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

SAP has a reputation – rather deserved – for complexity. And it makes sense. Many of the largest and most advanced companies in the world rely on its solutions for their critical activities: their accounting, their inventory management, their supply chains, their human resources, their sales or their marketing (non-exhaustive list).

This complexity has led to a galaxy of acronyms, products and modules that is 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. , during a SAPPHIRE.

What are SAP Lines of Business (LOB)

To make things even more complex, the SAP portfolio is constantly evolving, resulting in an almost constant stream of name changes and new abbreviations. This has been especially true in recent years, with the arrival of a new generation suite (S/4HANA) in the ERP range, which has led to a rethink 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 main S/4 modules as quickly as possible, depending on how they are organized according to the SAP defined LOB groups.

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

The most important S/4HANA LOBs

The module Finance covers everything related to the financial and accounting management of the company, including the general ledger (GL), accounts receivable and accounts payable, financial planning and analysis, management control, treasury and management risk, as well as financial close and consolidation.

The fundamental 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 are 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 move 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 discusses governance, risk and compliance from a financial perspective.

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

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

Ariba – both a supply management tool and supplier networking – can be chosen as a standalone product, but is very tightly integrated into this LOB.

the LOB production includes planning and execution of production, quality management and everything related to the conversion of raw materials into finished products. At the heart of this LOB we find the Production Planning module, another “defector” of ECC.

The functions of LOB Manufacturing include fabrication engineering and process planning, production planning, bill of materials management, manufacturing execution, subcontracting, inspection and quality management, as well as maintenance, repair and overhaul work.

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

The supply chain (supply chain) is a particularly important LOB for production and distribution companies. The 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 transportation and logistics on a global scale.

the LOB Asset management includes 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, which is known to many ECC customers, also plays an important role here.

the LOB Dirty deals with all aspects of converting products and services into revenue, from pricing and quotes 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 with CRM and marketing automation features. In 2018, SAP rebranded Hybris as C/4HANA. It is closely integrated into LOB Sales and should play an increasingly important role there in the future.

the LOB R&D/Engineering is built around SAP’s Product Lifecycle Management module. It helps companies manage product development and revisions, bills of materials and cost calculation. In addition, this LOB helps to manage all product portfolios and comply with product-related health and safety regulations.

the LOB human resources (HR or HCM) offer all the functionalities 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 the on-premises HCM module and continue to use it as a standalone application, integrated with S/4. The others will switch to the SuccessFactors cloud HRIS, which serves as an HCM brick for S/4HANA… pending another on-site option requested 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 scheduling capabilities.

For deeper analytics requiring 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 labels certain technical components as “modules”. For example, SAP Basis and the NetWeaver platform form the technical basis 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 provides industry-specific functionality to complement SAP’s ERP. For example, the construction industry often involves complex progress billing and payments to subcontractors that require specialized management processes. The SAP Industry Cloud solution for the construction sector provides these capabilities as a cloud extension that can be deployed alongside ECC or S/4. The list of offerings of these “vertical clouds” that SAP offers continues to grow.

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