SAP makes business software—it’s the 3rd largest software company in the world.
- 440,000+ customers in 180+ countries
- 101,450+ employees
- 340+ products
If you like to learn almost anything about SAP, then this article is for you.
Let’s get right into it!
What Is SAP?
SAP, or Systems, Applications, and Products in Data Processing, is an unusually-named European, former German, company that sells enterprise-level software to companies worldwide.
It is particularly well-known for its business applications, which cover things from customer relationship to supply chain management to human resources—the various business processes of a company.
SAP exists just because of IBM (International Business Machines Corporation): five former IBM employees founded SAP because IBM canceled a project the five employees worked on.
Furthermore, they and IBM could not agree about who will work with whom in the following project. Therefore, the five IBM employees quit IBM and started SAP in 1972.
SAP started as a small software startup in Germany with one pilot customer and without any product yet: SAP developed its first product on-site of its first customer, the German branch of the ICI (Imperial Chemical Industries) Group.
The SAP definition is:
SAP made the way from:
- 1 pilot product to now 340+ products
- 1 pilot customer to now 440,000+ customers in 180+ countries
- 5 founders to now 101,450+ employees
Now, SAP is worldwide the:
- #1 in the ERP software market
- #1 largest software company in Europe
- #2 in the enterprise application software market (Microsoft is #1)
- #2 in the CRM market (Salesforce is #1)
- #3 in the software & programming market
Here are some SAP fun facts to get you started:
- 98% of the 100 most valued brands use SAP
- 97% of the greenest companies use SAP
- 93% of the world’s greeting cards are produced by SAP customers
- 86% of the world’s athletic footwear are produced by SAP customers
- 82% of the world’s medical devices are distributed by SAP customers
- 82% of the world’s coffee and tea are produced by SAP customer
- 78% of the world’s food is distributed by SAP customers
- 77% of the world’s beer is produced by SAP customers
- 70% of the world’s chocolate is produced by SAP customers
- 52% of the world’s movies are produced by SAP customers
- 50% of the world’s packages are couriered by SAP customers
In this definitive guide to SAP, you’ll learn more about the company’s history, who they target products towards, what their most notable products are, and why you should or shouldn’t consider using them.
Let’s kick things off with SAP’s history:
The History of SAP
SAP started in 1972 when its founders decided to experiment with real-time business software, using experience gained from working with IBM. They began with financial accounting software, then eventually started expanding out to other areas of business.
This first product became known as the SAP RF (Real-Time Financial) or SAP R/1 (Real-Time 1 Tier) system, and it was quickly adopted by many companies in a position to take advantage of its offerings.
Leveraging the income from that, SAP began expanding and improving things, starting with a complete overhaul of their SAP R/1 system that was, perhaps inevitably, named SAP R/2 (Real-Time 2 Tier).
#technical foundation sap r/1 and r/2
Growth to R/2
It’s described as a growth, but it’s essential to understand the environment they were operating in at the time. SAP R/1 had fewer than 1,000 customers for a large part of its life cycle, and SAP R/2 only had around 2,200 customers, a far cry from the more than 600,000 customers SAP has today.
While many companies were starting to invest in technology in the 1980s, technology didn’t see truly explosive growth until the late 1990s, when heavy investing fueled the meteoric adoption of technology by many more companies.
The most significant change here was the switch to using mainframes for real-time data processing, to the extent that was possible with their current technology.
#what are maingrames
#what is real-time data processing
SAP R/2 also began accounting for supply chain logistics, human resources, accounting, manufacturing processes, and other details that are now a hallmark of modern SAP software.
#technical foundation sap r/2
Over the next two decades, SAP began growing and focusing on international developments. It was already used by about half of Germany’s Top 100 companies, and that gave it a degree of real-world experience and support that few competitors could match.
While SAP focused on Europe in its earliest years, complete with exports to Austria, Denmark, Italy, and Sweden, it wasn’t long before it turned its attention to the United States as well.
The Third Generation
By the 1990s, SAP was growing even more, leading to its SAP R/3 (Real-Time 3 Tier) software release on a three-tier server structure. The company also partnered with Microsoft, whose own technology offerings were also becoming a fundamental part of modern businesses.
SAP R/3 had about 15,000 customers, which was phenomenal growth but still smaller than what was coming.
By the mid-2000s, SAP settled in as the third-largest vendor for software globally, eclipsed only by Microsoft itself and IBM:
#top erp companies chart
SAP upgraded the SAP R/3 a number of times and with version 5.0, SAP changed the name from SAP R/3 to SAP ECC. However, SAP ECC is more an evolution of the SAP R/3 than a different product—even though the upgrade from version 4.0 to 5.0 was a major one.
#technical foundation sap r/3 and ecc
However, SAP still wasn’t satisfied, although dethroning the tech industry’s leaders would be challenging under any circumstances. That pushed them towards their next primary offering:
SAP HANA, released in June 2011, is the world’s first in-memory database. This is relevant to computing for several reasons, but the most important one is that it runs software on a computer’s RAM, rather than reading information off of a hard disk.
RAM is drastically faster than almost any other data-storage medium companies currently have access to.
A modern SSD (Solid-State Drive) is limited by the SATA (Serial Advanced Technology Attachment) interface that connects it to the rest of the computer. SATA can process about 750 megabytes of information per second.
That’s quite a lot, but still too slow for some situations.
RAM (Random-Access Memory), in contrast, is limited mainly by its physical design. However, modern RAM can often transfer over 10,000 megabytes per second, making it more than an order of magnitude faster than the hard drives people already think of as fast.
Holding data in RAM, rather than on a physical disc, allows for near-instant responses to complex queries. Eventually, SAP decided to expand further on this system and developed SAP S/4HANA, its now main flagship product.
SAP S/4HANA marks a significant step away from its previous SAP ERP software, which is itself the legacy of SAP R/1, SAP R/2, SAP R/3, and SAP ECC.
SAP ERP had over 100,000 customers thanks to the increasing number of technology-oriented businesses, and newer developments indicated that it was time to change course or get left behind.
SAP is the 3rd largest software companies globally, and even many businesses that provide similar types of software don’t operate on anywhere near the same scale:
That means SAP’s main competition is Oracle Corporation, which is known for databases, cloud computing, and its Java computer software.
As of 2019, Oracle earned about US$39.50 billion, while SAP earned about €27.553 billion (about US$32.42 billion), placing them relatively close to each other in overall revenue.
