SAP S/4HANA Cloud for Transportation

In S/4HANA 1811 cloud release, SAP has included some basic functionalities of Transportation Management. This is the first time SAP is incorporating some of the functionalities of SAP Transportation Management (TM) in the cloud release.

Software as a Service (SaaS) or the public cloud option of SAP, has high standardization and less flexibility to configure/modify. This has most of the pros and cons of a standard cloud solution. However, more functionalities will be added by SAP on a quarterly basis. For example, in the latest 1902 release, charge calculation and ‘billing of transportation costs to customer’ are available. The next release will be in 1905 (May 2019). Hence, it is important to keep track of the available functionalities in each release. It may be easy to identify which functionalities are not available in the offering as there are many. However, it is important to understand the current functionalities and roadmap, so that companies can evaluate the suitability of the product to their business requirements.

S/4HANA Cloud for TM Road Map: (As per December 2018 version)

Link: https://www.sap.com/products/roadmaps.html

Order based transportation consolidation(3EP):

3EP is the only scope item currently available in SAP S/4HANA Cloud (1811 & 1902), which uses SAP TM functions. As expected, the functionalities available are not as mature as those in the on-premise solution (S/4HANA 1809 Embedded TM or SAP TM 9.6). The following diagram details the simplified version of the process flow provided by SAP.

Based on the requirement to transport goods, the sales order is created. The shipping condition of the sales order determines whether it is relevant for TM. Accordingly, Freight Unit (FU) is created based on predefined rules. As per the SAP documentation, Self Service Configuration UIs are available for:

1. Define Transportation-Relevance of Sales Documents
2. Define Default Settings for Freight Unit Building

FU worklist can be used to monitor the FUs. Once the FUs are created, these are sent to an external TM system. Optimized consolidation of various FUs happens in the external TM system. This can either be a third-party cloud/On-premise TM system or even SAP on-premise TM system. In the external system, a shipment document will be created with the details of FUs. Using the standard interfaces, the data can be received in the S/4HANA cloud system and Freight Order (FO) will be created with respective FUs. Once this process is complete, delivery creation is triggered from the FO, which will create deliveries in the cloud system and the predecessor documents are updated.

Pre-requisites:

Since the planning happens in the external system, master data and transactional data are to be transferred to the external TMS. SAP has given a standard interface to replicate data between S/4HANA cloud and external TMS. Master data such as Business Partner, Products, and Locations will be replicated using ‘Outbound Interface’. ‘Inbound Interface’ can be used for the acknowledgment that the data is replicated successfully.

For transactional data, we can activate the standard Outbound Interface (/SCMTMS/CO_CPX_TOR_GN_RQ_OUT) to replicate Freight Units from the S/4HANA cloud. Standard Inbound Interface (/SCMTMS/II_CPX_TOR_GN_RQ_IN) should be activated to replicate the Freight Order that is created from External TMS to S/4HANA cloud. As a prerequisite, cloud connecter needs to be configured and communication arrangement needs to be activated in S/4HANA for communication with Web Services. A separate ‘Communication Arrangement ID’ needs to be created for the master data such as BP, Products, Locations, and Transactional data such as Freight Units and Freight Orders. This communication arrangement should be assigned to a replicated model with roles

Billing of transportation costs to customers:

In the 1902 release, SAP widened the scope of item 3EP by including additional functionalities. Now we can create carrier contracts/freight agreements that can be used in charge calculation. Once the FO is created and the carrier updated, charges are calculated based on the freight agreements. In the 1902 release, only cost distribution based on weight is supported. Once the goods issue is processed & the billing document is created, standard condition types are available to pull the cost from FO to the billing document. This is the new functionality available only in the cloud edition (not a straightforward scenario in an on-premise solution). Currently, only header-level resolution base and standard/break weight calculation methods are available. More functionalities may be available in future releases.

Carrier Settlement:

Carrier settlement deals with accruals postings of transportation costs (via service purchase orders (POs)) & invoice verifications based on the received carrier invoices (taking the service PO into account for matching). This may require integration with Business Network for Logistics. Since this is a work in progress, we can get more details after the 1905 release. Based on the initial feedback, there is a high chance that this functionality will be pushed to Q4 of 2019.

