SAP01 Logistics

April 2012





The basic logistics process comprises procurement of materials, manufacturing items using these materials, and then sale of the manufactured products. SAP ERP supports these key operational activities. The procurement process is composed of purchasing, inventory management, and invoice verification. Production comprises of planning and manufacturing. Sales order management includes creation of the sales order, delivery by the vendor, and billing.

Secondary activities include quality management, warehouse management, plant maintenance, and customer services. We will discuss these in detail in the coming slides.



The operational process delivered through SAP ERP gets expanded by the solutions included in SAP Business Suite. The basic process is production, and the extended process is Supply Chain Management, SCM. The company may optimize and centralize its production using SAP SCM. It includes features such as advanced planning systems, APS, and covers functions of sales order management. Materials and capacities are planned simultaneously. In addition, a sales plan can be made available to external partners to see if the plan is practical.



SAP Customer Relationship Management, SAP CRM, is a comprehensive solution for managing your business relationships with your customers. It supports all customer-focused business areas, from marketing to sales and service, as well as customer interaction channels such as interaction center, internet, and mobile clients.



The SAP Supplier Relationship Management, SAP SRM, application manages the business relationship with the supplier. It provides strategic value through sustainable cost savings, contract compliance, and instant assessment. With SAP SRM, your company will be equipped with tools to drive superior results through end-to-end source-to-pay process. Activities such as spend analysis, category management, requisitioning, sourcing, operational contracts, invoicing, and supplier management are part of an integrated platform.


SCM, SRM, CRM, and PLM are integrated to form the components of SAP Business Suite from a logistics perspective. SAP Business Suite is a group of open business solutions that integrates people, information, and processes. With SAP Business Suite, you can streamline your business operations and you can maintain profitable business relationship. It includes industry solutions, cross-industry solutions, technological infrastructure, and services. The components are integrated in the same platform to achieve business objectives.




This slide depicts the entire cycle in sales order management. The eight steps demonstrated in the slide cover every aspects of a product cycle, beginning from creation of a sales order to payment processing. However, it is not necessary each stage mentioned are involved. These are the steps that you could possibly be using in the sales management process.

Note that we are now discussing from a sales perspective, but the functionality of the steps can be from procurement area, it can as well be from production or finance areas.

Steps one and two inherently belong to the sales group. The sales order picks up information from presales documents like a quotation or an inquiry and then creates a sales order. The system can be set up for checking the availability of the inventory. Now, you may or may not have the materials required by the customer, you may have them in some other plant, it is also possible that you might not be able to guarantee the delivery of the product at the time stated by the customer. In the end, all depends upon the customer, he might decide to wait, he may have no objection buying the product of some other plant of yours, or he might cancel the order. Thus, the availability check is defined by the customer.

Steps three, four, five, and six have some sort of warehouse functionality involved. The delivery document created in third step defines the functions of other steps such as how the product is to be delivered to the customer, how the customer wants it packed, what time the product is to be delivered, how it is going to be picked up, and so on. These are all the warehouse functionalities. After these activities are complete, you post the goods issue document in the SAP system for the picked quantities.

The last two stages are the billing and payment processing. These are finance-related steps, but this whole process is a sales process. You put a sales order in the system and you want to get your money for it. So, it incorporates not only the sales group, but also the warehouse groups, the inventory groups, the procurement groups, the production groups, and then lastly, the finance groups.


SALES ORDER MANAGEMENT - Sales related steps


The sales order is a document that records what goods have been sold and to whom, the price, the company code and the name of the purchasing organization, and similar details. The relevant information is drawn from the customer master record and the material master record.

SALES ORDER MANAGEMENT - Transportation related steps



The logical conclusion of a sales transaction is reached only after the goods have been packed and shipped to the customer. The Shipping component is integrated under the Logistics Execution component. The shipping process includes determining deadlines for the shipment; creating the outbound delivery document; planning and monitoring the picking and packing of the goods for transportation; maintaining shipping documents; and posting the goods issue (goederenuitgifte). You do not need to print any of these documents. You will be able to view the sales order, outbound delivery document, the pick document, the packing document, the transportation document, and the transfer document in the warehouse. You also can see the post good issue document stating that it left the inventory and now it is in the transit.

The result is an efficient and largely automatic shipping process in which manual changes are necessary only under certain circumstances.

