Transform Manufacturing

with SAP S/4HANA ®

1/19
White Paper Background
and Key Definitions
The information outlined below is helpful to understand the contents
of this value proposition white paper. It gives clear details on the objective
and scope of the paper. Key definitions are also provided for select
sections of the paper to provide further clarification.

DELIVERABLE OBJECTIVE With the value proposition section, all quantified

Provides information on the value in moving from benefits are conservative estimated improvement
an ERP on a traditional database to SAP S/4HANA® ranges tied to the top value drivers. They are based on
and cloud and line-of-business (LoB) solutions early adopters or new developments/enhancements of
SAP S/4HANA + LoB and cloud enhancements that can
drive value. Keep in mind that these should be used as
KEY DEFINITIONS
a guide. We recommend working together to assess your
Within the process and sub-process deep-dives, there is current maturity and the value of moving to SAP S/4HANA
detailed content in table format articulating the following: in order to develop a personalized business case.
Pain points
Represents major customer business and IT challenges
Current state with ERP on traditional database Detailed road map available on SAP.com
Represents the ERP capabilities that are available (Customer Login Required)
on a traditional database This document and SAP’s strategy and possible future
developments are subject to change and may be changed
SAP S/4HANA capabilities
by SAP at any time for any reason without notice. This
Represents the capabilities shipped with the latest
document is provided without a warranty of any kind,
release of SAP S/4HANA
either express or implied, included but not limited to,
Cloud/LoB + SAP S/4HANA capabilities the implied warranties of merchantability, fitness for
Represents all other solutions that can be integrated a particular purpose, or non-infringement.
with SAP S/4HANA and provides business value.
For example, SAP S/4HANA + the SAP Integrated
Business Planning solution, or SAP S/4HANA + the
SAP Manufacturing Integration and Intelligence (SAP MII)
application, etc. These solutions are not embedded in
SAP S/4HANA, but integration scenarios exist for these
Planned innovations and future direction*
Represents new functionalities planned for future release
of SAP S/4HANA, or new integration possibilities planned
for SAP S/4HANA
2/19
Agenda

