SAP Strategic Enterprise Management The Functions - A Closer Look

Copyright 1999 SAP AG. All rights reserved. No part of this brochure may be reproduced or transmitted in any form or for any purpose without the express permission of SAP AG. The information contained herein may be changed without prior notice. Some software products marketed by SAP AG and its distributors contain proprietary software components of other software vendors. Microsoft®, WINDOWS, NT® ,EXCEL and SQL-Server® are registered trademarks of Microsoft Corporation. IBM®, DB2®, OS/2®, DB2/6000®, Parallel Sysplex®, MVS/ESA®, RS/6000®, AIX®, S/390®, AS/400®, OS/390®, and OS/400® are registered trademarks of IBM Corporation. OSF/Motif is a registered trademark of Open Software Foundation. ORACLE is a registered trademark of ORACLE Corporation, California, USA. INFORMIX-OnLine for SAP is a registered trademark of Informix Software Incorporated. UNIX® and X/Open® are registered trademarks of SCO Santa Cruz Operation. ADABAS is a registered trademark of Software AG SAP®, R/2®, R/3®, RIVA®, ABAP®, SAPoffice®, SAPmail®, SAPaccess®, SAP-EDI®, SAP ArchiveLink®, SAP EarlyWatch®, SAP Business Workflow®, SAP Retail®, ALE/WEB®, SAPTRONIC® are registered trademarks of SAP AG. Powersim® is a registred trademark of Powersim Corporation and Powersim AS SEM, Strategic Enterprise Management, Management are Trademarks of SAP AG.

SAP

Strategic

Enterprise

The Management Cockpit is a Trademark of SAP AG, originally created by Prof. Dr. Patrick M. Georges and delivered by N.E.T. RESEARCH.

SAP AG

l Neurottstraße 16 l 69190 Walldorf l Germany

Contents

Introduction ..........................................................................................................................................3 Enabling Value-Based Enterprise Management ....................................................................................4 Translating Strategy into Action: The Balanced Scorecard....................................................................5 The Situation Today.............................................................................................................................6 Integration and Acceleration of the Strategic Management Process with SAP SEM ....................7 Installation Scenarios .............................................................................................................................7 Structure of the SAP SEM Software.......................................................................................................9 Business Planning and Simulation (SEM-BPS)........................................................ 9 Corporate Performance Monitor (SEM-CPM)....................................................... 10 Business Consolidation (SEM-BCS) ........................................................................ 11 Business Information Collection (SEM-BIC).......................................................... 11 Stakeholder Relationship Management (SEM-SRM)............................................ 12 Implementation of a Strategic Management Process with SAP SEM ..................................................12 Example of a Management Process Based on Shareholder Value Principles .................................................................................. 14

Description of Functions...................................................................................................................20 Integration Through the Unified SAP SEM Data Basis ........................................................................20 SAP Business Information Warehouse as Basis .................................................... 20 Integration of Metadata and Application Data ..................................................... 20 Components of SAP SEM....................................................................................................................23 Business Planning and Simulation (SEM-BPS)...................................................... 23 Corporate Performance Monitor (SEM-CPM)....................................................... 29 Business Consolidation (SEM-BCS) ........................................................................ 37 Business Information Collection (SEM-BIC).......................................................... 44 Stakeholder Relationship Management (SEM-SRM)............................................ 48

SAP Strategic Enterprise Management

l May 1999

This and further reading on the respective topics can be found in the media centers on our homepage. http://www.sap.com or directly http://www.sap.com/sem

