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SAP Digital Building Products Whitepaper

The Digital Building Products CompanyInspire and Shape a Digital World That Reinvents Customer Experience and Productivity

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Dear industry professional,

Massive global changes are impacting companies in the building products industries. Standards of living are growing, as is the overall urban population and middle class. This creates an enormous demand for building products in developing countries. In developed regions like North America and Europe, low interest rates and migration are revitalizing renovation and home building. Global construction output is expected to grow in the range of 85% by 2030, creating a $15.5 trillion marketplace worldwide by the end of this time frame.1 Major shifts in behavior, attitudes, and technologies are also impacting the market:

• Consumer behavior: As end consumers and homeowners are increasingly involved in the purchase decision and taking on do-it-yourself projects, they conduct more online research on building products. Often, they rely on information from their network in social media channels or online stores. These new buying behaviors are also happening in business-to-business (B2B) instances.

• Impact on society and environment: The trend toward “greener” construction has taken hold in construction. Smart products enabled by the Internet of Things (IoT) for connected homes and buildings can improve energy, efficiency, and security for homes and buildings. Concepts like circular economy and cradle to cradle will help building products companies generate new revenue streams and have a more positive impact on society and the environment.

• 3D printing and building information modeling: Construction companies are looking to gain efficiencies in construction projects through prefabrication, 3D printing, and building information modelling. Creating a “digital twin” of a facility can speed up and optimize the design and construction phase by fostering a collaborative approach between architects, owners, contractors, and building materials suppliers. Using the digital twin concept with sensors and other technologies to track the actual operation and maintenance of the building can increase efficiency, reduce costs, and improve tenant satisfaction.

• New business models: Thought-leading companies are transitioning from pure manufacturers of products to technology and innovative solutions providers for living and the environment. On the other hand, car manufactures and utilities companies are threatening traditional building products companies by offering solar roofing and home automation solutions. Some companies are complementing existing product and service portfolios to become the “one-stop shop” for a specific area within building products, such as bathroom or flooring.

Currently, the industry is challenged with operating the existing infrastructure cost effectively while being hit with changing paradigms. Leading companies are reevaluating their processes, assets, and customer relationships to achieve:• Customer centricity• Digital supply chain and connected manufacturing• Innovative and smart products• New business models and value-added services

This “reimagination” requires collaboration and common understanding of market dynamics between IT and all the lines of business including R&D, production, sourcing, sales, marketing, supply chain, finance, and HR. Collectively, they can explore how digitalization is not only a supporter but a crucial enabler to reimagine their business.

This document offers our perspective where the industry will go and how SAP can help in the evolution of the digital building products business. Thank you for your interest, and we are looking forward to your feedback.

Eckhardt Siess and Folkert Haag

Eckhardt SiessGlobal Vice President Mill Products and Mining Business SolutionsSAP SE

Folkert HaagGlobal Lead for Building ProductsSAP SE

ECKHARDT’S AND FOLKERT’S POINT OF VIEW

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The Digital Economy

Big Picture

The Future

4

4

5

Reimagining

Reimagine Business Models

Reimagine Business Processes

Reimagine Products

Reimagine Work

6

7

8

9

10

SAP Digital Transformation Framework

Five Pillars

SAP Portfolio with SAP S/4HANA and SAP Leonardo

Digital Platform Enables Critical Business Capabilities

How Does It All Come Together?

11

12

13

14

15

From Your Current State to Digital

Transforming from Your Current State to Digital

SAP Digital Business Services

Comprehensive SAP Ecosystem

17

18

19

20

Why SAP?

SAP Is Committed to Innovation

21

22

Resources 23

TABLE OF CONTENTS

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THE DIGITAL ECONOMY

The Big PictureThe digital economy is real and will continue to transform business

Three main forces are driving the digital economy: consumer pull, technology push, and business benefits. In the next 10 years, 40% of the S&P 500 will no longer exist if they do not keep up with the continuously emerging technology trends.2 Cloud and in-memory computing, smartphones, and other mobile devices including wearables are part of the daily life to a growing number of the world’s population. Emerging technologies provide new and exciting opportunities that are reshaping building products companies. These new technologies are hitting a tipping point in terms of driving business value in a scalable way:

• Internet of Things• 3D printing• Augmented reality

Electronically controlled showers or faucets and R&D projects using 3D printing might sound exotic for some people. In fact, this is already reality. In a relatively short time frame, sensors, IoT, and Big Data will become essential for everyone in the building products industries and will dominate our homes, offices, factories, and cities.3

Trends in the digital economy

The industry is undergoing profound changes driven by new forces including the emergence of the global information consumer, technology becoming ubiquitous across the globe, and new business processes and models that result from an explosion of creativity and disruption across industries.

Redefinition of the businessReal-time supply chains are already a reality in some industries such as consumer products, incorporating everything from raw-materials suppliers to point-of-sale (POS) data. Omnichannel commerce and social media marketing are new ways of doing business that have already been adopted by a few players in the building products industries. Instead of having only a few specific products, the trend is for companies to offer one-stop shops for customers. They would offer complete solutions with all materials, services, and know-how in one package and can also offer highly individualized versions of the same offering. “Creating greater differentiation that protects and elevates the brand, as well as changing business models to align with customers’ needs, will define the industry’s leaders going forward, while those that choose to commoditize will trail the pack.”4

Information consumersEmployees, customers, and suppliers throughout the building products industries are all expecting the digital experience they have come to know from their private life in their professional life as well. This covers not only how information is being presented, but also having information at their fingertips when and where needed. For example, this could be having the pricing and product availability information at a client visit to discuss and plan a new bathroom. Customers want the same approach with an online store. In a business-to-consumer (B2C) scenario, it could be supporting customers to install the products for their renovation work using complementary 3D visuals, how-to videos, and consumer feedback. For a B2B business, it could be access to detailed product data, market trends, and order status for the retailer or contractor to review recent business and discuss new opportunities. Workers in manufacturing or logistics could save time by having work orders or status alerts sent to them through mobile applications.

Digital business models are disruptive. The rules have changed.

