What is SAP SCM? (Supply Chain Management)

Before getting into the details of SAP’s SCM solution, let’s chat about what Supply Chain Management in general?

Supply Chain Management is the process of centrally managing the flow of goods from raw materials into finished products.

Let’s take a T-shirt manufacturing company as an example. On a high level, their supply chain would involve activities such as sourcing the cotton threads, buttons and labels from different vendors. Then combining those raw materials into making T-shirts in the factory and sending them to warehouses. From the warehouses, they are distributed to different wholesalers. The wholesalers then distribute them to retail shops before eventually reaching the end consumers. This is a simplistic example but supply chain processes of big organisations would be much more complicated than this. A software or a multiple set of software that helps an organisation manage these end to end supply chain processes in an efficient way is known as the supply chain software.

At SAP, SCM is not just one application but it is made up of a group of software applications that helps organisations perform operations such as supply chain networking, supply chain planning, supply chain coordination and supply chain execution.

Now let’s take a look at the different types of SAP applications that fall under the SCM umbrella.

SAP SCM consists of different varieties of SAP applications that enable organisations manage their end-to-end supply chain operations

  • SAP PLM – Product Lifecycle Management. I have already written a blog about SAP PLM. Please check it out here. In a nutshell, SAP PLM is used by organisations around the world to manage development lifecycle of both physical and digital products. It has got capabilities to manage product development projects, product costing, product engineering, product development and much more.
  • SAP IBP – IBP stands for Integrated Business Planning. It is a cloud-based solution which consists of functionalities such as sales & operations planning, forecasting and demand, response and supply, demand-driven replenishment and inventory planning. It incorporates technologies such as machine learning and artificial intelligence that enables capabilities such as what-if simulations, alerts and predictive planning.
  • SAP Digital Manufacturing Cloud, SAP Manufacturing Execution and SAP S/4HANA Manufacturing – These bunch of applications are used for streamlining end to end manufacturing processes. They incorporate functionalities such as manufacturing operations management, comprehensive planning features, integrated scheduling, managing equipment effectiveness, etc.
  • SAP WM and EWM – Warehouse Management and Extended Warehouse Management – These are used for warehouse management and contains functionalities such as logistics management, storage and operations, outbound logistics management, freight logistics collaboration, global track and trace and much more. The Extended Warehouse Management contains the same core functionalities of SAP Warehouse Management but with additional capabilities such as internal routing and labour management.
  • SAP TM – Transport Management is used to manage the transportation aspects of goods between multiple locations. It contains functionalities such as strategic freight management, order management, transportation planning and transportation execution.
  • SAP EAM – Enterprise Asset Management is used to maintain and manage the performance of an organisation’s physical assets. It contains functionalities such as asset information management, centralised asset data repository, automated equipment tracking, work order management and mobile asset management.

As you have seen, SAP’s SCM solution contains a variety of powerful applications that are more than capable of managing supply chain operations of any organisation. A lot of these applications contain predictive analytics and machine learning which helps organisations to predict consumer behaviour well in advance.

Walgreens, one of the biggest pharmaceutical company in the US, uses SAP’s SCM solution to manage their supply chain operations. It uses analytics to predict customer behaviour and works its way up to meet the expected demand. For example, they anticipate flu patterns based on location, which allows them to forecast the required inventory for over-the-counter flu medicines in certain locations during a certain time of the year. This process helps the company to reduce excess inventory and all the cost associated with transportation and storage in warehouses.

If you have any questions, please feel free to let me know in the comment section below.

What is SAP PLM? (Product Lifecycle Management)

During the development process, a product goes through different stages such as planning, design and engineering, manufacturing, transportation, service and disposal/recycle.

If it is a digital product, then the stages will be bit different, like, requirement analysis, design, develop, test, launch, upgrade.

Whether it is a physical product or a digital product, organisations require efficient process and tools to successfully manage each and every phase of a product’s lifecycle. So that they can streamline the production process and reduce the production cost.

Lifecycle of a typical physical product development

Lifecycle of a typical digital product

SAP PLM stands for Product Lifecycle Management and it is used by big organisations around the world to manage development lifecycle of both physical and digital products. It has got capabilities to manage product development projects, product costing, product engineering, product development and much more.

SAP PLM is available in different version. The one that is part of business suite of solutions, is based on the NetWeaver technology and can run on any database. Whereas the latest PLM capabilities are available as part of the S/4HANA application and runs only on the HANA database. It can be hosted as both, on-premise and cloud.

