4.3    Key Functionalities

SAP S/4HANA is the digital enterprise resource planning (ERP) core built on SAP HANA, and it’s the next-generation business suite that enables companies to reinvent business models and drive new revenues and profits. The digital ERP core is the key foundation and enabler for business innovation and optimization, and it helps enterprises drive digitization of their critical business processes across all operations.

Enterprises can run their advanced analytics at any point in time at all levels of granularity in real time and from a single system source, increasing supply chain visibility and transparency. They can now easily connect to people, devices, and business networks in real time and deliver new value in the digital economy. Additionally, SAP S/4HANA offers capabilities to predict and simulate business outcomes that will allow them to quickly respond and make better decisions.

With these core capabilities, CSCOs can now expand their digital transformations across the entire value chain to do the following:

• Improve collaboration with suppliers and customers
• Deliver new and more personalized experiences to their customers, along with better services due to a better understanding of the customer demands and better integration between business processes.
• Manage their assets more effectively and drive new business insight through real-time information on big data. They now have the ability to leverage an open innovation platform to quickly integrate, extend, and build innovative SAP Fiori apps and embed device data across the value chain to create new business models.

With SAP S/4HANA, the innovations can be split into three different categories:

• Re-architecting the functional core
  In this category, innovations have been made within the SAP S/4HANA core. The technology footprint has been optimized and modernized and OLTP and OLAP have been enabled, which allows the processing of on-the-fly reporting and analytics.
• Responsive UX
  This category focuses on SAP Fiori, a role-based UX with a new responsive design. SAP Fiori apps can be run on any device and have been designed for exception-based issue handling.
• Unifying the functional core
  The focus for the third category is the elimination of redundancies, which have been built in to the SAP Business Suite over the years, resulting in a simplified suite.

SAP S/4HANA resolves some of the key challenges and provides a single source of truth, as well as advanced analytics and insights via real-time data. With SAP S/4HANA, enterprises can truly become analysis-led and technology-enabled digital enterprises. You can make your supply chain more transparent and create a more agile environment where you can predict and respond more rapidly.

In the following sections, we’ll go through the key functionalities provided by SAP S/4HANA per LoB and address the key innovations, optimizations, and simplifications in SAP S/4HANA Materials Management and Operations.

4.3.1    Manufacturing

A material planner is responsible for hundreds of materials and is challenged with dozens of exceptions in a day. He has to make sure there is enough supply to meet demand and identify and take action on material shortages and other critical situations quickly.

Following are some of the key challenges in manufacturing today:

• Production planning and evaluation in the traditional system is time-consuming and labor-intensive. Due to the high volume of data, execution time for MRP runs is long and needs to be scheduled in batch processes, either once a week or a few times a week. The material planner can’t detect critical situations easily, and his day-to-day work often requires intensive manual analysis of the stock requirements list and data from multiple sources.
• Lack of real-time information causes inaccurate data for reporting and analysis, which results in the following:
  • Inaccurate production planning, causing incorrect inventory levels
  • Inaccurate capacity planning and leveling of resources
  • Insufficient information to detect and focus on critical situations only
  • Poor decision-making processes due to the lack of a real-time single view of materials and inefficient processes to evaluate solutions (need to navigate to multiple transactions)
  • Inability to minimize production risks across the networks (due to lack of complete and accurate manufacturing data)
• Many applications and disparate systems for different processes, creating different versions of truth, and duplicated and scattered information

Due to these challenges, the traditional system doesn’t provide sufficient capabilities for companies to improve service levels and inventory accuracy, to avoid critical situations, and to drive revenue growth. In the following sections, we’ll look at the major functionality that SAP S/4HANA has introduced in the area of manufacturing.

MRP Live

SAP S/4HANA offers MRP Live, which is an optimized MRP functionality in an SAP Fiori app with several improvements, including real-time data and advanced analytics to improve material flow visibility to enable better decision-making for the material planner. With MRP Live, production planning can be done based on real-time data, and stock situations can be analyzed based on the most up-to-date material and stock information. This will allow a more accurate MRP run and reduce the lead time for planning.

With MRP Live, users have access to real-time data that can be run on any device via SAP Fiori and for which the UI is fully adoptable based on the user role. Companies can analyze material flows in real time with a single query access to data. The rules that define shortages can be flexibly determined to provide insights into material shortages, and demand and supply can be presented in chronological order, showing the exact level of stock by day.

The system supports a real-time alert functionality based on the current stock requirements situation. This allows users to be proactive—rather than reactive—and take actions quickly to avoid critical situations. ATP confirmation to customers will be faster and more accurate. With the real-time data and analytics in SAP S/4HANA, users can monitor the standard processes in an efficient way and focus specifically on exceptions. Companies will have better control over their material availability, resulting in fewer stock-outs, decreased stock levels, and an increase in customer satisfaction.

The MRP Cockpit is the main entry point for the material controller to identify disruptions in the material flow and review the impact of these issues quickly. MRP proposes solutions and provides simulation capabilities to support user decision-making, resulting in decreased material shortages.

With the Manage Material Coverage app, users can with material availability details and solution suggestions by the system. The system will perform a rating for each solution to indicate the viability of the solution; 2 stars resolves the issue, and 1 star resolves the issue partially. The user can preview the suggested solution, and the system will provide a simulated view of the solution, taking into account any possible constraints such as maximum order quantities and inventory in supplying plants.

Additionally, in MRP Live, the MRP Dispatcher offers automatic determination and selection of planning mode for each material based on the functional requirements of the material. It offers a new mode and a classic mode, as follows:

• New mode
  Supports procurement and in-house production, delivery schedules and configurable materials. This mode will be enhanced continuously in future releases.
• Classic mode
  Supports capacity planning and discontinuation. Special functionalities in MRP will remain in the classic mode, together with existing customer enhancements, which means there is no loss of functionality, and the special functionalities can be used immediately in a compatible way.

SAP S/4HANA significantly improves the performance of the MRP run (Figure 4.5). In the classic MRP, the application server has to call to the database table multiple times for each table one by one, and a lot of data has to be transferred and read by the application server. This causes performance issues, so executing an MRP run in the traditional system is a time-consuming process and often has to be scheduled in batches to handle the data.

