“The
Only Thing That Is Constant Is Change” is a famous quote by Greek philosopher
Heraclitus, and it very much applies in today technology dependent business
world. Every company ranging from small to Fortune 500 is working every day to
implement new technological solutions or keep their existing technology
solutions running effectively. This is
just with a goal to increase their customer outreach, run their business
operations effectively, run their internal operations, or optimize their supply
chain processes.
In this article, we will look at
ERP solutions that companies implement to
collect, store, manage and interpret data from many business activities, including:
·
Product
planning
·
Marketing
and sales
·
Inventory
management
·
Shipping
and payment
Personally, I worked
in the technology consulting industry focusing on SAP ERP implementations and
was a part of four lifecycle projects. The exposure was a considerable one
because all the implementations were for fortune 500 companies. ERP is key
business management software that has been running large businesses under
varied industries such as Consumer Products, Healthcare and Life Sciences,
Transportation.
The SAP solution
provides different modules to manage processes such as Procurement to Pay,
Order to Cash, Finance and Controlling, Material Management, Inventory
Management, and Warehouse Management. Let us look at the ‘Procurement to Pay’ module
and how is it implemented by SAP to support business operations for
large fortune 500 clients.
Procure to pay
(purchase to pay or P2P) is the process of obtaining and managing the raw
materials needed for manufacturing a product or providing a service. The P2P
process involves the management of the vendors, get the best quotations, place
an order based on the customer needs, and pay the vendor (P2P module interfaces
with the Finance module). This entire process becomes very complex when we talk
about global fortune 500 clients. Thus, companies need to use sophisticated but
well integrated ERP solutions.
Whenever a manufacturing
company receives a Customer Order, the system checks for the available stock. A
request is sent to the Inventory Management module of the integrated system.
The module checks if the order can be served using the given inventory or a new
order needs to placed to the vendor. If the order can be served using the
available stock, then Warehouse Management module is used to find the
respective Storage Bin and start the Distribution/Delivery process. Warehouse
Management module is used to manage warehouse in terms of good movements,
storage and planning, storage bin management, and optimize storage. Otherwise,
if the inventory is not available, then system generated Purchase Requisition document
is sent to all the available vendors on the system. In response, Vendors send
their respective Quotations and best Quotation based on key parameters (such as
Cost, Delivery time) is selected by the company. Once the Vendor is finalized,
a Purchase Order is created and sent to the vendor.
On the agreed delivery time, the company
receives the goods to their warehouse with a Good Receipt document and an
Invoice. On receiving the goods/raw materials, the company uses Warehouse Management
module to figure out storage bin for the material storage. This mapping of good
in the warehouse is based on factors such as optimization, speed of delivery,
storage type.
After receipt of goods
is verified, the system uses the received Invoice and creates a Payment
document against it. This process recalls the integration of Finance module of
SAP. The payment is either done using a Check, Credit card or ACH payments (as
per the agreement between Vendor and the company).
This entire cycle uses
various modules of SAP and is automation of a key business process in
manufacturing companies. Similarly, SAP provides automation of various other
key processes such as Order to Cash, Material Management, Asset Management,
etc. Scalability of SAP helps these global companies to run their businesses
effectively and efficiently.
References:
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