SAP S/4HANA Enterprise Management: 15 Questions Answered

SAP recently launched the first big SAP S/4HANA release – SAP S/4HANA Enterprise Management. It is the first to cover all lines of business. Andrea Schmitz posted this on the SAP website. A worthwhile read.

1. In addition to simpler financials, SAP S/4HANA will also cover other lines of business in the future. What should we expect and when will the new line-of-business apps be available to customers?

The SAP S/4HANA launch in February 2015 was closely followed by the first “big” SAP S/4HANA release that will bring simplicity to all lines of business. Be it materials management, production, procurement, sales, or planning–everything covered by a “regular” ERP plus financial solution can now be purchased in a simplified version on SAP S/4HANA Enterprise Management. Only a few solutions, including SAP Environment, Health, and Safety Management and some quality management functions will follow in upcoming releases.

2. What are the biggest business innovations in this “new” SAP S/4HANA? What advantages does SAP S/4HANA Enterprise Management offer businesses?

Agile planning: The new solution makes it possible to change plans at any given moment. So far, this required a lot of time – up to five hours – but now you can do it during live operations. If there are sudden complications with a supplier, you can now change your order on the spot without undue complications. This saves time and ultimately means more happy customers.

Simulation of logistics processes: If a customer’s product runs out of stock, they can now immediately simulate different solutions and decide what to do based on them. Up until now, production planning was usually a background job that took several weeks. Once a week, a new plan would be developed and implemented. Interactive planning with SAP S/4HANA Enterprise Management makes it possible to make adjustments anytime. This is very valuable for both inventory management and supply chain management.

Real-time inventory management: We have simplified our data models greatly by distancing ourselves from some 20 tables with partial views and histories, instead of working only with master data and movement tables. This way, the employee can see inventory information that is updated every second and react to changes faster than before. If the raw materials and half-finished products are removed, the system will accurately display the new stock on hand immediately. An important improvement is that customers can reduce their inventory because they no longer need as many safety stocks as before. Until now, planned and actual figures lay far apart. SAP S/4HANA will change this.

Flexible material valuation: The new solution is more flexible and has more functions for valuing parts that ultimately determine the price of a product. This way, the actual cost valuation of materials can be standardised. ERP customers can already use this option right now, though it may affect performance and mean more work in a normal system. The valuation takes into account the raw material costs and the run-time of machines during production. The solution is especially attractive for customers who work with lower margins. A customer who produces different types of chocolate bar, for example, would want to know which products actually make a profit, and which “just” give revenue. Small changes to the costs in production can cause big cost savings or increases.

“Soft Close”: The current solution could already accelerate period-end closing. But by including all lines of business in SAP S/4HANA Enterprise Management, the books can now be closed permanently. Up until now, this process mostly took several days. The new solution can give you an immediate P/L at any time and gives companies more insight into their current performance. However, there is one condition. Just like with the current SAP S/4HANA-based solution, the central financial system must be based on SAP S/4HANA. Plus, customers using non-SAP systems must run a real-time soft close with Central Finance that will pool the data from different systems in SAP S/4HANA.

3. What, specifically, is simpler in this new wave of applications based on SAP S/4HANA? Could you give a few examples?

One of the big advantages of SAP S/4HANA is that the new user interface (UI) spares people much redundant clicking around by showing the most important information as tiles on a single display. SAP just recently won the Red Dot Design Award for the SAP Fiori 2.0 user experience from among 4,000 competitors.

The shared service centre usually takes on the transactional tasks and makes the efficiency gains. For example, we can reduce the lead time for manual booking of an incoming payment by half, which makes shared service centres much more profitable.

4. Many users talk about “Simple Logistics” as analogous to “Simple Finance.” Is this accurate?

“Logistics” is not an official term at SAP, but has rather established itself through long-term historical use. Nowadays, “logistics” tends to refer to the transportation sector of an industry. What we mean with “logistics,” however, is not the transportation of products, but the transportation of the entire inventory management and valuation, as well as the operative processes linked to them, such as purchasing, selling, and production. This is why we named the individual sub-sectors of SAP S/4HANA according to their lines of business: SAP S/4HANA Finance, SAP S/4HANA Sales, SAP S/4HANA Supply Chain, etc.

5. How have the operative processes changed? What will change for the material planning processes?

How do SAP Integrated Business Planning and SAP Advanced Planning and Optimisation interact?
The processes themselves will not change yet; neither the integrated business planning nor the individual elements of SAP Advanced Planning and Optimisation. The capacity planning and global availability check (Global ATP) will not change either. We will, however, optimise the processes, for example by bringing the global availability check planning algorithms natively onto the SAP HANA platform. This improved performance of the platform will increase the accuracy of inventory calculations in real time. The processes will also be more deeply integrated. So far, SAP customers needed a full APO system for their capacity planning. This meant the entirety of the master and transition data on the ERP system had to be duplicated. Now we are integrating planning elements such as capacity planning, global availability checks, and transportation management onto SAP S/4HANA Enterprise Management (called Co-Deployment). The advantages: Less data has to be duplicated, and planning elements can be directly integrated into the ERP processes. Integrating capacity planning into the material requirements planning makes it possible to show material and capacity requirements jointly on one screen. We will be implementing these extensive functionalities step by step now.