• Villeroy & Boch equipped retail stores with a tablet-based sales assistant to combine stationary and online retail.5

• Wienerberger uses 3D printing to create and optimize prototypes until mass production by less expensive means is feasible.6

• Nest is not just a thermostat company. It is a home automation company that “creates the thoughtful home: a home that takes care of the people inside it and the world around it.”7

• L.E.K. Consulting comments that a new level of depth is required to address the emerging voice of the homeowner and create a viable presence in other market access points, including digital channels.8

• Winsun Global, a leader in the 3D printing of buildings, is leasing printers on a large-scale project of 30 million square meters of 3D printed buildings, in what should result in up to 1.5 million affordable new homes for the Saudi Arabia population.9

Access more information on the latest technology

trends here:

https://www.sap.com/documents/2017/06/7ecd1766-c37c-0010-82c7-eda71af511fa.html

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THE DIGITAL ECONOMY

By 2030Digitally enabled direct distribution will be common in the building materials industry.10

Strategic priorities for building products companies

In this situation, where the opportunities are huge but, at the same time, market characteristics are changing, traditional building products companies need to focus on the right strategic priorities to drive digitalization across the business.

Customer centricityCritical customer relationships need to be strengthened for sustaining high customer satisfaction and retention rates.

Digital supply chain and connected manufacturingQuick order completion and delivery of tailor-made solutions create additional value for customers.

Innovative and smart productsConstant innovation is demanded by customers and end consumers to stay relevant.

New business models and value-added servicesThe digitalization and interconnection of products and services create additional value; for example, offering advice on the best usage of a complex product.

The Future Building products industries in transition

Reimagining

Building products companies have been driven primarily by manufacturing and logistics efficiency. However, this is no longer sufficient, and new business models and processes can illustrate a successful path into the future. The starting point of the digital journey is the ability to reimagine your business together with customers. That means reimagining your business models, your business processes, and your work.

Over 30% Of industrial companies are already using or developing IoT projects, and another 25% are actively evaluating IoT projects.11

Ecommerce = growthThe first companies to use e-commerce to sell and distribute building materials have demonstrated the potential for revenue growth.10

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In a connected world where every company is becoming a technology company, smarter products and services will refocus commerce on business outcomes and blur industry lines.

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REIMAGINING

THE DIGITAL ECONOMY OFFERS INFINITE NEW OPPORTUNITIES

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REIMAGINE BUSINESS MODELS

REIMAGINE EVERYTHING

Increasing globalization including the emergence of new competitors, building regulations, and digitalization, are destroying established business models in building products industries. We expect that companies will explore four major areas to develop new business models.

Social selling

The use of social media for all aspects of marketing and selling becomes a key pillar at building products companies as they deal in B2B and B2C with many different types of decision makers, from architects to builders to home owners and commercial real-estate companies. Using social media to sense the demand, generate leads, and take follow-up actions is something completely new but should be integrated into overall sales and marketing activities. The power of social selling comes once customers become your best salespeople by sharing high ratings and positive interactions with others that improve your reputation. Customer satisfaction can increase through advanced automation by responding to customer demands and social media posts. Some advanced companies are tracking and responding in real time to customer tweets, closing transactions in minutes.

One-stop-shop approach

One-stop shopping offers customers the convenience to have multiple needs satisfied in one location, such as design services, direct access to product information, option to buy supplementing products, installation services, and much more. This doesn’t necessarily mean that a building products company is offering each and every service directly. Being connected with a supplier and service provider through a business network enables digital building products companies to act as an intermediary to facilitate the one-stop-shop model. LIXIL Group Corporation is one of many building products companies expanding through strategic acquisitions and partnerships to accelerate its growth in foreign markets and to be able to provide a complete bathroom solution.12

Individualized and specialized offerings

Technology enables building products companies to respond to specific customer demands and produce individualized offerings at reasonable costs, but higher margins than standardized offerings. This value-add can be realized with 3D printing and modern production and planning processes and is helping building products companies to differentiate in a commoditized market. This move changes not only where and how we produce our products but also requires new, integrated processes from order taking to passing the information down the supply chain to suppliers and how we design and manage our distribution network in the future.

“Implementing a single, tier-one ERP solution enabled Woodgrain to open up new channels and offer new services, including third-party logistics services.”Woodgrain Millwork Inc.13

“We are transforming the way construction material providers work with architects.”Hartwig Schwarzlmüller, Vice President, FunderMax GmbH 14

New Business Models and Value-Added ServicesIndustry lines are blurring across all building products industries and beyond. Thought-leading companies are introducing new business models and capabilities that deliver new value to customers. Some companies are transitioning from pure manufacturers of products into technology and innovative solutions providers for living and the environment. Others are complementing their existing product and service portfolio to become the one-stop shop for a specific area, such as bathroom or flooring.

Servitization and sharing economy

Building products companies are enhancing customer relationships through the servitization or renting of building products for continuous engagement instead of just performing an on-time traditional sales Transaction.This trend is not entirely new. For example, the leasing of metal facades has been an option for 100 years. However, technology and connectivity innovations are making the process much easier. These approaches support concepts like cradle to cradle and circular economy where material flow can be reduced and reorganized to reduce waste and reduce impacts on society and the environment while enabling new revenue streams.

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REIMAGINE BUSINESS PROCESSES

The traditional building products value chain is transforming at breakneck speed as a result of changes of profitability within business segments, connected value chain partners, and highly interactive processes that are now executed in close to real-time speed.


Customer journey and experience

Supply chain partners in the distribution network as well as end consumers are connected and expect access to information using the channel and device of their choice. Providing tailored information based on user roles, needs, and interests across all touch points is critical to strengthen the relationship and drive revenue. Remote sensing of product health and status open up new aftersales revenue streams and, at the same time, contribute to an improved consumer experience.

Demand sensing and real-time logistics

A tightly connected supply chain from suppliers to POS enables building products companies to make smarter inventory decisions and improve demand management. By using predictive analytics to help determine demand according to item, location, or customer segment, companies can improve product availability and reduce expediting costs. With real-time information from trucks, warehouses, and traffic conditions, the whole supply network can be optimized even while the goods are already on their way.

