SAP S/4HANA Retail: Processes, Functions, Customising

SAP S/4HANA Retail

Processes, Functions, Customising

By Dr. Michael Anderer and Michael Niestroy

Woodbridge Publishers

1200 Century Way, Thorpe Park,

Leeds, LS158ZA

Copyright © 2023 by retailsolutions

All Rights Reserved

First Edition

ISBN (Paperback):978-1-916849-06-8

ISBN (Hardback): 978-1-916849-07-5

No part of this publication may be reproduced, stored in retrieval system, copied in any form or by any means, electronic, mechanical, photocopying, recording or otherwise transmitted without written permission from the publisher. You must not circulate this book in any format.

Under no circumstances will any blame or legal responsibility be held against the publisher, or author, for any damages, reparation, or monetary loss due to the information contained within this book, either directly or indirectly.

Table of Contents

Introduction

Chapter 1 The Architecture of SAP S/4HANA Retail

1.1. From SAP R/3 to SAP S/4HANA

1.1.1. Release Concept of SAP S/4HANA

1.1.2. Switch Framework and Business Functions

1.2. Elements of the SAP S/4HANA Retail Architecture

1.2.1. SAP Customer Activity Repository

1.2.2. User Interface - SAP Fiori

1.2.3. SAP Business Technology Platform

1.3. Outlook – The Intelligent Enterprise

1.3.1. Systems Focus on the Cloud

1.3.2. Application-Specific Focus on the Cloud

Part I: Standard Processes

Chapter 2: Master Data

2.1. Organisational Structures

2.1.1. Organisational Master Data

2.1.2. Configuration Options

2.2. Business Partner

2.2.1. Basics

2.2.2. Vendors (Vendor Master Data)

2.2.3. Customer (Customer Master Data)

2.2.4. Site Master Data

2.2.5. Customising of the Site Master Data

2.2.6. Customising of the Business Partner

2.2.7. Duplicate Check for Business Partner

2.3. Article Master Data

2.3.1. Options for Managing Article Master Data

2.3.2. Article Master Data Tabs

2.3.3. Additional Data - Article

2.3.4. Display Different Validity Areas

2.3.5. Accessing Article Master Data Tabs

2.4. Grouping Options in SAP S/4HANA Retail

2.4.1. Article Categories and Types

2.4.2. Merchandise Categories

2.4.3. Article Hierarchy

2.4.4. Product Hierarchy

2.4.5. Purchasing Groups

2.4.6. Classification and Reclassification

2.4.7 Article Number

2.5. Article Life Cycle

2.5.1. Planning an Article

2.5.2. Data Procurement

2.5.3. Article Master Creation

2.5.4. Article Provision and Maintenance

2.5.5. Article Status

2.5.6. Seasonal Articles

2.5.7. Article Archiving and Deletion

2.6. Reference Handling

2.6.1. Reference Handling for Article Master

2.6.2. Reference Handling for Business Partner

2.6.3. Reference Handling for Site Master

2.7. Assortment

2.7.1. Assortment Types

2.7.2. Assortment Allocation and Maintenance

2.7.3. Assortment Module Allocation and Maintenance

2.7.4. Listing Procedure

2.7.5. Assortment List

2.7.6. Discontinuation

2.8. Retail Prices and Conditions

2.8.1. Price Determination

2.8.2. Calculation Schema

2.8.3. Purchase Pricing

2.8.4. Sales Pricing

2.9. Important Transactions at a Glance

Chapter 3: Data Governance and Data Exchange

3.1. Design Areas of Data Quality Management

3.2. Master Data Quality Assurance in SAP S/4HANA Retail

3.2.1. Data Quality Assurance with SAP Master Data Governance

3.2.2. Data Quality Assurance using SAP Retail Add-Ons

3.3. Data Exchange between Retailers and Vendors

3.3.1. Global Data Synchronisation

3.3.2. Global Data Pools

3.3.3. GDSN Inbound Processing in SAP S/4HANA Retail

3.3.4. Data Exchange via SAP BTP

3.4. Migration of Master Data to SAP S/4HANA Retail

3.4.1. Migration Preparation

3.4.2. Initial Data Export

3.4.3. Data Analysis and Validation

3.4.4. Data Transformation

3.4.5. Migration Test

3.4.6. Productive Loading

Chapter 4: Procurement

4.1. Flow of the Procurement Process

4.1.1. Outline Agreement

4.1.2. Requirements Planning

4.1.3. Purchase Order

4.1.4. Shipping Notification or Goods Receipt

4.1.5. Invoice Verification

4.1.6. Condition Contract

4.1.7. Store Procurement

4.2. Procurement in Sales Order Processing

4.2.1. Basic Functions

4.2.2. Delivery

4.2.3. Possible Applications

4.2.4. Create Sales Order

4.3. Message Control in Procurement

4.3.1. Creating Message Condition Records for a Purchase Order

4.3.2. Customise Message Type

4.3.3. Output Management

4.4. SAP Forecasting and Replenishment

4.4.1. Advantages of SAP Forecasting and Replenishment

4.4.2. Functions at a Glance

4.4.3. Master Data Procurement

4.4.4. Architecture and Interfaces

4.4.5. Forecasting Demand Influencing Factors

4.4.6. Forecasting and Replenishment Processor

4.4.7. Exception Management

4.4.8. Planning Workbench

4.4.9. Analyses with SAP Business Intelligence Tools

4.4.10. Include Weather Data in the Forecast

4.4.11. Sales Forecasts for Fresh Produce

4.5. Unified Demand Forecast

4.5.1. Functions at a Glance

4.5.2. SAP Fiori Apps and Services

4.5.3. Architecture and Interfaces

4.5.4. Consuming Applications

4.5.5. Outlook

4.6. SAP Replenishment Planning

4.7. Changing the Procurement Process in SAP S/4HANA

4.7.1. Monitor Purchase Order Items

4.7.2. Scheduling and Transportation Chains

4.7.3. Additionals and Value-Added Services

4.7.4. Distribution Curves replace Value and Quota Scales

4.7.5. Responsive Order Monitoring

4.8. Important Transactions

Chapter 5: Logistics and Goods Distribution

5.1. Retail and Logistics Processes

5.2. Incoming Goods Process

5.2.1. Flow of the Goods Receipt Process in the Warehouse

Management Environment