However, Oracle is a somewhat larger company overall, with significantly more assets than SAP currently possesses.
As of 2020, SAP remains the world’s third-largest software and programming organization and operates more-or-less globally. Although best-known for its work with larger companies, SAP also offers product sets specifically designed and developed for small and mid-size businesses.
Outside of software sales, SAP also manages and maintains data centers for users that help provide various capabilities as a service to users. These services include SAP HANA, cloud platforms, and other ways to access their software at scaling rates.
Who Uses SAP?
“Everyone” is a slight exaggeration, but it’s not too far from the truth. In theory, almost any business can benefit from using SAP software, although that isn’t the same thing as needing to use it. Most customers ultimately fall into one of two primary categories.
Individual solutions cover companies who need help in a specific area. For example, an established business may need help managing its supply chains, but not anything else.
In these cases, SAP provides support for just that area. Unsurprisingly, this is the cheaper of the two options.
SAP also provides full-suite services, which provide access to their entire library of software. This category is mainly for customers who want to work exclusively with SAP, rather than moving between them, Oracle, and any other enterprise software companies.
Services and Sizing
Larger companies get more use out of SAP software than smaller ones do. Part of this is the sheer scale of SAP’s software. With literally dozens of modules, it takes a long time to train an employee on the complete system.
Instead, most companies only teach employees a few modules within the system. This helps narrow things down and allows each person to focus on what matters to their daily activities.
Smaller businesses don’t have enough people to use every module, much less get the most out of them.
Mid-size businesses typically settle for partial implementation. For example, an e-commerce company may buy SAP software to access its customer data cloud (described later in this guide).
This helps organize customer information and ensure compliance with EU regulations, and that’s much easier for mid-size companies than developing regulation-compliant software themselves.
Sometimes known as their Business Suites, SAP offers two types of enterprise resource planning software: SAP ERP and SAP S/4HANA. Together, these comprise a huge part of their business, and most new developments improve either or both of these services.
That SAP occasionally moves things around or puts them into different groupings, is especially true for SAP S/4HANA systems because that set of enterprise software is still being developed. While SAP has plans for numerous modules, plans can and do change over time, and it’s unrealistic to assume they’ll remain the same forever.
Accordingly, it would be best if you treated this overview as precisely that: a robust, in-depth guide to what the software can do, but not a perfectly-accurate and up-to-date outline of how the systems can look to end-users—this nearly changes on a daily basis.
Further, several modules cross over and perform similar roles, so you may find the same capabilities in fundamentally different parts of the system.
The SAP ERP suite (not to be confused with the SAP Enterprise Resource Planning software, described below, despite the similarity in their names) is SAP’s main legacy business suite. It builds off of the R/1, R/2, and R/3 suites, and it’s the first part of SAP software that integrates with the internet at a large scale.
However, it’s important to emphasize this software’s legacy nature, which means that SAP wants to transition customers away from it by about 2030 so they can focus mainly on SAP S/4HANA instead.
While it may continue functioning past that time, SAP does not currently plan to provide maintenance or updates past that time.
SAP ERP consists of five primary services and systems. Some of these have cross-industry support, while others aren’t relevant to all businesses. Clients can easily use one or all of these systems.
SAP Enterprise Resource Planning
SAP Enterprise Resource Planning is the core of SAP ERP and is distinguished mainly by using its full name to help avoid confusion. It is further divided into eight primary categories, consisting of several additional services, as described below:
Human Capital Management:
The human capital management part of SAP Enterprise Resource Planning focuses mainly on finding and using employees effectively.
- Talent Management: Talent management includes processes related to finding new employees, developing skills, aligning work with corporate objectives, and retaining top employees. It provides a company-level view of each employee’s performance, education, management needs, and related data that affects their overall performance.
- Workforce Process Management: Workforce process management covers employee planning and scheduling, with a particular focus on creating optimized schedules based on business needs and captured data. It is particularly useful for workforces with frequently-changing schedules, such as retail environments.
- Workforce Deployment: Also known as Workforce Management, and not to be confused with process management, Workforce Deployment is a retail-focused category that mainly covers benefits, payroll, and time management systems.
- End-User Service Delivery: End-user service delivery focuses on deploying software and solutions to many users, rather than providing individual updates to each person. In effect, this part of the service focuses on improving resource allocation to minimize wasted effort and maximize overall performance within the company.
The financial sector of this software focuses entirely on money-related processes and services. Some companies leave this mainly to their accountants, but it does impact all areas of a business.
- Financial Supply Chain Management: Financial supply chain management focuses on broad, end-to-end views of financial needs and operations, rather than examining them as individual tasks. Improvements in this area can help free up funds, reduce errors, and generally support a business.
- Treasury: SAP’s treasury services cover actively managing money. This includes payment management processes, bank connectivity, and real-time cash positions and forecasts to help improve overall liquidity.
- Financial Accounting: As the name implies, the financial accounting services focus on paperwork and compliance with regulations. This software can help produce reports, provide information for audits, and check for errors in reports.
- Management Accounting: Not to be confused with financial accounting, SAP’s management accounting systems focus on planning future costs and comparing them with actual data to help adjust those plans as needed.
- Corporate Governance: Corporate governance helps focus on regulating businesses from the top down, with a particular emphasis on improving lines of communication between different groups and ensuring people can manage a business well.
Product Development And Collaboration:
Product development modules focus on creating new products and services for customers.
- Product Development: SAP product development focuses on idea-to-launch strategies for creating new products and services. This includes finding the right personnel, sourcing materials for prototyping, and predicting financial returns from product launches.
- Product Data Management: Product data management covers all of the data and documents related to each project, from its start to discontinuing it. This includes hosting product documentation, maintaining chemical information about products, and even providing access to data for partners or suppliers to use as needed.
- Product Intelligence: Product intelligence covers collaboration and innovation, including user interfaces, cloud deployment for systems, and managing data so people can access whatever they need as quickly as possible.
- Product Compliance: Product compliance is essential for many industries and focuses on ensuring that all aspects of any product meet regulatory hurdles. This is particularly important for companies that operate internationally because different nations or regions may have incredibly different overall product compliance standards.
- Document Management: Document management, in this context, refers specifically to managing all documents related to each project. This can include development information, messages about the project, legal information, regulatory paperwork, and any other documentation a company should or may need to keep on file.
