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This blog presents key highlights of the new functionalities of SAP S/4HANA Cloud release 1808 and the end-to-end business cases that can realized for Two-Tier ERP.

Lets hear from Komathi on top release highlights relevant for Two-Tier ERP with this release:

Manufacturing / Component Manufacturing Subsidiaries

Enabling Subsidiary to manage assembly for Headquarter

As part of S/4HANA 1808 release we have a new two-tier scope item (2WL) to support manufacturing subsidiaries to handle assembly processing for headquarters.

As a prerequisite, there should be master data synchronization between subsidiary and headquarters. Usually master data will be created in headquarter and shared across subsidiaries. If Headquarter and Subsidiary have different master data, then we have option to maintain master data mapping in the SAP Cloud Platform (SCP) which may require some minimum development effort.

Let’s see the process flow in detail.

Here, the Headquarter creates subcontracting purchase order for the Assembly. A corresponding sales order will be created at the subsidiary and confirmation will be sent back to headquarter automatically. Further, Goods issue will be posted against the subcontracting purchase order.

Subsidiary will then run the MRP to fulfill the demands generated by the sales order from Headquarter, which in-turn will generate planned orders and purchase requisition at Subsidiary for the assembly and components. These plan orders and purchase requisitions will further be converted in to production orders and purchase orders (Purchase order with zero value will be created as these components are provided by headquarter for assembly processing) respectively, followed by goods receipt.

Once the stocks are available at Subsidiary from Production process, Warehouse clerk at Subsidiary will create the outbound delivery against the sales order with Customer as Headquarters and goods will be issued. An Advance Shipping notification will be sent to headquarter automatically. Finally billing document will be generated and an invoice will be sent to headquarter for payment automatically. Headquarter will receive the advance shipping notification (Inbound delivery) which might be helpful for their planning, and will post goods receipt against the inbound delivery once physically goods are received from the Subsidiary. Subsidiary invoice will be verified and subsequently the payment will be released for Subsidiary.


Figure 1: Enabling Subsidiary to manage assembly for Headquarter



Central Purchasing (Centralized Scheduling Agreement) in Two-tier ERP

This solution caters to the needs of the Headquarters to centrally manage their procurement business processes for all the connected Subsidiaries. This business solution provides the flexibility of connecting multiple systems to single SAP S/4HANA Cloud system and carrying out procurement processes centrally. The use of scheduling agreements can shorten processing times and reduce the amount of paperwork you are faced with. One delivery schedule can replace many discrete purchase orders or contract release orders. Delivery of the total quantity of materials specified in a scheduling agreement item is spread over a certain period in a delivery schedule, consisting of lines indicating the individual quantities with their corresponding planned delivery dates. Delivery various scheduling enables suppliers to plan and allocate their resources more efficiently. This in turn helps in reduction of the TCO from an enterprise perspective & also to give a consolidated overview of the overall business.

In Central buyer system i.e., S/4HANA Cloud system, a central contract is created in S/4HANA Cloud system, which will be distributed across subsidiary systems. Outline Agreement Type “Scheduling Agreement” is distributed to subsidiaries. Scheduling agreement with and without release information (LP and LPA) is supported to be created from the central contract. Scheduling agreement shall not be editable in the connected subsidiary systems. However, Schedule lines can be manually added in the subsidiary system. The scheduling job ‘Schedule import of Release orders’ can be used to extract the release information for scheduling agreements as well from the connected systems to update consumption.

Figure 2: Central Purchasing (Centralized Scheduling Agreement)



Hybrid Cash management deployment

Hybrid Cash Management makes it possible to have a standalone SAP S/4HANA treasury workstation and have other finance module like Accounts payables/Accounts receivables in an existing ERP environment. Here the Accounting documents and bank account master data are maintained centrally in S/4 HANA Cloud treasury station and shared to the to the S/4HANA On-Premise and Cash flow information will be; transferred from S/4HANA On-Premise to S/4 HANA Cloud Treasury station. This data is then incorporated into the various cash reports for the cash disposition analysis. This helps in the seamless integration of cash processes across the entire corporate group.

The key capabilities of the central treasury station include Cash Position/Forecast, Bank Account Management, Memo record, make bank transfers, cash pooling, Bank statement import and processing (for treasury accounts) Cash Flow Analysis and much more.

Central treasury station would lower the adoption barrier by allowing customers to first have smaller business entities and cash management functions in the cloud before running all functions in cloud

In due course of time, reverse scenario of hybrid cash deployment on S/4HANA OP for Headquarters and subsidiaries running S4HC is in pipeline. Stay tuned for further updates from me in this area.

Figure 3:Hybrid Cash deployment

Professional Services

Procurement of Project Services from Subsidiary by Headquarters

Customers in professional services industry can already utilize the financial consolidation capabilities offered in two-tier. With 1808 release, Headquarters can procure project services from Subsidiaries. In this scenario subsidiary implements and manages the end-to-end customer project in SAP S/4HANA Cloud, based on the delivery schedule defined by the Headquarters.

The Headquarters will create a Purchase Order with vendor/supplier as Subsidiary. The delivery schedule (project deliverable-based) should be maintained in the Purchase Order as this sets the expectation for the subsidiary on project timelines.

Using the visibility application on SAP Cloud Platform (realized via the BAPIs in Headquarter system), subsidiary can filter and view the Purchase Orders created at the Headquarters, based on the vendor/supplier.

The subsidiary will now identify a Project Manager, who in turn creates the Customer Project. Work Packages and Work Items are defined based on the deliverables. Also, roles are identified for the execution of the project. Based on the request raised by the Project Manager, resource manager will check the availability of the resources during the staffing process. The project manager will raises Purchase Orders in case contingent workers or materials are required for the project execution.

Now, we need to define the billing contract type, including the detailed billing plan and for this the project status is set to “Contract Preparation”. The Sales Order is auto-generated after the maintenance of the billing plan. The Purchase Order number (from the Headquarters) should be maintained in the Project as customer reference.

Once the project is in “In Execution” status, the consultants starts the work and books time against the Project.The Project Manager tracks the project progress in S/4HANA Cloud. The Headquarter can also view the project progress via visibility application on the SAP Cloud Platform.

Based on the billing plan, billing is generated. This in turn leads to the creation of Supplier Invoice (auto-generation based on integration) in the Headquarters’ system. The Headquarter now settles the subsidiary invoice and the project is closed.

The scenario provides real-time automation of the invoicing process between Subsidiary and Headquarters, apart from reducing the manual intervention between the two organizations with its visibility scenarios.

Figure 4: Procurement of Project services from subsidiaries by Headquarters


For more information on SAP S/4HANA Cloud, check out the following links:

For more information on SAP S/4HANA Cloud, check out the following links:

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