Transform Supply Chain
with SAP S/4HANA
®
1/16
White Paper Background
and Key Definitions
The information outlined below is helpful to understand the contents
of this value proposition white paper. It gives clear details on the objective
and scope of the paper. Key definitions are also provided for select sections
of the paper to provide further clarification.
DELIVERABLE OBJECTIVE
Provides information on the value in moving from
an ERP on a traditional database to SAP S/4HANA®
and cloud and line-of-business (LoB) solutions
KEY DEFINITIONS
Within the process and sub-process deep-dives, there is
detailed content in table format articulating the following:
With the value proposition section, all quantified
benefits are conservative estimated improvement
ranges tied to the top value drivers. They are based
on early adopters or new developments/enhancements
of SAP S/4HANA + LoB and cloud enhancements that
can drive value. Keep in mind that these should be used
as a guide. We recommend working together to assess
your current maturity and the value of moving to SAP
S/4HANA in order to develop a personalized business case.
Pain points
Represents major customer business and IT challenges
Current state with ERP on traditional database
Represents the ERP capabilities that are available
on a traditional database
SAP S/4HANA capabilities
Represents the capabilities shipped with the latest
release of SAP S/4HANA
Cloud/LoB + SAP S/4HANA capabilities
Represents all other solutions that can be integrated
with SAP S/4HANA and provides business value.
For example, SAP S/4HANA + the SAP Integrated
Business Planning solution, or SAP S/4HANA + the
SAP Manufacturing Integration and Intelligence (SAP
MII) application, etc. These solutions are not embedded
in SAP S/4HANA, but integration scenarios exist for these
Planned innovations and future direction*
Represents new functionalities planned for future
release of SAP S/4HANA, or new integration possibilities
planned for SAP S/4HANA
Detailed road map available on SAP.com
(Customer Login Required)
This document and SAP’s strategy and possible future
developments are subject to change and may be changed
by SAP at any time for any reason without notice. This
document is provided without a warranty of any kind,
either express or implied, included but not limited to,
the implied warranties of merchantability, fitness for
a particular purpose, or non-infringement.
2/16
Agenda
SAP S/4HANA Supply Chain
Capability and Value Proposition Overview
4
Demand-Driven Business Planning Deep-Dive
7
Response and Supply Orchestration Deep-Dive
9
Logistics and Order Fulfillment Deep-Dive
11
Value Proposition
13
Customer References
14
3/16
SAP S/4HANA Supply Chain Overview
TRANSFORM SUPPLY CHAIN ON SAP S/4HANA
In today’s dynamic digital marketplace, companies need comprehensive access to accurate,
real-time information about their enterprise – and about their customers, suppliers, and competitors.
With the right information, businesses can be agile
enough to produce and distribute personalized
products with shorter lead times and smaller runs –
even down to a lot size of one – and ensure that
they can meet customer demand while keeping
costs under control and productivity at its highest.
Achieving excellence in this environment requires
two important capabilities: visibility into operational,
customer, and market data, and speed across
the extended supply chain to react to changes in
demand and supply and gain competitive advantage.
With SAP S/4HANA as the digital core, customers
can build a foundation for extended supply chain
visibility and speed. Since the release of the SAP
S/4HANA Enterprise Management solution in
November 2015, the wave of digital business-enabling
innovation in our next-generation business suite
has spread throughout the enterprise, across finance,
manufacturing, procurement, and the supply chain.
SAP S/4HANA Supply Chain and SAP S/4HANA
Manufacturing allow companies to gain visibility
into real-time market conditions and production
efforts, and then react to that information with the
speed required to deliver products that customers
want with the efficiency they need.
Innovative technology in SAP S/4HANA yields
enhanced visibility across the entire supply chain.