5.2.2. Goods Receipt Process via Inbound Deliveries

5.2.3. Delivery with Embedded EWM and Decentralised EWM

5.3. Goods Issue Process

5.3.1. Preceding Documents

5.3.2. Sequence of the Goods Issue Process

5.3.3. Route Planning

5.4. Distribution of Goods

5.4.1. Distribution Planning

5.4.2. Distribution Handling

5.5. Returns Process

5.6. Inventory and Stocktaking

5.6.1. Inventory Management within Materials Management

5.6.2. Physical Inventory

5.7. Batch Processing

5.8. Embedded EWM for SAP S/4HANA Retail

5.9. Key Transactions and SAP Fiori Apps

Chapter 6: Sales Processes and Point of Sale

6.1. Integration of the Point of Sale with the POS Interface

6.1.1. Monitoring of the POS Interface when using IDocs

6.1.2. POS Inbound Interface with IDoc Connection

6.1.3. POS Inbound Interface with SOA Inbound Services

6.1.4. POS Outbound Interface with IDoc Connection

6.1.5. POS Outbound Interface via Transaction DRFOUT

6.2. POS Data Transfer and Audit

6.2.1. Goals of POS Data Transfer and Audit

6.2.2. Architecture of POS Data Transfer and Audit

6.2.3. POS Inbound Processing Engine

6.2.4. POS Sales Reporting

6.2.5. Business Processes with POS Data Transfer and Audit

6.3. SAP Omnichannel Sales Transfer and Audit

6.4. Fraud Detection

6.4.1. Analysis of Cash Register Data for Fraud Detection

6.4.2. Evaluate Patterns

6.4.3. Fraud Detection Tools

6.5. In-Store Merchandise and Inventory Management

6.5.1. General Information about the SAP Fiori Apps for branches

6.5.2. Configuration of the SAP Fiori Apps

6.5.3. Assignment of Employees to Stores

6.5.4. Store Control and Task List

6.5.5. Show Product Data

6.5.6. Labels Print

6.5.7. Store Order

6.5.8. Incoming Goods

6.5.9. Rearrange Products

6.5.10. Inventory

6.5.11. Correct Stock and Make Mass Stock Correction

6.5.12. Applications with RFID Function

6.5.13. SAP Smart Store

Chapter 7: Financial Accounting in SAP S/4HANA

Retail

7.1. Check-out Sale to an Unknown Customer

7.1.1. Goods Issue Postings after Sale of Goods

7.1.2. Outgoing Invoice To Store Customer (Unknown Customer)

7.2. Sale to Customers via Online Order

7.2.1. Customer Order

7.2.2. Goods Issue in the Customer Order Process

7.2.3. Outgoing Invoices to Customers

Part II: Advanced Retail Processes

Chapter 8: Promotions

8.1. Promotion Planning with SAP Promotion Management and

SAP Marketing Cloud

8.1.1. Architecture

8.1.2. User Interface and Customising

8.1.3. Planning Objects

8.1.4. Master Data Objects

8.1.5. Campaign Management

8.1.6. Offer Creation and Processing

8.1.7. Create Event

8.1.8. Create Vendor Fund

8.1.9. Planning Workbench

8.2. Integration of SAP Promotion Management with SAP S/4HANA Retail and other Peripheral Systems

8.2.1. Import Master Data from SAP S/4HANA Retail

8.2.2. Transferring Offers to SAP S/4HANA Retail

8.2.3. Transmitting Offers to Peripheral Systems with

SAP Omnichannel Promotion Pricing

8.2.4. Integration of Third-Party Systems with SAP Omnichannel Promotion Pricing

8.2.5. Post Processing Office

8.2.6. Export to Desktop Publishing Systems

Chapter 9: Special Forms of Procurement

9.1. Perishable Processing

9.1.1. Variants of Perishable Processing

9.1.2. Customising Transaction WDFR

9.1.3. Requirements Planning List

9.1.4. Lists and Environment Functions

9.1.5. Perishables Procurement in SAP Business Client

9.2. Procurement Services

9.2.1. Vendor Selection

9.2.2. Service Procurement Process

Chapter 10: Fashion Management

10.1. Retail Cycle

10.1.1. Process Model

10.1.2. Implementation of the Reference Model in the

SAP System

10.2. Financial, Merchandise and Assortment Planning

10.2.1. Financial Planning

10.2.2. Merchandise and Store Planning

10.2.3. Assortment Planning

10.3. Allocation Management

10.3.1. Seasonal Goods

10.3.2. Promotional Merchandise

10.3.3. Opportunity Buying

10.4. SAP S/4HANA for Fashion and Vertical Business

10.4.1. Operational Procurement Process

10.4.2. Fashion and Wholesale Scenarios

10.5. In-Season Management

10.5.1. Slow-Seller Management

10.5.2. Price Planning Workbench

10.6. Important Transactions and SAP Fiori Apps at a Glance

Chapter 11: Omnichannel Retailing

11.1. Introduction to Omnichannel Retailing

11.2. SAP Commerce Cloud

11.2.1. Classification of SAP Commerce in the

SAP Product Portfolio

11.2.2. SAP Commerce as a Digital Experience Platform

11.2.3. Technical Components of SAP Commerce

11.2.4. Architecture, Integration and Release Management

11.3. Marketing Automation

11.4. Order Management System

11.5. Integration Scenarios

Chapter 12: Management Information Systems

12.1. Introduction to Management Information Systems

12.2. SAP Technologies and Platforms

12.2.1. SAP S/4HANA Embedded Analytics

12.2.2. SAP BW/4HANA

12.2.3. SAP Data Warehouse Cloud

12.2.4. SAP Analytics Cloud

12.2.5. Reporting Clients: SAP BusinessObjects

12.3. Areas of Analysis and Special Features in Retailing

12.3.1. Supply Chain Management and Procurement

12.3.2. Point of Sale and Store Management

12.4. Outlook

Glossary

The Authors

In this book, you will notice the use of certain terms interchangeably, even though they refer to the same concepts. It is crucial to understand the context and recognize the synonymous nature of these terms. Here are some examples:

Product / Material / Article: These terms all pertain to the same entity within the SAP retail landscape. Whether referred to as a product, material, or article, they represent the specific items or goods being handled within the system.

