Best Practices to organize internal LOB within SAP---IT vs LOB

Jim Sun

If IT is about doing things right, then LOB (Line of Business) is more about doing the right things, and SAP is standing on the middle point. In the past two decades, the IT department has become more and more of an important part of any organization, because it is responsible for "keeping the routine". IT needs to follow up with the business plan of its served company and make sure everything is secured and under control. Whereas LOB is different, LOB is more about innovation or, I would say, IT improvements. LOB makes the operation more reasonable on your IT system, let us say, SAP system. In corporate finance, HR, operations and manufacturing, LOB is not only translating the business processes to tables and cubes in SAP, but also improving efficiency and convenience, because LOB is much closer to the real need of company. And although SAP includes a lot of built-in functions and business models, the client company still needs specific LOB settings within SAP system, below are some of the best practices to organize LOB:

Best Practice Line of Business

  • Organization Structure: different types of organizations may use different structure types, but the 3 main structure types could be as follows:
    • Profit Center: lots of retailing brands manage their retail stores in this way, all the stores in different locations will be listed in the system and visualized and managed separately. For example, Wal-Mart could have several hundred supermarkets serving many kinds of products all over the US, but the product demand and profitability could be different. In the SAP system, "profit center" would be the term representing each of those retailing nodes, and the system will assign a serial number to each of those stores.
    • Department: here department is not like HR, Finance and so on, it means distribution channel. Some of the automobile dealers apply this kind of structure in their internal system. For example, most truck dealers can sell, rent, repair and recycle trucks, in that case, lots of truck dealers can seperate departments according to the functions so that the data from each functional department will be aggregated/calculated internally, in this way it best fits the real business model within the company.
    • Activity Type: some companies, such as gas manufacturers, only have limited types of product, the type of working process is also limited. In that case, those gas manufacturers will use activity type to signify craft and model their organization structures. This is also a good practice to build structural models for a company especially when this company only produces limited types of products and has fixed working process.
  • Departments/Functional Parts: it is obvious that different industries could have different LOBs and it is not likely to cover every industry in this part, but there are some particular industries to be listed below:
    • Manufacturing: continuous product and service innovation is enabled in PPM (Project and Portfolio Management). Also within SAP it includes E-BOM to enhance material management and integrated product management.
    • Human Resource: the Enhancement Package 5 (Enhancement Package) enables SAP systems to better find qualified candidates and manage current employee information. Dashboards are available to help recruiters and HR managers in decision making process.
    • Accounting/Finance: for asset management, there are various SAP products that are designed for that, EHP 6 and PPM are the 2 main tools for that. It is convenient to manage and track date planning and portfolio management, also there is budget tracking for projects aligned to strategic business goals.
  • Innovations: as we discussed at the beginning, unlike IT, LOB is about business innovation, and SAP is there to promote and integrate the innovation process. In SAP, there are all kinds of LOB innovations available to enable the system to support strategic goals.
    • Single-sign-on: single-sign-on means that the user will not need to input their credential many times to log in among different systems and servers, it enables users to freely dive among their BW system, ECC system and BI platform for example, although sometimes it brings security issues with it.
    • Mobile Capability: decision makers in client company could be extremely busy, and it makes no sense to require them sit in front of their laptop and keep their eye on those dashboards and reports from time to time, it is consultant's work. And the mobile capability of the SAP BI system enables the management team to have anytime access to their system on mobile devices.
    • Real-time availability: there is increasing need from LOB managers for real-time availability, especially for industries such as logistics, fashion and digital products. HANA is an in-memory product that helps those industries improve sensitivity to market and gain real-time sight of their business.

The implementation of a SAP system is different from IT development, actually most of time it has few relationship with development but more about understanding LOB and sticking to business requirements. And a successfully implemented SAP system should be organized closely to the client's LOB.