2.2    Business Value Scenarios

Most of you likely have an existing SAP solution in place and have invested a lot of money to ensure that it fulfills your current requirements. Some of you may be uncertain about the business value and the migration costs that come along with moving to SAP S/4HANA, but there is a huge opportunity to reconsider the current processes with a focus on the digital transformation and the ability to support the future creation of business models. Therefore, it’s essential to understand the value SAP S/4HANA brings from a functional perspective, as well as the technical capabilities that must be embedded in your strategy to tailor an individual road map that fits your future business.

Looking at the impact of the digital transformation (see Figure 2.9), you’ll see five different layers that need to be supported to achieve the highest transformation toward creating new business models.

Digital Transformation Adoption Model

Figure 2.9    Digital Transformation Adoption Model

How does SAP S/4HANA address those challenges? Platform speed is increased with the migration to SAP HANA as an in-memory database. Speed is also increased by simplifying the data model and reducing the redundant application data. Creating a single data source for end-to-end processes (described in Section 2.2.2) aids in decision making, and simplified and improved processes are enriched by role-based, user-specific user experience (UX) (discussed in Section 2.2.1).

Additionally, having a single data source and the ability to aggregate data on the fly, in combination with the storage of customer behavior from different sources, provides better insight into customer behavior. You can understand what they may do, what they are doing right now, and what they have done in the past. All this information is available in real time and is part of the future digital platform with SAP Hybris (discussed in Section 2.2.2). All of these capabilities are provided as part of SAP S/4HANA and the supporting LoB solutions that are tightly integrated to support the digital value chain.

For each of the layers shown in Figure 2.9, we’ll outline potential use cases to help you understand the value of SAP S/4HANA.

Let’s begin with Figure 2.10, which contains a summary of the key innovations that are available in the current release. As you can see, it’s in line with the digital transformation model and is based on the following three main changes:

All of these changes have implications on the innovation capability of SAP S/4HANA Enterprise Managements and are the foundation for the different scenarios and simplifications in FI and logistics.

Key Innovations for SAP S/4HANA Enterprise Management

Figure 2.10    Key Innovations for SAP S/4HANA Enterprise Management

Note

You can create your own business scenario recommendations report based on your transaction usage. You can get a guide on how to do this at https://www.s4hana.com/how-to-guide. The report provides you with a detailed overview of the recommended business scenario, the relevance for your company based on the analyzed transactions, and the improved or relevant transactions that are affected. For illustrative purposes, a sample of an executive summary is shown in Figure 2.11.

Business Scenario Report Executive Summary

Figure 2.11    Business Scenario Report Executive Summary

Let’s now look at the three main areas where SAP S/4HANA can add value to your business: through improved customer centricity and experience, increased customer insight and a better decision-making process, and a new digitally enabled supply chain.

2.2.1    Customer Centricity and Experience

As part of the digital transformation, the way users are going to access ERP solutions is different from the past. Users want access via different devices (e.g., mobile) in a simplified, user-friendly experience. As stated in Chapter 1, there is a massive change in the behavior based on the target group, such as Generation Y or Millennials; they are looking for a customized and focused user experience that is simple to handle. Based on changing requirements and the future of digitally enabled enterprises, SAP decided to provide customers with a new UX called SAP Fiori. SAP Fiori applies the following new design principles to reimagine the UX:

With the usage of SAP Fiori, there is a significant shift from the pure functional view that was available in the old SAP ERP to a role-based UX with one single entry point and a common design in SAP S/4HANA (see Figure 2.12) across the business applications, whether cloud or on-premise. From a strategy perspective, all new or existing SAP solutions will use SAP Fiori to harmonize the unified UX for SAP Ariba, SAP SuccessFactors, SAP Hybris Cloud for Customer, SAP Fieldglass, and all SAP S/4HANA editions.

Role-Based View with SAP Fiori as Part of SAP S/4HANA Cloud

Figure 2.12    Role-Based View with SAP Fiori as Part of SAP S/4HANA Cloud

So what is the real business value? Aside from the creation of a nice UI, it also affects the way people work. This is evident in nonmonetary benefits such as the following:

Those nonmonetary benefits will lead to significant business results such as the following:

To give an example from an existing client, one food delivery business improved its productivity by 60% after adopting the new processes based on SAP Fiori. Another customer eliminated training effort due to the intuitive SAP Fiori design and the user-specific UI.

Note

SAP provides a tool to calculate the business value for selected scenarios at http://www.sapcampaigns.de/us/UX_Calculator/.