Customer / Vendor / Business Partner: These terms are used interchangeably to describe the individuals or organizations involved in business transactions. Depending on the perspective or SAP module being discussed, they can be referred to as a customer, vendor, or business partner.

Branch / Store: The terms branch and store are interchangeable when referring to retail locations or outlets. They both represent physical locations where business activities take place.

Purchase Order / Sales Order: Although distinct in nature, the terms purchase order and sales order can sometimes be used interchangeably. They both refer to transactional documents that document the details of purchasing or selling goods or services.

Understanding the interchangeable usage of these terms is important for comprehending the concepts discussed throughout the book. By recognizing their synonymous nature, readers can effectively interpret and apply the concepts in different SAP products and modules.

Introduction

In today's rapidly evolving business landscape, the retail industry is witnessing a transformative shift like never before. The emergence of new technologies, changing consumer behaviours, and the impact of global events have created a host of challenges for retailers worldwide. Amidst this complexity, organisations are seeking effective strategies to adapt, survive, and thrive in the face of adversity. This book aims to explore the role of SAP solutions in overcoming these obstacles and driving success in the retail industry.

This book is primarily aimed at readers who are either about to implement SAP S/4HANA Retail, who are in the process of implementing it, or who have already successfully implemented it and would like to learn about further possibilities offered by the world of SAP S/4HANA Retail. In addition, you can also use this book to familiarise yourself with and deepen your knowledge of individual specialist functional areas of SAP S/4HANA Retail or simply to gain a general overview of the solution.

Structure of the book

The book is divided into two parts, whereby each part is containing a number of chapters. The individual chapters of this book are in logical sequence and build on each other, but each chapter forms a self-contained unit and can therefore also be worked through individually.

Part I focuses on the core retailing processes and functions whereas Part II provides insights into specialised retailing processes such as special types of procurement, e.g. Fresh Item Procurement, Fashion Management as well as Omnichannel Retailing.

In Chapter 1, Architecture of SAP S/4HANA Retail, we provide insights into the evolution of SAP for Retail, the high level system architecture of SAP for retail customers and also an outlook of what we believe is the likely roadmap of SAP S/4HANA Retail.

Chapter 2, Master Data, is probably one of the most important chapters in this book as it reflects the relevancy of master data within the context of an SAP S/4HANA Retail system. Master data is leveraged in all business processes and functionalities within SAP and therefore, its understanding and correct setup is of the utmost importance to SAP customers.

The chapter includes a comprehensive overview of all organisational structures, business partners, articles, pricing and price management and other central constructs of SAP S/4HANA Retail such as merchandise categories, assortment, and conditions.

In Chapter 3, Data Governance and Data Exchange, we look at data quality management and quality assurance. We also explore the interaction with data pools and explain the options that SAP S/4HANA Retail provides for exchanging data with these pools.

In Chapter 4, Procurement, we discuss what types of procurement are supported by SAP S/4HANA Retail including the procurement for Stores as well as Distribution Centres. We explain details behind requirement planning, source determination, source lists, quota arrangements and many more functions within SAP. In addition, we explain how SAP Forecasting & Replenishment (F&R) can be leveraged to support the procurement processes and how Condition Contract Settlement and other inventory management functions trigger follow-on processes.

Chapter 5, Logistics and Goods Distribution, outlines the various inventory management as well as logistics processes that SAP S/4HANA Retail supports but also the integration with SAP Extended Warehouse Management (EWM) and SAP Transportation Management (TM). In addition, we explain the SAP concept of Merchandise Distribution including Cross-Docking, Flow-Through and Put-Away strategies. Finally, we will cover the concept of ‘Embedded EWM’ that may be applicable for a range of retailers as well.

In Chapter 6, Sales Processes and Point of Sale, we will go into detail on the integration of point-of-sale (POS) data into the SAP environment and introduce the POS Data Transfer and Audit function of the SAP Customer Activity Repository solution. We further discuss the monitoring of transactional data, various integration methods, but also options for fraud detection. Finally, we are providing a comprehensive overview of SAP’s In-Store Merchandise and Inventory Management functionality, effectively the possibilities for store personnel to interact with the SAP S/4HANA solution.

As this book’s primary focus is on the retail, merchandising, logistics and supply chain processes and not on Finance, we have decided to only include a relatively small chapter on the financial processes. Chapter 7, Financial Accounting in SAP S/4HANA Retail reflects the recording and processing of sales and revenues for known as well as anonymous customers within the Finance component of SAP S/4HANA.

In Part II, Specialised Retail Processes, we describe processes in the SAP S/4HANA Retail environment that address certain specialised topics and processes (e.g. fashion, fresh produce replenishment, etc.). As such, part II of the book will also include sections on SAP functionality that are outside of SAP S/4HANA Retail, i.e. SAP Promotion Management, SAP Fashion Management and Omnichannel Retailing. Further, in this part we also explain how SAP management information systems are being leveraged in connection with SAP S/4HANA Retail.

In Chapter 8, Promotions, we look at the functions of the SAP Promotion Management solution, which is offered as an application on the SAP Customer Activity Repository. Here you will learn about promotion planning options that go beyond SAP S/4HANA Retail, the different types of promotions, pricing and integration with SAP S/4HANA Retail.

Procurement processes in retail are complex and can differ depending on the type assortment, e.g. Fresh Produce, Apparel, Seasonal, Ultra-Fresh, etc. In Chapter 9, Special Forms of Procurement, we therefore look at two special forms of procurement and describe the basic functions and processes for fresh produce procurement and also go into the procurement of goods-not-for-resale (GNFR), e.g. services as well as the integration with SAP Ariba.