SAP S/4HANA Manufacturing Capability

and Value Proposition Overview 4

Manufacturing Planning and Available to Promise Deep-Dive 7

Manufacturing Orchestration and Execution Deep-Dive 9

Inventory and Basic Warehouse Management Deep-Dive 13

Quality Management Deep-Dive 15

Value Proposition 17

Customer References 18

3/19
SAP S/4HANA Manufacturing Overview
TRANSFORM MANUFACTURING ON SAP S/4HANA
Manufacturing is undergoing fundamental changes driven by dynamic market trends, demand variability,
increasing product configuration, omnichannel sales and marketing, and compressed delivery times.
The “market of one” is becoming reality as customers
require products that are tailored to their specific
needs or desires; they expect rapid delivery and
yet they demand the highest quality at competitive
prices. Furthermore, they have traceability and
genealogy requirements stemming from product
safety, legal, or maintenance needs.
The combination of these factors is straining
every aspect of the manufacturing lifecycle, from
managing the supply chain, bill of material (BOM),
and order management, to engineering design,
through manufacturing engineering, to the shop
floor, logistics, and service. How can manufacturing
businesses reduce these pressures and not
just compete in this market environment,
but actually thrive?
A focused effort is needed to integrate systems,
streamline processes, capture reams of data and
analyze it intelligently to make sound decisions,
adjust resources, and reduce waste. In order to
achieve this digital transformation effectively,
a high degree of efficiency in manufacturing
processes and automation in business decisions
must be established. Automation of processes
from material requirements planning (MRP),
through production, to distribution, with intelligence
that predicts actions, enables more accurate
forecasts, and provides the agility to make individual
adjustments to products, optimizing customer
desire, revenue, and margins.
Moreover, this needs to be done in a market that predictive indicators for preventative maintenance
expects the manufacturer to operate a live business, and product service, all while understanding
where “right now” information is dictating processes the cost implications and tradeoffs scenarios.
and driving decisions. SAP S/4HANA enables you to react quickly to
variable market demand, predict operational
However, when companies are thinking about
issues, and improve manufacturing performance
digital transformation, they often begin on the “edge”
by streamlining and integrating the entire lifecycle
in areas like sales and marketing. This approach
– from planning and scheduling, to sequencing
ignores the fact that, without an agile manufacturing
and execution, to analysis. With SAP S/4HANA
process, transformed for the dynamic and resource-
providing the most current information on demand,
constrained environment, it becomes impossible to
manufacturing processes, resources, and capacity
serve the demands of the customer. Many companies
are tightly aligned to market and customer demands
have evolved to a complex core business system
to ensure optimal production efficiency and profitable
through organic growth or through M&A, and, in
and timely delivery of products. The holistic, single-
many cases, have deployed multiple systems across
source solution provides the optimal transparency
multiple plants. This results in a severe lack of
and capabilities for end-to-end analysis.
integrated visibility into enterprise business systems.
Those who try to merely integrate systems find that The effort involved to identify and implement
it leads to more complexity, resulting in a high cost continuous improvement or optimization measures
of ownership, inability to respond adequately to is becoming unsustainable. Therefore, in future
changing demand, data synchronization issues, enhancements, SAP intends to incorporate artificial
data latency, and poorly informed decision-making intelligence services such as machine learning to
based on dated information. further enable automation and insight to action.
The SAP system would continuously learn from
To help mitigate these challenges, SAP designed
the actual data and would automatically apply
SAP S/4HANA as a digital core, a single holistic
customer-defined rules to either propose measures,
solution that encompasses enterprise planning,
change master data, or adapt processes so the user
manufacturing execution, and service. SAP S/4HANA
can focus on exceptions and other business priorities.
enables unprecedented harmonization of planning
and execution processes with the capacity to connect
Internet of Things (IoT) devices to automatically
respond to fluctuating signals, as well as to provide
4/19
 SAP S/4HANA Manufacturing Overview

MANUFACTURING CAPABILITIES

Outlined below are the primary capabilities for manufacturing where value can be achieved
through SAP S/4HANA + SAP cloud and LoB solutions.

Manufacturing Manufacturing Inventory and Quality

Planning and Orchestration Basic Warehouse Management
Available to Promise and Execution Management
• Material requirements •P
 roduction control • Goods issue • Quality engineering
planning •M
 anufacturing execution • Goods receipt • Quality inspection
• Order promising and •S
 ubcontracting • Inventory management • Quality improvement
available to promise
•E
 xternal processing • Traceability
•R
 epetitive manufacturing
•K
 anban
• Just-in-time (JIT) outbound

5/19
 SAP S/4HANA Manufacturing Overview

SAP S/4HANA MANUFACTURING VALUE PROPOSITION SUMMARY

SAP S/4HANA enables companies to integrate and embed intelligence

in manufacturing processes with one single source of live information.
It provides an optimal coordination of planning and execution processes,
covering all aspects of the manufacturing cycle from planning to shop floor.

• Faster business outcomes with reduced operational cost, •R

thanks to simplified system landscapes. Reduced number
of systems and interfaces because of a redesigned data
structure and embedded solutions in SAP S/4HANA
• Live inventory data combined with drastically reduced
MRP processing times allows for a more transparent and
responsive exception-based working approach, thereby
improving planning accuracy and reducing inventory cost
• Comprehensive available-to-promise (ATP)
functionality, which optimizes processes, such
as back order management or release of shipments,
with easy-to-use SAP Fiori® apps and improves
product delivery cycle times
 esponsive to demand fluctuations and
variable product designs through live inventory
management and material flow analysis that
optimizes manufacturing resources, heightens
productivity, and maximizes throughput
•D
 esigned with the SAP Fiori user experience
to deliver personalized, responsive, and intuitive
applications across all facets of the manufacturing
process, on any device, anywhere
•C
 aters to the “market of one” with products tailored
to the specific needs and desires of the customers

• Immediate insights on information with planning,

execution, prediction, and simulation analysis done
at the finest level of granularity to drive faster business
decisions and optimal manufacturing performance

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 Manufacturing Planning and
Available to Promise Deep-Dive