1.      Create an Outbound delivery


2.      Post a Goods Isssue






SALES ORDER MANAGEMENT- Finance related steps


The sales process consists of four crucial steps. We need to have a sales order, we need to have an outbound delivery document, we need to have a post goods issue document, and we have to have a billing document. The billing document or invoice is created after the goods have been delivered. The invoice is sent to the customer, who then pays for the goods received. The invoice is created in sales order management in the SAP system. An associated document is automatically created at the same time in financial accounting, which records the receivable in the customer’s account (debiteur).

3.      Create billing document




This slide depicts the logical document flow in the sales process. It begins with the creation of the sales order, followed by the delivery document. After goods have been delivered, the invoice has to be posted, which automatically creates a corresponding document in accounting. You can view on the slide that each such document created has a document number, which helps in tracking the process.


Customer Relationship Management extends SALES ORDER MGT


The SAP Customer Relationship Management, SAP CRM, application focuses on customers. It provides best-in-class functionality for marketing, sales, and service. By supporting customer-linked business processes across multiple interaction channels, SAP CRM enables organizations to focus on strategies for customer-driven growth and helps the organizations differentiate themselves in the market by providing a superior customer experience. With SAP CRM, you get the necessary assistance to please your customers, strengthen your team, and expand your business. Your organization can capitalize on customer insight, improve front-line efficiency and effectiveness, streamline critical business processes, and quickly adapt to changing business and customer needs.


The main purpose of any business firm is to find customers to sell their products. Customers play an integral role in the success of your business. Customer Relationship Management assists companies understand as well as anticipate the needs of current and potential customers. CRM helps the organizations to have a thorough knowledge of their needs, wants, and buying patterns.

To achieve the closed-loop relationship with customers, SAP CRM focuses on the roadmap illustrated in the slide.

Identify your customers: SAP CRM promotes collaboration between your organization and its customers. It then enables everyone to have superior interactions and experiences across all channels.

Gain new customers: SAP CRM authorizes employees to carry out interactions anytime and anywhere with existing customers and gain new customers. This provides a real-time view of customer information that facilitates collaboration across your entire global business network.

Retain customers: SAP CRM offers a superior customer experiences and ensures that the customer is both happy and satisfied with the product. It helps your organization distinguish itself and grow by capitalizing on the customer insights. The customer will remain loyal to your company even if your competitor offers similar products with discounts rate or low price.


In the traditional direct sales, the knowledge of a particular customer would be limited only to the employee who is handling that customer. Here, relevant information about that customer will not pass accurately or completely to other employees or departments. In other words, in the traditional way, there is no connection or flow of information to other individuals working on customer relationship management. So, if an employee leaves the job, the vital customer information is lost.

As you can see in the slide, every department representatives have information regarding their respective customer contacts. However, integration of information is not possible. Thus, knowledge transfer does not take place across other departments such as sales, service, or company.


Contrary to the traditional sales practice, knowledge transfer is possible at all customer interaction phases if you are using the SAP CRM tool. Further, the stored information can be accessed by all employees whenever the need arises.

As demonstrated in the slide, sales representatives interact with the customers and know their requirements. They also collect other relevant information. This all is transferred to telesales employees who then create the order. The company will keep the knowledge about all business transactions. The service team will also have the knowledge about all the customers in case they need help regarding the products such as troubleshooting or repair. Field service team can access the information using laptop or other mobile devices. The flow of information runs through all the departments automatically, so that all the related departments are well informed about every single customer. Hence, your organization can increase its service package, quickly respond to the queries, strengthen relationships with customers, and increase the customer loyalty.


The fundamental capabilities of SAP CRM are marketing, sales, and service. It also analyzes the performance of these capabilities.

Marketing includes all the marketing processes, that is, analyze, plan, develop, and execute all marketing activities through all customer interaction points. This central marketing platform empowers marketers with complete business insights thus enabling you to make intelligent business decisions and to drive end-to-end marketing processes.

Sales maintain focus on productive activity to acquire, grow, and retain profitable relationships with sales functions such as sales planning and forecasting, territories, accounts, contacts, activities, opportunities, quotations, orders, product configuration, pricing, billing, and contracts.

Service – In a scenario where the customer is not satisfied with the product and complains about it, the service technicians will take care of such complaints and repair the product. To help customers achieve optimum benefit from the product, technicians need to have total information and knowledge about the product and the customer. SAP CRM enables to carry out this activity with its tight integration across all departments. Hence, service is carried out seamlessly and efficiently. Call centers, field service, and e-service provide various flexible delivery options.

Analytics generates reports on all the business transactions performed by sales, marketing, and service.


