SAP R/3 Business Blueprint: Understanding Enterprise Supply Chain Management / Edition 2

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Overview

The complete business and implementation guide to SAP™ R/3™!

In order to gain the maximum value from SAP™ R/3™, you need to understand the rich business framework embedded in R/3™ and know how to implement it within your unique organization.

The revision of this best-selling classic does both: documenting the deep process knowledge built into R/3™, helping decision-makers understand its benefits and offering start-to-finish guidance for R/3™ implementers organization-wide. Newly updated to reflect R/3™ Release 4.5, this book delivers:

  • Detailed coverage of finance, human resources, production, purchasing, sales, and service management with SAP™ R/3™
  • Key business-process scenarios, presented in common business terms
  • An overview of the IT infrastructure provided by SAP™ for e-commerce and supply chain management
  • Analysis of R/3™ middleware transaction management and application distribution
  • Practical coverage of the R/3™ Repository, SAP™ Business Framework, and R/3™ Business Objecs
  • Updates on the latest methodologies for R/3™ evaluation and the tools for R/3™ implementation
  • A view of SAP™ R/3™ beyond Y2K and the challenges for the next generation enterprise using the Internet

You won't find a clearer guide to SAP™ R/3™. You'll discover how key components of R/3™ link together, how they integrate the entire enterprise, and how to keep deriving business benefits from R/3™ long after it's been installed.

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Editorial Reviews

Booknews
Offers practical information on process orientation in business and the implementation of these concepts in R/3, SAP's client/server business application suite. Examines the conceptual framework and strategy behind SAP's business engineering; process design including sales and distribution, production planning, procurement, external accounting, and such supporting value activities and human resources management, business planning, and finance; and architecture, framework, and tools. Annotation c. Book News, Inc., Portland, OR (booknews.com)
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Product Details

Meet the Author

Thomas Curran is President of Component Software (Cambridge, MA), which produces desktop ERP applications. He worked for five years as technology strategist for SAP AG.

Andrew Ladd is Director of Communications for Component Software, Inc., for whom he was written numerous white papers and technical documents.

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Read an Excerpt

Introduction
  • "Business engineering is the rethinking of business processes to improve and accelerate the output of processes, materials or services."
    (Philip Morris, Lausanne, Switzerland)
  • "It's the search for an optimal flow in a company."
    (Messerli AF, Switzerland)
  • "It's the streamlining of business processes to have maximum effect with minimum resources in supporting company goals."
    (Ernst & Young, South Africa)
  • "Generally, it's a customer focus. It's also the designing of new processes using new information technology to create an efficient business network that involves creative staff in the process redesign."
    (Fahrzeugausrustung Berlin GmbH, Germany)

Companies from around the world are taking advantage of information technology (IT) to radically alter how they conduct business. In the past, IT was used simply to automate existing business functions, but now IT can improve or completely change how businesses operate. This approach is called Business Engineering, which has been the logical next step in the business-process reengineering revolution.

Unlike business-process reengineering (BPR), which used IT mainly to automate certain functions performed in individual organizations — such as manufacturing, finance, or production — Business Engineering (BE) utilizes IT for designing or redesigning processes, the set of connected steps or "chains" performed in a business. In this way, BE takes advantage of information technology to support the redesign of organizations. By using BE to engineer entire process chains that span functional or organizational boundaries, companies can integrate all their critical business activities. Moreover, they can do so much earlier in an IT implementation than if using the older, function-centric approach of early BPR strategies. Completing process chains rapidly and efficiently is of great added value to both the company and its customers. It makes such core processes as production and finance more efficient and can bring competitive advantages through reduced costs, faster time-to-market, and improved responsiveness to customers.

Business engineering arose out of the need created by BPR for software systems that could adequately support changing business processes. Although companies have gained a great deal from improving their business processes, many also have encountered problems with their business-process reengineering. After examining existing business processes, many companies completely dispensed with them, creating new process designs instead. Too often they miscalculated the risks and costs not only of reinventing new processes but of finding a software solution to match the new process design. After various trials and tribulations with poor software tools and systems, many companies have had to do away with their process design work simply because their information system software could not support the new design.

In Business Engineering, IT is used both to create and support new process designs. Software can describe, simulate, or model organizations. It can also show how changes made to the organizations will affect processes. BE is not limited to describing processes, however. A model or business-process diagram illustrates not only a company's tasks and organizational structure but also how the company gets things done. A company's information model usually includes descriptions of aspects such as data, function, organization, information, and communication flow. A well-integrated information system not only improves overall business operation but makes it easier for the company to identify areas for further improvement. With prefabricated models of business applications, companies can reduce their risks while taking advantage of best-business procedures for business process engineering.

As is the case in all engineering efforts, a good blueprint will map out the best strategies for implementing new designs. This book centers on a specific blueprint designed by the international software vendor SAP

TM, a company that has successfully integrated IT with business engineering. In support of its R/3

TM system, SAP

TM provides sample business objects and business processes that reflect the best-business practices in successful companies and that can either be used either "as is" or extended and customized by a company to suit its needs. These predefined processes are supplied in a comprehensive business blueprint called the R/3

TM Reference Model, which is actively linked with the R/3

TM running system.

SAP

TM R/3

TM Business Blueprint: Understanding Enterprise Supply Chain Management is designed to function as a map of this system. Our aim is to guide the reader through the most important aspects of SAP

TM 's Reference Model. All business professionals who are considering implementing or are currently using SAP

TM software may benefit from this book. From the theory behind the applications to real-life business examples, this book guides the reader through the key areas of the R/3

TM system. In order to help the reader better navigate through this book, the remainder of this Introduction will answer general questions about the book's subject matter as well as direct readers to places where more in-depth treatments of key terms and issues may be found.

I.1 What Is SAP

TM?

Founded in 1972 in Walldorf, Germany, SAP

TM (Systems, Applications and Products in Data Processing) commands a significant share of the worldwide client/server enterprise application software market. SAP

TM is the number one vendor of standard business application software and is the fourth largest independent software supplier in the world. More than 10,000 companies in over 90 countries use SAP

TM software. Current SAP

TM company facts include:

  • Leading client/server business software company
  • Leading vendor of standard business application software
  • Worldwide market share of 33%
  • Fourth-largest independent software supplier in the world
  • Availability in 14 languages
  • 34% of customer base under $200 million
  • 10 out of the top 10 U.S. companies with highest market value
  • 8 of the top 10 largest U.S. corporations
  • 8 of the top 10 highest profit U.S. companies
  • More than 10,000 customers in over 90 countries

For a more detailed examination of SAP

TM and its history, see Chapter 1, SAP

TM and Client/Server Technology.

I.2 What Is R/3

TM?

Initially, SAP

TM made the move from mainframes to open systems in the late 1980s with R/2

TM, a monolithic, mainframe legacy solution. As early as 1988, however, SAP

TM chose to move toward client/server technology and began developing R/3

TM. In 1992, SAP

TM unveiled R/3

TM just as client/server and its potential were beginning to be fully realized in the business world. R/3

TM 's success is largely due to its ability to provide a highly integrated environment that can fully exploit the potential of client/server computing.

A full description of R/3

TM's product architecture can be found in Part 3, Architecture, Framework, and Tools, but here we define R/3

TM simply as SAP

TM 's enterprise application for open-system platforms. More specifically, R/3

TM is an integrated enterprise software system that runs in open-system environments. The R/3

TM architecture is essentially a three-tier client/server consisting of a database server, application server, and presentation server (see Chapter 1). These dedicated, task-oriented servers are linked in communication networks, which allow them to integrate data and processes within the system. The applications are developed using SAP

TM 's fourth-generation language ABAP/4 and the ABAP/4 Development Workbench (see Chapter 15).

R/3

TM 's advantages lie in its flexibility, scalability, and expandability. R/3

TM can be used in client/server architectures with 30 seats as in installations with 3,000 end users. This scalability ensures that R/3

TM can provide support for current business operations and allows flexible adaptation to change and progress. Designed as a total system, but also suitable for modular use, R/3

TM is expandable in stages, making it adaptable to the specific requirements of individual businesses. R/3

TM can run on hardware platforms of leading international manufacturers and can integrate with customers' in-house applications. It is also open to allow interoperability with third-party solutions and services; it can be installed quickly and efficiently. R/3

TM is so designed that such experts in scalable software as Microsoft, IBM, and Apple have all deployed SAP

TM as their enterprise solution.

In the age of Internet computing, SAP

TM R/3

TM has emerged as a platform for electronic commerce, supply chain management, and data warehouse applications.

I.3 What Is the R/3

TM Reference Model?

SAP

TM has packaged 25 years of best-business practices in many different industries in the form of a "blueprint" called the R/3

TM Reference Model. The Reference Model, also known as SAP

TM 's Business Blueprint, guides companies from the beginning phases of engineering, including evaluation and analysis, to the final stages of implementation. It is the definitive description of R/3

TM, providing a comprehensive view of all the processes and business solutions available in the system. Technical details, however, are "hidden" so that the business user can focus solely on business-process issues. Thus, the Business Blueprint is written in the language of the business user.

