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Sapphire Orlando '23 - Hitachi Energy's logistics lessons from its global SAP Business Network project

Jon Reed Profile picture for user jreed May 25, 2023
SAP Sapphire Orlando brought some major global projects into the spotlight. Hitachi's global S/4HANA and SAP Business Network for Logistics project is one example. But how does a multi-year initiative keep momentum? Here's what I learned.

Andrejas Jerkovic of Hitachi Energy at SAP Sapphire
(Andrejas Jerkovic of Hitachi Energy at SAP Sapphire)

During my review of SAP's generative AI SuccessFactors news, I talked about my top event goal: identifying the gaps between vendor and customer priorities. My next goal? Dig for the underrated stories - and document customer projects in action.

No, SAP Business Networks were not my choice for the underrated story of SAP Sapphire Orlando. But: if I had to pick underrated keys to SAP's competitive edge going forward, the potential of business networks would definitely be on that list, though if SAP wants to make that happen, there is plenty of work ahead.

I wasn't always that way; I've documented how my issues with SAP Business Networks have shifted (see: Is the SAP Business Network ready for prime time? An SAP Spend Connect Live review). Analyst Josh Greenbaum was in on this early. We got into that in our Making sense of Sapphire Orlando '23 podcast. I put Greenbaum in the proverbial hot seat, asking: why does he think SAP is doing something interesting here? Greenbaum responded, in part:

Because we live in an interconnected, interdependent global economy. It's the butterfly effect times 1000, these perturbations across the globe... And we need to really re-engineer how business is done, in order to obtain the kind of resiliency, and the kind of the kind of adaptability that, frankly, the economy needs. So, a network theoretically, is the best way to do this. It allows you to interact one to many, many to many in different configurations - and leverage the economies of scale.

Greenbaum ties this into an overriding Sapphire 2023 theme: sustainability.

Sustainability is a perfect example. I'm a small supplier; I want to be sustainable. I want to be certified sustainable and supply to multiple supply chains... I want to be able to comply once, and have that certification work. And the Business Network is a great place to do that. The visibility and transparency in the Business Network could allow me to meet whatever the requirements are and then publish to anybody, 'Hey, you can look at my certifications. I'm good.'

In terms of how SAP stacks up with Greenbaum's answer, well, that's a focal point of the podcast. But I also want to document how this plays out on projects. Hitachi Energy checks several boxes for me: they are pursuing a global SAP Business Networks rollout, integrated to their S/4HANA implementation.

Hitachi Energy - taking on the logistics network challenge

Hitachi Energy is also serious about sustainability. As noted on their web site, Hitachi Energy has been rated amongst the top five percent of the most sustainable companies. They've also been selected as the partner for the largest-ever HVDC wind energy project. With customers across more than 140 countries utilizing their power tech and energy solutions, Hitachi will put SAP's Business Network to the global test.

Andrejas Jerkovic, Lead Architect, Global Trade and Transportation for Hitachi Energy, joined the company two years ago. When he was hired, the decision to move to S/4HANA had already been made. Why join Hitachi Energy? Because Jerkovic wanted a fresh challenge. As he told me:

Hitachi Energy is basically a buyout of the ABB power grids business. They decided not to lift and shift the European holdings into a new data center, but instead to bring them onto the S/4HANA core that we are architecting, designing, testing and delivering.

Jerkovic has worked with SAP before; he wanted to see what S/4HANA was capable of:

Bringing these concepts about systems business into SAP has always attracted me. And in Hitachi Energy, there is the same challenge. You have standard manufacturing production. You have MTO/ETO, but you also have the system business. You have like a six year project, and you still need to manage it in an SAP environment.

One more twist: in 2012, Jerkovic was on a difficult SAP global trade services project. Back then, collaboration with carriers proved challenging; complex manual processes clogged things up. Fast forward to Hitachi Energy: Jerkovic found out he'd be revisiting these carrier challenges, but this time with Hitachi Energy's investment in SAP's Business Network for Logistics (Hitachi Energy also uses Ariba for direct and indirect procurement, but Jerkovic's team is focused on logistics - and collaboration with their carrier network). So how did Jerkovic react to this surprise?

I remember when I joined Hitachi. I looked at the project scope, and I saw SAP Business Network for Logistics [LBN at that time]. I asked my VP of Transportation, 'Hey, Manuel, you're all in.' And he said, 'What do you mean - yes, we're all in on LBN.' No other option? 'Yes, we're all in.' I wasn't scared. I thought about mitigation actions and whatever. But I will say, at the end of the day, it turned out to be good.

Just like in 2012, there were challenges. But this time, Jerkovic's team got to the other side:

You need to do a lot of change management with the carriers, not so much internally, but really with the carriers to get them on, to get them trained. But these are all things we have addressed with SAP  - and they really support us in this one.

In July 2022, Hitachi Energy went live with the Business Network for Logistics pilots, in Switzerland and Spain. There is more to come: several big Hitachi Energy manufacturing units are slated to go live: the next in October 2022, then April 2023, then October 2023.

One of my concerns about Sapphire 2023? SAP's emphasis on fast go-lives. While I can appreciate the goal of streamlined implementations, the reality is some SAP customers have multi-year, global rollouts in the works, with tons of moving parts. What I believe is needed on such projects is a different aspect of SAP's goal of speed-to-value: "quick wins." What happens if a multi-year initiative loses momentum? But Jerkovic told me they have already notched significant benefits:

We already have benefits. Just the visibility that we get - it's just incredible, you know, who responds to to our requests. How fast do they respond today? Do they adhere to the prices that we have agreed with them, let's say in our freight agreements.

Network visibility is changing how carriers work with Hitachi Energy:

What's really pushing is the visibility on the milestones. I know it's picked up. So I know it's deliberate. For example, in a drop shipment, it is essential for us to know that the customer has received the goods, so we can do revenue recognition. In the past, there was more guessing, or you had to call people. These are things that already boost what we have.

These early gains extend beyond the corporate offices:

The benefits are there, obviously, too, but it also starts with our sourcing, or our operational teams about how many freight orders did we send out?

The wrap - advice and lessons learned

Jerkovic's lessons for other SAP customers? He comes back to change management:

It's one thing to get the business out of the legacy systems. It's another thing to do the change management, and get things right the first time.

He adds that SaaS solutions still need IT engagement:

Make sure that you address the carrier onboarding through the sales channel of the carrier, but also demand and IT involvement. Because at the end of the day, it's a SaaS solution. But it also needs to be administered. So you have messages that fail; you have wrong data; you need to set up an authorization concept, or you need to apply the authorization concept. This is something that we have just taken too easy. For me it was a business task that's as defined in the program. But these days I'm putting more effort into that.

I know, from my Sapphire Orlando talk with SAP's Muhammad Alam, President & Chief Product Officer, Intelligent Spend and Business Network at SAP, that ease of onboarding remains a big priority for the SAP Business Networks team.

While speaking at ASUG's Executive Exchange program with Greenbaum, that was a big topic for the ASUG members, who had just finished a Business Networks/Ariba session. Alam told me that onboarding remains a focus for the SAP Business Network for Logistics, given the thousands of smaller carriers that come into play (more on that in a future piece). But from Jerkovic's view, good results can still be achieved: "We have made big progress there, and SAP really wants to make this work, and they listen to us."

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