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From Strategic Enterprise Management to Process Reengineering: Hollistic Enterprise Management

by Werner Sinzig | SAPinsider

April 1, 2003

by Werner Sinzig, SAP AG SAPinsider - 2003 (Volume 4), April (Issue 2)
Enterprise management plays a key role in creating value. SAP offers a powerful tool to support management decisions: SAP Strategic Enterprise Management/Business Analytics.

Enterprise management has made major advances in the past several years, both in theory and in practical software support. Breakthroughs in strategic management include value-based management and balanced scorecard methodology, benchmarking and “beyond budgeting” to assist performance management, and campaign management and supply chain operations reference (SCOR) metrics to support operational management. On the software side, transaction processing has been largely separated from analytical processing. The key elements are online transaction processing (OLTP), online analytical processing (OLAP), business intelligence, and analytical applications. Available solutions are shifting from individual “best-of-breed” vendors to systems that offer comprehensive support, especially integration with operational systems.

The Management Challenge
Enterprise management involves focusing a company (or division) simultaneously on long-term value creation and mid-term profitability, while optimizing day-to-day business to meet these longer-term goals. This complex challenge involves the management of several nested feedback loops, and can encompass an entire company or individual business units.

The strategic planning loop involves developing a strategy and drawing a consistent picture; it can entail quantitative simulation models and scenario planning. It is essential that the models, calculations, and documents be permanently available to all those involved in the process. The resulting strategy must be described in clear terms in the strategy and business management loop and converted to specific targets, metrics, and quantitative amounts. These, in turn, are then disseminated to the organization as a whole, or at least communicated to the business units as clear goals. Any measures that go beyond day-to-day business must be defined as specific projects.

The operational management loop is based largely on operational planning (sales, headcount, cost planning). To promote decentralized management, organizations give the employees charged with executing the operational processes targets, ground rules, and a defined scope for decision-making. These processes are tracked in the management system in the form of metrics. The metrics are continuously compared with the defined operational goals within the framework of a (rolling) forecast. They also flow as feedback into the strategic planning loop. In the investor relationship loop, the strategy and its implementation progress are communicated to the stakeholders — including investors and staff from other divisions of the company.

The SAP Solution
SAP’s answer to the enterprise management challenge is SAP Strategic Enterprise Management/Business Analytics (SAP SEM/BA). SAP SEM supports the strategic planning loop, the strategy and business management loop, and the investor relationship loop; Business Analytics focuses on the operational management loop. SAP SEM/BA is an analytical application based on technology implemented in the SAP Business Information Warehouse.

SAP SEM is divided into these functional areas:

  • Strategy management with balanced scorecard and risk management
  • Performance measurement with value driver tree and management cockpit
  • Business planning and simulation with general functions and predefined applications
  • Business consolidation with management consolidation and legal consolidation
  • Stakeholder relationship management with address management and contact management

Business Analytics includes these functional areas:

  • Financial analytics with profitability management and working capital management
  • CRM analytics with sales planning and campaign planning
  • SCM analytics with supply chain performance analysis
  • PLM analytics with concurrent costing and product portfolio analysis
  • HR analytics with personnel cost planning and commission analyses

SAP SEM has been available for several years and is in continual development; Release 3.2 is now being delivered. Enhancements to SAP Business Analytics are under development, with some already available. The ramp-up for SAP SEM/BA 3.5 is scheduled for the second quarter of this year. Experience shows that customers often start with the implementation of the SAP Business Information Warehouse (SAP BW) and follow up with SAP SEM/BA; integration of the analytical applications is the next logical step following an SAP BW project.

Typical combinations include planning and simulation (balance sheet planning and operative planning, particularly sales planning, profit planning, and overhead cost planning) with consolidation and financial reporting (first legal consolidation, then management consolidation). Other popular combinations are strategy management and performance measurement (management cockpit and balanced scorecard) with CRM analytics and financial analytics (analysis of customer behavior and customer-specific profitability analyses).

For practical reasons, SAP customers usually start with individual components, which by themselves offer a good return on investment. In the long term, customers tend to approach enterprise management step by step — from strategic enterprise management to process optimization.

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SAP Service Marketplace

SAP Strategic Enterprise Management
Enables companies to execute strategies quickly and successfully, and manage business performance throughout the entire organization. Strategic enterprise management also supports integrated strategic planning, performance monitoring, business consolidation, and effective stakeholder communication, thus enabling value-based management.

Business Accounting
Records quantities and values from financially relevant transactions,and maintains a consistent, reconciled, and auditable set of books for statutory reporting and for management reporting and analysis.

SAP Financial Supply Chain Management
Provides greater visibility into working capital, allowing enterprises to streamline cash flow activities throughout the organization. It reduces costs associated with billing and payment processes, and optimizes your transactions with customers, vendors, and suppliers.

SAP Real Estate
Integrated tools that improve decision-making and enable more effective management of real estate assets, investment portfolios, and risk. Offers comprehensive project support for efficient use of resources, more efficient monitoring of project planning and implementation, and more cost-effective management of outsourcing services.

SAP Travel Management
An integrated, online managed solution that can lead to considerable savings in direct and indirect travel costs. It can handle the entire business trip, empowering travelers and helping reduce unnecessary and unproductive administrative tasks.

SAP Incentive and Commission Management
Helps to develop effective incentive programs, including sales and brokerage commissions, profit sharing, and bonuses.

Financial Portal Solutions
Provides finance employees, business managers, and business partners with access to financial and business information as well as related services.

Werner Sinzig is Vice President for Product Management in GBU Financials at SAP AG. He joined SAP AG in 1983, and has held positions as Program Director in the areas of Profitability Management and Strategic Enterprise Management. He studied industrial engineering and management at the Technical University of Darmstadt, and holds a Ph.D. from Frankfurt University, with a focus on Database-Oriented Management Accounting.


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