The Business Blueprint can be the starting point for business engineering efforts. Documenting processes in R/3

TM is a critical part of the "understanding equation" at customer sites. To date, few companies have been able to provide a comprehensive, process-oriented description of a business that fits into almost any industry. The Business Blueprint is a means of streamlining processes and implementing R/3

TM without a business having to start from scratch.

The Business Blueprint concentrates on four key areas necessary for understanding business: events, tasks or functions, organization, and communication. These areas define who must do what, when, and how. Events are the driving force behind a business process, prompting one or more activities to take place. This model is the essence of SAP

TM 's Event-Driven Process Chain (EPC) Methodology, which is discussed in Chapter 2.

In Releases 4.0, SAP

TM offered more than 1,000 predefined business processes, with variants, that generally correspond to different industries and corporations — a milestone in the evolution of process management and enterprise software. These business processes are illustrated with the EPC graphical method. By connecting events and tasks, the method models and analyzes even very complex business processes. An EPC model can show where breaks in the chain of tasks and responsibilities hurt the ability of a company to optimize its processes. Graphical models help users select and understand the software, visualizing how data flow through business areas and showing how various functions interact with each other. The EPC model is the central, process-oriented view. Other models show function, process, information flow, and organization views.

The Business Blueprint can be viewed and analyzed with the help of the R/3

TM Business Engineer, which is discussed in full in Chapter 16. A set of integrated tools for configuring R/3

TM, the Business Engineer has graphical browsing facilities for displaying the Business Blueprint directly from the R/3

TM Repository, which contains all the data definitions and structures required by ABAP/4 programs. The Business Engineer also includes customizing components that allow a user to adapt or modify the system to meet the user's own specific needs.

Benefits of the R/3

TM Reference Model during R/3

TM implementation include quick overviews, business engineering support, and better communication among different departments (see Chapter 3 for implementation issues). A majority of R/3

TM Reference Model customers use the blueprint for business-process modeling. Some organizations, however, use modeling tools and methods in different ways to suit their specific needs. In many organizations, process modeling is used for documentation, visualization of processes, better comprehension, training, and process optimization.

I.4 Who Uses R/3

TM?

R/3

TM is the accepted standard in key industries such as software, oil, chemicals, consumer packaged goods, and high-tech electronics. Other industries include automotive, building and heavy construction, communication services, consulting (software), financial services, furniture, healthcare and hospitals, pharmaceuticals, public sector, raw materials, retail, services, steel, tourism, transportation, and utilities.

Table I-1 is a partial list of R/3

TM users.

TableI-1R/3

TM Users

Industry Company
Automotive ITT Automotive Europe Yamaha Audi General Motors Chrysler BMW Subaru Toyota Volkswagen
Building and Heavy Construction ABB Industrietechnik AG Gebauer Kawasaki Heavy Industries ADtranz ABB Daimler-Benz Babcock Prozess Automation GmbH CEGELEC AEG Anlagen und GESOBAU GAG Dover Elevator International, Inc.
Dürkopp Adler AG E. Heitkamp GmbH Eldim B.V.
Frequentis
Chemicals Bayer Procter & Gamble CCPL Degussa Henkel Kemira Lever Europe Pirelli Pneumatici S.P.A Reichhold Sasol Alpha Olefins Schülke & Mayr Wintershall, Wingas, Kali und Salz Zeneca
Communication Services, Media Random House Simon & Schuster, Inc.
IPSOA Editore S.R.L.
Optus Vision Ringier AG Seattle Times SFR Telecom PTT
Computer Software Apple
3com Corporation Autodesk Inc.
Fujitsu Microelectronics Fujitsu Network Communications, Inc.
Hewlett-Packard IBM Samsung Wang Intersolv Legend QDI Ltd.
Logistix Micrografx Microsoft Micro Software Group Visio
Consumer Products: Food Alfred Ritter GmbH & Co. KG Anheuser-Busch Companies Boston Beer Cameo, S.P.A.
Guinness Heinecken Italia S.P.A.
Imperial Tobacco Nestlé
Keebler Company
Consumer Products: Non-Food Braun AG Colgate-Palmolive Hans Schwarzkopf GmbH Heissner Unilever Italia S.P.A.-Divisione Lever
Financial Services, Banks, Insurance ABB Holding Ltd. (CN)
Allied Irish Banks plc (IE)
BMW Bank GmbH (DE)
BMW Finance Ltd (GB)
Banca D'Italia (IT)
Banco De Portugal Det Dep. Emissão E Tesouraria (PT)
Banco Itau S.A. (BR)
Bank of Canada (CA)
Bank of Slovenia (SI)
Bayerische Landesbank (DE)
Bayerische Vereinsbank (DE)
Commerzbank AG (DE)
Countrywide Banking Corporation Limited (NZ)
Credit Suisse (CH)
Deutsche Bank AG (DE)
First Chicago NBD Corporation (US)
First National Building Society (IE)
Jyske Bank A/S (DK)
LGT Bank in Liechtenstein (LI)
Lloyds TSB Group plc (GB)
Mercedes Benz Finance Ltd (GB)
National Westminster Bank plc (GB)
PARIBAS BANQUE France PT Bank Bali (ID)
PT Bank Bali (ID)
Putnam Company (US)
The Bank of N.T. Butterfield & Son Ltd. (BM)
The Government Savings Bank (TH)
The Nomura Securities Company (JP)
Toyota Finance (AU)
UBS Schweiz. Bankgesellschaft (CH)
Volkswagen Financial Services (DE)
Volkswagen Leasing Polska SP. Z (PL)
WestLB Westdeutsche Landesbank (DE)
Zürcher Kantonalbank (CH) Bruderhilfe LBS Bayerische Landesbausparkasse Mercedes-Benz Lease Finanz Sega Victoria
Industrial and Commercial Machinery Fiat Avio Gurtec GmbH Kapp Mann & Hummel Metabo Sulzer Electronics
Oil and Gas British Gas Chevron Conoco Shell Exxon Mobil Petromidia
Pharmaceuticals Boehringer Mannheim Italia S.P.A.
Ciba-Geigy Degussa AG FRESENIUS AG Warner Lambert Merck Weimer Pharma Zeneca Plc.
Primary Metal, Metal Products, Steel Carnaud Metalbox Degussa AG EBG/Thyssen
Retail Diethelm Holdings Grofa GmbH Prisma-Aspri STANDA S.P.A.
CompUSA Fleming Florsheim Home Depot Kerr Drugs Maxim Group Office Max PetsMart Reebok Shoe Show Woolworth
Transportation Services, Tourism Condor Flugdienst GmbH Copenhagen Airport A/S
Utilities British Gas GEA AG Industrielle Betriebe Aarau New York Power Authority Pacific Gas and Electric STEWEAG Energie Westcoast Energy
Wood and Paper Gizen GmbH Papierfabrik August K SCP
I.5 How Do Customers View R/3

TM?

In a 1995 survey, TCM contacted over 500 SAP

TM customers in an extensive effort to evaluate the technical and customer requirements of SAP

TM 's R/3

TM, and R/3

TM Reference Model, as well as associated methodologies and software products related to R/3

TM implementation. The goal of the study was to ascertain how R/3

TM customers, consultants, prospects, and complementary software vendors deal with models and model-driven software configuration and implementation. This study revealed a number of novel approaches for using R/3

TM, the Reference Model, and other SAP

TM tools.

Reasons for Using R/3

TM

Integration, price, SAP

TM 's reputation, standard software, client/server technology, business engineering, and migration from R/2

TM were some of the reasons companies chose R/3

TM.

  • "The key factors were demand of the company's strategy (PDM integration) and the methodology for implementation."
    (ABB Turbo Systems Ltd., Baden, Switzerland
  • "Standard techniques support C&L R/3

    TM implementation methodology."
    (Coopers & Lybrand, Brussels, Belgium)

  • "We were in the process of a R/2

    TM implementation and felt R/3

    TM had a longer future. Our company chose SAP

    TM because of its integration."
    (Rapistan Demag Corp., Grand Rapids, Michigan, USA)

  • "R/3

    TM was decided upon to replace the self-created software, which is in use up to now, and to improve economic performance. At the same time, it's seen as a chance to reengineer processes."
    (Rheinbraun AG, Cologne, Germany)

Approaches to Using the R/3

TM Reference Model

The Reference Model can be a good starting point for customer BE projects. Customers who begin engineering projects with other modeling tools often switch to the Reference Model in later phases, finding the models and analysis techniques more helpful during R/3

TM implementation.

  • "In a high abstraction level, we modeled the overall business. In manufacturing and sales, the Reference Model was very helpful."
    (ABB Turbo Systems Ltd., Baden, Switzerland)
  • "We began with the R/3

    TM Reference Model and proceeded to create a specific model from there; we always tried to stay to the standard processes wherever possible."
    (Hewlett-Packard Austria)

  • "We used the Reference Model as a starting point for business engineering projects. It has been extremely successful."
    (Fahrzeugausrüstung Berlin GmbH, Berlin, Germany)
Perceived Benefits of the R/3

TM Reference Model

Stabilization, easier implementation, and better communication were some of the benefits customers found when using the Reference Model during R/3

TM implementation. The following statements characterize how each customer uses the Reference Model during implementation.