Shop-floor operations

Capturing and analyzing data from machines, vehicles, or products allows better predictions, simulations, and decisions to be made. Automation and connectivity across the plant floor reduces error rates, adds speed, cuts operating costs, and significantly changes the way manufacturing personnel act on the plant floor. Predictive quality of products and predictive maintenance of assets are superior to the reactive models many companies use today.

Digital engagement between companies and their suppliers and customers is five times larger in the leading sectors than in others.16

“We use predictive analytics to find out which products might fail. This not only helps from a cost-saving perspective, but it also enables us to let our customers know we might have an issue and, more important, explain how we can fix that issue. It’s about creating a better customer experience.”15

Anders Reinhardt, Head of Business Intelligence, VELUX A/S

Digital Supply Chain and Connected Manufacturing

Customer Centricity

Digital technology in plants and in the supply chain intelligently connects manufacturing operations and supply chain networks to the rest of the enterprise, while technologies like predictive quality and maintenance can help dramatically change the way products are created, sold, and delivered.

Digitally connected and globally aware consumers are driving a revolution and impacting all aspects of the building products industries.

Supporting retailers, wholesalers, and architects

Most building products companies have a two-step sales model where the retailer, wholesaler, or architect is the link to the final customer and has tremendous influence over purchase decisions. Innovations like virtual showrooms enabled with augmented or virtual reality that include real-time product availability and pricing can be a huge differentiator.

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REIMAGINE PRODUCTS

Building products manufacturers can drive new business, keep current customers happy, and avoid product commoditization by providing digital smart products that are more secure, connected, and intelligent.


New generationLeading companies are introducing a new executive role into their organizations. The chief digital officer (CDO) is responsible for driving digitalization into every aspect of a company – first and foremost its products.18

31% Of respondents to a Forrester research survey answered that they were looking to create products that have never existed before.17

Innovative and Smart Products

As products become more intelligent and interconnected, the opportunity to sense and serve the needs of customers will increase dramatically. At the same time, companies can be run more cost effectively and have less impact on society and the environment. Leverage the Internet of Things to drive customer satisfaction, and increase revenue by turning your products into smart solutions. The following three examples illustrate new trends in the industry.

Customer service as a product

Innovative service offerings and processes can have a game-changing impact on customer relationships and the top and bottom lines. All service processes will be digitally connected to the workforce, suppliers, customers, and assets for higher efficiency and greater customer value. New services can provide full transparency during order processing and allow access to detailed product data by piece.

A service solution could offer joint product planning to help ensure on-time availability to the customer and more-accurate planning for the supplier.

Products with less impact on the environment

Constant innovation is demanded by customers, forced by increased regulations, but also driven by fast-changing fashion trends. Being a leader in product innovation often secures market share. For example, customers are increasingly willing to pay higher prices for green products, which are made from renewable sources, environmentally friendly to operate at low cost, and are easy to recycle. Building professionals are looking for solutions that enable them to erect a stronger building more easily and quickly while meeting increasing and changing customer and regulatory requirements.

Home automation and smart buildings

Automation itself is not a new topic, and there are many players in that market already. However, the game is changing, and building products companies are equipping their products with sensors and a built-in intelligence. Of course, it’s natural that customers and consumers of those building products would expect IoT-enabled services as well as energy saving and greater security and comfort. For the building products producers, this means they will need to think about both automation of facilities and smart products.

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The digital transformation of building products industries profoundly changes what people do and how they learn, interact, and grow.

REIMAGINE WORK


Digital business processes replace manually executed transactions in procurement, production data collection, inventory management, sales, and many other areas. Digital processes access real-time data and provide instant analytics to support rule-based decision making and exception handling.

Predictive software analyzes data from a machine network, enriched with additional data like quality requirements, and triggers actions based on the predictive analysis of the data in manufacturing. This requires employees who understand the complex rules, can maintain them, and thus be responsible to orchestrate the highly complex, automated system.

Interactive technologies reflect the transition of people’s roles from transaction workers to exception workers that engage when the digital rulebook needs human creativity and ingenuity. These technologies provide a personalized, responsive, and simpler user experience across devices and deployment options to meet end-user’s expectations.

Flexible business-to-people relationships. The transformation to a digital building products company creates hundreds of millions of new people interactions: between customers and service teams, between the core and the extended workforce, and with the public over social and broadcasting networks. Real-time digital information on the right devices is critical to advance the business agenda through interaction between people.

People continue to be key assets in digital building products. Their roles will change and become more strategic.

Talent management has become a headache for CEOs, with only 30% saying that they have the talent they need to fulfil their future growth ambitions.19

78%Of employees say it is vey important to work for a digitally enabled company or digital leader.20

Robots could replace

1.7 million American truckers in the next decade.21

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SAP DIGITALTRANSFORMATIONFRAMEWORK

A SIMPLE AND PROVEN APPROACH TO VALUE CREATION THROUGH DIGITALIZATION

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• IoT and supply chain connect all stages of the supply chain and assets on your factory floor to the digital core. A large amount of flexibility is needed to connect new equipment on a constant basis.

• Your customers require flexibility in the way they interact with you through multiple channels.

• Flexibility and adaptability in working with spend management are key in order to onboard new suppliers quickly and shift supply to alternates.

• Flexibility is required when building and maintaining an agile workforce.

As companies are reimagining their entire business, they need an IT architecture that provides both stability for the core enterprise processes, and, at the same time, allows for flexibility in areas where change is happening on a constant basis.

This concept, which is often referred to as “bimodal IT,” is brought to life through the SAP Digital Transformation Framework graphic, pictured below.

• The digital core is the foundation for the core enterprise processes, which need to run consistently and uninterrupted. It provides real-time transactions and analytics, the ability to work with Big Data, and connectivity to the four outside pillars of the framework.

