4.2    Addressing Logistics Pain Points

CSCOs are responsible for the mechanics of planning, production, logistics and customer service. But their role has become more challenging. They are responsible for not only controlling costs and increasing efficiency and productivities of their business processes but also for bringing and maintaining customer satisfaction to an all-time high by delivering the “perfect order.” On top of this, the environment they are working in is changing rapidly and dramatically.

Based on the CSCO study, the following five key challenges have been identified:

In the following sections, we’ll provide some further insights on each of these challenges and reveal how SAP S/4HANA addresses them.

4.2.1    Lack of Supply Chain Visibility

CSCOs are working hard to optimize their supply chains and make them more visible, but most CSCOs struggle to create a holistic view. In the traditional system, supply chain visibility is a challenge due to lack of real-time availability of granular data and advanced analytics and high complexity of system landscapes with information from different sources that aren’t well integrated. Enterprises must first resolve their visibility challenges within the enterprises. In the second phase, they must extend that visibility to their external partners to have full visibility across the entire extended supply chain.

Following are some of today’s key challenges caused by lack of visibility:

Next to the challenges within the enterprises, companies are also struggling to create transparency in the extended supply chain and have visibility in stock availability and capacities of their suppliers and logistics service providers. Additionally, due to lack of customer real-time data, enterprises don’t have visibility into their customers’ stock availability and requirements.

CSCOs know real-time data and advanced analytics are critical for their enterprises to become more transparent and visible. Most of them want to improve these areas but struggle to do so due to challenges and limitations with the traditional SAP ERP system.

With the following features of SAP S/4HANA, several key challenges can be addressed to increase supply chain visibility:

4.2.2    Increasing Volatility in Demand and Supply

In the past, competition meant that you had a competitor in the same industry who came up with a cheaper or better product or service. Today, the competition isn’t visible until it’s too late. Competition doesn’t just come from the same industry anymore; new competitors are emerging from old industries and also from digital invaders with totally different business models.

CSCOs are worried about these new invaders entering their territory. Based on the results of the study, executives believe industry convergence is the biggest trend that will emerge over the next three to five years.

Additionally, CSCOs are also being challenged by their customers, who are more and more demanding and have a lower threshold to move to your competition. Customers today, on the whole, expect the following:

Additionally, growth rates across various emerging markets imply that rising labor costs can alter the traditional model of choosing manufacturing locations. Today’s outperforming organizations take a different approach; they are moving the production location closer to the demand, based on total landed costs (total price after a product arrives at the customer’s door). Our C-level executives have to prepare themselves for a future in which technology advances are increasingly blurring the distinctions between different industries and where new competitors are emerging from left field. With the increasing volatility in demand and supply, they have to prepare themselves and make their supply chain flexible to handle changes quickly. Companies need to be prepared to actively redesign their operating models to create an innovative ecosystem and boost their digital acumen.

With SAP S/4HANA, enterprises can be more resilient against increasing supply and demand volatilities. SAP S/4HANA creates opportunities to reinvent business models and drive revenue and profit growth via the following:

4.2.3    Increased Complexity

Products and supply chain processes are becoming more and more complex. On one hand, complexity is caused by increasing customer demand and specific requirements for products and services. On the other hand, complexity is also introduced due to globalization, the efforts to expand business into new markets with low-cost manufacturing locations, and the need to offer new and innovative products and services. With rising competition, companies are emphasizing the importance of new business models to generate additional value to the product range and conquer new demand channels of increasingly digital customers.

The key challenge for the CSCOs is to simplify and optimize the supply chain processes and landscape, while still offering the capabilities for enterprises to run complex processes. They want intelligent products that are capable of automating processes in production, logistics, product returns, and failure analysis. The C-suite study showed that the majority of executives still rely on traditional techniques (e.g., brainstorming and predictive analytics) to identify the next new trends in their business. Most of the CSCOs in the traditional system lack support for simplification and standardization of processes, using advanced analytics, and using modeling tools to optimize their flows. The use of innovative technologies, such as cognitive computing, prescriptive analytics, or simulations technology to truly simply their processes is still low.

SAP S/4HANA simplifies and standardizes several core processes into one single integrated business suite as the backbone of the enterprise, where speed plays the biggest role. Simplifications and standardization of core processes within SAP S/4HANA Materials Management and Operations include the following:

4.2.4    Lack of Collaboration

CSCOs want to expand their network and collaborate more with their customers and other external influencers. They want to improve flexibility and reduce the cycle time to market through efficient and tight collaboration with their suppliers. They also want to convert traditional competitors into partners to mitigate risks, reduce costs, and even use their support for codevelopment.

CSCOs also want to collaborate more with their customers. Through tight collaboration with their customers, they can get a better understanding of their requirements and set and shape their short-term and long-term demand.

CSCOs want to build an agile, on-demand virtual network of partners with whom they can share timely information that can be used to sense, predict, and act to optimize outcomes. By using collaborative information more extensively, they want to better manage their performance and involve their partners to make important decisions and increase supply chain flexibility and visibility. They want to integrate digital-physical strategy to combine their physical product/service flow with their digital operations and share predictive insights with their partners.

SAP S/4HANA offers a single platform for integration of core enterprise management processes. Compared to the traditional SAP ERP system, SAP S/4HANA offers several features that allow seamless collaboration between internal core processes. For instance, the MRP Cockpit functionality provides improved integration capabilities between production and procurement. Real-time material flow data and analytics provide users from both departments a clear view of the stock situation for in-house and procurement production materials. With the release of version 1610, capacity planning became part of the core due to the embedded Production Planning and Details Scheduling (PP/DS).

SAP Extended Warehouse Management (SAP EWM) is also now part of the core product, and so can be used instead of SAP ERP Warehouse Management. The main advantage is that additional supply chain management systems are no longer required, which simplifies the system landscape. When data is created in SAP S/4HANA, it automatically syncs with PP/DS and SAP EWM without the need for middleware.

Additionally, SAP S/4HANA offers standard features to improve collaboration with SAP S/4HANA extended solutions such as the SAP Ariba Network, SAP SuccessFactors, and SAP Hybris.

4.2.5    Lack of Customer-Friendly Interface

In today’s platform, information is often spread across various systems, and CSCOs can’t easily access demand and sales history data through one single report in order to predict customer demand. Due to a lack of real-time reporting and advanced analysis, CSCOs can’t quickly detect issues or monitor their business processes efficiently. Often, their employees have to go through various screens (or even various systems) to check the status of sales orders, which doesn’t allow them to serve their customers efficiently and easily.

CSCOs want to have a flexible customer platform that can serve customers accurately and effectively. They want a platform that capitalizes on the available customer data and uses it to look at their behavioral patterns, transactional histories, and feedback to predict new trends and manage their supply chain proactively. Real-time demand signals to alert employees to critical situations and better integration between sales and marketing functions to ensure activities are coordinated between the two departments.

With SAP S/4HANA, enterprises can now have a user-friendly SAP Fiori UX that can offer users a personalized experience. Through the different SAP Fiori apps, users can now run insights at any point in time on any device.

In the next section, we’ll go into more detail about the key challenges per LoB, address the SAP S/4HANA functionalities, and dig deeper into the improvements that SAP S/4HANA will bring.