Typical Pain Points Current State with ERP SAP S/4HANA Cloud/LoB Extension Planned Innovations
Business Benefits
on Traditional Database Enhancements Enhancements and Future Directions

• Long and overnight • Planning runs at a • Live MRP available • Embedded production • Reduced manufacturing
batch runs result in predefined times with • Improved effectiveness planning and detailed cycle time
planning inefficiencies data that first must be of planning with more scheduling capabilities • Improved manufacturing
• Inflexibility to include consolidated from frequent and faster MRP with a single planning run function planning
real-time, changing various systems runs – multiple times a • Extension of MRP efficiency
demands in the • Separate manufacturing day and 10 times faster scenario coverage, • Reduced inventory levels
planning run leads planning processes • New MRP cockpit like make-to-order
to outdated and available in planning supports exception- or engineer-to-order
inaccurate planning systems and ERP based working model • New graphical
systems accompanied by planning table for
simulation features capacity load leveling
and decision support and sequence planning
with easy-to-use
SAP Fiori apps

• Complexity in back Low-volume back order • Easy-to-use/ • Flexible order • Reduction in back-
order processing processing supported high-volume back confirmation based ordered items cancelled
• Inefficient strategies order processing on business priorities • Improved productivity
to fulfill orders from • Performance in advanced ATP back in order fulfillment
the entire network or improvements order processing processes
to substitute products for releasing large • SAP Fiori app to
automatically production orders enable timely actions
on short-term supply
and demand changes

(continued next page)

7/19
 Manufacturing Planning and Available to Promise Deep-Dive

Typical Pain Points Current State with ERP SAP S/4HANA Cloud/LoB Extension Planned Innovations
Business Benefits
on Traditional Database Enhancements Enhancements and Future Directions

• Higher cost of ownership Sophisticated ATP • In the digital core of •A

 TP enhancements • Reduction in revenue loss
for available-to-promise requirements, like SAP S/4HANA, ERP like confirmation based due to fulfillment issues
functionality in ERP, global ATP, require and planning functions on sales allocations • Reduction in orders lost
which requires the system integration are available in the via sales rules, such
• Higher customer order
use of supplemental with additional same system, on as fair share, ranked,
fill rate
software products products, like the SAP the same database or prioritized share
Advanced Planning • Lower cost of ownership
• Difficult to fulfill • Mass product availability • Improved order
customer orders on time and Optimization check enabled by the promising in near-
with the proper quantity component SAP HANA database term horizon based
in near-term horizon for sales, planned, and on short-term changes
• Inefficient strategies production orders • SAP Fiori apps for sales
to sell scarce products • Advanced ATP check product allocation
in a fair manner for all items of multiple
order at once

Disparate planning and
transactional systems
lead to data integration
latency and errors
Inventory management ERP and planning are  educed supply chain
R
systems and planning part of the same digital planning technology cost
systems need core of SAP S/4HANA
integration with
ERP for material
requirement planning

8/19
 Manufacturing Orchestration and Execution

Typical Pain Points Current State with ERP SAP S/4HANA Cloud/LoB Extension Planned Innovations
Business Benefits
on Traditional Database Enhancements Enhancements and Future Directions

Overhead in managing The SAP Manufacturing • In combination Shop floor cockpit • Reduction in
a disparate set of shop Execution application with SAP S/4HANA, for live production manufacturing
floor systems across integrates shop floor SAP Manufacturing visibility, orchestration, technology cost
multiple plants that with ERP and reporting Execution and and confirmation • Reduction in
are not integrated into systems SAP Manufacturing manufacturing
enterprise planning Integration and overhead cost
and business Intelligence (SAP MII)
• Improved collaboration
allow for end-to-end
and productivity
process integration
across the plant
• SAP Plant Connectivity
software provides
connectivity directly
to the shop floor
device to enable “lot
size of one” production

Complex and expensive SAP Business Suite Fundamentally new data Global and local Reduction in
system landscapes software provides models and functions deployment options with manufacturing
with multiple shop an integrated solution reduce the number the possibility to run SAP technology cost and
floor systems in from enterprise of systems required, S/4HANA at the global simplified architecture
distributed plants, planning to shop simplifying the IT headquarters while local
resulting in high TCO floor execution landscape and plants or regions run their
lowering TCO manufacturing operations
with SAP Manufacturing
Execution and SAP MII
on any database