SAP Strategic Enterprise Management The Functions – A Closer Look Introduction Global competition is intensifying. Enterprises need to optimize their operational business processes. But this is no longer enough. They must also be able to react quickly on a strategic level to new developments, consider alternative courses of action and make the correct decisions without delay. Many enterprises have installed today integrated Enterprise Resource Planning Systems (ERP) such as R/3. They have succeeded in making their operational business processes more efficient and customer oriented and, as a result, increased their competitiveness. As a byproduct of ERP system implementations these enterprises have got a wealth of information at their disposal that can also be utilized to effectively support strategic management processes. Harnessing this information is currently one of the top priorities for most enterprises. It has become obvious that only efficient enterprise management processes ensure the consistent realization of strategy and its continuing translation into the day-to-day activities – one of the most important success factors in enterprise management today. It is a very real problem to guarantee that the strategic decisions are actually converted into concrete operational objectives for the business units and that these are understood and optimized at all levels of the enterprise. To achieve this, you have to implement integrated, strategic management processes as unifying functions for all operational enterprise units. Only with well implemented Strategic Enterprise Management processes corporations are able to quickly translate strategy into action and channel feedback from activities back into the strategic decision making process for continuing learning and strategy optimization. Only this way, can an enterprise really use appropriate strategies to align its entire activities with the value expectations of the shareholders and other stakeholders, for example employees, business partners, public interest groups, and thus ensure its long term profitability. Strategy has to move out of the executive back office and has to be integrated into the day-to-day work of each employee who can contribute to make strategy happen and who can provide feedback for further optimization of the enterprise strategy.

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This requires new types of information systems, namely analytical applications for Strategic Enterprise Management. These systems must support the management processes themselves – especially top down translation of enterprise strategy into business unit strategy, product strategy, support center strategy and so on and bottom up performance monitoring and related decision support. Also the system has to guarantee, through close integration with the ERP system, continuous feedback with the operational business processes.

Management Processes

Yesterday

Tomorrow

Strategic

Strategic

Link strategy to action in real time

Support

Support

Automation/ outsourcing/ shared services

Operational

Optimize extended supply chain ad-hoc

Operational

Degree of effort necessary for enterprise management excellence

Figure 1: The importance of the strategic management processes will increase.

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Enabling Value-Based Enterprise Management

The broad spread and acceptance of the shareholder value concept has led to a situation where investors now play a much more active role in enterprises than was the case a few years ago. Institutional investors in particular try to influence enterprise management in order to have the enterprise strategy aligned with the objective of increasing the enterprise value. Other stakeholder groups for example, employees, business partners, and social interest groups now have a greater say in the enterprise policy. This means that when the enterprise is defining its strategy, their expectations must be taken into account similar to those of the investors. In order to satisfy these requirements, enterprises are rethinking the efficiency of their management processes, and are taking the principles of value-based management and the interests of stakeholders into greater account in their planning and performance monitoring processes. SAP Strategic Enterprise Management is enabling value-based management in corporations through new software applications which are supporting this new type of management processes.

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SAP Strategic Enterprise Management – Enabling Value Based Management (White Paper), SAP AG, 1998

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Translating Strategy into Action: The Balanced 2 Scorecard A Fortune magazine article, based on a survey of management consultants, reported that less than 10% of strategies are successfully implemented. Yet strategy has never been more important. As the economy moves rapidly away from the “Industrial Age” to an “Information Age” characterized by global and knowledge-based competition, every organization must rethink the fundamental assumptions on which it competes. Every organization must develop a new vision on how it will compete in this new economy. And every organization must translate this vision into actions that will make them an “Information Age” competitor. If organizations are to survive this economic transition, they must learn to successfully implement strategy. They must learn to beat the 90% failure rates experienced be their peers. They must make “Strategic Enterprise Management” a core competency of their organizations. A new approach to implementing strategy has emerged. The Balanced 3 Scorecard , developed by Harvard professor, Robert Kaplan, and management consultant, David Norton, was first introduced in a 1992 Harvard Business Review article. The idea has spread rapidly. The Balanced Scorecard is a technique to translate an organization’s strategy into terms that can be understood, communicated, and acted upon. A balanced scorecard clearly defines the meaning of strategic concepts like value, quality, customer satisfaction, and growth. Once a scorecard that accurately describes the strategy has been developed, it serves as the organizing framework for the management system. As Financial measures tell only the story of the past, the Balanced Scorecard complements financial measures with measures of the drivers of future performance. Using the Balanced Scorecard, corporate executives can now measure how their business units create value for current and future customers, investors and other stakeholders and how they must enhance internal capabilities and the investment in people, systems, and procedures necessary to improve future performance. SAP Strategic Enterprise Management enables organizations to implement Strategic Enterprise Management processes such as business planning and simulation, performance management and stakeholder communication based on the Balanced Scorecard concept.