  • "Implementation of R/3

    TM gains stabilization. Also it provides helpful support in identifying which process elements in R/3

    TM will be useful."
    (ABB Turbo Systems, Baden, Switzerland)

  • "We don't have to start from scratch when we are modeling."
    (Ascom Hagier AG, Solothum, Switzerland)
  • "It provides a quick overview and very good introduction to application architecture."
    (Berufsakademie Mannheim, Mannheim, Germany)
  • "The benefits lie in the visualization of processes, resulting in improvement of communication and higher transparency."
    (LUHNS GmbH, Germany)
  • "It offers a better view of what SAP

    TM is able to cover and examples of 'best practices.'"
    (ICS lnternational Consulting Solutions GmbH, Bottmingen, Switzerland)

  • "It will allow us to arrive at a proposed solution faster and more completely than otherwise."
    (Pilkington, St. Helens, Great Britain)
Business Engineering with R/3

TM

Most R/3

TM Reference Model customers are engaged in BE, although uses and methods often vary significantly from customer to customer.

  • "We use the R/3

    TM Reference Model as visual help to discuss our processes, and we modify models of the Reference Model according to our needs; furthermore, we create new models to describe interfaces between the SAP

    TM system and other non-SAP

    TM applications, using terminology and symbols of the Reference Model."
    (Miele & Cie GmbH & Co., Gatersloh, Germany)

  • "We have essentially modeled our entire enterprise to help determine 'fits' and 'gaps' between our desired state and what R/3

    TM can provide."
    (Mentor Graphics, USA)

  • "The function and process diagrams are used to identify business activities that are deemed applicable. These are then reviewed and adapted for our company's business practices. Process modeling insures a standard methodology and allows the activity to be identified and refined based on process data flow."
    (Rapistan Demag Corp., Grand Rapids, Michigan, USA)
Documentation of Business Processes

Documenting processes in R/3

TM improves an overall understanding of the system. The Reference Model not only provides a good overview of the R/3

TM system, it also can be used to define current business processes.

  • "It plays a major role as a documenting tool, as well as feedback to clients to show understanding and point out conflicts and omissions."
    (Ernst & Young CSI, Johannesburg, South Africa)
  • "The R/3

    TM Reference Model has been the basic model. Our teams have designed in the first project phase of R/3

    TM the new business processes. All new processes are stored, including documentation, in a user model (company model)."
    (Fahrzeugausrusting Berlin GmbH, Berlin, Germany)

  • "We used the Reference Model as a starting point — detailed processes were described using the EPC methodology."
    (Philip Morris, Switzerland)
Approaches to Business Modeling

As standard software, R/3

TM offers standard business solutions. R/3

TM is also flexible enough, however, to be customized or extended to meet special customer demands. Some companies create customized models for sales and distribution, procurement, financing, and project management. Using the EPC methodology, these customers created the models listed in Table I-2.

I.6 Conclusion

As we have seen, R/3

TM and the R/3

TM Reference Model are highly flexible means of assisting BE. Throughout SAP

TM R/3

TM Business Blueprint, we will continue to draw from real business experiences and practices to illustrate basic principles of the R/3

TM system. Furthermore, we have attempted to provide examples from a wide variety of industries so that the reader can intuit the many possibilities inherent in the R/3

TM system.

Table I-2Modeling Strategies of R/3

TM Customers

Model Customer
Order processing inside and outside of R/3

TM

Ascom AG, Switzerland
Order fulfillment; sales and quotations Bühler AG, Switzerland
Package distribution Ernst & Young CSI, South Africa
Branch-oriented models for the chemical industry ICM Unternehmensberatung GmbH, Germany
Entire enterprise model to determine "fits" and "gaps" between the company's desired state and R/3

TM

Mentor Graphics, USA
Order processing model with customized scenarios for invoicing, order, and distribution Miele & Cie GmbH & Co., Germany
Manufacturing process and organizational responsibility; material process flow for factory; generic process control systems Nestlé, Great Britain
Concurrent engineering; global logistics Nokia Mobile Phones, Finland
Flow charts showing process flows divided into system steps, information used, manual steps, and external steps Pilkington P/C, Great Britain
Handling of new contracts; installation of equipment at customer site; scheduling workers for reading meters at customer site Raab Karcher Energieservice, Germany
Project-related order processing; manufacturing order and requirement processing Rapistan Demag Corp., USA
Process of acquisition of land for mining purposes Rheinbraun AG, Germany
Process of creation of a sales order for export; goods receipt and recycling of equipment STG-Coopers & Lybrand, Switzerland
Presales process; consulting process Systime AG, Switzerland
Operating funds administration; freight data management ZF Friedrichshafen AG, Germany

While our main focus is BE with R/3

TM, we have tried to explain as much of the R/3

TM system and its variants as possible. We understand that different parts of this book will interest different readers, and for that reason we have tried to steer the reader toward his or her areas of interest in this Introduction. Generally speaking, the best strategy for readers with specific areas of interest is to follow these option paths:

  • Readers who are most interested in business engineering and implementing R/3

    TM with the Reference Model should begin with Part 1, Business Engineering.

  • Readers who would like to examine specific business-process scenarios and business objects available in R/3

    TM should begin with Part 2, Process Design.

  • Readers interested in learning about the sophisticated platform for supporting business-process design and configuration for enterprise application software systems should examine Part 3, Architecture, Framework, and Tools.
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Table of Contents

I. BUSINESS ENGINEERING.

1. Business Engineering and Enterprise Optimization.

Significance of Business Engineering. Principles of Business Engineering. Elements of Business Engineering. Requirements for Successful Implementation of Business Engineering. IT Implementation Issues. Effects of Integration of Information Technology. Evolution of Information Technology. Client/Server Technology. Benefits of Client/Server Technology. SAP™ and Client/Server Technology. Beyond Business Engineering. Continuous Engineering. Supply Chain Management. Desktop ERP. Conclusion.

2. The Business Blueprint.

Pros and Cons of Business Blueprints. General Design of the R/3™ Blueprint. Focus of the R/3™ Blueprint. Event-Driven Process Chain Methodology. Describing Complex Business Processes. Ordering Toner. Recruiting a New Employee. Planning a Seminar. EPC Methodology and Viewpoints in the R/3™ Reference Model. Reference Model Viewpoints—Car Dealership. The Component Model—What Happens? The Organizational Model—Who Does What? The Data Model—What Is Needed? The Interaction Model—How Do Company Models Interact? Summary.

3. Configure to Order.

Standard Software Implementation Issues. Mapping with the Business Blueprint. Redlining the Blueprint. Extending the Business-Process Design. Conclusion.

II. PROCESS DESIGN.

4. Value Chain Thinking.

The Value Chain Principle. R/3™ and the Value Chain. Overview of Part 2: Value Chain Thinking.

5. Sales Logistics.

Standard Order Handling Scenario. Mailing Campaign Processing. Sales Activity Processing. Customer RFQ Processing. Customer Quotation Processing. Standard Order Processing. Delivery Processing. Goods Issue Processing for Stock Material. Billing. Contract Handling and Scheduling Agreements. Third-Party Order Handling. Customer Consignment Stock Handling. Cash Order Handling. Rush Order Handling. Make-to-Order Sales Order Handling. Assembly-to-Order Sales Order Handling. Empties and Returnable Packaging Handling. Returns Handling. Decentralized Shipping. R/3 Sales Logistics Summary.

6. Production Logistics.

Production by Lot Size. Processing of Sales and Operation Planning. Demand Management. Material Requirements Planning (Single-Item MPS). Creation, Release, and Execution of Production Order. Repetitive Manufacturing. Make-to-Order Production. Process Manufacturing. Project-Related “Engineer to Order.” Quality Management for Goods Receipt from Production. R/3 Production Logistics Summary.

7. Procurement Logistics.

Procurement of Stock Material. Material Requirement Planning. Requisition Processing to Stock Material. Processing of RFQ Issued to Vendor. Vendor Quotation Processing. Purchase Order Processing for Stock Material. Goods Receipt Processing. Procurement of Consumable Materials. Procurement of Consignment Materials. Procurement of Subcontract Work. Stock Transfer Processing. External Services Management. R/3™ Procurement Logistics Summary.

8. External Accounting.

Vendor Handling. Vendor Master Record Processing. Vendor Invoice Processing. Down Payment Release. Automatic Payment. Manual Payment. Customer Processing. OTA Vendor Processing. Creditor Subsidiary/Head-Office Processing. General Ledger Processing. Special-Purpose Ledger Handling. Consolidation. R/3™ External Accounting Overview.

9. Organization and Human Resource Management.

Recruitment. Creating a Search. Tracking the Search Process. Job Description. Employee Application Processing. Confirming the Application Receipt. Preliminary Personnel Choice. Personnel Processing. Employment Agreement Offer Processing. Applicant Status Check. Preparation for Employing the Applicant. Rejection of Offer. Applicant Pool Administration. Putting an Application on Hold. Rejection of Application. Business Event Handling. Business Trip Management. Time Management Handling. International Payroll Processing. Salary Administration. Benefits Administration. Personnel Planning and Management. R/3 Procurement Logistics Overview.

10. Business Planning and Controlling.

Cost Object Controlling. Production Order Preliminary Costing. Production Order Simultaneous Costing. Period-End Closing and Final Costing. Profitability Analysis. Profit Center Accounting. Overhead Cost Management. R/3™ Business Planning and Controlling Summary.

