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Author's profile photo Sven Denecken

Cloud Myth Busting: Myth #3 – Is Manufacturing Really Possible in the SaaS world?

Welcome to the third blog post of the blog series to dispel myths about Cloud ERP. Today we will debunk the myth that Manufacturing is not possible in the SaaS world. This blog post builds on the first two Cloud Myth Busting blog posts that you can review here and here.

A common belief exists in the market that cloud applications are best suited for front office applications and professional services companies, and that handling product and manufacturing companies’ processes is too complex for a SaaS model.

The product and manufacturing companies fall into one, or a mix of, the following categories: Buy-sell, in-house production or outsourced and/or subcontracting production. In this blog post, we will highlight the breadth and depth of the functionality offered by SAP S/4HANA Cloud to address the needs of manufacturing companies already today and how they are leveraging the unique opportunity presented by cloud solutions.

Breadth of Functionality – Industries and Manufacturing Types

 

Each industry has their unique manufacturing requirements. For example, the processes associated with Electronics Manufacturing are quite different from Chemical or Automobile Manufacturing. SAP S/4HANA Cloud offers a breadth of manufacturing options and processes to meet these different industry requirements. The main manufacturing options in the Cloud are:

  • Discrete Manufacturing
  • Process Manufacturing
  • Repetitive Manufacturing
  • Outsourced Manufacturing
  • Just-in-Time Manufacturing
  • Kanban Manufacturing

Customers in High Tech, Industrial Machinery, and Consumer Goods industries can leverage the rich functionality offered by Discrete Manufacturing, whereas those in Chemical, Mining, and Oil and Gas can take advantage of Process Manufacturing. Our Automobile industry customers can benefit from Just-in-Time and Repetitive Manufacturing.

As a result of globalization and an increase in specialized manufacturing processes, subcontracting and outsourced manufacturing – and lately insource/near shore again – have become common trends. Companies seeking to combine outsource / insource, off shore/near shore their manufacturing or specific manufacturing processes can take advantage of SaaS solutions that can be set up quickly and still adapt quickly. Extensibility plays a growing importance in the volatile environment we are all in.

Depth of Functionality – Functional Capabilities and End-to-End Process

 

Very often conversations start with features&functions, less so with standardization which we think would be healthier – but we will get there. SAP S/4HANA Cloud offers in-depth functionality in the Supply Chain and Manufacturing areas, so let’s start there.

Functional Capabilities view:

SAP S/4HANA Cloud offers rich functionalities in the Supply Chain area, ranging from Inventory Management to order processing and delivery as well as Transportation Management; thus, reducing inventory levels and stockouts and increasing on-time delivery performance. With the integrated finance there is real-time view of the financial position.

The major functionality provided by the Supply Chain scope includes:

  • Inventory Management
  • Warehouse Management
  • Advanced Order Promising
  • Delivery and Transportation Management
  • Logistics Material Identification
  • Built-in support for running your Warehouse Processes on Mobile RF Devices

Figure 1. Supply Chain in SAP S/4HANA Cloud

In the Manufacturing area, SAP S/4HANA Cloud offers a variety of functionalities such as production planning, production execution, and Quality Management, improving capacity utilization and planner productivity while reducing total manufacturing costs and production lead time. Apart from traditional MRP (Materials Requirement Planning), SAP S/4HANA Cloud also offers the latest advancements in planning with predictive MRP and demand-driven replenishment.