In order to increase the efficiency and profits, the CRM department, consisting of the marketing department, sales department, and service department, needs to have continuous interaction with the customer. Hence, there arises the need of well-defined ways to interact. With SAP CRM, you will have various channels to interact with customers, which will help both the company and the customers achieve their objectives.

This slide focuses on the various interaction channels between the customer and the company. Various channels are:

Channel Partners – SAP CRM provides a Web-based application to manage partner relationships and enables channel partners to sell more effectively. Personalized portals help brand owners manage their partner relationships, collaborate with channel partners, and optimize channel operations. In addition to this, you can provide channel partners with portal-based access to all the information they need to market to, sell to, and interact with end customers. With SAP CRM, you can optimize your partner channel management processes, including partner marketing, channel sales, channel service, and channel analytics.

Field – SAP CRM lets field-sales professionals use PDAs and other popular handheld devices to perform their daily tasks any time any where. As a result, they can manage customer information and business activities, create quotations and sales orders, and maintain sales opportunities. Key functions for mobile sales handheld include sales order management, account management, activity and task management, opportunity management, product information, signature capture, sample management, and on-demand availability information.

SAP Interaction Centre – SAP CRM helps organizations set up an interaction center that serves as a strategic delivery channel for service, sales, and marketing efforts to maximize customer loyalty, reduce costs, and boost revenue. Organizations can give agents the tools to seamlessly handle inbound or outbound transactions and can give managers role-based access to SAP or third-party administration, maintenance, and reporting analytics to ensure the interaction center operates efficiently. SAP CRM enables key business processes including, telemarketing, telesales, and multi-communication and interaction centre analytics.

SAP E-Commerce – SAP CRM provides an e-commerce application that enables you to turn the Internet into both a profitable sales channel and an interaction channel for business customers and consumers. With SAP CRM, you can empower your customers with a personalized Web experience and convenient self-services. In addition to this, the application delivers a fully integrated Web channel, helping you strengthen sales and service operations while reducing transaction costs and customer service calls. SAP CRM enables a complete range of e-commerce processes, including e-marketing, e-selling, e-service, and e-analytics.


SAP CRM on-demand is a new product available since 2006. It is an easy-to-use and quick-to-deploy Web-based solution, which is available on a subscription basis. CRM on-demand solution is very productive, effective, and efficient as the customer gets immediate response. SAP provides the flexibility for a smooth migration from on-demand to on-premise SAP CRM and offers low-cost, low-risk tools to quickly improve sales, service, and marketing effectiveness. You can make the move to on-premise if and when you are ready, with minimal disruption to user adoption, system performance, or continuous operations.


SAP sales order is an electronic document that captures and records the day-to-day business activities. As you can see in the slide, different types of sales in CRM include telesales, mobile sales, internet sales, and direct entry. Sales will be done with CRM, and logistics part will be done with ECC R/3. In the ERP system, business processes such as shipping and transportation of goods and the billing are processed. The completion progress is transferred to the SAP CRM system in a status update. Status update will take place both in CRM and ECC to transfer the data.


The main components of SAP CRM are SAP CRM and ECC. Other components, such as SAP NetWeaver XI, BI, Mobile, and MDM, may be part of the solution depending on the business scenario.





Production or manufacturing technology provides the tools that enable production of all manufactured goods. These master tools of industry magnify the effort of individual workers and turn the raw materials into affordable quality goods essential to today’s society. With SAP ERP, you can manage the production activities from the planning stage to execution and analysis stage. SAP establishes critical links between the external real-time process control and laboratory information systems to make your enterprise as competitive as possible.

This slide focuses on various stages of production cycle.

Production planning is the first stage where you plan the various aspects involved in manufacturing of a particular material. The planning aspect comes in from several different ideas. It can come in from a legacy. It can also come out of customer relationship management aspect where the sales guys say that the customer wants something and we bring it in a forecast need. Thus, the planning can have sales and operation planning incorporated in it.

Order creation is the second stage where an order is created for a particular requirement. Whether it is a forecast plan for something you are going to build for inventory or whether it is a different kind of plan that you dump it into the system, the system creates the order.

Order release is where the created order is released for production so that you can do rest of the process.

Order printing is taking a printout of the released order.

Material staging is an important step of production. In this step, you carry out all the goods movement for the order and get then ready for execution.

Order execution is the seventh step. Here, you execute the production of the created order.