Based on the design principles described earlier, the changing of the UX strategy has the goal to support the simplification of the SAP S/4HANA solution, which is why SAP S/4HANA and SAP Fiori are tightly integrated. At present, not all SAP solutions are enabled fully with SAP Fiori, but solution development will continue. More SAP Fiori apps will be available in later releases that will simplify the overall solution. In addition, not all transactions are being replaced with SAP Fiori apps because there will be a move to a more role-based UX, and the processes will be streamlined and condensed to the necessary core functionality.

You may wonder why SAP S/4HANA Cloud is fully based on SAP Fiori, and the on-premise version isn’t. This is due to the limited functionality provided with SAP S/4HANA Cloud and the fact that it’s based on a completely new product line. As the product evolves, more and more processes will be supported by SAP Fiori Apps while the simplification process is going forward. All this effort is based on the desire to reduce the redundancy on any level, ranging from the SAP HANA database up to the SAP Fiori UX.

The simplification process from SAP ERP to SAP S/4HANA doesn’t just consist of the new UX design. Based on the simplification of the data model, redesign of the business logic, code pushdown, and role-based tailoring of the solution, there is also a process redesign coming along with the move to SAP S/4HANA.

How many processes are supported by SAP Fiori? Within SAP S/4HANA Finance 1503, more than 140 SAP Fiori apps were supported; with SAP S/4HANA 1511, more than 260 SAP Fiori apps are supported.

If you want to realize the benefits of SAP S/4HANA, you should first look at the roles and the usage of the transactions to get a better understanding where the best case for simplification or value realization resides. Second, you should look at the currently available SAP Fiori apps and review how they fit into your role requirements and where the gaps are. This will give you a good overview of the functionality your end users need and an understanding of what the current release covers.

Note

Not all users will be SAP Fiori users at the beginning, so you have to plan for the traditional SAP GUI users or a combination of those as well.

To identify the currently available SAP Fiori apps, you can browse through the SAP Fiori apps reference library (see Figure 2.13) at https://fioriappslibrary.hana.ondemand.com/sap/fix/externalViewer/#.

In the SAP Fiori apps reference library, you can select the area of interest to review the available apps. All apps are assigned to different roles; for example, under the Accounts payable accountant, there are apps available for Create Manual Payment/Create Single Payment (see Figure 2.14). You can see the details regarding app availability, the required backend product, and any additional documentation. You can also take a detailed look via the list view and select the different product suites to get a quick glimpse.

Overview of the SAP Fiori Apps Reference Library

Figure 2.13    Overview of the SAP Fiori Apps Reference Library

If you want to get a recommendation based on your system usage, you can select this as an option within the library. A detailed guide on running an SAP Fiori relevance and readiness analysis is available at https://fioriappslibrary.hana.ondemand.com/sap/fix/externalViewer/docu/Relevance_and_Readiness_Document.pdf.

The results of the analysis provide a list of possible relevant SAP Fiori apps based on your transaction usage, as well as the relevant prerequisites.

Sample for Identifying an SAP Fiori App in the Finance Area

Figure 2.14    Sample for Identifying an SAP Fiori App in the Finance Area

As a sample for the improved process time via SAP Fiori within SAP S/4HANA, let’s look at the FI area to see how SAP S/4HANA Finance (formerly SAP Simple Finance) has been improved and simplified, in this case, for an account receivables accountant processing incoming payments (see Figure 2.15). Table 2.1 summarizes the differences between SAP GUI and the new SAP Fiori app that is available via SAP S/4HANA for posting received customer payments and cleared customer invoices. This process was traditionally handled by Transactions F-04, F-28, and FB05.

Clearing Invoices from Incoming Payments

Figure 2.15    Clearing Invoices from Incoming Payments

SAP GUI (Traditional) SAP Fiori (Simplified) Improvement
Duration: 1:26 min Duration: 0:59 31% reduction
Clicks: 27 Clicks: 17 37% reduction
Screen changes: 14 Screen changes: 2 86% reduction
Fields filled: 14 Fields filled: 7 50% reduction

Table 2.1    Comparison of Activities and Savings between SAP GUI and SAP Fiori

As you can see, there is a significant improvement running the clearing process via the SAP Fiori app not only in the total duration but also in the change of screens and the information that needs to be entered manually. This is a simplification example that really demonstrates the value that SAP S/4HANA brings with its unified UX.

In short, SAP Fiori isn’t just about a nice UI; it’s more about redesigning processes from an end-user perspective to be more efficient and to reduce costs. SAP Fiori can provide business value for your organization from a UX perspective, and there are tools available to identify the relevant business scenarios for your organization.