(continued next page)

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Typical Pain Points
Lack of visibility into
production processes,
status, and performance
in enterprise systems
leads to inaccurate
decision-making
Limited system
flexibility and automation
available to cater to
the customization
demands in a cost-
effective manner
Manufacturing Orchestration and Execution
Current State with ERP SAP S/4HANA Cloud/LoB Extension Planned Innovations
Business Benefits
on Traditional Database Enhancements Enhancements and Future Directions
Manufacturing insights • Manufacturing insights Reduction in the
available with support offered on the SAP cost to support
from IT department HANA Cloud Platform manufacturing
using analytical as a cloud- based service intelligence
tools like SAP® encompassing all data
BusinessObjects™ sources, not just those
business intelligence from SAP
solutions • In combination with
SAP S/4HANA, SAP
Manufacturing Execution
and SAP Manufacturing
Integration and Intelligence
(SAP MII) allow for
dashboard creation,
without coding, for
real-time insights in to
all shop floor operations
and profitability metrics
SAP Business Suite IoT capabilities supporting Reduction in order
software provides machine-to-machine fulfillment lead time
solutions for variant connectivity, allowing for make-to-order
configuration and make- for automation and (MTO) scenario
to-order and assemble- unprecedented flexibility
to-order scenarios of manufacturing processes
(continued next page)
10/19
 Manufacturing Orchestration and Execution

Typical Pain Points Current State with ERP SAP S/4HANA Cloud/LoB Extension Planned Innovations
Business Benefits
on Traditional Database Enhancements Enhancements and Future Directions

Inefficient or ad hoc Visual manufacturing Visual manufacturing Engineering cockpit that • Improved manufacturing
handover of bill-of- planner for leveraging planner for leveraging uses 3D information to FTE efficiency
material information 3D CAD information, 3D CAD information, create manufacturing- • Simplified and enhanced
and design changes thereby simplifying thereby simplifying relevant master data digital collaboration
from engineering the handover process the handover process and efficiently handles
to manufacturing engineering changes

Complicated ecosystem; No standard integrated SAP Asset Intelligence • Reduction in

collaboration requires solution offered by Network: data about manufacturing
every manufacturer, SAP today; there machine operations, technology cost
service provider, or is a manual effort such as current state, • Reduced fixed
equipment operator to collaborate with usage profile, and asset service and
to link up with each business partners utilization, as well maintenance cost
business partner as about each serialized
• Reduction in
separately to exchange component that is
unplanned downtime
data on equipment used in the assembly
and components of the machine,
can be exchanged
via the network

(continued next page)

11/19
 Manufacturing Orchestration and Execution

Typical Pain Points Current State with ERP SAP S/4HANA Cloud/LoB Extension Planned Innovations
Business Benefits
on Traditional Database Enhancements Enhancements and Future Directions

Inefficient application • SAP Manufacturing UI simplification, role- Role-based apps • Further enhancements Improved manufacturing
proximity often requires Execution provides based (persona-based) provided by SAP of manufacturing apps execution FTE productivity
shop floor workers configurable, role- UI5/SAP Fiori apps Manufacturing • New SAP Fiori UX
to go to a central and place-specific to support production Execution and SAP MII, for complex assembly
terminal to make and personalized transactions (for tailored to the needs manufacturing
required entries, dashboards for example, order of operators with easy-
resulting in delays operators; SAP confirmations, operation to-use personalization
and errors Manufacturing confirmations, etc.) options available
Execution and on touch screen
SAP ERP need or mobile devices
to be integrated
• Touch screen operator
UIs for use on
manufacturing floor
• Browser-based
UI5/HTML5 mobile
applications for
wireless bar code
scanners used
on the shop floor

12/19
 Inventory and Basic Warehouse Management

Typical Pain Points Current State with ERP SAP S/4HANA Cloud/LoB Extension Planned Innovations
Business Benefits
on Traditional Database Enhancements Enhancements and Future Directions

