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Enterprise Resource Planning Systems

      1. Enterprise Resource Planning (ERP) Defined

  1. SAP AG's R/3

  2. R/3 Application Modules
    1. Financial Accounting
      1. Financial Accounting Defined
    2. Human Resources
      1. Human Resources Defined
    3. Manufacturing and Logistics
      1. Manufacturing and Logistics Defined
    4. Sales and Distribution
      1. Sales and Distribution Defined

  3. Implementing ERP Systems

  4. Conclusion

This managerial briefing highlights an enterprise resource planning (ERP) system. This system, when implemented correctly, links all areas of a business. Manufacturing knows about new orders as soon as they are entered in the system. Sales knows the exact status of a customer order. Purchasing knows what manufacturing needs to the minute, and the accounting system is updated as all the relevant transactions occur. The potential benefits of this integration are huge for an organization. The briefing focuses on a company called SAP AG and their well-known product, R/3, which is a benchmark for comparing other similar ERP products on the market today.

The R/3 software consists of four major modules: Financial Accounting, Human Resources, Manufacturing and Logistics, and Sales and Distribution. The core of the system is a high-speed network of database servers. The R/3 applications are fully integrated. Data are shared between all applications so as transactions are processed in one area other areas are immediately updated. Another feature incorporated into the software is the use of a data warehouse.

The financial accounting segment of R/3 includes three major categories of functionality needed to run the financial accounts for a company - financials (FI), controlling (CO), and asset management (AM). Also included in the controlling category is a module to add activity-based costing to other types of costing approaches.

The human resources (HR) segment contains the full set of capabilities needed to manage, schedule, pay, and hire the people who make a company run. It includes payroll, benefits, administration, applicant data administration, personnel development planning, workforce planning, schedule and shift planning, time management, and travel expense accounting.

The manufacturing and logistics segment is the largest and most complex set of modules. It is divided into five major components: materials management (MM), plant maintenance (PM), quality management (QM), production planning and control (PP), and a project management system (PS). Each component is divided into a number of sub-components.

The sales and distribution (SD) set of modules provides customer management, sales order management, configuration management, distribution, export controls, shipping, transportation management, billing, invoicing, and rebate processing.

All modules in the R/3 system are based on best industry practices and SAP continually integrates better ways to carry out a process or sub-process in system upgrades. Implementation on an ERP is costly, and the actual costs of the software are only one-third the total costs of the system. However, most companies do implement ERP initiatives because they want a standardized and improved process with improved information quality. To select from the many ERP systems that are available, one needs to evaluate the strengths and weaknesses of each offering.

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