ERP system

The necessity in ERP system for Azovmash appeared in the period of enterprise revival in 2000 – 2001. Powerful upswing of production in combination with extension of the list of products, as well as improvement of produced machines designs put a serious question about development of administrative process with help of modern information technologies. Obviously that to date development of heavy machine building companies is impossible without creation of competitive products and reduction of manufacturing expenses that directly depends on quality of engineering and administrative work. To reduce products self-cost and to create flexible pricing policy it is necessary to have reliable records of financial, material, labor and energy resources, effective planning and business analysis with help of developed corporate information system – CIS.

Preparation for CIS introduction at Azovmash was started in 2001. To 2002 two similar systems were chosen, they were SAP R/3 and Oracle Applications. Consulting teams that represented these two systems had essentially different approaches to introduction. Taking in consideration complicacy and importance of this choice the expert team was created according to the order of A.V. Savchuk, the President of Azovmash. This team included leading specialists of management subdivisions and the Centre of Automated Management Systems. After careful discussion of merits and demerits of both systems the expert team chose the system from SAP and recommended it for introduction at Azovmash. Unfortunately, expert team members failed to acquaint with experience of SAP introduction at machine building companies. Azovmash became the first machine building company that introduced this system.

On November 6th, 2013 the order No. 502 “About automation of management accounts…” that determined the strategy of system introduction at enterprise was signed. At the beginning of 2003 Azovmash together with SAP-Ukraine started project works for development and adjustment of four modules: FI (financial accounting), MM (materials management), SD (sales and distribution), CO (controlling). Works were being carried out by project team included leading specialists of the Centre of Automated Management Systems and functional departments that were mutually complementary in their knowledge.

To estimate project scale we shall mention several numbers that characterize informational base at the moment of starting:

  • list of products used at the enterprise amounted one hundred thousand units,
  • 1.2 millions of material standards,
  • volume of database of bill of materials amounted near 2 millions details and assembly units,
  • organizational structure of enterprise included 163 subdivisions (31 basic, 17 auxiliary shops, 37 storehouses),
  • quantity of employees amounted at the average 23 thousand people,
  • 5 legal entities (business units) were functioned at the territory of enterprise, number of which was technologically interconnected. Product in time of its movement on technological route can pass from one business unit to another.

In preliminary stage it was planned to deploy system as pilot draft within one legal entity, but due to companies close interconnection it was necessary to widen the project and involve other business units, making corrections in its functional fullness. Complete integrated accounting at machine building enterprise is impossible without real time interaction between administrative divisions, production shops and engineering services – between the places where corporate economics is born. It demanded to reconsider place and role of CO module in the project as source of information for FI module. Shops are the most important in chain of expenditures collection and shall be main subjects of CO module. As a result, it was necessary to develop PP module as the source of information for CO module. At machine building enterprise in time of introduction of any CIS modular, preliminary information creates in designing and technological departments, and consequently it is needed to have modern integrated system of engineering and technological production preparation. One of the main reasons of delay in introduction was underestimating of this fact at the initial stage. In time of project realization specialists of SAP and Azovmash had to by trial and error understand peculiarities of CIS application in the field.

At the present financial, account and tax recording, procurements and sales, human resources records management, time-keeping (management and personal administration, organizational management, scratch data control) have been realizes in the system, several elements of administrative accounting are functioning (CO module). 700 users are productively working in the system.

The main project and introduction work on SAP concentrated in the centre of the CIS introduction (in consequence the Department of CIS introduction) that was specially created and included leading analytics and mathematics of the Centre of Automated Management Systems. Besides deployment of CIS standard modules and widening of geography of its usage, specialists of department took to CIS a number of current tasks of Automated Human Resources Management Systems. For example, all documents on production technical preparation can be issued in CIS SAP. With usage of built-in tools modern analogs of forms have been developed, technology for quick preliminary information input has been created.

Several words about effectiveness. Accounts receivable of the enterprise was reduced, inventory of materials was optimized, and procedure of budget execution was improved. Efficiency of administrative decisions was increased. Management personnel were reduced on 30 % that allows involving of additional labour resources to main production shops. Besides aforesaid results the system has been served as effective instrument for putting in order paperwork of specialists of corresponding divisions.

ERP system contributes in enterprise profit that in period before crisis increased almost twice (from 2.6 billion UAH in 2003 to 5 billion UAH in 2008).