• Delayed material • Inventory status is Live inventory • The SAP Extended •P

postings caused
by system locking
• Live inventory
behaviors
• Distributed systems
or pre-aggregated data
leads to inaccurate
stock reporting
• Material buffers are
needed that increase
average inventory levels
 erformance • Optimized
calculated overnight management through Warehouse optimization for goods inventory levels
redesigned data Management movement helps to
• Reduced inventory
model enables (SAP EWM) application enable efficient material
updates are not obsolescence and waste
unlimited simultaneous integrated with flow in high-volume
available; inventory • Reduced TCO through
material movements, SAP S/4HANA, production scenarios
status is reflected landscape simplification
which allows for supporting all levels of
in the system with •A
 bility to change lot
true transparency warehouse complexity
time offset size to “one,” enabling
on inventory and • The SAP Transportation better customer service
material flows Management (SAP TM)
•S
 AP EWM embedded
application integrated
in SAP S/4HANA core,
with SAP S/4HANA,
reduction of interface
supporting distribution
complexity, and enabling
and logistics holistically
change management
of deliveries
•S
 AP TM embedded
in SAP S/4HANA core,
significant reduction
of interface complexity,
and enabling additional
integrations

(continued next page)

13/19
 Inventory and Basic Warehouse Management

Typical Pain Points Current State with ERP SAP S/4HANA Cloud/LoB Extension Planned Innovations
Business Benefits
on Traditional Database Enhancements Enhancements and Future Directions

• Limited inventory Inventory analysis is Easy-to-use and Extended SAP Fiori apps • Increased inventory
visibility, thereby possible via a separate intuitive SAP Fiori apps for inventory analysis accuracy
increasing error analytical system with for inventory managers • Increased on-time
rates, driving supply data integration issues and warehouse clerks delivery performance
shortages, and and data latency
inhibiting profitable
inventory sourcing
• Lack of clear visibility
across the material
flow and inventory
monitoring results
in poor on-time
delivery performance

• I n-process valuation
leads to longer locks of
materials on site level
•C
 omplexity in valuating
inventories in multiple
currencies and for
different valuation
methods (legal/
profit center/
reporting purposes)
• Material ledger • Material ledger available Optimization of lock • Increased visibility
activation available as a default option; all behavior for moving into actual profitability,
along with functionality inventory valuation data average-priced allowing for margin
of actual costing; exists in material ledger, materials optimization
however, inventory removing redundancies • Increased inventory
valuation data and aggregates accuracy
exists in multiple • Faster actual costing
aggregated tables due to optimized code
• Inefficient processes based on SAP HANA,
for carrying out faster reporting as
actual costing needed for actual
redistribution/ costing, multiple
revaluation; currency and multiple
slow reporting valuation methods

14/19
 Quality Management

Typical Pain Points Current State with ERP SAP S/4HANA Cloud/LoB Extension Planned Innovations
Business Benefits
on Traditional Database Enhancements Enhancements and Future Directions

Difficulty getting Quality-management- Supports core quality Core quality Reduction in the cost
an end-to-end view relevant functions management processes management processes to support quality
of quality due to are integrated with for user roles of quality supported by new roles management
distributed systems supply chain, covering engineering, quality in SAP Fiori user
the areas of quality inspection, and quality experience for quality
engineering, quality improvement technician, quality
inspection, and engineer, quality
quality improvement planner, quality manager,
quality auditor, and
calibration technician

Analysis based on past • Different systems are Integrated, simplified Reduction in revenue
performance instead available for quality quality management loss due to quality
of proactive measures management and quality combining quality and compliance issues
based on asset and issue management management
production performance processes; integration and quality issue
needs to be done management
between these systems capabilities with built-in
• Real-time simulations IoT connectivity and
or predictive capability predictive analytics
to detect quality issues
is not available

(continued next page)

15/19
 Quality Management

Typical Pain Points Current State with ERP SAP S/4HANA Cloud/LoB Extension Planned Innovations
Business Benefits
on Traditional Database Enhancements Enhancements and Future Directions

