SAP & ERP Glossary

Definition: A contractual interface layer that lets software systems exchange data.

An API (Application Programming Interface) is an interface layer that lets two pieces of software talk to each other through a predefined contract. It is like a controlled door a system opens so others can use specific data or functions in a secure, consistent way. In the enterprise, APIs are used mostly for integration: they are how an ERP shares stock, order and invoice data in real time with an e-commerce site, marketplace, accounting or CRM system. Common protocols are REST and OData; webhooks handle event-based notifications. Well-designed APIs are versioned, protected with authentication and authorization, and include rate limiting and error handling. Platforms such as SAP BTP Integration Suite are used to manage, monitor and secure APIs centrally. An API-based architecture reduces manual data entry, keeps a single source of truth across systems and forms the backbone of automation; it also frequently feeds ETL/ELT data pipelines.

Definition: Integrated enterprise software that unifies core business processes — finance, procurement, manufacturing, sales and HR — on a single data model.

ERP (Enterprise Resource Planning) is an enterprise system that unifies core business processes — finance, procurement, manufacturing, sales, inventory and HR — in a single integrated application on a shared data model. Its goal is to bring data that each department otherwise keeps in separate spreadsheets into one single source of truth and to enable real-time data flow across modules, so that a sales order immediately becomes visible to inventory, production and finance. Benefits include process standardization, less manual work, end-to-end traceability and faster, more reliable reporting. Major vendors are SAP, Oracle, Microsoft Dynamics and Netsuite, with Odoo popular among SMEs. Within an ERP run end-to-end processes such as procurement (P2P) and sales (O2C), along with methods like MRP that drive production planning. A successful ERP project is not just software installation; it is about designing processes correctly, migrating data and achieving user adoption.

Definition: Patterns for extracting, transforming and loading data from source systems; in ELT, transformation runs at the destination.

ETL (Extract, Transform, Load) and ELT (Extract, Load, Transform) are two approaches for moving data from source systems into a data warehouse. In ETL, data is cleaned and transformed in a separate layer before it is loaded into the target; this is typical of classic, mostly on-premise warehouses. In ELT, raw data is loaded first and the transformation runs inside the target using its own compute; this has become the norm in modern cloud warehouses such as BigQuery, Snowflake and Databricks. Which to choose depends on data volume, source variety, compliance/privacy needs and your team's tooling: ELT offers flexibility and scale in high-volume, cloud-first scenarios, while ETL fits cases where transformation must happen before loading. Both approaches require attention to data quality, lineage and reliable, scheduled data pipelines. ETL/ELT flows are often fed by API integrations across systems and turn data from sources like an ERP into something usable for reporting and analytics.

Definition: A planning method that automatically proposes purchase and production orders based on production and stock targets.

MRP (Material Requirements Planning) is a planning method that calculates which materials are needed, when and in what quantity, to meet production and stock targets. It evaluates inputs such as demand (sales orders and forecasts), current stock, open orders, the bill of materials (BOM) and procurement/production lead times, then computes net requirements and proposes purchase and production orders. The goal is neither to tie up capital in excess stock nor to halt production through shortages, but to plan the right quantity at the right time. In the SAP world, MRP runs largely in the PP (Production Planning) module and comes in two flavors: classic MRP and HANA-based, real-time MRP Live. Accuracy depends on master-data quality (BOM, routings, lead times, safety stock), forecast quality and correctly tuned parameters. MRP is the core mechanism that drives production planning and typically works as part of a broader ERP system, alongside procurement (P2P) processes.

Definition: The end-to-end sales process from customer order capture to cash collection.

O2C (Order-to-Cash) is the end-to-end sales process that runs from receiving a customer order to collecting payment. Its typical steps are: quotation and contract, sales order entry, credit/approval checks, preparing and shipping the goods (outbound delivery), billing, collection and accounting reconciliation. The goal is to keep these steps flowing accurately, quickly and traceably, because delays directly affect cash flow. In the SAP world, O2C is run largely through the SD (Sales & Distribution) module and integrates with FI-AR for accounts receivable. Process health is usually measured with KPIs such as DSO (days sales outstanding), order accuracy and invoice error rate. A well-designed O2C process also handles pricing rules, revenue recognition and return/cancellation scenarios clearly. Together with the procurement-side P2P process, O2C forms one of a company's two core value streams, and it typically runs on an ERP.

Definition: The end-to-end process from purchase requisition to vendor payment.

