GRC
HR
SCM
CRM
BI


Article

 

Implementing SAP SEM to Meet New Challenges in Business Planning and Development

by Ulrich Hauke | SAPinsider

October 1, 2001

by Ulrich Hauke, SAP AG SAPinsider - 2001 (Volume 2), October (Issue 4)
 

The coming of the information age brings with it a number of challenges, including a quickly changing market environment, shorter product lifecycles, new threats to customer loyalty, and increasingly demanding stakeholders. But it also provides opportunities to apply new business models - and to leverage IT as an increasingly important source of competitive advantage.

     The result is a dramatic change for the business as a whole and for finance functions in particular. In fact, financial management teams find themselves in a key role, confronting some critical new questions for business decisionmaking, such as these:

  • How can we leverage our existing SAP implementation to speed up, enhance, and integrate financial closing, reporting, and rolling forecasting? Internal management and external stakeholders require more and more up-to-date information on the current and expected business situation.


  • Can we move from static budgeting and short-term planning to predictive and perpetual management? Strategies and operations need to be updated continuously and be forward-looking.


  • How do we link corporate strategy with management and staff action throughout the organization? As management strategies change more frequently, staff will need tools to guarantee fast, effective implementation.


  • How do we describe the real value of our business? Balance sheets and income statements have proven inadequate to fully describe the intrinsic value of the business. Non-financial measures and indicators need to be integrated into the performance measurement system.


  • How can we better manage financial performance and link feedback to closed-loop planning and reporting systems? This requires benchmarking and ranking of the actual results of key performance indicators against internal and external peers, and establishing real-time assessments and automatic linkage to incentive systems.


  • How can we manage the collaboration between the business partners in the company's value chain? Establishing and maintaining the right network of value-chain partners and outsourced services can generate new revenue and reduce costs.


  • How can we better manage communication to the financials community? Shareholders want information - in real time over the web - about the current and future performance of the company.

Strategic Enterprise Management (SEM), mySAP Financials' integrated decision-support environment, incorporates five key capabilities:

  • Performance Measurement
  • Strategy Management
  • Planning & Simulation, Budgeting, and Rolling Forecasts
  • Business Consolidation
  • Shareholder Relationship Management

     These capabilities are designed to help speed up financial consolidation and reporting, integrate budgeting, planning, and forecasting, and shorten planning cycles.

     SAP SEM makes it easier to measure and manage financial performance along the whole business network, with a business balanced scorecard, value drivers, and a business repository of KPIs, measures, and benchmarks. This technology enables you to describe, simulate, and execute the business strategy more efficiently, with functions for collaborative planning and reporting across departments and tools to better manage external communication for increased shareholder intimacy.

SEM Key Capability Features
Performance Measurement    Measure Builder
   Measure Tree and Analysis
   Management Cockpit
   Benchmarking
   Performance Drill Down

Strategy Management

   Balanced Scorecard
   Risk Management
   Strategy Maps
   Value Driver Trees
   Capital Market Interpreter
Planning & Simulation, Budgeting, and Rolling Forecasts

 

   Analytical Planning Workbench:
  • OLAP-based planning toolset
  • Easy modeling and simulation
  • Flexible user interfaces
  • Collaboration and integration

    Prefabricated Planning Applications:

  • Financials statement planning
  • Sales and profit planning
  • Resource planning
  • Liquidity planning
  • Investment planning
  • Portfolio planning

Business Consolidation

 

   Legal Consolidation:

  • Monitoring data collection and consolidation process
  • Predefined consolidation methods (inter-company elimination, inter-company profit, consolidation of investments, reclassification)

    Management Consolidation:

  • Allocation
  • Organizational changes
  • Restatement and simulation
Shareholder Relationship Management    Administration of shareholder master data
   Preparation of segmented information
   Active distribution of shareholder-relevant information
   Analysis of shareholders

Table 1

Overview of SAP SEM Functionality

Business Planning in Action: SEM at Work

Whether you want to simply increase the operational efficiency of your current management processes, or completely revamp your approach based on best- practice SEM methodologies, SAP SEM key capabilities (see Table 1), include end-to-end support for strategic management, specifically:

   Performance Measurement

Effectively monitoring performance demands more than just simple analysis. It requires an efficient way to define the right measures - both external and internal - and pass those results along, up and down your financial supply chain, to update your organization's strategy, planning, incentives, and compensation. Defining measures, such as key performance indicators, is the first step.