Recording quality Generic UIs are Point-of-detection • Enhanced efficiency Improved quality
inspection results available for recording recording via SAP in quality assurance management
is time-consuming quality inspections Fiori app (also mobile- execution (results FTE efficiency
and inefficient enabled) for faster and recording)
more efficient recording • SAP Fiori apps for
by quality technicians results recording
(role-based)

•D
 ifficult to maintain Batch traceability SAP Asset Intelligence • Enhancements in the Improved regulatory
traceability and throughout all Network: data about area of user interface compliance
serialization of manufacturing the machine usage, and performance
components steps and inbound its failures, information optimization
• Traceability reports and outbound on each serialized • Improved insight into
are time-consuming logistics processes component, including action capabilities
to generate and are its history and quality
often error-prone data, can be exchanged
via the network

16/19
SAP S/4HANA Manufacturing Value Proposition
The opportunity exists to transform business processes and achieve your digital transformation
goals with more automation and better alignment to your end-customers by delivering products
tailored to their specific requirements.

STRATEGY ENABLEMENT $ BUSINESS BENEFITS

• R
 un Simple (master complexity) – Simplified and • Reduction
 in total manufacturing costs up to 10%
efficient production planning and execution processes • Reduction
 in manufacturing cycle time up to 10%
• R
 un Live – Decision-making with automated transfer of • Reduction
 in scrap value up to 25%
production results and real-time updates on performance
• Increased material posting throughput from 5–25x
• F
 undamentally new available-to-promise
• Reduction
 in order lead times (10–15%)
functionality for increased customer
satisfaction • Improved
 labor utilization with “live” production
Strategy Business
monitoring (up to 10%)
• A
 utomation that enables business Enablement Benefits
process transformation • Distinct
 systems consolidation, reduced by 30%
• Improved profitability

Risk Employee
Management Engagement
RISK MANAGEMENT EMPLOYEE ENGAGEMENT

• D
 emand-driven planning model and live inventory updates • Increase in productivity through tailored UX
reduce risk of revenue loss due to stock-outs • Higher throughput
• I ntegration of execution and planning systems reduces
risk of revenue loss due to cancelled orders

*
 enefits are based on early adopters of SAP S/4HANA or conservative outside-in benefits due to moving from a traditional ERP to enhanced
B
SAP S/4HANA + LoB and cloud capabilities. As each enterprise is at a different level of maturity, our recommendation is to work with you
to determine the value proposition for your enterprise.

17/19
Customers are Achieving Value from SAP S/4HANA
VECTUS INDUSTRIES
Highlights
Vectus deployed the SAP S/4HANA Enterprise
Management solution and started experiencing
total ease in managing business operations.
It has decreased its days sales outstanding and
can deliver accurate, instantaneous customer
invoices. Customers now experience excellent
service and on-time delivery, which will remain
unchanged during rapid expansion.
• Real-time year-end financial close
(down from a few months)
• 15% reduction in operation costs
• 50% faster access to and visibility
of real-time data
• 60% increase in operational efficiency
Solution
SAP S/4HANA Enterprise Management
Industry
Industrial machinery and components
Vectus Industries source reference
SWISS PROPERTY AS
Highlights
SWISS PROPERTY worked with INTELSYS,
an SAP partner, to implement SAP S/4HANA
Enterprise Management by using business
process content supported by SAP Best Practices
packages. Focused on the engineering and
construction industry, INTELSYS helps provide
an end-to-end solution for design, planning,
and construction execution. SWISS PROPERTY
sees this functionality and these processes
as a definitive competitive advantage.
Solution
SAP S/4HANA Enterprise Management
Industry
Engineering, Construction and Operations
SWISS PROPERTY source reference
AIRBUS DS OPTRONICS
Highlights
Hindered by processing times for sales
forecasts and order processing, Airbus looked
to SAP S/4HANA to make information “live”
to better plan production and eliminate latency
in order visibility.
All information, including sales forecasts
and orders, are now available “at the touch
of a button” on any device.
• Simplified IT landscape and operations
• 75% reduction in data volume
• Achieved compliance with parent
group policies
Solution
SAP S/4HANA Enterprise Management
Industry
Aerospace and defense
Airbus source reference
18/19
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19/19