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Author's profile photo Sven Denecken

Two-Tier ERP: Service Order Management in a Headquarter-Subsidiary Model

To integrate business processes which vary significantly from organization to organization and often reflect unique business needs, companies need to right-engineer their approach. To enable such an integration and to sustain growth, companies need scalable solutions out of the box. When a company implements different ERP systems for different parts of the organization, the industry calls this a Two-Tier ERP strategy. A combination of on-premise/Cloud and cloud solutions enables customers to better standardize their processes and helps to innovate and therefore differentiate themselves from the market.

There are various deployment models that companies can adopt to integrate and standardize their processes. For instance, the companies can go for a Headquarters and Subsidiary model, Supply chain network or separate cloud ERP systems. With SAP S/4 HANA Cloud, SAP offers various deployment possibilities with out of the box integration.

The headquarter processes the customer’s order and details of the service recipient are communicated as a service order to the subsidiary. Services are directly delivered from the subsidiary to the customer with seamless process integration between headquarters and subsidiary.

The process starts when the customer places an order at the headquarter for services. The internal sales representative at the headquarter creates the customer’s sales order, where a purchase requisition is created for the sales order. The purchase requisition is converted to a purchase order from the displayed list of purchase requisitions. Once the purchase order is approved, an Electronic Data Interchange (EDI) based approach is used to automatically transfer the purchase order information for the creation of a service order at the subsidiary.

Customer service manager will receive the automatically generated service order at the subsidiary with sold-to, bill to and pay to information coming from the headquarter and ship-to information for the end customer. Once the service order is confirmed, the EDI based approach is used to confirm the purchase order at the headquarter.

As soon as the service order is confirmed, the service technician or service customer manager at the subsidiary confirms and provides the service. Once the service is delivered the purchaser at the headquarters posts the service entry sheet (this is an optional step).

The billing document is created at the subsidiary and billed to the headquarter; consequently, corresponding supplier invoice will be created automatically at the headquarter. Finally, the headquarter bills the customer.

Note: Customers who use SAP S/4HANA on-premise and are using Service orders can start the process with the Service order creation for their customers at the headquarter instead of starting with the sales order. Since this service is to be provided by the subsidiary, a purchase requisition is created for the service order.

Through Two-Tier ERP solutions, seamless orchestration of processes between headquarters and subsidiary along with the below listed integration points is enabled.

  1. Purchase orders at the headquarter will be automatically transformed to the service order at the subsidiary.
  2. The subsidiary confirms the service order and subsequently the purchase order at the headquarter is updated.
  3. The subsidiary creates billing documents; corresponding supplier invoice will be created at headquarters.

Benefits resulting for your business from implementing a Two-Tier ERP system:

  • Experience greater automation for service delivery in Two-Tier ERP. Seamless integration of transactional steps like creation of Service Order at the subsidiary and vendor invoice at the headquarter
  • Reduce time and manual efforts for exchanging messages and information. Services are directly delivered from the subsidiary to the customer
  • Increase productivity, performance, and work satisfaction of sales professionals and accountants
  • Save costs for paper, postage, mailing, records management
  • Enable higher degrees of scalability with process efficiency gains


SAP S/4HANA Insight Series

Earlier this quarter, we setup the SAP S/4HANA Insight Series to bring together deep product, process and solution insights from various product experts across our solution portfolio. Here you will find blogposts on a range of SAP S/4HANA topics like, Central Business Configuration, Intelligent Technologies, functional topics, analytics, user authentication, cloud operations and much more. This is an ongoing series, and we currently have a large roadmap of topics we plan to blog about in the coming months. You can refer all our published blogposts in SAP S/4HANA Insight Series. This blog series is a complementary to the SAP S/4HANA Value Series

Inside SAP S/4HANA Podcast

As always, I would like to encourage you to subscribe to our podcast “Inside SAP S/4HANA”. This podcast leverages the unique knowledge and expertise of SAP S/4HANA product experts, partners, and customers to address your needs by sharing product insights and project best practice. There is no customer success without product success and project success; we help you get to the next level and make your SAP S/4HANA projects a success. Subscribe now and benefit from the shared knowledge.


openSAP microlearnings for SAP S/4HANA

Just a couple of months ago, we launched openSAP microlearnings for SAP S/4HANA as an exciting new learning opportunity. What began with a small batch of 20 videos, has now become a channel with more than 50 microlearnings that have generated over 20,000 views since then. Today we cover multiple lines of business, like Finance and Manufacturing & Supply Chain, and key technology topics like Master Data Management, Extensibility, User Experience, and Upgrade Management. We are continuously adding new microlearnings to the SAP S/4HANA channel, so make sure you check them out.


Your voice matters!

If you want to learn more and actively engage with SAP subject matter experts on SAP S/4HANA Cloud, join our SAP S/4HANA Cloud Community – now fully integrated with SAP Community. The community brings together SAP S/4HANA Cloud customers, partners and SAP experts and has a clear mission: deliver an interactive community to engage with one another about best practices and product solutions. We invite you to explore the new SAP S/4HANA Cloud Community ‘one-stop shop’ as the central place for all resources, tools, content questions, answers and connect with experts to guide you through your SAP S/4HANA Cloud journey.


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

  • The power of best-in-class and Next Practices business content for a modern ERP blog post
  • SAP S/4HANA Cloud: The Intelligent ERP blog post
  • SAP S/4HANA Cloud: New Product Releases here
  • Latest SAP S/4HANA Cloud Release blog posts here
  • SAP Intelligent Robotic Process Automation Content here
  • SAP S/4HANA Cloud release info:
  • SAP S/4HANA PSCC Digital Enablement Wheel here
  • Inside SAP S/4HANA Podcast here
  • SAP S/4HANA Cloud Community here
  • SAP Activate Community here
  • Best practices for SAP S/4HANA Cloud here
  • Help Portal Product Page here


Follow us via @SAP and #S4HANA, or myself via @SDenecken


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