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Can Your Enterprise Solutions Adapt to New Industry Demands? How mySAP ERP Meets the Requirements of a Changing Business Landscape

by Chris Hanna | SAPinsider

January 1, 2006

Business challenges -- including shrinking business cycles and increasing pressure to reduce production costs -- are amplified whenever a company changes its core business or crosses multiple industries. Learn how mySAP ERP 2005 provides new, industry-specific technical and functional enhancements for integrating disparate systems and eliminating siloed views of business processes.
 

More than two decades ago, software containing enterprise resource planning (ERP) capabilities started to play a significant role in helping executives to cut costs and increase efficiency. These early software solutions provided accounting, payroll, and operational (for example, purchasing, order entry, and materials management) functionality designed for business. At the time, these applications enabled organizations to eliminate paper-based systems, improve corporate visibility of operational activities, manage and consolidate financial information more quickly, and begin to standardize business processes.

Twenty years later, the business world is a very different place. Organizations must contend with shrinking business cycles and timelines. There is greater pressure on companies to find ways to reduce time-to-market and production costs, while at the same time increase innovation to differentiate their products and services. New legislation, corporate governance regulations, and industry mandates require companies to achieve greater accountability and streamline business processes. Innovation occurs at stunning speeds, and new entrants to the market deliver finished goods at dramatically lower costs.

To add to these organization-wide challenges, there are the demands particular to your industry — and the impact of these demands are magnified whenever an organization changes its core business or crosses multiple industries. Many enterprises that 20 years ago operated in a single industry are now looking at operations in multiple arenas. Others are working hard to focus only on their core business and outsource their production of goods, concentrating instead on rapid response to orders, improved customer service, and after-sales service and support. This requires adding, removing, and retooling industry best practices and business processes.

A Sampling of the Industries SAP Serves

SAP offers flexible, comprehensive solutions based on mySAP ERP for a range of industries, including:

  • Aerospace and Defense
  • Automotive
  • Banking
  • Chemicals
  • Consumer Products
  • Defense and Security
  • Engineering, Construction, and Operations
  • Healthcare
  • High Tech
  • Higher Education and Research
  • Industrial Machinery and Components
  • Insurance
  • Life Sciences
  • Logistics Service Providers
  • Media
  • Mill Products
  • Mining
  • Oil and Gas
  • Postal Services
  • Professional Services
  • Public Sector
  • Railway
  • Retail
  • Telecommunications
  • Utilities
  • Wholesale Distribution

Meeting the Challenge of Changing Industry Needs

Amidst all this change, organizations need to both support new business processes and modify current ones — all while utilizing their existing information technology software. For many organizations, the continuous evolution and development of both homegrown and commercial off-the-shelf software systems has resulted in a heterogeneous IT landscape. Because of the cost of integration among these disparate systems, the reality for many organizations is that they have a compartmentalized (or "siloed") and incomplete view of business functions. The resulting lack of insight exposes organizations to many issues, ranging from operational inefficiency and ineffectiveness to regulatory noncompliance and missed growth opportunities.

With mySAP ERP, SAP software support for cross-organizational functions like finance and human capital management has been complemented by industry-specific enhancements to address the unique needs of over 25 industry segments. In the most recent release, mySAP ERP 2005, SAP offers new industry solutions as well as new enabling technology to help organizations achieve greater levels of productivity and efficiency. mySAP ERP 2005 can serve as the foundation for an integrated, enterprise-wide approach that allows even an industry-specific solution to work with all aspects of standard business processes, avoiding siloed solutions that resist change.

More Flexible Adaptation of Industry-Specific Processes

Despite common operating challenges, no two industries — and no two organizations within an industry — are exactly alike. So that organizations can leverage industry-wide best practices as well as their own unique business processes, mySAP ERP, built on the SAP NetWeaver platform, can be integrated and extended with available industry-specific features and customized to meet the needs of almost any environment.

As your organization and functional needs change, the technology supporting your business processes must facilitate change as well. SAP provides a variety of services and technology to support this pace of change.