Every building products company needs to think about the five pillars of a digital strategy

SAP DIGITAL TRANSFORMATION FRAMEWORK

We have looked at the four strategic priorities for building products companies and how they lead to reimagining business models, business processes, products, and work to accomplish the digital transformation. Let‘s now look at how SAP can help enable building products companies do this by providing the following architecture.

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SAP has innovated its portfolio to provide for a stable digital core as well as flexible line-of-business (LoB) extensions.

SAP PORTFOLIO WITH SAP S/4HANA AND SAP LEONARDO

In the digital economy, simplification and business innovation matter more than ever. To do this effectively, it’s important to cover the end-to-end digital transformation journey, ranging from planning a digital innovation road map and implementation plan with proven best practices to the ability to run all deployment options and, ultimately, optimize for continuous innovation with a focus on outcomes. Processes are designed from the outset to flow end to end across the cloud-based solution extensions, listed in the white bands, and are fully integrated to the SAP S/4HANA® Enterprise Management solution and are optionally deployed to address business needs. The solution capabilities in the dark blue band, the digital core, are delivered as part of SAP S/4HANA Enterprise Management. The lighter blue band, also in the digital core, are part of SAP S/4HANA Enterprise Management, but added on as needed.

Learn more about SAP solutions today and discover

planned innovations for building products businesses

Digital core: Core solution capabilities delivered as part of SAP S/4HANA Enterprise Management

Digital Core: Solution capabilities that are also part of SAP S/4HANA Enterprise Management, but added/purchased as needed.

Extensions: Cloud-based (LoB) solution extensions that are fully integrated with SAP S/4HANA Enterprise Management, but added/purchased as needed.

Leonardo: Solution capabilities that are powered by a Leonardo technology and included in the Leonardo suite and how to add/purchase is not shown on this diagram.

https://support.sap.com/content/dam/website/roadmaps/en_us/industry/SAP Road Map for Mill Products.pdf?logActivity=true

© 2014 SAP SE or an SAP affiliate company. All rights reserved.

Customer centricity

• Generate leads through predictive product replacement and precise segmentation

• Gain live insights into customer needs and market opportunities

• Provide individualized products

• Establish demand-driven, collaborative supply networks

• Enable on-time delivery and advanced available-to-promise capabilities

• Automate short-term forecasting processes in accordance with real-time consumer demand

• Support an exception-based working model accompanied by simulation features and decision support

• Adjust production orders with greater flexibility based on customer priorities

• Produce lot sizes of one

• Personalize the buying experience for each individual customer

• Provide consistent, dynamic, and contextual content across all touch points and devices

• Anticipate real-world demand

• Promote knowledge sharing and community building

• Enable flexible work teams

• Attract and secure top talent

• Evaluate the financial implications of strategic business choices with data simulation and analysis

• Manage the customer portfolio strategically

• Support spend, contract, and vendor evaluation

• Engage suppliers digitally to proactively use and predict consumer demand and adjust production

• Enable a closed-loop, circular supply chain

Digital supply chain and connected manufacturing

• Visualize manufacturing processes digitally based on harmonized product data

• Collaborate internally and externally through a single platform with harmonized product data

• Improve product quality based on Big Data root analysis

• Analyze key performance indicators, identify supply chain risks, and create alerts – all in real time across the entire value chain

• Facilitate product configuration and variant management including costing

• Track and trace fleets and shipments with the Internet of Things (IoT)

• Enable omnichannel order fulfillment

• Integrate vertically up to the customer

• Respond to demand and supply fluctuations through live inventory management and material flow analysis

• Enable IoT capabilities for manufacturing

• Align supply chain and sales planning

• Route customer orders directly into the factory as production orders

• Access and analyze structured and unstructured data from multiple channels

• Manage external contractors with greater flexibility

• Identify, forecast, and address skill gaps

• Manage contingent labor and services

• Onboard and train employees quickly and seamlessly

• Address increased financial risks associated with highly flexible supply chains and manufacturing operations

• Analyze profitability instantly with multidimensional views such as products, customers, and projects

• Speed costing and reporting with optimized code for multiple currency and valuation methods

• Allow contractual enablement of global supply chains with multitier supplier management

• Discover new and alternative suppliers flexibly

• Accelerate order fulfillment across geographies through a flexible supplier network

Innovative and

smart products

• Adopt an engineering approach that includes mechanical features, software, and electronic capabilities

• Gain unprecedented insight from text, spatial, predictive, time-series, streaming, and graph analytics to continuously improve products

• Track digital components

• Support efficient and flexible internal and external logistics and supplier collaboration

• Install and manage in-product software

• Support advanced testing and connectivity management

• Offer services for digital smart products

• Generate leads through predictive product replacement and precise segmentation

• Facilitate powerful and consistent product content management

• Find and contract talent with specific noncore skills to drive innovation beyond the current product scope

• Train and certify the workforce on new digital technologies

• Include payment models for digital services in product calculations and financial reporting

• Manage and help ensure digital rights compliance

• Automate and simplify the integration of material and service suppliers

• Drive innovation by collaborating with suppliers

• Bundle third-party services with products

New business

models and

value-added

services

• Extend the product and service portfolio to penetrate new markets

• Collaborate with service- and knowledge-based partners to deliver fundamentally new and differentiated customer value propositions

• Create an aligned and flexible supply chain, operations, and sales planning

• Drive efficient distribution strategies

• Evaluate potential business plans rapidly by integrating what-if simulations with sales and operations planning and multiechelon inventory optimization

• Support leasing, rental, and product-as-a-service offerings

• Use the ecosystem to provide value-added services

• Deliver complex product bundles and configurations

• Maintain a pipeline of top talent

• Attract and secure top talent

• Identify, forecast, and address skill gaps

• Use simulation and analysis to assessthe financial implications of strategic business choices, including mergers and acquisitions

• Manage a strategic and agile global supplier network that supports economies of scale and flexible call orders

2. Use a flexible business infrastructure that balances demand with production,

focuses on profitability, and yields more efficient operations.

1. Anticipate real-time demand and supply, digitalize manufacturing operations, operate

resilient supply chains, and innovate the customer experience.