Confirmations and goods receipt are the final stage of production where the manufactured products are confirmed and moved to warehouse with receipt.


Production planning


Production planning and control involves the acquisition and allocation of limited resources to production activities so as to satisfy the customer demand over a specified time horizon. Thus, planning and control problems are the natural problems for optimization of the plan that meets the demand at minimum cost or that fills the demand and maximizes the profit.

As shown in the slide, planning is divided into several steps. These steps may be executed independently or may be carried out together.

Sales and Operations Planning, SOP, generates sales plans and production plans using estimation values and requirements from the sales information system and costing/profitability analysis as inputs for determining the requirements.

Demand Management affects management of the independent requirements. The action of independent requirements in material requirements planning is determined by their requirements type or by the planning strategy. Based on the plans from SOP, requirement quantities and dates for finished products and assemblies are determined.

Master Production Scheduling is planning of the products that influence company profits or those that require critical resources. This procedure ensures that the instabilities in planning are kept to a minimum. MPS is an optional step in the planning process.

Material Requirements Planning MRP is used to plan procurement in a plant, at all BOM levels if necessary. Planning can either be consumption based or demand driven. The output of MRP is either a planned order or a purchase requisition.

Manufacturing Execution involves several activities like production order, creation, release, goods movements and confirmation.

Sales order creation


1.      Create order


2.      Display stock  / requirements list - 1



3.      Display Bill of Materials (BOM)



4.      Run the MRP process



5.      Display stock  / requirements list - 2


Order release


The production order is the central data object in a shop floor control and manufacturing execution. The production order contains all data relevant to production objectives, material components, required resources, and costs. Operation material components and production resources or tools are normally copied from the routing and the bill of materials, or BOM. The production order can be generated automatically or manually by converting it from a planned order. A start and finish date is entered for the order item according to the scheduling type. Lead time scheduling is executed automatically; it calculates the start and finish date of the order, and detailed dates and capacity requirements of the operations. You must release a production order before you can process it; the order release is the basis for further processing of the production order.

You can see from the slide that the production order consists of routing and BOM, which is responsible for sequence of operations for carrying out the production, specifying the required components for production respectively. Since every production is unique to a particular production plant, planning plant, and the materials requirement planning or MRP area, we process the routing and BOM for the plant that production is carried out for.

6.      Create and release a production order with reference to a planned order



7.      Display stock  / requirements list - 3


Confirmation and good receipt



Order confirmation is used to enter internal activities generated for the production order. The work progress of a production order can be measured based on the order confirmations. Control is then maintained using the operation control key or the production scheduling profile. Thus, we have two main confirmations, operation related and order related. Order confirmation is the confirmation of the entire order header level whereas an operation confirmation allows you to confirm an order step by step. There are different types of confirmation procedures available in the SAP system such as completion confirmations, milestone completion confirmations, standard completion confirmations, normal completion confirmations, collective completion confirmations, and completion confirmations at order header level.

In the SAP component, goods receipt from production in a warehouse occurs exclusively the same way as for normal goods receipts from a purchase order. Goods receipt from production can be posted either manually or automatically. Automatic goods receipt can be controlled specific to either operation (operation control key) or material (production scheduling profile). If you choose specific to material, the goods receipt is posted upon confirmation of the last operation requiring confirmation.


8.      Display stock  / requirements list - 4


INFO: Settlement, a financial exercise


The settlement is used for production orders and process orders in the product cost by order component. Order settlement is carried out in SAP to credit an order. In general, settlements are carried out periodically. You control settlements using a settlement profile. You must credit orders according to the cost element.

Once the closure of production order is done, the activity of delivery and settlement starts. Required data is extracted from materials, quantity, time, and work centre and is further posted to accounting. Depending on the scenarios, the system debits either the balance sheet account or a price difference account with the difference during the settlement.




SAP Supply Chain Management, SAP SCM, is one of the SAP Business Suite solutions. It encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management activities. It is the process of planning, implementing, and controlling the operations of the supply chain as efficiently as possible. Supply chain management covers all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption.

The slide provides an overview of supply chain management involving sales order management and procurement in its process.


The objective of Supply Chain Management is to provide timely delivery of goods and services to the customers at the lowest cost possible. The slide gives you an overview on the flow of information from supplier to customer. In order to achieve the supply chain optimization, an automated business process is introduced between the suppliers and customers in supply chain management. The value chain encompasses the various channels of supply chain such as supplier, manufacturer, distributor, retailer, and finally, the consumer. This brings clarity on all supply and demand information.