When to go for public cloud (SaaS)?

Currently, the Software as a Service (SaaS) or public cloud option of SAP has very limited functionalities and hence system complexity and implementation size are important factors to be considered.

So, if the system complexity and implementation size are low, then cloud solutions should be evaluated. Since the cloud solutions can scale up faster than the on-premise solution, even if the implementation size is high (with low complexity), cloud solutions can be considered. If the complexity of the implementation is high, then enhancements along with advanced functionalities may be required. Hence, the cloud solution may be difficult to cater to most of business requirements.

So, small to mid-size companies can consider cloud options, since the functionalities required are basic and the customization needed is minimal (with limited integration). Moreover, companies can consider a hybrid model, where most of the functionalities are in on-premise solutions and certain specific functionalities are in a public cloud solution. For example, in the transportation process, even big and complex implementations can consider carrier communication via Logistics Business Network (LBN) and keep all other functionalities in SAP TM on-premise solution.

Subsidiaries are another area where cloud solutions are suitable. SAP has released various documents related to the application of the S/4HANA cloud for subsidiaries in a two-tier architecture. More details about this are available in the SAP Press E-Bite - SAP S/4HANA Cloud for Two-Tier ERP Landscapes.

Application of SAP TM Cloud Edition

As per the above process flow of the 3EP scope item, it is imperative to have an external TM system to complete the process. Prima facie it may look like the application of the above process flow is limited. However, there are many existing SAP implementations where the companies use an external TM system such as OTM, JDA, Infor, etc… So, if these firms want to move their core ERP to the S/4HANA cloud, then they can do so without making many changes in the external TMS system.

Similarly, if SAP TM is already in the architecture with SAP as the core ERP, then the firms can move to the S/4HANA cloud without making many changes to the on-premise SAP TM solution. This can be a viable approach for some companies, as there are requirements to move the core-ERP to the cloud first, and then the supply chain processes. Moreover, the implementation takes time and with new releases, additional processes can be activated/implemented.

As mentioned above, in two-tier architecture for subsidiaries, the TM cloud edition can be considered. Here, we can use the TM of the parent company as an external TM and run the core processes in the S/4 cloud. Since core processes in the S/4HANA cloud have many advanced functionalities, this is one of the most important application areas of the TM cloud edition.

Conclusion:

SAP has started providing SAP TM functionalities in the public cloud version (SaaS) and as expected, very limited functionalities are available. More functionalities are expected in the next releases and it is important to keep track of the regular updates. Even though many functionalities are not available & there is very limited flexibility to configure the solution, still there can be some valid scenarios, where we can explore the possible use of the solution.

For an on-premise solution, the approach is to understand the gaps and design various processes (with multiple custom developments) as per the business requirements. Whereas for public cloud solutions, the approach should be to analyze the processes that are available and how best we can fit the business processes. This is clearly reflected in the new ACTIVATE methodology (Fit-to-Standard). So, for consulting companies, expertise in various processes (in scope and out scope) in TM, is extremely important to advise clients about the suitability of cloud solutions and how best we can implement them. Configuration, processes, and settings are more or less in place, in a cloud solution. Hence, the success and stability of the implementation are based on the deep expertise in the area and the ability to fit the available process to the business needs. The consultants should find innovative ways to fit the business process into the available functionalities. So, niche expertise in the area is desirable. The consultants should be an expert in the product and must have multiple implementation experiences. He should also be focused on the recent developments and the roadmap of the product.

ArchLynk, with more than 50 successful SAP TM on-premise implementations, is the leader and most experienced consulting firm in the TM area. We implement cutting-edge technologies in SAP TM with various companies, including machine learning, IoT, optimization, mobility, etc. Our consultants are well-equipped to advise clients about the various aspects of the cloud solution and are already working with multiple companies across the world on various projects. We expect many companies will consider the SAP TM cloud edition in the coming years and we will be part of most of these projects.