The S/4HANA Business Case: Inventory Management

The S/4HANA Business Case: Inventory Management Customer ASUG, April 14, 2016 Carl Dubler, SAP: carl.dubler@sap.com Sascha Schwarzbauer, Deloitte: sschwarzbauer@deloitte.com

Today s Agenda and Goals Answer these burning questions: 1. Where is the business value in SAP S/4HANA inventory management innovations? 2. What are the innovations SAP S/4HANA brings to inventory management? 3. What can I do now to get started? 4. Carl s hidden marketing agenda Next week (April 21): Supply Chain big picture and road map Sascha Schwarzbauer, Deloitte Senior Manager focusing on SAP enabled supply chain transformation sschwarzbauer@deloitte.com Follow us on Twitter @DeloitteSAP Carl Dubler, SAP Director, Product Marketing for SAP S/4HANA carl.dubler@sap.com 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 2

Let s Relive a Mediocre Movie from the 1990s Disclosure (1994), Starring Michael Douglas and Demi Moore Despite what Hollywood wants you to believe, locking is a real problem! 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 3

Part 1: Customer Stories

Customer Story: Large Consumer & Industrial Products Company The company went live with Inventory Management in SAP ECC 6.0. Challenges that were discovered after Go-Live would not have existed in SAP S/4 HANA Inventory Management. Business Challenges The client s facilities run 24 x 7 including high-volume, small lot size shipping transactions Materials are shared across plants and multiple shipments are frequently executed in parallel. Experiencing instances where PGI failed because the material data (batch stock) was locked: Goods movement is posted Quantity on hand is updated in aggregation tables Delays trying to post goods issue while the truck driver is waiting. Resolution in ECC 6.0 Repeat attempts to post PGI until there is no lock Reschedule background jobs for PGI Rethink batch strategy for materials Identify SAP Basis changes to reduce number of locks Resolution in SAP S/4 HANA Enterprise Management The Batch Stock tables no longer exist. Only the material movement needs to be created without regard for the actual stock level. Transactions can be run in parallel without table locks. Reduced transaction processing time. No carrier detention fees Reduced risk of users working around the system 2016. For information, contact Deloitte Touche Tohmatsu Limited.

Customer Story: Large Heavy Industry Manufacturing Company The company has an aging set of legacy systems with limited access to information to support business needs. SAP S/4HANA Enterprise Management will provide a much more integrated solution with a radically simplified users interface. Business Drivers / Challenges Deployment Model Inadequate systems capabilities Autonomous business units with multiple, non-integrated mainframe and decentralized standalone solutions New Implementation ERP System Non-SAP System On-Premise Significant opportunities for operational efficiencies Limited access to data Results Scope SAP S/4HANA Enterprise Management Fiori screens to simplify system access and interaction for the majority of the users Solution Facts Fully integrated solution simplifying the system landscape Harmonized user experience reduces risk for end user change adoption On-the-fly access to nonaggregated inventory information. Reduced inventory levels due to increased transparency and realtime updates. Single source of truth globally, across all plants and business units. A scalable, robust, and high performance platform with reduced TCO. 2016. For information, contact Deloitte Touche Tohmatsu Limited.

Part 2: SAP S/4HANA Inventory

The Digital Core SAP S/4HANA Enterprise Management: The Digital Core SAP S/4HANA FINANCE SAP S/4HANA HUMAN RESOURCES SAP S/4HANA MANUFACTURING SAP S/4HANA SUPPLY CHAIN SAP S/4HANA SOURCING & PROCUREMENT Streamlined Procure to Pay Accelerated Plan to Product Optimized Order to Cash Enterprise Management Enhanced Request to Service Core Finance Core Human Resources The Digital Core SAP S/4HANA MARKETING SAP S/4HANA SALES SAP S/4HANA SERVICE SAP S/4HANA ASSET MANAGEMENT SAP S/4HANA RESEARCH & DEVELOPMENT 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 8

The Digital Core SAP S/4HANA Enterprise Management How does it compare to what I have today? Modules* Logistics General (LO) Sales and Distribution (SD) Logistics Execution (LE) Plant Maintenance (PM) Production Planning & Control (PP) Environment, Health & Safety (EHS) Enterprise Management Product Lifecycle Management (PLM) Materials Management (MM) Quality Management (QM) Customer Service (CS) Project System (PS) Others: Global Trade Management, Compensation Management, Agency Business, Industries* Core industries Chemicals Life Sciences Wholesale High Tech Mining Industrial Machinery & Components Core Industries adding features and processes Automotive** IM&C** A&D** Feature and function parity to SAP ECC 6.0x plus - major innovations in core modules like Finance and Logistics - Inclusion of additional industries in the Core Finance Human Resources Mill Products** ** New included in EM * Included in Software Component S4CORE Note: Not all modules are activated in the cloud edition 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 9