SAP SCM solution is divided into the areas of SC planning execution, SC coordination, and SC collaboration. Specifically, the SC planning area incorporates demand planning, cross-plant distribution, procurement planning, as well as detailed production planning all the way down to the operation level. You can execute these functions in SAP R/3 and/or SAP SCM in the APO-DP.

As shown in the slide, there is supply chain collaboration between the suppliers, the customers, and the partners. The collaboration involves the SCM processes, which start from strategy, planning, sourcing, manufacturing, and delivering. This entire process is called supply chain performance management. Supply chain event management is an application that supports control processes for managing events within a company as well as between the companies. SAP SCM solution allows you to monitor your supply chain processes, providing transparency within the process. We will discuss more on this in the coming slides.


SAP SCM consists of two main applications – planning applications and execution applications. Planning applications use advanced algorithms to determine the best way to fill an order. Execution applications track the physical status of goods, the management of materials, and financial information involving all parties.

The slide gives you an overview on different planning and execution steps such as supply chain design, manufacturing planning, and manufacturing execution.

The supply chain design consists the hierarchy of supply chain with vendors, plants, distribution channel, and customers.

The manufacturing planning and production horizon deal with demand planning, production planning, and detailed scheduling and supply network planning. Demand planning allows you to forecast customer requirements by calculating the historical consumption data; for example, demand planning data is usually period based and unconstrained. You use the production horizon to decide which requirements are to be planned in supply network planning and which in production planning and detailed scheduling.

Transportation planning is the core area in manufacturing execution .The transportation planning helps your organization to determine the right shipment mode, carriers, and routes based on the lowest cost of delivery.



The supply chain collaborative planning is used in demand planning or supply network planning data with customers, subsidiaries, or suppliers using your internet browser. You can also use macros, alerts, and notes in collaborative planning. Collaborative planning is designed for the exchange of small volumes of the current data rather than the mass data. It integrates easily and quickly with the retails systems.

As you can see, the slide focuses on the collaboration between supplier who supplies the raw materials to the manufacturers, manufacturer who manufactures the product, and customer who is the end user of the product. This collaboration is done to achieve the supply chain optimization.



In this slide, we will discuss on the integration between SAP ECC (R/3) and SAP SCM (APO). SAP ECC deals with the execution processes whereas planning optimization takes place in SAP SCM. Planned independent requirements come from ECC demand management or from SCM demand planning. Sales orders come from the ECC sales and distribution module.

Supply network planning generates purchase requisitions and planned orders. These planned orders can be converted into production orders in ECC or planned in detail in SCM production and planning/detailed scheduling. These are then transferred to R/3 as production orders. Detailed scheduling can therefore take place in ECC or SCM.

HC REMARK: HC does not use SCM solution but standard work process to operate the planning to production orders manually in ECC (=ERP CENTRAL COMPONENT)



The main components in SAP SCM are SAP ERP Central Component (SAP ECC), SAP Supply Chain Management (SAP SCM), and SAP Auto-ID Infrastructure. R/3 enterprise was replaced with the introduction of SAP ECC. The SAP Business Warehouse, SAP Strategic Enterprise Management, and Internet Transaction Server are merged into SAP ECC. SCM is the oversight of materials, information, and finances as they move in a process, that is, from supplier to manufacturer to wholesaler to retailer to consumer. SCM consists of RFID technology, which helps to optimize the supply chain network to cut the costs, increase the revenue, decrease the working capital, and reduce the fixed capital. SAP AII is used to deliver the RFID technology of SAP SCM.





The procurement process is triggered due to the generation of certain need in the organization. The need can be either for material or for service. The generated need can be satisfied by procuring relevant goods through cross-company transfer or transfer of stock from one plant to another or from one storage location to another.

A typical procurement procedure that is performed to satisfy the generated needs involves various stages. First, you create a purchase requisition, and after necessary approvals, hand it over to the procurement team for processing. The procurement team invites the offer or determines the source of supply that can satisfy the need. Then, evaluation of the offer takes place based on certain defined criteria such as time, quality, and price. After this, you place the order on the selected source and you receive the goods against the purchase order. The next stage would be quality check of the received goods and then acceptance or rejection of the goods. Finally, receipt of invoice for accepted goods is generated and payment processing is done.

Based on the need and requirement of an organization, you can map this procurement process in the SAP system. The slide illustrates this procurement cycle.