11. Capital Asset Management.

Planned Plant Maintenance. Maintenance Plan Processing. Maintenance Plan Scheduling. Maintenance Call Processing. Maintenance Order Creation and Processing. Maintenance Order Release. Maintenance Order Execution. Maintenance Order Completion Confirmation. Maintenance Order Settlement. Damage-Related Maintenance Processing. Project-Based Maintenance Processing. Cash Management. Budgeting. Fixed Asset Processing. Leased Asset Processing. R/3™ Capital Asset Management Summary.

12. Finance Management.

Treasury Management. Fixed-Term Deposit Processing (Money Market/Foreign Exchange/Derivatives Trading). Product Type Selection. Fixed-Term Deposit Processing. Rollover. Correspondence. Settlement in Treasury. Netting Processing. Posting Approval in Treasury. Posting in Treasury. Accrual. Key Date Valuation. Realized Profits/Losses. Treasury Master Data Scenario. New Security Management. Treasury. Treasury Information System. Cash Management. Market Risk Management. R/3™ Finance Management Summary.

13. Customer Service.

Field Service. Recording and Processing Service Notifications. Opening and Processing Service Orders. Service Order Release. Service Order Completion Confirmation. Technical Results Recording. Resource-Related Billing and Invoice Processing. Service Order Settlement. Long-Term Service Agreements. In-House Repair Processing. Replacement Part Delivery Processing. Notification Receipt and Processing. Evaluations. R/3™ Customer Service Summary.

III. ARCHITECTURE, FRAMEWORK, AND TOOLS.

14. Architecture of the R/3™ System.

R/3™ and the Distributed Environment. The Three-Tier Client/Server R/3™ Architecture. Benefits of the R/3™ Three-Tier Client/Server. Interprogram Communication. Middleware Transaction Management. Rationale for Distributed Business-Process Integration. Capabilities of Application Distribution in R/3™. Tools for Application Distribution. Model-Based Application Distribution. Distribution Reference Model. Using the Business Blueprint for Application Integration. Conclusion.

15. R/3™ Framework and Infrastructure.

Background of Business Integration. SAP™ Business Framework. Configuration of Enterprise Applications. Rationale for the Business Framework. Repository as Integrating Factor. Business Processes. Business Objects. Data Models. Object-Oriented Interfaces. Business Components. Enterprise Application Development. ABAP/4 Development Workbench. Development Workbench Features. Conclusion.

16. Business Engineering in R/3™.

R/3™ Business Engineer Overview. Business Engineer and Streamlined Implementations. Modeling the Distributed Enterprise. Application Components. Session Manager. Enterprise Organization. Using the R/3™ Reference Model. Business Object Model. Object-Oriented Data Model. Business Process Model. Workflow Model. Guideline for Implementing R/3™. Project Management Procedure Model. AcceleratedSAP™. The Roadmap. Tools. R/3™ Services and Training. Phase 1: Project Preparation. Phase 2: Business Blueprint. Phase 3: Realization. Phase 4: Final Preparation. Phase 5: Go Live and Support Continuous Change. Workflow and Personnel Organization. Open Repository Interface. Business Engineer: Future Vision.

17. Next Generation Enterprise.

What Is Internet ERP? Next Generation Application Components. The Industry Reference Model, Process Configuration, and Vertical Markets. Supply Chain Optimization, Planning, and Execution. Enterprise Application Integration. Business Object Integration Model. Business Process Integration Models. Electronic Commerce. Desktop ERP: Automating the Way People Work. Improved Browsers. Desktop ERP. Autonomous Software Agents. Conclusion.

Index.

Read More Show Less

Preface

Introduction

  • "Business engineering is the rethinking of business processes to improve and accelerate the output of processes, materials or services."
    (Philip Morris, Lausanne, Switzerland)
  • "It's the search for an optimal flow in a company."
    (Messerli AF, Switzerland)
  • "It's the streamlining of business processes to have maximum effect with minimum resources in supporting company goals."
    (Ernst & Young, South Africa)
  • "Generally, it's a customer focus. It's also the designing of new processes using new information technology to create an efficient business network that involves creative staff in the process redesign."
    (Fahrzeugausrustung Berlin GmbH, Germany)

Companies from around the world are taking advantage of information technology (IT) to radically alter how they conduct business. In the past, IT was used simply to automate existing business functions, but now IT can improve or completely change how businesses operate. This approach is called Business Engineering, which has been the logical next step in the business-process reengineering revolution.

Unlike business-process reengineering (BPR), which used IT mainly to automate certain functions performed in individual organizations — such as manufacturing, finance, or production — Business Engineering (BE) utilizes IT for designing or redesigning processes, the set of connected steps or "chains" performed in a business. In this way, BE takes advantage of information technology to support the redesign of organizations. By using BE to engineer entire process chains that span functional or organizational boundaries, companies can integrate all their critical business activities. Moreover, they can do so much earlier in an IT implementation than if using the older, function-centric approach of early BPR strategies. Completing process chains rapidly and efficiently is of great added value to both the company and its customers. It makes such core processes as production and finance more efficient and can bring competitive advantages through reduced costs, faster time-to-market, and improved responsiveness to customers.

Business engineering arose out of the need created by BPR for software systems that could adequately support changing business processes. Although companies have gained a great deal from improving their business processes, many also have encountered problems with their business-process reengineering. After examining existing business processes, many companies completely dispensed with them, creating new process designs instead. Too often they miscalculated the risks and costs not only of reinventing new processes but of finding a software solution to match the new process design. After various trials and tribulations with poor software tools and systems, many companies have had to do away with their process design work simply because their information system software could not support the new design.

In Business Engineering, IT is used both to create and support new process designs. Software can describe, simulate, or model organizations. It can also show how changes made to the organizations will affect processes. BE is not limited to describing processes, however. A model or business-process diagram illustrates not only a company's tasks and organizational structure but also how the company gets things done. A company's information model usually includes descriptions of aspects such as data, function, organization, information, and communication flow. A well-integrated information system not only improves overall business operation but makes it easier for the company to identify areas for further improvement. With prefabricated models of business applications, companies can reduce their risks while taking advantage of best-business procedures for business process engineering.

As is the case in all engineering efforts, a good blueprint will map out the best strategies for implementing new designs. This book centers on a specific blueprint designed by the international software vendor SAP TM , a company that has successfully integrated IT with business engineering. In support of its R/3 TM system, SAP TM provides sample business objects and business processes that reflect the best-business practices in successful companies and that can either be used either "as is" or extended and customized by a company to suit its needs. These predefined processes are supplied in a comprehensive business blueprint called the R/3 TM Reference Model, which is actively linked with the R/3 TM running system.

SAP TM R/3 TM Business Blueprint: Understanding Enterprise Supply Chain Management is designed to function as a map of this system. Our aim is to guide the reader through the most important aspects of SAP TM 's Reference Model. All business professionals who are considering implementing or are currently using SAP TM software may benefit from this book. From the theory behind the applications to real-life business examples, this book guides the reader through the key areas of the R/3 TM system. In order to help the reader better navigate through this book, the remainder of this Introduction will answer general questions about the book's subject matter as well as direct readers to places where more in-depth treatments of key terms and issues may be found.

I.1 What Is SAP TM ?

Founded in 1972 in Walldorf, Germany, SAP TM (Systems, Applications and Products in Data Processing) commands a significant share of the worldwide client/server enterprise application software market. SAP TM is the number one vendor of standard business application software and is the fourth largest independent software supplier in the world. More than 10,000 companies in over 90 countries use SAP TM software. Current SAP TM company facts include:

  • Leading client/server business software company
  • Leading vendor of standard business application software
  • Worldwide market share of 33%
  • Fourth-largest independent software supplier in the world
  • Availability in 14 languages
  • 34% of customer base under $200 million
  • 10 out of the top 10 U.S. companies with highest market value
  • 8 of the top 10 largest U.S. corporations
  • 8 of the top 10 highest profit U.S. companies
  • More than 10,000 customers in over 90 countries

For a more detailed examination of SAP TM and its history, see Chapter 1, SAP TM and Client/Server Technology.

I.2 What Is R/3 TM ?

Initially, SAP TM made the move from mainframes to open systems in the late 1980s with R/2 TM , a monolithic, mainframe legacy solution. As early as 1988, however, SAP TM chose to move toward client/server technology and began developing R/3 TM . In 1992, SAP TM unveiled R/3 TM just as client/server and its potential were beginning to be fully realized in the business world. R/3 TM 's success is largely due to its ability to provide a highly integrated environment that can fully exploit the potential of client/server computing.

A full description of R/3 TM 's product architecture can be found in Part 3, Architecture, Framework, and Tools, but here we define R/3 TM simply as SAP TM 's enterprise application for open-system platforms. More specifically, R/3 TM is an integrated enterprise software system that runs in open-system environments. The R/3 TM architecture is essentially a three-tier client/server consisting of a database server, application server, and presentation server (see Chapter 1). These dedicated, task-oriented servers are linked in communication networks, which allow them to integrate data and processes within the system. The applications are developed using SAP TM 's fourth-generation language ABAP/4 and the ABAP/4 Development Workbench (see Chapter 15).