Capabilities of SAP PLM

Capabilities of PLM:

  • Portfolio and project management – Supports product development processes, project tasks, proposals, timelines, commercial project management, project network, etc.
  • Product costing – Determine product costing and simulation taking various aspects into consideration, pricing features, best target price and profitability prediction.
  • Product engineering – Collaborate with multiple teams to produce a product. Provide secure and easy access to all product development information.
  • Product development – PLM offers a 3D viewer to help engineers get a visual simulation of their product development. It can be integrated with design software like CAD to assist the development process.
  • Product compliance – Depending on the type of products you manufacture and type of industry/customers you serve, there are a variety of regulations which your product must fulfil. PLM offers capabilities to centrally manage product compliance regulations, registrations, classifications, labels and documents.
  • Integration – SAP PLM can be integrated with other SAP applications such as ECC (finance and master data), CRM (customer information), SRM(supplier and raw materials information), SCM (supply chain and transportation) and BI (analytics) to perform the end to end manufacturing business process.

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What is SAP SRM? (Supplier Relationship Management)

SRM stands for Supplier Relationship Management. Big organisations have to deal with hundreds of suppliers on a day to day basis. Those suppliers supply the organisation with materials and resources that will help the organisation to manufacture their products or deliver their services. So, it is important for an organisation to manage its suppliers efficiently which in turn will help them build a long-term relationship with them.

You might already start to notice a pattern with SAP’s product portfolio. They usually have an on-premise application for a particular domain which has been there for a long time. But in the recent years, they might also have a cloud application for the same domain which might succeed the on-premise version in the near future.

For example, SAP CRM 7.0 (on-premise version) and SAP C/4HANA (cloud application). SAP BW 7.5 or SAP BW4HANA (on-premise version) and SAP Analytics Cloud/SAP Datawarehouse Cloud (cloud application).

Watch my YouTube video about SAP SRM

In the same pattern, we have two different versions when it comes to SAP SRM as well. One is the on-premise version, SAP SRM 7.0. Enhancement pack 4 is the latest EHP version and it is based on the NetWeaver platform. It can run multiple databases such as MS SQL Server, Oracle, DB2, MaxDB and SAP HANA. End of mainstream maintenance for SAP SRM 7.0 is 31st December 2027. After that, SAP recommends its customers to transition towards its cloud application for procurement solutions called SAP Ariba.

SAP SRM 7.0 is usually integrated with MM (Materials Management) module in SAP ECC or SAP S/4HANA to achieve the end to end procurement business process operation which includes, purchase requisition, purchase order management, goods receipt, material management invoices, financial invoices, and open item clearings.

In this blog, we will be discussing SAP SRM 7.0, the on-premise version of SAP SRM.

Capabilities of SAP SRM 7.0:

  • Operational Procurement – Catalog management, creating invoices, processing purchase orders, shopping cart management for direct procurement and indirect procurement.
  • Strategic Sourcing – RFx and bids management and centralised sourcing.
  • Operational Contract Management – Managing supplier contracts centrally.
  • Supplier Self Service – Manage self-service capabilities for suppliers.
  • Services Procurement – To manage services procurement for large services provided or received.
  • Operational reporting and workforce mobility.

As mentioned previously, SAP also has a cloud based B2B sourcing and procurement application called Ariba where buyers and suppliers can do business in a networked structure. It provides capabilities such as Supplier Management, Strategic Sourcing, Supply Chain, Procurement, Services Procurement and External Workforce, Selling and Fulfillment. Let’s discuss SAP Ariba in detail in an another blog post.

Please let me know your thoughts in the comment section below.

What is SAP CRM? (Customer Relationship Management)

What is CRM in general?
CRM stands for Customer Relationship Management. As the name implies, it is a software that is used to manage customer relationships of a company. It helps companies to focus on individual customers throughout their lifecycle.

Say for example, I run a SAP consulting company. Below are some of the activities that my company needs to perform when it comes to customer management.
• Manage marketing campaigns
• Lead generation
• Store customer contact information
• Manage sales opportunities
• Convert opportunities into sales
• Manage customer issues
• Receive customer feedback

A CRM software will help me perform the above activities efficiently. These activities might vary depending on the type of service or product a company sells, but the core activities will remain the same.

What are the benefits of running a CRM system?
The number of customers will grow as the company grows. So it’s vital for a company to make sure they capture all their customer information, their feedbacks, the products and services they bought, the products and services they like and dislike and much more. So that the company can keep the customers happy and as well as continue to sell them their products and services.

Below are some of the benefits of running a good CRM system
• Identify, capture and categorise leads in a better way
• Increase referrals from existing customers
• Offer better customer support
• Improve the quality of products and services

Now what CRM software does SAP have?