- Tool And Workgroup Integration: Finally, tool and workgroup integration covers ensuring that each group within a company has the tools that are best suited for their tasks. This crosses over with talent management to help predict what training specific employees may need to perform at optimal levels.
Procurement covers obtaining non-employee resources that a company needs. This mainly focuses on physical goods, such as office supplies and materials for manufacturing, but may also include software procurement for certain businesses.
- Purchase Requisition Management: Purchase requisition management gives you better control over all purchasing orders, including dividing them into different categories and helping ensure the correct people receive each order for supplies or materials.
- Operational Sourcing: Operational sourcing covers more of the day-to-day operational needs for a company, including managing supply chains and maximizing the efficiency of procurement processes.
- Purchase Order Management: Purchase order management is a higher-level view of procurement needs. This includes making orders, seeing which orders are getting fulfilled, and evaluating suppliers to help determine which of them are the most reliable.
- Contract Management: Contract management is a legal-focused section of the procurement operations. This area deals with contracts you have with other companies, helps embed legal processes, and provides better user interfaces to access, understand, and ultimately help enforce contracts.
- Invoice Management: Invoice management is mainly a financial matter and deals with invoices both sent and received. Aside from helping to predict future cash flow, invoice management is also useful for scheduling payments, tracking fraud, and providing other payment services as needed.
Operations: Sales And Customer Service:
Sales and customer service modules focus entirely on selling products and managing relationships with customers.
- Sales Order Management: Sales order management covers things ranging from quotes to shipments, billing, and obtaining revenues. This also includes sales inquiries (requests from customers for information), sales orders (requests for specific deliverables), and help with ensuring the company can avoid accepting orders it can’t fulfill.
- Aftermarket Sales And Services: Aftermarket sales and services mainly include additional revenue generated by further interaction with customers, as well as general customer support for dealing with products. That includes troubleshooting, answering questions, replacing faulty products, and any other aftermarket services your company may need to provide.
Manufacturing processes focus entirely on creating physical products. This is separate from creating digital products, such as software and other applications. Most companies outsource their manufacturing, so businesses that use these processes may use little, or none, of SAP’s other software.
- Production Planning: SAP’s production planning covers aligning demand for products with production and procurement schedules designed to maximize cash flow and minimize trapped value. It also helps monitor and schedule everything from obtaining raw materials to converting things into semi-finished or finished products.
- Manufacturing Execution: Manufacturing execution focuses on making products, typically at a factory or similar facility. This includes managing supply lines, storage, transportation, quality control, and other processes necessary for creating goods in accordance with company objectives and regulatory standards.
- Manufacturing Collaboration: Manufacturing collaboration focuses on allowing manufacturing managers to interact with the entire supply network. Benefits of this include higher asset utilization, reduced cycle times, improved delivery performance, and improved ability to minimize liabilities based on product batch issues.
Enterprise Asset Management:
Enterprise asset management is a large part of SAP and focuses on dealing with all of the assets a company might own. Since companies have many types of assets, these modules are more separate from each other than those in many other parts of this software.
- Investment Planning And Design: Investment planning and design cover capital investments, research and development costs, overhead expenditures like employee training, and anything else that has an initial cost and only may generate revenue. Do not confuse this with general financial investments, such as purchasing stocks.
- Procurement And Construction: Procurement and construction focus on obtaining new assets for the company as needed, including predicting when it may need them. Many companies eventually build their own facilities, which fall into this part of their software.
- Maintenance And Operations: Maintenance and operational costs are a necessary part of doing business; even the best machines eventually wear down. This module focuses on optimizing maintenance schedules to minimize losses while increasing overall uptime and performance.
- Decommission And Disposal: Some assets are no longer worth keeping. Decommission involves taking things down and essentially removing them from active operations. Disposal often means destroying assets, but it could also include selling them to other businesses.
- Asset Analytics And Performance Optimization: Asset analytics help you understand how valuable your company’s assets are and what you can do to get even more value out of them. This is also useful for determining which assets are candidates for decommission or disposal.
- Real Estate Management: Real estate is essential for larger companies. Real estate management covers buying, selling, leasing, and paying taxes on land, as well as following any additional laws or contractual obligations that could apply to using those facilities.
- Fleet Management: Fleet management covers your ability to manage your transportation network. This includes all forms of transport, including ships, helicopters, planes, buses, and shipping containers.
Operations: Cross Functions
Cross functions broadly include software for managing work involving two or more sections of a company. This can be direct, but it also includes parts of the company that, by nature, interact with others regularly.
- Quality Management: SAP’s quality management focuses on improving overall quality control processes. It helps prevent defects, supports continuous process improvements, and helps establish sustained quality control programs. It may also help meet regulatory hurdles and, in many cases, tends to improve customer satisfaction.
- Environment, Health, And Safety Compliance Management: These modules focus on meeting compliance requirements, particularly in cases where companies need to report that compliance with a regulatory body. In some cases, it can help indicate when employees need to receive additional safety training before proceeding with a particular task.
- Inbound And Outbound Logistics: These services cover collecting shipments and goods, as well as picking, packing, and shipping items as needed. This is more specific than supply chain management, which also covers things like transportation options.
- Inventory And Warehouse Management: Inventory and warehouse management are not the same things as inbound and outbound logistics. These modules cover things like where to store items for maximum efficiency, when to reorder products, and other factors that can affect both warehouse and non-warehouse storage.
- Global Trade Services: Global trade is significantly different from national trade, especially if it involves finished products rather than raw materials. Accordingly, SAP offers separate software and services for companies that sell internationally.
- Project And Portfolio Management: Project and portfolio management help provide a bird’s eye view of operations, including what different teams are doing and whether or not you’re allocating resources well.
SAP Customer Relationship Management
SAP Enterprise Resource Planning briefly touches on CRM (Customer Relationship Management) or now also called CX (Customer Experience) with its aftermarket sales software, but that suite purposefully limits its focus on dealing with customers. Instead, most of that is contained in this software suite, which offers many ways to monitor and monetize customers.
SAP Customer Relationship Management has three primary areas of focus:
Marketing covers advertisements and attempts to alert customers to products. It also covers some pre-purchase activities by customers, including identifying likely buyers.
- Marketing Resource Management: Marketing resources include many different things, ranging from art assets to licensing agreements. To some extent, this also includes marketing employees and their skills, which often determine how fast you can create and start using new marketing materials.