Figure 4.5    Classic MRP vs. MRP Live

With SAP S/4HANA, the MRP run is significantly improved. With the parallelization functionality of SAP HANA, different tables can be read at the same time, and data from these tables can be transformed into a common structure, ignoring all the columns that aren’t needed by MRP. The data in the database server is used to detect material shortages. MRP creates planned orders and purchase requisitions to cover these shortages, and these objects are again inserted into the database at one time. MRP Live can read material receipts and requirements, calculate shortages, and create planned orders and purchase requirements all in one database procedure. In SAP S/4HANA, an MRP run can be up to 10 times faster compared to the classic MRP, and users can run MRP as frequently as needed without system performance issues.

MRP Live offers the following business benefits:

• Increased visibility of material flow, improving efficiency and accuracy of production planning
• Proactive decision-making and ability to react quickly to demand changes due to improved analytics and real-time reports
• Flexibility in tailoring capacities and receipts to meet required quantities
• Real-time visibility to inventory levels and automation of procurement proposal creation

With MRP Live, SAP provides a product design that is lean and flexible. With the real-time analytics and decision support of MRP Live, material planners can now work more efficiently and focus more on exceptions and problem solving, rather than standard operational tasks.

SAP Integrated Business Planning

SAP Integrated Business Planning (SAP IBP) is SAP’s new state-of-the-art platform for real-time supply chain planning that is built on SAP HANA and fully integrated with SAP S/4HANA. In the long run, SAP IBP will replace SAP Sales and Operations Planning (S&OP). SAP IBP will bring several enhanced functionalities, such as statistical forecasting techniques, multilevel demand and supply planning, collaboration tools, and user-friendly Microsoft Excel and web-based UIs. It’s being developed to deliver integrated planning across sales and operations, demand, inventory, supply, and responsible planning. Additionally, a supply chain control tower is provided for dashboard analytics monitoring.

Note

At the moment, SAP IBP is only available on SAP S/4HANA Cloud and can be interfaced with on-premise deployments of SAP S/4HANA. SAP IBP is an additional product and therefore additional are costs associated for licensing and implementation.

General Functionality

In SAP S/4HANA, storage location MRP isn’t available anymore; MRP can only be planned on the plant and MRP area levels. With the introduction of MRP areas, MRP requirements for different subcontractors can be differentiated within the same plant. MRP areas cover the same requirements for MRP on the storage location level (through MRP type ND or VB).

In the traditional MRP, SAP ERP doesn’t create planning file entries on the storage location level. MRP in SAP ERP has to plan all materials separately in the planned storage locations and plant levels every time inventory or an expected receipt is changed in a single separately planned storage location. In SAP S/4HANA, the system can create planning file entries on the plant and MRP area levels. There is no need to set up MRP area-specific materials master data anymore for every subcontractor.

Additionally, in SAP S/4HANA, changes have been made to the product master data, as the material number has been extended to 40 characters. The related functionality for extended material numbers can be switched on; however, the technical Data Dictionary (DDIC) object contains this length of material number. This change doesn’t represent any issues for a greenfield implementation and, in fact, paves the way for industry-specific content to be enabled within the SAP S/4HANA core release, such as for the automotive industry. In fact, the IS-Automotive extension is where the 40-character material number originates.

SAP provides migration tools to analyze the impact of this change in the DDIC; however, this is limited to the identification of customer tables containing this domain. This change represents a significant consideration for migration customers, as their custom code should be reviewed and assessed for impact, which could be a significant task.

Also in the realm of the product master, several fields in the MRP view won’t be used anymore in SAP S/4HANA (e.g., storage location MRP, quota arrangement usage [procurement data], etc.). There is also a new material type, SERV. In SAP S/4HANA, material type SERV is introduced for the product master for simplification purposes. Because not all fields and user departments are relevant for this type of material, in SAP S/4HANA, these fields are hidden to give it a more simplified and leaner look. Additional configuration for this material type is required.

SAP S/4HANA has simplified the subcontracting and sourcing logic. In SAP ERP, there are three different ways of planning parts for a subcontractor, as follows:

• Planning subcontracting demand together with internal demand in the make-to-stock planning section (SAP ERP 3.0 logic)
• Separating subcontracting demand and stock into single subcontracting planning sections (one section per subcontractor) and planning uncovered subcontracting demand together with internal demand in the make-to-stock planning section (SAP ERP 4.0 logic)
• Planning separately the demand of every subcontractor by means of subcontracting MRP areas (SAP ERP 4.5 logic)

In SAP S/4HANA, the 4.0 logic was removed while the 4.5 logic was simplified. Additionally, the following is now true:

• Default parameters are used if MRP area-specific material master records don’t exist.
• MRP areas for every subcontractor can be created.
• MRP area/supplier-specific material master data can still be created if required.

SAP S/4HANA offers a reduced set of sources of supply and a simplified sourcing logic. The following types of sources of supply are offered:

• Production versions: procurement type E (in-house production) or X (both procurement types)
• Purchasing info record: procurement type F (external procurement)
• Delivery schedules: procurement type F (external procurement)
• Purchasing contract: procurement type F (external procurement)

Following are some of the key simplifications in sourcing logic in SAP S/4HANA:

• Production versions are the only sources of supply for in-house production and are integrated into quota arrangements. In the traditional SAP ERP system, the source of supply for internal production was determined via a selection method in the material attributes of quantity, explosion data, and production version. A production version references a routing, and the routing is used to create production orders.
• In SAP S/4HANA, MRP only selects production versions that are neither Locked for Usage nor Locked for Automatic Sourcing, as opposed to Locked or Not Locked in SAP ERP. The new status Locked for Automatic Sourcing corresponds with the Relevant for Automatic Sourcing indicator in the purchasing info records. One production version can be defaulted for new planned orders and manually dispatched to proper lines/work centers.
• In SAP S/4HANA, you don’t have to create a source list entry for purchasing info records that are relevant for MRP. A new indicator in the purchasing info records Relevant for Automatic Sourcing can be set for records that are relevant for MRP.
• Source lists aren’t yet considered in the latest SAP S/4HANA releases, as a workaround quota arrangement can be used.
• You no longer need to set up material master attributes for consideration of quota arrangements for SAP ERP. In SAP S/4HANA, MRP will always consider quota arrangements.

