How Do Logistics Processes Compare Between SAP ERP and SAP S/4HANA?

With the advent of SAP S/4HANA in the mid-2010s, SAP undertook a major change in how it provided logistics capabilities to customers.

In this blog post, we’ll take a look at how logistics in SAP S/4HANA compares to logistics in the SAP ERP solution.

Logistics in SAP ERP

SAP ERP included SAP’s main logistics offering up until the arrival of SAP S/4HANA. It focused on three key areas: procurement and logistics execution, product development and manufacturing, and sales and service.

For procurement and logistics execution, SAP ERP focused on reducing costs in purchasing, providing in-depth inventory management, and managing an efficient warehouse.

For product development and manufacturing, SAP ERP focused on improving production processes, which included product planning, master production scheduling, and material requirements planning. For manufacturing, this included production technique support, plant maintenance, and quality management.

For sales and service, SAP ERP focused on sales order management from order to delivery (including transportation management) and customer service like repairs and warranties.

Logistics in SAP S/4HANA

SAP S/4HANA provides four lines of business relating to logistics processes: Sourcing and Procurement, Manufacturing, Supply Chain, and Asset Management. Let’s look at each briefly.

SAP S/4HANA Sourcing and Procurement

In the Sourcing and Procurement line of business, SAP assists users in identifying and acquiring materials through extended procurement, operational purchasing, contract and supplier management, and more. Peripheral solutions such as SAP Ariba and SAP Fieldglass are considered part of the Sourcing and Procurement line of business.

Manufacturing

With the Manufacturing line of business, SAP assists users in product creation through responsive manufacturing, production operations, scheduling and delivery planning, quality management, and more. Legacy processes such as the manufacturing extension SAP Manufacturing Integration and Intelligence (SAP MII), quality and quality issue management, and production planning and control are considered part of the Manufacturing line of business.

Supply Chain

The Supply Chain line of business assists users in overall business planning, as well as storing and dispatching products when purchased. It covers processes including production planning, batch traceability, warehousing, and inventory management. Solutions such as SAP Integrated Business Planning (SAP IBP) and embedded versions of SAP Extended Warehouse Management, and SAP Transportation Management are considered part of the Supply Chain line of business.

Asset Management

In the Asset Management line of business, SAP assists users in taking care of in-house items from a maintenance perspective. Maintenance management solutions such as SAP Enterprise Asset Management (SAP EAM) and EHS monitoring and reporting tools are considered part of the Asset Management line of business.

How is SAP S/4HANA Logistics Different from SAP ERP Logistics?

The most striking change to logistics in the new suite was the retirement of the SAP ERP module concept and the advent of SAP S/4HANA lines of business. In the legacy suite, users would routinely utilize modules such as Materials Management, Warehouse Management, Plant Maintenance, etc. to complete their tasks. These no longer exist per se; all logistics functionality remains accessible in the new suite, of course, but within the four logistics lines of business. This change was done purposefully by SAP to better distribute functionality and place similar processes together.

Beyond that, central to the SAP S/4HANA logistics solution are the process and reporting improvements available via SAP HANA’s in-memory architecture; SAP says reporting times in SAP S/4HANA are 1800x faster than SAP ERP. Many reports, like Resource Scheduling for Maintenance Planners and the Maintenance Scheduling Board, can be run with SAP Fiori applications designed with the end user in mind. New options such as predictive maintenance and predictive MRP introduce intelligent technologies to SAP users, and SAP S/4HANA is Industry 4.0 compatible.

SAP S/4HANA Logistics Value Maps

There are a number of benefits to moving to SAP S/4HANA for logistics. SAP has laid them out in maps, which we’ll discuss in the following sections.

Streamlined Procure to Pay

The streamlined procure-to-pay value map helps businesses manage the procurement function more efficiently by leveraging the SAP S/4HANA central system and role-based functionality. The functionality available in this value map gives the business information to make more informed procurement decisions.

This value map includes operational purchasing, collaborative sourcing and contract management, inventory and basic warehouse management, invoice and payable management, supplier management, and procurement analytics. Let’s explore these further.

Operational purchasing includes the following functions:

• Self-service requisitioning: End user procurement by leveraging catalog pricing and approved vendors
• Requirements processing: Automated and manual requisitioning, including the approvals process
• Purchase order processing: Simplification of buyer activities by leveraging enhanced purchase order processing tools
• Purchase order collaboration: Communication of procurement activities with vendors
• Service purchasing and entry: Greater automation in the requisition and approval processes to empower buyers within service purchasing 

Collaborative sourcing and contract management includes the following functions: 

• Source assignment: Automation of the source assignment tasks and operational sourcing tasks
• Operational contract management: Management of the contract operation to maximize the value of existing contracts 

Inventory and basic warehouse management includes the following functions: 

• Goods issue: Outbound warehouse processes to align with demand and minimize customer disruption
• Goods receipt: Inbound processes that allow for systemic background processing
• Basic warehouse management: Warehouse operations to streamline the flow of materials in a warehouse
• Basic shipping: Automation of shipping processes 