- Segmentation And List Management: This module focuses on creating and using lists of customers, allowing marketers to target specific audience members with personalized messages that are more likely to generate a return on investment. This module also helps identify sales opportunities.
- Campaign Management: SAP campaign management software focuses on marketing efforts to promote sales, improve public perception of products, and generate opportunities for cross-selling or add-on purchases. In some cases, this software can run automated marketing campaigns, allowing marketing employees to focus on other tasks.
- Trade Promotion Management: This module includes planning and budgeting for trade promotions, which are marketing incentives offered through business customers. These customers mostly take the form of retail stores. Manufacturer’s discounts are an example of trade promotions (versus regular store discounts, which are not trade promotions).
- Lead Management: Lead management includes identifying and capitalizing on lead opportunities. For some companies, this also includes proactively identifying potential leads, but most companies leave that to marketing and focus on identifying leads they’ve already made contact with.
Sales cover everything involved with directly making sales to customers, rather than merely trying to reach customers and get them to buy.
- Sales Planning And Forecasting: Sales planning and forecasting are an essential part of many businesses because they help you decide when and how to order products to fill those orders. Forecasting is also important for predicting cash flow and making investments to promote future growth.
- Territory Management: In this context, a territory is a specific sales region, typically anywhere from one city to several states in size. Territory management helps maximize profits by figuring out where to assign employees and how to get the most from each opportunity.
- Accounts And Contacts: Accounts and contacts are primarily for managing customer information. In most cases, customers provide contact information when they sign up for an account, likely including their name, address, email, and phone number. These are extremely useful for marketing teams.
- Opportunity Management: This isn’t as spontaneous as the name suggests. In SAP, an opportunity is a known possibility for sales that goes through the company’s sales cycle to try and convert that possibility into a real sale. The opportunity management module helps direct employees and makes it easier to capitalize on as many opportunities as possible.
- Quotation And Order Management: Companies don’t always have fixed quotes for customers. The quotation and order management system helps record prices offered to customers, so everyone knows what to charge them, and it also helps process orders received from customers so you can process them.
- Pricing And Contracts: The pricing module mainly covers the prices shown to potential customers and helps ensure consistency throughout the company. The contract aspect of this module covers sale-specific pricing and is particularly useful after negotiating with high-value customers.
- Incentive And Commission Management: This is an employee-focused sales module. Many companies offer incentives or commissions to encourage good performance from marketing team members. This module helps track what employees earn and can also help measure incentives to figure out the optimal reward level for each employee based on their performance.
- Time And Travel: Some companies don’t have employees travel around, but when they do, this module helps account for that. Although primarily a record-keeping module, this software also helps automate travel requests and process expense statements.
Service mainly covers post-sale activities and order processing. Customer service is part of this category, but not all of what service does.
- Service Order Management: Service order management is a high-level module to help define service orders’ processes. In this context, a service order is a post-sale process to help customers and encourage them to buy again, such as repairing products, fulfilling warranties, or providing customer support for setting up the product.
- Service Contract Management: Service contract management covers the legal contracts that relate to a service order that a customer initiates. This includes checking to see if something is under warranty, so the company does not waste money on service orders it did not agree to fulfill at the time of sale.
- Complaints And Returns: This module helps manage customer complaints and desires to return products, typically including giving them a refund for its purchase price. Aside from that part, managing complaints can also help identify problems in production practices or errors in software and support improvements to reduce the number of future complaints.
- In-House Repair: The in-house repair module is a straightforward part of the software that deals with repairs you perform internally. Repaired products could be returned to the customer, but they may also be repackaged and resold if they’re in sufficiently good condition. This helps minimize waste and maximize revenue.
- Cash Management: The cash management module is a smaller part of its overall financial functions and focuses on managing liquidity to ensure you can cover all payment obligations. This module works closely with other modules to help predict future cash flows as accurately as possible.
- Installed Base Management: The installed base management module focuses on understanding customer environments, as well as managing some objects in those environments. For example, this module could help you understand what types of devices people are installing your software on if you sell software. That can make it easier to create and test updates.
- Warranty Management: Warranty management is a relatively small component of the service modules, especially because some companies don’t offer warranties. It helps track which warranties apply to each sale, as well as how much fulfilling those warranties costs.
- Resource Planning: This module helps you design and execute plans for service requests. That includes assigning employees and tools to meet demands. The plans themselves vary by company, so this is one of the most customized parts of SAP ERP.
SAP Supplier Relationship Management
SAP’s Supplier Relationship Management system is dramatically simpler than most of its other modules. While relationships with suppliers can be complicated, especially when managing a supply chain with dozens of other companies involved, it’s still typically easier than managing internal affairs and customer accounts. This software covers five main areas.
- Spend Analytics: Spend analytics analyze how much you’re spending on suppliers and looks for opportunities to minimize those costs. If you order products from multiple suppliers, this module may also help your business determine which suppliers are the most cost-effective, and therefore worth ordering more products from in the future.
- Sourcing: The sourcing software is a high-level solution that helps automate the sourcing processes, up to and including contract management and meeting any compliance standards. Its main objective is to simplify how you buy things, and therefore make it predictable and easier to analyze as needed.
- Contract Management: This is different from managing contracts with customers. On the supply side, this helps determine who owes what and what the timetables for deliveries are. Contract management is also useful for determining which suppliers are more likely to break a contract, which can have significant effects on your profitability.
- Operational Procurement: Operational procurement covers requests from different parts of the company and makes it easier to fill those as needed. These range from refilling basic office supplies to getting spare parts for repairs or even raw materials for prototyping. Operational procurement is not the same thing as general inventory and warehouse management.
- Invoice Management: Finally, the invoice management module helps you keep track of payments you owe to suppliers. This integrates with the other cash flow management modules to predict your liquidity and help you avoid situations where you can’t pay an invoice on-time. This module focuses on what you owe to others, not what they owe you.
SAP Product Lifecycle Management
SAP’s Product Lifecycle Management software focuses on creating, managing, and ultimately terminating specific products. In this context, “product” refers to anything your company could sell to customers. In most cases, this includes physical goods, but it may also cover software, services, and anything else you might be able to sell.
The word “sell” is also somewhat ambiguous here. While most companies focus on straightforward transactions, a sale in this context could also include rental agreements or non-cash payments. The Product Lifecycle Management software has four primary sections.
General product management includes a high-level view of projects, allowing managers to monitor development, allocate resources, and predict future needs.