R/3 TM 's advantages lie in its flexibility, scalability, and expandability. R/3 TM can be used in client/server architectures with 30 seats as in installations with 3,000 end users. This scalability ensures that R/3 TM can provide support for current business operations and allows flexible adaptation to change and progress. Designed as a total system, but also suitable for modular use, R/3 TM is expandable in stages, making it adaptable to the specific requirements of individual businesses. R/3 TM can run on hardware platforms of leading international manufacturers and can integrate with customers' in-house applications. It is also open to allow interoperability with third-party solutions and services; it can be installed quickly and efficiently. R/3 TM is so designed that such experts in scalable software as Microsoft, IBM, and Apple have all deployed SAP TM as their enterprise solution.

In the age of Internet computing, SAP TM R/3 TM has emerged as a platform for electronic commerce, supply chain management, and data warehouse applications.

I.3 What Is the R/3 TM Reference Model?

SAP TM has packaged 25 years of best-business practices in many different industries in the form of a "blueprint" called the R/3 TM Reference Model. The Reference Model, also known as SAP TM 's Business Blueprint, guides companies from the beginning phases of engineering, including evaluation and analysis, to the final stages of implementation. It is the definitive description of R/3 TM , providing a comprehensive view of all the processes and business solutions available in the system. Technical details, however, are "hidden" so that the business user can focus solely on business-process issues. Thus, the Business Blueprint is written in the language of the business user.

The Business Blueprint can be the starting point for business engineering efforts. Documenting processes in R/3 TM is a critical part of the "understanding equation" at customer sites. To date, few companies have been able to provide a comprehensive, process-oriented description of a business that fits into almost any industry. The Business Blueprint is a means of streamlining processes and implementing R/3 TM without a business having to start from scratch.

The Business Blueprint concentrates on four key areas necessary for understanding business: events, tasks or functions, organization, and communication. These areas define who must do what, when, and how. Events are the driving force behind a business process, prompting one or more activities to take place. This model is the essence of SAP TM 's Event-Driven Process Chain (EPC) Methodology, which is discussed in Chapter 2.

In Releases 4.0, SAP TM offered more than 1,000 predefined business processes, with variants, that generally correspond to different industries and corporations — a milestone in the evolution of process management and enterprise software. These business processes are illustrated with the EPC graphical method. By connecting events and tasks, the method models and analyzes even very complex business processes. An EPC model can show where breaks in the chain of tasks and responsibilities hurt the ability of a company to optimize its processes. Graphical models help users select and understand the software, visualizing how data flow through business areas and showing how various functions interact with each other. The EPC model is the central, process-oriented view. Other models show function, process, information flow, and organization views.

The Business Blueprint can be viewed and analyzed with the help of the R/3 TM Business Engineer, which is discussed in full in Chapter 16. A set of integrated tools for configuring R/3 TM , the Business Engineer has graphical browsing facilities for displaying the Business Blueprint directly from the R/3 TM Repository, which contains all the data definitions and structures required by ABAP/4 programs. The Business Engineer also includes customizing components that allow a user to adapt or modify the system to meet the user's own specific needs.

Benefits of the R/3 TM Reference Model during R/3 TM implementation include quick overviews, business engineering support, and better communication among different departments (see Chapter 3 for implementation issues). A majority of R/3 TM Reference Model customers use the blueprint for business-process modeling. Some organizations, however, use modeling tools and methods in different ways to suit their specific needs. In many organizations, process modeling is used for documentation, visualization of processes, better comprehension, training, and process optimization.

I.4 Who Uses R/3 TM ?

R/3 TM is the accepted standard in key industries such as software, oil, chemicals, consumer packaged goods, and high-tech electronics. Other industries include automotive, building and heavy construction, communication services, consulting (software), financial services, furniture, healthcare and hospitals, pharmaceuticals, public sector, raw materials, retail, services, steel, tourism, transportation, and utilities.

Table I-1 is a partial list of R/3 TM users.

TableI-1 R/3 TM Users
Industry Company
Automotive ITT Automotive Europe
Yamaha
Audi
General Motors
Chrysler
BMW
Subaru
Toyota
Volkswagen
Building and Heavy Construction ABB Industrietechnik AG
Gebauer
Kawasaki Heavy Industries
ADtranz ABB Daimler-Benz
Babcock Prozess Automation GmbH
CEGELEC AEG Anlagen und
GESOBAU GAG
Dover Elevator International, Inc.
Dürkopp Adler AG
E. Heitkamp GmbH
Eldim B.V.
Frequentis
Chemicals Bayer
Procter & Gamble
CCPL
Degussa
Henkel
Kemira
Lever Europe
Pirelli Pneumatici S.P.A
Reichhold
Sasol Alpha Olefins
Schülke & Mayr
Wintershall, Wingas, Kali und Salz
Zeneca
Communication Services, Media Random House
Simon & Schuster, Inc.
IPSOA Editore S.R.L.
Optus Vision
Ringier AG
Seattle Times
SFR
Telecom PTT
Computer Software Apple
3com Corporation
Autodesk Inc.
Fujitsu Microelectronics
Fujitsu Network Communications, Inc.
Hewlett-Packard
IBM
Samsung
Wang
Intersolv
Legend QDI Ltd.
Logistix
Micrografx
Microsoft
Micro Software Group
Visio
Consumer Products: Food Alfred Ritter GmbH & Co. KG
Anheuser-Busch Companies
Boston Beer
Cameo, S.P.A.
Guinness
Heinecken Italia S.P.A.
Imperial Tobacco
Nestlé
Keebler Company
Consumer Products: Non-Food Braun AG
Colgate-Palmolive
Hans Schwarzkopf GmbH
Heissner
Unilever Italia S.P.A.-Divisione Lever
Financial Services, Banks, Insurance ABB Holding Ltd. (CN)
Allied Irish Banks plc (IE)
BMW Bank GmbH (DE)
BMW Finance Ltd (GB)
Banca D'Italia (IT)
Banco De Portugal Det Dep. Emissão
E Tesouraria (PT)
Banco Itau S.A. (BR)
Bank of Canada (CA)
Bank of Slovenia (SI)
Bayerische Landesbank (DE)
Bayerische Vereinsbank (DE)
Commerzbank AG (DE)
Countrywide Banking Corporation Limited (NZ)
Credit Suisse (CH)
Deutsche Bank AG (DE)
First Chicago NBD Corporation (US)
First National Building Society (IE)
Jyske Bank A/S (DK)
LGT Bank in Liechtenstein (LI)
Lloyds TSB Group plc (GB)
Mercedes Benz Finance Ltd (GB)
National Westminster Bank plc (GB)
PARIBAS BANQUE France
PT Bank Bali (ID)
PT Bank Bali (ID)
Putnam Company (US)
The Bank of N.T. Butterfield & Son Ltd. (BM)
The Government Savings Bank (TH)
The Nomura Securities Company (JP)
Toyota Finance (AU)
UBS Schweiz. Bankgesellschaft (CH)
Volkswagen Financial Services (DE)
Volkswagen Leasing Polska SP. Z (PL)
WestLB Westdeutsche Landesbank (DE)
Zürcher Kantonalbank (CH) Bruderhilfe
LBS Bayerische Landesbausparkasse
Mercedes-Benz Lease Finanz
Sega
Victoria
Industrial and Commercial Machinery Fiat Avio
Gurtec GmbH
Kapp
Mann & Hummel
Metabo
Sulzer Electronics
Oil and Gas British Gas
Chevron
Conoco
Shell
Exxon
Mobil
Petromidia
Pharmaceuticals Boehringer Mannheim Italia S.P.A.
Ciba-Geigy
Degussa AG
FRESENIUS AG
Warner Lambert
Merck
Weimer Pharma
Zeneca Plc.
Primary Metal, Metal Products, Steel Carnaud Metalbox
Degussa AG
EBG/Thyssen
Retail Diethelm Holdings
Grofa GmbH
Prisma-Aspri
STANDA S.P.A.
CompUSA
Fleming
Florsheim
Home Depot
Kerr Drugs
Maxim Group
Office Max
PetsMart
Reebok
Shoe Show
Woolworth
Transportation Services, Tourism Condor Flugdienst GmbH
Copenhagen Airport A/S
Utilities British Gas
GEA AG
Industrielle Betriebe Aarau
New York Power Authority
Pacific Gas and Electric
STEWEAG Energie
Westcoast Energy
Wood and Paper Gizen GmbH
Papierfabrik August K
SCP

I.5 How Do Customers View R/3 TM ?

In a 1995 survey, TCM contacted over 500 SAP TM customers in an extensive effort to evaluate the technical and customer requirements of SAP TM 's R/3 TM , and R/3 TM Reference Model, as well as associated methodologies and software products related to R/3 TM implementation. The goal of the study was to ascertain how R/3 TM customers, consultants, prospects, and complementary software vendors deal with models and model-driven software configuration and implementation. This study revealed a number of novel approaches for using R/3 TM , the Reference Model, and other SAP TM tools.

Reasons for Using R/3 TM

Integration, price, SAP TM 's reputation, standard software, client/server technology, business engineering, and migration from R/2 TM were some of the reasons companies chose R/3 TM .