Multiple levels of data structures and aggregations
are removed, allowing material data, status
of production, procurement, and inventory to
be available in real time, reducing latency and
inaccuracies in understanding supply and demand
and enabling the most recent demand signals to
be factored into planning decisions. With material
requirements planning (MRP) specifically designed
to take advantage of SAP HANA, planning can be
run more frequently, reducing inventories and
increasing responsiveness. Users can also access
critical operational analytics and decision support
information in real time. Embedded analytics –
a core concept of SAP S/4HANA – means that
business users can conduct real-time evaluations
of analytical views of the same data that is present
in the execution system. Users no longer have to
wait for analytical data to be available, and their
analyses are no longer based on outdated data.
Visibility provides insight when supply and demand
are out of balance. But this visibility is valuable only if
one can act fast enough to respond to the information
presented. Once a supply and demand issue has been
detected, the organization must rapidly evaluate
alternative scenarios for responding, select the best
one, and execute. With SAP S/4HANA Supply Chain,
any supply or demand change, such as a promotion
that generates higher-than-forecasted demand or
disruption in supply due to a late delivery, can be
quickly propagated up and down the supply chain to
detect imbalances as well as simulate alternate scenarios.
For example, in order promising, the processing
of large, multi-line orders can be dramatically
accelerated. Companies that receive large order
batches overnight via electronic data interchange
(EDI) often have challenges in processing these
volumes quickly. This is particularly challenging
when a growing number of customers is requesting
same-day shipment. In SAP S/4HANA Supply
Chain, multi-line orders are processed efficiently,
dramatically shortening this latency.
SAP S/4HANA can be integrated with SAP Integrated
Business Planning, enabling advanced planning and
response across strategic, tactical, and operational
time horizons. SAP Integrated Business Planning
for sales and operations allows companies to align
market demand and opportunity with collaboration
across all lines of business, including financial and
supply chain simulations, to ensure profitable business
growth. SAP Integrated Business Planning for
inventory and SAP Integrated Business Planning for
demand enable companies to sense short-term
demand pattern changes and optimize working capital
to ensure inventory supports a competitive service
level. Short-term volatility is inevitable, and the
SAP Supply Chain Control Tower solution and
SAP Integrated Business Planning for response and
supply will alert all stakeholders in the supply chain
to any changes in demand or supply, and allow realtime response management and simulation to propose
effective resolution to ensure priority demands are
satisfied at the lowest cost.
4/16
SAP S/4HANA Supply Chain Overview
SUPPLY CHAIN MANAGEMENT (SCM) CAPABILITIES
Outlined below are the primary capabilities for SCM where value can be achieved through
SAP S/4HANA + SAP cloud and LoB solutions.
Demand-Driven
Business Planning
Response and Supply
Orchestration
Logistics and
Order Fulfillment
• Sales and operations planning***
• Supply chain control tower***
• Inventory optimization
• Response and supply management
• Demand planning and
demand sensing***
• Material requirements planning
(MRP)/constrained production
scheduling*
• Extended warehouse
management**
• Rescheduling and availableto-promise (ATP)/advanced
available-to-promise*
• Track and trace***
***
***
• Inventory and basic warehouse
management*
• Transportation management**
* Technically part of SAP S/4HANA, may or may not require an additional license
** Planned to be part of SAP S/4HANA in the future, may or may not require an additional license
*** Requires additional products integrating with SAP S/4HANA
5/16
SAP S/4HANA Supply Chain Overview
SAP S/4HANA SUPPLY CHAIN VALUE PROPOSITION SUMMARY
SAP S/4HANA enables companies to integrate, embed intelligence, and
visualize all supply chain processes from supplier to customer. Digital
supply chain and mission-critical business processes are supported
across the enterprise with one single source of live information.