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SAP Strategic Enterprise Management – Translating Strategy into Action: The Balanced Scorecard (White Paper), SAP AG, 1999 3 The Balanced Scorecard - Translating Strategy into Action. Robert S. Kaplan and David P. Norton, Harvard Business School Press, 1996

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The Situation Today Most corporations today are still far away from Strategic Enterprise Management excellence – a capability which will differentiate successful and unsuccessful enterprises in the future. Management processes are not very well structured, too inflexible and not market and stakeholder focused enough. One area where many companies today see a real challenge for their organization to improve in the short term future is enterprise planning. The process is too inflexible, too time consuming and is not linked with strategy planning. The reason is, that the planning and budgeting process in the enterprise today generally follows a fixed procedure. This does not allow for any adjustments during the procedure, and typically lasts for several months. After the strategic objectives are determined by upper management, a draft budget is produced. In a second step this draft is broken down into budget targets for the individual business units in the group structure. The top-down draft is then reviewed bottom-up by the business units and the final result is the budget for the business units and the planning time period. The comparison of the actual figures with the budget is a criterion for success. This is one of the measures used to assess the performance of the managers at business unit level. The business unit management, therefore, will typically focus on achieving the targets for the planning time period. This has important disadvantages. Apart from the fact that a budget, by definition, is inflexible, it is frequently the case that a budget that has been laboriously put together is already outof-date by the time the budget period begins. It has been overtaken by events. Another disadvantage of the traditional approach is the concentration on profit as a target figure. In order to maintain the long-term profitability of an enterprise, it is becoming increasingly important to include other target figures such as the cost of capital employed and 'leading indicators' from the areas of sales, human resources, and of internal activity processes. The flexibility (as described above) required during any particular planning time period, and the efficient implementation of the enterprise strategy while considering the interests of shareholders and other stakeholders cannot be successfully achieved using traditional procedures.

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Integration and Acceleration of the Strategic Management Process with SAP SEM Strategic Strategic Enterprise Enterprise Management Management (optimizing (optimizingstakeholder stakeholdervalue) value)

Business Planning & Simulation (BPS)

Business Information Collection (BIC)

Business Consolidation (BCS)

Corporate Performance Monitor (CPM)

Stakeholder Relationship Management (SRM)

Stakeholders Stakeholders

Extended Extended Financials Financials (Financial (Financialexecution executionsystem) system) Investment Mgmt

Tax Warehouse

Treasury

ABC Mgmt

Traditional Financials

Supplier

Customer

Manufacturing

Distribution

Sales

Supply Chain Optimization Planning and Execution

Figure 2: SAP SEM – Strategic Enterprise Management

SAP, with its product Strategic Enterprise Management (SEM), is the first software provider to offer integrated software with comprehensive functionality that allows enterprise management to significantly accelerate and streamline the entire strategic management process. The comprehensive functionality guarantees end-to-end IT support of all the steps in the strategic management process, so that the process can be performed flexibly between one management meeting and the next. This way the enterprise can anticipate and react promptly to impending changes in its business environment and at the same time actively manage the expectations of its stakeholders.

Installation Scenarios SAP SEM is a new product that can be installed independently of R/3. It does not require a direct link to ERP software. However, if R/3 is being used then data acquisition for SAP SEM is simplified.

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You can use SAP SEM in the corporate center, at business unit level, for regional organizational units, for product lines or other organizational units with their own strategic planning processes, or where a link to a higher strategic planning process is required (business units, product lines). You can have a centralized (one SAP SEM System) or decentralized installation (several SAP SEM Systems linked together).

Business Unit HQ

SAP-SEM

SAP-SEM

Head Office

Head Office

Region HQ

Centralized Implementation

SAP-SEM

SAP-SEM

Business Unit HQ

Region HQ

Decentralized Implementation

Figure 3: Centralized and decentralized installation of SAP SEM

SAP SEM is a analytical application based on SAP Business Information Warehouse (SAP BW) . The SAP SEM product comprises the SAP BW functionality. Three different technical installation scenarios are possible.