- Product Strategy And Planning: Strategy and planning cover your company’s objectives for each product, as well as the steps you plan to take to reach those goals. This often functions as a supervisory module to help determine how well employees are meeting your goals.
- Product Portfolio Management: The previous module addresses company goals, while product portfolio management addresses administrative goals, particularly when it comes to maintaining alignment with overall product strategy. This module is mainly useful for executives, so other employees will not use it nearly as often.
- Innovation Management: Innovation is difficult because you can’t always get the result you want when people spend time working. The innovation management software helps bring some support to this by providing a platform to collect and validate ideas, allowing you to better understand which ideas are worth pursuing and which aren’t.
- Requirements Management: The requirements management system helps analyze, record, and trace project requirements throughout its lifecycle. This covers everything from the materials required for manufacturing to legal and documentation requirements.
- Market Launch Management: As the name suggests, this module focuses on launching projects. Many companies aim for a sudden, large impact when launching products, but this module also helps with softer, rolling launches that allow you to improve products before launching them to a wider audience incrementally.
Product Development And Collaboration:
Most products that businesses release are a collaborative effort between many different parts of the company. Even employees who don’t actively create the product, such as customer support members, need to get involved at some point so they can learn about the product and prepare to help customers use it. This software focuses on such things.
- Engineering, R&D, And Collaboration: The engineering and R&D module focuses on actual product development and allows teams to see 2D and 3D models of products, as well as relevant information like the necessary materials to create those products. It also includes opportunities for feedback so developers can update products more effectively.
- Supplier Collaboration: Supplier collaboration is an integral part of product development, especially once you begin producing physical prototypes. This module helps analyze and predict material requirements, allowing product developers to obtain supplies with minimal downtime, and reducing the risk of violating internal deadlines.
- Manufacturing Collaboration: The manufacturing collaboration module is similar to the supplier collaboration, but focuses on creating prototypes (and eventually products) rather than getting supplies and raw materials. Many businesses do not create prototypes in-house, so this helps ensure you can create prototypes as quickly as possible.
- Service And Maintenance Collaboration: This isn’t necessary for the development stages, but many products eventually require some form of service or maintenance, even if that’s telling customers how to do it themselves. This module helps the relevant personnel learn what they need to know so they can provide additional services as needed.
- Product Quality Management: The product quality management module focuses on continuously improving overall product quality to reduce manufacturing errors and ultimately improve profits. It also helps track problems so you can identify the source and resolve the issue.
- Product Change Management: Some products change over time. This module helps track changes so you can implement them correctly. It includes collaborating with suppliers and manufacturers, so they don’t start producing something that doesn’t match your specifications.
Product Data Management:
- Product Master And Structure Management: This module focuses on important master data for projects, including their dependencies, classes, values, and characteristics. By centralizing this information, employees always know where to look, and managers can see the most up-to-date information about the project.
- Specification And Recipe Management: This is mainly a data-storage module. Specifications and recipes include detailed technical information about creating a product, possibly including sensitive information that competitors would love to know.
- Service And Maintenance Structure Management: Service and maintenance structures are vital in supporting products after their release. This module helps establish what each product needs and ensures you’re ready to meet those needs the day your product launches.
- Visualization And Publications: Visualizations and publications are supplementary components for product launches. They include graphic representations of the product, manuals, advertisements, videos, and anything else your company publishes about a particular product.
- Configuration Management: The configuration management systems are essential for products with options. This module includes important information about each setting the product has, as well as the ways they interact with each other. It is particularly useful for troubleshooting problems.
The Product Lifecycle Management Foundation modules are the last major section of PLM. These modules help support product development by providing important information that is relevant at different stages of the process.
- Product Compliance: The product compliance module focuses on meeting regulatory standards, especially for hazardous materials. Many products use potentially hazardous materials, and this part of the software makes it easier to determine where a product can be sold with a given design.
- Product Intelligence: Intelligent product design focuses on networked products, including how, where, and why to consider networking them. This also helps address issues that are important but not fundamentally tied to product development, such as integrating with smart home assistants produced by other companies.
- Product Costing: The product costing module helps plan out expenditures over the entire life cycle of a product, especially when it comes to material prices for manufacturing. Calculating these costs helps determine the eventual return on investment.
- Tool And Workgroup Integration: The tool and workgroup integration systems focus on helping people collaborate and ensuring that employees have access to the tools, hardware, and software they need for their jobs. In some companies, this can be predictive and help determine which resources to make available for each workgroup.
- Product And Resource Management: The product and resource management module has similarities to other modules, but it focuses on all resources that may be necessary throughout the life of a product. That includes cash, employees, raw materials, software, licenses, and other types of resources as needed.
- Document Management: Finally, most products have extensive documentation requirements. These cover everything from prototype designs to inter-agency communications. Managing these documents makes it easier to find information if anyone needs to reference it again, and to meet certain regulatory or paperwork hurdles that may apply to your projects.
SAP Supply Chain Management
SAP’s Supply Chain Management system is the last of the five main components of SAP ERP, and it’s one of their larger systems. While modules in other components touch on supply chains, this is the system designed to provide robust views, control, and data for people at all levels of your organization.
Demand And Supply Processing:
These planning modules focus on forecasting and planning ahead to minimize potential delays when manufacturers start working.
- Demand Planning And Forecasting: Demand planning focuses on determining how many materials you’ll need at any given time, as well as where you’ll need them. This module also helps cut down waste by limiting the amount of excess material you’d need to store, which can be a problem in some situations.
- Safety Stock Planning: Safety stocks are excess materials or finished products that you want to keep (as opposed to unwanted extras, as mentioned above). This stock helps account for irregularities in the supply chain, allowing you to continue delivering the number of products you want to send out.
- Supply Network Planning: This module integrates purchasing, manufacturing, distribution, and transportation to help you apply tactical planning to your sourcing decisions. It also helps plan and optimize product flow throughout your supply chain to reduce order fulfillment times and improve customer service.
- Distribution Planning: Distribution planning focuses on the part of the supply chain between the manufacturer and the seller (typically a retail store). These networks can get exponentially more complicated as a business grows, so careful planning is essential to success, and that’s what this module focuses on.
- Service Parts Planning: Also known as “spare parts planning,” this module focuses on acquiring components for products, rather than entire products, to allow for repairs and replacements. Parts often have different shipping requirements than finished goods, so SAP uses this module to help plan and govern that.
