SAP IMPLEMENTAION AT LANDIRENZO PAKISTAN

INDUSTRIAL ENGINEERING & MANAGEMENT , IoBM

Contents
LETTER OF ACKNOWLEDGEMENT ........................................................................................ 3 EXECUTIVE SUMMARY ............................................................................................................ 4 1. ABOUT LANDI RENZO ........................................................................................................ 5

2. REASON FOR SAP-ERP IMPLEMENTATION AT LANDIRENZO ..................................... 6 3. SAP MODULES AT LANDIRENZO ........................................................................................ 7 A. PRODUCTION PLANNING (PP): ....................................................................................... 7 B. MATERIAL MANAGEMENT (MM): ................................................................................. 9 C. FINANCIAL MODULE (FI): .............................................................................................. 10 4. Business Benefits of SAP ERP ................................................................................................. 11 A. Increased Flexibility Resulting into Cost Reduction ........................................................... 11 B. Improvement in Financial Management .............................................................................. 11 C. Benefits on ROI.................................................................................................................... 12 D. Better Alignment of Strategies ............................................................................................. 12 E. Improved Productivity .......................................................................................................... 12 QUESTION ASKED AT LANDIRENZO PAKISTAN .............................................................. 14

Introduction to ERP SAP Application

LETTER OF ACKNOWLEDGEMENT

Date: 3rd May, 2014 Dear Readers: We would first like to thank Allah all mighty who has given us the opportunity, belief and strength of completing the final report of the course Introduction to ERP- SAP Application on the topic SAP Implementation in an Organization; secondly we are also thankful to Mr. Murtaza Ali, Deputy Technical Manager at LANDIRENZO for helping us in the collection of information for our report. We are also extremely thankful to our faculty member Sir Moinuddin Ali Khan who provided us with such opportunity to write a report on SAP Implementation in an Organization. Sincerely, Suleman Saleem Muhammad Bin Amin Muhammad Ahmed Farooq Waleed Suhail

Introduction to ERP SAP Application

EXECUTIVE SUMMARY

Introduction to ERP SAP Application

1. ABOUT LANDI RENZO

Landi Renzo SpA is a world-leading company serving more than 30% of the market for LPG and CNG alternative automotive fuel systems and components. The company was established in 1954 when Renzo Landi and his wife Giovannina Domenichini founded Officine Meccaniche Renzo Landi in Reggio Emilia, the only manufacturer of mixers specifically designed for all kinds of vehicles. National sales grew rapidly, and between 1963 and 1964 the company began exporting to Japan, France, Belgium, and The Netherlands. Opportunities soon arose on the Eastern European, Indian, and South American markets. Renzo Landi passed away prematurely in 1977. The company continued under the management of his wife and son, Stefano. Stefano became Managing Director in 1987, when the company became a Joint Stock Company, officially launching Landi Renzo SpA. Landi Renzo became an Industrial Group in 1993, when it took over Landi Srl and Eurogas Holding BV, a Dutch company operating in the same market. In 1999 the Group launched its Polish branch, Landi Renzo Polska S.p.Z.o.o. The following year, the company purchased Med SpA. in Reggio Emilia. In 2001, 70% of Eurogas Holding B.V. was sold and Eurogas Utrecht B.V. was purchased by the company's subsidiary, Landi International B.V. Architecturally innovative new headquarters to represent the companys advanced technologies were inaugurated in Cavriago di Reggio Emilia in 2001. The internationalization process continued with the opening of branches in Brazil in 2003, in China in 2005 and in Pakistan in 2006. This same year also saw the foundation of the LANDIRENZO Corporate University: a centre for ideas and development of human resources in the Landi Group, to pass on the company's focus on sustainable mobility. 2007 saw the opening of Landi Renzo Pars in Tehran (Iran). The Landi Renzo Quality System, which has been ISO 9001 certified since 1996 and was awarded ISO/TS 16949 certification, specific to the automotive market, in 2001, extended ISO 9001 processes and procedures to its Italian network in November 2006 as a guarantee of the quality standards already in use in the company. On June 26 2007 Landi Renzo SpA. made its debut on the Star segment of the Italian Stock Exchange. This important step gave the company new impetus for growth while providing a guarantee of transparency and improving the Landi Renzo Groups reputation on the market and in its relations with prestigious customers and suppliers. The intention was to accelerate the process of development in the alternative energies sector, an area requiring major investment to make research the main driver of growth.

Introduction to ERP SAP Application

October 13 2008 marked another important milestone on the road of constant growth: the takeover of a third international player, Lovato Gas. In September 2009 the company opened another international branch, Landi Renzo RO in Bucharest (Romania). During the last two years, the acquisition of AEB Technologies and the American company Baytech, alongside the opening of additional subsidiaries in Romania, Venezuela, Argentina, India and the United States.

