In a fast-moving digital economy, a business must be prepared to seize an opportunity the moment it comes into view. The company that is unprepared to pounce when the occasion arises will likely get stuck on the road to irrelevance. Organizations need to be willing to change — in some cases, on a daily basis.
This need for unprecedented business agility is not restricted to a particular market. For any industry in which the transaction of products or services is still relevant, rapid transformation supported by digitization is fast becoming a necessity to match the rapid pace of innovation and globalization. And with customers — both in the business-to-business (B2B) and business-to-consumer (B2C) worlds — expecting personalized interactions and individualized products and services, businesses have no choice but to meet these demands or risk losing customers to a competitor.
The answer to the pressures presented by rapidly increasing, across-the-board disruption is agility, and the way to achieve business agility is with a flexible, digital core. With a digital core, organizations can do far more than simply address challenges at a minimum base level of success. They can pivot in near real time to capitalize on innovations in areas such as cloud, big data, and business network connectivity to completely transform the business.
A Reimagined Digital Core
A digital core is an enabling platform for transformation and innovation, but what are its hallmarks? We find five key characteristics that make up a successful digital core:
- The ability to drive and anticipate business outcomes in real time
- Seamless integration of the business across all value chain processes, such as client interaction, administration, production, and research and development
- Increased efficiency by automating processes and distributing customer insights across an intelligent business network
- Increased effectiveness by bringing big data to the size and scale needed to turn insight into tangible action
- Increased agility enabled by elevating each user’s view of the organization
Companies can achieve these levels of efficiency, effectiveness, and agility and drive end-to-end digitized operations across key business functions with SAP S/4HANA Enterprise Management, a comprehensive solution introduced with the 1511 update of SAP S/4HANA. Built natively on the SAP HANA platform and designed with an SAP Fiori-based user interface, SAP S/4HANA Enterprise Management serves as the foundational solution of the SAP S/4HANA business suite. It delivers a massive wave of simplifications and innovations that cover mission-critical business processes across 10 lines of business: finance, sales, service, marketing and commerce, sourcing and procurement, manufacturing, the supply chain, asset management, research and development, and HR. SAP S/4HANA Enterprise Management builds on the success of SAP Business Suite powered by SAP HANA with a completely new and reimagined suite that is the industry’s first digital core.
SAP S/4HANA Enterprise Management covers all core business processes, such as order-to-cash and procure-to-pay, as well as core capabilities, such as finance and various specialized line-of-business and industry capabilities. In addition, it delivers native integration with SAP’s cloud-based technology, including SAP SuccessFactors solutions and the Ariba Network. By leveraging these innovations, along with the processing power of SAP HANA, an enterprise can drive unprecedented business value in the following ways:
- Optimizing working capital with new accounts payable and accounts receivable cockpits
- Decreasing stock buffers with a simplified data model in inventory management for real-time, high-volume processing
- Increasing visibility with real-time stock and material flow insight
- Lowering procurement costs with standard integration with the Ariba Network
- Improving customer service with a new sales order fulfillment cockpit for instantly identifying bottlenecks and issues
SAP S/4HANA Enterprise Management enables formerly siloed lines of business to have complete visibility into the entire enterprise. Finance, sales, and manufacturing can now act in concert, basing decisions on the same information in real time. A perfect example is SAP Digital Boardroom, a product based on the capabilities of the digital core. This solution integrates data from various lines of business and other sources and enables executives to perform analyses, ad hoc reporting, and what-if simulations in real time during meetings.
Out with the Old, In with the New
To see how all of this translates to specific business processes, let’s take a closer look at a common use case: real-time inventory management. The traditional challenge in inventory management is to provide precisely the right amount of product to the right customer at precisely the right time. While this has been possible with classic inventory management processes, those processes also have traditionally entailed manual workarounds, costly overstocks and safety stocks, and significant fire drills to handle last-minute changes.
With the need to adopt a “segment of one” mindset to accommodate evolving customer expectations, which include immediacy and personalization, those processes have reached their functional limitations. Classic inventory planning simply cannot keep up — as new orders fly in at a high rate, slow update cycles lead to outdated information, resulting in limited inventory visibility that increases error rates and leads to supply shortages, which in turn affect available-to-promise levels and, finally, cause unacceptable customer churn.
So what does real-time inventory management look like with a digital core powered by SAP S/4HANA Enterprise Management? In a nutshell, a digital core enables real-time processing of inventory postings and inventory values so that warehouse inventories are always in harmony with demand and supply. Real-time visibility extends to using company-wide data analysis to influence key decisions about stock levels, rather than needlessly reserving warehouse space while waiting to make decisions based on overnight data loads. Organizations can begin to manage inventory in a completely need-based way. There is no longer a manufacturing offset between what is happening physically on the shop floor and what’s happening in IT.
The SAP S/4HANA Enterprise Management digital core achieves this unprecedented agility and granularity because its architecture — optimized for the in-memory platform SAP HANA — turns on its head the prevailing philosophy of how data should be handled. The old philosophy held that to ensure maximum performance, data should be stored directly in the application itself. The problem was that with mission-critical processes, such as inventory management, multiple applications often leverage the same information while requiring different levels of detail, leading to redundancies and needless complexity. With SAP S/4HANA Enterprise Management, the application master data can be flexibly extended as needed, without the need for redundancy. Everything exists in one place.
SAP S/4HANA Enterprise Management covers all core business processes and capabilities and delivers native integration with SAP’s cloud-based technology, including SAP SuccessFactors solutions and the Ariba Network.
— Sven Denecken,Senior Vice President, Product Management and Co-Innovation, SAP S/4HANA, SAP SE
The Race to Digitization Is On
We used inventory management here as a common example familiar to most organizations that produce a product or provide a service, but with SAP S/4HANA Enterprise Management bringing together core processes for 10 lines of business in one central system, it is certainly not the only use case. More than 2,700 SAP customers have already started to explore transforming their organizations with SAP S/4HANA, and they’ve started restructuring processes to spark transformation and innovation in areas such as material requirements planning, sales order fulfillment, on-demand soft financial close, and real-time fraud detection.
In the not-too-distant past, many customers were questioning the need for digitizing the enterprise. Now they want to know the most effective route to get there. And while SAP S/4HANA Enterprise Management is a major milestone, customers are often surprised to discover that arriving at a digital core is not as difficult as it might seem. It does not entail, as many suspect, a multi-year upgrade. With SAP Activate, we have a dedicated implementation methodology to help customers move to SAP S/4HANA with ready-to-run, digitized business and technology processes as well as guided configurations to support multiple starting points, including new implementations, system conversions, and landscape transformations.
A digital core helps organizations run faster and simpler, so getting there should not be as complex and complicated as the siloed line-of-business applications and redundancies that businesses are leaving behind. To learn more, visit sap.com/s4hana and sap.com/activate.