The advent of SAP S/4HANA in the mid-2010s marked a significant transformation in SAP’s logistics capabilities for customers.
This blog post will explore the differences between logistics in SAP S/4HANA and the SAP ERP solution.
Logistics in SAP ERP
SAP ERP served as SAP’s primary logistics platform until the launch of SAP S/4HANA. It concentrated on three main areas: procurement and logistics execution, product development and manufacturing, and sales and service.
In procurement and logistics execution, SAP ERP aimed to reduce purchasing costs, provide comprehensive inventory management, and ensure efficient warehouse operations.
SAP ERP aimed to enhance production processes for product development and manufacturing, including product planning, master production scheduling, and material requirements planning. It also supported manufacturing techniques, plant maintenance, and quality management.
In sales and service, SAP ERP managed the entire sales order process from order to delivery, including transportation management, and supported customer service functions such as repairs and warranties.
Logistics in SAP S/4HANA
SAP S/4HANA encompasses four key areas related to logistics processes: Sourcing and Procurement, Manufacturing, Supply Chain, and Asset Management. Let’s briefly examine each one.
In SAP S/4HANA’s Sourcing and Procurement domain, users are supported in material acquisition processes such as extended procurement, operational purchasing, and contract and supplier management. Peripheral solutions like SAP Ariba and SAP Fieldglass are integrated within this domain.
Regarding Manufacturing, SAP aids users in product creation through responsive manufacturing, encompassing production operations, scheduling, delivery planning, and quality management. Supporting tools like SAP Manufacturing Integration and Intelligence (SAP MII), quality issue management, and production planning and control are included.
Within the Supply Chain segment, SAP facilitates overall business planning, product storage, and dispatch upon purchase. This involves production planning, batch traceability, warehousing, and inventory management. Solutions such as SAP Integrated Business Planning (SAP IBP), embedded versions of SAP Extended Warehouse Management, and SAP Transportation Management are integrated.
In Asset Management, SAP supports users in maintaining in-house items, focusing on maintenance management. Tools like SAP Enterprise Asset Management (SAP EAM) and EHS monitoring and reporting are incorporated within this segment.
How SAP S/4HANA Logistics Differs from SAP ERP Logistics
The most notable alteration to logistics within the new suite was the discontinuation of the SAP ERP module framework and the introduction of SAP S/4HANA lines of business. In the previous suite, users commonly utilized modules like Materials Management, Warehouse Management, and Plant Maintenance. While these modules no longer exist in their original form, all logistics functionalities are still available within the new suite, now organized into four logistics lines of business. SAP deliberately made this change to streamline functionality and better group similar processes.
Additionally, at the core of the SAP S/4HANA logistics solution are the enhancements in processes and reporting facilitated by SAP HANA’s in-memory architecture. According to SAP, reporting times in SAP S/4HANA are 1800 times faster than in SAP ERP. Various reports, such as Resource Scheduling for Maintenance Planners and the Maintenance Scheduling Board, can be executed using SAP Fiori applications designed with the end user in mind. Moreover, new features like predictive maintenance and predictive MRP introduce intelligent technologies to SAP users, and SAP S/4HANA is designed to be compatible with Industry 4.0 standards.
SAP S/4HANA Logistics Value Maps
As outlined by SAP in their value maps, transitioning to SAP S/4HANA for logistics has numerous advantages, which we will delve into in the subsequent sections.
1. Streamlined Procure-to-Pay Process:
The streamlined procure-to-pay value map facilitates more efficient management of the procurement function by harnessing the capabilities of the SAP S/4HANA central system and role-based functionalities. The functionalities encompassed in this value map furnish businesses with valuable insights to make informed procurement decisions.
This value map comprises operational purchasing, collaborative sourcing and contract management, Inventory and basic warehouse management, invoice and payable management, supplier management, and procurement analytics. Let’s explore each component in more detail.
1. Operational purchasing comprises several functions:
Self-service requisitioning: Allows end-users to procure items using catalogue pricing and approved vendors.
Requirements processing: Involves automated and manual requisitioning, including the approvals process.
Purchase order processing: Simplifies buyer activities through enhanced purchase order processing tools.
2. Purchase order collaboration: Facilitates communication of procurement activities with vendors.
Service purchasing and entry: Enhances automation in requisition and approval processes for service purchasing.
3. Collaborative sourcing and contract management encompasses:
Source assignment: Automates source assignment tasks and operational sourcing tasks.
4. Operational contract management: Manages contract operations to maximize the value of existing contracts.
5. Inventory and basic warehouse management includes:
Goods issue: Manages outbound warehouse processes to align with demand and minimize customer disruption.
Goods receipt: Handles inbound processes with systemic background processing.
Basic warehouse management: Streamlines warehouse operations to facilitate material flow.
Basic shipping: Automates shipping processes.
6. Invoice and payables management involves:
Invoice processing: Manages the invoice process from receipt through reconciliation.
Accounts payable: Handles payable data received from vendors.
Invoice collaboration: Automates invoice communications with vendors.