These modules focus on procuring supplies and raw materials. Some manufacturers expect you to do this for them, which makes it essential for any large-scale production.
- Strategic Sourcing: Strategic sourcing focuses on optimizing supply chains by acquiring raw materials and finished products. This may involve networking with a series of suppliers rather than finding a single company to fill your orders. Strategic sourcing also helps reduce costs and improve delivery times.
- Purchase Order Processing: This is a high-level module that integrates with other parts of SAP software to monitor procurement, help process order lists, group relevant documents together, and otherwise help your company deal with purchase orders.
- Invoicing: SAP’s invoicing software supports making and receiving payments. These are often complex and time-sensitive payments, so the software also integrates with other SAP modules to help predict cash flow and ensure you can make all payments when needed. This helps avoid disruptions in your supply chain.
These modules cover the main aspects of manufacturing products, especially when it comes to scheduling things to maximize overall performance.
- Production Planning And Detailed Scheduling: Scheduling is a key aspect of any manufacturing process, both for knowing when products will be done and arranging transportation to take the finished goods to stores. To a lesser extent, this module also helps estimate payment times and, like the Invoicing module, manage your liquidity.
- Manufacturing Visibility, Execution, And Collaboration: This module helps provide more information about the current status of all manufacturing activities, such as when factories start producing goods. Its collaboration elements help provide manufacturing partners with additional information to reduce wasted time.
- MRP-Based Detailed Scheduling: This module allows you to create a detailed manufacturing plan without requiring a specific supply source. It’s especially useful for integrating with the main planning functions of SAP ERP outside of the supply chain management systems.
These modules deal with storing items in different warehouses, including accepting them, sending them out, and generally storing things. These do not cover the transportation of products between warehouses, which is a separate part of the software described below.
- Inbound Processing And Receipt Confirmation: The inbound processing module helps keep track of inventory you receive at your warehouses, with receipt confirmation serving as an extra check to ensure you’re getting what you ordered. This is one of the two fundamental parts of successful inventory management.
- Outbound Processing: Outbound processing is the opposite of the previous module and focuses on keeping track of products you send out of your warehouse. Aside from helping to manage inventory levels, outbound processing also helps determine when to reorder each product.
- Cross-Docking: Cross-docking is the process of sorting goods to improve efficiency and reduce transportation requirements. Although not necessary for every industry, companies with complex warehousing requirements usually benefit from this module’s ability to help calculate and predict cross-docking operations.
- Warehousing And Storage: This module deals with general warehousing issues, including the ability to manage the quantities of stock in different locations. This module is detailed enough to manage things down to the bin level, allowing you to locate any product with minimal search times. It also helps optimize product movement.
- Physical Inventory: SAP’s physical inventory system focuses on auditing and ensuring that the products physically present in your warehouses match what the system expects. This helps stop fraud, meet legal requirements, and generally support your company’s daily operations.
Order fulfillment modules help process orders received from customers. This is where many companies make the majority of their profits, so it’s considerably more important than its relatively small size suggests.
- Sales Order Processing: This module focuses on all aspects of processing sales orders, including selecting a warehouse to ship the product from and optimizing complex orders that may require multiple shipments. For some businesses, this can also help collect useful information about customer buying habits.
- Billing: The billing module focuses entirely on collecting payments from customers, making it arguably the most important part of the entire software system. Aside from collecting information from customers, it also works together with payment processing systems to collect funds from banks and other financial systems.
- Service Parts Order Fulfillment: The service parts order fulfillment system focuses on repairs, warranty service, and other needs for parts outside of regular sales order processing. Its main goal is optimizing service orders by reducing storage costs and transportation times, which also tends to make customers happier with you.
Transportation modules focus on moving products around, ranging from transporting things to and from warehouses to shipping orders out to customers.
- Freight Management: In this context, “freight” refers to all forms of transportation a company may use, including sea and air shipments. This module helps plan, track, and otherwise optimize all freight processes your company needs, which could go as far back as collecting and transporting the raw materials for products.
- Planning And Dispatching: This module works together with the previous one to help plan, schedule, and deliver instructions for transporters. Communication is a particularly important part of this module because it doesn’t matter how well you optimize your transportation plans if you don’t have the people to operate that plan.
- Rating, Billing, And Settlement: This is the financial aspect of transportation. Aside from helping calculate transportation fees, it also helps with billing from transportation services and supports prompt settlements that encourage transporters to keep working for you.
- Driver And Asset Management: This module focuses on managing drivers and transportation assets. Do not confuse it with other asset management systems that apply to the rest of your business. Among other features, it helps determine which drivers are the most reliable and worthy of continued offers.
- Network Collaboration: Network collaboration systems focus on helping non-company parts of your transportation network get the information you need. For example, this can help a shipping company know when to expect requests and how much transportation capacity they should have available to meet those requests.
These modules focus on maintaining information about inventory so your company can keep track of all products.
- Auto-ID (RFID) And Item Serialization: RFID tracking uses small, affordable chips to track inventory in real-time. This makes it significantly easier to find errors in stock levels and resolve problems as they occur, rather than waiting for an annual inventory check to find out that something is missing.
- Event Management: In this context, an event is something that happens regarding the movement or storage of a particular product. The event management system helps track individual goods and get more information about product movement. It’s also useful for helping ship out older products first, avoiding waste as items decay over time.
Supply Chain Visibility:
These modules are mainly for managers and focus on providing more information about your supply chains, including the performance of each segment. These also help identify weak points and ways to reduce costs.
In most cases, the supply chain visibility modules also make it easier to adjust your supply chain to account for real-world factors. For example, a sudden rush to buy products might trigger temporarily increased production to compensate, while slowing sales can trigger fewer material purchases. The primary modules of this section include:
- Strategic Supply Chain Design: Strategic supply chain design focuses entirely on optimizing supply chains to achieve the best results for your company. This includes adjusting the supply chain to account for failures or problems, such as vehicle collisions that destroy finished products while they’re on the road.
- Supply Chain Analytics: The supply chain analytics module deals with the actual data of the supply chain. It’s mainly useful for identifying strong or weak spots in the network, such as unreliable operators or consistently over-performing drivers. Note that performing too well can be as much of a problem as not doing well enough.
- Supply Chain Risk Management: This module focuses on identifying and mitigating risks in supply chains. Risks include improper shipping or handling, vehicle collisions, delayed loading or unloading, and anything else that can negatively impact your systems’ performance.