In Chapter 10, Fashion Management, we explain the planning and merchandise management processes in apparel retailing. For this purpose, we present the retail cycle in the fashion sector using a reference model. Building on this, we look at the planning process from strategic financial planning to merchandise and assortment planning. In addition, you will find explanations on seasonal order processing, order release and open-to-buy. Furthermore, we introduce you to the SAP S/4HANA for Fashion and Vertical Business solution.

In Chapter 11, Omnichannel Retailing, we provide an overview of the SAP solution set to address omnichannel commerce processes. In this overview, we have included SAP Commerce Cloud, SAP Emarsys as well as an initial outlook on SAP’s industry cloud roadmap. As this area is evolving and SAP are adding new solutions to their portfolio, we have tried to keep some of the roadmap topics fairly high level.

Finally, in Chapter 12, Management Information Systems, you will learn how SAP solutions such as SAP S/4HANA Embedded Analytics, SAP BW/4HANA, SAP Data Warehouse Cloud or SAP Analytics Cloud can be leveraged within a retail organisation.

Acknowledgement

Writing this book has been a very humbling experience. On the one hand, because it took a lot more effort than originally anticipated but on the other hand because it made us realise how much knowledge and expertise our colleagues and co-authors possess that we were able to leverage. We are therefore very fortunate to be able to work with a great team of professionals. A very big thank you goes to all co-authors as well as to Martina Püschel and Richa Rishiraj, who project managed as well as supported and kept us on track with all chapters in an energetic, inspiring and always motivating way.

Dr. Michael Anderer & Michael Niestroy

Chapter 1

The Architecture of SAP S/4HANA Retail

In this chapter, we give you an overview of the diverse system landscape of the SAP S/4HANA Retail for Merchandise Management system with all its core components and satellite systems.

The dynamics in retail continue unabated—not only since the pandemic. In parallel, we are experiencing dynamic developments in the IT world, such as cloud computing, Smart Apps, AI, and agile project methods. For retailers, it is therefore crucial that they have a stable but at the same time flexible IT solution at their disposal.

SAP S/4HANA Retail is SAP's industry solution for retail. First, in this chapter, you will learn some technical basics that are important for understanding the development and operation of SAP S/4HANA Retail (see Section 1.1). Then, after an initial general overview, we look at the individual components of SAP S/4HANA Retail (see Section 1.2). We will also look at the SAP Fiori user interface and the possibilities of the SAP Business Technology Platform (SAP BTP), which, as a pure cloud product, can make the connectivity and expandability of SAP's on-premises systems more flexible and is therefore very important for hybrid architectures (on-premises and cloud). Finally, you will get an outlook in the form of a roadmap on how SAP S/4HANA Retail is expected to develop in the coming years (see Section 1.3).

1.1. From SAP R/3 to SAP S/4HANA

To understand the evolution towards a modern and powerful SAP S/4HANA system, we would first like to give you a brief overview of the predecessor system SAP R/3 and the fundamental differences.

The classic client-server architecture of an SAP R/3 System consists of three layers:

Presentation Layer/User Interface

Application Server

Database Server

The further development from the SAP R/3 system to SAP S/4HANA is characterised by the vertical integration of these layers in technical terms.

With SAP S/4HANA, you licence at least two components/layers from one source. This means you no longer have to choose between different databases but buy them directly with the licence (SAP S/4HANA database).

With the first SAP HANA-based system for the retail industry, SAP S/4HANA Retail, SAP is changing its previous database strategy. The new SAP S/4HANA Retail, optimised for SAP HANA, uses only SAP HANA as its database. This applies equally to the other solutions optimised for SAP HANA.

The SAP HANA database, which was initially designed for SAP's business intelligence applications to improve performance in the area of online analytical processing (OLAP), uses the in-memory technology of the main memory (Random Access Memory, RAM), whereby the data is no longer stored in tabular rows, but in columns and rows. This enables significantly faster data access and, thus, has seen significant performance improvements compared to the previous architecture.

But it is not only data storage that takes place in the main memory. Some computationally intensive parts of the coding are also kept and processed in the main memory of SAP HANA through the so-called Code Pushdown. Examples include the new run for Material Requirements Planning (MRP), which is processed directly in the SAP HANA database as Rapid Replenishment, or the Unified Demand Forecast (UDF), a forecasting method that will gradually replace the previous methods (see Section 1.3, Outlook).

These new functions reveal the basic idea of in-memory technology, namely the shifting of performance-intensive applications from the application layer to the in-memory database (to the cache memory). The former bottleneck between the hard disk and main memory is avoided in this way. This, in combination with the massive parallelisation of the processors, makes data access significantly faster but also increases the capacity requirements on the main memory.

However, in-memory technology also has some disadvantages. The costs for processors and main memory are relatively high. In addition, a persistence layer with recovery points and transaction logs is needed to be able to perform a recovery in the event of data loss. The persistence layer in SAP S/4HANA Retail is based on the SAP MaxDB database.

Figure 1.1 shows the product development from SAP R/3 to SAP S/4HANA. While the later versions of R/3 (SAP Business Suite) are still operating on any database (Any DB), this changed with Release 1609 and Simple Finance at the latest, as here the financial processes for SAP S/4HANA were partially moved into the database (code pushdown). Furthermore, customers can operate their SAP S/4HANA Retail system in their own data centres (on-premises) or in the cloud operated by hyper scaler providers (Amazon, Microsoft, and Google) or with SAP directly.

Figure 1.1: Evolution from SAP R/3 to SAP S/4HANA.

