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SAP ERP makes your business run betterAre you an SAP ERP newbie and looking for information which can help you understand the basic concepts?… You are on the right spot. The discussion here focuses on SAP ERP for beginners though SAP professionals too may get some information helpful in broadening their understanding. This will be a two part series about SAP ERP and what it does.

ERP makes businesses more efficient. It makes businesses more profitable. It gets employees paid on time. Makes management choose smarter and more strategic decisions and even gets your products to customers. So we now know that, what exactly is SAP ERP? SAP is a German company that develops business software and ERP stands for Enterprise Resource Planning. The term used to describe an integrated software solution that incorporates the key functions of an organization.

Now we can go home happy. Unless of course you never got around figuring that course in school entitled big business terms that got shortened in authoritative acronyms to make them sound more credible. The reality is that ERP is an umbrella term for very complicated type of software solutions, so if you are looking for a simpler answer to your question.

Now let’s look at ERP on how it can help your business. So you wake up one morning with an idea for a new product. You thought of a really great idea for a new product but your idea and a few bucks could only get you a cup of coffee, so what will you do? How do you make or get your idea turn into a product to make customers like so much that they want to give you money for it?

You often start to make your idea into a design. When you start to design your product, you need to define it exactly maybe need to draw it out. ERP doesn’t do that. What ERP does is help you start compiling a list of all the materials you will need to eventually build the product. While you go to the design process, ERP will let you estimate what will each unit cost and how you decide to price it. Hopefully your price exceeds your cost and discovers that this idea of yours might actually fly. Now you decide to transfer that design to manufacturing. No matter how pretty your design, customers won’t give you money for it anymore than the bare idea. So you need to make your two dimensional idea into a three dimensional product.

ERP allows you to setup a supply chain to bring all the necessary materials together to build your product. Once a company implements SAP software it has its business processes online available to its users across departments. For example, the executive in the Material Management department who is responsible for taking action for materials in shortage can raise the purchase requisition after running MRP (Material Requirements Planning) in the SAP system. MRP run calculates the material availability or shortfall on the basis of present requirements.

Purchase department views this purchase requisition and creates purchase order. The Supplier supplies the material to the company. Vendors from all over the world can be accommodated by ERP which can send them purchase orders to those materials. When the materials are ordered, schedule for their delivery, shipment construction, payment for these materials, and eventually their arrival and receipt can be all handled by ERP. These materials can even be identified in the warehouse using straight logistics, barcodes, or even radio frequency. ERP will handle all that in your business as well.

Maybe your original idea was not to make or design your product but from someone else and distribute it into a new market. ERP doesn’t mind, it will take care of you all the same. While all of these buying and selling going on, you’ve sent out a sales team to find customers out there who desperately wants their money in exchange of the brand new product. Their job is to get those orders rolling in. Your ERP will take care of those orders and can also keep track sales peoples territories and their commissions.

Read Part 2 HERE