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SAP S/4HANA Cloud 1902 release zeros in on manufacturing, finance

New features in SAP S/4HANA 1902 are meant primarily for manufacturers, but they may be challenging to take advantage of without preparation.

SAP S/4HANA Cloud now includes new and enhanced functions for manufacturers, including transportation, warehouse and service management.

The functions are infused with machine learning, AI and advanced analytics capabilities that enable manufacturers to automate processes and use predictive capabilities to make better and faster decisions, said Sven Denecken, senior vice president and head of product management and coinnovation for S/4HANA at SAP.

SAP S/4HANA Cloud 1902 is now in general release, and it also includes several new financial features.

SAP S/4HANA Cloud is a cloud-based version of SAP S/4HANA that's aimed primarily at smaller and medium-sized organizations. Because it's cloud-based, SAP can deliver an updated version of S/4HANA Cloud every quarter, with enhancements or new functionality in each version, Denecken said.

Sven Denecken, SAP's senior vice president and head of product management and coinnovation for S/4HANASven Denecken

The new features and functionality for manufacturing were driven by demand from the Asian market, particularly China, which is adopting S/4HANA Cloud rapidly, Denecken said.

"A lot of manufacturing companies there are leapfrogging from older ERP systems right to this intelligent ERP, so that's why we are bringing in new innovations," he said.

A closer look at S/4HANA Cloud 1902 for manufacturing

The new and enhanced features include the following:

  • Warehouse Management enables manufacturers to inspect products delivered from either production or external suppliers before they are stored in warehouses. It includes decision-making processes for partial lots, such as those that only have a certain number of inspected goods that are of appropriate quality. The new feature is underpinned by machine-learning-based predictive analytics that helps inventory managers make better and faster decisions about inventory levels, Denecken said.
  • Transportation Management allows manufacturers to view transportation charge details and manually calculate charges; view transportation charges based on the freight agreements between the company, the purchaser and the carrier; and break down freight costs to the level of each delivery item based on gross weight.
  • Service Management allows companies to combine traditional fixed-asset production work with services in one contract or service-level agreement -- from billing to revenue recognition. "This is totally new in this version," Denecken said. "You have the pricing agreements, the discount flexibility [and] service-based pricing all in this new area of service-based contracts."

New functions are powerful, but be ready for them

The new manufacturing enhancements are welcome improvements, but S/4HANA Cloud users may need some time to adapt to them, said Shaun Syvertsen, managing partner of ConvergentIS, a consulting firm that helps companies build and manage SAP systems, based in Calgary, Alta.

One ConvergentIS client is an automobile manufacturer that's live on S/4HANA Cloud 1902 and is looking forward to eventually using the Warehouse Management and Transportation Management functions. But the company needs to get some prerequisites in order first, and these prerequisites require some significant change management to grow the business sophistication so that they can take advantage of Warehouse Management and Transportation Management.

"The good thing about the S/4HANA Cloud ERP option is that they can get it ready though do not have to roll it all out immediately on that quarterly release," he said. "They have a bit more time to organize themselves and get ready first."

The Transportation Management function is more capable than previous S/4HANA capabilities, and it could open up opportunities to change business practices that are struggling with basic delivery functions because of legacy systems and processes, according to Syvertsen.

"The ability to plan routes, transportation costs and manage or direct subcontracted carriers is powerful, so much so that the business improvement and change management will be challenging for some teams to digest," he said.

For example, the Transportation Management feature has the potential to streamline delivery execution considerably if an organization has been using the SAP Sales and Distribution module for simple outbound delivery. But this will require additional planning to make sure the prerequisites are in place and managed to enable the new process.

While that may be challenging for some customers, SAP S/4HANA Cloud quarterly releases are also a blessing, Syvertsen said. Large annual or even biannual upgrades result in significant new functionality, but also significant change management to deal with it. Breaking it down to quarterly releases makes the upgrades more bite-size and digestible.

"Further, with the right evolutionary mental approach on the business team's part and a strong set of automated test scenarios for key processes and all custom apps, the quarterly releases can really create a momentum and ongoing excitement about the new functions as they come available. So, I'm for it 100%," Syvertsen said.

Financial functions also gain next-gen tech

Because 100% of S/4HANA Cloud customers use the financial functions, much of the innovation in this new release is also centered in the financial area, Denecken said.

S/4HANA Cloud 1902 uses next-generation technologies, such as machine learning, AI and advanced predictive analytics, to bring added transparency and speed to the financial closing process through its advanced financial closing function.

"This supports business processes in heterogeneous environments where companies may have different ERP systems with different departments involved," Denecken said. "The advanced financial closing function brings full transparency to the entire closing process and helps speed up the closing cycle."

S/4HANA Cloud 1902 also includes a time-based revenue recognition function that enables companies to meet with International Financial Reporting Standard 15 for the accounting and invoicing of professional services.

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