Building products companies need to transform their business and process models now to pave the way for a sustainable future.

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Sustainable Product

Innovation

Supply Chain Planning

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Typical business

benefits*

▪ On-time delivery: +20%–30%

▪ Customer satisfaction: +10%–20%

▪ Productivity of order management full-time

equivalents: +10%–15%

▪ Manufacturing cycle time:

As low as -10%

▪ Manufacturing costs: Up to -10%

▪ Unplanned asset downtime: -5%–10%

▪ New product revenue: +10%–20%

▪ Time to market: -10%–55%

▪ R&D expenses: -20%–30%

▪ Days to close annual books: -40–50 days

▪ Budgeting and forecasting costs: -25%–

50%

▪ Audit costs: -20%–40%

▪ Days in inventory: -10%–12%

▪ Total logistics costs: -10%–12%

▪ Supply chain planning costs:

-3%–5%

▪ Lower costs for time and attendance

▪ HR full-time equivalents: -44%

▪ Procurement cost: -15%–20%

▪ Accounts payable errors: -5%–6%

▪ Days payables outstanding on targeted

spend: -2–5 days

Digital Innovation

SAP Leonardo

Extensions

▪ Configure, price, and quote

▪ Cloud for sales

▪ Commerce

▪ Cloud for service

▪ Service engagement center

▪ Cloud for marketing

▪ Cloud for customer commerce

▪ Order and contract management

▪ Service management

▪ Service master data management

▪ Service parts management

▪ Service agreement management

▪ Maintenance management

▪ Production orchestration and execution

▪ Quality management and compliance

▪ Asset operations and maintenance

▪ Environment, health, and safety

▪ Multiresource scheduling

▪ Constrained production planning &

production scheduling

▪ Mobile service

▪ Responsive manufacturing

▪ Production operations

▪ Digital operations for manufacturing

▪ Yard logistics

▪ Enterprise portfolio and project

management

▪ Commercial project management

▪ Compliant product lifecycle mgmt.

▪ Product development and project control

▪ Production engineering

▪ Collaborative product development

▪ Product network

▪ Integrated business planning

▪ Central finance

▪ Governance, risk, and compliance

▪ Collaborative finance

▪ Accounting and closing operations

▪ Cost management and profitability

analysis

▪ Advanced available to promise

▪ Supply chain control tower

▪ Integrated business planning

▪ Extended warehouse management

▪ Transportation management

▪ Global batch traceability

▪ Side-by-side advanced planning and

optimization

▪ Inventory and basic warehouse

management

▪ Production planning

▪ Time recording

▪ Core human resources and payroll

▪ Talent management

▪ Time and attendance management

▪ Human capital analytics

▪ Supplier collaboration

▪ Business network

▪ Guided end-user buying

▪ External workforce management

▪ Supplier management

▪ Operational procurement

▪ Invoice and payables management

▪ Operational sourcing & contract

management

▪ Procurement analytics

Digital Core

SAP S/4HANA

SAP Cloud Platform Analytics Services Mobile Services Security Services Collaboration Services UX Services

BlockchainMachine Learning Big DataInternet of Things Analytics

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▪ Sales planning and performance

management

▪ Billing and revenue innovation

management

▪ Accounting and financial close

▪ Treasury and risk management

▪ Fraud management

▪ Receivables management

▪ Global track and trace ▪ Predictive maintenance and service

▪ Asset intelligence networks

▪ Predictive quality

▪ Invoice matching ▪ Resume matching

▪ Job matching

Sales and Channel ManagementResponsive ManufacturingSustainable Product Innovation FinanceSupply Chain Planning and Order

Fulfillment Human Resources Procurement Excellence

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1. A customer service or product manager discovers a consumer complaint on a social media forum about problems with windows fittings. A fitting broke, and the consumer is highly unsatisfied.

2. The employee analyzes other end-customer complaints related to this product and by searching records from in-house systems, finds that several other end-customers have had similar issues.

3. To find out more, the employee takes the root cause analysis to the next level, incorporating shop-floor sensor data, customer specification, machine status information, and raw material analysis.

4. With insights from predictive quality analysis, employees look at what has the strongest influence on product quality. Often, this is not a single parameter but a combination of several aspects. Once this correlation is known, they alert production to adjust the process parameters and run the production more predictably, and within tighter boundaries.

5. Predictive analytics is used anticipate and prevent potential complaints or issues.

6. Production makes sure the already produced batch with quality problems is found and blocked from further processing (to avoid scrap and rework cost), and ensure it is not shipped to customers.

Example of digital business scenario: predictive quality and complaints

Delivering bottom-line results in manufacturing by focusing on efficient operations and reduction of inventory and by shortening lead times was the main focus of building products companies. But this is changing. While the five digital business pillars deliver significant value as a stand-alone capabilities, the ultimate goal is to design the next generation of business processes that will span across all the digital pillars.

7. Predictive quality and real-time shop-floor visibility show operators how they compare against the current best-practice production and where they deviate to continually work toward the “golden run.”

8. Sales or customer service reps reach out to customers (craftspeople and distributors) and inform them proactively and as specifically as possible which products are affected – either still in the inventory or installed and sold to end-consumers. This allows service to replace parts where possible.

9. Customer and service teams collaborate to modify the product so future quality claims won’t happen. This includes not only changes in product design but also possible changes to installation, operation, and maintenance instructions.

10. Finance and accounting automatically receive the updated information so they can adjust and optimize warranty accruals.

HOW DOES IT ALL COME TOGETHER – EXAMPLE 1

“Our initiative, our lingo was ‘Zero defect line,’ zero, not

‘kind of good defect line,’ zero!”Mike Livermore, Director, U.S. Operations Systems, Moen Inc.22

Watch a video illustrating the scenario here

Optimize warranty accruals

Root cause analysis of

quality issues

Social media triggers

service ticket

1

3

4

Predict future complaints and claims

Benchmark for “golden

“run” constantly

7 Proactive customer

service and callback

8

Collaborative product update

92

Analyze similar

customer complaints

Find and block affected

inventory

6

Adjust process parameters for tighter process

control

4

2 Customer ExperienceOmnichannel

Internet of Things and Big Data

Digital Core

7

5

10

https://www.sap.com/assetdetail/2017/02/a8d41c06-a77c-0010-82c7-eda71af511fa.html

https://www.sap.com/assetdetail/2017/02/a8d41c06-a77c-0010-82c7-eda71af511fa.html

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1. End-consumers connect through mobile and social media. A variety of valuable data is left on the Web, ready to be analyzed and turned into action.

