the products or services is
evaluated and any follow up service support if required is analyzed.
Contract Renewal
Once the product or services are consumed or contract expires and needs to be
renewed, or the product or service is to be re-ordered, company experience with
vendors and service provider is reviewed. If the products or services are to be re-
ordered, the company decides whether to order from previous supplier or think
about new suppliers.

Common assignment types in SAP MM system?

 Plant to Company code

 Purchasing organization to company code
 Purchasing organization to Plant
 Standard purchasing organization to plant

Business Process Re-engineering

Business process reengineering (BPR) began as a private sector technique to help

organizations fundamentally rethink how they do their work in order to
dramatically improve customer service, cut operational costs, and become world-
class competitors. A key stimulus for reengineering has been the continuing
development and deployment of sophisticated information systems and networks.
Leading organizations are becoming bolder in using this technology to support
innovative business processes, rather than refining current ways of doing work.

Business Process Reengineering (BPR) is basically the fundamental rethinking and

radical re-design, made to an organizations existing resources. It is more than just
business improvising.

It is an approach for redesigning the way work is done to better support the
organization's mission and reduce costs. Reengineering starts with a high-level
assessment of the organization's mission, strategic goals, and customer needs.
Basic questions are asked, such as "Does our mission need to be redefined? Are
our strategic goals aligned with our mission? Who are our customers?" An
organization may find that it is operating on questionable assumptions, particularly
in terms of the wants and needs of its customers. Only after the organization
rethinks what it should be doing, does it go on to decide how best to do it.
 Within the framework of this basic assessment of mission and goals, reengineering
focuses on the organization's business processes—the steps and procedures that
govern how resources are used to create products and services that meet the needs
of particular customers or markets. As a structured ordering of work steps across
time and place, a business process can be decomposed into specific activities,
measured, modeled, and improved. It can also be completely redesigned or
eliminated altogether. Reengineering identifies, analyzes, and redesigns an
organization's core business processes with the aim of achieving dramatic
improvements in critical performance measures, such as cost, quality, service, and
speed.

Reengineering recognizes that an organization's business processes are usually

fragmented into sub processes and tasks that are carried out by several specialized
functional areas within the organization. Often, no one is responsible for the
overall performance of the entire process. Reengineering maintains that optimizing
the performance of sub processes can result in some benefits, but cannot yield
dramatic improvements if the process itself is fundamentally inefficient and
outmoded. For that reason, reengineering focuses on redesigning the process as a
whole in order to achieve the greatest possible benefits to the organization and
their customers. This drive for realizing dramatic improvements by fundamentally
rethinking how the organization's work should be done distinguishes reengineering
from process improvement efforts that focus on functional or incremental
improvement.

Methodology

There are wide range of methodology in which seek to synergies some of the idea
implicit in the reengineering concept.
1. Talwar method
2.COBRA method

Talwar method
Developed by Talwar, this seeks to strike a balance between strategy formulation,
process, redesign, exploitation and management of the reengineered business. It
entails three stages as below:

 Initiation: Defining strategic scope, scale and planning the change

 Implementation: Business redesign, integration and testing
 Exploitation: Continuing the improvement process
COBRA method

COBRA stands for: C- Constrains, O – Opportunities, B – Business, R –

Restructuring, A – Analysis
This is an approach adopted by the commission of the European communities in
1994. As outlined by Coulson-Thomas.
It’s a six stage of BPR methodology designed to be implemented by a technocratic
approach with due regard to people issues.
1. Establishing an organization’s approach to BPR
2.Identifying the opportunity
3.Analysis of an existing process
4.Process re-design
5.Implementation of the change
6.Performance monitoring

BPR and Information Technology

Business Process Re-engineering has rapidly developed towards a new

management philosophy based upon predecessors like Total Quality Management,
Overhead Value Analysis, Kanban or Just-In-Time-Management. Business
processes can be re-engineered by redesigning the steps, by changing the logical
and temporal sequence of the steps, or by changing any other characteristics of the
process.
The role of IT is discussed in contradictory way. Advocates of information systems
favour the view that the new technology is an enabler of process re-engineering. IT
has to be monitored constantly to determine whether it can generate new process
designs or contribute to the performance of a business process. The breakthrough
of BPR is closely connected with IT, which opens new dimensions of process
reorganization.
Moreover, those who take the initiative in process improvement/redesign,
influence the role of IT. If the data processing department initiates the process
change, then IT will have more of a generator function for new process redesigns.
If on the other hand, the top management sets off the change process, then the
process will be first restructured and later optimized through IT.

Benefits of BPR

1.Can save a company which is running at a loss

2.By changing the present process through BPR a losing business can make profits
3.Can find new business dimensions
4.BPR will open up new dimension into the existing business
5.Continues improvements will enhance the business performance
6.Over all change could enhance the performance of the business
7.Improves quality
8.Improves the quality of service delivery and customer satisfaction
9.Speedier

Reengineering Recommendations

 BPR must be accompanied by strategic planning, which addresses leveraging IT

as a competitive tool.
 Place the customer at the center of the reengineering effort -- concentrate on
reengineering fragmented processes that lead to delays or other negative
impacts on customer service.
 BPR must be "owned" throughout the organization, not driven by a group of
outside consultants.
 Case teams must be comprised of both managers as well as those will actually
do the work.
 The IT group should be an integral part of the reengineering team from the start.
 BPR must be sponsored by top executives, who are not about to leave or retire.
 BPR projects must have a timetable, ideally between three to six months, so that
the organization is not in a state of "limbo".
 BPR must not ignore corporate culture and must emphasize constant
communication and feedback.
What is the difference between Procurement for stock vs consumption?
 Procurement for Stock − A stock material is a material that is kept in stock.
These materials are kept in stock once received from the vendor. The stock of
this material keeps on increasing or decreasing based on amount of the quantity
received or issued. To order a material for stock, the material must have a master
record within the system.
 Procurement for Direct Consumption − When procurement is for direct
consumption i.e. it will be consumed as soon as it is received, the user should
specify the consumption purpose. To order a material for consumption, the
material may have a master record within the system.
What is Purchase Order?
 Purchase order is the formal and final confirmation of the requirements which is
sent to vendor to supply material or services. Purchase order will include
 important information like name of material with its corresponding plant, details
of purchasing organization with its company code, name of vendor, and date for
delivery of material.
What are the different Procurement types that you can create Purchase
requisition?
 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.
What is Quota Arrangement in SAP system?
 A particular material can be procured from different vendors depending upon the
requirement. So, total requirement of a material is distributed to different
vendor’s i.e. quota is assigned to each source of supply. This is known as quota
arrangement.
What is a Scheduling agreement?
 Scheduling agreement is a long term outline agreement between vendor and
ordering party over a predefined material or service which are procured on
predetermined dates over a framework of time.
What are the different stock types in SAP system?

 Restricted Stock
 Unrestricted Stock
 Quality Inspection Stock
 Blocked Stock
 GR Blocked Stock