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Hybrid Cloud ERP – Process in Cross System Landscape

In this blog, I would be taking you through the business processes which can be run in hybrid deployment model by providing specific example on stock transfer process. One of the key process involved in integrating most of the scenarios is Sales and Purchase. We have already deployed out of the box integration scenarios as a part scope item in S/4HANA Cloud Best Practices.

You can refer the blog published on ‘Hybrid Cloud is the new black’ which discuss on the various hybrid deployment offerings. You can also refer the blog ‘Master Data and Integration in Hybrid Cloud Deployment’ which is the prerequisite process before going for the business process integration.

Now let us go in to the detail with the specific example on stock transfer and how the process works in hybrid cloud ERP.

Let us first understand how the stock transfer is managed in single system landscape. Generally, in stock transfer exchange of documents happens through stock transfer orders in a single system landscape. The companies may need to address challenges owing to the local regulations, transfer prices and so on.

Predominantly most of the companies follow following options of stock transfer:

Intra Company Stock Transfer – in this case, stock transfer is between two plants which belongs to same company as shown in following picture

Figure 1: Intra-Company Stock Transfer

Inter Company Stock Transfer – in this case, stock transfer is between the plants which are part of two different companies as shown in following picture

Figure 2: Inter-Company Stock Transfer

The process is same even for the company or the plant is in different geographical location, barring localization / legal restrictions.

With the result of digitization and to be competitive in the market, companies would opt for hybrid system landscape which has following advantages:

  • Opportunity to scale via optimal combination of cloud and on-premise solutions
  • Capitalizing on latest features and continuous innovations to maintain market leadership
  • Data visibility across the entire company
  • Consistent business practices across subsidiaries with reduced risk and complexity

There are certain constraints the companies would need to address before they go for hybrid approach of deployment. One of the constraints is integrating the business process for stock transfer process through Sales and Purchase route.

Hybrid deployment is offered through SAP’s SaaS based solution through S/4HANA Cloud for their Tier 2 and S/4HANA On-Premise or S/4HANA Single Tenant or Non-SAP ERP or S/4HANA Cloud for their Tier 1, based on industries’ requirement.

One of the critical process involved in the stock transfer is Ownership transfer. Let us understand the details:

Ownership Transfer and Stock in Transit visibility

One of the key business needs in the sales – purchase process is ownership transfer between multiple entities and handling of stock visibility. There could also be a requirement to view valuated stock in transit during the process of transfer of the goods between different tiers. With having the visibility of SIT or VSIT companies would also like to control the ownership transfer – at what stage should the quantity to be transferred to the customer.

Following are the approaches which would be used to define and control the ownership transfer.

Figure 3: Process of Ownership Transfer

Above explained process of ownership transfer can easily be adapted in a single system landscape owing to the org structure defined in a single box. In hybrid system landscape, customer need to follow different approach which explained below based on various deployment model:

Supplier with SAP S/4HANA On-Premise or ECC with EHP5 onwards:

In this model, the trigger point of the process for material transfer would be SAP S/4HANA OP or ECC with EHP5 onwards. You can consider the example of Sales – Purchase scenario between Headquarters and Subsidiary. The same scenario can also be applicable for various other scenarios like Drop-shipment sales, Subcontracting and so on.

To get the details of Stock in Transit or Valuated Stock in Transit, customer can perform the available configuration in SAP S/4HANA OP or ECC EHP 5 onwards with the standard movement type defined. Customer can also use the concept of Proof of Delivery (POD) to define the ownership transfer along with the incoterms. This would need additional enhancements based on the customers’ requirement.

Both Supplier and Customer with SAP S/4HANA Cloud:

This is the future scenario with respect to tracking of stock in transit or valuated stock in transit and is more relevant in B2B business. This is the potential use case for future to handle stock in transit or valuated stock in transit. In this model, both originating location or the supplier and the receiving location or the customer are both operated with SAP S/4HANA Cloud. Standard best practice content is deployed to cater this requirement.

Supplier with any Third-Party ERP:

This model is applicable for the business process where the customer would like to integrate their existing Third-Party ERP system with S/4HANA Cloud for their subsidiaries. Customer can adopt the same process which has been explained for “Supplier with SAP S/4HANA OP or ECC with EHP5 onwards” and can make use of their ERP system for getting the reporting requirements for the stock in transit or valuated stock in transit.

This blog helps the customer to understand the common and most widely used deployment scenario and the approach customer can follow with SAP S/4HANA Cloud.

You can watch out this space for Whitepaper “Business Process in Cross System Hybrid Landscape” which is planned to be released soon.

Stay tuned for further blogs in this series… and as always, keep your feedback flowing.

For more information on SAP S/4HANA Cloud, check out the following links:

Follow us via @SAP and #S4HANA, or myself via @Prakash Karkihallimath

 

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