7. Supplier management includes:
Classification and segmentation: Provides visibility into vendor categories and expenditure types.
Supplier evaluation: Manages vendor performance.
8. Procurement analytics encompasses:
Spend visibility: Offers real-time monitoring of vendor spending with a focus on savings opportunities.
Real-time reporting and monitoring: Provides buyer reporting and tracking across all purchasing elements.
2. Accelerated Plan to Product
The accelerated plan-to-product value map encompasses all functionality from product design to production assembly, supporting all aspects of the product lifecycle.
This value map includes:
Project control and product development, which involves:
1.Project financials control: Management of production spending by comparing planned versus actual costs.
2.Project logistics control: Management of project logistics, including resources and materials.
Simplified product introduction processes under the Product development foundation.
Production engineering, which includes:
1. Production bill of material (BOM) management: Processes and integrations between production engineering and other integrated departments.
2. Recipe/routing management: Processes for product creation.
3. Inspection planning: Processes for ensuring quality in the production process.
Production planning, incorporating:
- Material requirements planning (MRP): Processes for planners to monitor production and material production timing.
Integration of production dates and customer order commitments through Basic order promising/available-to-promise (ATP).
Production operations, encompassing:
- Production control: Management of production operations, such as releasing production orders.
- Basic production execution: Management of in-progress production operations.
Optimizing subcontracting processes, including planning, executing, and monitoring subcontracting operations under Basic subcontracting.
Management of external production operations under Basic external processing.
Controlling repetitive manufacturing processes, including production schedules, through Repetitive manufacturing.
Management of materials staging by leveraging lean principles in Kanban.
Integration of JIT lean principles into the manufacturing process with Just-in-time (JIT) outbound processing.
Following JIT inbound processes to streamline production operations in alignment with customer demand under JIT inbound processing.
- Quality management, including:
Integrate quality management into the new product development process with quality engineering.
Integrate quality management processes throughout manufacturing, shipping, and procurement with quality inspection.
Visibility in quality reporting and analytics for quality improvement.
- Maintenance management, comprising:
Planning and management of maintenance activities across supply chain operations with Maintenance planning and scheduling.
Execution of maintenance operations under Maintenance execution.
3. Optimized Order-to-Cash
The optimized order-to-cash value map facilitates a streamlined process from quote management to customer delivery and payment, offering insights into real-time customer requirements and dashboarding for faster response times to customer demands and more accurate information.
This value map comprises order and contract management and receivables processing, which include:
Order and contract management functions:
1. Sales master data management: Ensures streamlined sales master data across the organization.
2. Sales contract management: Focuses on managing sales contracts by comparing planned versus actual agreements.
Sales order management and processing: Integrates sales order management from quote to revenue recognition.
3. Billing and invoicing: Simplifies billing processes.
Claims, returns, and refund management: Streamlines complaints and returns processing.
Sales monitoring and analytics: Centralizes sales information for historical and predictive analytics.
4. Receivables processing function:
5. Accounts receivable: Manages accounts receivable data by leveraging automation for all customers.
4. Enhanced Request to Service
The enhanced request-to-service value map is tailored to address aftermarket sales and service business processes, providing functionality for managing installed bases, aftermarket contracts, and internal service management processes.
This value map encompasses service master data management, service management, service parts management, and service agreement management, which include:
1. Service master data management functions: Technical assets, structures, and history: Collection and management of technical master data.
2. Service task list and catalogues: Aggregate similar tasks to expedite service processing.
3. Service/maintenance plan and event scheduling: Manage and plan recurring service tasks.
- Service management functions:
1. Service initiation: Assessment of service requests and determination of service relevance.
2. Service planning and scheduling: Management and scheduling of service activities.
3. Service execution and delivery: Administration of service tasks throughout the entire service process.
- Service fulfilment: Cost management throughout the service lifecycle.
Service billing and settlement: Generation of service billing.
Claims, returns, and refund management: Management of complaint lifecycles and integration into service processes.
- Service parts management functions:
Service parts warehousing: Optimized warehousing tailored for service parts.
Service parts fulfilment: Improved service parts management from planning through customer service.
- Service agreement management functions:
Operational contract management: Optimization of service contracts and monitoring of service billing.
Warranty management: Handling warranty processes, including warranty creation and claims management.
Advantages of Transitioning to SAP S/4HANA for Logistics
Moving to SAP S/4HANA for logistics presents numerous advantages compared to the traditional SAP ERP system. Unlike the modular structure of SAP ERP, SAP S/4HANA consolidates logistics functionality into lines of business, streamlining processes and leveraging the power of SAP HANA.
With streamlined procure-to-pay processes, accelerated plan-to-product cycles, optimized order-to-cash workflows, and enhanced request-to-service capabilities, businesses can achieve increased efficiency and make better-informed decisions in logistics with just a migration.
Conclusion
At VE3, our expertise in SAP S/4HANA implementation and logistics optimization sets us apart. We understand the intricacies of logistics operations and tailor solutions that align with your business objectives. Connect with VE3 today to unlock the full potential of your logistics operations and embark on a transformative journey towards supply chain excellence.