SAP CRM 7.0 capabilities


SAP offers a variety of CRM applications in the form of both cloud and on-premise model. Initially, SAP offered CRM functionalities embedded within the R/3 application in 1990. Later on in 2000, SAP released its first standalone CRM software called SAP CRM 2.0.  

The latest version is SAP CRM 7.0 which is the on-premise version of SAP’s CRM application and It has Sales, Marketing, Service and Customer interaction capabilities. EHP 4 is the latest EHP version of CRM 7.0 and it is supported until 31st December 2027. After that, customers are advised to transition towards SAP C/4HANA.
 
Launched in 2018, SAP C/4HANA is the next generation CRM application offered by SAP in the cloud. It provides modern tools to engage modern customers through social media and mobile platforms. It can also integrate with other SAP backend systems and as well as applications such as email, calendar and social media. SAP C/4HANA provides capabilities such as Commerce, Marketing, Revenue, Sales and Services. We will discuss about SAP C/4HANA in another detailed blog post.

What is SAP ECC? (ERP Central Component)

In 2004, SAP launched a new version of R/3 software with a revised architecture called SAP ECC (SAP ERP Central Component). It is SAP’s ERP (Enterprise Resource Planning) solution. It is one of the most robust and successful ERP software available in the market that are used by more than 80% of the fortune 500 companies.

SAP ECC comprises of 10 functional components such as Financial Accounting (FI), Controlling (CO), Sales and Distribution (SD), Materials Management (MM), Production Planning (PP), Quality Management (QM), Plan Maintenance (PM), Customer Service (CS), Project Systems (PS) and Human Capital Management (HCM).

The modules within the ECC systems are tightly integrated with each other which makes the data flow between multiple line of businesses easy and efficient. It also provides an integrated view of the whole organisation.

Now let’s take a quick look at the modules available in ECC and it’s purposes..

ModulesDescription
FIFI stands for Finance. It is one of the most important modules of the SAP ECC system, which is used to collect, store and process various financial processes such as general ledger, accounts payable, accounts receivable, bank accounting, asset accounting and travel management.
COCO stands for Controlling. Controlling provides information for management decision-making. It facilitates coordination, monitoring and optimization of all processes in an organization. This involves recording both the consumption of production factors and the services provided by an organization.
SDSD stands for Sales & Distribution. It stores and processes information related to customers, services, shipping, selling and transportation of goods and services.
MMMM stands for Materials Management. It deals with the management of materials (products and services) that are required by an organisation to produce their goods or offer their services.
PPPP stands for Production Planning. Functionlaities in this module helps organisations to produce goods that are aligned with the market demand. It helps track the goods movement from raw materials to finished goods, hence providing organisations the ability to plan their production process well in advanced.
QMQM stands for Quality Management. As the name implies, the functionalities of this module helps organisations to ensure the goods produced by them meet certain quality control criterias.
PMPM stands for Plant Maintenance. It contains functionalities such as Inspection, preventive maintenace, Repair, Budget planning for plant maintenance to help organisations conduct repairs and maintain their plants (e.g. factories, warehouses, workshops, Engineering or electrical equipment, etc)
CSCS stands for Customer Service. It is involved in the planning of providing external services such as providing repair maintenance of a product a customer has bought or rented.
PSPS stands for Project Systems. This module is used by the project managers as it provides functionalities to manage projects successfully and ensure they are executed efficiently, on time and within budget.
HCMHCM stands for Human Capital Management. Contains all the required functionalities to manage an organisation’s workforce including Employee experience management, Core HR and Payroll, Employee master data, Talent management and Workforce planning.

SAP offers mainstream support for SAP ECC until 31st December 2025. Customers have an option to buy extended maintenance for two more years (until 2027) with an additional cost. The successor of SAP ECC is SAP S/4HANA.

Let’s chat about SAP S/4HANA in an another blog very soon.

Check my YouTube video about SAP ECC, if you are interested.

What is SAP Business Suite and SAP Business Suite on HANA?

What is SAP Business Suite

SAP Business Suite is an umbrella term provided to a bundle of five software applications known as SAP ECC (SAP ERP Central Component), SAP CRM (Customer Relationship Management), SAP SRM (Supplier Relationship Management), SAP SCM (Supply Chain Management) and SAP PLM (Product Lifecycle Management).

Let’s take a huge organisation like Apple as an example. They will require software to manage their finances, run payroll and perform other resource planning activities for which they can use SAP ECC. They have to take care of their customers (SAP CRM), manage their suppliers (SAP SRM), ensure their supply chain is efficient (SAP SCM) and develop products (SAP PLM).

