Welcome back to the next blog in the SAP S/4HANA Cloud 2-tier ERP blog series.
In the last one, we discussed about the value proposition that can be achieved by enterprises by running independent ERP systems in their subsidiaries. In parallel, we also weighed the benefits that SAP S/4HANA Cloud brings to the table.
We are now ready for some deep dive on specific business areas. In this blog, we will consider s
ales processes in a 2-tier model and see how SAP S/4HANA Cloud can support the organization and subsidiaries to run in an independent yet integrated fashion.
Enterprises may choose to adapt a 2 Tier model for different reasons which may vary from growing businesses to acquisitions. With this, the degree of autonomy that the subsidiaries will have could vary. On one hand, subsidiaries may be working as independent sales office with complete ability to start the sales activity, progress to fulfillment as well as handle the possible subsequent processes like returns etc. On the other hand, we may have subsidiaries who have a more collaborative business process model with the headquarters (HQ) in which the subsidiary acts as a mere sales office with sales presence, whereas the delivery of the material is the responsibility of the HQ. The below pictures show in a nutshell the above outlined possibilities.
Let us look deeper into the former case.
A sales office is in most cases, strategically located based on the customer reach for the products or services that it sells. An enterprise may decide to have multiple subsidiaries based on the target regions of sale. To bring in an optimized business model focusing on lower financial expenditures, the subsidiaries may be operating independently.
To elaborate a typical sales process – a customer may start the process by approaching the sales office for quotations. A variant of this scenario could be that the sales representative approaches the customers in his region, to provide insights about the new products that may be of interest to the customer. The starting point could even be a marketing campaign that helps identify opportunities.
One of the key steps is the conversion of the predecessor documents from sales activities to a sales order. The HQ, being keen on monitoring the performance and progress at the subsidiary, seeks visibility of information. The purpose may be to analyze the data from the subsidiary and produce actionable outcome – as an example, a central sales manager at the HQ may be centrally accountable for the performance and success of multiple subsidiaries. In such cases, the sales manager would closely monitor the phases of the order to cash process even starting from the percentage of opportunities that got converted to sales orders, to the fraction of timely deliveries versus the deliveries with delay from the promised date, to the status of the invoices that are past due.
A subsidiary which can run a complete order to cash process independently, can rely on the capability of SAP S/4HANA Cloud to take care of all the processes starting from an inquiry, quotation, create sales order, customer credit check, print order confirmation, create delivery, execute picking, post goods issue, create billing document. Similarly, customer returns process is completely supported as well for a 2 Tier scenario.
The other processes that are necessary to meet the business needs for operation as an independent subsidiary are supported by the SAP S/4HANA Cloud best practices. To specifically support the 2 Tier model, several points of integration have been identified for the 2-tier roadmap to let the subsidiary share the needed information with HQ or vice versa during the order to cash process and returns, thus enabling seamless process integration as well as enabling decision making possibility at the HQ. To name a few:
- sales orders status visibility
- stock visibility to headquarters
- financial reporting
These are being fulfilled by whitelisted APIs (SOAP/ REST) or whitelisted CDS views. Based on customer experience, more integration points are being identified to support other business processes as well to strengthen the independent subsidiary case.
Talking about the latter case – subsidiaries who have a tighter integration with the headquarters, the set-up is specific to the business model adopted by the enterprise. If your subsidiary is expected to have a more integrated sales process, the 2 Tier sell from stock – drop shipment scenario can be the answer.
The picture below depicts the complex process and the necessary integration between the subsidiary and the headquarters.
The 2 Tier scenario – “Sell from stock at a subsidiary with drop shipment from headquarters” provides prepackaged integration at every identified point where the subsidiary interacts with the HQ:
- sending purchase order from the subsidiary which gets converted into a sales order at the headquarter
- order confirmation back from the HQ to subsidiary and subsequently to the customer
- shipment notice to the subsidiary and subsequently to the customer
- invoice to the subsidiary
Whereas the above integration points are necessary for the process to run, SAP S/4HANA Cloud also provides integration points to enable reporting/ analytical needs as mentioned in our initial case where subsidiary functions independently. The returns process is covered, similarly.
To summarize, SAP S/4HANA Cloud for subsidiaries provides agility, flexibility in sales processes between the subsidiaries and the HQ to enable a seamless process flow.
Stay tuned to for the next blog in this series which will focus on Financial Planning and Consolidation.
For more information on SAP S/4HANA Cloud, check out the following links:
- S/4HANA cloud release information: http://www.sap.com/s4-cloudrelease
- SAP S/4HANA Cloud use case series
- Best practices for SAP S/4HANA Cloud here
- S/4HANA Cloud 2-Tier ERP series: The Collection here