• Faster business outcomes with reduced operational cost,
thanks to simplified system landscapes. Reduced number
of systems and interfaces because of redesigned data
structure and embedded solutions in SAP S/4HANA
• Live inventory management and accelerated MRP
leading to reduced days in inventory
•P
ersonalized user experience (UX) with instant
insight on any device, resulting in higher employee
productivity with a focus on value-added tasks
• I ntegration with sales and operations planning
and demand management for effective supply
chain planning
• Advanced ATP checks and back-order processing,
leading to improved order fulfillment capabilities
6/16
Demand-Driven Business Planning
Typical Pain Points
Current State with ERP
on Traditional Database
SAP S/4HANA
Enhancements
Cloud/LoB Extension
Enhancements
Planned Innovations
and Future Directions
Difficult to drive sales
and operations planning
(S&OP) process with
executional ERP system,
which causes planning
to be done in a slow,
manual process with
inconsistent information
across functional areas
Collaboration around
a sales and operations
plan needs separate
integration; difficult
to analyze different
scenarios of future
demand and supply
and hard to come up
with actionable plan
Fast MRP run and new
working model for MRP
controllers based on
decision support
Rapid and collaborative
S&OP, including “what
if” and scenario planning
of different potential
business plans, to allow
business stakeholders
and functional leaders
to agree on and execute
desired path forward
(SAP Integrated
Business Planning)
Additional integration
to sales and financial
planning processes
Not able to include realtime, changing demands
in the planning run,
leading to outdated
and inaccurate planning
Basic demand
planning features
exist with limited
ability to sense or
predict short-term
demand based on
growing number
of demand signals
Changes in demand
are visible without
waiting for lengthy
batch runs like backorder processing
Short-term demand
prediction with
demand sensing
algorithms and
forecasts for medium
to long-term demand
with advanced
statistical forecasting
methods (SAP
Integrated Business
Planning)
Incorporation of
additional demand
signals that drive
short-term forecast,
further development of
product segmentation
capabilities, and
enhancements to
new product
introduction and
demand planning
capabilities
Business Benefits
• Reduced overall supply
chain planning cost
• Reduced sales and
operations planning
cycle time
• Increased forecast
accuracy
• Reduced demand
planning and
forecasting cost
(continued next page)
7/16
Demand-Driven Business Planning
Typical Pain Points
Current State with ERP
on Traditional Database
Too much working
capital in the supply
chain leading to low
inventory turns and,
at times, subpar
customer service levels
Difficult to determine
optimal inventory
targets across the
supply chain, so
companies are left
with having to estimate
these manually
SAP S/4HANA
Enhancements
Real-time analytics
across all data held
in SAP S/4HANA,
covering orders,
invoices, inventory,
and costing
information
Cloud/LoB Extension
Enhancements
Planned Innovations
and Future Directions
Determination of
optimal inventory
targets across multiple
echelons of raw
material, work in
process, and finished
goods inventory,
enabling supply
chain to operate with
less working capital
while maintaining
target service levels
(SAP Integrated
Business Planning)
Additional inventory
optimization
capabilities such
as budget constrained
inventory target
setting and service
level prediction
Business Benefits
• Reduced days
in inventory
• Increased inventory
accuracy
8/16
Response and Supply Orchestration
Current State with ERP
on Traditional Database
SAP S/4HANA
Enhancements
Cloud/LoB Extension
Enhancements
Planned Innovations
and Future Directions
Long batch run
processes lead to
inefficient planning
Planning runs at
a predefined times
without real-time data
Accelerated MRP:
improved effectiveness
of planning with faster
and more frequent
MRP runs – multiple
times a day
Supply planning beyond
MRP in conjunction
with S&OP to provide
unconstrained or
constrained (optimized)
supply plans
(SAP Integrated
Business Planning)
Principle of one
scalable planning
solution in the
SAP S/4HANA
core leveraging
the simplified
data model and
integration capabilities
• Reduced overall supply
chain planning cost
Inability to include
the real-time changing
demands in the planning
run and analysis leads to
outdated and inaccurate
planning decisions
MRP lists are working
with snapshots of
the planning situation
during the planning run
SAP Fiori® apps for
MRP (cockpit) provide
real-time insights
into material
availability and flow
Rapid and collaborative
S&OP, including
“what if” and
scenario planning
(SAP Integrated
Business Planning)
SAP Fiori apps for
dedicated MRP uses
cases, such as load
building, for efficient
order and transport
execution
• Reduction in revenue
loss due to stock-outs
• Planning systems
disregard capacity and
material constraints
Production planning
capabilities (MRP/
constrained planning)
available in ERP and