Finally, with release 1610, PP/DS can now be accessed in SAP S/4HANA through manufacturing planning capabilities. This change will reduce integration efforts because integration with master data and work center resource isn’t needed anymore, thus more seamless master data and UI harmonization. Functionalities include the following:

• Use the new Create Optimal Orders for Shipment app to order multiple materials in one purchase order and to optimize order quantities to best use the means of transport.
• Plan critical products (e.g., long replenishment lead time).
• Optimize and plan the resource schedule by taking the resource and component availability into account.
• Cover product requirements in procurement proposals for in-house production or external procurement.
• Create executable production plans.
• Access the production scheduling board through a web-based graphical scheduling tool for PP/DS that allows access to some of the new functionalities in this list.

Figure 4.6 shows the traditional process in SAP ERP versus the new reinvented process in SAP S/4HANA.

Figure 4.6    Production Planning and Detailed Scheduling: Traditional SAP ERP vs. SAP S/4HANA

4.3.2    Supply Chain

In today’s world, a company has to meet three key demands: speed, individuality, and innovation. With the rise of new technologies, customer expectations have increased significantly. Customers have more specific product requirements and want the delivery of their orders as quickly as possible. In addition, with the heavy competition today, customers have a lower threshold and can switch at any moment to another supplier or to someone who hasn’t entered the market before.

Following are some of today’s key challenges for supply chains:

• Increasing customer requirements causes companies to produce products adapted to individual requirements. Classic inventory planning can’t keep up with the flexible accommodations or custom configurations that customers are expecting today.
• Lack of real-time reports on stock levels often leads to delivery delays and dissatisfied customers.
• Lack of transparency and real-time insights causes companies to struggle with data analysis.

In the following sections, we’ll take a look at two of the major changes SAP S/4HANA brings to the supply chain: the simplification of the Materials Management/Inventory Management (MM/IM) data model and the simplification of the inventory valuation data model. We’ll then discuss some of the innovations to the IM functionality in SAP S/4HANA and a few of the SAP Fiori apps available in this area.

Finally, we’ll conclude the section by discussing the embedded SAP Extended Warehouse Management (SAP EWM) functionality brought to SAP S/4HANA with release 1610.

Material Management/Inventory Management Data Model Simplification

In SAP ERP, material documents are stored in two document tables, MKPF and MSEG. Additionally, there are other tables that store aggregated actual stock quantity and material master attributes. On top of these, specific tables with aggregated actual stock quantity by stock type (e.g., sales order stock) also exist.

With SAP S/4HANA, material document data won’t be stored in tables MKPF and MSEG anymore. Instead, it will be stored in the new denormalized table MATDOC, which will contain the header and item data of a material document as well many other attributes. The tables for aggregated actual stock quantities won’t exist anymore; instead, actual stock quantity will be calculated on the fly from the new material document table MATDOC. As a result, the new data model will work on the database level in an INSERT mode without database locks.

Figure 4.7 shows the traditional data model and the new simplified data model in SAP S/4HANA.

The key benefit of the SAP S/4HANA data model change is a significant decrease of aggregates and history tables (24 tables), resulting in the following:

• Increased throughput due to fewer tables to be updated and thus fewer tables to be locked
• Better and faster reporting as most information comes from just one table MATDOC, and more flexibility as actual stock quantity data is calculated on the fly
• Flexible design for new stock types (no additional tables)

Figure 4.7    Inventory Management: Data Model Design

All aggregates tables will continue to exist in SAP S/4HANA. Through a redirect feature in SAP S/4HANA, any redundant table will be guided to the new table. Therefore, all customer coding will continue to work in SAP S/4HANA.

Inventory Valuation Data Model Simplification.

In SAP ERP, the inventory valuation tables contain transactional as well as master data attributes. With SAP S/4HANA, this will be simplified. The inventory valuation tables do still exist as DDIC definitions as well as database objects. However, they will only be used to store material master data attributes. The transactional fields will be retrieved from the SAP Material Ledger (ML), which is mandatory with SAP S/4HANA. As a result, those fields aren’t updated anymore in the original tables. The original tables will be updated less often, which will increase the system throughput.

SAP S/4HANA features scalable material valuation capabilities using only one SAP ML. That way, customers can use multiple currencies and valuation methods per different accounting laws such as generally accepted accounting principles (GAAP). In the traditional SAP ERP system, material valuation needs to occur on the IM level and the MM level.

Activation of the ML is mandatory with SAP S/4HANA, which enables improved and more flexible valuation methods in multiple currencies and parallel accounting standards. It also improves scalability of the business processes. In addition, the ML is a prerequisite for the use of actual costing.

With SAP S/4HANA, there is a simplification of the data model structure for inventory valuation. Data will now be stored mainly in the Universal Journal table ACDOCA.

Inventory Management

IM powered by SAP S/4HANA enables organizations to harmonize warehouse inventories and demand and supply planning, as well as use all data and analysis on a company-wide basis. With real-time processing of inventory postings and inventory values rather than overnight jobs, warehouse spaces can be reduced to a minimum and lead to a higher accuracy of inventory, increase in turnover, and reduced days of items on stock.

Additionally, IM can also take all production locations and external supply chains into account and can manage the changing demand for smaller lot sizes passing through entire logistics operations with all involved parties. Real-time information, including early error detection, creates precise where-used information per unit.

SAP S/4HANA allows real-time processing of inventory postings and visibility to warehouse inventory, resulting in the following business benefits:

• Improved on-time delivery
• Increased inventory turnover
• Reduced cost of inventory
• Single source of truth of inventory in one system
• Decreased stock levels due to increased transparency

The SAP Fiori offers three types of apps: transactional apps, analytical apps, and fact sheet apps.