In 2011 reorganisation at the enterprises of group PJSC Azovmash, PJSC MZTM, PJSC Azovobshemash has been held and CIS allowed significant reduction of deadlines of all organizational procedures.

In 2012 new stage in CIS development was started. The system modernization was started according to the order of the Director General No. 32 as of 03.08.2012. It was necessary to carry out modernization of server complex and to introduce new version of SAP ERP. All works on modernization were successfully completed to 31.03.2013.

Functionality of ERP system

Functionality of introduced SAP system

1. Module Financial Accounting (FI)

Functionality of accounting of credits, receivables and ledger has been realised, at the present it is almost completely used according to conceptual project.

Additional programmes and reports for work with accounts payable and receivable, tax invoices and registration, as well as ledger have been developed.

1.1. Business transactions in module FI–AP (accounts payable):

Credits record keeping, invoices entry from creditors, credit advice entry from creditors, preliminary registration of documents (input, amendment, and looking through), document input of recurring entry, documents cancellation, clearing of creditors account, keeping and analysis of accounts payable, looking through separate positions of creditors according to set characteristics, looking through creditors balance, receipt of turnover balance sheets, analysis of accounts payable as per agreements, reconciliation statements, letter of advice for material accounting, register of material accounting documents, aggregate registers of documents, documents registers for counter inspections.

1.2. Business transactions in module FI–AR (accounts receivable):

Debtors record keeping, invoices entry from debtors, credit/debit advice entry, preliminary registration of documents, documents cancellation, entry/ amendment/ removal of preliminary registered documents, clearing of debtors account, keeping and analysis of accounts receivable, registers for counter inspections, debtors records, receipt of turnover balance sheets on debtors.

1.3. Ledger accounting:

Conducting transaction on ledger accounts, invoice posting, creation of recurring entry, clearing of accounts, account printing, documents cancelation, correspondence of ledger accounts.

1.4. Tax accounting

1.4.1. Accounting of VAT obligations

The following was realized:

•      generation of tax invoices to sales invoices, correcting tax invoices to credit/debit advice,

•      generation of tax invoices to advance payments documents, correcting tax invoices to repayments of advance payments,

•      printing of tax invoices, correcting tax invoices according to legislation,

•      binding of repayment crediting to original account,

•      forming of register of reconciliation of issued tax invoices,

•      repeated generation of tax invoice that was reversed earlier,

•      forming of register of received/issued tax invoices.


1.4.2. Accounting of tax credit

The following was realized:

•      Automatic preliminary registration of received tax invoices to suppliers’ invoices and documents to suppliers’ advance payments,

•      Automatic preliminary registration of correcting received tax invoices to suppliers’ credit advices,

•      Forming of register of preliminary registered incoming tax invoices for control of uncollected tax invoices from suppliers,

•      Forming of register of received/issued NN.


1.5. Module AA (assets accounting)

Assets accounting has been realized within module standard functionality according to legislation of Ukraine.


The following was realized:

•      keeping of unified centralized reference book of capital assets,

•      accounting and control of assets movement during all life cycle beginning from purchase order or the first payment to its complete disposal (integrated interaction with applications of MM and SD modules),

•      automation of process of capital assets mass processing (depreciation, accumulated depreciation, transfer, etc.)

•      accounting of capital assets in section of divisions;

•      prognosis of assets amortization;

•      receipt of full and reliable information about real-time condition of capital assets,

•      use of centralized procedures of month-end and year-end closing,

•      ensuring of all forms of final accounting.


2. Module FM (funds management)

Accounting functionality of the following has been realized: funds at cash desk and settlement account; purchase, sale, conversion of exchange; securities and bill transaction; bank credits, deposits, letters of credit and guarantees.

Interface to the system client-bank has been developed.

To ensure automatic forming of payments and clearing of accounts payable, electronic payment orders have been introduced. Introduction of electronic payment orders allows

to ensure correct (automatic) choice of payment of accounts payable in section of purchase order (earlier function of the Accounting Department),

to create automatically request for advance payment or request for partial payment (earlier function of the Financial Department),

to prepare elected and created documents for payment (earlier function of the Financial Department).

3. Module MM (materials management)

Functionality of conduct of basic and organisational data, purchases, material management, controlling of logistics invoices has been realised. At the present it is completely used according to conceptual project.