2.2.2    Customer Insight and Improved Decision Making

As part of the digital transformation, it’s not only important to improve the UX, as outlined in the previous section, but it has also become increasingly critical to better understand client behavior so that you can offer a tailored service or product. Therefore, it’s essential to collect all necessary data, make the data available in real time, and create actionable results based on the analysis and prediction of data. With the transition to SAP S/4HANA, several changes enable you to provide better customer information and support the decision-making process. Due to the use of an in-memory database, the redesign of the data model, and the data footprint reduction that comes with SAP HANA, it’s now possible to provide a single platform across the different solutions with one copy of the data and less integration effort.

SAP S/4HANA is designed to fulfill the end-to-end requirements of a digital value chain (see Figure 2.16). It contains optimized, end-to-end processes that reside on a single data source, with SAP HANA as the digital backbone. It also contains Internet of Things (IoT) integration via the SAP HANA Cloud Platform, which allows companies to get insights and automatically initiate business processes from social media tools, as well as analyze structured and unstructured big data in real time.

This value chain is only possible because SAP S/4HANA also integrates SAP’s existing portfolio of LoB cloud solutions, as follows:
SAP HANA as the Foundation for the Digital Value Chain

Figure 2.16    SAP HANA as the Foundation for the Digital Value Chain

This enables customers to run their entire company digitally, in a fully integrated manner. More information on the extended portfolio is provided in Chapter 5, which explains how those solutions fit into the overall strategy of SAP S/4HANA.

The step toward SAP S/4HANA and the plan to integrate all LoB solutions into a single data source combined with the capabilities of an in-memory database enables customers to move from a traditional separated transactional and analytic data approach toward a unified one (see Figure 2.17). This significantly reduces the delay between the different data sources and enables customers to drive real-time analysis and make decisions on live data. You also can embed analytics as part of the transactions to improve the process and provide better information based on real-time data instead of aggregating the data manually and spending additional time and manpower to produce outdated data.

Integrating Real-Time Data Access for Improved Decision Making

Figure 2.17    Integrating Real-Time Data Access for Improved Decision Making

As shown in Figure 2.17, SAP S/4HANA provides all capabilities that are required from a digital platform. The redundant data limitation and the complex data models overview are gone, which enables you to conduct ad hoc and real-time analysis without data extraction and data loading.

As a concrete example, let’s take a closer look at the work of an accounts receivable manager. If the accounts receivable manager wants to get an overview of the 90 days’ receivables he is expecting sorted by the top 10 customers outstanding, he can easily access this information via an SAP Fiori app that provides detailed information for his entire customer base (see Figure 2.18). The reports available via SAP Fiori allow different user groups to get a detailed understanding of the finance data (e.g., auditors can drill down into the details of the overdue receivables and sort them by customer, company code, accounting clerk, etc.).

Overdue Accounts Receivables

Figure 2.18    Overdue Accounts Receivables

Using this report, the accounts receivable manager can get a better overview of the top 10 customers and their behavior and then drill down into further details (see Figure 2.19). All this information provides transparency and helps companies improve their decision-making based on real-time financial data combined with on-the-fly reporting capabilities.

This example provides an overview of the key benefits of SAP S/4HANA based on the simplified data model. These benefits are listed here:

Overdue Receivables by Top 10 Customers

Figure 2.19    Overdue Receivables by Top 10 Customers

2.2.3    Digitally Enabled Supply Chain

Section 2.2.1 showed how users are being empowered with people-centric UIs, while Section 2.2.2 showed how the simplification of a single data model with no redundant data is supported by SAP S/4HANA. Let’s now look at the third piece of the puzzle: how logistics is changing due to the market trends that are driven through the digital transformation and how SAP S/4HANA addresses those topics. Although there are no changes to the processes themselves, there is a significant change in the way processes are executed more efficiently, as was shown earlier in Table 2.1. In the area of logistics, the digital transformation has brought about significant changes; for example, consumers expect their orders to be fulfilled and shipped on the same day, so they can receive their product on the next day.

Another example is the IoT and the collection of big data via sensors or other devices, which has huge implications on the way companies monitor their supply chains. The rapid growth of collaborative networks is removing borders between suppliers and consumers, which has a big impact on the way processes can be executed and improved.

The current SAP ERP system serves as a classical system of record storing your transactional data. The business user goes through different transactions to get transparency on demand shortages, analyzes various reports, adds intelligence to the information, and then either prioritizes production or transfers goods from one plant to another to avoid shortages. With SAP S/4HANA, the business user gets away from the traditional system of record and leverages the core capabilities of the platform, such as IoT or business network connectivity, to obtain more detailed information and advanced analytical options that help him do his work more effectively.