2. The building products company screens social networks and consumer ratings of its products. Structured and unstructured data is considered.

3. Data from other sources supplements the data pool. Big Data analysis revealed three major areas that seem to be dominant on the Web: a quality issue, missing product features, and happy customers.

4. Data about the quality issue is sent to the engineering/quality management department for further investigation, including root cause analysis.

5. As a result, a high-priority engineering change request is issued.

6. The user manual is updated to more explicitly tell the end-consumer about the correct use of the product.

7. A new manual is published and distributed through various channels.

8. The marketing and sales department looks into requested product features and the significant number of happy customers. A targeted marketing campaign using social media is triggered to reach end consumers. At the same time, retailers are incentivized with a special campaign that focuses on the high end-consumer rating of the product.

Example of digital business scenario: social engagement

9. Going forward, social media is monitored on a real-time basis to enable a more timely response to relevant social media activities.

10. The campaigns have a really good outcome: orders pour in over various channels.

11. The tight integration with production planning and inventory levels allows for an exact delivery date determination, which is part of the order confirmation.

12. Transportation planning is triggered and a multistop shipment is created considering constraints like trailer size or given unloading time windows. Delivery notifications including tracking options are sent out. Finally. billing documents are issued.

13. Retail customers (B2B) send electronic payments. For those orders that were received from consumers (B2C) directly through the online shop, credit card payments are processed.

14. Once the products are with the end consumers, online product registration delivers valuable data about the end consumer.

HOW DOES IT ALL COME TOGETHER – EXAMPLE 2

Consumer

creates social

media content

Delivery

and Billing

Order

confirmation

Updating

care

instructions

Receive

orders

Engineering

change

request

Online

marketing

campaign

Root cause

analysis of

quality

issue

1

Enrich data

and analyze

Publishing

new

manualCustomer Experience

Omnichannel

Internet of Things and Big Data

Digital Core

Screening

of social

media data

$Receive

payment

Product

registration

2

3

4

5

6

7

8

10

11

12

13

Social

media

monitoring

in real time

9

14

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FROM YOUR CURRENT STATE TO DIGITAL

THE JOURNEY BEGINS WITH A CAPABILITY ANALYSIS THAT RESULTS IN THE TRANSFORMATION AGENDA

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- 18 -


In the digital economy, simplification and business innovation matter more than ever. To do this effectively, it’s important to cover the end-to-end digital transformation journey, ranging from planning a digital innovation road map and implementation plan with proven best practices to the ability to run all deployment options and, ultimately, optimize for continuous innovation with a focus on outcomes.

TRANSFORMING FROM YOUR CURRENT STATE TO DIGITALThe keys to success

And to move forward with speed and agility, it helps to focus on live digital data, instead of Big Data, and combine solution know-how and industry-specific process expertise with data analytics so that the right digital reference architecture is defined and delivered. In that context, we believe that a model company approach is very relevant to enable you to transition from your current state to digital. Model companies represent the ideal form of standardization for a specific line of business or industry. They are built on existing SAP solutions using best-practice content, rapid prototyping solution packages, and additional content from customer projects. They provide a comprehensive baseline for rapid, customer-specific prototypes, cloud demos, and quick-start implementations.

BUILD/LAUNCHwith proven best

practices

Standardize and innovate• Model company approach

to accelerate adoption with model industry solutions

• Design thinking and rapid, tangible prototypes

• Co-engineered industry innovations delivered with agility

PLANwell to manage

expectations

Simplify and innovate• Reimagined business

models, business processes, and work

• Digital business framework as a guide for digital transformation

• Value-based innovation road maps

RUN all deployment

models

Run with one global support team• One global, consistent

experience

• End-to-end support – on premise, cloud, or hybrid

OPTIMIZEfor continuous

innovation

Optimize to realize value• Capture and realize

benefits of digital transformation continuously

The end-to-end digital transformation journey

Model company approach

Social

networks

Business

networks

Internet

of Things

Big Data

Devices

People

End-to-end solution

Innovation

Differentiation

Best practice SAP® productsModel company

End-to-end business process

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SAP DIGITAL BUSINESS SERVICES

SAP has a broad range of services to cover the end-to-end digital transformation journey, ranging from advising on a digital innovation road map and implementation plan with proven best practices to the ability to run all deployment options and, ultimately, optimize for continuous innovation. We provide both choice and value within our service offerings, allowing you to tailor the proper approach based on your specific company expectations and industry requirements.

Enabling your success in digital transformation

From providing a comprehensive digitalization proposal to realizing and running it, SAP delivers on the digital transformation promise to its customers, on time, within budget, and on value.

SAP value delivery relies on unique differentiating assets:

Digital business foundation Business insights Continuous improvement

• Digital boardroom

• Predictive customer insights

• Value realization dashboard

• Agile decision making and

execution support

• Joint value governance

• Sustainable engagement model

• Innovation without disruption

• Simplification

• Digital business model

• Flexible, scalable enterprise

architecture

• Platform for the digital future

• People and culture transformation

The SAP Digital Business Services organization delivers digital innovation with simplification and accelerated implementation, which is key to adoption and value realization. Continuous improvement is supported through on-going assessment of real-life data insights and joint governance with customers.