Transactional apps allow you to execute specific tasks and transactional activities. Transactional apps that are currently available for IM allow you to do the following:

• Post goods receipts (GR) for purchase orders.
• Transfer stock from one storage location to another storage location and for changes to stock type.
• Manage stock by posting an initial GR or scrapping from stock.

Analytical apps are used to provide real-time insights and/or KPI information into specific parts of a process. Related to IM, an analytical app is available for material document overview and stock overview (for a single material). The analytical app provides the user an overview of inventory level and material postings at any point in time and on any device.

The SAP Fiori fact sheet apps allow users to quickly navigate to other related documents and provide links to follow-on processes. Fact sheets for IM are provided for the following:

• Goods receipt
• Goods issue
• Material

SAP EWM Embedded in SAP S/4HANA

Traditional SAP ERP Warehouse Management (WM) is available within SAP S/4HANA, and all existing business processes and functionalities will remain available. However, traditional WM isn’t the target architecture and in the long term will be replaced by SAP EWM. Release 1511 already provided integration for a decentralized SAP EWM deployment. As part of release 1610, one of the key innovations is SAP EWM embedded in SAP S/4HANA, which provides state-of-the-art warehousing capabilities within one system. With this functionality, SAP offers an additional deployment option for its customers to have SAP EWM deployed within the core of SAP S/4HANA.

Figure 4.8 shows the available options for deployment. SAP ERP WM is already available as part of SAP S/4HANA. With release 1511, standard integration to decentralized SAP EWM and SAP ERP WM is offered. As stated previously, SAP EWM embedded in SAP S/4HANA is included in release 1610.

Figure 4.8    Warehouse Management Deployment Options in SAP S/4HANA

In the long term, SAP will continue to support and invest only in SAP EWM (SAP EWM embedded in SAP S/4HANA and decentralized SAP EWM), and a common core of functionalities within EWM will evolve over time for both options. Decentralized SAP EWM, either integrated to SAP S/4HANA or SAP ERP, will remain a valid deployment option on the longer term due to various business reasons for customers, such as the following:

• Risk mitigation
• Regional SAP EWM systems
• Multiple SAP ERP connections (e.g., some logistic service provider scenarios, where multiple SAP ERP systems needs to be connected)

SAP EWM embedded in SAP S/4HANA will contain the scope of SAP EWM 9.4, and both deployment options will have an almost identical common core, covering the same business scenarios and processes with very few minor exceptions (e.g., multiple SAP ERP connections aren’t possible in SAP EWM embedded in SAP S/4HANA). The technical integration with SAP ERP will be different for SAP EWM embedded in SAP S/4HANA and decentralized SAP EWM; however, the same integration will be used with other systems (e.g., SAP Global Trade Services [GTS] or SAP Transportation Management [SAP TM]). SAP EWM embedded in SAP S/4HANA will use the scope of SAP EWM 9.4 with a main focus on simplification and reduction of redundant objects and data.

With SAP EWM embedded in SAP S/4HANA, SAP provides the latest warehousing capabilities that are also in SAP S/4HANA. Following are the key benefits of this change:

• One single system
• Reduction of data redundancy
• Simplification

The detailed benefits of each area will be further described in the following subsections.

One System

First, with SAP EWM embedded in SAP S/4HANA, the integration with SAP S/4HANA core processes is simplified. Core interfaces are no longer required for master data objects, resulting in a reduction of data replication, which offers the following benefits:

• Reduced database footprint
• Reduced effort for monitoring and data alignment, thus less total cost of ownership (TCO)
• Simplification of system and data setup

Master data objects and actual data, for example, accounting objects and material values, are all within one system, allowing a direct read of data, increasing system throughput, and reducing system complexity. In the decentralized SAP EWM version, several almost identical Customizing tables exist between the SAP ERP system and SAP EWM. In SAP EWM embedded in SAP S/4HANA, these redundant tables are reduced, resulting in a significant reduction of Customizing in SAP EWM.

Additionally, with SAP EWM embedded in SAP S/4HANA, the SAP Fiori launchpad is enabled, providing warehouse users with a similar UX as the SAP Fiori launchpad as the single point of access for all apps.

We’ll now describe the main details of these changes for each object:

• Business partners
  In the classic version of SAP EWM, core interfaces are needed to transfer business partners (customers/vendors) to SAP EWM, and these will be mapped to business partner objects in SAP EWM. SAP EWM uses a different numbering, and due to differences in data objects, different address check routines need to be set up in SAP ERP and in SAP EWM. With SAP EWM embedded in SAP S/4HANA, there will be only be one business object (i.e., business partner), which will be used for both customers and vendors across different LoB in SAP S/4HANA.
• Material master
  Like business partners, in SAP EWM embedded in SAP S/4HANA, there’s no need to transfer master data from the SAP ERP system to SAP EWM; instead, all the relevant data (e.g., various SAP APO tables) will be read through Core Data Services (CDS) views and used for SAP EWM. SAP EWM embedded in SAP S/4HANA also provides the additional benefit of support for the 40-digit material master.
• Batch master
  In SAP EWM embedded in SAP S/4HANA, all relevant batch information will be available immediately for usage within SAP EWM. This offers users various benefits such as the ability to manage batches with shelf life even without batch classifications and the ability to manage batches based on plant-specific attributes, which is a limitation in SAP EWM 9.4.

Figure 4.9 shows the traditional scenario and the new SAP EWM embedded in SAP S/4HANA scenario for the three data objects.

Figure 4.9    Classic SAP EWM vs. SAP EWM Embedded in SAP S/4HANA

Next to the preceding data objects, the same principle applies for the following data objects:

• Product valuation data and accounting data
  Standard table MBEW is used to store material valuation data. Specific information from this table in the traditional scenario is transferred through remote function calls (RFC) into two tables in SAP EWM to store the material price and split valuation. In SAP EWM embedded in SAP S/4HANA all material values can be read directly in SAP S/4HANA from the main table MBEW.
  In addition, only relevant accounting objects will be replicated in SAP EWM through RFC; therefore, not all accounting-related information is available in SAP EWM. With SAP EWM embedded in SAP S/4HANA, all accounting documents will be immediately available and can be accessed directly. There is no longer any need to replicate accounting objects.
• Project stock
  With SAP EWM embedded in SAP S/4HANA, the existing table /SCWM/ERP_PSP with the mapping and conversion routine will be redundant because you can access standard table PRPS directly.
• Dangerous goods/hazardous substance and phrases
  No data replication through Application Linking and Enabling (ALE) is required. With SAP EWM embedded in SAP S/4HANA, you have direct access to all standard tables.