6. What are the main differences between a traditional ERP system and SAP S/4HANA?

A big advantage is that we can access all data in real time with the ERP system. Another advantage is the agility of traditional ERP processes. The system is capable of reacting to “outside interference” on its own. Changes in storage can be identified immediately and remedied through re-planning. Plus, the new user experience displays the most important steps on a display with an entirely role-based interface. The fourth advantage is that the solution is available both as a cloud and an on-premise solution, thus allowing for quick innovation cycles in the cloud.

7. Are there any use cases of SAP S/4HANA?

More than 1,300 SAP customers worldwide are already using SAP S/4HANA. Twenty pilot customers and partners have gone through the customer validation process with SAP for the new SAP S/4HANA Enterprise Management release. Among them were important representatives of the manufacturing, administration, and financial services sectors.

8. Where can customers find information about the new developments?

• Detailed descriptions of the functionalities are available on the SAP Help Portal for anyone interested
• Information about test versions, use cases, and application scenarios are available on sap.com/s4hana
• “Cookbooks” on SAP Community Network, about the recent SAP S/4HANA releases are available under Specialist Discussions about SAP S/4HANA
• Customers and interested individuals can find more specialised information about individual industries, business sectors, and technologies, as well as search for SAP S/4HANA innovations with the SAP Solution Explorer
• Customers can receive specialised information about the solutions from SAP in the SAP Service Marketplace
• MOOC courses are offered on the openSAP platform to learn all about the solutions and earn an SAP S/4HANA certificate

9. SAP S/4HANA is now “complete.” Does it make more sense to implement SAP S/4HANA all at once or step by step?

Both options are possible. Customers can change from their current release to SAP S/4HANA in one go, or step by step. It depends on the individual customer scenario and the complexity of their current applications. SAP and partners help customers make the best decision on how to transition onto SAP S/4HANA and plan the process to the smallest detail.

10. Do SAP partners and service providers already know the new solution?

In preparation for the first big SAP S/4HANA release, 1,600 SAP partners worldwide participated in courses on the new solution. Our ecosystem is ready. Our partners have also implemented most of the SAP S/4HANA solutions in the past. They were already learning how to use the improved solutions while they were still being updated.

11. Some of our customers have long-term outsourcing partners that run and support SAP products. Will the service providers also take care of transitioning to SAP S/4HANA?

Of course, it is possible for an outsourcing partner to take care of SAP S/4HANA. The outsourcing partner would take over the technical transition aspects. In this case, however, customers might be required to take care of the application aspects themselves. It depends on the contract the customer has with the service provider. Most of these outsourcing partners are also implementation partners of SAP, meaning that they could technically also take care of the application aspects for the customer.

12. Some customers have spent a lot of money customising their ERP systems. Can they keep their individual settings?

In most cases the enhancements can be kept; they are backwards compatible. The tables that are no longer covered but the customer wants to use are still available in a dynamic form as SAP HANA View. This allows customers to continue using their ERP system enhancements in an SAP S/4HANA context. Of course, you can also optimise your enhancements to achieve the exact optimisations we have already made in SAP S/4HANA. Some tools can be useful for this, such as the SAP Code Inspector. It analyses current in-house developments and makes optimisation proposals based on the current systems.

13. Some customers are running hundreds of systems that are integrated with their SAP software. How much time and effort would it take to reconnect them? Are there any pre-tests for non-SAP systems?

There is nothing to fear in this respect. The application interfaces used to connect non-SAP systems so far have largely remained the same for SAP S/4HANA. In other words, receipts and bills will continue coming in and going out as before. Where we have made larger changes to business processes, it might be necessary to create a special application interface. I would say that in average, four out of five interfaces can be used as before without necessary changes.

14. How much do the on-premise and cloud solutions cost?

Cloud solutions usually require a subscription. Certain cost elements such as application management, infrastructure, and software use are included in the subscription. However, customers can also continue using their on-premise license for SAP S/4HANA. Also, the SAP HANA database must be licensed, just like every other database.

15. Realistically, how long does the changeover take?

It took 75% of our customers no longer than six months to change to SAP Business Suite powered by SAP HANA. From there, changing onto SAP S/4HANA Finance was a quick process. It is even possible to change from SAP ECC 6.0 to SAP S/4HANA in one go. We believe that changing to SAP S/4HANA will take about as long as a large enhancement package upgrade. This will help every company calculate how easy or complicated the change will be depending on the complexity of their application.