Determination of demand or requirement – a purchase requisition can be created manually or triggered automatically if MRP procedures are maintained in the material master.

Next, the request for quotation (or RFQ) can be created manually or by referring to the purchase requisition (or PR). The RFQ is also supported by determination of source of supply. We can also refer to the PO (or purchase order), contract, and condition already available in the system to determine the source of supply.

Vendor or supplier selection –selection of vendor is simplified by making the price comparison between the quotations.

Purchase order processing and monitoring – a purchase order can be created with reference to PR, RFQ, contract, and material information record. The status about the delivery date and quantity to be delivered can be monitored.

After you have issued PO to the vendor, the next step in the simple procurement process is the goods receipt .Goods can be received with or without the purchase order.

Finally, an invoice can be posted before or after the goods receipt (or GR). After the invoice is posted in the SAP system, the financial accounting is updated .The process of payment is intimated to the finance department to end the procurement cycle.

A purchase order is a formal request to the vendor to supply you the goods or services. It contains certain conditions under which the request will be carried out. The goods receipt and invoice verification are usually carried out on the basis of the purchase order.

The slide gives you an overview on the contents of the purchase order. While creating a purchase order, you have to enter the company code, purchasing organization, purchasing group, and plant. When you enter the purchase order data, the system suggest default values, for example, ordering address, terms of payment, Inco terms from the vendor master, as well as material group, material short text, and unit of measure from the material master.


Goods receipt = goods ready from manufactor/vendor

Good issue = goods forwarded from warehouse




SAP ERP also includes self-service procurement. The self-service procurement empowers employees to easily procure needed materials using a Web-based shopping cart. This shopping cart enforces compliance with corporate purchasing policies. Thus, by decentralizing procurement, you will reduce overhead burden of purchasing professionals and allow them to focus on managing relationships instead of working exclusively on transaction.


As we learned from the previous slide, in the procurement process, goods receipt is the next step after you have issued PO to the vendor. GR in the SAP system is replicated through the documents. During goods receipt, you need to check various things such as the right material has been delivered or not, whether the right quantity has been delivered or whether there has been over or under delivery, whether perishable goods are within their minimum shelf life. You can enter several GR items against a PO item in one operation.





Invoice verification is the final stage of procurement process. During invoice verification, invoices and credit memos are entered and the contents and prices are checked for accuracy. Note that payment and evaluation of invoices is not involved in this process. The actual payment is handled by the accounting department.

Look at the slide to understand the invoice verification process. After you have received material against purchase order and posted a goods receipt in SAP system, you need to enter invoice to conclude the process. You can post invoice in SAP by calling the transaction MIRO. The system generates an invoice document and an accounting document. The material document contains material number, quantity, blocking reason, and amount reference. The accounting document contains the General ledger accounting which is affected by the posting such as vendor account, input tax account, and GR/IR (=goods receipt / invoice receipt) clearing account.




Invoice Created (blocked for payment)



All purchasing documents can be issued as a message. The messages can be issued via print, fax, electronic data interchange (EDI) or by E-mail. Each time you create a request for quotation document, purchase order, contract, or a schedule agreement, the system creates a message from the affected document. This message is placed in the message queue. The message queue contains all messages that have not been transferred to the vendor. From the message queue, you have the option to issue the messages immediately or later.











As we have learned in the first lesson, the SAP Supplier Relationship Management application, SAP SRM, provides strategic value through sustainable cost savings, contract compliance, and instant assessment. With SAP SRM, your company is equipped with tools to drive superior results through end-to-end source-to-pay process. From strategy to execution, SAP SRM covers the full supply cycle. It streamlines procurement and sourcing processes, maintains supply quality, and increases profits, supplier collaboration, and innovation. It has increased supply chain visibility and automated processes that connect the entire supply base. This feature helps you monitor global expenditure closely and discover new abilities to cut the cost of purchased goods and company-wide services.

Procurement and sourcing are the two main components of SRM. In this slide, we will learn the processes involved in the strategic procurement and sourcing cycle.

SRM helps in efficient handling of procurement and sourcing which in turn helps in the ultimate profitability and helps improve the supplier base with the company.

The typical procurement procedure includes

·        determination of the requirement,

·        source determination, order creation,

·        release of the purchase order,

·        monitoring the status,

·        goods receipt, and

·        invoice verification.

On the other hand, the sourcing cycle includes

·        negotiating beneficial condition with the supplier,

·        strategic planning and analysis to find a qualified source,

·        analysing the contract,

·        evaluate the supplier performance, and once all these processes are done, you

·        offer the contract to the supplier.