With SAP EWM embedded in SAP S/4HANA, several Customizing tables have been eliminated due to similar Customizing in SAP ERP. An example is table THUTYPE in SAP ERP for the handling unit type configuration and its equivalent in SAP EWM, table /SCWM/THUTYPE, with the exact same configuration. As a result of this, 12 different tables have been removed in SAP EWM, eliminating double data maintenance and risk for data mismatch.

Reduction of Data Redundancy

The following changes have been made to optimize processes and reduce data redundancy:

• Expected goods receipt (EGR) will no longer be used
  With decentralized SAP EWM, EGR can be used to copy data from a purchase order or production order to the inbound delivery. Data replication occurs through a report in SAP EWM. With SAP EWM embedded in SAP S/4HANA, EGR no longer exists and isn’t needed anymore because the inbound delivery can be created directly from the purchase order production order with the most up-to-date information.
  Figure 4.10 shows the decentralized SAP EWM option versus the new SAP EWM embedded in SAP S/4HANA version.
  

  Figure 4.10    Expected Goods Receipt in Classic SAP EWM vs. SAP EWM Embedded in SAP S/4HANA

• Delivery request (notifications) and posting change request document eliminated
  The delivery request (notification) document can be used for inbound and outbound processes to save and transfer all relevant information from a reference document to the delivery document. With decentralized SAP EWM, the delivery request (notification) document is skipped and instead the delivery document in SAP EWM is created directly from either the inbound or outbound delivery document in SAP S/4HANA. As a result of this, any functionalities in standard SAP EWM that are linked to the delivery request or notification document will no longer be available in SAP EWM embedded in SAP S/4HANA.
  The same applies for the posting change request document. In SAP EWM embedded in SAP S/4HANA, the posting change document is created directly from the outbound delivery document.
  Figure 4.11 shows the current process and the new option for both inbound and outbound processes.
  

  Figure 4.11    Delivery Request (Notifications) and Posting Change Request Documents in Classic SAP EWM vs. SAP EWM Embedded in SAP S/4HANA

Elimination of the Quality Inspection Engine

The elimination of quality inspection engine is the result of reduction of data redundancy is an important new benefit. The Quality Inspection Engine had been used as a lean solution to support the quality inspection process and offered functionalities that provided flexibility for configuration inspection rules. In the classic SAP EWM scenario, inspection details are set up in the material master, and the inspection rule details are set up to determine the inspection relevance of a document.

With SAP EWM embedded in SAP S/4HANA, no inspection setup is required in the material master; all details are captured in SAP EWM embedded in SAP S/4HANA.

Due to the elimination of the Quality Inspection Engine, the process will be optimized significantly. In classic SAP EWM, the inspection process is as follows:

1. In SAP EWM, a GR of an inbound delivery is waiting to be posted.

   Note

   The trigger can also be at delivery creation or in yard status.

2. Based on the inspection rules setup, the Quality Inspection Engine will determine whether it’s relevant for the inspection process.
3. If yes, an inspection document is created and saved.
4. After release of the inspection document, the Quality Inspection Engine informs the SAP ERP system of the creation of an inspection document.
5. An inspection lot is created based on the inspection setup data in SAP ERP. The inspection document in the Quality Inspection Engine and inbound delivery is updated accordingly.
6. The inspection is executed and details are recorded in SAP ERP.
7. The usage decision is also recorded in SAP ERP.
8. SAP ERP transfers the relevant inspection details to the Quality Inspection Engine, and the inspection document is updated.
9. Follow-up actions in SAP EWM are executed accordingly.

With SAP EWM embedded in SAP S/4HANA, the inspection process is as follows:

1. In SAP EWM, a GR of an inbound delivery is waiting to be posted.
2. Based on the inspection rules setup, in Quality Management (QM) in SAP S/4HANA, the system determines whether it’s relevant for the inspection process.
3. If yes, the system determines the inspection setup data and creates an inspection lot.
4. The inspection is executed and details are recorded in SAP ERP.
5. The inspection details are recorded.
6. The usage decision is recorded.
7. In SAP EWM, follow-up actions are executed accordingly.

In the first release of SAP EWM embedded in SAP S/4HANA, the quality inspection process comes with a basic scope. Several processes have still not been included yet in SAP S/4HANA release 1610, and other functionalities are included in QM in SAP S/4HANA.

Following are some of the processes that aren’t included yet in the first release:

• Several inspection object types, such as preliminary inspection inbound delivery, counting, and preliminary inspection handling unit
• Partial inspection lot decisions
• Presampling in production
• Returns inspection

Following are the processes that are included in the core QM functionalities instead:

• Physical sample-drawing procedure, quality level, or dynamic modification
• Inspection rule features, document attachment, and findings

Simplification

As a result of release 1610, SAP EWM embedded in SAP S/4HANA offers massive simplifications through reduction of redundant data and through leaner processes and fewer business documents. Additionally, specific functionalities within the classic SAP EWM have been disabled or replaced to meet SAP S/4HANA guidelines and vision. The following functionalities have been disabled/replaced:

• SAP Transportation Management (SAP TM), also known as freight order management (FOM)
  The decision to not include FOM in SAP EWM embedded in SAP S/4HANA is mainly because SAP TM offers enhanced functionalities and will be moving into SAP S/4HANA in 2017. SAP TM is also offered as a sidecar solution.
• Labor demand planning
  Labor demand planning isn’t offered in the first releases of SAP S/4HANA because reengineering of the SAP S/4HANA core functionalities are required to meet SAP S/4HANA guidelines. As a result, labor demand planning will be scheduled for a later release of SAP S/4HANA.
• Supply chain routing (SAP Supply Chain Management [SAP SCM] routes)
  SAP doesn’t want to offer routes in SAP ERP, SAP TM, and SAP SCM in the long run; therefore, the SAP SCM routes are disabled, and only SAP ERP routes are used.
• Microsoft Silverlight UI replaced by SAPUI5 technology
  The official end of support date for Microsoft Silverlight is October 5, 2021. Microsoft Silverlight will be replaced by SAPUI5 technology for the following four use cases:
  • Creating appointments
  • Monitoring appointments
  • Planning staging areas
  • Maintaining capacity

Due to the mentioned massive simplifications of SAP EWM embedded in SAP S/4HANA, the effort for basic setup of SAP EWM has reduced significantly and now only requires a third of the setup required in the SAP EWM/SAP ERP integration guide.

