Introduction
In our day and age, the speed and cadence at which a company can innovate and catalyze digital transformation is a key enabler for their long-term success. As many companies are upgrading to SAP S/4HANA, they are facing numerous challenges, one of which is the migration of the Warehouse Management System and its processes.
What makes this challenge unique is that SAP released Extended Warehouse Management (EWM) in 2005, effectively replacing the Logistics Execution-Warehouse Management module (LE-WM) as the strategic warehouse management solution. While LE-WM is still delivered in S/4HANA, it is only available as a temporary solution in a compatibility mode, to allow a migration of existing warehouse processes with lower effort. The support of LE-WM functionalities in S/4 expires end-2025 [1] & [2]. As a workaround, SAP introduced Stock Room Management containing a reduced set of LE-WM functionalities. While Stock Room Management can be used beyond 2025, it is not a strategic product and SAP is not planning to deliver new features.
But how should you tackle this migration challenge? Can you leverage pre-existing LE-WM setups and which decisions do you need to take?
Firstly, we will explore available options and secondly, the selection criteria that will lead you to the right decision.
Available Options
Companies require a solution that fulfills their warehouse requirements, ensures maximum system availability, is future-proof and that comes at reasonable costs.
There are a few important choices to be made when it comes to the selection of the appropriate Warehouse solution to work with your S/4HANA:
- Stock Room Management vs. EWM
- Embedded EWM vs. Decentralized EWM
Companies need to decide to move from LE-WM to Stock Room Management, or follow a more strategic path, implementing EWM. If EWM is the way forward, then it is necessary to decide if it should be deployed embedded in S/4HANA (Embedded EWM) or on a separate server (Decentralized EWM).
Stock Room Management
If the business context prevents a migration prior to 2025, companies can consider implementing Stock Room Management instead of LE-WM in Compatibility Mode. However, some LE-WM features are currently not available in Stock Room Management such as Task & Resource Management, Value-Added Services, Cross-Docking, Wave Management, and SAP also does not care to release information whether such functionality will be delivered out of the box at a later point in time.
Prior to the migration, companies are advised to carefully evaluate their logistics and warehousing requirements and ensure coverage by Stock Room Management.
Using Stock Room Management as a bridge in the migration from LE-WM to EWM is possible migration approach, where companies may benefit from lower implementation effort and change management required in comparison to a full-blown EWM implementation.
Having in mind that Stock Room Management will not be developed further by SAP, we do not recommend this solution. However, it can still be considered if the following conditions are verified:
- You run small-scale or low-complexity warehouses
- Your warehouses produce a limited number of transactions
- Existing warehouse processes are supported by Stock Room Management
- There is no integration with external warehouse systems
If customers want to move to a strategic solution that covers more processes and allows continuous warehouse optimization, then EWM (Extended Warehouse Management) is the way to go. Now the decision is to choose between Embedded EWM or Decentralized EWM. The following image shows criteria that will help you select the right tool to deploy.
Extended Warehouse Management
Embedded EWM in S/4HANA
Implementing Embedded EWM in S/4HANA can make sense since it covers almost all LE-WM functionalities out of the box. One key advantage of Embedded EWM is in avoiding data replication: With Embedded EWM, there is no need to replicate Master Data or Transactional Data to another server. In addition, this migration brings significantly lower complexity and, therefore, less implementation effort.
This option has two licensing types:
- Basic Warehousing – Does not need separate EWM license.
- Advanced Warehousing – Needs separate EWM license.
Advanced Warehousing contains all the key features of Basic Warehousing and in addition provides functionality such as for example Material Flow System, Cross Docking or Labour Management.
Especially when you run a warehouse where movements are posted manually, and there are no automated Material Flow Systems generating a high number of transactions, then Embedded EWM might be the right solution for you.
Decentralized EWM
Decentralized EWM is deployed on a separate server that is connected to S/4HANA. This solution is suited for large and complex warehouses handling a high number of transactions. If you require having your EWM connected to several S/4HANA systems, then Decentralized EWM is the way to go, as this is not possible with Embedded EWM.
Some key advantages of Decentralized EWM:
- Handles high volumes of transactions.
- Can connect to various S/4HANA instances.
- Warehouse operators can continue working with Decentralized EWM, even if S/4HANA is down.
- Upgrades in Decentralized EWM do not have a direct impact on S/4HANA and vice-versa.
Although most of the features and functionalities are the same in Embedded EWM (Advanced Warehousing) and Decentralized EWM, there are some restrictions due to the nature of the system architecture (embedded vs decentralized) [4].
Pros and Cons
In the table below, you can find a Pros and Cons analysis that highlights the main advantages and disadvantages of each solution.
Once you have taken a decision on which solution fulfills your business requirements, you need to take a few key decisions on your implementation approach.
Selection Criteria
Number of S/4HANA instances
This criterion is about checking the current and future system landscape. If it is necessary to connect EWM to several S/4HANA instances, then Decentralized EWM is the right solution, since Embedded EWM does not support this.
In the case of having only one S/4HANA instance, the possibility to implement Embedded EWM can be considered. If you are considering implementing Embedded EWM, you will have to choose between Basic Warehousing or Advanced Warehousing. This choice will be based on:
- The coverage of the warehouse process requirements by the features available in each solution.
- Licensing costs as described below on criterion #3.
Expected transactional volume
Transactional volume is a key criterion in this process since it has a direct impact on system performance. It is important to understand your company’s warehouse strategy for the future:
- Will the number of warehouses grow?
- What is the transactional volume in each warehouse?
- Will the integration with Material Flow Systems (MFS) be implemented or grow?
If it is expected to have a high and increasing transactional volume being processed, then there is a potential risk of having performance issues in S/4HANA if Embedded EWM is used. Decentralized EWM is designed to handle a high volume of transactions, and since it is on a dedicated server, it will not affect performance on S/4HANA.
On the other hand, if your warehouses are managed with manual processes and the transactional volume is not high, then Embedded EWM might be an adequate solution since it has lower costs. This brings us to the next criteria.
Costs
The following image shows the different solutions classified by cost level in ascending order.
Upgrade Cycles
Should EWM upgrade cycles be independent of S/4HANA upgrade cycles? Independent upgrade cycles allows upgrading EWM on a different release calendar as compared to your S/4HANA, and thus, managing system downtimes independently.
Since Decentralized EWM is deployed on a different instance than S/4HANA, it can be upgraded independently of S/4HANA, while Embedded EWM does not allow this.
The weight of this criteria will vary from company to company, depending on the complexity of the systems landscape.
Conclusion
So far, we have covered the options available for the deployment of the warehouse solution in S/4HANA. In the next post of this series, we will go through some general criteria that can and should be used to support the selection of the right The selection of the right warehouse solution for your is the result of the consideration of the key criteria described above. However, we understand that your company operates in a unique environment. If you are looking for out-of-the-box thinkers and status quo challengers to help guide your technology investment decisions, please reach out to us.
References
[1] SAP Note 2577428 – Road map for LE-WM in SAP S/4HANA
[2] SAP Note 2269324 – Compatibility Scope Matrix for SAP S/4HANA
[3] SAP Note 2882809 – Scope Compliance Check for Stock Room Management
[4] SAP Note 2938308 – Release information and restrictions of Decentralized EWM on SAP S/4HANA 2020