  • "The key factors were demand of the company's strategy (PDM integration) and the methodology for implementation."
    (ABB Turbo Systems Ltd., Baden, Switzerland
  • "Standard techniques support C&L R/3 TM implementation methodology."
    (Coopers & Lybrand, Brussels, Belgium)
  • "We were in the process of a R/2 TM implementation and felt R/3 TM had a longer future. Our company chose SAP TM because of its integration."
    (Rapistan Demag Corp., Grand Rapids, Michigan, USA)
  • "R/3 TM was decided upon to replace the self-created software, which is in use up to now, and to improve economic performance. At the same time, it's seen as a chance to reengineer processes."
    (Rheinbraun AG, Cologne, Germany)

Approaches to Using the R/3 TM Reference Model

The Reference Model can be a good starting point for customer BE projects. Customers who begin engineering projects with other modeling tools often switch to the Reference Model in later phases, finding the models and analysis techniques more helpful during R/3 TM implementation.

  • "In a high abstraction level, we modeled the overall business. In manufacturing and sales, the Reference Model was very helpful."
    (ABB Turbo Systems Ltd., Baden, Switzerland)
  • "We began with the R/3 TM Reference Model and proceeded to create a specific model from there; we always tried to stay to the standard processes wherever possible."
    (Hewlett-Packard Austria)
  • "We used the Reference Model as a starting point for business engineering projects. It has been extremely successful."
    (Fahrzeugausrüstung Berlin GmbH, Berlin, Germany)

Perceived Benefits of the R/3 TM Reference Model

Stabilization, easier implementation, and better communication were some of the benefits customers found when using the Reference Model during R/3 TM implementation. The following statements characterize how each customer uses the Reference Model during implementation.

  • "Implementation of R/3 TM gains stabilization. Also it provides helpful support in identifying which process elements in R/3 TM will be useful."
    (ABB Turbo Systems, Baden, Switzerland)
  • "We don't have to start from scratch when we are modeling."
    (Ascom Hagier AG, Solothum, Switzerland)
  • "It provides a quick overview and very good introduction to application architecture."
    (Berufsakademie Mannheim, Mannheim, Germany)
  • "The benefits lie in the visualization of processes, resulting in improvement of communication and higher transparency."
    (LUHNS GmbH, Germany)
  • "It offers a better view of what SAP TM is able to cover and examples of 'best practices.'"
    (ICS lnternational Consulting Solutions GmbH, Bottmingen, Switzerland)
  • "It will allow us to arrive at a proposed solution faster and more completely than otherwise."
    (Pilkington, St. Helens, Great Britain)

Business Engineering with R/3 TM

Most R/3 TM Reference Model customers are engaged in BE, although uses and methods often vary significantly from customer to customer.

  • "We use the R/3 TM Reference Model as visual help to discuss our processes, and we modify models of the Reference Model according to our needs; furthermore, we create new models to describe interfaces between the SAP TM system and other non-SAP TM applications, using terminology and symbols of the Reference Model."
    (Miele & Cie GmbH & Co., Gatersloh, Germany)
  • "We have essentially modeled our entire enterprise to help determine 'fits' and 'gaps' between our desired state and what R/3 TM can provide."
    (Mentor Graphics, USA)
  • "The function and process diagrams are used to identify business activities that are deemed applicable. These are then reviewed and adapted for our company's business practices. Process modeling insures a standard methodology and allows the activity to be identified and refined based on process data flow."
    (Rapistan Demag Corp., Grand Rapids, Michigan, USA)

Documentation of Business Processes

Documenting processes in R/3 TM improves an overall understanding of the system. The Reference Model not only provides a good overview of the R/3 TM system, it also can be used to define current business processes.

  • "It plays a major role as a documenting tool, as well as feedback to clients to show understanding and point out conflicts and omissions."
    (Ernst & Young CSI, Johannesburg, South Africa)
  • "The R/3 TM Reference Model has been the basic model. Our teams have designed in the first project phase of R/3 TM the new business processes. All new processes are stored, including documentation, in a user model (company model)."
    (Fahrzeugausrusting Berlin GmbH, Berlin, Germany)
  • "We used the Reference Model as a starting point — detailed processes were described using the EPC methodology."
    (Philip Morris, Switzerland)

Approaches to Business Modeling

As standard software, R/3 TM offers standard business solutions. R/3 TM is also flexible enough, however, to be customized or extended to meet special customer demands. Some companies create customized models for sales and distribution, procurement, financing, and project management. Using the EPC methodology, these customers created the models listed in Table I-2.

I.6 Conclusion

As we have seen, R/3 TM and the R/3 TM Reference Model are highly flexible means of assisting BE. Throughout SAP TM R/3 TM Business Blueprint, we will continue to draw from real business experiences and practices to illustrate basic principles of the R/3 TM system. Furthermore, we have attempted to provide examples from a wide variety of industries so that the reader can intuit the many possibilities inherent in the R/3 TM system.

Table I-2 Modeling Strategies of R/3 TM Customers
Model Customer
Order processing inside and outside of R/3 TM Ascom AG, Switzerland
Order fulfillment; sales and quotations Bühler AG, Switzerland
Package distribution Ernst & Young CSI, South Africa
Branch-oriented models for the chemical industry ICM Unternehmensberatung GmbH, Germany
Entire enterprise model to determine "fits" and "gaps" between the company's desired state and R/3 TM Mentor Graphics, USA
Order processing model with customized scenarios for invoicing, order, and distribution Miele & Cie GmbH & Co., Germany
Manufacturing process and organizational responsibility; material process flow for factory; generic process control systems Nestlé, Great Britain
Concurrent engineering; global logistics Nokia Mobile Phones, Finland
Flow charts showing process flows divided into system steps, information used, manual steps, and external steps Pilkington P/C, Great Britain
Handling of new contracts; installation of equipment at customer site; scheduling workers for reading meters at customer site Raab Karcher Energieservice, Germany
Project-related order processing; manufacturing order and requirement processing Rapistan Demag Corp., USA
Process of acquisition of land for mining purposes Rheinbraun AG, Germany
Process of creation of a sales order for export; goods receipt and recycling of equipment STG-Coopers & Lybrand, Switzerland
Presales process; consulting process Systime AG, Switzerland
Operating funds administration; freight data management ZF Friedrichshafen AG, Germany

While our main focus is BE with R/3 TM , we have tried to explain as much of the R/3 TM system and its variants as possible. We understand that different parts of this book will interest different readers, and for that reason we have tried to steer the reader toward his or her areas of interest in this Introduction. Generally speaking, the best strategy for readers with specific areas of interest is to follow these option paths:

  • Readers who are most interested in business engineering and implementing R/3 TM with the Reference Model should begin with Part 1, Business Engineering.
  • Readers who would like to examine specific business-process scenarios and business objects available in R/3 TM should begin with Part 2, Process Design.
  • Readers interested in learning about the sophisticated platform for supporting business-process design and configuration for enterprise application software systems should examine Part 3, Architecture, Framework, and Tools.
Read More Show Less

Introduction

Introduction

  • "Business engineering is the rethinking of business processes to improve and accelerate the output of processes, materials or services."
    (Philip Morris, Lausanne, Switzerland)
  • "It's the search for an optimal flow in a company."
    (Messerli AF, Switzerland)
  • "It's the streamlining of business processes to have maximum effect with minimum resources in supporting company goals."
    (Ernst & Young, South Africa)
  • "Generally, it's a customer focus. It's also the designing of new processes using new information technology to create an efficient business network that involves creative staff in the process redesign."
    (Fahrzeugausrustung Berlin GmbH, Germany)

Companies from around the world are taking advantage of information technology (IT) to radically alter how they conduct business. In the past, IT was used simply to automate existing business functions, but now IT can improve or completely change how businesses operate. This approach is called Business Engineering, which has been the logical next step in the business-process reengineering revolution.

Unlike business-process reengineering (BPR), which used IT mainly to automate certain functions performed in individual organizations — such as manufacturing, finance, or production — Business Engineering (BE) utilizes IT for designing or redesigning processes, the set of connected steps or "chains" performed in a business. In this way, BE takes advantage of information technology to support the redesign of organizations. By using BE to engineer entire process chains that span functional or organizational boundaries, companies can integratall their critical business activities. Moreover, they can do so much earlier in an IT implementation than if using the older, function-centric approach of early BPR strategies. Completing process chains rapidly and efficiently is of great added value to both the company and its customers. It makes such core processes as production and finance more efficient and can bring competitive advantages through reduced costs, faster time-to-market, and improved responsiveness to customers.

Business engineering arose out of the need created by BPR for software systems that could adequately support changing business processes. Although companies have gained a great deal from improving their business processes, many also have encountered problems with their business-process reengineering. After examining existing business processes, many companies completely dispensed with them, creating new process designs instead. Too often they miscalculated the risks and costs not only of reinventing new processes but of finding a software solution to match the new process design. After various trials and tribulations with poor software tools and systems, many companies have had to do away with their process design work simply because their information system software could not support the new design.