4.3.3    Sourcing and Procurement

One of the key challenges within sourcing and procurement today is the technical complexity of the landscape related to the previous solutions introduced for procurement, such as SAP Ariba, SAP SRM, and SAP Supplier Lifecycle Management. Different systems are providing operational, tactical, and strategic activities, resulting in many challenges in aligning data across systems and supporting the data.

With the introduction of SAP S/4HANA Enterprise Management, some of the traditional challenges are being addressed by the following:

• Leveraging the SAP Ariba Network to overcome the complexity of supply chains and to provide a system that functions as a single point of interaction.
• Enable self-service purchasing using SAP Ariba
• Integrating SAP Supplier Lifecycle Management functions with collaboration tools for a more efficient and tighter collaboration with business partners to reduce time to market, increase flexibility in the context of volatile demands, and increase supply chain visibility
• Introducing a simplified process using one data object for purchasing requirements, which helps to shorten process cycle times
• Using built-in transactional or strategic analytics, for example, through improved contract monitoring or supplier evaluation reporting

SAP S/4HANA provides a streamlined view of all procure-to-pay processes and gives you the visibility and insights you need to make strategic decisions or to optimize the procure-to-pay processes. With the new system capabilities combining OLAP with OLTP on the same SAP Fiori screen, drilling down into the lowest level of details with real-time exposure gives performance providers a compelling value proposition to exploit. In the following subsections, we’ll discuss the most important new functionalities introduced with SAP S/4HANA Enterprise Management to the sourcing and procurement space.

Supplier Lifecycle and Performance Management

With the initial release of SAP S/4HANA Enterprise Management, SAP has made the move to incorporate the following three core business functions (excluding sell-side components) from the SAP Supplier Lifecycle Management solution within the latest releases of SAP S/4HANA:

• Supplier portfolio management
  Strategic procurement activities such as supplier categorization are now enabled through the portfolio management business function. Specifically, strategic buyers can classify and manage their supply base within purchasing categories. The integration components for Dunn & Bradstreet (D&B) integration are also included in the SAP S/4HANA core delivery.
  With SAP S/4HANA, suppliers can be classified based on various criteria such as spend, strategic importance, risk, and so on. Companies can define internal activities to track supplier performance and view and analyze supplier information. This gives companies transparency on their supplier portfolio based on these classifications and reduces risks by identifying low-performing suppliers.
• Supplier evaluation
  Supplier evaluation and performance management processes can be initiated and managed across the supplier base by strategic buyers.
  In the traditional system, no real-time data was available due to the volume of the data, causing a lack of transparency and decision support. In SAP S/4HANA, the full question library and survey management functionality is available for use, so business user input on supplier performance can be evaluated and included as input for supplier management activities with the additional improvements in SAP S/4HANA:
  • Questionnaires defined directly in SAP S/4HANA
  • Monitor and search flexibility for evaluation responses and ability to navigate to response details
  • Ability to create evaluation requests and distribute to appraisers
• Collaboration and activity management (integration with SAP Jam)
  Increased collaboration functions are enabled for the Purchasing users to communicate and collaborate with internal parties through activity integration with SAP Jam. The sell-side components and functionality aren’t yet available in the initial release, so relevant sell-side integration with suppliers isn’t yet possible.

Additionally, several new SAP Fiori apps have been developed for use in the SAP Supplier Lifecycle Management functions:

• Task processing for management of internal collaboration activities
• Completion of supplier evaluation surveys by internal users
• Supplier activity management
• Supplier lists and portfolio statuses
• Supplier appraisal
• Supplier portfolio and category management
• Purchasing categories created, managed, and assigned to the supply base
• Management of supplier evaluation processes by the strategic buyer, including evaluation of results

The GUI transactions for vendor master are made obsolete in line with the change in data model in SAP S/4HANA. The business partner is now the primary business objects for both vendors’ and customers’ master data, so the business partner transactions will be used for creating or maintaining the business partner.

Sourcing and Contract Management

The processes from a sourcing and contract management perspective that are delivered within the first releases of SAP S/4HANA are streamlined and mostly based on the standard SAP ERP transactional processes, facilitated through the same SAP Fiori apps that have been available since the first release of the SAP Fiori principle transactional apps.

The processes and transactions available within the SAP S/4HANA core components related to sourcing processes are limited to the standard request for quotation (RFQ) and quotation transactions from SAP ERP.

The contract management functions that are present within the SAP S/4HANA initial releases are the same as those contained within the SAP Business Suite powered by SAP HANA enabled by the SAP Fiori principle apps.

There are three main SAP Fiori apps that enable operational contract management:

• Purchase Contract
• Contract Line Item
• Manage Purchase Contracts

The contract management processes are facilitated through these SAP Fiori apps, which deliver a display-only view of the standard SAP ERP data structures for contracts. The Manage Purchase Contracts app delivers an analytical view of contract usage, status, and validity.

A set of SAP Fiori apps for establishing and managing purchasing info records is used within the SAP S/4HANA core component, allowing the overview of the various sources of supply for a particular material across plants and purchasing organizations. The SAP Fiori app Manage Sources of Supply gives a list display of the purchasing info record and links to the SAP Fiori fact sheet apps for displaying purchasing info records.