Carl s equation for expressing SAP S/4HANA value Key components for generating interest Simpler data model + improved UX = new capability Example Unified data model eliminates FI-CO batch reconciliation Drill down to detail and KPI cockpit Continuous soft close Example Unified data model with no latency Instantly-refreshed KPIs and what-ifs Reduced inventory carrying costs Tools to help: Business Scenario Recommendations, Trial Editions, and Use Case Series on SCN 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 10

Business Suite SAP S/4HANA Simplification Examples Sales and Distribution Inventory Mgmt. (Quantities) Inventory Mgmt. (Valuation via MBEW) Material Ledger (multi GAAP, multi currency) Accounting Export/import tables EIKP EIPO Primary Document tables VBAK LIKP VBRK LIPS VBAP VBRP VBFA Index tables VBUK VBUP Rebate index VBOX LIS tables S066 S067 Output mgmt NAST Status tables VAPMA VAKPA VLPMA VLKPA VRPMA VRKPA MSTQH MARD MSTEH MSTBH MSSQH MARC MSLBH MSKUH MSSAH MSKAH MKOLH MCHBH MSPRH MARDH MARCH History tables Totals tables MSTQ MSPR MSLB MSTE MSTB MSSQ MSSA MSKU MSKA MKOL MCHB MKPF Document MSEG MBEW OBEW Totals MBEWH OBEWH QBEW OBEW QBEWH OBEWH Totals CKMLPP CKMLCR CKMI1 Index Document MLHD MLIT MLPP MLCR MLPPF MLCRF COSP COSS COFIT COBK BKPF BSEG COEP GLPCT ZZFISLT GLPCA FAGLFLEXT ZZFISLA ANEK GLFUNCT FAGLFLEXA ANEP Totals BSIS BSIT BSIK BSID BSIM Indices BSAS BSAT BSAK BSAD GLFUNCA Documents COFIS Sales and Distribution Master Data Inventory Mgmt (Quantities) Material Ledger (multi GAAP, multi currency) Accounting VBAK LIKB VBRK VBAP LIPS VBRP VBFA Material MATDOC Material Prices BKPF ACDOCA SIMPLE DATA MODEL» Only main tables remaining, no redundancies» Clear separation of master data from transactional data» Reduction of memory footprint PRINCIPLE OF ONE» Only one valuation method (Material Ledger) instead of 2 (IM + ML)» Flexible rebate management instead of cumbersome and expensive redundancies THROUGHPUT INCREASE» INSERT only on database level (MM-IM), no locks for standard price valuation 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 11

Innovations: Inventory Management Simplification Aggregates eliminated Aggregates History MSTQ MSLB MSTQH MSLBH On the fly aggregation MSTE MSKU MSTEH MSKUH Document MSTB MSKA MSTBH MSKAH MSSQ MKOL MSSQH MKOLH MKPF MSEG Inventory movements MATDOC MSSA MCHB MSSAH MCHBH Material Document MSPR MSPRH MARDH Master data Transactional Data 26 aggregate tables MARCH MARCH MARDH Material Master Master data with Stock aggregates MARC MARD MARC Master data without Stock aggregates MARD 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 12

Intuitive User Experience Improve user acceptance, efficiency, and onboarding speed Responsive Bringing together transactions and analytics to close the gap between insight and action Personalized Offering personalized role-based tailored KPIs, actionable insights, news feeds, and tasks Seamless Delivering the same real-time insights and user experience across desktops, mobiles, and tablets Beautiful Combining simplicity, easy of use, and functionality with a completely reimagined user interface 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 13

Applying SAP S/4HANA to Inventory Management Simpler data model Improved User Experience New Capability MATDOC On-the-fly aggregation Insert only DB (no lock) Single valuation method Drill-down to detail Analytic content + = Collaboration Role-based UI Technical Real-time Finest granularity Business Reduced carrying cost Improved accuracy Easier to change (JIT, Kanban, etc) 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 14

Demo: Real-Time Inventory Management 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 15

Quantity Inventory Backflush The Old Way Order 1 BOM 1 Lead Time Reorder Point Order 2 BOM 2 Run inventory updates in the night Safety Stock Time Order 3 BOM 3 Decisions and Actions on Old Data 10:00 AM 10:00 AM >24 Hours 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 16