SAP value delivery focuses on the following deliverables:

SAP Activate methodologyExhaustive service portfolio

SAP Solution Manager

SAP® Model Company service

SAP Mission Control Center

• 25,000 professionals in 70 countries

• Serving customers in 130 countries

• Outcomes delivered as one team in one contract

• Projects connected in real time to global network of support functions through SAP Mission Control Center

• SAP MaxAttention™ and SAP ActiveEmbedded services to safeguard investment

• Consistent experience – on premise, cloud, or hybrid

• Standardized adoption of processes and tools

• Streamlined onboarding and ramp-up of stakeholders

Expert organization

Global reach Partner ecosystem

Industry expertise

Focus on business outcome

Co-innovation

Run better: operate

Use better: harvest

Extend use:invest

Build new:innovate

Corporate strategy

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Orchestrating the world to deliver faster value

DRIVING CUSTOMER

VALUE

BUSINESS NETWORK

• 1.9 million suppliers

• 200 major travel partners (air, hotel, and car)

• 50,000 service and contingent labor providers

IMPLEMENTATION SERVICES

• 13,300 partner companies

• 3,200 service partners

• Delivering >1,300 industry-specific solutions

PLATFORM AND INFRASTRUCTURE

• 1,400 cloud partners overall

• >1,500 platform partners

CHANNEL AND SME

• 4,800 overall channel partners

INNOVATION

• >1,900 OEM solution partners to extend SAP solutions

• 2,700 startups developing applications that integrate with SAP HANA®

INFLUENCE FORUMS AND EDUCATION

• 32 user groups across all regions

• >40 industry councils

• SAP community with >24 million unique visitors per year

• 1,800 members of SAP® University Alliances

Our comprehensive ecosystem offers:

• A wide range of business services (banking, travel, and more)

• Open architecture, with choice of hardware and software

• Complementary and innovative third-party solutions like 3D visual variant configuration

• Reach, with partners to serve your business of any size anywhere in the world

• Forum for influence and knowledge

• A large pool of industry experts with broad and deep skill sets

Source: internal SAP data

COMPREHENSIVE SAP ECOSYSTEM

http://www.tieto.com/

https://www.accenture.com/us-en

http://www2.deloitte.com/global/en/services/consulting-deloitte.html

http://www.dr-lauterbach.de/

http://www.novigo.com/en/homepage

https://vestapartners.com/

http://www.utopiainc.com/

http://atos.net/en-us/home.html

http://www.wipro.com/

http://www.rolta.com/

http://www.ibm.com/

http://www.osisoft.com/

http://www.vistex.com/

http://www.team-con.de/en.html

- 21 -



- 21 -


SAP HAS THE VISION, THE SOLUTIONS, AND THE COMMITMENT TO GO WITH YOU ALL THE WAY, FROM DEFINING YOUR DIGITAL STRATEGY TO DELIVERING THE RIGHT SOLUTIONS TO RUNNING YOUR DIGITAL BACKBONE IN THE CLOUD.

WHY SAP?

- 21 -


- 22 -


SAP IS COMMITTED TO INNOVATION

Vision

Mission

Strategy

Help the world run better and improve people’s lives

Help our customers run at their best

Become the cloud company powered by SAP HANA

GLOBAL PRESENCE

AND RELEVANCE

INDUSTRY AND LOB

FOCUS

DIGITAL ECONOMY

READY

INNOVATIONLEADER

INDUSTRIAL INTERNET OF

THINGS ENABLED BY

SAP

• 84,200 employees representing 130 nationalities

• 345,000 customers

• SAP operates in 190 countries

• Solutions for 25 industries and 12 LoBs

• 98% of most-valued brands are our customers

• 76% of the world’s transactions managed with SAP solutions

• 120 million business cloud users

• 1.9 million connected businesses

• >$800 billion in B2B commerce

• >99% of mobile devices connected with SAP messaging

• 2011 SAP HANA launched

• 2012 SAP Cloud launched

• 2014 SAP business networks form the largest marketplace in the world

• 2015 SAP HANA Cloud Platform launched

• 2015 SAP /4HANA launched as the next-generation business suite

• 15 of the 20 top cement producing companies in the world run SAP solutions

• 92% of the construction materials producers in the Forbes Global 2000 are SAP customers

• >2,200 building materials companies in 91 countries use SAP solutions

FROM ZERO TO MOBILE IN JUST 10 WEEKS WITH MOBILE SOLUTIONS FROM SAP

Using mobility solutions from SAP and partners, Woodgrain Millwork Inc. has eliminated handwritten paperwork and manual quality tracking. Now, product innovation, improved quality, and higher sales are increasing customer satisfaction.24

15% FASTER PRODUCTION LEAD TIME AND 3% DECREASE IN SCRAP

With SAP solutions, top management at Joris Ide Group has immediate insight into manufacturing key performance indicators.23

Source: internal SAP data

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RESOURCES

1. “2016 Top Markets Report: Building Products and Sustainable Construction,” page 4, U.S. Department of Commerce, International Trade Administration, May 2016. http://trade.gov/topmarkets/pdf/Building_Products_Top_Markets_Report.pdf

2. “A decade to mass extinction event in S&P 500,” CNBC, June 2014.http://www.cnbc.com/2014/06/04/15-years-to-extinction-sp-500-companies.html

3. “The IoT Opportunity: Is Your Go-To-Market Strategy as Smart as Your Product?”, L.E.K. Consulting LLC, July 2015. http://www.lek.com/our-publications/lek-insights/iot-opportunity-your-go-market-strategy-smart-your-product

4. “2015 State Of The Industry: Building Products,” page 2, L.E.K. Consulting LLC, August 2015. http://www.lek.com/our-publications/lek-insights/building-products-industrials-2015-state-industry

5. Villeroy & Boch Group, “Annual Report 2016,” page 51. https://www.villeroyboch-group.com/fileadmin/user_upload/VuB_AG_Annual_Report_2016_s.pdf

6. Wienerberger, “Annual Report 2016: Smart Solutions, Success Story 3.” http://www.annualreportwb.com/en/

7. Nest home page, https://nest.com/about/

8. “2015 State Of The Industry: Building Products,” page 1, L.E.K. Consulting LLC, August 2015. http://www.lek.com/our-publications/lek-insights/building-products-industrials-2015-state-industry