Aids for Implementation and Operation

SAP Best Practices have long provided roadmaps to ease the path to implementing and operating SAP solutions within and across industries (see sidebar below). More recently, SAP's rendition of a service-oriented architecture (SOA), Enterprise Services Architecture (ESA), looks at the entire IT architecture and the benefits of service-enabling the most common business processes, such as procure-to-pay, order-to-cash, and hire-to-retire. ESA expands the concept of Web services into enterprise-wide, service-enabled business architecture. With ESA-enabled software from SAP, including mySAP ERP, organizations have the flexible infrastructure required to support the rapid change of operational business models, processes, applications, and organizational structures, and to enable flexibility, openness, and speed — elements that are critical for both short-term and long-term business success.

How Can SAP Best Practices Help You Meet Industry Demands Now?

For three decades, SAP has developed best business practices based on experience with our most successful customers and partners. SAP Best Practices help you control costs, reduce risk, and make the most of a fully documented and reusable prototype that you can turn into a productive solution quickly, with:

  • A proven methodology that leverages a prototype approach to implementation

  • Thoroughly documented scenarios — from both a business and a technical perspective

  • Proven preconfigurations of SAP solutions

These benefits reach companies of any size — and both new and existing customers — so you can easily adapt techniques to meet your specific requirements or use them as a starting point for customized ASP or hosted solutions. Provided to SAP customers free of charge, SAP Best Practices cover both industry-specific and cross-industry requirements (see below).

Industry-Specific Coverage Cross-Industry/Generic Business Coverage
  • Automotive
  • Chemicals
  • Consumer Durables
  • Consumer Products
  • Fabricated Metals
  • High Tech
  • Home and Personal Care
  • Industrial Machinery and Components
  • Logistics Service Providers
  • Pharmaceuticals
  • Professional Services
  • Retail
  • Water Utilities
  • Wholesale Distribution
  • Baseline Package
  • Business Intelligence
  • Customer Relationship
    Management
  • Enterprise Portal
  • Human Capital Management
  • IAS/IFRS
  • Preconfigured Smart Forms
  • Supply Chain Management

For more on SAP Best Practices, please visit www.sap.com/bestpractices and see "The Secret to Accelerated SAP Implementations: SAP Best Practices" in the October-December 2005 issue of SAP Insider (www.SAPinsider.com). For a list of partners who have contributed to the development of SAP Best Practices, visit www.sap.com/
services/servsuptech/bestpractices/partners.epx
.

The Switch Framework

mySAP ERP 2005 offers yet another new way to address faster shifts in industry requirements. The Switch Framework, a flexible implementation and management tool, enables easier installations and changes to the SAP software implemented within your organization. This technology change will deliver increased flexibility in deploying industry-specific capabilities and the ability to share generic business functions between industries. The Switch Framework provides application support for innovative new business processes and models on the same platform as that for established business activities.

With the Switch Framework, SAP has defined a mechanism that will allow all industry solutions to be integrated into mySAP ERP. Upgrades to mySAP ERP are now synchronized with industry solution upgrades. What's more, you can reuse generic business functions that cross multiple industries. For example, an organization in the high tech industry may find that business functions used in the professional services industry also support their goals. Depending on your needs, you can choose whether a particular piece of software is active by turning a "switch" on or off.1 The installed mix of software may support an industry with very unique requirements — all with a single instance, or software "image," running.

The Switch Framework makes for easier systems management of the more complex business models and processes. Combined with the synchronized release schedule for mySAP ERP and industry solutions, organizations will be able to reduce the cost of implementing and maintaining their software environment; the number of development and test environments can be reduced, updates supporting legal requirements are synchronized, support packages are synchronized, and the full range of SAP industry solutions are supported in mySAP ERP 2005.

For additional information on the Switch Framework in mySAP ERP 2005, please see the mySAP ERP 2005 Master Guide document in SAP Service Marketplace at http://service.sap.com/instguides. The Master Guide also contains a brief description of the industry solutions and the support matrix (see Figure 1).2

Industry Solution
(A Subset of SAP's IS Portfolio)
Functions Within the mySAP ERP Core I-BFS or G-BF Within mySAP ERP (Switch Framework)* Industry-Specific Application**
SAP for Automotive
 
I-BFS
SAP Dealer Business Management***
SAP for Banking
 
G-BF

SAP Financial Services Process Platform+

SAP Bank Analyzer+

SAP Syndications Management***

SAP Leasing***/SAP Full Service Leasing

SAP for Chemicals
I-BFS
 
SAP for Consumer Products
G-BF
I-BFS
SAP Apparel and Footwear***
SAP for Defense and Security
 
