Tag Archives: sap functionality

Material Management as Part of Logistics

Logistics can be defined as the management of business operations, including the acquisition, storage, transportation, and delivery of goods along the supply chain. The supply chain can be defined as a network of retailers, distributors, forwarder, storage facilities, and suppliers that participate in the sale, delivery, and production of particular product.

From these definitions it is clear that materials managements is an integral part of the logistics function within SAP. There are three flows that are important when we look at MM in the supply chain. These are:
– The material flow
– The information flow
– The financial flow

The material flow describes the movement of materials from the vendor to the company and then on to the customer. Today companies are integrating with suppliers and customers, not just interfacing. Therefore any improvements companies can provide to the visibility of their material flow will allow them to be flexible and responsive to their customers. Customers will want to do business with companies who are responsive. Those companies will also be able to gain a competitive advantage and increase market share by being more flexible , quicker, more dependable.

The information flow includes the transmitting of orders (including EDI,fax,etc) and updating the status of all deliveries. Companies that can show customers and vendors viability by using real time information have a distinct competitive advantage over others.

The financial flow includes the accounting documents that are created at each material movement .

How does SAP help clients to manage this supply chain to gain a competitive advantage?

SAP R/3 software provides a company with the ability to have the correct materials at the correct time, with the correct quantity at the most quantitive cost. The competitive advantage is achieved when the company can manage the process. This involves managing the company’s relationship with its vendors and customers, it also involves controlling their inventory, forecasting customer demand, and receiving timely information with regards to all aspects of the supply-chain transactions.

When we break this down and look at the modules involved in the management of the supply chain, we can see that although materials management is an integral part of logistics, it is only part of the big picture.

The Logistics function in SAP includes the following:
Material Management (MM)
Sales and Distribution (SD)
Quality Management (QM)
Plant Maintenance (PM)
Production Planning (PP)
Project System (PS)
Finance (FI)
Warehouse Management (WM)
Logistics Information System (LIS)

There is additional functionality in the Logistics area, such as Batch Management, Handling Unit Management, Variant Configuration Engineering Change Management, Environmental, Health, and Safety (EHS). These can be important in the Logistics area, depending on the individual customer requirements.

Main SAP Functionality

SAP was originally developed as an enterprise application-software package that was attractive to very large manufacturing companies. As the number of companies adopting SAP began to grow, a number of smaller companies in many different industries came to believe that SAP was the product that could give them a competitive advantage.

Many of these companies required just the core of SAP functionality. That usually comprises FI, MM,SD, and PP. Often companies would start their implementations with this core functionality and then on the second hand and third phases of their implementations they would introduce functionality such as CO, WM, HR,etc.

With the advent of distributed client–server computing SAP AG brought out a client–server version of the software called SAP R/3 (the “R” was for “Real-time data processing” and “3” was for “3-tier”: 1) database, 2) application server, and 3) client (SAPgui)). This new architecture is compatible with multiple platforms and operating systems, such as Microsoft Windows or UNIX. This opened up SAP to a whole new customer base.

SAP R/3 was officially launched on 6 July 1992. Various releases of the software were made through the 90s.

A newer version of the software, with new architecture, was released in 2003–2004, renamed as SAP ERP. ECC is a version name for SAP ERP,(ERP Central Component). Other SAP Implementations can be customized products can function on the central component. SAP came to dominate the large business applications market over the next 10 years. SAP ECC 5.0 ERP is the successor of SAP R/3 4.70. The newest version of the suite is SAP ERP 6.0, Enhancement Pack 7.

Here is the complete list of SAP release version:

SAP release versions:SAP R/1, System RF: 1972
SAP R/2, ran on a mainframe architecture: 1979
SAP R/3 Enterprise Edition 1.0 A: July 1992
SAP R/3 Enterprise Edition 2.0: 1993
SAP R/3 Enterprise Edition 3.0: 1995
SAP R/3 Enterprise Edition 4.0 B: June 1998
SAP R/3 Enterprise Edition 4.3
SAP R/3 Enterprise Edition 4.5 B: March 1999
SAP R/3 Enterprise Edition 4.6 C: April 2001
SAP R/3 Enterprise Edition 4.6 F
SAP R/3 Enterprise Release 4.70: March–December 2003[2]
SAP R/3 Enterprise Edition 4.7
SAP R/3 Enterprise Central Component (ECC) 5.0: 2004
SAP R/3 Enterprise Central Component (ECC) 6.0: October 2005 – June 2006
SAP ERP 6.0: Enhancement Packages (1, 2, 3, 4, 5, 6, 7)

As SAP develops more extensive solutions and tools for its customers, Material Management continues to be an important part of foundation on which subsequent functionality is built.