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Why should companies on SAP AFS move to SAP S/4HANA?

Thu, Apr 15, 2021



Since the launch in 2017, we have helped customers adopt S/4HANA technology. But for many, the complexity of the migration has made them hesitant and uncertain about the business drivers and justifications.

Operating SAP AFS in the Digital Economy

For the past decade, SAP fashion customers have managed different system landscapes. Brick and mortar retailers typically run SAP Retail (industry specific standard SAP ERP) whereas brand manufacturers run SAP AFS (highly modified SAP ERP).

For wholesale distributors, SAP AFS provides industry-specific processes that empowers employees, customers, and business partners to collaborate successfully - anywhere, anytime. But as wholesale distributors expanded into the retail industry and started their private labels, they soon realized that the platform was ill-equipped to handle retail trade scenarios.

Vice versa, retailers began integrating their wholesale/manufacturing operations, and could not manage their wholesale business on their SAP Retail platform. This meant these vertical fashion companies had no choice but to manage these units separately using two ERP systems – one to support their wholesale/manufacturing business and the other for their retail operations.

This rise in two or more ERP systems, coupled with fragmented peripheral applications created a host of new challenges, restricting fashion companies to adapt to new and emerging market trends. Limited visibility into global inventory, complex integration, and data models, data duplication, misalignment of supply and demand are just a few of these challenges - driving the need for a vertical fashion solution.

SAP S/4HANA for Fashion and Vertical Business answers to this call – helping fashion companies unite disparate business operations and leverage the full potential of mobility, big data, cloud, analytics, and other emerging technologies to support an omni-channel business model. It is the necessary core foundation for the fashion industry as it merges all verticals - manufacturing, wholesale, retail, and e-commerce – onto a single digital core.

Below we look at a couple of reasons why fashion businesses should migrate from AFS to S/4HANA:

1. S/4HANA is a future-ready digital platform, designed for scalability

This is the retail world which we now live in – the existence of multiple channels through
which consumers can browse and place orders. Retailers will have to balance these channels without compromising service, efficiency, transparency, or fulfillment in any single one. This will require better platforms that can consolidate operations, prioritize steps in the supply chain and handle new obstacles in the developing world of retail.
With S/4HANA, companies are now able to:

  • Create a smarter, faster fashion on a common data and forecast foundation
  • Empower employees and redefine customer engagement and commerce
  • Create efficiencies, insights, and new revenue models by tapping into HANA in-memory processing
  • Reinvent commerce with connected business partners, connected consumers, and connected devices
  • Transform business processes with a complete and real-time understanding of customers, inventory, and sales
  • Simplify IT landscape and business processes to unlock business innovation and lower TCO
  • Global inventory transparency
  • Cross channel integration across retail, wholesale, ecommerce, and manufacturing

2. Designed to manage Retail-Trade scenarios for futureproofing in the digital world, unlike the AFS solution

The specific group of 300+ AFS customers runs a system with a highly modified data model. Vertical integration of the value chain has become a challenge for these customers and with S/4HANA, companies are able to gain an end-to-end solution that supports retail processes across the entire retail value chain. This includes:

  • Master Data: Provides a unified view of Articles, Customers, Vendors, Seasons, Collections, and Sites
  • Price and Promotion Management: Offers centralized management of listings, pricing, promotions, and inventory
  • Omnicommerce Customer Experience: Integrates direct-channel orders, deliveries, and point-of-sale systems for immediate inventory visibility across all channels (wholesale, retail, franchisee, and digital) to optimize cross-channel allocation methods from planning through execution
  • Assortment Planning: Helps in seasonal forecasting, multi-channel allocation, and store replenishment
  • Supply Chain: Optimize merchandise flow across the supply chain for Replenishment and Allocation, Demand Forecasting and Planning and Omnichannel Inventory and Order Response

3. As a manufacturer, S/4HANA becomes mandatory to enable The Digital Supply Chain

The goal for fashion companies to conceive, build and deliver an innovative product to customers at the right time and right price. This involves a chain of events, which need to be perfectly orchestrated and then repeated over and over again. All this requires multiple processes functioning in an intelligent and coordinated way to ensure the organization achieves this goal - which begs the question: Can SAP AFS keep up with the pace of these changes?

Although, the solution has served manufacturers well for years; with today’s market trends – it is no longer sufficient. SAP S/4HANA meets these new demands with a range of advanced functionality for production planning, inventory management, order promising, and more; ushering in a new era of Digitized Supply Chains that are immediate, intelligent, and connected.

Processes such as Advanced Available-to-Promise Functionality in SAP S/4HANA boosts visibility and profitability. These allocations ensure that the interests of top-priority customers are protected even when the company has limited supply and employs an FCFS scenario.

Companies also need flexibility for last-minute changes. After running back-order processing overnight, companies often get a last-minute request to change an order before deliveries. With S/4HANA Back Order Processing, the company can find where they can pull the additional items from using a five-category set-up quickly.

4. Enhanced UI/UX - User Interaction and User Experience

With the introduction of SAP S/4 HANA, it became clear that SAP not only continues to support the Fiori interface ecosystem but also puts more emphasis on it than ever before. A successful transformation requires digital adoption, and with S/4HANA, SAP has ensured that end users can easily adopt new technologies, systems, and processes by employing a user-centered design concept.

  • Simplification - Not all the users need all the options of the applications. Fiori reduces their number, so the users see a cleaner interface with relevant features to focus on what matters.
  • UX optimization - The simplification of the interface results in higher customer satisfaction and less confusion.
  • Access from different devices - Access the information that you need wherever, whenever.
  • Role-based information - SAP Fiori provides advanced user management features.

5. More challenging (higher effort & cost) to integrate/interface AFS as opposed to S/4HANA

One of the chief considerations when evaluating new software is: will it work with existing applications? Companies often face a further investment in getting commercial software to communicate and operate with their existing infrastructure.

Operating separate systems for retail, wholesale and manufacturing can lead to an increased total cost of ownership. This is due to separate integration, development, and maintenance costs for each unit to overcome the structural differences in master and transactional data.

For example, integration to warehouse systems, vendor management systems, planning systems, reporting tools, etc. needs to be built separately for wholesale and retail systems. This leads to data redundancy, data inconsistency, and separate teams of internal resources working on different systems, thereby further increasing training costs.

With S/4HANA, companies can tap into the SAP Business Technology Platform to extend the core with mission critical functionality, deployed on the cloud. This platform paves the way to augment existing SAP investments by integrating with other SAP Products e.g. SAP Ariba, C/4HANA, Success Factors, etc. Additionally, with SAP Business Technology Platform, custom software can be built to integrate with your IT environment by leveraging your existing infrastructure providers e.g. Amazon AWS.

Making the Transition - the deadline is getting closer…

The deadline is set. The support of AFS is going to end in 2027. This means that it will not receive any new updates past this date, and it will not benefit from any further innovations made by SAP. The lack of innovation in one of the core systems of your business is a dangerous scenario, which means companies must act upon migrating to SAP S/4HANA soon.

S4HANA Assessment Fashion Retail