In Business Engineering, IT is used both to create and support new process designs. Software can describe, simulate, or model organizations. It can also show how changes made to the organizations will affect processes. BE is not limited to describing processes, however. A model or business-process diagram illustrates not only a company's tasks and organizational structure but also how the company gets things done. A company's information model usually includes descriptions of aspects such as data, function, organization, information, and communication flow. A well-integrated information system not only improves overall business operation but makes it easier for the company to identify areas for further improvement. With prefabricated models of business applications, companies can reduce their risks while taking advantage of best-business procedures for business process engineering.

As is the case in all engineering efforts, a good blueprint will map out the best strategies for implementing new designs. This book centers on a specific blueprint designed by the international software vendor SAPTM, a company that has successfully integrated IT with business engineering. In support of its R/3TM system, SAPTM provides sample business objects and business processes that reflect the best-business practices in successful companies and that can either be used either "as is" or extended and customized by a company to suit its needs. These predefined processes are supplied in a comprehensive business blueprint called the R/3TM Reference Model, which is actively linked with the R/3TM running system.

SAPTM R/3TM Business Blueprint: Understanding Enterprise Supply Chain Management is designed to function as a map of this system. Our aim is to guide the reader through the most important aspects of SAPTM 's Reference Model. All business professionals who are considering implementing or are currently using SAPTM software may benefit from this book. From the theory behind the applications to real-life business examples, this book guides the reader through the key areas of the R/3TM system. In order to help the reader better navigate through this book, the remainder of this Introduction will answer general questions about the book's subject matter as well as direct readers to places where more in-depth treatments of key terms and issues may be found.

I.1 What Is SAPTM?

Founded in 1972 in Walldorf, Germany, SAPTM (Systems, Applications and Products in Data Processing) commands a significant share of the worldwide client/server enterprise application software market. SAPTM is the number one vendor of standard business application software and is the fourth largest independent software supplier in the world. More than 10,000 companies in over 90 countries use SAPTM software. Current SAPTM company facts include:

  • Leading client/server business software company
  • Leading vendor of standard business application software
  • Worldwide market share of 33%
  • Fourth-largest independent software supplier in the world
  • Availability in 14 languages
  • 34% of customer base under $200 million
  • 10 out of the top 10 U.S. companies with highest market value
  • 8 of the top 10 largest U.S. corpora highest profit U.S. companies
  • More than 10,000 customers in over 90 countries

For a more detailed examination of SAPTM and its history, see Chapter 1, SAPTM and Client/Server Technology.

I.2 What Is R/3TM?

Initially, SAPTM made the move from mainframes to open systems in the late 1980s with R/2TM, a monolithic, mainframe legacy solution. As early as 1988, however, SAPTM chose to move toward client/server technology and began developing R/3TM. In 1992, SAPTM unveiled R/3TM just as client/server and its potential were beginning to be fully realized in the business world. R/3TM 's success is largely due to its ability to provide a highly integrated environment that can fully exploit the potential of client/server computing.

A full description of R/3TM's product architecture can be found in Part 3, Architecture, Framework, and Tools, but here we define R/3TM simply as SAPTM 's enterprise application for open-system platforms. More specifically, R/3TM is an integrated enterprise software system that runs in open-system environments. The R/3TM architecture is essentially a three-tier client/server consisting of a database server, application server, and presentation server (see Chapter 1). These dedicated, task-oriented servers are linked in communication networks, which allow them to integrate data and processes within the system. The applications are developed using SAPTM 's fourth-generation language ABAP/4 and the ABAP/4 Development Workbench (see Chapter 15).

R/3TM 's advantages lie in its flexibility, scalability, and expandability. R/3TM can be used in client/server architectures with 30 seats as in installations with 3,000 end users. This scalability ensures that R/3TM can provide support for current business operations and allows flexible adaptation to change and progress. Designed as a total system, but also suitable for modular use, R/3TM is expandable in stages, making it adaptable to the specific requirements of individual businesses. R/3TM can run on hardware platforms of leading international manufacturers and can integrate with customers' in-house applications. It is also open to allow interoperability with third-party solutions and services; it can be installed quickly and efficiently. R/3TM is so designed that such experts in scalable software as Microsoft, IBM, and Apple have all deployed SAPTM as their enterprise solution.

In the age of Internet computing, SAPTM R/3TM has emerged as a platform for electronic commerce, supply chain management, and data warehouse applications.

I.3 What Is the R/3TM Reference Model?

SAPTM has packaged 25 years of best-business practices in many different industries in the form of a "blueprint" called the R/3TM Reference Model. The Reference Model, also known as SAPTM 's Business Blueprint, guides companies from the beginning phases of engineering, including evaluation and analysis, to the final stages of implementation. It is the definitive description of R/3TM, providing a comprehensive view of all the processes and business solutions available in the system. Technical details, however, are "hidden" so that the business user can focus solely on business-process issues. Thus, the Business Blueprint is written in the language of the business user.

The Business Blueprint can be the starting point for business engineering efforts. Documenting processes in R/3TM is a critical part of the "understanding equation" at customer sites. To date, few companies have been able to provide a comprehensive, process-oriented description of a business that fits into almost any industry. The Business Blueprint is a means of streamlining processes and implementing R/3TM without a business having to start from scratch.

The Business Blueprint concentrates on four key areas necessary for understanding business: events, tasks or functions, organization, and communication. These areas define who must do what, when, and how. Events are the driving force behind a business process, prompting one or more activities to take place. This model is the essence of SAPTM 's Event-Driven Process Chain (EPC) Methodology, which is discussed in Chapter 2.

In Releases 4.0, SAPTM offered more than 1,000 predefined business processes, with variants, that generally correspond to different industries and corporations — a milestone in the evolution of process management and enterprise software. These business processes are illustrated with the EPC graphical method. By connecting events and tasks, the method models and analyzes even very complex business processes. An EPC model can show where breaks in the chain of tasks and responsibilities hurt the ability of a company to optimize its processes. Graphical models help users select and understand the software, visualizing how data flow through business areas and showing how various functions interact with each other. The EPC model is the central, process-oriented view. Other models show function, process, information flow, and organization views.

The Business Blueprint can be viewed and analyzed with the help of the R/3TM Business Engineer, which is discussed in full in Chapter 16. A set of integrated tools for configuring R/3TM, the Business Engineer has graphical browsing facilities for displaying the Business Blueprint directly from the R/3TM Repository, which contains all the data definitions and structures required by ABAP/4 programs. The Business Engineer also includes customizing components that allow a user to adapt or modify the system to meet the user's own specific needs.

Benefits of the R/3TM Reference Model during R/3TM implementation include quick overviews, business engineering support, and better communication among different departments (see Chapter 3 for implementation issues). A majority of R/3TM Reference Model customers use the blueprint for business-process modeling. Some organizations, however, use modeling tools and methods in different ways to suit their specific needs. In many organizations, process modeling is used for documentation, visualization of processes, better comprehension, training, and process optimization.

I.4 Who Uses R/3TM?

R/3TM is the accepted standard in key industries such as software, oil, chemicals, consumer packaged goods, and high-tech electronics. Other industries include automotive, building and heavy construction, communication services, consulting (software), financial services, furniture, healthcare and hospitals, pharmaceuticals, public sector, raw materials, retail, services, steel, tourism, transportation, and utilities.

Table I-1 is a partial list of R/3TM users.