G-BF

SAP Defense***

SAP Mobile Defense Solution***

SAP for High Tech
 
I-BFS
  
SAP for Insurance
 
I-BFS
G-BF

SAP Reinsurance***

SAP Product and Policy Management+

SAP for Logistics Service Providers
 
 
SAP for Media
   
I-BFS
SAP Classified Advertising Management+
SAP for Oil and Gas
 
I-BFS
G-BF
SAP Oil and Gas Secondary Distribution***
SAP for Pharmaceuticals
 
 
SAP for Professional Services
 
 
SAP for Public Sector
G-BF
I-BFS

SAP Extended Functions for US Federal Agencies***

SAP Versorgungs-administration (for the German public sector)***

SAP for Retail
I-BFS
G-BF
 
SAP for Telecommunications
 
I-BFS
 
SAP for Utilities
 
I-BFS
G-BF
 
* I-BFS — Industry business function set (industry extension, only one can be switched on), which includes further business functions
G-BF — Generic business function (enterprise extension, several of them can be switched on)
** Industry-specific applications are add-ons containing industry functions. They can be add-ons to either SAP NetWeaver or to a general-purpose application:
      + Add-on to SAP NetWeaver
      *** Add-on to a general-purpose application
Figure 1
A Sampling from the Switch Framework Support Matrix: mySAP ERP and Enablement of SAP Industry Solutions

Enhancements Especially for Industry-Specific Needs

mySAP ERP 2005 delivers enhancements that address the functional requirements of organizations in all of the industries we serve. All organizations have functional requirements to support some combination of roles related to end-user service delivery, analytics, human capital management, financials, procurement and logistics execution, product development and manufacturing, sales and service, and corporate services.

Specific enhancements within mySAP ERP 2005 are tailored to industry needs. For example, SAP Dispute Management, a new application in mySAP ERP Financial Supply Chain Management (FSCM), can apply to organizations in the insurance, logistics service provider, railway, retail, telecommunications, utilities, and wholesale distribution industries. SAP Dispute Management supports the processing of receivables-related disputes.

Because customers typically do not notify their suppliers in advance about payment reductions or nonpayment, many vendors must deal with huge numbers of payment deductions or delays. The result is declining cash-collection percentages and eroding day sales outstanding (DSO) averages. Without an enterprise software solution, suppliers must spend a great deal of time manually processing disputes. Estimates show that the average cost of an invoice dispute can range from US$128 to US$640 per invoice. Because the vast majority of these disputes can be settled with a simple credit memo, companies often waste significant resources to fix rudimentary invoicing issues. SAP Dispute Management is designed to eliminate this inefficiency.

Communication is integrated into the SAP Dispute Management functions as well (see Figure 2). The solution offers a correspondence function that enables standard letters, faxes, and email to be sent automatically. It supports various communication channels, including the SAP Biller Direct application and the SAP Collections Management application, so that the organization can reduce DSO, improve liquidity and liquidity forecasting, improve customer relationships through faster processing of inquiries and complaints, and get early identification and notification about possible problems in the logistics value chain or internal processes.3

Figure 2

Integration of Biller Direct with SAP Dispute Management

click here for a larger version of this image

Conclusion

Industry solutions from SAP provide capabilities that meet the unique needs of your organization and increase business benefits in the short term. Integration of these solutions with mySAP ERP creates a solid foundation for long-term growth and provides tools to meet the challenges of future market and business changes.

The mySAP ERP application is the proven foundation for business excellence and innovation, allowing you to achieve operational excellence in all areas of your organization, adapt quickly and cost-effectively to changing requirements, and deliver business insight to a broad and highly productive user community. With a complete and integrated suite of next-generation analytics, human capital management, financials, procurement and logistics execution, product development and manufacturing, sales and service, and corporate services functionality built on a powerful open technology platform, mySAP ERP delivers the capabilities you need to drive down operating costs and provide advanced flexibility to enable quick implementation of your industry-specific business strategies. For more information, please visit the resources in the sidebar, "Additional Resources," below.

Additional Examples of New Industry-Specific Capabilities in mySAP ERP 2005

Trials in Recipe Management
Industries including: Chemicals, Consumer Products,
Life Sciences

By integrating product, formula, and quality definitions into a single environment, trials in recipe management speeds and improves new product development. Authorized personnel can easily obtain information from previous efforts, including existing recipes and formulas. A trial monitor feature controls the process flow from the laboratory environment through pilot plants and production, including formulation, quality definition, trial execution, stability studies, and results reporting. New product development and introduction (NPDI) process support includes the generation of recipes, specifications, formulas, materials, and production requirements from the recipe development environment.

