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This blog provides you with the latest and greatest 1805 highlights of our next-generation, intelligent cloud ERP solution for Two-Tier ERP deployment.

Check out the video below for a quick overview of top innovations released for 2-Tier ERP.


Central Purchasing 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 backend systems to single SAP S/4HANA Cloud system and carrying out procurement processes centrally. This in turn helps in reduction of the TCO from company perspective & also to give a consolidated overview of the overall business.

With Central Purchasing scenario, SAP S/4HANA Cloud gives single point of access and visibility to Purchasing documents like Purchase Requisition & Purchase Order to the connected Backend systems. It also offers central approval process, Central Portal, Central output management, Analytics & Responsibility Management of Product Categories. In this scenario, S/4HANA Cloud system can be used as a central (Buyer) system and various ERP can be connected as the various backend systems.

I also want to give an additional information on source of supply. In Central buyer system ie S/4HANA Cloud system, a central contract is created in S/4HANA Cloud system, which will be distributed across various subsidiary systems. For this Two-tier ERP scenario, the Central Buyer has to be in SAP S/4HANA Cloud who can access Purchase requisitions in multiple systems which are on SAP ECC 6.0 or above. The advantage is, Central buyer can access Purchase Requisitions from various systems and can convert them into PO at much faster rate, which is required, for e.g. shared services environment. With Two-tier ERP Central Purchasing, Organization can get transparency & it helps in Streamlining Procurement business processes across HQ and Subsidiaries.


Fig 1: Central purchasing



Drop Shipment from Subsidiary

Let’s move to next Scenario, earlier as part of Two-tier ERP, we know there is already a drop shipment scenario where Subsidiary acts as a Sales office which runs on SAP S/4HANA Cloud. Here Subsidiary gets the Order from the Customers. The Headquarter running on SAP S/4HANA OnPremise or ECC will receive the order from its subsidiary. The Headquarter running on ECC or SAP S/4HANA OnPremise will fulfils the Orders on behalf of the Subsidiary. Subsidiary in turn will bill the customer, once customer receives the materials.

With 1805, now we can address the scenario where Headquarter is on SAP S/4HANA OnPremise or ECC will receive the Customer Orders centrally and in backend will pass on the Order to the respective subsidiary which is on SAP S/4HANA Cloud. Subsidiary will fulfill the Orders directly on behalf of the Headquarter. A sales order is automatically uploaded to the subsidiary system when a purchase order is created in the headquarters system. The receipt of the sales order in Subsidiary is electronically confirmed back to headquarters. After the ordered goods are produced by the manufacturing subsidiary, the delivery process happens at subsidiary to ship the goods to the customer. The process includes the electronic sending of an advance shipping notification to the headquarters. Afterwards, the billing process runs at the subsidiary, and an electronic invoice is sent to the headquarters.


Figure 2: Drop Shipment from Subsidiary


Integration of External Payment to Customer Payments

It’s a challenging task in a 2tier deployment model capturing the payments done on the external billing system like PayPal. With the Customer Payment SCP app, customers can view their open invoices and payments. They can do the matching proposals for the items to be cleared and payment information will be sent to ERP system. With this 2 Tier ERP scenario, we can manage the Customer Payments with External Payment systems. Here again the HQ is running on SAP S/4HANA On premise and Subsidiary is running on SAP S/4HANA Cloud. By integrating external payments to customer payments, an external payment method on HQ and subsidiaries can be used to clear the open invoices received from the external billing systems.


Figure3: Integration of External Payments to Customer Payments



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

Follow us via @SAPand #S4HANA, or myself via @srivatsan.santhanam