Invoice and payables management includes the following functions: 

• Invoice processing: Invoice management process from receipt through reconciliation
• Accounts payable: Management of payable data received from the vendor
• Invoice collaboration: Automation of invoice communications with the vendor 

Supplier management includes the following functions: 

• Classification and segmentation: Visibility into vendor categories and expenditure types
• Supplier evaluation: Management of vendor performance 

Procurement analytics includes the following functions: 

• Spend visibility: Real-time monitoring of vendor spending with a focus on savings opportunities
• Real-time reporting and monitoring: Buyer reporting and monitoring across all purchasing elements 

Accelerated Plan to Product

The accelerated plan-to-product value map includes all the functionality from product design to production assembly. It provides all the needed functionality to support all areas of the product lifecycle.

This value map includes project control and product development, production engineering, production planning, production operations, quality management, and maintenance management. Let’s explore these further.

Project control and product development includes the following functions: 

• Project financials control: Management of production spending by leveraging planned versus actual costs
• Project logistics control: Management of project logistics, including resources and materials
• Product development foundation: New, simplified product introduction processes

Production engineering includes the following functions: 

• Production bill of material (BOM) management: Processes and integrations between production engineering and other integrated departments
• Recipe/routing management: Processes for product creation
• Inspection planning: Processes for ensuring quality in the production process 

Production planning includes the following functions: 

• Material requirements planning (MRP): Processes for planners in monitoring production and material production timing
• Basic order promising/available-to-promise (ATP): Integration of production dates and customer order commitments 

Production operations include the following functions: 

• Production control: Management of production operations such as releasing production orders
• Basic production execution: Management of in-progress production operations
• Basic subcontracting: Optimizing subcontracting processes such as planning, execution, and monitoring of subcontracting operations
• Basic external processing: Management of external production operations
• Repetitive manufacturing: Controlling repetitive manufacturing processes, including production schedules
• Kanban: Management of materials staging by leveraging lean principles
• Just-in-time (JIT) outbound processing: Integration of JIT lean principles into the manufacturing process
• JIT inbound processing: Following JIT inbound processes to streamline production operations in alignment with customer demand 

Quality management includes the following functions: 

• Quality engineering: Integration of quality management into the new product development process
• Quality inspection: Integration of quality management processes throughout manufacturing, shipping, and procurement
• Quality improvement: Visibility into quality reporting and analytics 

Maintenance management includes the following functions: 

• Maintenance planning and scheduling: The planning and management of maintenance activities across supply chain operations
• Maintenance execution: The execution of maintenance operations 

Optimized Order-to-Cash

The optimized order-to-cash value map allows for a streamlined process from quote management to customer delivery and payment. It allows for insights into real-time customer requirements and dashboarding, which provides fast response times to customer demands and more accurate and timely information.

This value map includes order and contract management and receivables processing. Let’s explore these further.

Order and contract management includes the following functions: 

• Sales master data management: Streamlined sales master data across the organization
• Sales contract management: Management of sales contracts with a focus on planned versus actual contracts
• Sales order management and processing: Integration of sales order management from quote to revenue recognition
• Billing and invoicing: Simplified billing processes
• Claims, returns, and refund management: Streamlined complaints and returns processing
• Sales monitoring and analytics: Centralized sales information for both historical and predictive analytics 

Receivables processing includes the following function: 

• Accounts receivable: Management of accounts receivable data by leveraging automation for all customers 

Enhanced Request to Service

The enhanced request-to-service targets the aftermarket sales and service business processes. It provides functionality for managing an installed base, aftermarket contracts, and internal service management business processes.

This value map includes service master data management, service management, service parts management, and service agreement management. Let’s explore these further. Service master data management includes the following functions: 

• Technical assets, structures, and history: Collection and management of technical master data
• Service task list and catalogs: Aggregation of like service tasks for faster service processing
• Service/maintenance plan and event scheduling: Management and planning of reoccurring service tasks 

Service management includes the following functions: 

• Service initiation: Assessment of service requests and determination of service relevance
• Service planning and scheduling: Management and scheduling of service activities
• Service execution and delivery: Administration of service tasks throughout the entire service process
• Service fulfillment: Cost management throughout the service lifecycle
• Service billing and settlement: Generation of service billing
• Claims, returns, and refund management: Complaint lifecycle management and integration into service processes 

Service parts management includes the following functions: 

• Service parts warehousing: Optimized warehousing specifically designed for service parts
• Service parts fulfillment: Improved service parts management from planning through customer service 

Service agreement management includes the following functions: 

• Operational contract management: Optimization of service contracts and monitoring of service billing
• Warranty management: Management of warranty processes, including warranty creation and claims management

Benefits of Moving to SAP S/4HANA for Logistics

Moving to SAP S/4HANA for logistics offers numerous advantages over 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 SAP HANA. With streamlined procure-to-pay processes, accelerated plan-to-product cycles, optimized order-to-cash workflows, and enhanced request-to-service capabilities, increased efficiency and better decision-making in logistics are only a migration away!