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1.

SAP SEM as a stand alone application The organizational unit installing SAP SEM does not require an operational data warehouse. The SAP BW functions which are necessary to operate SAP SEM are coming “within the box” together with SAP SEM. SAP SEM obtains its data from the ERP system and, if necessary, from external sources.

2.

SAP SEM as a data mart linked with a Data Warehouse The enterprise already has a data warehouse and, for technical or organizational reasons, wishes to run SAP SEM separately. As in configuration 1, SAP SEM is installed with SAP BW technology as unified software. SAP SEM obtains its data from the data warehouse system and, if necessary, from external sources. The Data Warehouse system can be SAP BW based or a third party solution.

3.

SAP SEM as a SAP BW application The enterprise already has a SAP BW installation and wants to use SAP SEM within the same infrastructure. SAP SEM is running as an application on top of SAP BW on the same hardware and software basis. SAP SEM obtains its data from the SAP BW and, if necessary, from external sources. The SAP SEM data basis is created in the enterprise's SAP BW.

Structure of the SAP SEM Software The software is structured functionally into five components and features a high level of integration in terms of the metadata and the application data. SAP’s software architecture, the Business Framework Architecture, guarantees that the individual SEM components can readily use each other’s functionality when required.

l l l l l

BPS Linking strategic planning and simulation with enterprise planning BIC Automatic sourcing of external and internal business information BCS Speeding up legal and management consolidation CPM Providing Balanced Scorecards and Management Cockpit KPIs and interpretation models

Corporate Performance Monitor (CPM)

Stakeholder Relationship Management (SRM)

Business Information Collection (BIC)

Business Planning & Simulation (BPS)

SRM Linking your enterprise management process directly with your most important stakeholders

Business Consolidation (BCS)

BW

Figure 4: Software components of SAP SEM

The SAP SEM System architecture is designed to allow access to all the principal functions via the Internet or an Intranet using a Web browser.

Business Planning and Simulation (SEM-BPS) SAP SEM supports the trend away from key figures that focus on the past such as those provided by quarterly and annual accounts. The trend is towards performance management that allows future-focused enterprise management and active management of stakeholder expectations. The SEMBPS component, therefore, is designed to enable you to carry out comprehensive simulations and scenario analyses without investing excessive time and effort. For strategic planning and specific operational problems, SEM-BPS provides facilities for dynamic simulations based on special tools and functions. Thus it is possible for example, to model and simulate the complex, nonlinear relationships between markets, competitors, and your own enterprise. You define functional and organizational plan sections to model operations at the enterprise’s resource level in the multidimensional SAP SEM data basis. The planning processor enables you to model the business activities for each planning unit and in the corresponding plan sections ranging from sales volume planning through materials requirements, cost, capacity and headcount planning, to profit and loss planning, financial budgeting and balance sheet planning in an integrated quantity and value flow.

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SEM-BPS integrates different planning levels and, therefore, lets you build an integrated planning model from the strategic level to the resource allocation level. With the integration of Activity-Based Management (ABM), SEM-BPS provides a specific decision support tool for operational and strategic resource optimization and cost management issues. SEM-BPS enables close planning integration with ERP systems. You can transfer data from ERP systems to SAP SEM and use it there as the basis for the SEM planning process. The reverse is also possible. You can transfer planning results from SEM-BPS back to ERP systems e.g. to carry out more refined planning there. SEM-BPS uses Business Consolidation (SEM-BCS) functions to consolidate planning scenarios at the push of a button. The Corporate Performance Monitor (SEM-CPM), with Balanced Scorecard functions and the Management Cockpit, supports the visualization, analysis and assessment of planning scenarios.