The major functionalities in the Manufacturing area include:

  • Production Engineering
  • Production Planning
  • Manufacturing Operations
  • Quality Management
  • Environment, Health, and Safety
  • Manufacturing Insights

Figure 2. Manufacturing in SAP S/4HANA Cloud

 

End-to-End Process View:

Companies can take advantage of the end-to-end integrated processes from planning to execution to financial settlements. For example, the list of end-to-end integrated processes which can be executed in the system includes:

  • Forecast: Generated statistical forecast or planned independent requirement upload
  • Materials Requirement Planning (MRP): Traditional MRP, Predictive MRP, DDR (demand-driven replenishment)
  • Planned Proposals: MRP Output: Purchase or Production Proposals
  • Capacity Planning: Work Center or Resource Planning and leveling
  • Production Scheduling and Production Orders: Re-allocation of operations, shifts, timing and production order release for execution
  • Materials Replenishment: Staging of input materials for production
  • Production Confirmation: Operation yield and machine and labor time confirmation
  • Quality Inspection: In-Process and Finished Goods Inspection
  • Finished Product Goods Receipt: Receipt of Finished Goods into Inventory
  • Financial Settlement: WIP, Overhead Settlement

Out of Box Integration with Other SAP and Third-Party Solutions

 

SAP S/4HANA Cloud provides breadth and in-depth of functionality in itself, but there might still be a need to integrate this with other cloud or on-premise SAP and third-party solutions. Apart from standard whitelisted APIs, there is also out-of-the-box integration to other systems using iFlows. Some of these standard, out-of-the-box integrations include:

  • SAP S/4HANA Cloud integration with SAP Digital Manufacturing Cloud for Shop Floor execution via Integration Templates
  • SAP S/4HANA Cloud integration with SAP on-premise Extended Warehouse Management for existing Warehouse Management installations
  • SAP S/4HANA Cloud integration with third-party solutions via EDI and public APIs
  • SAP S/4HANA Cloud Equipment Integration via public APIs (SAP API Hub for SAP S/4HANA Cloud) for production confirmations, quality, etc.

 

2-Tier as new predominant approach in larger companies

 

Not just lately, but lately growing much faster than ever – we see a growing need to place significant workload for manufacturing and supply chain to SaaS. Traditionally, SAP ERP deployments in on-premise organizations have been built in a centralized way that allowed organizations to standardize and centrally govern business processes and systems.

With the introduction of cloud solutions and a standardized mindset, customers don’t need to oversee standardization of business processes and can instead leverage the standardized business processes delivered by SAP. At the same time, by deploying cloud solutions for dedicated workloads, subsidiaries, M&A – just to mention some classical scenarios – they can benefit from greater agility, increased speed, standardization, and the lower cost of operating the solution

 

Check out the latest whitepaper on the 2Tier topic here, some latest innovations here – and scan opportunities starting from there.

 

 

Conclusion

As illustrated above, there should be no doubt that manufacturing companies can take advantage of the breadth and depth of functionalities available in the cloud to run their business.

In one brilliant example, an SAP S/4HANA Cloud customer recently realized the real value of our cloud solution by providing direct controlled access of their SAP S/4HANA Cloud instance to their third-party Logistics provider, allowing the 3PL to perform inventory transaction and production confirmation directly in the system and providing real-time inventory and increased inventory accuracy. This would not have been possible in an on-premise environment without establishing integration between the systems of two companies. Thus, the promise of the cloud environment provides a unique opportunity to improve Supply Chain efficiency.

Links and resources:

  • SAP S/4HANA Cloud for Manufacturing and Supply Chain:

https://blogs.sap.com/2018/08/15/sap-s4hana-cloud-for-manufacturing-supply-chain/

  • Discrete Industries in SAP S/4HANA Cloud

https://blogs.sap.com/2021/05/07/discrete-industries-in-sap-s-4hana-cloud-the-link-collection/

  • Open SAP Microlearning – Supply Chain

https://microlearning.opensap.com/category/Supply+Chain/173267521

  • Open SAP Microlearning – Manufacturing

https://microlearning.opensap.com/category/Manufacturing/208095823

 

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: http://www.sap.com/s4-cloudrelease
  • 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
  • What’s New here

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      Author's profile photo Markus Florian Oertelt
      Markus Florian Oertelt

      Excellent overview blog post! Totally agree that manufacturing and supply chain work in a SaaS ERP world - reducing complexity and TCO!