What Does This Mean for Your Supply Chain?
On February 4, 2020, SAP announced a maintenance commitment for SAP S/4HANA until the end of 2030. S/4HANA enables organizations the ability to take advantage of digital capabilities including greater levels of automation, artificial intelligence, machine learning and more. It is the platform to help organizations improve customer and employee experiences, predict and proactively meet business challenges and improve business agility.Included in SAP’s announcement was the declaration that they will continue mainstream maintenance support for core SAP Business Suite 7* applications of software until the end of 2027, with optional extended maintenance available until the end of 2030.
What Provoked SAP to Extend Support of Business Suite 7?
Could be organizations are delaying their plans to move to S/4HANA struggling with the business case, including how to effectively take advantage of the new capabilities it will provide. Businesses are faced with challenges utilizing current capabilities in their current ECC system and want to make certain their next move is not a technical upgrade but instead preparing the business to improve their use of data, people, and digital assets in aggregated ways to deliver world-class experiences and results.Paraphrasing statements made by SAP co-CEO Christian Klein, “Changing the technology is not the biggest problem when implementing S/4HANA, it’s about changing legacy business processes and getting employee buy-in, that is why there is a delay in customers going live with S/4HANA, the next-generation intelligent suite.”The insights shared by Mr. Klein support what we find when helping organizations. Change management addressing people and processes was lacking in the initial implementation which impacted the value provided by people, processes, and use of SAP. Across a wide range of organizations, we discover:
- Business users lack understanding of SAP capabilities, reports and analytics (you don’t know what you don’t know)
- Extensive customizations that provides information that likely can be found in standard SAP configuration (increasing total cost of ownership)
- Business processes are not aligned with SAP best practices leading to a high level of work arounds, manual processes and excessive use of spreadsheets (higher operational costs)
- Lack of trust in the data (limiting the ability to make informed business decisions)
- Limited use of MRP (reactive vs proactive approach to running the business)
- Constant firefighting versus management by exception (attention on the urgent vs the important)
- Additional resources required to run the business (working harder not smarter)
The list goes on. It seems business leaders are hesitant to move to S/4HANA while there are so many questions about their current situation. The main question is how the move to SAP’s next-generation technology will produce more value.
Start Realizing That Value NOW From Your People, Processes and Current SAP Investment
Although SAP has extended the maintenance support timeline, businesses should start transforming their operations today to realize more value from their people, processes and use of SAP. To get started, here are four best practices that will produce value today and position you for a successful migration to S/4HANA in the future:
- Educate employees on SAP functionality, reports and best practices to execute their roles. When organizations implement SAP, they often customize it to mimic their legacy systems and did not take the proper time to learn what standard SAP capabilities can provide. Working with a wide range of companies we have found more than:
• 70% of customizations are not used
• 30% of customizations used could be replaced by standard SAP
• 70% of available standard functionality is not being used
- Education should also include teaching employees on how to analyze their business, understand how their actions impact the end-to-end value chain, and when master data changes are needed to address evolving business requirements.
- Make sure business rules (master data) reflect reality. To improve efficiencies and achieve value targets the master data in SAP must be accurate and relevant. For example, lead times from suppliers, MRP strategies aligned with production strategies (MTS, MTO, etc.), work center and labor capacities loaded, planning boards set up, correct storage types established, etc. If you want the system to do the heavy lifting then it needs the right data to be able execute and provide business value.
- Clean up transactional data and keep users accountable for keeping it clean. Data integrity is essential for trusting MRP results. When MRP runs it is calculating net requirements for supply to meet demand based on scheduled receipts from purchasing and production. If there are open POs from years prior, when MRP runs it factors those as material receipts coming in that day. With bad data comes bad results, lack of trust in the system and extra work to reconcile supply to meet demand. To improve efficiencies and extract more value from SAP, keep the data real-time and establish a governance process to measure data integrity.
- Transforming the business should include moving from firefighting too managing by exception. One of the least understood benefits of SAP is exception monitoring and management. This is the daily discipline of running exception reports, understanding and prioritizing exceptions, taking proper action to address the exception and establishing a governance process to uncover and address the root cause of each exception. Managing by exception and doing root cause analysis allows the organization to be proactive in addressing potential service level issues and establishes a practice of continuous improvement. Leveraging exception management will reduce operating costs, improve service levels, free up working capital tied up in excess inventory, improve communication across the operation and allow businesses to scale more efficiently.
All Roads Lead to S/4HANA, but Everyone’s Journey Is Unique
These disciplines are fundamental no matter where a business is on its SAP journey and they will unlock financial and operational opportunities throughout the organization. Imagine your business running more effectively and efficiently needing 20% less working capital tied up in inventory, increasing revenues and profit from happier customers, improving service levels and having trustworthy information to make strategic business decisions.SAP may have extended maintenance support for Business Suite 7 by a few years but no time like the present to optimize the value of your people, processes, data and SAP system to improve your bottom line and capitalize on future digital investments.
SAP is an ASSET that enables Digital Transformation and the Intelligent Enterprise. All roads lead to S/4HANA but not all paths are equally cost-effective and trouble-free. By reading, "A Practical Business Guide to Migrating Successfully and Cost-Efficiently to S/4HANA”, you will receive insights on leveraging your SAP asset as it relates to the business and options how to migrate to S/4HANA.Reveal offers educational tips, tools and supply chain industry solutions to organizations to help them achieve their goals to transform and sustain their improvements.* Core applications of SAP Business Suite 7 software include SAP ERP 6.0, SAP Customer Relationship Management 7.0, SAP Supply Chain Management 7.0, and SAP Supplier Relationship Management 7.0 applications and SAP Business Suite powered by SAP S/4HANA.