Corporate Performance Monitor (SEM-CPM) In the area of performance management, SEM offers innovative concepts for the interpretation and visualization of Key Performance Indicators (KPIs). These concepts extend beyond the scope of regular management reporting. They allow the general inclusion of non-financial measures in performance management. The product includes a software application that corresponds to the Balanced Scorecard concept of Robert S. Kaplan and David P. Norton. The Balanced Scorecard is a management methodology for communicating the enterprise strategy and converting it into operational targets for all levels of the enterprise. 4

The Management Cockpit is an ergonomic concept for structuring and visualizing performance indicators using large, easy-to-understand displays on the walls of a meeting room. The aim is to support and accelerate communication in the management team through the use of ergonomically optimized visualizations of decision-relevant information. The concept includes appropriate work and decision techniques in association with the Management Cockpit room. The SEM-CPM contains the software component of the Management Cockpit. The hardware and consulting services required to install a Management Cockpit room are optional and can be supplied by the SAP international subsidiaries in cooperation with N.E.T. Research. The components SEM-CPM and SEM-BPS are not only linked at the data level but are also closely linked functionally. For example, the SEM-CPM facilities for structuring and visualizing performance indicators are used by the SEM-BPS component for modeling and analysis of planning scenarios.

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The Management Cockpit, an SAP product originally developed by Professor Patrick M. Georges

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Business Consolidation (SEM-BCS) The SEM-BCS component provides complete functionality for the legally required consolidation by company and segment (for example by US GAAP, IAS and local GAAPs). At the same time it enables you to carry out management consolidations based on user-defined organizational units and user-defined hierarchies. Using automation, SEM-BCS can significantly accelerate the consolidation process. The treatment of balance differences ranges from automated posting of currency-related variances to automatic creation of letters/emails/faxes etc. between organizational units for reconciling balance differences. SEM-BCS allows consolidation simulations, for example, to determine the effects of mergers and acquisitions, different currency translation methods or changed consolidation rules. The internal and external consolidations can be based on the same data basis. This harmonizes the financial accounting and management accounting systems. The data structures for the management consolidation, however, provide the required flexibility, for example, to analyze the consolidated revenue for customer groups, destinations, product groups or distribution channels. SEM-BCS allows you to automate Economic Profit calculations at the level of internal organizational units, legal entities and at every desired group level. You can define the necessary adjustments and allocations in advance and have them posted automatically. The SEM-BCS functionality is also used by the SEM-BPS and SEM-CPM components for consolidation of plan data and for reporting. SEM-BCS provides the relevant functions in the form of a consolidation engine.

Business Information Collection (SEM-BIC) SEM-BIC provides the necessary infrastructure for SAP SEM’s data collection. The component automates the collection of structured data, for example key figures from the ERP system, stock prices from commercial database providers via the Internet etc., and supports the decentralized collection of financial figures from subsidiaries in a structured and systematic way. A new feature is the web-based Editorial Workbench. This provides functionality for efficient collection of relevant information from the Internet.

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The search process for documents in the Internet is automated to a large extent using automatically generated search strings. The information retrieved (brokers’ reports, press reports, announcements on competitors’ homepages etc.) is processed by the Editorial Workbench, indexed and saved in the data basis. It is then forwarded automatically to the relevant information receivers. These information items are linked to the evaluation objects in the multidimensional database and are therefore available for general reporting purposes.

Stakeholder Relationship Management (SEM-SRM) The long-term success of an enterprise depends increasingly on its ability to establish solid partnerships with its various stakeholder groups. The most important of these groups are investors, customers, employees, partners, suppliers, social groups and state institutions. Good, stable relationships with the stakeholder groups represent ’intangible assets’. They affect the capital market’s valuation of the enterprise. Therefore, fostering these relationships is an essential component of value-based management SEM-SRM provides support for communicating enterprise strategy, current plan data, and strategic initiatives to the different stakeholder groups. This communication, however, is not all one way. Enterprises are showing more and more interest in finding out about stakeholder expectations in order to incorporate them into their strategic management processes. The Internet is the ideal means of SEM-SRM communication, but conventional methods such as mailings are also supported. Certain stakeholder groups, for example private investors, can be very large numerically and may demand a great deal of information. The information exchange with such groups can become a time-consuming and costly business. The SEM-SRM functionality can place investor relations queries in a workflow process and have them dealt with semi-automatically. SEM-SRM manages a stakeholder database to support the communication functions. This database would enable an enterprise, with justifiable expense, to issue and administer registered stock, and thus to keep a close eye on the stockholder structure. Using SEM-SRM, the enterprise can more actively manage the expectations of analysts and the capital markets.