P2P (Procure-to-Pay) is the end-to-end procurement process that begins with a purchase requisition and ends with paying the supplier. Its typical steps are: requisition, approval, creating the purchase order (PO), receiving the goods or services, matching the invoice against the PO and goods receipt (three-way match), and payment. The goal is to keep spending under control, prevent unauthorized purchases and ensure invoices are paid correctly and on time. In the SAP world, P2P is run largely through the MM (Materials Management) module and integrates with FI-AP for accounts payable. Process health is tracked with metrics such as PO cycle time, contract compliance (maverick spend rate) and invoice-match success. A mature P2P process also covers vendor master data, approval hierarchies and digital invoice flows. Together with the sales-side O2C process, P2P completes a company's core value streams, and it typically runs on an ERP.

Definition: A technique that enriches LLM responses with relevant documents retrieved from an enterprise knowledge base at query time.

RAG (Retrieval-Augmented Generation) is a technique that supports a large language model's (LLM) answer with relevant documents retrieved from an enterprise knowledge base at query time. Instead of relying only on its training data, the model answers based on the company's own documents, procedures or database, which reduces hallucination and gives access to fresh, organization-specific knowledge. A typical architecture has these steps: splitting documents into chunks and turning them into embeddings, storing those vectors in a vector database, retrieving the most relevant chunks via similarity search when a question arrives, and adding that context to the prompt given to the model. RAG is powerful for internal question-answering assistants, customer support bots and search over documents, because it lets the model work with current information without retraining. Data cleanliness, a good chunking strategy and source citation matter for quality. RAG solutions usually rely on API integrations to pull data from systems.

Definition: SAP Business Technology Platform; SAP's cloud platform unifying integration, extension, data and AI services.

SAP BTP (Business Technology Platform) is SAP's cloud platform that brings integration, application development (extension), data/analytics and AI services under one roof. Its main components include Integration Suite for connecting systems, Build (formerly Extension Suite) for low-code/pro-code development, HANA Cloud for database and application services, Datasphere for an enterprise data layer, and AI Core/AI Launchpad for artificial intelligence. BTP's most important role is the 'clean core' principle: it lets you extend S/4HANA without modifying its core by moving customizations outside the core onto the platform, which keeps upgrades easy. Organizations can thus keep standard SAP intact while safely building their own apps and integrations on the platform. Related terms: SAP S/4HANA, API, SAP Fiori.

Definition: SAP's cloud solution that unifies travel, expense and invoice management, automating the flow from spend request to approval and posting.

SAP Concur is SAP's cloud solution that unifies travel, expense and invoice management on a single platform. Employees book travel and upload receipts and invoices via the mobile app; the system automatically matches credit card statements, flags out-of-policy items and runs the approval workflow. Approved expenses are automatically transferred to the ERP side (for example SAP S/4HANA or FI/CO) and posted, reducing manual data entry and error risk. With Concur Invoice, supplier invoices can also be captured and approved on the same platform. The critical points in implementation are defining the expense policy correctly in the system, setting up cost center and account mapping with the ERP, and driving user adoption. Configured well, it shortens expense reporting time, improves policy compliance and provides real-time visibility into company spend. Related terms: SAP FI/CO, SAP S/4HANA, ERP.

Also known as: Concur

Definition: SAP's advanced warehouse module for complex operations, with bin, wave and resource management.

SAP EWM (Extended Warehouse Management) is SAP's advanced solution for complex warehouse operations, replacing the classic WM module. It offers bin-level inventory tracking, warehouse tasks, wave planning, cross-docking, yard management and integration with handheld devices and automation. It is designed for high-volume distribution centers and production warehouses and can integrate with labor management and automated storage systems (via MFS). With S/4HANA, EWM can be deployed in two ways: embedded in the same system or decentralized in a separate system. It integrates with MM and PP for goods movements and with SD for shipping. A well-run EWM improves picking/putaway efficiency, reduces errors and makes better use of warehouse capacity. Related terms: SAP MM, ERP.

Also known as: WM

Definition: SAP's Financial Accounting (FI) and Controlling (CO) modules that together run statutory reporting and management accounting.

SAP FI/CO is SAP's finance core, referring to the Financial Accounting (FI) and Controlling (CO) modules together. FI covers outward-facing statutory accounting: general ledger (G/L), accounts receivable (AR) and payable (AP), fixed assets, banking and legal reporting. CO covers inward-facing management accounting: cost centers, internal orders, product costing and profitability analysis (CO-PA). Together they provide both a statutory and a managerial view from the same data. With S/4HANA the strict FI/CO separation largely disappears; all postings are written to a single universal journal (ACDOCA), reducing reconciliation effort and enabling real-time financial visibility. Set up well, FI/CO speeds up period-end closes, improves cost transparency and makes reporting reliable. Related terms: SAP S/4HANA, ERP, O2C, P2P.

Definition: SAP's role-based, mobile-friendly modern UX and design language.