  • creation and conduct of organisational data of structural divisions (central storehouse, shops, departments), purchasing departments and groups.
  • creation and conduct of basic data of basic records of purchased inventory and suppliers-creditors, adjustment of reference information about unit of measurement, groups, sectors and types of material.
  • Purchasing

Creation and conduct of contracts, purchase orders (including produced from goods made on commission) and services.

  • Resource management

Entrance of materials as per purchase orders to central storehouses, entrance from assets write-off. Movement of materials from central storehouses to divisions, issue of materials for production, to places of costs appearance, on asset card, to stock of goods made on commission, for exploitation household inventory, for return to supplier. Creation of material and accounting documents by set up automatic balance sheet accounts entries. Printing of documents forms for abovementioned operations. Automatic blocking of materials movement as per operation types, valuation classes and period. Conduct of monthly automatic revaluation of standard prises for materials before closing of current period on prices, calculated on the basis of purchasing prices; conduct of daily revaluation of selling price for standard materials. Forming of stock list and summary data for conduct of plan and special inventory. Accounting of non-liquid materials. Accounting of a number of stock items as per serial numbers.

 The following programmes were developed: programmes of package input-output of balance and non-liquid materials from balance sheet accounts, programmes of package movement of resources between divisions, of package creation of purchase orders in one balance unit on the basis of distributive invoices of another balance unit, of package creation of distributive commercial order for material sale.


  • Accounts controlling

Preliminary registration of invoices for received materials and fulfilled services, invoices for additional debit/credit with indication of agreement of alternative invoice issuer, credit advises. It was developed the programme for removal of preliminary registered invoices according to which period of limitation ended.


  • Material sale

Functionality of SD module was adapted for materials sale. Creation and conduct of contract, commercial orders for materials sale.

Numerous of reports for users of different divisions on all functional directions of MM module have been developed.

4.  Module SD (sales and distribution)

The following data has been adjusted in the system:

  • Organizational structure (sales organization, distribution channel, sector, sales area, sales group, shipping point)
  • Basic data (business partner, basic material record).
  • Creation of basic material records – finished product/good and rendered services – is carried out according to classifier as per the standard of enterprise STP 05.040-2011 The Order of Cipher Assignment to finished products, works, services and orders.
  • Conditions (discounts and additional payments, payment conditions, terms of delivery, reasons of order, transportation groups, loading groups, sales area, delivery terms, payment terms, revenue accounts, account assignment group for materials).

All business processes of products sales have been realized:

  • Sale – creation and conduct of sales order, contracts and additional agreements.
  • Shipping – creation and picking of shipments, forming of shipping documents and automatic posting in accounting.
  • Invoicing – forming and correction of invoices (credit/debit advice, crediting of repayment).

 Registration system of contract on all business activities (agreement for sale of finished products, goods, rendering of services, for purchase of commodities and materials, as well as service purchase) has been developed and introduced with forming of reporting in registered documents.

Unified register of concluded contracts on all business activities of enterprise is forming.

It was developed a numerous of procedures for control of input data in conduct of trade documents on each stage of their forming.

New and improved output forms of flow of trade documents on each stage of their forming.

Reporting system for control and analysis of sales information in system including routine operations has been developed.

5. Module CO (controlling)

According to the conceptual project the following has been developed:

Accounting of primary expenditures through integration from other modules of the system (FI, АМ, ММ, SD).

Accounting of expenditures for wage paid and invoiced taxes of enterprise.

Re-calculation of cost centre works as per planned rate for production and internal orders and other cost centre.

Forming of shops cost estimation (cost estimation of production and manufacturing expenses), closing of period.

Forming of cost estimation of administrative expenses/closing of period.

Production regards. Adjustments of business operations of production order.

In addition to standard functionality the following was developed:

Forming of shops cost estimation (cost estimation of production and manufacturing expenses), closing of period.

The complete set of reference and methodical information on accounting of labour expenditures in the system in section of production and manufacturing expenses in view “self-cost and other operational expenditures” has been developed and approved in functional departments.

The decision was made to form cost estimation of manufacturing expenses. Statistical orders of “shop manufacturing expenses” and groups of orders for each shop to form cost estimation of shop manufacturing expenses by items.

Forming of administrative expenditures cost estimation.

