SAP S/4HANA Logistics : A Functional Perspective

As of the latest releases (May/June 2016) for S/4HANA packages both On Premise (Edition 1511 FPS02) & On Cloud (Edition 1603), there have been certain significant enhancements & extensions on the functionalities under logistics. In this piece, I will focus on the business value & benefits of different offerings under Sourcing, Procurement, Supply Chain & Manufacturing along with key functionalities provided in S4/Hana under each of them. I am not at all going to touch on the technical differences between OP & Cloud editions but at a broader level will highlight the functional aspects which are quite similar for both sort of deployments.

SAP has tried to make it clear that SAP S/4HANA is a new product line & not the successor of any pre-existing business suite but the sort of functionalities covered under S/4HANA Enterprise Management edition directs one to think that if at all they will be migrating to S/4HANA which is inevitable, they have to leave the existing business suite behind to fully harness the capabilities S4/HANA has to offer. I also totally understand that the offerings under On Premise & Cloud edition may differ a bit but not to such an extent that we have to have separate write-ups from point of view of covering logistics functions.

I will be discussing the Key Innovations under each area in S4/HANA as per the mapping into product map & I will also try to go deeper wherever needed into exactly how these innovations will work for any business based on the best practices adopted into S/4HANA.

PROCUREMENT

Simplicity – Procurement is an area is well known for the complexity, manual work, time-consuming processes with high volume of purchasing documents and line items. S/4HANA lowers the procurement operation cost by providing a simple yet efficient procure to pay process facilitated by Fiori apps i.e. for Analytics, Spend KPI’s. User experience is simplified & enhanced by role based apps. Business value is added by real time analytics.

Visibility – S4/HANA gives ultimate visibility at fingertips by using Fiori apps, providing Ad-hoc supplier transparency & performance evaluation based on detailed data points & most importantly integrating with SAP Ariba network for transactional data.

Adoption – Procurement process is supposed to be manual or semi-automatic leading to slow cycle time & error prone. S/4HANA has Self-Service Requisitioning leading to higher business user adoption through a consumer-grade user experience. It also offers five times less interaction steps to get the procurement information leading to faster & accurate data.

INVENTORY MANAGEMNET

Accuracy – Due to missing real time analytics, process & data redundancies one can’t be sure of the accuracy of valuation or Inventory figures. S/4 HANA is capable of more timely & detailed real-time processing of Inventory postings leading to higher accuracy of Inventory. Parallel inventory posting for standard price-driven materials is also possible. This also helps in Improved On time delivery. Valuation is more accurate since it’s based on one valuation method (Material Ledger) instead of 2 (MM-IM and ML). All of this is simplified by use of Fiori apps for Mangers as well as warehouse resources.

High Inventory Turnover – S4/HANA gives more visibility & accuracy of Inventory across the board & hence lesser Safety stock can be an option which will help to have better Inventory turnover ultimately leading to reduced Working capital cost to company.

Segment of One – S4/HANA offers real-time processing instead of batch processing & support to manage dynamic demand fulfillment for even lot size of one & facilitate this throughout the logistics operations.

MATERIAL REQUIREMENT PLANNING / CAPACITY PLANNING

Flexibility – It’s is common to have revenue loss due to stock-outs & poor on time delivery performance. S4/HANA offer prioritized view on material flow issues with clear visibility. It also gives system-generated solution proposals & automated creation of procurement proposals. It’s flexible in tailoring of available capacities and receipts to meet required quantities.

Quick – Accelerated MRP run on S4/HANA can be 10+ times faster along with faster demand propagation along the supply chain giving more chances for simulation & better planning quality.

Real Time – S4/HANA offers Real-time alerting based on current stock requirements situation as well as Real time Inventory picture.

MRP Fiori apps offers managing and monitoring external and internal requirements, material coverage, monitoring production or process orders. It’s planned to have one MRP system for planning including the APO PP/DS into S/4 Hana & Live cache-based, finite-capacity planning as an integral part of the SAP HANA platform, requiring just one database to manage along with simplified data integration, advanced analytics. It will also offer Intuitive maintenance of master data and integration models. This will be a great innovation & edge for planning aspect on S4/HANA since this will lead to fulfillment of an order on time with accurate quantity using various checks for different business scenarios along with performing automatic back-order processing.

AVAILABLE TO PROMISE

On Time – S/4HANA enabled mass product availability check for sales, planned and production orders i.e. ATP check for all items of an order at once which leads to fulfill an order on time and in the desired quantity using different kind of checks for different business scenarios. It helps to promise accurate and reliable order dates & to fulfill orders from the entire network or to substitute products automatically.

Efficient – S/4HANA has significant performance improvements for releasing large production orders. There are plans for data and process innovations in Backorder processing and Sales Product Allocation.

PS: All the above are personal perspective on the basis of exposure to information provided by SAP on S/4HANA.