advanced planning
systems (APO/
third party)
Streamlined data and
processes with and
embedded analytics and
decision support enable
faster MRP-based planning
and execution processes,
resulting in more accurate
information and reduced
latency planning
Advanced and
embedded production
planning and detailed
scheduling capabilities
in SAP S/4HANA with
harmonized master
data and SAP Fiori
user experience (UX)
• SAP Fiori apps (SAP
Fiori Gantt chart) for
advanced production
scheduling and shop
floor dispatching
• Reduction in revenue
loss due to stock-outs
Typical Pain Points
• Disparate planning and
transactional systems
lead to data integration
latency and errors
Business Benefits
• Improved manufacturing
function planning
efficiency
• Improved manufacturing
function planning
efficiency
• Increased production
plan adherence
• Real plan automation for
seamless orchestration
of production plans
into execution
(continued next page)
9/16
Response and Supply Orchestration
Typical Pain Points
• Inefficient strategies
or manual processes
to manage orders
and allocations lead
to revenue loss and
fulfillment issues
Current State with ERP
on Traditional Database
• Global ATP checks
in a different
planning system
• Low-volume backorder processing
supported
• Inability to select
alternative sources
intelligently impacts
profitability targets
SAP S/4HANA
Enhancements
Cloud/LoB Extension
Enhancements
Planned Innovations
and Future Directions
Mass product
availability check
for sales, planned,
and production orders;
advanced ATP check
and performance
improvements
for releasing large
production orders
Response planning
capability for midterm
allocation planning
and short-term order
confirmation in order
to automate allocation
procedures and take
effective corrective
action and respond
rapidly (SAP Integrated
Business Planning)
• Use-case-driven
allocation, maintenance,
and check during
confirmation
• Inability to promise
accurate and reliable
order dates leads to
customer dissatisfaction
and revenue loss
Lack of visibility into
the end-to-end supply
chain leads to poor
decision support and
slow corrective actions
• Back-order processing
with intuitive requirement
classification and
automatic exception
handling
Business Benefits
• Reduction in
revenue loss due
to fulfillment issues
• Reduction in
back-ordered
items cancelled
• SAP Fiori app for intuitive
last-minute changes
before release for delivery
• KPI-based selection
of best confirmation,
taking into account
alternative plants and
substitutable materials
Supply chain analytics
possible using an
online analytical
processing (OLAP)
engine like business
warehouse (BW); the
data is not real time
Embedded analytics
allow on-the-fly
simulations with
real-time data; userand use-case-centric
views are also supported
Empowers business
users to perform
ad hoc analysis in
real time with alerts,
KPIs, reporting, and
insights that detect
and notify users of
potential disruptions
(SAP Integrated
Business Planning)
Monitoring and
orchestration of
internal and distributed
supply chains
• Improved supply
chain planning FTE
productivity
• Reduced overall
supply chain
planning cost
10/16
Logistics and Order Fulfillment
Typical Pain Points
• Lack of accurate,
up-to-date inventory
data, lead times, and
procurement timings
for the planning lead
to an inefficient
planning process
• Low inventory
throughput prevents
live inventory updates
Current State with ERP
on Traditional Database
• Inventory status is
calculated overnight
• Live inventory
updates are not
available; inventory
status is reflected
in the system with
time offset
• Inventory throughput
may reach boundaries
depending on
business scenario
SAP S/4HANA
Enhancements
• Live inventory
management through
redesigned data model
enables unlimited
simultaneous material
movements and allows
for true transparency
on inventory and
material flows
Cloud/LoB Extension
Enhancements
Planned Innovations
and Future Directions
Performance
optimization for
goods movement
helps with efficient
material flow in highvolume production
scenarios
Business Benefits
• Reduced supply
and inventory
planning cost
• Increased inventory
accuracy
• Ability to change lot
size to “one,” thus
capturing the lowest
level of granularity in
inventory stock keeping
• Decrease stock buffers
due to better transparency
and insights
Limited inventory
visibility, increasing
error rate and
supply shortages
Inventory analysis is
possible via a separate
analytical system with
data integration issues
and data latency
SAP Fiori apps for
inventory managers
and warehouse clerks
• SAP Fiori apps for
inventory analysts
• I ncreased inventory
accuracy
• SAP Fiori UX
improvements for
material documents
•R
educed supply and
inventory planning cost
(continued next page)
11/16
Logistics and Order Fulfillment
Typical Pain Points
Complexity in valuating
inventories in multiple
currencies and for
different valuation
methods (legal/profit
center/reporting
purposes)
Current State with ERP
on Traditional Database
SAP S/4HANA
Enhancements
• Material ledger
activation available
along with functionality
of actual costing.