Implementation of a Strategic Management Process with SAP SEM You can adapt the strategic management process with SAP SEM to suit the requirements of your enterprise or organizational unit. The use of the SAP SEM components depends on the enterprise-specific form of the management processes and their integration into the organizational structure. SAP SEM supports various concepts and methods of enterprise management.

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In the following table you can see which SAP SEM components you might use in conjunction with specific strategic management concepts, business planning and performance management:

SEM- SEM- SEM- SEM- SEMBPS BIC BCS CPM SRM Strategic Management Concepts Value-Based Management

X

X

X

X

X

Balanced Scorecard / Planning of Strategic Initiatives

X

X

X

X

(X)

Portfolio Management

X

X

X

Activity-Based Management

X

X

X

Target Costing

X

X

X

Risk Management / Asset & Liability Management

X

X

Price / Volume Planning

X

X

Headcount Planning

X

X

Cost Planning

X

X

Investment Planning

X

X

Tax Planning

X

X

X

Income Statement / Balance Sheet Planning

X

X

X

X

Planning and Budgeting

X

Performance Management Collect Actuals

X

Financial Consolidation / Economic Profit Calculation

X

Actual / Plan Comparison Adapt Planning Scenario Define Operative Actions Communicate to Stakeholders

X X X X

Figure 5: Usage of the SAP SEM components depending on the management task

Below we describe a possible strategic management process with SAP SEM at different levels of an enterprise. The SAP SEM processes at the different organizational levels can communicate dynamically with each other.

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Corporate SEM Process Enterprise Modeling

Sourcing

Strategy & Enterprise Planning

Business Consolidation

Performance Monitoring

Take Action

Busines Unit SEM Process Business Unit Modeling

Sourcing

Strategy & Business Unit Planning

Business Consolidation

Performance Monitoring

Take Action

Sourcing

Product Line SEM Process Product Line Modeling

=

Sourcing

Strategy & Product Line Planning

Performance Monitoring

Take Action

Example of integration between management processes

Figure 6: Example for an integrated SAP SEM process infrastructure on different organisational levels

A management process supported by SAP SEM is no longer a strict sequence of planning activities. Now: q SAP SEM supports and accelerates the process in such a way that a complete strategic management cycle can take place from one board meeting to the next. q You may have loops within the cycle. This means that whenever the circumstances change, you can go back to a previous stage, for example model definition, capital market evaluation, development of strategic initiatives etc. and make changes in retrospect. Then you can continue where you left off and the new conditions apply.

Example of a Management Process Based on Shareholder Value Principles Building up the Data Model for the Enterprise First you map the enterprise structure in the SAP SEM data model. The data model consists of the key figures, characteristics, characteristic hierarchies, processes etc. (see below) of the entire SEM System. Important components of the data model include the key figures that are transferred from ERP systems into SAP SEM, and also the organizational, regional and productrelated structure of the enterprise. In order to implement SAP SEM at several levels of the organization, as in the example illustrated here, you must determine the appropriate level of detail of the data model for each level, and also alternative characteristic dimensions that may be required. Any changes in the real enterprise structure should be reflected in the data model as soon as possible.

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Setting up Data Collection The data model fills up with content through the collection of master and transaction data. The SEM-BIC component allows the definition of automatic data collection processes for the structured information from ERP systems, for the financial statements of subsidiaries, or for the pooling of SAP SEM data from organizational units with their own SAP SEM data models. The automatic data collection runs with the aid of SAP BW functions typically at regular intervals of days, weeks or months. Unstructured textual information in the form of press reports, brokers’ reports, information on competitors etc. is also very important both for the planning process and the assessment of the enterprise performance. You can obtain this information in the Internet using the Web-based Editorial Workbench, a special SEM-BIC functionality, and then store it in the appropriate place in the database.

