SAP S4/HANA: Ready for Digital Manufacturing

Industry 4.0 solutions and the Internet of Things (IoT) are drivers of business for companies in manufacturing. However, ERP systems based around traditional technologies have long since fallen behind the requirements of innovative solutions like these. Enter SAP S/4HANA, which offers the key to overcoming digital obstacles.


With SAP S/4HANA, every user department can realize tangible advancements in development, resulting in increased competitiveness and efficiency.


Platforms and solutions for Industry 4.0 and IoT are hardly subjects for the distant future; indeed, they have been executive-level concerns for some time now. Many companies are already investing in corresponding systems in specific areas. Digital customer experiences, highly customized products, smart factories, digital supply chains, new service-oriented business models for the aftermarket – these new technologies open the door to a number of promising possibilities. To make efficient use of such innovative solutions, however, associated ERP systems need to fulfill standards that conventional technologies no longer support. In serving as a company’s digital core, SAP S/4HANA plays a prominent role in dealing with the hurdles involved in digital transformation.


Strategic Business Objectives: What the Manufacturing Industry Wants

When outlining their strategies, manufacturing companies focus on three goals in particular:

  • Customer focus: End customers are increasingly at the center of all activities. To gain a competitive edge, companies need to offer more tailored products, solutions, and services. At the same time, customers are demanding more speed, reliability, and simplicity in dealing with the providers of these offerings.
  • New business models and integrated services come together based on data generated from products themselves, from customers – through digital interaction, supply chains, or sensors – or from production operations at smart factories.
  • Efficient IT: Companies are facing an increasing need to run their IT systems in more flexible and cost-effective ways as a means of reclaiming resources that could be used to provide faster support and create new offerings or processes. Since IT budgets are only rising slightly, however, expenditures need to focus more on transformation than on actual business operations. In this context, the cloud is gaining importance in all areas of IT.


User Department Demands on Future Process Support

The prerequisites of achieving these strategic aims vary greatly depending on the individual user department at hand. There are a number of highly specific requirements involved, as the following examples illustrate:

  • Financial departments need the ability to compile closings – ideally with just a click – without spending time reconciling warehouse inventory, accounting, and controlling.
  • Demand and MRP runs should be carried out on an ad hoc basis or several times in sequence, including for simulation purposes.
  • Production systems need to be flexible enough to accommodate short-notice changes to even the smallest batches while still meeting specifications regarding lead time or scrap KPIs.
  • Value chains should balance supply and demand in a more dynamic way and factor in relevant information in real time.
  • Sales departments are looking to take full advantage of customized product variants. Customers appreciate a wide range of choices, after all – especially when their items are delivered on time in the expected level of quality.
  • New services related to product usage are meant to generate excitement among users and tap into additional revenue.


ERP Undergoing Digital Transformation

While conventional ERP systems are running up against their technical limitations, IT landscapes have grown highly complex. As a result, the demands user departments are placing on these systems as they try to reach their strategic goals are very difficult to meet in a timely, budget-compliant fashion. Why is that?


Data Capacity and Flexibility

Digitalization is causing the number and complexity of system postings to rise at a rapid pace. The tremendous increase in processes alone is putting considerable pressure on the traditional ERP systems designated to handle them.

When manufacturing products for the smallest customer segments (or even individual customers), every product variant continuously generates its own document chain, including on production orders and stock and delivery items. These documents then have to be processes by the cost centers, warehouses, and asset accounting departments involved, or for profit-and-loss statements.


Transparency and Intelligence

Once the requirements concerning data capacity and flexibility are met, controlling and monitoring all of the steps in the value chain in real time becomes an important success factor. Learning of market developments or the responses of a particular customer group several days after they occur is simply no longer acceptable. Management decisions need to be made and implemented based on the latest events.

Said implementation, however, also necessitates immediate arrangements and simulations based on real-time data. On the other hand, all of the processes within an ERP system that require a decision to be made will slow down overall operations. Fine-tuning factors such as asset utilization, waste reduction, stock-outs, and warehouse inventory in the face of increasing complexity thus demands a system capable of recommending actions and addressing errors in a proactive way, even as the automation of routine business operations continues to progress. This transformation also places much higher requirements on the interfaces used by processors, planners, and managers.


SAP S/4HANA: Providing Answers to Digital Challenges

As a next-generation ERP system, SAP S/4HANA is specifically designed to help companies take on the challenges described herein. That includes the user department requirements cited as examples above. SAP S/4HANA offers the answers manufacturing firms need to accomplish their three main strategic objectives.

By fully eliminating key technical obstacles and making technical processes available in all areas, the suite promotes both a focus on the customer and the development of innovative business models. SAP S/4HANA also provides for data capacity and flexibility by making all of the information it contains instantly usable, all while maintaining optimal response times. Meanwhile, the transparency and intelligence it offers are tailored to each user’s specific role. Thanks to SAP S/4HANA’s smart user interface, for example, users can call up predictive support straight from the software. This makes it possible to address the cause of a problem before it even crops up, which significantly increases productivity.

To achieve cost efficiency – the third main strategic goal of manufacturing companies – along with speed and flexibility, SAP S/4HANA is designed to reduce complexity. The suite includes an innovative data storage system that helps lower operating costs in IT, which frees up needed resources that can be used for business activities. SAP S/4HANA also makes it possible to forgo separate systems for ERP data analysis and consolidate a number of other ERP installations. In some cases, it even makes applications like SAP Advanced Planning and Optimization (SAP APO) and separate supply chain management systems obsolete.

In addition, SAP S/4HANA is available in a public cloud variant that enables users (at branch offices, for example) to take advantage of ERP functions in just a few weeks. This version also integrates with systems in place at your company’s headquarters.

By continuing SAP’s 40-year success story in this field without the technical limitations of the past, SAP S/4HANA takes ERP to the next evolutionary level. It provides benefits to all types of user departments, from financial and cost accounting to all manufacturing-related processes, logistics, and sales. Manufacturing companies that switch to SAP S/4HANA now stand to take a significant leap in their development.

Neil How
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Neil How

Neil ran his first SAP transformation programme in his early twenties. He spent the next 21 years working both client side and for various consultancies running numerous SAP programmes. After successfully completing over 15 full lifecycles he took a senior leadership/board position and his work moved onto creating the same success for others.

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