1.1.1. Release Concept of SAP S/4HANA

Since the introduction of SAP S/4HANA, there have been annual releases for the on-premises version, usually in September or October. The nomenclature used to consist of the year and the month of the release, e.g., 1709, 1810, 1909. In 2020, the designation was adjusted and now simply includes the year of release. A distinction is made between so-called Support Package Stacks (SPS) and Feature Package Stacks (FPS). SPS refers to bug fixes, new legal requirements, or performance improvements and serves to improve the quality of your SAP S/4HANA system, whereas FPS contains new functions or innovations. A new release is always being delivered with SPS level 0, after which the numbering follows continuously—regardless of whether SPS or FPS. The so-called Enhancement Packages (EHP) refer to the SAP Business Suite (R/3), which is being phased out. After EHP 8, there will be no more releases for SAP Retail, the predecessor of SAP S/4HANA Retail. SPSs are cumulative, i.e., when you import the current SPS, you also receive all the functions of the previous SPSs. You can find an overview of the contents of the SPSs in the SAP Support Package Stacks portal at https://support.sap.com/en/my-support/software-downloads/support-package-stacks.html.

1.1.2. Switch Framework and Business Functions

When installing an SAP ERP system, you are given the option of choosing a specific industry variant or Industry Solution (IS), for example, IS Retail (ISR) or IS Oil. This activates a complete set of industry-specific functions, the so-called Business Functions. Business functions are processes, functions, and transactions tailored to the respective industry, such as retail-specific master data or promotions. With SAP S/4HANA, it is possible to activate several industry solutions at the same time. This means that if you run a verticalised business—such as production and retail—one system on which both business processes run together is sufficient.

Figure 1.2 shows a section of some activated business functions of an SAP S/4 HANA Retail system.

Figure 1.2: Business Functions in SAP Retail Customizing (Transaction SFW5).

SAP had significantly reduced the number of business functions with the release of SAP S/4HANA 1610, as many functions have either already been removed, have been anchored in the core system or will be in the future as part of the Simplification compared to the architecture of SAP ERP. With Release 2021, however, the previously removed perishables planning function was reinstated (see Chapter 9, Special Forms of Procurement). The shift of industry functions back into the core of SAP S/4HANA is referred to by SAP as "Back to Core".

Note: SAP S/4HANA Retail Deployment Models in the Context of SAP S/4HANA: Offerings

SAP S/4HANA Retail is offered in three deployment models as part of SAP S/4HANA. In the On-Premises solution, the customer installs the system himself and operates it in his own data centre. SAP also offers a Private Cloud Solution, i.e., a Hosting Solution provided exclusively for the individual customer. The Public Cloud Solution, in which several customers access a standardised system in a cloud provided by SAP, will be available from the third quarter of 2022. In addition, there are—exclusively in the cloud—the so-called Industry Apps, which function as a supplement to the SAP Retail Standard and can come either from SAP itself or from partners. One example is the promotion planning Add-On Promotion Planning & Calendar from retail solutions, which is available in the SAP Store.

The migration from SAP Business Suite to SAP S/4HANA has both a technical and an application-specific aspect. The technical part of this transformation is the database migration. To migrate to the SAP HANA database, the source system must have at least EHP 7 and be unicode-enabled. In addition, the new general ledger must be activated. The tools Maintenance Planner, Software Update Manager (SUM), and Database Migration Option (DMO) support you in the technical adjustments, e.g., with Guided Procedures.

As far as the application changeover is concerned, you should know which SAP Retail functions have been deleted, streamlined, or simplified. You can find the relevant notes in the SAP S/4HANA Simplification List. The Simplification List for SAP S/4HANA 2020 can be found in the SAP Help Portal at:

https://help.sap.com/doc/e8f908b4892d44ad90e8c582b0cd1866/2020/en-US/SIMPL_OP2020.pdf.

The list includes several hundred topics across the entire SAP S/4 HANA solution, of which more than 60 topics are for the retail and fashion sectors. As part of pre-checks, it must be checked whether the functions used in the legacy system still exist in the target system or whether they have been replaced by new functions, if applicable. This has a significant influence on the scope and approach of the transformation project.

Furthermore, it is essential to check the customer-specific coding for compatibility with SAP S/4HANA and then import it into the new 2021 release. Both SAP itself and SAP partners offer corresponding services for this purpose.

1.2. Elements of the SAP S/4HANA Retail Architecture

If the activities in retailing are divided into primary, value-creating, and supporting activities, the picture is as follows in Figure 1.3.

Figure 1.3: Retail value chain.

This graphic also illustrates which functions SAP S/4HANA Retail covers. The core merchandise management system focuses on the following areas:

Procurement

Logistics and goods distribution

Sale

We cover these areas in Chapter 4, Procurement, Chapter 5, Logistics and Goods Distribution, and Chapter 6, Sales Processes and Point of Sale. A new addition to the book is Chapter 7, FI for Selected Retail Processes. Master data is the foundation for all these areas. We, therefore, deal with it separately in Chapter 2, Master Data, and Chapter 3, Data Governance and Data Exchange.

In addition, from an IT perspective, there are other software components that support and complement these primary activities. In terms of procurement, for example, this is the area of forecasting and replenishment (see Section 4.6, SAP Forecasting and Replenishment), and for promotions, it is Promotion Management Retail (PMR, see Chapter 8, Promotion Process). In Chapter 9, we have added the Special Forms of Procurement. For planning, especially in the area of fashion, SAP provides its own concept (see Chapter 10, Fashion Management), which is now fully integrated into SAP S/4HANA Retail. In the area of customer management, value creation across all channels is supported with various omni-channel retailing features (see Chapter 11, Omni-Channel Retailing). The topic of business intelligence is covered in Chapter 12, Management Information Systems.

The topic of omni-channel retailing, in particular, is becoming increasingly important for all retailers and, thus, also for SAP. Here, customers and their purchasing data are—technically speaking—extensively analysed to enable an enhanced and customer-centric shopping experience. With the SAP Customer Activity Repository, SAP provides you with a powerful tool that, in interaction with SAP S/4HANA Retail and SAP Service Cloud, SAP Emarsys, or SAP Sales Cloud, offers completely new possibilities for customer interaction. We explain this repository in more detail in the following section because of its great importance for SAP S/4HANA Retail.

1.2.1. SAP Customer Activity Repository

SAP Customer Activity Repository basically provides information on sales (across all sales channels), inventory information, and expected sales.