Capital Market and Other Stakeholder Expectations of the Development of the Enterprise The capital market participants, especially institutional investors, assess enterprises based on their shareholder value which, in turn, depends on their future performance. To estimate the future development of the enterprise, investors and analysts create and analyze simulation models. Based on the calculated shareholder value and the actual market price of the stock, they then make buy or sell decisions which directly affect stock prices. Therefore enterprises need to be aware of capital market expectations and take these expectations into account in their business planning. Determining the capital market, therefore, is an important prerequisite for the strategic planning process. You learn about these expectations from external information, for example from brokers’ reports. These reports often contain direct information about the expected development of the enterprise’s value drivers such as sales growth. According to the theory of value-based management, there is a relationship between enterprise value on the one hand, and sales growth, profitability, capital costs and other variables on the other. Therefore you can also determine implicit growth expectations from statements made by analysts regarding the upside target of the stock, or sell or buy recommendations. With the Capital Market Interpreter, SAP SEM provides a special function for such calculations. The analysis of the capital market expectations can be enhanced by the inclusion of other stakeholder expectations. The SEM-SRM component’s functionality enables the stakeholders to inform the enterprise of their expectations and also enables the enterprise to receive, organize and effectively evaluate the feedback from a large number of individual stakeholders.

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Apart from the more financial-oriented expectations of the capital market, the stakeholder feedback can provide management with useful hints on what kind of initiatives are expected by the public, for example better media relations, a more consistent environmental policy, special product initiatives, improved customer service etc. The stakeholder expectations identified in this way can be considered in the strategic management process as an input to strategy formulation and business planning, or as feedback on the success of the current strategy.

Building Models for Business Planning The choice of one particular strategy includes the commitment to a set of strategic objectives and a bundle of assumptions on how these goals are to be achieved. The strategy forms the basis for building the strategic planning model. As well as helping to pursue strategic goals, the strategic level modeling serves to determine the main input figures for the resource planning model. This includes primarily future sales volume and the development of sales prices, as well as the cost of equity and outside capital for value-based management. These figures depend in turn on market development, the competition, raw material and labor costs, technical developments in production methods, general interest rate trends and many other factors. You can use the SEM-BPS ’system dynamics’ functions to build the required non-linear, dynamic models. You can build separate dynamic models for each organizational unit where SAP SEM is implemented. You can compare and reconcile the output of the model at the Corporate Center level (topdown) with the aggregated results of the models at other organizational levels (bottom-up). As a second step, you could use the output of the corporate level model as input for the models at other organizational levels. The resource level modeling is carried out with the SEM-BPS multidimensional planning functionality. The individual plan sections (sales volume, direct costs, variable overhead costs, fixed overhead costs, ABC/M activities/processes, capacities etc.) are user-defined and are linked using the SEM-BPS planning processor. For resource level planning too, you can build the models specifically for the relevant organizational unit. You can aggregate the planning results upwards bottom-up and reconcile them with a top-down model created at corporate level. With SEM-BPS, you can transfer planning results back to the ERP system. The level of aggregation of planning in SAP SEM is usually higher than in the ERP system. Therefore, SEM-BPS provides functions to distribute the SAP SEM plan data to the more detailed planning units in the ERP system.

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The Value Gap In the reversal of the relationship described above between the capital market and enterprise growth, it is also possible to determine the likely effect of the current planning on the enterprise value. You can use the Capital Market Interpreter to do this. If you compare the plan valuation with the capital market valuation there is often a ’value gap’ i.e. the value attributed to the enterprise by the capital market exceeds the shareholder value that results from the enterprise plan. In this situation there is a danger that the stock price will fall as soon as the capital market realizes that this value gap exists. To relieve the situation, management must develop business initiatives that contribute positively to the enterprise value, and thus reduce the value gap (product initiatives, profitability increases, cooperation etc.). The initiatives considered are modeled in SEM-BPS and merged with the existing planning to form scenarios. These scenarios are then analyzed and compared with respect to their contribution to the enterprise value. You can avail of the SEM-CPM visualization and presentation facilities to analyze planning alternatives. The Management Cockpit supports communication and decision making within the management team. The Balanced Scorecard functionality supports the translation of the strategic initiatives into operational planning. Planning scenarios can also be consolidated as part of SEM-BPS planning. The functions of the SEM-BCS component are available on-line for this purpose. When the analysis is concluded, management decides if and how the enterprise strategy is to be changed and whether new value-creating initiatives are to be undertaken.

