Migration to SAP S/4HANA: A Proven Framework for the Chemical Industry to drive exceptional business outcomesPublish Date: December 29, 2020
The digitalization of businesses across industries is accelerating rapidly. Nearly every sector is undergoing tremendous change, and the chemical manufacturing industry is no exception. It is one of the most diversified sectors globally, made up of mid-sized and large corporations spread across hundreds of sub-segments. Industry players experience product commoditization, erratic demand patterns, increasing global competition, “green” supply chains, contributing to a rapidly changing market dynamic. Many of these companies have embarked on ambitious digitalization plans covering key business processes, including production planning, formula management, regulatory compliance, warehousing, and logistics.
A coherent digital vision needs to be in place to reduce this complexity and rationalize the industry-specific data for value creation. Chemical companies need to utilize disruptive technologies to reach new safety levels, gain agility in a competitive environment, and attain operational excellence. Migrating chemical operations such as substance volume tracking and multi-resource scheduling to a digital platform has become crucial to provide clear visibility across material flows, especially in the constantly evolving areas.
Here is when an intelligent ERP solution, SAP S/4HANA, dramatically helps. It empowers businesses with contextual information for faster and better decision making. It provides chemical companies with the opportunity to simplify business processes in manufacturing and supply chain, procurement, and more. Additionally, it integrates these processes with real-time analytics to enable a smarter, faster, and simpler enterprise.
How Migrating to SAP S/4HANA is Beneficial to the Chemical Industry?
Migrating to SAP S/4HANA can bring simplification, innovation, and operational excellence to the chemical industry. Let’s understand how migrating to SAP S/4HANA is beneficial for chemical industries.
- Process Simplification SAP S/4HANA eliminates the need for manual multiple batch processes and summarized reporting. Instead, it transforms the multi-step process of Manufacturing Requirements Planning (MRP) into a single-step, exception-based working model accompanied by simulation features and decision support. This automation simplifies order commitment and fulfillment processes and reduces the total manufacturing costs up to 10%.
- Simplification of User Experience
SAP S/4HANA provides re-engineered and simplified business processes to chemical companies transforming multi-step capital project management into a single point, real-time process with actionable insight. This leads to:
- 10%–20% increase in revenue through faster completion of projects
- 20%–30% reduction of project cost overruns
- 20%–30% Reduction in capital projects management cost
- Asset Management
SAP S/4HANA, with its predictive analysis capabilities, provides real-time health information of assets based on critical values and trends. It reduces the need for time or condition-based inspection and eliminates the risk of failure. It enables businesses to build efficient asset management strategies and predict failures, enhancing the business process performance with reduced risks and costs, thereby helping chemical plants achieve operational excellence. SAP S/4HANA can:
- Reduce 10%-15% asset service and maintenance cost
- Reduce 5%-10% unplanned asset downtime
- Issue Resolution
Earlier, issues and exceptions were identified, working through multiple disparate lists to ensure high-quality order fulfillment of chemical products. The process was not only time-consuming and error-prone but also hampered the delivery deadlines. SAP S/4HANA provides a single entry point that lists the issues and exceptions to help sales teams identify and resolve problems and anomalies in no time. This improves customer satisfaction and retention. Use of SAP S/4HANA can:
- Improve 10%-14% internal sales productivity
- Improve 25%-30% subscription invoice processing time
SAP S/4HANA with Industry Best Practices
SAP S/4HANA benefits are not just limited to simplification, management, administration, improved performance, cost-effectiveness, ease of use, and transition from on-premise to cloud. SAP S/4HANA offers industry best practices for chemical manufacturers and enable business processes critical to the chemical industry. It includes the core functionalities in procurement, supply chain, sales, manufacturing, finance, and more.
1. Procurement of Materials and Services
While the chemical companies’ primary focus is often revenue generation, SAP S/4HANA can help manufacturers maximize procurement savings.
- Batch Management: SAP S/4HANA enables manufacturers to ensure effective batch management, identify correct materials, materials in the pipeline, and reduce the risk of failures.
- Vendor Evaluation: Intelligent ERP solutions help monitor and evaluate the vendors’/suppliers’ performance based on the automated and real-time calculation of business documents in operational procurement.
- Procurement of Services: Seamless integration of SAP S/4HANA helps in the monitoring process for the procurement of services. It ensures a stable and efficient procurement process right from the initial creation of a purchase requisition to invoice creation and handling.
- Consumable Purchasing: SAP S/4HANA simplifies the purchase order creation activities during the procurement process via automation.
2.Supply Chain Planning and Execution
SAP S/4HANA provides visibility with intelligent responses and enables chemical companies to create demand-driven, responsive supply networks in volatile markets. It helps manage customer response and assists in developing responsive and agile manufacturing processes, thereby increasing profits.
- Physical Inventory: Using the basic functionalities of SAP S/4HANA, chemical industries and manufacturers can manage chemical stocks at a storage bin level. The use of SAP solutions makes it easier to control warehouse stock and meet legal requirements.
- Warehouse Inbound Processing: Management of hazardous chemical goods in storage bins received from the supplier is challenging. A single error might require the repetition of the entire process. Stock management with SAP solutions reduces errors and simplifies the inbound warehouse processes.
- SAP Handling Unit Management: Handling Unit Management is a packaging controlled logistics system used to map the movement of handling units of chemical materials instead of tracking each material individually. SAP S/4HANA helps in the segmentation and management of handling units and helps reduce the costs through process efficiencies.
3. Process Manufacturing
Process manufacturing is a process of creating goods by combining chemical supplies and raw materials using a formula. Due to its high demand, it is seen that chemical companies have to deal with high volumes of backorder processing that gives rise to complexities. With SAP S/4HANA, chemical manufacturers can automate the backorder processing and release large volumes of production orders in less time.
- Rework Processing: The rework process is a procedure to upgrade the processed chemical goods following predefined standard guidelines. SAP S/4HANA provides a range of new features that helps in improving the quality management of the materials. While performing rework operation activities, it also keeps a record of unplanned materials required to improve the chemical goods.
- Inbound Storage Tanks: Chemical storage tanks contain liquid chemicals and mix a new batch with a current batch with a specialized mixing process order type. As the chemical manufacturing industry deals with a massive amount of chemical production daily, maintaining an inventory data of storage tanks and every detail, including their size, type, and technical capability, becomes crucial. SAP solutions help manufacturers provide timely and accurate data to facilitate the selection of the right carrier.
- Make-to-Order: Make-to-order production is a manufacturing process in which a chemical product is manufactured based on a client’s specific requirement and is not a pre-packaged product. The product is filled and packed after the sales order is received. Intelligent ERP solutions help customers track their sales order’s progress and add their specific requirements in real-time, thereby providing flexibility and convenience.
With the above-highlighted benefits and best practices of SAP S/4HANA for chemical companies, it is clear that migration to this intelligent ERP solution helps in attaining operational excellence. However, to execute the business strategies consistently and reliably, chemical manufacturers need to choose an SAP solution service provider capable of re-engineering processes with analytics and technology to unlock revenue opportunities and improve operational effectiveness.
Yash Technologies is one of the largest SAP service providers globally, with extensive experience working with Chemical companies globally. We have helped companies minimize production variations, improve product quality, reduce operational costs, and achieve increased margins. At Yash Tech, we implement solutions to address the specific challenges of the chemical industry, and at the same time, help companies to comply with industry rules and regulations and maintain stringent environmental safety norms.