- Sales And Operations Planning: Finally, sales and operation planning within the supply chain is another level of monitoring performance and planning ahead to minimize waste. This module works together with the rest of the visibility software to provide as close to total awareness of the supply chain as possible.
Supply Network Collaboration:
Collaboration modules focus on interacting with people outside of your company, including suppliers and customers. This is not the same as marketing, which is a completely different type of interaction with customers.
- Supplier Collaboration: Supplier collaboration systems focus on helping acquire raw materials and finished products. By giving companies access to this information, they can also plan ahead and help optimize your supply chain to ensure the steady delivery of finished products to your retail location.
- Customer Collaboration: Customer collaboration is somewhat rarer, but retail stores and other environments may collaborate with you to stock shelves or store items. This provides a centralized point for gathering and providing the necessary information.
- Outsourced Manufacturing: Many companies outsource their manufacturing instead of doing everything internally. This module covers some of the specific needs and requirements of outsourcing, including the extended transportation times and a greater chance of irregularities that these delays can cause.
The demand planning module focuses on predicting what you’ll need to meet future demand for your products. For many companies, this includes creating predictions for different scenarios and using them to guide decisions if a product does better, or worse, than anticipated.
- Demand Planning In MS Excel: Demand planning uses Microsoft Excel and its spreadsheet-creating capabilities to help estimate future demand. This is particularly useful for forecasting different scenarios and adjusting purchase and delivery times as needed to account for the real-world performance of your company.
SAP S/4HANA is the successor to SAP’s previous systems, R/3 and SAP ERP. One of its most notable functions is that it’s optimized for in-memory databases, which makes it fast enough to support the needs of larger businesses.
Notably, SAP S/4HANA is also designed mainly for larger enterprises that have more complex needs than a small business. Small companies don’t need the level of help this software requires, even if it could theoretically help, so most of them use little or none of this software.
As the successor to SAP ERP, SAP S/4HANA is the company’s primary product moving forward and has a much longer life planned for it. That makes it fundamentally better for companies who are just now trying to pick what enterprise software to buy and use.
The name stands for SAP Business Suite 4 SAP HANA. SAP HANA is the in-memory database system mentioned above, and it builds on the SAP ERP systems to provide faster and better support for business operations.
Like SAP ERP, SAP S/4HANA is divided into five primary categories, and users can pick which of these to use for their business.
While they perform at their best when a company uses all of them, it is possible to use separate modules only as needed. This provides a degree of flexibility that full-suite-only systems can’t match.
SAP S/4HANA Finance
SAP S/4HANA’s Finance platform covers financial planning, accounting, treasury services, cash management, risk management, accounts payable and receivable, and similar topics.
It also allows your choice of cloud or on-premise deployment, which can provide extra security on-demand.
However, perhaps the most unique aspect of the financial model is its self-learning data.
Embedded statistics, reports, and benchmarking algorithms use cross-company data to provide a better view of what works and what doesn’t. That makes forecasting financial information considerably easier for everyone, and without compromising your company’s security.
Other financial systems include simulations of organizational changes, a unified data model that helps simplify processes, and the ability to perform financial analysis at any level of granularity.
The cash management systems include real-time visibility of bank balances and currency options.
SAP S/4HANA SRM and SCM
SAP S/4HANA organizes supply chains differently than how SAP ERP does. Instead of having Supplier Relationship Management and Supply Chain Management, it organizes the software into four distinct categories.
- Sourcing And Procurement: This system focuses on raw materials, including extended procurement needs, operational purchasing, and managing contracts. Essentially, it focuses on helping you get everything you need to start production once you have a manufacturing facility lined up.
- Manufacturing: This module focuses on product creation. It addresses areas like quality management, scheduling, planning deliveries, operations, and responsive manufacturing that can speed up or slow down based on demand.
- Supply Chain: The third module focuses on the broader picture, from pre-planning production to delivering finished goods to purchasers. It covers topics like transportation management, warehousing your products, and tracing batches of products in case you need to recall them. This is fundamentally the largest component.
- Asset Management: This module focuses on fixed assets, ranging from tools to buildings and real estate. It also covers production plant maintenance and other factors. This module typically doesn’t treat products as assets because things you’re selling are fundamentally different from things your business has and uses.
SAP S/4HANA Sales
The Sales module is, unsurprisingly, the software that focuses on helping you get and close sales, and it addresses everything that can impact a buyer’s decisions. That starts with pricing products, getting sales inquiries and quotes, and generating sales contracts as necessary.
The Sales module also supports some less-common needs, such as available-to-promise checks, individual requirements for products, credit memo requests, and repair orders.
However, this system does not support marketing or topics like web design in the same way SAP ERP organizes things. Marketers typically prefer using other systems to collaborate, generate advertisements, and monitor the effectiveness of marketing campaigns.
SAP S/4HANA R&D/Engineering
The R&D/Engineering module focuses on the larger life cycle of a product. This begins with determining the overall product design and the bill of materials for creating it, which is an essential component of forecasting its profitability for the company.
After that, this module can project things into the future to help evaluate product lifecycle costing, often including niche details like replacing manufacturing equipment.
For managers, it also supports a leadership-level view of portfolios and projects, as well as managing innovation (as described earlier in this guide).
Finally, the R&D/Engineering module helps monitor chemical data to help you comply with all health and safety regulations.
This is particularly important in manufacturing because product safety problems could sink a company, so the robust systems provide additional help and support for ensuring your product is safe enough to sell.
SAP S/4HANA Human Resources
Finally, the Human Resources module is one of the system’s newest components, and SAP estimates it will be fully available for on-premise customers by 2022. They recommend using SAP ERP’s human resources systems until it’s ready.
Planned features include most of what SAP ERP offers, including the ability to track employees, evaluate benefits, and otherwise help improve worker performance.
SAP S/4HANA is not a complete product in its current form. While the existing modules work well, SAP is developing numerous additional lines of benefits and features for customers. In time, you may hear about new features and services beyond those described in this guide.
Make sure to stay on top of the news from SAP if you choose to use their systems. This can help you decide whether or not to start using their newest modules at your company.
Announcements can come up to several years ahead of when products release, but you may be able to test their systems earlier if they think you’re a good match for that.