The functional scope of the SAP Customer Activity Repository comprises the following core elements:

POS Data Transfer and Audit (POS DTA)

Dashboards for Multichannel Sales Analytics

Real-time stocks (Stock Visibility)

Omni-channel Article Availability and Sourcing (OAA)

Omni-channel Promotion Pricing (OPP)

On-Shelf Availability (OSA)

Unified Demand Forecast (UDF)

Demand Data Foundation (DDF)

Figure 1.4: Components of SAP Customer Activity Repository.

We will take a closer look at some of these core elements in the following while others will be explained in more detail in subsequent chapters.

Omni-Channel Promotion Pricing (OPP)

The Central Price and Promotion Repository within SAP Customer Activity Repository ensures that the same prices, especially promotion prices, are available in every sales channel. Due to the diverse and partly decentral processed promotion price calculations (e.g., at the checkout or on the checkout server, in the online shop, in the ERP system), it can happen that different prices are displayed in the different sales channels. The complexity and variability of promotions can exacerbate this phenomenon. With the omni-channel promotion pricing function and the central price and promotion repository, the following aspects are ensured:

Central price repository

Uniform logic for pricing

Consideration of the respective customer context (e.g., happy hour, article combinations, total purchase price etc.)

Supply of all channels (point of sale, web applications, ERP system, other SAP customer experience solutions).

Technically, in addition to the central price repository in SAP CAR, there are corresponding local repositories for the Point of Sale (POS) and SAP Sales Cloud.

Unified Demand Forecast (UDF)

After a number of forecasting models had accumulated in SAP's portfolio over the course of time—including through acquisitions, among other things— SAP Customer Activity Repository 2.0 delivered a unified forecasting engine for the first time: Unified Demand Forecast (UDF) . UDF calculates future demand on the basis of time series and Demand Dnfluencing Factors (DIFs) such as public holidays, promotions, seasons, etc. The historical data is first examined for outliers, e.g., periods with no sales (e.g. due to out-of-stock situations), which are then eliminated from the calculation. If too little or no historical data is available for an item, similar merchandise group-store (location) combinations or (similar) reference articles can be used instead—for fashion items, for example.

UDF now calculates the demand forecast for future periods based on historical data as well as future demand influencing factors. For each calculated sale, a probability or confidence index is calculated at the article or location level, the so-called Forecast Confidence Index (FCI). The forecast demand can be displayed disaggregated, i.e., also according to the quantity of individual demand influencing factors.

Omni-channel Article Availability and Sourcing

The Omni-channel Article Availability (OAA) function supports an online available-to-promise (ATP) check across all inventory-managing sites for measuring item availability in the various channels. The availability check is a stock calculation that can be used to determine when and with which quantities customer orders or purchase orders can be fulfilled. This check is central to being able to make a statement about the inventory situation vis-à-vis the end customers.

Furthermore, in the SAP Customer Activity Repository, a source of supply determination—for example, for orders from an online shop—can also be maintained and carried out.

On-Shelf Availability (OSA)

Since SAP S/4HANA Retail manages stock at the store or site level and may also include storage locations, out-of-stock situations can occur at the shelf level in the stores i.e., an article is no longer on the shelf or in the location, contrary to what is stated in the merchandise management system. Reasons for this can be:

Theft

Break

Spoilage

Other shrinkages

To avoid such stock gaps and thus lost sales, the module for on-shelf availability (OSA) uses the intraday transactional data of the POS systems at the item level (i.e., not the cumulated data). Based on the data from the POS transaction logs (TLogs), the out-of-shelf algorithm calculates probabilities for stock shortages. The algorithm also takes into different inventory turning classes (e.g., fast-moving/slow-moving), seasonality, advertising measures, outliers, and other factors. The statistical sensitivity can be set to track critical items more precisely (more sensitively) than less critical ones. In this way, alerts can be customised for the store manager.

The presentation layer of the OSA module is a mobile App that forecasts stock shortages to the hour. An article list in this App shows items that have a high probability of shelf gaps. This means that the responsible store employee or manager no longer has to search entire departments for possibly missing items.

The prerequisite for a high forecast quality is an analysis of the sales data for each relevant article in each branch over several months. This requires computing power that can only be provided with an SAP HANA database.

Consuming Applications

Furthermore, the SAP Customer Activity Repository is the baseline to utilise so-called consuming Apps, which leverage the Demand Data Foundation (DDF) of the SAP Customer Activity Repository system and are delivered under the name SAP Customer Activity Repository Application Bundle (SAP CARAB). These applications, which you can also see in Figure 1.4, include:

SAP Promotion Management (PMR)

SAP Merchandise Planning

SAP Assortment Planning

SAP Allocation Management (AMR)

SAP Replenishment Planning

SAP Customer Activity Repository is a separate data storage level and therefore requires master data from SAP S/4HANA Retail (articles, sites, merchandise categories, prices, etc.); this applies equally to stock data. To obtain a view of the current company-wide stock situation for an article in SAP Customer Activity Repository, the repository effectively accesses the current stock data in the SAP S/4HANA Retail system and offsets it against sales data that has not yet been processed. Thereby, the user gets a near real-time overview of the inventory levels per article per location.

This data is held in an up-to-date worklist in a dedicated database table. If sales transactions are transferred online via POS Data Transfer and Audit, and sales order data on transit stock is also taken into account, SAP Customer Activity Repository can calculate the actual available stock of a store or distribution centre at any time. This information is crucial for e-commerce and omni-channel business processes.

Furthermore, partner applications can also be connected, e.g., a promotion planning and calendar Add-On from retail solutions provides additional functionalities on top of the SAP Promotion Planning (PMR) application. In addition, it is possible to access the POS data directly with SAP Analytics Cloud Dashboards and present the user with real-time sales analyses.

For further analyses based on historical data, integration with the SAP BW/4HANA management information system is possible via a standard integration interface.

1.2.2. User Interface - SAP Fiori

As part of the simplification and renewal strategy within the framework of SAP S/4HANA, SAP has launched SAP Fiori. With the consistent conversion of all previous user interfaces (SAP GUI, NetWeaver Business Client, etc.), the end user should be able to use the system in a new, easier way.