Inventory Backflush with SAP S/4HANA Order 1 BOM 1 Technical Capabilities New data base architecture New locking logic Order 2 BOM 2 Instant Insight to Action on Live Data Business Capabilities Precise information Early error detection Precise where-used information Lot size of 1 Order 3 BOM 3 10:00 AM 10:00 AM Immediate 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 17

Classical Inventory tracking Goods movements posting on predetermined times # Stock Overview in Inventory Management Application Calculated stock Theoretical value: e.g. based on Production Planning via MRP Run Production hazards: e.g. Quality issues Physical and real stock 06:00 AM 08:00 AM 10:00 AM 12:00 AM 02:00 PM t Time 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 18

Classical Inventory tracking Goods movements posting on predetermined times # Stock Overview in Inventory Management Application Physical stock needed Safety Stock Calculated stock Theoretical value: e.g. based on Production Planning via MRP Run Security Physical and real stock Production hazards: e.g. Quality issues 06:00 AM 08:00 AM 10:00 AM 12:00 AM 02:00 PM t Time 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 19

Real-Time Inventory Management Frequent real-time goods movements posting # Stock Overview in Inventory Management Application Stock Transfer Security Real stock Theoretical value: e.g. based on Production Planning via MRP Run Physical and real stock Production hazards: e.g. Quality issues 06:00 AM 08:00 AM 10:00 AM 12:00 AM 02:00 PM t Time 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 20

The Need for a new Inventory Data Model ECC6 SAP S/4HANA Content of the aggregate tables calculated from» the inventory data in MKPF and MSEG» the IMG tables e.g. Stock type Two aggregate tables are used as logical locking arguments to block a parallel creation of material document creation» One lock for quantity posting (for goods issue)» Second lock for value posting (materials with moving average price)» Built for SAP HANA Database and the new data model to use the advantage of in-memory columnar storage» Separation of the MKPF information and MSEG information in different tables becomes obsolete.» Single table (MATDOC) with almost all required attributes and views represents the data for all business perspective» Elimination and reorganization of the IMG table structure» Existing fields MBLNR and MJAHR of the table MKPF are not key fields any more 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 21

Material Document MATDOC comprises 289 columns» 32 columns from MKPF (Material Document header table)» 204 columns from MSEG (Material Document item table)» 53 additional columns for fast Calculations / Analytics Warehouse stock grouping fields e.g. stock categories (special stock, unrestricted, ) Additional units and key figures e.g. stock quantities stored with sign for fast on-the-fly aggregation Two sets of stock identifying fields (source and target) Transfer postings Periods and time information e.g. year-month combination for comparison of stock time series Data footprint: 25%.. 38% of total table size 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 22

Part 3: Getting Started

The Path to S/4HANA Enterprise Management System Conversion ERP System On-Premise Conversion of an existing SAP Business Suite system (e.g., ECC6) to SAP S/4HANA Enterprise Management Database, NetWeaver and Application transition in one step. Software Update Manager (SUM) with Database Migration Option (DMO) + Migration without reimplementation + No disruption for existing business processes + Re-evaluation of customization and existing process flows - Technically challenging New System Implementation ERP System Non-SAP System On-Premise Use of Business configuration (BC sets) to copy configuration from ECC to SAP S4/HANA Enterprise Management environment + Configuration migration from ECC 6.0 using BC Sets + Re-evaluation of customization and existing process flows + Reduced testing time 2016. For information, contact Deloitte Touche Tohmatsu Limited.

Migrating to SAP S/4HANA Enterprise Management Prerequisite Versions Supported * SAP ECC 6.0 up to EhP 7 SAP Business Suite on HANA SAP Simple Finance 1.0 SAP Simple Finance 1503 High level migration steps Update to SAP Netweaver Application Server 7.5 component for ABAP Migrate database to SAP HANA Inventory Management Considerations New data structures MATDOC consolidates inventory management information and eliminates over 20 ECC 6.0 tables Compatibility views support existing custom code that referenced the eliminated tables Material Ledger is activated by default but use of Actual Costing is still optional Business Partner becomes mandatory starting with 1511 Unicode is a prerequisite S/4HANA migration Pre-checks and custom code reviews should be performed in preparation for migration Install SAP S/4HANA, on-premise edition Install SAP Fiori for SAP S/4HANA, on-premise edition Migrate data from old structures to new structures SAP S/4 HANA Simplification Database (SAP Marketplace) Run custom code analyzer on existing system custom code analysis Custom code migration worklist (SAP NW 7.50) Worklist OSS notes to address worklist items * Previous versions require a two-part migration to first get to a supported version 2016. For information, contact Deloitte Touche Tohmatsu Limited.