9. “Chinese 3D printing construction company WinSun & Saudi Arabia’s Al Mobty Contracting Co agree 10 billion RMB deal,” www.3ders.org, March 2017.http://www.3ders.org/articles/20170321-chinese-3d-printing-construction-company-winsun-saudi-arabia-al-mobty-contracting-co-agree-10-billion-rmb-deal.html

10. “Bringing Digital Disruption to Building Materials,” bcg.perspectives, The Boston Consulting Group. https://www.bcgperspectives.com/content/articles/process-industries-go-to-market-strategy-bringing-digital-disruption-building-materials-reinventing-customer-journey/?chapter=2#chapter2

11. “Cloud for Industry,” Siemens AG, 2015. http://www.industry.siemens.com/services/global/en/portfolio/plant-data-services/cloud-for-industry/Documents/Onepager_Cloud-for-Industry_E10001-T430-A349-X-7600.pdf

12. LIXIL, www.lixil.com

13. Woodgrain Millworks Inc., SAP Business Transformation Study, 2016. https://www.sap.com/documents/2016/11/c6aa27e4-977c-0010-82c7-eda71af511fa.html

14. “SAP Simplifies Work and Empowers the Mobile Workforce,” SAP News Center, February 2017. http://news.sap.com/mwc-sap-simplifies-work-empowers-mobile-workforce/

15. Velux A/S, SAP Business Transformation Study, 2015. https://www.sap.com/documents/2015/03/84e385fe-237c-0010-82c7-eda71af511fa.html

16. “The Most Digital Companies Are Leaving All the Rest Behind,” Harvard Business Review, January 2016. https://hbr.org/2016/01/the-most-digital-companies-are-leaving-all-the-rest-behind

Note: All sources sited as “SAP” or “SAP benchmarking” are based on our research with customers through our benchmarking program and/or other direct interactions with customers.

17. “Online and Mobile Are Transforming B2B Commerce,” Forrester Research Inc., October 2013. www.hybris.com/en/downloads/white-paper/b2b-forrester-paper/529

18. “The Rise of the Chief Digital Officer,” Russell Reynolds Associates, 2012. www.russellreynolds.com/insights/thought-leadership/the-rise-of-the-chief-digital-officer

19. “Talent mobility 2020 and beyond,” PwC, 2012. https://www.pwc.com/gx/en/managing-tomorrows-people/future-of-work/pdf/pwc-talent-mobility-2020.pdf

20. SAP Center for Business Insight, 2015, calculation based on “The Rise of Robotics,” Boston Consulting Group, August 2014. www.bcgperspectives.com/content/articles/business_unit_strategy_innovation_rise_of_robotics

21. Natalie Kitroeff, “Robots could replace 1.7 million American truckers in the next decade,” LA Times, September 2016. http://www.latimes.com/projects/la-fi-automated-trucks-labor-20160924/

22. “SAP ME [SAP Manufacturing Execution] Implementation at Moen,” SAP Customer Video, June 2013. https://www.youtube.com/watch?v=zZEok-Di4kY

23. Joris Ide Group, SAP Business Transformation Study, 2013.https://dam.sap.com/dam-ws/download?id=efHocS%2BhGWR3lJ34I1jDIP1irQNR7H1uXpzvGg92j/35MvgtEzCOh2YD51aaaldd

24. Woodgrain Millworks Inc., SAP Business Transformation Study, 2016. https://www.sap.com/documents/2014/08/82777a23-0a7c-0010-82c7-eda71af511fa.html

Listed below are the sources used as supporting material for this white paper.

http://trade.gov/topmarkets/pdf/Building_Products_Top_Markets_Report.pdf

http://www.cnbc.com/2014/06/04/15-years-to-extinction-sp-500-companies.html

http://www.lek.com/our-publications/lek-insights/iot-opportunity-your-go-market-strategy-smart-your-product

http://www.lek.com/our-publications/lek-insights/building-products-industrials-2015-state-industry

https://www.villeroyboch-group.com/fileadmin/user_upload/VuB_AG_Annual_Report_2016_s.pdf

http://www.annualreportwb.com/en/

https://nest.com/about/

http://www.lek.com/our-publications/lek-insights/building-products-industrials-2015-state-industry

http://www.3ders.org/

http://www.3ders.org/articles/20170321-chinese-3d-printing-construction-company-winsun-saudi-arabia-al-mobty-contracting-co-agree-10-billion-rmb-deal.html

https://www.bcgperspectives.com/content/articles/process-industries-go-to-market-strategy-bringing-digital-disruption-building-materials-reinventing-customer-journey/?chapter=2#chapter2

http://www.industry.siemens.com/services/global/en/portfolio/plant-data-services/cloud-for-industry/Documents/Onepager_Cloud-for-Industry_E10001-T430-A349-X-7600.pdf

http://www.lixil.com/

https://www.sap.com/documents/2016/11/c6aa27e4-977c-0010-82c7-eda71af511fa.html

http://news.sap.com/mwc-sap-simplifies-work-empowers-mobile-workforce/

https://www.sap.com/documents/2015/03/84e385fe-237c-0010-82c7-eda71af511fa.html

https://hbr.org/2016/01/the-most-digital-companies-are-leaving-all-the-rest-behind

http://www.hybris.com/en/downloads/white-paper/b2b-forrester-paper/529

http://www.russellreynolds.com/insights/thought-leadership/the-rise-of-the-chief-digital-officer

https://www.pwc.com/gx/en/managing-tomorrows-people/future-of-work/pdf/pwc-talent-mobility-2020.pdf

http://www.bcgperspectives.com/content/articles/business_unit_strategy_innovation_rise_of_robotics

http://www.latimes.com/projects/la-fi-automated-trucks-labor-20160924/

https://www.youtube.com/watch?v=zZEok-Di4kY

https://dam.sap.com/dam-ws/download?id=efHocS+hGWR3lJ34I1jDIP1irQNR7H1uXpzvGg92j/35MvgtEzCOh2YD51aaaldd

https://www.sap.com/documents/2014/08/82777a23-0a7c-0010-82c7-eda71af511fa.html

- 24 -


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