SAP Fiori Apps are a set of applications that provide users with intuitive and role-based access to real-time insights and analytics within the SAP Fiori user interface framework. These Apps are designed to help users analyse, visualise, and interpret data from various SAP systems and applications.

Here are some key features and characteristics of the SAP Fiori analytical Apps:

Role-Based: SAP Fiori Apps are tailored to specific user roles within an organisation. They provide targeted analytics and insights based on the user's responsibilities and needs.

Real-Time Analytics: These apps leverage real-time data from SAP systems, allowing users to monitor and analyse business processes and make informed decisions based on up-to-date information.

Interactive Visualisations: Fiori analytical Apps provide interactive and visually appealing charts, graphs, and dashboards. Users can drill down into the data, apply filters, and perform various analytical operations to gain deeper insights.

Mobile-Friendly: SAP Fiori Apps are designed to be responsive and mobile-friendly. They can be accessed and used on a variety of devices, including smartphones and tablets, enabling users to access critical business information on the go.

Integration with SAP Systems: These Apps seamlessly integrate with other SAP solutions and systems, such as SAP S/4HANA, SAP Business Suite, and SAP Analytics Cloud. They leverage the underlying data models and services provided by these systems to deliver meaningful analytics.

Pre-Built Content: SAP Fiori analytical Apps come with pre-configured content and predefined key performance indicators (KPIs). This accelerates the implementation process and allows users to quickly start analysing their data without extensive customisation.

Extensibility: While Fiori Apps provide out-of-the-box functionality, they can also be extended and customised to meet specific business requirements. Developers can use the SAP Fiori tools and frameworks to enhance the Apps or build new ones.

SAP Fiori Apps are becoming increasingly important in the area of Business to Employee (B2E), for example, in the classic store processes (SAP Fiori for In-Store Merchandising) see Section 6.5, SAP Fiori In-Store Merchandise and Inventory Management).

In the meantime, numerous Apps exist here, such as Look Up Retail Products (stock enquiry), Receive Products (goods receipt), and Count Stock (inventory). Information on the available Apps can be found in the SAP Store (www.sapstore.com).

These Apps are grouped together on the SAP Fiori Launchpad, depending on the role. The SAP Fiori Launchpad is a customisable interface and the entry point for several Apps relevant to a role.

Figure 1.5 shows a SAP Fiori Launchpad for a store manager.

Figure 1.5: SAP Fiori Launchpad for the Store Manager.

The exact architecture of SAP Fiori depends on the Apps you want to use. For use within stores, for example, the use of Retail-Store-Apps is relevant. These are based on an SAP Retail system. Another example would be the SAP PMR App Manage Promotional Offers, which is deployed on an SAP Customer Activity Repository system.

1.2.3. SAP Business Technology Platform

In addition to the elements of SAP S/4HANA Retail, SAP Customer Activity Repository, and SAP Industry Cloud, the SAP Business Technology Platform (SAP BTP) has been added as a fourth building block to make your SAP system landscape more flexible and dynamic.

With the SAP Business Technology Platform, SAP has rebranded the SAP Cloud Integration (SAP SCI) on one hand but also bundled other cloud technologies. In this respect, the SAP BTP is a portfolio of several applications or a separate suite consisting of several solutions and services. SAP also calls it the Foundation of the Intelligent Enterprise and thus expresses that the SAP BTP is more than a pure technology platform.

In Figure 1.6, you can see what SAP BTP consists of:

Figure 1.6: Components of SAP BTP.

The SAP BTP consists of the following capabilities:

Database and Data Management

Analytics

Application Development and Integration

Smart Technologies

SAP BTP also offers you the option of developing your own extensions or Apps. Here, customers can develop their own individual coding with a side-by-side approach - either with the SAP Cloud Application Programming Model or with the ABAP RESTful Application Programming Model. Side-by-side extensibility has several advantages:

Easier transformation.

Decoupling individual applications from the SAP standard.

Up-to-datedness and innovations (SAP BTP is managed by SAP).

Clean Core (upgrades easier/faster to implement).

Higher level of agility and flexibility.

1.3. Outlook – The Intelligent Enterprise

SAP's vision for the Intelligent Enterprise revolves around leveraging advanced technologies, data-driven insights, and streamlined processes to empower businesses to operate more efficiently, make informed decisions, and drive innovation. The Intelligent Enterprise is an approach that integrates various technologies and capabilities to enable organisations to transform and adapt to the evolving digital landscape.

At its core, SAP aims to provide a comprehensive suite of enterprise software solutions that enable companies to connect and integrate their business processes, data, and applications across the entire organisation. This includes areas such as finance, human resources, supply chain management, customer experience, and more.

Here are some key aspects of SAP's vision for the Intelligent Enterprise:

Integrated Suite: SAP envisions a unified suite of applications that work seamlessly together, eliminating silos and enabling end-to-end visibility and collaboration across departments and functions. This integration allows for the efficient flow of data and information throughout the organisation.

Intelligent Technologies: SAP harnesses emerging technologies like artificial intelligence (AI), machine learning (ML), Internet of Things (IoT), and analytics to augment human capabilities and automate processes. By embedding intelligence into its software, SAP enables businesses to gain actionable insights from data, automate repetitive tasks, and make predictive and prescriptive decisions.

Data-driven Insights: SAP recognises the value of data as a strategic asset and focuses on enabling businesses to unlock their potential. The Intelligent Enterprise leverages advanced analytics and reporting capabilities to provide real-time, contextualised insights that help organisations understand their operations, identify trends, and make data-driven decisions.

Cloud-Based and Hybrid Solutions: SAP embraces cloud computing as a key enabler of the Intelligent Enterprise. By offering cloud-based solutions, SAP allows businesses to access and deploy software more flexibly, scale resources as needed, and benefit from regular updates and innovation. SAP also supports hybrid deployments, allowing organisations to combine on-premises and cloud solutions to suit their specific requirements.