2. REASON FOR SAP-ERP IMPLEMENTATION AT LANDIRENZO

Following are the reason for implementing SAP at Landirenzo: Review information, incidents, problems and analysis collected and escalated by the SAP users, perform additional analysis of incidents and problems. Resolve the incidents and problems. Establish strong working relationships and understanding between the SAP Application Management team members, SAP Help Desk team in Italy and other support teams. Support SAP Applications Management Team Lead in planning, coordinating, and ensuring timely and quality delivery of enhancements. Inventory Difference Postings. Goods receipts and Invoice receipts clearing maintenance. Redesign, introduced and managing Line Side Rejection from Production. Managing incoming rejection from Quality Management Dept. Managing Physical Inventory periodically with difference postings.

Introduction to ERP SAP Application

Re-design, introduced and managing Subcontracting in procurement to pay cycle. Managing Stock Transfers and Transfer Postings. Support users in usage decision and stock transfer in quality management. Business process GAP analysis among PP/MM/QM. Transferring of relevant knowledge to End Users through conducting extensive Training sessions and internal documentation development.

3. SAP MODULES AT LANDIRENZO

Purpose of the report is to analyze Landi Renzo sap modules. How successful they have been in implementing SAP in their organization. What module of ERP are they using and whether they are satisfied with all those modules. Secondly our purpose is to show the importance of ERP in the real world, how companies like Landi Renzo use the modules studied in the course to reduce their cost and improve communication through better integration.

A. PRODUCTION PLANNING (PP):

The PP link in this chain deals with quantity-based and time-based product planning and controls the production process. Besides its master-data maintenance functions, the PP functionality supports all quantity-based and capacity-based production planning and control steps. Production planning and control comprises various planning concepts, such as MRP II and Kanban, and various production types, such as production by lot Size, make-to-order production, variant production, repetitive manufacturing, and process manufacturing. Processes in production planning and production control comprise the following main areas: Sales and operations planning: for determining the quantities to be produced Material requirements planning: to calculate net requirements and component requirements, taking into account scrap and lot sizes

Introduction to ERP SAP Application

Capacity requirements planning: for detailed production planning, taking into account available capacities Production control: to control and record the production process (create production documents, record confirmation

Organizational structure of PP consists of: Client: Used to Differentiate between a Development, Quality Assurance, and Production System within SAP R/3 Common Set of Rules Common Tables, Common Master Files, Common Data Bases Standardized data a vendor number and name is common across the client, a customer is common across the client, a material number and description is common across the client Company Code: A company code represents an independent balancing/legal accounting entity, for example, a company within a corporate group. Balance sheets and profit & loss statements, required by law, can be created at the company code level. Plant: Usually a manufacturing facility, a warehouse, or a location that stocks , manages, and valuates inventory. May be a physical site with multiple manufacturing/production lines, may be multiple manufacturing/production lines at one physical site. It can be a physical location (cost centers may or may not be associated to a plant i.e. Administrative vs. Manufacturing cost centers). Links to production (PP), materials management (MM), and sales and distribution (SD), a plant is assigned to a company code,purchasing organization are assigned to plants. Storage Location: A storage location is the place where stock is physically kept within a plant. A storage location has the following attributes: There may be one or more storage locations within a plant. Stocks are managed only on a quantity basis and not on a value basis at storage location level. Physical inventories are carried out at storage location level. Storage locations are always created for a plant.

PP is very crucial module in any organization, same is the case in Landi Renzo. Landi Renzo has succesfully integrated this module into their organization and use it to plan their production. They are quite satisfy with its performance. Plant: Usually a manufacturing facility, a warehouse, or a location that stocks , manages, and valuates inventory. May be a physical site with multiple manufacturing/production lines, may be multiple Introduction to ERP SAP Application

manufacturing/production lines at one physical site. It can be a physical location (cost centers may or may not be associated to a plant i.e. Administrative vs. Manufacturing cost centers). Links to production (PP), materials management (MM), and sales and distribution (SD), a plant is assigned to a company code,purchasing organization are assigned to plants. Storage Location: A storage location is the place where stock is physically kept within a plant. A storage location has the following attributes: There may be one or more storage locations within a plant. Stocks are managed only on a quantity basis and not on a value basis at storage location level. Physical inventories are carried out at storage location level. Storage locations are always created for a plant.

PP is very crucial module in any organization, same is the case in Landi Renzo. Landi Renzo has succesfully integrated this module into their organization and use it to plan their production. They are quite satisfy with its performance.