The analysis was carried out of expenditures under cost estimation. Regulations of forming of administrative expenditures in system were developed. Necessary definitions of cost centre basic data groups and expenditures types were fulfilled.

Production accounting.

Software – data interface unit from task “Normative accounting of metal cutting as per orders” for materials write-off from shops storehouses to orders.

Software – interface for recalculation of works for production orders. Data controlling. Data distribution between shops for errors correction. Batch input for recalculation of works – working hours of pieceworkers and production time-worker.

Report on material consumption from shop storehouse to production. Report formats for closing of reporting period.

Distribution of recycling waste of production as per orders at blank production shops (software and adjustments).

Development of software function “Calculation of actual self-cost on expenditures elements in shops section (debit and credit) as per orders of unfinished production and one-time orders”:

transaction "Calculation of actual self-cost";

reports on selection criterium (periods, shops).

Development of task “Distribution of price differences and labour expenditures as per subject of expenditures accounting” (adjustment of distribution cycles).

Report on distribution results “Distribution of price differences and labour expenditures as per subject of expenditures accounting” was developed.

 Development of software on function of accounting of finished products and realized services in section of actual self-cost and in sale prices:

Conduct of summary reporting data on accounting of finished products and fulfilled services in section of differences between actual self-cost and sale prices;

Distribution of variances of actual self-cost from standard prices as per variances accounts, at the account of realization, in production. Revaluation of finished products stock by report results.

Report on marketable products and rendered services as per selection criterium.

Report “Self-cost of realization: export, import”

Looking through consolidated report on finished products and rendered services for reporting month.

Report on realization accounting for production controlling (revenues data as per accounting documents with production orders).

Reports on revenues of sold products and services as per KVED trade classification.

Secondary production.

  • Statistical orders for accounting of operating expenditures for equipment and expenditures for current repair have been created.
  • Development of software as per order of shop 155 with function of accounting of expenditures for engines repair for internal orders (with technical characteristics of engines).
  • Creation of orders basic data with technical characteristics of engines.
  • Reports on orders.

Solution of accounting functionality of transport shop expenditures has been developed:

  • model of expenditures accounting was determined;
  • necessary adjustments were carried out (adjustments of basic data, expenditures distribution scheme as per types of works);
  • improvement of standard functionality;
  • fields to variants of standard transactions screens for actual expenditures entries were added;
  • creation of special orders search help to collect expenditures for sold services as per works types  through trade document;
  • arrangement for creation and conduct of “waybill” accounting document was additionally developed.

Building and complete overhauls

Investment orders types and necessary adjustments in system for checking of expenditures entries as per investment orders have been created.

Closing of period:

Creation of program for batch input of statistical key figures for period closing; development of expenditures recalculation cycles; development of task schedule for period closing; necessary adjustments and creation of basic data for operation of closing.

6. Module PP (production planning)

Complex of production technical preparation was developed with forming of reporting: specific norms of consumption f. 0502, f.0505; selective specifications f.0323-1, 0323-7, 0323-7a; list of specifications for product (assembly unit); list of purchased units f.0506, f.0507.

Requirements list to completion IMC for including in process flow diagram was developed in SAP system.

Completion of detailed composition of products in production is being carried out.

The following is to be realized and introduced:

Development of interface for data changing with archive maintenance system of technical documents of «Search» enterprise of company Intermech.

Forming of data basis of labour expenditures standards.

Labour expenditures rating as per products.

Calculations of planned self-cost considering technological and productive variation.

7.  Module HR (human resources)

 Personnel Administration. Functions of the Personnel Department were realized, namely: fixation of staff appointments, sanctions accounting, conduct of different periods of service, including injurious service, conduct of different personal information in accordance with government services requirements, as well as for realization of algorithms in other module components; completion of reports for submission to government services, as well as for qualitative and quantitative analysis of enterprise labour resources.

Interface with control system of access to enterprise was realized.

Organizational Management. Functions of the Labour and Wages Department were realized, namely: conduct of organizational and staff enterprise structure, integration of data with data of the Personnel Department, reports for qualitative and quantitative analysis of enterprise labour resources.

Personnel Time Data. Functions of timekeepers were realized, namely: accounting of worked hours, fixation of reasons of deviations from planned labour hours, forming of daily report for month, automatic forming of right for leave and accounting of its use.