For complex source-to-contract functions, SAP Ariba is recommended.

Operational Procurement

There are a number of key changes to the operational procurement processes that will be employed within the SAP S/4HANA Enterprise Management core in the following areas: self-service procurement, collaboration, UI changes, and purchase order output.

In the traditional SAP ERP system, there is no real-time insights for the operational purchaser to perform his day-to-day tasks. Decisions are made based on outdated data, and there is no real-time KPI reporting, which makes improving the service level challenging.

With SAP S/4HANA, users can get real-time insights and KPIs immediately. The operational purchaser can do his job based on the most up-to-date information, and at any point in time, users can run real-time KPI reports to get insight on their performance. SAP S/4HANA offers the following real-time KPI reports:

• Purchasing and invoicing spend
• Contracts
• Purchase order average delivery time
• Supplier information

SAP S/4HANA provides the operational purchaser a holistic view of activities within operational procurement.

Real-time analytics facilitates the purchaser to directly react to spend exceptions or overdue purchase order items.

Self-service requisitioning is a new capability in SAP S/4HANA. The self-service procurement processes have been simplified by consolidating the shopping cart and purchase requisition objects into a single structure based on the purchase requisition. The basic process of requisition, approval, purchase order creation, and GR is facilitated by the new UI changes described next. With SAP S/4HANA, customers have an integrated catalogue functionality within the purchasing requisition SAP Fiori apps that is based on the Enterprise Search functionality. The SAP ERP self-service procurement business function is made obsolete with the SAP S/4HANA core deployment.

In the traditional system, a user has to go through multiple screens to find and assign sources to purchase requisitions. The creation of purchase orders is often done through a batch input report. In SAP S/4HANA, all tasks to search, find, assign a source of supply, and create a purchase order can be done in one screen. The system automatically proposes the available sources of supply to the purchaser. This significantly increases the efficiency and the speed for the purchaser to assign supplies to the purchase requisitions. Additionally, a new SAP Fiori interface will be introduced to convert purchase requisitions to purchase orders. Transaction ME57 is still available through the GUI.

The creation of manual purchase orders in SAP S/4HANA is supported by several capabilities to improve efficiency:

• Users are allowed to select previous purchase orders or sources such as a template, minimizing errors and improving efficiency.
• Several fields are prefilled based on the selected supplier or material type.
• A draft purchase order is created automatically when sessions are lost and retrieved automatically when logged on again.

A number of additional SAP Fiori apps are delivered to manage this streamlined procurement process:

• Create Purchase Requisition
• My Purchase Requisitions
• Confirm Goods Receipts

The SAP Ariba Network is currently only available for use with SAP ERP 6.0 and forms a core part of the SAP S/4HANA release. SAP Ariba integration can be done via three distinct methods (see Figure 4.12):

• Direct integration of SAP S/4HANA through standard output management
• Through SAP Process Orchestration (SAP PO) (on-premise)
• SAP HANA Cloud Integration (cloud deployment)
  

  Figure 4.12    SAP Ariba and SAP S/4HANA

With SAP S/4HANA, a new output management approach is in place. By design, the new output management includes cloud qualities such as extensibility enablement, multitenancy enablement, and modification-free configuration. Therefore, the complete configuration differs from the configuration that is used when output management is based on table NAST. The new configuration is based on the Business Rule Framework plus (BRF+), which is accessible for customers. In SAP S/4HANA, the target architecture is based on Adobe Document Server and Adobe Forms only. For the form determination rules (along with other output parameters), the BRF+ functionality is used (in this sense, in combination with the message determination). Output management based on table NAST is no longer supported for new documents in purchase orders. Purchase orders that are migrated from legacy systems and for which table NAST based output has been determined can be processed with this technology. For all new purchase orders, the new output management is used. Therefore, in Procurement for purchase orders, there is a need to adapt the configuration settings related to output management.

Organizations face a number of challenges within Accounts Payable (AP) processes that should be addressed with systemized solutions in the future:

• Slow invoice processing, leading to late payment and endangering supplier relations
• Lack of visibility into invoice and payment data
• Slow invoice/payment approvals
• High percentage of exceptions, which require manual handling

SAP S/4HANA seeks in the future to address all of these issues by simplifying processes for collecting, registering, and checking invoices; verifying them against preconfigured business rules; and handling exceptions with SAP solutions for invoice and payables management. However, this is currently an area where little is delivered within the SAP S/4HANA core that can be considered best practices. The current processes focus around the standard Logistics Invoice Verification (LIV) processes, in conjunction with SAP Fiori-enabled invoice approvals. The SAP road map will start to incorporate the open text Vendor Invoice Management (VIM) functionality, but it’s currently unclear to what extent; that is, whether this will include optical character recognition (OCR) and exception handling, and how this will integrate with invoice handling in the SAP Ariba Network.

Additionally, there is a change of authorization concept for the supplier invoice. Before when posting invoices for a specific company code, the user was checked to ensure he was authorized for any plant. Now, the system checks in general the authorization for the company code. If an item is changed with a purchase order reference, the specific plant is checked.

Business Partner

In line with the change in the data model, the business partner is now the primary business object, meaning the business partner transactions are now used to complete the creation or maintenance of the business partner. This will allow a holistic view of the business partner for all applications. However, in terms of managing the configuration, certain constraints exist when dealing with the business partner object; for example, the customer vendor integration (CVI) mapping and business partner number ranges must be considered across multiple application areas.

The traditional SAP ERP system has redundant object models for master data. With SAP S/4HANA, the business partner approach is now capable of centrally managing master data for business partners, customers, and vendors. During the course of the business relationship, the business partner can assume other business partner roles, and, in this case, with SAP S/4HANA, the general data, which is independent of a business partner’s function or of application-specific extension, need not be created again. This prevents data from being created and stored redundantly.

As a result, the standard IDoc type for vendor master integration CREMAS is discontinued and not available within an SAP S/4HANA system. Therefore, the replacement technology for business partner replication via service-orientated architecture (SOA) must be used.