B. MATERIAL MANAGEMENT (MM):

Material management is concerned with planning, organizing and controlling the flow of materials from their initial purchase through internal operations to the service point through distribution. The Materials management (MM) function of SAP is part of the logistics area. It is one of the important modules in SAP ERP software and MM application module supports the procurement and inventory functions occurring in day-to-day business operations. The Materials Management module consists of all master data, system configuration, and transactions to complete the Procure to pay process. This process map spans from MRP generated procurement proposals through final invoice receipt and verification. Purchasing Valuation It includes material price change, balance sheet valuation, actual costing/material ledger foreign trade Manage import and export processes, integrating them efficiently into the supply chain External procurement of materials and services. Determination of possible sources of supply for a requirement identified by the materials planning and control system. Logistic invoice verification MRP It is situated at the end of the logistics supply chain that includes Purchasing, Inventory Management, and Invoice Verification. It includes, Reorder point procedure Forecast-based planning Time-phased materials planning. The organizational structures form a framework of a company in which business is conducted. A hierarchy in which the organizational units in an enterprise are arranged

Introduction to ERP SAP Application

according to tasks and functions MM module is fully integrated with other modules. Client Company code Plant Storage location purchasing organization Purchasing group Sub Modules of MM Material Planning Purchasing Inventory Management Vendor Valuation, Invoice Verification, Statutory Requirements

MM module is the one which is very interesting and important module in SAP compare to other modules. This includes the material management in industry, it is responsible for all the steps during the purchase of materials and maintaining that materials. MM module is integrated with other SAP modules such as controlling(CO), sales and distribution(SD), quality management(QM), plant maintenance(PM), production planning(PP), warehouse management(WM) and financial accounting(FI). This module has a great impact on every industry because every industry works on this, so demand for this module is more compare to other modules in SAP. Landi Renzo is also successfully using it and helps company to operate according to their need.

C. FINANCIAL MODULE (FI):

This module is designed to collect transactional data for preparing portfolio reports. They include: 1. Balance Sheet 2. Income Statement 3. Statement of Cash Flows It represents legal and/or organizational view of an enterprise. Forms a framework that supports the activities desired by management. Helps to develop and present relevant information in order to support business decisions. It structure also helps to have different areas for classification. CHART OF ACCOUNTS: it consists of a group of general ledger (G/L) accounts. The G/L accounts it contains are used by one or more company code. CREDIT CONTROL AREA: an organizational entity which grants and monitor a credit limit of the customer. Introduction to ERP SAP Application

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BUSINESS AREA: an organizational unit that represents a separate area of operations within an organization and for which financial statements can be created.

Through SAP ERP Landi Renzo creates Master Data which is a unique combination of company code and chart of accounts. It contains a list of transactions affecting each account in the chart of accounts and the respective account. Not only it creates the general Master data but also develop Customer and vendor Master Data. Fully integrated account payable and receivable sub-modules are maintained. In Account Receivable Sub-Module information with respect of customer is recorded such as sales and payments made. Substantive and important integration is there between Sales and Distribution (SD) and FI. Billing in SD generates FI journal entries. In Account Payable Sub-Module information related to Vendors/Suppliers is recorded such as purchases and payment made. Realistic integration between MM and FI. After all transactions are recorded they are converted into the reports mentioned above. In Balance Sheet presentation of organizations Assets, Liabilities and Equity of the current period. In Income Statement presentation of organizations revenues and expenditure are recorded for current time period. In Statement of Cash Flows consider the changes in cash inflow and outflow. Auditor also finds it easy to trace individual transactions effecting financial statement. Therefore FI module is an important part of the Landi Renzo and it is well integrated in the company and us successfully operational.

4. Business Benefits of SAP ERP

SAP ERP furnishes its clients with a comprehensive set of integrated business processes, and through optimum utilization of these processes, an organization can leverage the business benefits of the application. Some of the definite, business benefits of SAP ERP are as follows:

A. Increased Flexibility Resulting into Cost Reduction

SAP uses the services architecture of an enterprise to improve its efficiency, process standardization and adaptability. Further, it also enables organization to extend its information and collaborative functions to broader communities, which would otherwise cost a lot. This flexibility in extension helps organizations to save few extra bucks.

B. Improvement in Financial Management

Through the various components and modules of SAP ERP Financial solutions, this application helps companies to improve their financial management. With the help of financial and management accounting functionality along with business analytic, it allows a

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Introduction to ERP SAP Application

person to have better visibility of the organizations financial status. The better visibility results into better risk management and improved financial control.

C. Benefits on ROI
Installing SAP ERP through rapid-implementation techniques costs companies half of the cost of installation through traditional approaches. Further, there are specific industries that can leverage more benefits on ROI through preset defaults and prepackaged versions that are available only for them.

D. Better Alignment of Strategies

Proper use of ERP helps an enterprise run in accordance with the plans and strategies made by the top officials. It helps employees access the right information in real time and thereby operating accordingly. Therefore, there is an improved alignment of strategies as well as operations. Further, SAP ERP also helps an enterprise to identify the concerns early.