Otherwise, SAP typically updates its software quarterly (for cloud-based customers) or annually (for on-premise customers). These can be large updates, so consider trying to schedule things so that nothing particularly important is scheduled for the update days.
Errors can happen no matter how hard you try to prevent them, and reducing your reliance on the system during update days can help minimize the impact of issues on your business.
SAP maintains a robust customer service network, so chances are you can resolve any problems quickly.
SAP Customer Experience
SAP’s Customer Experience platform (originally known as SAP C/4HANA) is a set of five cloud-based applications designed to support the changing needs of businesses. These are divided into five primary components:
SAP Customer Data Cloud
The customer data cloud focuses on gathering and protecting sensitive customer information, including information provided to your company when customers fill out forms.
Notably, this software also complies with the General Data Protection Regulation (GDPR), a major European Union law affecting your ability to collect and manage some types of data.
Functionally, this service makes it easier to coordinate business activities within the European Union without having to learn as much about its regulations.
This is useful for both European and International businesses, although the customer data cloud is still helpful for companies located outside of the EU.
SAP Marketing Cloud
The marketing cloud is SAP S/4HANA’s home for marketing activities. Notably, it focuses on collecting as much data as possible about all marketing campaigns, then determining the real impact of each campaign.
Armed with that information, you can improve future campaigns in an ongoing cycle.
SAP Commerce Cloud
The commerce cloud isn’t quite as straightforward as its name suggests. This service covers four primary areas: content management for products, experience management for customers, personalization, and managing orders.
It’s particularly useful for e-commerce needs, such as setting up online stores or selling through existing digital retailers.
To a lesser degree, this system also helps support business websites by managing content for products. That’s not the main focus here, but since many companies sell products through their website, the commerce cloud can impact that area.
SAP Sales Cloud
The sales cloud focuses on actual sales to customers, rather than marketing to them and trying to get them to buy. The difference is that marketing mostly occurs before the customer interacts with the company, while sales occur after they start interacting.
This cloud heavily emphasizes data collection and forecasting, providing a broader view of potential customers and maximizing the chances of converting each potential customer into a revenue source.
SAP Service Cloud
The Service Cloud focuses on customer service and helps provide a seamless experience for (potentially upset) buyers. It integrates messages from different locations, ranging from social media messages to live calls, to help customer service teams provide consistent responses.
This system also helps track and monitor service volumes to predict when you’ll want more customer service staff ready to help out. By optimizing shifts, you can both reduce costs and improve overall effectiveness.
Reporting and Analytics with SAP
Analytics is one of the central features of SAP’s software, and with good reason: It doesn’t matter how much data you have if you can’t extract useful information from it. With SAP S/4HANA, most analytics capabilities are included in their relevant modules for easy access.
This is one of the parts of the software most likely to see updates and changes as people figure out new ways of storing and evaluating data.
SAP is already using machine learning and analytics algorithms to create better revenue projections, and they’re in a special place to do that.
As you learned near the beginning of this article, SAP is easily one of the world’s largest enterprise software companies.
That means it has access to extensive amounts of real-world data from customers, most of whom are happy to help improve the software they’re using by sharing that data.
Accordingly, getting analytics isn’t difficult with SAP software. However, companies must proactively choose to use that data’s results, and making organizational changes based on data is challenging.
Keep that in mind when setting your company’s policies on using data and analytics.
SAP User Interfaces
SAP currently offers two primary user interfaces. The first of these, the SAP Graphical User Interface (SAP GUI), is for SAP ERP products.
The alternative, SAP Fiori, is for SAP S/4HANA and all cloud-based services. The Graphical User Interface can imitate SAP Fiori to a certain degree, and it’s usually better to do that in case you end up switching to SAP S/4HANA.
The SAP Back-End
As you know, from reading through this guide, SAP’s software is some of the most complex and robust enterprise software ever created, and it’s built on literally decades of experience and active development. Few pieces of software come anywhere close to this.
While most people stick to the front, user-facing side of the software, there are a few things to consider about the back end of things. Notably, by customizing the software, you can alter it to fit your unique needs and perform routine tasks.
Here are the main ways you can customize SAP systems:
Extensions are additions to the basic SAP software that allow it to do new things. These can be as simple as adding a small amount of code to automate certain processes, or as complex as completely new applications that run on, or alongside, a SAP system.
Most extensions use the ABAP (Advanced Business Application Programming) language to code the software, which SAP itself developed for integration with their software. It’s a robust programming language that can use different general principles as needed.
ABAP is also a relatively old language since SAP wrote its R/3 software with it. This means it’s old enough and popular enough that programmers can easily find classes, guides, and other information to help learn it.
Therefore, programming extensions in-house is entirely possible for larger corporations, and even smaller companies can hire someone else to do it.
Cloud And Mobility
SAP works at the forefront of business needs, and few of those needs are bigger than the need to work on the go.
Between real-world factors encouraging people to work from home and the increasingly high speeds of internet connections, mobility is rapidly changing from a perk to a necessity.
Many of SAP’s services are already cloud-based, which means people can technically access them from anywhere. That isn’t limited to processes hosted on their servers, either.
By using technology like VPNs, employees can access SAP software hosted on their company’s servers, too, all without compromising security.
Any SAP software that isn’t inherently mobile can usually be made mobile through a little extra programming and accessing the SAP Cloud Platform. SAP even provides software development kits (SDKs) to support this.
Despite SAP’s size, most companies don’t rely exclusively on their software and systems. Many businesses have a combination of purchased and customized software developed for their unique needs, and that isn’t likely to stop happening anytime soon.
SAP’s response to this is a collection of integration modules and options that allow their software to interface with other systems.
The value of this varies by company, but most businesses can benefit from linking their existing databases to SAP modules so they can process more information and generate better suggestions.
These types of platform integration are also helpful for working with clients and customers. For example, integration can link business partners with on-premise applications, or cloud applications with relevant public authorities.
While SAP makes this easier on people, that doesn’t make integration as simple as it could be. There are too many systems and variables for a one-size-fits-all solution, so proper integration usually requires creating custom code.
The important point is that integration is possible, and it’s usually easier than people who aren’t tech-savvy realize.
Finally, SAP uses a variety of administration systems to help managers, IT personnel, and other people get more information about how people are using the software and how well the business is running.
Administrative components of SAP software help monitor user access, assign authorizations for accessing different components, and even manage change controls to ensure nobody deletes things by mistake. IT access services help with troubleshooting problems.