Strategic purchasing and sourcing is the process of developing a sound supply strategy and executing it by finding qualified sources to fulfill the supply needs, negotiate purchase agreements, manage contracts, and evaluate supplier performance.

Capabilities of strategic purchasing and sourcing include

·        supply strategy development,

·        spend analysis,

·        supplier selection,

·        contract management, and catalog management.

The overall score card feature helps you figure out who was the best vendor from a delivery perspective, who was the best vendor from a price perspective, and who had the most on-time delivery.



Operational procurement is the process of buying direct materials and services (those used in production) or indirect materials and services (those used for maintenance, repair, and operations). Capabilities include self-service procurement, plan-driven procurement, and services procurement.

Let us take an example given in this slide.

1.      The procurement requirements are generated from various components of ERP such as SCM, SRM, and so on.

2.      Once the requirements are generated, all the suppliers are invited to take part in a bid through the bidding engine.

3.      Once this process is over, the assignment of sources is done through the price comparison.

4.      Next, information is transmitted to the suppliers through fax, PDF, XML, and so on.

5.      After the information is passed, the suppliers give their confirmation for the supply of material.

6.      Further, an invoice will be received after the supply of materials or services.

7.      Once the invoice is posted, the financial accounting is updated for payments.


SAP supplier collaboration connects to a number of processes of the supplier relationship lifecycle in a cost-effective way. Using a Web browser, suppliers can gain access to a supplier portal that serves as a centralized hub for all the related activities.

The illustration focuses on how the collaboration takes place between the supplier and a buyer. Here, the supplier and the buyer are connected through a Web browser. The buyer portal receives the requirements from PLM, SCM, and so on, which is connected through NetWeaver. The supplier and the buyer then are accessed via a Web browser which provides a clear picture regarding the requirement.


Both professional buyers and standard users work in SAP SRM through a Web browser. Purchase orders created in this way are then posted in the ERP back end for follow-up processes such as goods receipt or invoice verification, and the data become available for material planning and availability checks.

The slide shows that an ECC system is integrated with the SRM system for optimized procurement process. You order something through internet and put it in your shopping cart. Now, this goes back to ECC and creates a purchase requisition. Further, you will confirm your shopping cart and then possibly invoice it. So, it is possible for you to actually buy something, give your confirmation, and also get your invoice all at once in the Supplier Relationship Management with interfaces going back and forth over to ECC if needed.

Main components in SAP SRM are SAP ECC and SAP SRM. In a complete logistics value chain, procurement through SAP SRM is a highly integrated process. Requirements for materials that are to be externally procured can be created through planning processes in SAP SCM or through actual sales processes. Once the actual purchasing process is computerized, the purchasing department can focus on strategic and quality improving tasks.





The SAP Product Lifecycle Management, SAP PLM, supports lifecycle data management. It provides an integrated environment for handling all product-related information.

Various industries such as companies in the discrete process or consumer product industries can use SAP PLM to evaluate the complete spectrum of product and project data and then distribute the information inside and outside the company. The data ranges from the documents and product master to the service and maintenance details. By making highly reliable data accessible to all stakeholders, SAP PLM empowers companies to make more informed decisions.


The successful enterprise offers the right products at the right time and at the right prices.

By bringing down the customer and vendor in one platform for the actual development of the product, SAP PLM enhances the performance of your enterprise.

SAP PLM supports your enterprise in

·        product development,

·        the maintenance of assets, and

·        service processing for your products.

As shown in the slide, different stages of product lifecycle, from designing of a product to discontinuation of the product, are integrated in SAP PLM.

It also brings together the customer relationship and supply chain managements. Thus, the product lifecycle is mapped in its entirety.

SAP PLM is a complete integrated solution that covers the entire product lifecycle both from the provider’s and asset manager’s perspectives. It provides a wide range of scope with functional areas needed for product and asset management.

The main functional areas of SAP PLM include

·        program and project management,

·        lifecycle data management,

·        enterprise asset management,

·        maintenance,

·        service management,

and so on.

We will discuss these in detail in the coming slides.

Project management includes

·        planning,

·        monitoring, and

·        executing the project as intended.

Successful project management is the main contributing factor to the competitiveness of your enterprise. The SAP project system makes available the basic data, standard structures, and templates that assist in creation of plans for different projects.

The project structure plan, PSP, represents the organizational structure of the project and describes it from the point of view of phases, functions, or the product.

