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SAP S/4HANA: Influence on Logistics

January 13, 2016 by Andreas Schmitz 863

Logistics processes are now integrated in the core of first major SAP S/4HANA release. Here we look at the benefits in practice.

What the Market Wants

Speed, individuality, and innovation: These are the three key demands companies have to meet. Logistics processes must produce products adapted to individual customers’ requirements and deliver them as quickly as possible. This means manufacturers have to know when the product will be ready to ship and be able to respond fast to changes.

Which Logistics Functions are in the SAP S/4HANA Core?

Logistics functions are now part of the SAP S/4HANA core following the software’s first major release. These functions supplement the financial processes in the initial SAP S/4HANA release. Finance and logistics together make up over two-thirds of any company’s processes, which is why there is so much to be gained from integrating them. Costs of the parts needed for production are automatically recorded in the accounting system and have an immediate effect on the company’s balance sheet. Even better, these changes are displayed in real time.

The core logistics module is SAP S/4HANA Supply Chain, which includes production planning, inventory management, and warehouse management. Also, Production Planning and Detailed Scheduling (PP/DS as a codeployment), and Advanced Available to Promise have been completely reprogrammed and are available for use as add-ons. Sales orders are created with the SAP S/4HANA Sales module. The procurement processes are directly integrated into the digital core through the SAP S/4HANA Sourcing and Procurement module.

Peter Bickenbach, an SCM expert at SAP, says: “This can greatly simplify inventory management, requirements planning, capacity planning, sales, and purchasing.”

What are the Advantages of SAP S/4HANA Supply Chain?

The advantages are similar to those in finance. Since SAP S/4HANA uses a new data model, aggregates and indices are no longer necessary, so significantly less memory space is required than with conventional database management systems. Experience shows that the same data that takes up 593 gigabytes of storage on a traditional database can be compressed to less than one tenth (42.4 gigabytes) on SAP S/4HANA. A particularly advantageous SAP S/4HANA logistics process is parallel posting. Traditional systems can only post one transaction at a time because the system is locked momentarily while doing so.

The new software, however, achieves a similar throughput using less memory and with shorter runtimes. The system also makes actual costs more transparent at any time.

Benefits in Practice

  • Parallel posting:When trucks leave a company’s distribution center, the system automatically records all the finished goods in ERP. The same applies to goods returned. With SAP S/4HANA, it is possible to post transactions concurrently, no matter how many trucks leave or arrive at the distribution center at the same time. The transactions can run simultaneously without locks, which avoids time lag.
  • Automation:Some companies use trucks for direct customer business. Vendors use mobile devices to record the products customers bought. As soon as the truck returns to the distribution center, the mobile device syncs with ERP and the system simultaneously registers how many goods are missing, posts goods issues, creates invoices for the customers, and plans the next routes for this particular truck, all without locks.
  • MRP Cockpit: Material requirements planning (MRP) is a fine balancing act for the materials planners responsible for ensuring that there are always enough parts available while keeping inventory levels to a minimum. The MRP Cockpit includes personal key performance indicators, sends notifications of delayed orders, and makes it possible to run simulations to assess exactly how precarious the situation is. It even makes proactive suggestions on how to solve the problem. Another benefit of the new software is that it can depict the situation in a graphic (SAP Fiori). The integration of logistics processes into SAP S/4HANA allows processes to run up to ten times faster and reduces the amount of data required to a fifth.
  • Reduce inventory:One of the most important goals for materials planners is to minimize inventory levels. SAP S/4HANA can run an ABC/XYZ Analys is to classify inventory and therefore create transparency about which items are fast moving, and which items are only ordered very rarely and therefore merely add to costs. The precise balance between goods receipts and goods issues can be displayed on a screen. Sven Denecken from the SAP S/4HANA Co-Innovation team explains the advantages of real-time inventory management with SAP S/4HANA in this video:

What Benefits Can This Solution Bring to Logistics?

  • Cockpit for materials planners: The user interface is intuitive and can be customized. Materials planners can display charts on their cockpit according to their roles and responsibilities. This greatly reduces the effort required to access the information that is relevant to them in real time.
  • Decision support: Algorithms help users make decisions. If an order is delayed, the system will make suggestions on how best to navigate this pending bottleneck. The system can also run simulations that show an accurate preview of how inventory levels will develop in the next few days and weeks.
  • Improved customer service: Service employees now have access to accurate production data so they can answer customers’ questions about products and delivery dates. They can see exactly when and how many newly completed products will be ready for delivery, and to pass on this more precise information to those who wish to know.
  • Alerts: If the material flow is interrupted and there are bottlenecks in material requirements planning, the system flags up these situations before they arise and sends alerts to everyone responsible. This cuts response times and keeps processes flowing.
  • Business decision support: The greatly simplified data model based on SAP S/4HANA makes duplicate data retention (including 24 aggregate and history tables) unnecessary and therefore greatly reduces the storage capacity required. Whether it be material requirements, current sales figures, or yearly reports – all the calculations are up-to-the-second. This allows management to respond to changes in demand and new customer requirements much more quickly.

The questions were answered in collaboration with Peter Bickenbach, head of the Center of Excellence for SCM (SAP Deutschland).

Top image via Shutterstock

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