Understand the concept of “Lines of Business” (LOB) in S/4HANA

SAP has a reputation – quite deservedly – for complexity. And that makes sense. Many of the largest and most sophisticated companies in the world rely on their solutions for their critical activities: their accounting, managing their inventory, their supply chains, their human resources, their sales or their marketing (non-exhaustive list).

This complexity has spawned a galaxy of acronyms, products and modules that are particularly confusing even to those familiar with the company’s offerings and who have a “PhD in SAP nomenclature,” as Gartner’s Paul Saunders joked. , under a SAPPHIRE.

What is SAP Lines of Business (LOB)

To make matters even more complex, SAP’s portfolio is constantly evolving, resulting in an almost constant stream of name changes and new acronyms. This has especially been the case in recent years, with the arrival of a new generation suite (S/4HANA) in their ERP range, which has led to a rethinking of the modules of the old ECC (ERP Central Component).

SAP has reorganized its modules around the concept of “Lines of Business” (LOB). In this article I will try to give an overview of the most important S/4 modules as soon as possible, depending on how they are organized according to the LOB groups defined by SAP.

In summary, think of LOBs as logical groupings of SAP modules that correspond to well-defined business functions in your organization.

The main S/4HANA LOBs

The module Finance covers everything related to the financial and accounting management of the business, including the general ledger (GL), debtors and creditors, financial planning and analysis, management control, liquidity and management risks, and financial closing and consolidation.

The basic elements of LOB Finance are divided into the Finance (FI) and Controlling (CO) modules as well as the Treasury Management (TM) module. FI and CO, which form the core of most customers’ SAP systems, are often referred to as “FICO”. This nomenclature dates back to the early days of SAP.

FICO is a natural starting point for most customers implementing SAP for the first time. Customers migrating from ECC to S/4HANA may need to switch from SAP’s “Classic General Ledger” to “New General Ledger” as S/4HANA only supports the latter.

LOB Finance also includes the Investment Management module, which aims to guide investment decisions in tangible assets. This LOB also deals with governance, risk and compliance from a financial perspective.

RACE Procurement and purchasing includes modules Materials Management (MM) and Supplier Relationship Management (SRM). Like many S/4HANA modules, MM and SRM come from the old ECC.

This LOB handles end-to-end purchasing and procurement processes and is closely integrated with manufacturing and supply chain functions. The functions of this LOB include service agreement management, consumption analysis, supplier management and categorization, sourcing, contract management, operational procurement and invoice management.

Ariba – both a supply management tool and supplier network – can be chosen as a stand-alone product, but it is very tightly integrated into this LOB.

RACE Manufacturing includes planning and execution of production, quality control and everything related to the transformation of raw materials into finished products. At the heart of this LOB we find the production planning module, another “departure” of ECC.

LOB Manufacturing functions include manufacturing engineering and process planning, production planning, bill of materials management, manufacturing execution, outsourcing, inspection and quality control, and maintenance, repair and overhaul.

These functions are closely integrated with LOBs Sourcing and Procurement, Supply Chain Management, Sales and R&D/Engineering.

The supply chain (supply chain) is a particularly important LOB for manufacturing and distribution companies. Its core module is simply called Supply Chain Management and covers everything from high-level operational planning to pre-production planning to managing optimal inventory levels. Another module, Logistics Information Systems, helps manage transport and logistics on a global scale.

RACE asset Management covers everything related to “durable” assets: from machinery, equipment and tools to real estate assets such as land and buildings.

Asset management also includes facility maintenance as well as environmental, health and safety management. The central module of this LOB is Enterprise Asset Management. The plant maintenance module, familiar to many ECC customers, also plays an important role here.

RACE Dirty deals with all aspects of converting products and services into revenue, from pricing and quotations, to contracts, returns, order fulfillment, invoicing and revenue recognition.

This LOB groups the sales and distribution module. CRM Customer Service modules also play a key role for companies where after-sales service is important.

Hybris, which started as an e-commerce platform, has evolved to include CRM and marketing automation features. In 2018, SAP renamed Hybris to C/4HANA. It is closely integrated into LOB Sales and should have an increasingly important place there in the future.

RACE R&D/engineering is built around SAP’s Product Lifecycle Management module. It helps companies manage product development and revisions, BOMs and costs. In addition, this LOB helps manage all product portfolios and comply with product-related health and safety regulations.

RACE Human resources (HR or HCM) offers all the functions of a Core HR as well as payroll, time and attendance management and employee access to their HR data.

Many SAP customers migrating from ECC choose to keep and continue to run their local HCM module as a stand-alone application, integrated with S/4. The others will switch to SuccessFactors cloud HRIS, which acts as an HCM brick for S/4HANA… while waiting for another on-premises option, demanded by its customers.

Without forgetting the “analytical”, “technical” and SAP Industry Cloud modules

Analytics is not usually categorized as a module or LOB, but it is an essential component for virtually any business that uses SAP. For S/4 customers, SAP Analytics Cloud offers a wide range of functionality, including standard reports, BI, dashboards, predictive analytics and planning capabilities.

For deeper analytics that require data warehouse capabilities, SAP offers SAP Business Warehouse (SAP BW) or its DBaaS successor, SAP Data Warehouse Cloud.

Technical modules. In addition to the LOBs and functional modules described above, SAP designates certain technical components as “modules”. SAP Basis and the NetWeaver platform, for example, form the technical foundation on which functional modules are built. It is interesting to think of these technical modules as the engine that makes all the other components of SAP’s ERP machines work.

Industry Cloud is not listed as a standard S/4HANA module, but it offers industry-specific functionality to complement SAP’s ERP. The construction industry, for example, often involves complex progress invoicing and payments to subcontractors that require specialized management processes. The SAP Industry Cloud solution for the construction industry offers these capabilities as a cloud extension that can be implemented together with ECC or S/4. The list of offerings from these “vertical clouds” offered by SAP continues to grow.

Leave a Comment