The slide illustrates different phases and functions in developing a product such as

·        network where you plan the costs of the product,

·        concept where you do the inquiry,

·        rough-cut planning,

·        detailed planning,

·        approval of the budget,

·        realization,

·        completion,

and so on.

The project management structure is a graphical interface for planning and controlling projects efficiently. For effective management, the tasks of the project are arranged hierarchically.

The project management structure generally comprises the

·        definition of a project,

·        activities,

·        network planning,

·        and relationships.

Collaborative project management or cProjects includes the management of templates, teams, phases, milestones, tasks, scheduling, interactive Gantt charts, checklists, documents, objects links, multi-project management, Microsoft project capabilities to import and export things, the creation of a project snapshot, and the usage of cFolders.

With cProjects, you can handle the entire range of project activities, from concept and planning through execution and the closing of a project, covering all project types, from development to service projects. Additionally, it enables companies to comply with industry standards by implementing project methodologies such as advanced product quality planning.


Life-cycle data management is the backbone of all logistical processes. It manages a wide range of data within a company and across company boundaries.

The collaborative working environment of life-cycle data management provides all the main capabilities that are needed in all phases of a product's lifecycle.

In the document management phase, all documentation about the product, from development to dispatch cycle, will be recorded for the future reference. It also provides information about storage areas, versions, status management, document change management, and object link to other objects.

Recipe management facilitates the daily management of R & D departments. It supports efficient knowledge-sharing and leaves time for more creative and experimental work. It also involves the manufacturing division at an early stage of development so that their input, together with the knowledge of the other departments, helps the developed product adapt to the production lines.

Product structure management manages material, BOM, task list, classes, and management using production structure browser. It provides an overview of all product-related information such as, the material master, documents, BOMs, routings, and information from classification.

The SAP PLM CAD and conversion interface integrates all this data to be available to employees outside of the design process using PLM interfaces.

Change and configuration management changes object with different validities. It documents the configuration and distributes to other system using replication.



The collaboration helps in mediation between the employees, business partner customer, vendor, and design team in a heterogeneous environment about the project progress.

It allows employees from different trading partners to effectively share relevant product and project information that is consistently and conveniently maintained at a central location.

SAP PLM lifecycle collaboration focuses on new product development and sourcing among multiple companies. The collaboration broadens the areas of design collaboration, collaborative project management, and quality collaboration.

SAP PLM quality management is a comprehensive solution designed to meet all the needs with regards to quality management throughout the product life cycle and along the supply chain. It supports the task of inspection planning and processing. It also focuses on continuous process improvement through collaboration and sustained quality control. The quality management is not only an integral part of a production, it is also essential in the functional areas such as maintenance, sales and distribution, storage, purchasing and design, and so on.

The quality management in the PLM has several enhanced features that include

·        quality engineering,

·        quality assurance and control,

·        quality improvement, and

·        audit management.


Enterprise asset management, or EAM, addresses the key lifecycle processes associated with each process segment and focuses on the business issues of concern throughout the collaborative ecosystem.

SAP EAM aligns to address these business issues, resulting in

·        better managed capital expenditures,

·        reduced operating costs,

·        and improved asset utilization.

The capabilities for collaboration with equipment suppliers, engineering contractors, and other service providers add opportunities for an increased return on assets. The enterprise asset management solution improves the profitability of your technical assets throughout all phases of the product's lifecycle.

The relationship between business data and technical information supports management in making decisions about repair, refurbishment, and scrapping of technical assets. Enterprise Asset Management is a complete solution for achieving optimal condition of assets with the least cost and the best possible asset performance for all technical assets within your company.


SAP PLM supports you throughout the product’s lifecycle and the entire supply chain.

With integrated architecture, it ensures the consistency of information exchanged between business and environmental, health, and safety process. It also streamlines and computerizes all activities necessary to let you implement business process safely and in accordance with the national and international laws and regulations.

The solution integrates a variety of environment, health, and safety functions such as

·        product safety,

·        hazardous materials management,

·        dangerous goods management,

·        industrial hygiene and safety management,

·        occupational health, and waste management.

The result is reduced costs, minimized risks as well as an enhanced image and improved market opportunity.

The main components of SAP PLM are SAP ECC and cProject suite. It also integrates with other components such as SAP NetWeaver Portal, SAP BI, and SAP XI. SAP offers proven methodologies, advanced software tools, and best practice to make the PLM application contribute significantly to achieve your business goals.