     The SEM Key Performance Indicator (KPI) catalog comes with more than 200 predefined measures in the area of mySAP Financials, mySAP CRM, mySAP SCM, and mySAP HR, in addition to the more than 70 measures already connected to the SAP Business Information Warehouse (BW).

     These KPIs are then available to the SAP SEM Balanced Scorecard, Management Cockpit, and Business Planning functions to help you set targets, report those targets against the actual, plan, and benchmark data. The screen shown in Figure 1 is an example of an executive performance analysis. From here, an executive can drill down to more detailed information in SAP BW reports. SEM Performance Measurement capabilities can also be linked to:

  • Compensation Management capabilities in mySAP Human Resources
  • Strategy Management in SEM, to correct strategies in real time
  • Business Planning in SEM, for the immediate updating of rolling forecasts and action plans

Figure 1

Performance Measurement in mySAP Financials SEM

    Strategy Management

When indicators show that a strategy is going off course, the business plan needs to be adjusted accordingly. But even the most responsive, well-constructed strategy is of little use if it is not communicated to the management team. SEM Strategy Management is designed to allow management to quickly make necessary changes and provide real-time updates to others in the financial organization.

     Figure 2 is an example of the "Enhance Customer Management" strategy for a company's division, with three strategic elements (objectives) assigned to the strategy. The objective "Grow Revenue" is measured through three KPIs: Gross Profit, Net Sales, and Sales Growth vs. Segment Average. SEM Strategy Management automatically calculates a score for the objective, so that if the strategy is going off course, the appropriate people are alerted to the need for changes.

Figure 2

Balanced Scorecard via mySAP Workplace

   Planning & Simulation, Budgeting, and Rolling Forecasting

Organizations are finding that to be responsive, they not only have to devise business plans more quickly, but also adjust them more frequently - thus the focus is moving away from static, rigid budget processes and toward rolling budgets and continuous updates.

     Once targets are set using SEM Strategy Management, budgets and plans can be quickly created with SEM Business Planning and Simulation (BPS). SEM-BPS provides flexible OLAP-based functions and ready-to-use applications for instant planning functionality. Moreover, SEM-BPS supports business modeling and simulation for predictive business management.1

     SEM Business Planning and Simulation promotes the "perpetual" management of budgets and forecasts.2 It provides a single interface from which you can plan sales, costs, profits, asset acquisitions, etc., along with the pro forma P&L, Balance Sheet, and Income Statement - all with real-time planning aids by SEM.

   Business Consolidation

For a faster, streamlined "close" at the end of the month, SEM Business Consolidation creates consolidated financial statements - including balance sheets, income statements, and cash-flow statements - for external reporting, and for timely flow of information to management. Business Consolidation automates data collection and consolidation processes, and integrates other SEM components for synchronized processes. You can ensure, for example, that the same legal consolidation methods for inter-unit elimination in SEM-BPS are also implemented in Business Consolidation.

   Shareholder Relationship Management

More and more, market analysts and shareholders are demanding timely and accurate company information, especially when it pertains to future strategy. At the same time, the goal of management is to provide markets and major shareholders with information that effectively communicates the full value of the business, and in that way to prevent undervaluation.

     SEM's Shareholder Relationship Management functionality provides an effective way to manage such communication. SEM-SRM includes shareholder and contact databases that contain information requirement profiles for each shareholder. By offering an information channel (e.g., a Document Download Center) in conjunction with an investor portal, such as the one in Figure 3 (below), information can be distributed quickly, and timely feedback can be easily collected.

Figure 3

The SAP Shareholder Investor Portal and Document Center

SAP SEM's Tight Integration with Your Business Data

No matter how complicated the systems landscape, SAP SEM offers a decision-support environment that is highly integrated with the rest of your financial supply chain. The SEM architecture is designed for closed-loop planning and reporting capabilities without disruption to the production environment.