TableI-1 R/3TM Users
Industry Company
Automotive ITT Automotive Europe
Yamaha
Audi
General Motors
Chrysler
BMW
Subaru
Toyota
Volkswagen
Building and Heavy C Industries
ADtranz ABB Daimler-Benz
Babcock Prozess Automation GmbH
CEGELEC AEG Anlagen und
GESOBAU GAG
Dover Elevator International, Inc.
Dürkopp Adler AG
E. Heitkamp GmbH
Eldim B.V.
Frequentis
Chemicals Bayer
Procter & Gamble
CCPL
Degussa
Henkel
Kemira
Lever Europe
Pirelli Pneumatici S.P.A
Reichhold
Sasol Alpha Olefins
Schülke & Mayr
Wintershall, Wingas, Kali und Salz
Zeneca
Communication Services, Media Random House
Simon & Schuster, Inc.
IPSOA Editore S.R.L.
Optus Vision
Ringier AG
Seattle Times
SFR
Telecom PTT
Computer Software Apple
3com Corporation
Autodesk Inc.
Fujitsu Microelectronics
Fujitsu Network Communications, Inc.
Hewlett-Packard
IBM
Samsung
Wang
Intersolv
Legend QDI Ltd.
Logistix
Micrografx
Microsoft
Micro Software Group
Visio
Consumer Products: Food Alfred Ritter GmbH & Co. KG
Anheuser-Busch Companies
Boston Beer
Cameo, S.P.A.
Guinness
Heinecken Italia S.P.A.
Imperial Tobacco
Nestlé
Keebler Company
Consumer Products: Non-Food Braun AG
Colgate-Palmolive
Hans Schwarzkopf GmbH
Heissner
Unilever Italia S.P.A.-Divisione Lever
Financial Services, Banks, Insurance ABB
Banco Itau S.A. (BR)
Bank of Canada (CA)
Bank of Slovenia (SI)
Bayerische Landesbank (DE)
Bayerische Vereinsbank (DE)
Commerzbank AG (DE)
Countrywide Banking Corporation Limited (NZ)
Credit Suisse (CH)
Deutsche Bank AG (DE)
First Chicago NBD Corporation (US)
First National Building Society (IE)
Jyske Bank A/S (DK)
LGT Bank in Liechtenstein (LI)
Lloyds TSB Group plc (GB)
Mercedes Benz Finance Ltd (GB)
National Westminster Bank plc (GB)
PARIBAS BANQUE France
PT Bank Bali (ID)
PT Bank Bali (ID)
Putnam Company (US)
The Bank of N.T. Butterfield & Son Ltd. (BM)
The Government Savings Bank (TH)
The Nomura Securities Company (JP)
Toyota Finance (AU)
UBS Schweiz. Bankgesellschaft (CH)
Volkswagen Financial Services (DE)
Volkswagen Leasing Polska SP. Z (PL)
WestLB Westdeutsche Landesbank (DE)
Zürcher Kantonalbank (CH) Bruderhilfe
LBS Bayerische Landesbausparkasse
Mercedes-Benz Lease Finanz
Sega
Victoria
Industrial and Commercial Machinery Fiat Avio
Gurtec GmbH
Kapp
Mann & Hummel
Metabo
Sulzer Electronics
Oil and Gas British Gas
Chevron
Conoco
Shell
Exxon
Mobil
Petromidia
Pharmaceuticals Boehringer Mannheim Italia S.P.A.
Ciba-Geigy
Degussa AG
FRESENIUS AG
Warner Lambert
Merck
Weimer Pharma
Zeneca Plc.
Primary Metal, Metal Products, Steel Carnaud Meta
STANDA S.P.A.
CompUSA
Fleming
Florsheim
Home Depot
Kerr Drugs
Maxim Group
Office Max
PetsMart
Reebok
Shoe Show
Woolworth
Transportation Services, Tourism Condor Flugdienst GmbH
Copenhagen Airport A/S
Utilities British Gas
GEA AG
Industrielle Betriebe Aarau
New York Power Authority
Pacific Gas and Electric
STEWEAG Energie
Westcoast Energy
Wood and Paper Gizen GmbH
Papierfabrik August K
SCP

I.5 How Do Customers View R/3TM?

In a 1995 survey, TCM contacted over 500 SAPTM customers in an extensive effort to evaluate the technical and customer requirements of SAPTM 's R/3TM, and R/3TM Reference Model, as well as associated methodologies and software products related to R/3TM implementation. The goal of the study was to ascertain how R/3TM customers, consultants, prospects, and complementary software vendors deal with models and model-driven software configuration and implementation. This study revealed a number of novel approaches for using R/3TM, the Reference Model, and other SAPTM tools.

Reasons for Using R/3TM

Integration, price, SAPTM were some of the reasons companies chose R/3TM.

  • "The key factors were demand of the company's strategy (PDM integration) and the methodology for implementation."
    (ABB Turbo Systems Ltd., Baden, Switzerland
  • "Standard techniques support C&L R/3TM implementation methodology."
    (Coopers & Lybrand, Brussels, Belgium)
  • "We were in the process of a R/2TM implementation and felt R/3TM had a longer future. Our company chose SAPTM because of its integration."
    (Rapistan Demag Corp., Grand Rapids, Michigan, USA)
  • "R/3TM was decided upon to replace the self-created software, which is in use up to now, and to improve economic performance. At the same time, it's seen as a chance to reengineer processes."
    (Rheinbraun AG, Cologne, Germany)

Approaches to Using the R/3TM Reference Model

The Reference Model can be a good starting point for customer BE projects. Customers who begin engineering projects with other modeling tools often switch to the Reference Model in later phases, finding the models and analysis techniques more helpful during R/3TM implementation.

  • "In a high abstraction level, we modeled the overall business. In manufacturing and sales, the Reference Model was very helpful."
    (ABB Turbo Systems Ltd., Baden, Switzerland)
  • "We began with the R SIZE="-3">TM Reference Model and proceeded to create a specific model from there; we always tried to stay to the standard processes wherever possible."
    (Hewlett-Packard Austria)
  • "We used the Reference Model as a starting point for business engineering projects. It has been extremely successful."
    (Fahrzeugausrüstung Berlin GmbH, Berlin, Germany)

Perceived Benefits of the R/3TM Reference Model

Stabilization, easier implementation, and better communication were some of the benefits customers found when using the Reference Model during R/3TM implementation. The following statements characterize how each customer uses the Reference Model during implementation.

  • "Implementation of R/3TM gains stabilization. Also it provides helpful support in identifying which process elements in R/3TM will be useful."
    (ABB Turbo Systems, Baden, Switzerland)
  • "We don't have to start from scratch when we are modeling."
    (Ascom Hagier AG, Solothum, Switzerland)
  • "It provides a quick overview and very good introduction to application architecture."
    (Berufsakademie Mannheim, Mannheim, Germany)
  • "The benefits lie in the visualization of processes, resulting in improvement of communication and higher transparency."
    (LUHNS GmbH, Germany)
  • "It offers a better view of what SAPTM is able to cover and examples of 'best practices.'"
    (ICS lnternational Consulting Solutions GmbH, Bottmingen, Switzerland)
  • "It will all proposed solution faster and more completely than otherwise."
    (Pilkington, St. Helens, Great Britain)

Business Engineering with R/3TM

Most R/3TM Reference Model customers are engaged in BE, although uses and methods often vary significantly from customer to customer.

  • "We use the R/3TM Reference Model as visual help to discuss our processes, and we modify models of the Reference Model according to our needs; furthermore, we create new models to describe interfaces between the SAPTM system and other non-SAPTM applications, using terminology and symbols of the Reference Model."
    (Miele & Cie GmbH & Co., Gatersloh, Germany)
  • "We have essentially modeled our entire enterprise to help determine 'fits' and 'gaps' between our desired state and what R/3TM can provide."
    (Mentor Graphics, USA)
  • "The function and process diagrams are used to identify business activities that are deemed applicable. These are then reviewed and adapted for our company's business practices. Process modeling insures a standard methodology and allows the activity to be identified and refined based on process data flow."
    (Rapistan Demag Corp., Grand Rapids, Michigan, USA)

Documentation of Business Processes

Documenting processes in R/3TM improves an overall understanding of the system. The Reference Model not only provides a good overview of the R/3TM system, it also c define current business processes.

  • "It plays a major role as a documenting tool, as well as feedback to clients to show understanding and point out conflicts and omissions."
    (Ernst & Young CSI, Johannesburg, South Africa)
  • "The R/3TM Reference Model has been the basic model. Our teams have designed in the first project phase of R/3TM the new business processes. All new processes are stored, including documentation, in a user model (company model)."
    (Fahrzeugausrusting Berlin GmbH, Berlin, Germany)
  • "We used the Reference Model as a starting point — detailed processes were described using the EPC methodology."
    (Philip Morris, Switzerland)

Approaches to Business Modeling

As standard software, R/3TM offers standard business solutions. R/3TM is also flexible enough, however, to be customized or extended to meet special customer demands. Some companies create customized models for sales and distribution, procurement, financing, and project management. Using the EPC methodology, these customers created the models listed in Table I-2.

I.6 Conclusion

As we have seen, R/3TM and the R/3TM Reference Model are highly flexible means of assisting BE. Throughout SAPTM R/3TM Business Blueprint, we will continue to draw from real business experiences and practices to illustrate basic principles of the R/3TM system. Further attempted to provide examples from a wide variety of industries so that the reader can intuit the many possibilities inherent in the R/3TM system.

Table I-2 Modeling Strategies of R/3TM Customers
ModelCustomer
Order processing inside and outside of R/3TM Ascom AG, Switzerland
Order fulfillment; sales and quotations Bühler AG, Switzerland
Package distribution Ernst & Young CSI, South Africa
Branch-oriented models for the chemical industry ICM Unternehmensberatung GmbH, Germany
Entire enterprise model to determine "fits" and "gaps" between the company's desired state and R/3TM Mentor Graphics, USA
Order processing model with customized scenarios for invoicing, order, and distribution Miele & Cie GmbH & Co., Germany
Manufacturing process and organizational responsibility; material process flow for factory; generic process control systems Nestlé, Great Britain
Concurrent engineering; global logistics Nokia Mobile Phones, Finland
Flow site Raab Karcher Energieservice, Germany
Project-related order processing; manufacturing order and requirement processing Rapistan Demag Corp., USA
Process of acquisition of land for mining purposes Rheinbraun AG, Germany
Process of creation of a sales order for export; goods receipt and recycling of equipment STG-Coopers & Lybrand, Switzerland
Presales process; consulting process Systime AG, Switzerland
Operating funds administration; freight data management ZF Friedrichshafen AG, Germany

While our main focus is BE with R/3TM, we have tried to explain as much of the R/3TM system and its variants as possible. We understand that different parts of this book will interest different readers, and for that reason we have tried to steer the reader toward his or her areas of interest in this Introduction. Generally speaking, the best strategy for readers with specific areas of interest is to follow these option paths:

  • Readers who are most interested in business engineering and implementing R/3TM with the Reference Model should begin with Part 1, Business Engineering.
  • Readers who would like to examine specific business-process scenarios and business objects available in R/3
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