However, inventory
valuation data
exists in multiple
aggregated tables
• Material ledger
available as a default
option. All inventory
valuation data exists
in material ledger,
removing redundancies
and aggregates
•T
his leads to
slow processes
(actual costing,
redistribution/
revaluation) and
slow/inefficient
reporting
Missing visibility
and control of material
flow and real-time
inventory monitoring
result in poor on-time
delivery performance
Visibility on overall
progress across system
boundaries; ability
to achieve overview
on shipping and
transportation process
status with messaging
interface between ERP
and Extended Warehouse
Management application,
Transportation
Management
application, and the
track and trace package
Cloud/LoB Extension
Enhancements
Planned Innovations
and Future Directions
Optimization of
lock behavior for
moving averagepriced materials
Business Benefits
• Increased inventory
accuracy
• Increased visibility
in actual profitability,
allowing for margin
optimization
• Faster actual costing
due to optimized code
based on SAP HANA,
faster reporting as
needed for actual
costing, multiple
currency and multiple
valuation methods
• SAP Extended Warehouse
Management integrated
with SAP S/4HANA,
supporting all levels of
warehouse complexity
• SAP Transportation
Management integrated
with SAP S/4HANA,
supporting distribution
and logistics holistically
• Process execution,
goods, and assets in
transit tracked. Manage
by exception through
track and trace package
•S
AP Extended
Warehouse Management
embedded in S/4HANA
core for reduction of
interface complexity
and improved change
management of deliveries
•S
AP Transportation
Management
embedded in S/4HANA
core for significant
reduction of interface
complexity and
enablement of
additional integrations
• Reduced total
logistics cost
• Increased inventory
accuracy
• Reduced order
fulfillment lead time
• Reduced TCO
through landscape
simplification
12/16
SAP S/4HANA Supply Chain Value Proposition
STRATEGY ENABLEMENT
$
• R
un Simple (master complexity):
Adapt to market opportunities
and develop new channels
• 1 0–12% reduction in days of inventory
• I ntegrate planning and execution
across strategic, tactical,
and operational time horizons
• 1 0–12% reduction in total logistics cost
RISK MANAGEMENT
• 1 0–15% reduction in revenue loss due
to stock-outs
• 3
–5% reduction in supply chain planning cost
Strategy
Enablement
Risk
Management
Business
Benefits
Employee
Engagement
• R
eduction in order fulfillment lead time
EMPLOYEE ENGAGEMENT
• P
lan risk as part of a structured,
collaborative, integrated business
planning process
• A
ccelerate planning and response cycle times, moving
from monthly to weekly to daily decision processes
• H
elps production and material planners execute critical
daily tasks with embedded decision support analytics
and the role-based SAP Fiori user experience
• A
dopt short-term demand sensing and supply
re-planning to respond to variability
*
BUSINESS BENEFITS
• E
nhances supply chain planning productivity
through easy-to-use Microsoft Excel
and analytics-based planning interface
• I ncreases throughput
enefits are based on early adopters of SAP S/4HANA or conservative outside-in benefits due to moving from a traditional ERP to enhanced
B
SAP S/4HANA + LoB and cloud capabilities. As each enterprise is at a different level of maturity, our recommendation is to work with you
to determine the value proposition for your enterprise.