SAP Fiori is SAP's role-based, mobile-friendly modern user experience and design language, replacing classic SAP GUI screens with a consistent, clean experience. Users access apps (tiles) assigned to their role through the Fiori launchpad. There are three core app types: transactional (data entry/approval), analytical (KPIs and metrics) and fact sheet (a 360-degree view of an object). Fiori apps are built on the SAPUI5 framework; standard apps can be generated quickly with Fiori Elements, while custom needs can be freely developed. In S/4HANA, Fiori is the default interface and ships with embedded analytics. A well-designed Fiori experience shortens training time, reduces errors and delivers consistent productivity across mobile and desktop. Related terms: SAP S/4HANA, SAP BTP.

Definition: The SAP module that covers procurement, inventory management, vendor evaluation and invoice verification.

SAP MM (Materials Management) is the SAP module that manages procurement and inventory, sitting at the center of the end-to-end Procure-to-Pay (P2P) flow. Its scope covers purchase requisitions, purchase orders (PO), goods receipt, invoice verification (three-way match) and stock/inventory management. Core master data are the material master, vendor (supplier) master and purchasing info records; their accuracy determines the reliability of the whole process. MM integrates tightly with FI for invoicing and payment, with PP for production material requirements and with WM/EWM for warehouse movements. It supports contract-based purchasing, outline agreements and free-form procurement. A well-configured MM setup is critical for cost control, preventing unauthorized purchases (maverick spend) and optimizing stock levels. Related terms: P2P, SAP FI/CO, MRP, SAP EWM.

Definition: The SAP module for production orders, MRP, capacity planning and BOM management.

SAP PP (Production Planning) is the SAP module that plans and executes manufacturing. Its scope covers demand management, material requirements planning (MRP), releasing and confirming production orders, capacity planning and production feedback. Core master data are the bill of materials (BOM), routings and work centers, which define which material is produced, through which steps and where. PP integrates tightly with MM for material supply, QM for quality control and CO for cost collection. It supports discrete, process and repetitive manufacturing scenarios. Configured correctly, it reduces the gap between planned and actual production, prevents material shortages and ensures production costs are calculated accurately. Related terms: MRP, SAP MM, SAP QM, ERP.

Definition: The SAP module that runs quality inspection plans across goods receipt, production and shipping.

SAP QM (Quality Management) is the SAP module that runs quality control from goods receipt through production and shipping. It has three main areas: quality planning (inspection plans and master inspection characteristics/MIC), quality execution (inspection lots, results recording) and the quality decision (usage decision, accept/reject). It supports inspection scenarios for incoming material (supplier), in-process and final production checks, and outbound goods. QM integrates with MM for goods receipt, PP for production and SD for shipping. It is also used for supplier qualification, certificate management, quality notifications and corrective/preventive actions (CAPA). A well-implemented QM prevents defective product from moving forward, makes supplier quality measurable and satisfies audit/traceability requirements. Related terms: SAP PP, SAP MM, ERP.

Definition: SAP's next-generation ERP suite built on the HANA in-memory database, processing finance, logistics, manufacturing and HR data in real time.

SAP S/4HANA is SAP's next-generation ERP suite that replaces the ECC (R/3) generation and runs entirely on the HANA in-memory database. Its defining change is a simplified data model: for example, consolidating all financial postings into a single universal journal (ACDOCA) and removing aggregate tables and indexes, which enables real-time reporting. The user experience is modernized with role-based, mobile-friendly SAP Fiori, and analytics run embedded on top of transactional data. S/4HANA comes in three deployment options: Public Cloud (standardized, fast to adopt), Private Cloud and On-Premise (more customization). Migration typically follows one of three approaches: a fresh install (greenfield), converting the existing system (brownfield) or selective data transfer. A successful S/4HANA program is not just a technical migration; it is about simplifying processes, reviewing custom developments (Z code) and adhering to the 'clean core' principle. Related terms: ERP, SAP FI/CO, SAP Fiori, SAP BTP.

Also known as: S/4HANA

Definition: The SAP sales module managing customer orders, pricing, shipping and billing.

SAP SD (Sales & Distribution) is the SAP module that manages sales processes from customer order through shipping and billing, sitting at the center of the Order-to-Cash (O2C) flow. Its scope covers quotations and contracts, sales orders, availability checks (ATP), outbound delivery, shipping and billing. Pricing is handled through a flexible structure called the condition technique; discounts, taxes and freight are calculated through it. SD integrates with MM for stock, PP for production and FI-AR for accounts receivable. Customer master, material master and pricing conditions are its core master data. A well-implemented SD increases order accuracy, shortens delivery times and reduces billing errors, speeding up cash flow. Related terms: O2C, SAP FI/CO, SAP MM, ERP.