Enhanced User Experience: SAP places a strong emphasis on improving the user experience for both employees and customers. Through intuitive interfaces, personalised dashboards, and mobile access, SAP aims to empower users to perform their tasks efficiently and engage with business processes seamlessly.

For the retail and fashion industries, SAP envisages two core elements that are supported by Business Process Management (i.e., SAP Signavio) on the one hand and the SAP Business Technology Platform (BTP) on the other. The two core elements and their components are:

The Intelligent Suite:

The Industry Cloud:

Figure 1.7 provides a high-level overview of what we believe the SAP architecture for retail and fashion industries to be envisioned for the near future:

Figure 1.7: High-Level Architecture Vision for Retail & Fashion (source: retailsolutions).

It's important to note that SAP's product roadmap is subject to change as they respond to market trends, customer feedback, and evolving technology landscapes. To get the most accurate and up-to-date information on the roadmap for SAP S/4HANA Merchandise Management for Retail, we recommend reaching out to SAP directly or consulting their official documentation and announcements.

The trend towards the cloud is strategic at SAP and has several facets:

1.3.1. Systems Focus on the Cloud

With the RISE with SAP programme, SAP has taken a further verticalisation towards the management of the complete system infrastructure. In addition to the application and database layer, SAP also offers the computing power and storage of the hyper scalers from a single source. As an all-round carefree package, the services of RISE with SAP—in addition to enterprise support—also include infrastructure management and technical managed services, i.e., the customer and their consulting service providers can concentrate exclusively on application-specific aspects (more information on RISE with SAP can be found on the SAP website at https://www.sap.com/germany/products/rise.html).

1.3.2. Application-Specific Focus on the Cloud

Here, parts of the software are ported to the cloud and offered as subscription models in terms of licensing. Some examples that concern SAP S/4HANA Retail or conversion systems are:

SAP Omni-channel Sales Transfer and Audit (OSTA)

POS DTA functionalities are transferred to the cloud.

SAP Order Management for Sourcing and Availability (OMSA)

OAA functionalities are transferred to the cloud.

SAP Order Management Foundation (OMF).

The ordering process takes place in the cloud. In an extension, the Grab & Go scenario will also be introduced, i.e., the customer can shop seamlessly without being scanned or weighed or without a classic form of checkout (Q3/2022). Furthermore, functions for fulfilment (native in-store fulfilment) or drop shipping will be launched at the end of 2022.

SAP S/4HANA Cloud for Retail, Fashion, and Vertical Business.

This is the new public cloud solution for the retail sector, which SAP launched in Q4 2022. It is aimed at retail companies of medium complexity.

The following functionalities will be delivered:

In the next steps, further retail processes and fashion functionalities, including wholesale, will be made available up to the point of fashion production for vertically integrated retailers (see Figure 1.8).

Figure 1.8: SAP S/4HANA Cloud for Retail, Fashion, and Vertical Business (Planned Scope 2022 to 2025, Source: SAP).

Part I: Standard Processes

Chapter 2

Master Data

This chapter will provide insights into the significance of master data for enabling functional processes. Additionally, you will explore the available options in SAP S/4HANA Retail for master data maintenance, understand their utilisation, and discover techniques to simplify the creation of master data.

In SAP S/4HANA Retail, like any other ERP system, the proper maintenance and configuration of master data hold paramount importance. Inadequate or inaccurate master data can hinder processes, result in significant costs, and even damage the organisation's reputation. Therefore, it becomes increasingly crucial to establish and maintain master data accurately and efficiently, enabling you to focus on core business activities. To initiate this chapter, we will provide an overview of the fundamental master data objects, which will be subsequently elaborated upon in the upcoming sections.

2.1. Organisational Structures

Within this section, we will outline the key components of organisational master data. These organisational structures serve the purpose of representing the company or companies within SAP S/4HANA Retail. The organisational structure in SAP S/4HANA Retail can be envisioned as a hierarchical arrangement encompassing all organisational units present within the company. It offers the flexibility to effectively map and organize the company in its entirety, as well as its purchasing and sales processes. This structure comprises four primary organisational units:

Client

Company code

Sales organisation and distribution channel

Purchasing organisation

The client is at the highest hierarchical level in an SAP system. All other organisational units are subordinate to it. A client represents a group or a company that can be divided into subsidiaries later on.

Within external accounting, the company code serves as the most compact organisational entity capable of encompassing comprehensive and self-contained accounting processes. In the context of a legally autonomous company, this unit assumes responsibility for both accounting and organisational duties. Moreover, the company code can be further segmented into additional business areas, enabling the management and analysis of crucial metrics and occurrences specific to each business area. Within a client, it is possible to have multiple company codes, which proves advantageous when establishing several subsidiaries within a single client, each requiring separate closure for accounting purposes. In the context of an SAP S/4HANA retail system, the inclusion of the company code as an organisational unit is obligatory.

The sales organisation, within the logistics framework, serves as an organisational unit that arranges the company's structure based on sales-related demands. Its primary responsibilities encompass the efficient distribution of goods and services and the negotiation of terms and conditions with customers. Moreover, as a legally recognized selling entity, the sales organisation assumes accountability for product liability and addresses customer claims or returns. The sales organisation facilitates the consideration of regional market subdivisions, such as by region or country, enabling effective management within specific territories. All sales transactions occur within the purview of a sales organisation, ensuring comprehensive processing and oversight. In addition to the sales organisation, another crucial component in a company's logistics is the distribution channel. The distribution channel delineates the path through which a product travels to reach the customer. Examples include direct sales, retail, or wholesale. By leveraging various distribution channels or sales channels, the company always ensures optimal market supply and accessibility. A distribution channel is invariably linked to a sales organisation, and together they constitute the distribution chain. Given that numerous retail companies employ diverse sales approaches to reach end customers, it becomes imperative to define multiple distribution chains within the SAP S/4HANA Retail system. This allows for the effective management and customisation of distribution strategies tailored to different sales scenarios in the retail industry.

The purchasing organisation serves as a pivotal unit within a company's logistics structure. It assumes responsibility for overseeing the complete purchasing process and carries legal accountability for