All these applications can be tightly integrated not just from a technical perspective but also from a business process perspective so that there is a seamless flow of information across multiple departments.

A minimum version or enhancement pack level is required as a pre-requisite if these applications need to run on the SAP HANA database. For example, the minimum required version of SAP ECC to run on HANA DB is EHP 7. For other applications such as CRM, SRM, SCM and PLM, the minimum version required to run on HANA DB is 7.0.

An introduction to SAP

SAP stands for System Analyse Programmentwicklung (System Analysis and Program Development). It is a multinational software company, headquartered in Germany. According to Forbes’s 2019 list, SAP is the third largest software company in the world after Microsoft (1st) and SAP’s fierce rival, Oracle (2nd).

SAP was founded by five ex-IBM employees, namely Dietmar Hopp, Hans-Werner Hector, Hasso Plattner, Klaus Tschira and Claus Wellenreuther in 1972. While they were at IBM, they were working on an enterprise resource planning software project only to be told by IBM that it was no longer required. So, rather than abandoning the project, they decided to leave IBM and start a company on their own called S.A.P. Hasso Plattner is still involved in the company and currently serves as the chairman of the supervisory board, but other founders are not involved in the company anymore.

By the time of writing this blog in 2020, Christian Klein is the CEO, COO and member of the Executive Board of SAP. He joined SAP as a student in 1999, held various positions within the company over the years and on April 20, 2020, was appointed as the CEO of SAP.

SAP’s initial years

None of the enterprise software used by organisations during the 1970s provided the blend of real-time data processing, standardisation and integration. In an era of reel-to-reel tapes and punch cards-based systems, the founders of SAP had the vision to create standard enterprise software that integrated crucial business processes and enabled data processing in real-time. They knew software like that would massively improve the operational efficiency of organisations across the world.

To make their vision into a reality, SAP’s founders and its early employees, worked closely with customers – often sitting side-by-side with employees in customers’ offices to learn their business needs and processes. Using the information and experience gained by working with the customers, SAP was able to come up with software that included those crucial elements which helped them transform from a small German software company into a global leader in business software.

Evolution of SAP’s product portfolio

1975 – 2000

By 1975, SAP’s founders and their initial employees were able to build applications for financial accounting, invoice verification and inventory management. This version was called R1 and was based on a single-tier architecture where the application, database and presentation layer are all installed on one server.

In 1979, SAP started developing R/2, the second generation of its software. What made R/2 stand out from the rest of the enterprise software was its ability to process in real-time on a mainframe computer. R/2 took advantage of the mainframe’s time-sharing option and integrated all of an enterprise’s functions, such as accounting, manufacturing processes, supply chain logistics and human resources.

SAP developed R/3 in 1992. While R/2 was mainframe-based, R/3 was based on the client-server architecture. In R/3, “R” stands for “Real-time data processing” and “3” stands for “3-tier architecture” which is a database, application server and presentation layer (SAP GUI). This client’s server-based architecture enabled their software to be compatible with multiple platforms and operating systems, such as Microsoft Windows and Unix which made it an attractive option for a lot of huge organisations around the world.

2000 – 2020

In 2004, SAP launched a new version of R/3 software with a revised architecture called SAP ECC (SAP ERP Central Component).

In this time period, SAP started to acquire and develop multiple cloud products, an in-memory database called SAP HANA, analytical applications, User experience applications such as FIORI and more recently their flagship product called SAP S/4HANA which runs only on their HANA database.

SAP, what has it become now?

Today, SAP has become a massive name in the software industry. They are the market leader in business software. According to research firm Gartner, SAP has a market share of 22% of the global ERP market, while Oracle, which is their closest rival in this space has a market share of 11%.

Some of the stats about SAP help us to realise how crucial they are when it comes to running big organisations around the world. SAP claims, that 77% of all business transactions worldwide touch an SAP system. For example, SAP’s customers produce 78% of the world’s food products and 82% of the world’s medical devices. Some of the world’s biggest and most successful organisations such as Microsoft, Apple, Walmart, Nestle, Coca-Cola, DHL, Airbus, BMW, Reliance, etc run SAP to perform their day-to-day operations.

SAP serves 440,000 customers in 180 countries around the world. They employ 100,000 people in more than 130 countries including 20 SAP Labs which are development centres.

Disclaimer:

This post is not endorsed by SAP and does not represent/replace their documentation

Pictures are from OpenSAP course materials