     The main decision-support components for reporting, planning, performance management, and shareholder relationship management - the Corporate Performance Monitor, Business Planning and Simulation, and Shareholder Relationship Management capabilities - are bundled in one main SEM instance. With a relatively simple and short process, SEM can be installed as an add-on on top of SAP BW, or separately from any SAP or non-SAP data warehouse.3

     SAP SEM supports full integration with SAP BW or any third-party data warehouse. In either case, SEM runs separately from the productive OLTP system to avoid altering master data and to prevent any direct impact on the productive environment. This offers an environment where you can work on independent, flexible, and denormalized data structures. To ensure integration to SAP or non-SAP OLTP systems, SEM periodically extracts the meta, master, and transaction data from the system and changes it with respect to future plans.4

     An example of an SEM implementation is shown in Figure 4 The Coca-Cola Company's SEM installation. In this case, the company's divisions and regions have local SAP systems running together with SAP BW for reporting purposes. SAP SEM is located in the groups and corporate center, and is integrated with the divisional and regional systems. A next step could include installing SAP SEM on top of the regional and divisional SAP BW systems in order to include these units in SEM management processes.

Figure 4

Overview of The Coca-Cola Company's SAP SEM Implementation

Web-Enable Your Enterprise Planning with SAP SEM

SAP SEM takes advantage of one new opportunity for faster dissemination of strategic information across all areas of your business: web enablement. All SEM components are web-enabled in conjunction with ITS 4.6D and the Release 4.6D Internet Graphics Server.5 SEM is compatible with mySAP Workplace 2.11 and SEM-specific MiniApps, Internet services, and roles for all key functional SEM areas. For example, you can add a Balanced Scorecard MiniApp to your mySAP Workplace, and use it to look up the current status of individual KPIs and objectives. From there you can navigate into the SEM component system for more detailed information.

     Look for additional web integration with the next shipment release, SAP SEM 3.1A, planned in the first quarter of 2002. From that release, SEM's Corporate Performance Monitor and Business Planning and Simulation capabilities will be fully web-enabled on the basis of the new SAP Web Application Server. Companies can use Internet capabilities with SEM in a variety of ways:

  • Collaborative enterprise-wide planning within the company and across company networks
  • Using a web GUI to submit financial information (P&Ls, balance sheets) for processing
  • Online monitoring of consolidation and planning tasks

SAP SEM to Gain Competitive Advantage

With over 700 shipments and a fast-growing number of live customers, SAP SEM continues to be a widely accepted and robust decision-support application, highly integrated with your SAP and non-SAP systems, and available across your financial supply chain. As part of your financial strategy, SAP SEM provides financial management teams with a decision-support environment that leverages IT to answer the challenges presented by new technology and new business models.


Ulrich Hauke joined SAP in 1997 and is a mySAP Financials Product Manager in SEM. He accompanied the SEM rollin and rollout from its beginnings in 1998 and gained experience in the area of analytical applications. From the business perspective, he is an expert in Strategic Planning, Performance Management, and Value-Based Management.


For details on simulation and business modeling in SAP SEM, see "Powersim's Powerful Business Modeling and Simulation Tools Are Built Right In to SAP SEM" in this issue of SAP Insider, and online at www.SAPinsider.com.

2 For more information on new business models that incorporate rolling budgets, see "Go 'Beyond Budgeting' with mySAP Financials to Become a More Adaptable and Responsive Organization" in this issue of SAP Insider, and online at www.SAPinsider.com.

3 SEM customers have found SEM installation to been relatively simple, based on feedback of the first Partner Shipment program of SEM Release 3.0, where the average SEM installation took about two to three days.

4 The automatic push back of transaction data from SAP SEM back to the SAP system is currently supported for CO-PA (Profitability Analysis) and IM (Investment Management).

5 The Internet Graphics Server is an add-on service for the ITS and provided by SAP as part of the SAP GUI delivery.

An email has been sent to:






More from SAPinsider



COMMENTS

Please log in to post a comment.

No comments have been submitted on this article. Be the first to comment!


SAPinsider
FAQ