Batch Management
Industries including: Consumer Products, Life Sciences
Consumer products manufacturers face legal requirements to document where a product was produced, what components were used, and whether quality standards were met. In addition, manufacturers must also be able to track defects and manage recall activities. mySAP ERP supports batch tracking, which helps manage all required data such as material tracking numbers while eliminating the need to manage batch inventory. As a result, mySAP ERP helps businesses improve compliance with legal requirements by including search features that aid product traceability, reduce costs, and simplify internal logistics processes.

Quality Management
Industries including: Aerospace and Defense, Automotive, Chemicals, Consumer Products, Defense and Security, High Tech, Life Sciences, Logistics Service Providers, Media, Mill Products, Mining
mySAP ERP provides comprehensive quality management features that support quality planning, quality assurance, quality control, and continuous improvement processes. As a result, businesses can support quality processes related to product development, production, change management, and service and maintenance issues across the organization. By integrating quality information with logistics and manufacturing, mySAP ERP can help extend quality processes beyond the enterprise borders to all elements of the extended supply chain, resulting in higher-quality products, faster time-to-market, and reduced operating costs.

Support for RFID
Industries including: Aerospace and Defense, Automotive, Consumer Products, Defense and Security, High Tech, Life Sciences, Logistics Service Providers, Retail, Wholesale Distribution
Radio frequency identification (RFID) supplements or replaces bar codes with electronic tags that store unique identifying information for individual items, cases, or pallets and transmit this information to readers deployed at warehouses and distribution facilities. RFID tagging is now required by some of the world's largest retailers, including Tesco, Metro, and Wal-Mart, as well as the US Department of Defense. By eliminating line-of-sight requirements for scanning and allowing multiple tags to be scanned at once, RFID speeds product and order handling, reduces hands-on processing, and minimizes errors. In conjunction with the SAP Event Management application, RFID support within mySAP ERP improves visibility of stock levels and execution status throughout the supply chain, enabling the identification of potential quality and process improvements.

Catch Weight Management
Industries including: Consumer Products
For consumer products such as fresh meat and cheese, the variable relationship between base units (such as pieces, boxes, or pallets) and alternative units of measurement (such as kilograms or pounds) means that fixed conversion factors cannot be used. When quantities are updated in one unit, most systems are unable to update the associated alternative units as well. In the past, addressing this issue required entering and updating information in batches. With mySAP ERP, a catch weight management solution will be available that makes it easier to track weight and price variations and accurately assess the value of product orders and shipments.

Pendulum List for Supporting Indirect Sales
Industries including: Consumer Products
Beverage producers frequently deliver to distributors, who in turn deliver products to customers such as bars and restaurants. At the same time, producers often enter into direct agreements with customers, such as for volume-based rebates. To verify customer adherence to contractual obligations and support a variety of business analyses, manufacturers often require distributors to report actual indirect sales data and turnover for indirect sales associated with individual outlets. Pendulum lists in mySAP ERP provide beverage manufacturers with an easier way to track and manage the discount structure and product mix for individual customers.

Additional Resources

To learn more about new capabilities in mySAP ERP 2005, please see:


1- In mySAP ERP 2004, only one industry solution can be activated in the customer system.

2- For more information on the Switch Framework, please see "Under Development: A New and Improved Approach to SAP Industry Solutions" by Karl Kessler in the July-September 2005 issue of SAP Insider (www.SAPinsider.com).

3- For more on the capabilities of FSCM, see "Transform Your Cash Flow Processes with Financial Supply Chain Management" by Jürgen Weiss in this issue of SAP Insider (www.SAPinsider.com).


Chris Hanna began his career as an IBM Systems Engineer supporting mainframe MVS/CICS clients in the financial services industry. Chris held management positions at IBM in the sales organization as a Systems Engineering Manager and a Program Manager, and in the AS/400 division working with software vendors. Subsequently Chris had positions in development, professional services, and consulting management at a number of companies including Digital Equipment Corporation, Progress Software, Data General, and META Group. Chris has a BS in Business Administration from Rochester Institute of Technology in Rochester, New York.

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