Key Capabilities of a Modern ERP: Examples That Stand Out

New technology can be a game changer for enterprise software, but true value is often perceived as a better experience for the user. Likewise, digitalization is not about doing the same with new technology, but about changing the way businesses run. Innovative technology enables new capabilities that offer new opportunities for businesses and individuals.

SAP HANA is one of these game changers for enterprise software – and it is much more than just a database. It is the foundation for SAP S/4HANA. Thanks to SAP HANA, data is used in a different way — or, in other words, in a more intelligent and predictive way.

SAP S/4HANA comes with embedded machine learning cases, like tax compliance smart automation, demand-driven replenishment, supplier delivery prediction, intelligent staffing and resource matching, and sales performance prediction – with the artificial intelligence (AI) foundation in SAP HANA underneath.

These are the ingredients for a new user experience, as users can gain insights that support the decision-making – from insight to action. Insight to action is such a key capability of a modern enterprise resource planning (ERP), enabled by SAP HANA. Insight means the ability to get a comprehensive, real-time overview of a business, including information about liquidity, order stats, assets, and customer satisfaction. While this is, to a certain extent, also the case for legacy ERP systems, the insights were derived from outdated static data snapshots based on precalculated aggregates within databases. These technological limitations brought uncertainty and prevented us from making fully informed business decisions, particularly lacking the ability to react in real time to unforeseen events.

The unified data model in SAP S/4HANA allows companies to rely on a single source of truth, another key capability of modern ERP. The unified data model calculates key performance indicators (KPIs) on the fly by using actual line items instead of aggregates with undetermined timestamps – reflecting reality in the moment. Customers can see their inventory in real time. However, the data model itself is just the foundation for a new level of insight. To operationalize these insights, embedded analytics capabilities help raise awareness for business events in the moment they happen, guiding the users and enabling them to avoid issues and exceptions.

The same applies to finance, where the universal journal brings together previously separated tables and sub-ledgers. This capability allows for a soft close and an on-demand consolidation that gives leaders the full picture of all relevant data, helping them make informed decisions and resulting in greater business agility. It also captures all financial data in one place and therefore allows for one consistent parallelism across all sub-ledgers and value flows. Moreover, universal journal is a perfect fit to SAP HANA because of its simple structure without aggregates or hierarchies. Thanks to the in-memory technology, data from universal journal can be reported easily and quickly. Ledgers are a key field in the universal journal, enabling fast and efficient reporting of financial data according to different accounting principles and attributes – pulling the data from one table.

Speaking of business agility, and according to an Economist Intelligence Unit Ltd. study among 800 CFOs and senior finance executives, managing unexpected changes to financial forecasts and adapting finance processes to rapidly evolving business models are top challenges finance executives face in executing their day-to-day activities. Additionally, 90% of senior finance executives believe that finance should facilitate collaborative enterprise planning to ensure that operational plans are aligned with financial and strategic plans.

Being able to run planning, profitability analysis, and group reporting on the same data set will change finance forever. That said, we are moving toward a more future-oriented view. The latter can be enabled by smartly combining real-time data — as well as planning, prediction, and simulation data — to detect and react to both risks and opportunities quickly. This ultimately helps make processes even more efficient and intelligent and offers new opportunities for finance in the future. In times like these, with a global pandemic, this has helped many of our customers to steer their enterprises through rough waters and allow them the agility to quickly react to ever-changing environments.

But still, insight alone is not enough when it comes to bridging the gap between analytical and transactional systems, as is the case for legacy ECC systems. Automation, decision support, and AI cannot be fully utilized because of the technological divide. This is where action comes into play, providing the guidance business users need to realize decisions and operations in workflows and highly automated intelligent processes.

There are many examples of innovative SAP S/4HANA applications on SAP HANA in the area of material requirements planning (MRP) live, demand-driven MRP, inventory management, finance, availability-to-promise, backorder processing, and new variant configuration.

Take, for example, MRP live, the MRP cockpit, and predictive MRP. With MRP live, customers can plan and evaluate very large data volumes in real time. Compared to former MRP runs and evaluations, MRP live and MRP cockpit can run more frequently and the planner can significantly improve business KPIs, such as inventory levels and service-level agreements toward customers. Furthermore, with predictive MRP, it is possible to run simulations of the factory. This next-generation MRP within SAP S/4HANA automatically converts exceptions in solution proposals.

We have customers of all sizes and across regions and industries, such as industry machinery and components and consumer products, making use of MRP live. Thermo Cables, a midsize company based in India, runs SAP S/4HANA and could achieve increased revenue thanks to greater visibility, with key business processes such as MRP running on live data and instant access to reports across business functions. Or take ANTA, a provider of professional sportswear, that was able to enhance the MRP calculation mechanism and reduce the change time for bills of materials by 80% through collectively changing batches of data. Using SAP S/4HANA, ANTA also managed to increase efficiency of inventory consumption by 90%, thanks to automatic updates for a large number of orders.

Demand-driven MRP, a component of SAP S/4HANA, checks the demand and replenishment situation regularly and proposes optimal heights of buffers and inventory to be put into action via just one click. Demand and replenishment can now be adjusted more often and more regularly, which in turn leads to a more effective steering of the adjacent processes. What used to be an inventory optimizing project that companies conducted once a year in an Excel sheet has now become an automated routine process that offers the best delivery capacity while at the same time optimizing a company’s assets and liquidity.

The COVID-19 pandemic has showed us how fragile global supply chains are and how quickly they can be disrupted. But enterprise software helped keep organizations agile to reduce uncertainty and financial impact for companies.

As I laid out in the beginning, digitalization it is not about doing the same with new technology, but about changing the way businesses run. This is what companies need to be prepared to address today’s challenges.


Thomas Saueressig is a member of the Executive Board of SAP SE, Product Engineering.
This story originally appeared on LinkedIn.