E. Improved Productivity
Proper implementation of SAP ERP results into improved productivity. Through its help, you can leverage self-services that improve operational efficiency. Data and operations can be forwarded to employees efficiently, and they can also access important information and transactions through various access terminals.

SAP ERP has a robust architecture that makes it so beneficial for organizations and helps them to enhance their service level.

Functionality: The ERP SAP System offers you a software solution that covers all commercial processes and transactions commonly occurring in a company or group of companies. Integration: All work processes within a company or group of companies are linked through data and functions using the ERP SAP System. User Friendliness: The ERP SAP System has a uniform graphical user interface for all application areas.

Individual Solutions: System-controlled customizing procedures allow you to create solutions from a wide variety of prepared application variants to satisfy individual requirements. Flexible Structure: Whether in a departmental organization or on the warehouse or factory floor, change is the only facet of your business that will not vary. Adaptability must be universal, and the ERP SAP Systems flexible structure and extensive integration helps make that easier. Introduction to ERP SAP Application

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Enterprise-Wide Integration: SAPs enterprise-wide ERP SAP System solutions meet the needs of constantly changing, continually evolving businesses. The ERP SAP Systems application components are fully integrated. Transaction-related process chains trigger the next activity as needed from engineering to materials management, to production planning, to sales and distribution. The ERP SAP Systems full integration pulls your enterprise together, promoting data access, flexibility, and productivity. No other product or suite of products provides the ERP SAP Systems functional links between processes that multiply the power of each persons work. Real-Time Information: The ERP SAP Systems ability to drill down to whatever level of detail you need is legendary. More than any other product, the ERP SAP System provides up-to-the-minute, real-time information wherever and whenever you need it. Mission-Critical Business Processes: SAP has more than 20 years of experience designing sophisticated application software for backbone and mission critical business processes. Nine of the top ten Fortune 500 companies use SAP software. SAP developed most of the ERP SAP Systems functionality in close cooperation with these customers. Consequently, it has integrated the best business practices of the worlds most successful companies into the ERP SAP System. The ERP SAP Systems business processes are flexible, pragmatic and well documented. Today they form a widely acknowledged standard for Business Process Reengineering (BPR).

Best of Breed: Users want standard software as well as standard business processes and guidance on how to implement them successfully. With the ERP SAP System you get the best of breed for all common business processes. You do not need to compromise on flexibility. If you need or want to fine tune or tailor your ERP SAP System, the capability is there. Enterprise-wide three-tiered architecture: The ERP SAP System remains the only enterprise-wide, three-tiered architecture. The ERP SAP Systems three-tiered client/server architecture separates the system into areas devoted to database, application functionality, and desktop presentation. This structure promotes maximum flexibility, freedom of application component choice and the ability to change and add to the system as your organization grows. The development of the Internet, including the World-Wide Web, promises to make dramatic changes in communications between businesses and customers. SAP is working with several partners to develop enhanced Internet extensions for the ERP SAP System.

Concurrent engineering: Concurrent engineering cuts time-to-market by stacking up business processes whenever functions can take place concurrently rather than consecutively. The ERP SAP Systems flexibility and integration help you form the real-time workflow application links required for concurrent engineering. Lean Implementation: The ERP SAP System promotes lean implementation through its modular structure. By selecting key portions of the ERP SAP System for first-time Introduction to ERP SAP Application

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implementation, and minimizing customization, new users bring the full power of the ERP SAP System to address their business issues with great speed, at a reasonable cost. Once running, the ERP SAP System makes it easy to add more functional pieces. Tools on various system levels allow you to fine tune all ERP SAP System functional modules. Gradually adding functionality makes core solutions available sooner without sacrificing long-term application muscle.

QUESTION ASKED AT LANDIRENZO PAKISTAN

Q. Problem they are facing? When they installed, or when they are using?

Ans. There was no initial problem because the employees there were already working in their respective department so they knew what modules to implement and how to use them and when the company decided to implement sap in their organization they had an outsourced training program and invited only a few trusted and potential employees to it.

Q. Which module they cover & which module they use most?

Ans. They are using financial module, material management module and production planning module out of which mm and pp are mostly used.

Q. What include in total cost of ownership? Updating, training etc

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Introduction to ERP SAP Application

Ans. Costs are unknown but they havent planned for any updates and expansion in terms of modules and training has already been done. Q. Any failure up to date they face?

Ans. Basically Landirenzo is an internationally based organization and has its assembly plant in Karachi so most of the parts are coming from Italy and other countries the market share of Landirenzo Pakistan is 60% international (exported) and 40% local (Toyota, Suzuki....) so the basic intend of implementing SAP was sharing of information amongst all of the branches of Landirenzo and the parent company and they haven't have any troubles or failures yet but if they do a Skype session is conducted through which the Material Management guy in Pakistan can contact to Material Management guy in Italy.

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Introduction to ERP SAP Application