13/16
Customers are Achieving Value from SAP S/4HANA
VECTUS INDUSTRIES
Vectus deployed the SAP S/4HANA Enterprise Management solution and
started experiencing total ease in managing business operations. It has
decreased its days sales outstanding and can deliver accurate, instantaneous
customer invoices. Customers now experience excellent service and on-time
delivery, which will remain unchanged during rapid expansion.
• 15% reduction in operation costs
• Real-time year-end financial close (down from a few months)
• 50% faster access to and visibility of real-time data
• 60% increase in operational efficiency
Click here for Vectus Industries source reference.
SWISS PROPERTY AS
SWISS PROPERTY worked with INTELSYS, an SAP partner, to implement
SAP S/4HANA Enterprise Management by using business process content
supported by SAP Best Practices packages. Focused on the engineering
and construction industry, INTELSYS helps provide an end-to-end solution
for design, planning, and construction execution.
Click here for SWISS PROPERTY source reference.
“SWISS PROPERTY strives to always be
several steps ahead of our competition,
and this is one of the reasons that we chose
SAP S/4HANA Enterprise Management.”
Company
Vectus Industries
Industry
Industrial machinery and
components
SAP Solution
SAP S/4HANA
Enterprise Management
Customer Website
www.vectus.in
Company
SWISS PROPERTY
Industry
Engineering, Construction
and Operations
SAP Solution
SAP S/4HANA
Enterprise Management
Customer Website
www.swiss-property.ch
—Jaan Saar, head of process and IT, SWISS PROPERTY
14/16
Customers are Achieving Value from SAP S/4HANA
Company
Boryung
Pharmaceutical
BORYUNG PHARMACEUTICAL
Boryung Pharmaceutical needed to compete on a global scale,
and it required a simplified IT architecture and real-time analysis
to drive critical business management.
Industry
Life sciences
It turned to the SAP S/4HANA Finance solution as a foundation for
its transformation. It gained high visibility and control of its business
information in real time.
SAP Solution
SAP S/4HANA Finance
• 17% higher on-time delivery performance
• 15% fewer days in raw material inventory
Customer Website
www.boryung.co.kr
• 4.5% higher operating margin for in-house manufacturing goods
Click here for Boryung source reference.
INDEKS BILGISAYAR SISTEMLERI
Indeks Bilgisayar Sistemleri is a major wholesale distributor in Turkey.
It had to be better than the competition while wielding far-reaching business
processes the others only dreamed of.
Company
Indeks Bilgisayar Sistemleri
Indeks deployed SAP S/4HANA to simplify the data model and complex
subsidiary structure, cut infrastructure costs, and increase business agility.
• Timely consolidation of all subsidiary financials
• On-time delivery of products requested by retailers
Industry
Wholesale distribution
SAP Solution
SAP S/4HANA Finance
Customer Website
www.index.com.tr/eng
• Efficient management of mergers and acquisitions
Click here for Indeks source reference.
• SAPInsider Special Report Supply Chain article
• SAP S/4HANA Supply Chain Blogs:
ADDITIONAL REFERENCES
– Going Digital with S/4HANA Supply Chain
– SAP S/4HANA Influence on Logistics
– Building a Profitable Supply Chain with SAP S/4HANA
• Infographics on SlideShare
– SAP S/4HANA Supply Chain Infographics
• SAP S/4HANA Supply Chain Demo Videos
– Inventory Management
15/16
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