4.3.4    Sales

The role of the internal sales representative has become more and more challenging. Today, customers are more demanding than ever and are expecting a more personal approach to service. Additionally, they want the most up-to-date information related to their orders and delivery time lines at any point in time. Expecting sales representatives to share information with them, listen to their feedback, and involve them in the order fulfillment process creates many challenges for the sales representative:

• Lack of real-time data
  Real-time data is necessary for managers to make more efficient order fulfillment decisions.
• Advanced analytics
  Lack of advanced analytics hinders the creation of a holistic view of the supply chain processes.
• Integration
  Better integration of the various components of the supply chain is necessary to identify risks and issues more quickly (e.g., stock shortages).
• Collaboration with customers
  Enterprises need to collaborate with their customers to improve and personalize the customer experience to drive growth.

SAP S/4HANA can support today’s key challenges in sales. Its capabilities offer an internal sales representative a comprehensive overview of the current order fulfillment situation. Real-time data and on-the-fly analytics can be used for troubleshooting and decision-making purposes.

Sales Order Fulfillment Cockpit

The SAP Fiori UX provides you with the sales order fulfillment cockpit. In the traditional SAP ERP system, the internal sales rep has to check multiple reports to get a holistic view of all related processes. Multiple issues in one order can’t be detected easily in one step, creating a higher risk of undetected exceptions. Problem-related communication and decisions can’t be tracked in the system, and reports need to be run multiple times.

SAP S/4HANA allows the user to monitor, manage, and collaborate on sales orders due for shipping and invoicing, allowing customers and company agreements to be easily fulfilled on time and accurately. By using the SAP S/4HANA sales order fulfillment cockpit facilitated by the SAP Fiori frontend UI, the sales representative can filter sales orders with issues and get insight into the process execution. He can visualize issues over the entire end-to-end sales process in a single dashboard.

The sales order fulfillment cockpit in SAP S/4HANA offers the following business benefits:

• Enables visibility into order fulfillment
• Provides the internal sales representative the ability to focus on critical issues/exceptional cases
• Combines analytical insights with operational actions to allow internal sales representative to run actions directly and track the progress at any point in time
• Improves collaboration with internal and external contacts to resolve issues

With the sales order fulfillment cockpit, companies are now able to reduce their order-to-cash cycle time, increase their service level, and reduce outstanding payments.

Let’s examine some changes to peripheral solutions that have occurred with the introduction of SAP S/4HANA:

• SAP Global Trade Services (GTS) replaces SD foreign trade/customs
  The foreign trade/customs functionality won’t be available anymore in SAP S/4HANA because GTS is the successor of this requirement. SAP GTS (previously provided as an external service installed as an additional instance) can be natively integrated with SAP S/4HANA. Letter of credit, legal control, export control, and preference management in foreign trade/customs aren’t available anymore in the material master; instead, the SAP GTS-based functionalities can be used. GTS offers additional functionalities for import management and export management. For intrastate, a customer can leverage the functionality within SAP S/4HANA.
  Prior to conversion, careful analysis of all currently used foreign trade processes is needed. If the customer uses a third-party foreign trade system, it’s possible that an adjustment is needed by the respective third-party foreign trade system, or SAP GTS can be connected to SAP S/4HANA to run the respective foreign trade processes.
• SAP Credit Management replaces SD credit management
  With SAP S/4HANA, SAP Credit Management (FIN-FSCM-CR) will be used. SAP provides tools to migrate to SAP Credit Management, which contains several elements:
  • Configuration data
  • Master data
  • Credit exposure data
  • Credit decision data
• Settlement Management replaces SD rebates
  SD rebates will be replaced by Settlement Management, which means that all existing rebate agreements can only be processed up until the end of the validity date and after that closed by a final agreement. SAP CRM’s Trade Promotion Management (TPM) customers who want to integrate their existing SAP CRM TPM scenario with SAP S/4HANA still have to use SD rebate processing, which has been optimized for the database footprint.
• SAP Revenue Accounting and Reporting replaces SD revenue recognition
  SD revenue recognition isn’t available in SAP S/4HANA. Instead, SAP S/4HANA functionality should be used that supports the new revenue accounting standard according to International Financial Reporting Standard 15 (IFRS 15) and adapted by local GAAPs.

In SAP S/4HANA, various existing status tables have been eliminated, and all fields under these tables have been moved to the corresponding header and item tables for sales documents, deliveries, and billing documents. The document flow table has been simplified as well. Redundant document and rebate index tables have also been eliminated (see Figure 4.13).

Figure 4.13    SD Data Model Simplification

With the changes in the data model, SAP S/4HANA offers the following key benefits:

• Lower TCO due to data model simplification
• Reduced memory footprint (e.g., simplified document flow, elimination of index tables, fewer aggregates)
• Increased performance of SAP HANA queries and code pushdown (one SELECT statement instead of two SELECT statements, easier join for header/items, including status and business data)
• Increased robustness of rebate processing (no redundancies due to aggregates)
• Faster business outcomes with reduced operational cost
• Increased competitiveness with integrated, fast, and flexible business processes
• Higher employee productivity with focus on value-added tasks

Advanced Available-to-Promise

Release 1610 has provided additional functionalities related to ATP:

• Mass functionality for availability check for sales, planned orders, and production orders.
• New release for delivery app, which shows the order confirmation status of sales order requirements. This app offers the ability to prioritize sales orders, assignment of stock and manipulation of already-confirmed order quantities in case of confirmation deficit.
• New SAP Fiori UX for back order processing setup, with a new concept to allow setup based on predefined confirmation strategies. Additionally, filtering and prioritization can be used to select and sort requirements for each confirmation strategy.
• New SAP Fiori app for back order processing to display the results of back order processing runs. Grouping and aggregation capabilities to allow collective allocations and easy identification of issues.
• Additionally, several new SAP Fiori apps have been introduced with release 1610 to allow better monitoring and a more comprehensive overview of order-to-cash processes, including the following:
  • Order to Cash Performance Monitor
  • Sales Order Full Fulfillment Monitor
  • Sales Contract Fulfillment Rates
  • Quotation Conversion Rates