Technical Conversion Process SAP tools simplify and standardize the conversion to SAP S/4 HANA Enterprise Management Maintenance Planner Software Update Manager (SUM) Pre-requisite for system conversion to SAP S/4HANA EM, on-premise edition. Checks which business functions, industry solutions, and add-ons are activated Maintenance Planner must be run before executing the SUM tool. SAP Help: http://help.sap.com/maintenanceplanner Technical tool for system conversion to SAP S/4HANA Enterprise Management, on-premise edition. Ensure you use the latest version: http://service.sap.com/sltoolset Database Migration Option (DMO) One-step-migration to SAP HANA database for SAP systems. Combines installation of the SAP S/4HANA EM, on-premise software and database migration to SAP HANA in one tool Source system is on SAP HANA database Use SUM tool Source system is not on SAP HANA database Use DMO 2015. For information, contact Deloitte Touche Tohmatsu Limited.

First Steps to SAP S/4 HANA Enterprise Management Start the 1conversation Understand current state challenges and value areas Document case for change Determine preferred adoption path Conduct working sessions with implementation partner and/or SAP Build a business 2case Identify value opportunities Gather metrics and perform benchmarking Develop cost estimate Compile business case Approve moving forward Update your SAP S/4HANA EM IT 3 roadmap Evaluate and prioritize in-flight projects Determine deployment roll-out plan (if necessary) Update roadmap Proof of 4Concept Run pre-check programs Run custom code check programs Run third-party code check programs Conduct proof of concept or prototype Using an implementation partner with experience in SAP S/4HANA Enterprise Management reduces time to value and improves quality and consistency of results 2016. For information, contact Deloitte Touche Tohmatsu Limited.

How Deloitte can support your next steps to SAP S/4 HANA EM An assessment with clearly defined inputs, activities and outputs will identify areas of improvement and benefits. 1. Current state analysis 2. Benefit Assessment 3. Recommendations and Roadmap Evaluate current ERP Landscape Compare As-Is with SAP S/4HANA Capabilities Decision Support based on Findings and Restrictions Conduct Stakeholder Interviews Improvement Benefits Assessment Development of Future State Roadmap Conduct Visioning Workshops Document Findings and Restrictions Creation of overall cost and benefit overview Collect Data Process Heat Map Future Process Vision Functional Scope Statement SAP system analysis High Level Business Case Financial Impact Template Qualifiable improvements Implementation Roadmap Project scope definition High-level plan Accelerators 28 Integrated Supply Chain Toolkit Diagnose supply chains and identify value-generating opportunities Deloitte SAP Platform Analyzer Assess current SAP system security, data, business processes and custom code retrofit effort Deloitte Industry Print 5 Leading practice processes and mapping to SAP S/4 HANA EM capabilities and Fiori apps. Deloitte Enterprise Value Map TM Identify improvement opportunities and assess benefit potential 2016. For information, contact Deloitte Touche Tohmatsu Limited.

Where to go for more information SAP S/4HANA Home Trial Editions SCN Inventory Management Public Cloud Trial SCN Placeholder Journey Map Business Scenario Recommendations Learning Hub 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 29

Appendix

Demo Real Time Inventory Management FIORI Launchpad: Home screen of the inventory clerk Key benefits» Collection of transactional and analytical FIORI apps necessary for the daily work 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 31

Demo Real Time Inventory Management Inventory Turnover Analysis Key benefits» Real time stock analysis in graphical way» Overview of the entire inventory turnover situation for the selected scope of materials and / or plants and the selected time range» Dive into the details of the inventory analysis 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 32

Demo Real Time Inventory Management Inventory Turnover Analysis Key benefits» Comprehensive stock overview per material on the time scale» Display the most important inventory key figures 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 33

Demo Real Time Inventory Management Inventory Turnover Analysis Key benefits» Interactive graphics showing the inventory quantity for each point of the diagram 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 34

Demo Real Time Inventory Management Inventory Turnover Analysis Key benefits» Direct connection to supplier data» Showing supplier information» Showing key figures concerning the supplier quality / supplier accuracy 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 35

Demo Real Time Inventory Management Information Sharing Key benefits» Direct connection to SAP JAM» Sharing evaluation together with some comments in a SAP JAM group 2016 SAP SE or an SAP affiliate company. All rights reserved. Customer 36