To give a concrete example of the business value SAP S/4HANA provides in the logistics area, let’s look at inventory management. The challenge of inventory management is to provide customers with the right products at the right time while reducing storage and saving costs at the same time. In the past, to achieve transparency, you had to execute the backflush process (the process of determining the number of parts that must be subtracted from the inventory) once a day, which led to inaccurate inventory in the system. With customers now expecting individualized and on-demand products and services, it’s not feasible to work with outdated data that gives limited transparency on the available inventory, as this will lead to supply shortages and unsatisfied customers.

Most businesses are requiring real-time data in the entire supply chain in an effort to minimize the stock in warehouses to reduce the total costs. With older ERP solutions, separate data are loaded from several sources, which takes too much time. Therefore, a simplified data model is needed to avoid redundant data and enable on-the-fly analysis to provide a detailed look inside the inventory and minimize the risk of deviations between physical inventory and virtual inventory. This is where SAP S/4HANA comes in.

In Figure 2.20, you see the classic inventory management process flow:

  1. At 6:00 a.m., the stock is automatically entered via barcodes.
  2. During the day, the inventory manager checks the virtual inventory that is available in his system. In this example, he checks the inventory in two hour cycles at 8:00 a.m., 10:00 a.m., and 12:00 p.m.
  3. At 2:00 p.m., the stock is automatically entered via barcodes.
  4. At the same time (2:00 p.m.), the inventory manager checks the virtual inventory again and gets a first view of the real values after the actualization of the information. This leads to a large deviation between the virtual and the real stock through, for example, production quality issues.
    Classical Inventory Tracking

    Figure 2.20    Classical Inventory Tracking

In our example, we have a high deviation between virtual and actual stock. To compensate for this difference and to prevent the production chain from stopping due to lack of parts, you must have safety stocks (see Figure 2.21). Safety stock is expensive because it requires additional costs (e.g., handling costs, space costs, etc.) on top of the stock itself. Therefore, it’s essential to have minimized safety stock.

Inventory Tracking Including Cost-Intense Safety Stocks

Figure 2.21    Inventory Tracking Including Cost-Intense Safety Stocks

To avoid these deviations and to reduce the amount of safety stock, SAP S/4HANA enables you to reduce the difference between the theoretical and the real stock value. As shown in Figure 2.22, real-time inventory tracking allows you to enter values of the stock in real time, which allows you to anticipate actions to compensate for the risks of production and reduce your safety stock.

The foundation of this SAP S/4HANA simplification is the elimination of aggregates. In SAP ERP, the Materials Management (MM) inventory functionality is stored in table MKPF (header table) and table MSEG (line item table) with an additional 18 tables for quantities and values. Out of those tables, 11 aggregate tables have additional shadow tables for historical data (see Figure 2.23). All these tables are required to support reports such as report MB5B or report MMBE, among others. This all results in a great deal of redundant data, which was necessary before the possibilities of in-memory technology. With SAP S/4HANA, a new data model has been built that leverages the advantages of the in-memory columnar storage.

Real-Time Inventory Tracking

Figure 2.22    Real-Time Inventory Tracking

With SAP S/4HANA, the single table MATDOC contains all the information formerly stored in all those various tables, which eliminates redundancy and provides you with better performance. Now that the aggregate tables have been replaced with Core Data Services (CDS) views, both on-the-fly calculations and compatibility with custom developments are supported. With these changes, SAP S/4HANA provides you with real-time processing of inventory postings and visibility of inventory values so you can reduce your safety stock and manage smaller lot sizes moving through logistics operations. All of this leads to an overall cost reduction in your inventory.

Inventory Management Changes from SAP ERP to SAP S/4HANA

Figure 2.23    Inventory Management Changes from SAP ERP to SAP S/4HANA

Another example of the optimization is the accelerated material requirements planning (MRP) that is available with SAP S/4HANA. As you can see in Figure 2.24, there is a huge simplification between the SAP ERP system and SAP S/4HANA. With SAP S/4HANA you now have the ability to access your key KPIs in real-time. Due to increased transparency, there is a significant decrease to the amount of inventory you must keep on hand, which then in return results in cost savings.

Traditional SAP ERP SAP S/4HANA
No real-time planning due to elapsed time Real-time system with key performance indicators (KPIs) instantly refreshed
Decisions based on “old” data, resulting in lower quality Segment of one that reduces lot sizes down to single items
Lower forecast accuracy and attainment of promise date, and increase in inventory Focus on exception handling rather than standard processes
Inventory decrease with reliable ATP check

Table 2.2    Accelerated MRP Comparsion between SAP ERP and SAP S/4HANA

Note

For more details about logistics in SAP S/4HANA, see Chapter 4.

Accelerated Material Requirements Planning

Figure 2.24    Accelerated Material Requirements Planning