Continuous Performance Monitoring Effective Performance Management is a prerequisite for realizing the enterprise’s strategic and operational goals. The Balanced Scorecard functionality in SEM-CPM structures the strategic objectives by assigning them to the perspectives, ’financial view’, ’customerview’, ’internal business process’ and ’learning and growth’. You assign a key performance indicator (KPI) to each of the strategic objectives and these indicators enable you to plan and measure performance. On the one hand the different perspectives guarantee that besides the financial targets and key figures, the other areas such as the market, customers, logistics, process and product quality, innovation, human resources, the quality of the organization and of the information systems are included in an appropriate way in the particular case. On the other hand, the consideration of various areas of the enterprise provides a balance between ’leading’ and ’lagging’, between internal and external, and between qualitative and quantitative performance indicators.

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The use of a Balanced Scorecard is not restricted to the Corporate Level or to enterprise units that plan strategically. By building up a Scorecard hierarchy, you improve the communication of the strategic goals to all operational levels and to individuals. The Management Cockpit is a visualization and communication tool. It is excellently suited to vividly display the Balanced Scorecard messages in an ergonomically optimized manner. It helps to improve the efficiency of communication and decision making within management teams at all levels of the enterprise. The following is a possible scenario: The top management of an automobile manufacturer is worried about the drop in incoming orders for a certain model. The model is currently one of the enterprise’s top performers, however it is soon to be replaced by a successor. The market share has also fallen in line with the incoming orders. In the Management Cockpit the described changes in incoming orders and market share are visualized on the red wall for customer, market and competitor information. Marketing and Sales put the drop in sales down to the market expecting the launch of the successor model. It is normal to see a drop in sales for an automobile just before the launch of its successor. The white wall displays the status of strategic projects. A serious problem is indicated there for the production run of the new model. The production of the new model has not begun on time. On the contrary, it is foreseen that due to technical problems there will be a delay of several weeks. If no corrective measures are taken, the sales launch will also be delayed by several weeks and the sales of the old model will continue to slump. Although the financial key figures ’sales’ and ’contribution margin’ are not yet shown on the black wall of the Cockpit room as deteriorating, all members of the management team can literally see the need to act. The following measures are discussed and agreed: The planned production stop for the current model will be postponed. The supply of the required start materials for continued production is secured. The responsible executive will personally take care of the production start for the new model. The human and technical resources for the production start for the new model will be increased at once. In order to increase the sales of the old model in the mean time, a special version will be created with improved fittings, an effective marketing name and a lower price. At the same time a promotional campaign will

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be started for the special model so as to raise the incoming orders as quickly as possible. The measures described lead to a change in the cost and quantity planning. The affected plan sections for example sales, material costs, labor costs and marketing costs are modified in SEM-BPS and saved in a new plan version. By the time of the next management meeting, the updated planning is available for plan / actual comparisons and for plan / plan comparisons with the original budgeted version. Both the measures to accelerate the production start for the new model and the sales promotion for the current model are entered as an initiative into the enterprise’s Balanced Scorecard. Both initiatives are assigned to an ’owner’. The workflow functionality of the Balanced Scorecard ensures that the owners regularly check on the success of their initiatives and that their assessments are available to the other members of the management team via the Balanced Scorecard and the Management Cockpit. The management must continue to monitor performance. Either the measures taken will produce results or other actions will be necessary. The use of a reporting system for early recognition of variances represents the basis for the operational controlling process in modern enterprises. The Corporate Performance Monitor goes beyond this. With the Balanced Scorecard and the Management Cockpit, it provides interpretation models with which you can visualize and analyze the relationships between operational key figures and the strategic objectives of the enterprise. This way the SEM-CPM supports the enterprise’s continuous learning process both at the operational and the strategic level.

Communication of Decisions to the Stakeholders It is important to communicate decisions on enterprise strategy to the shareholders and other stakeholder groups. This is the only way to ensure that all parties feel fully informed and that management decisions are reflected in ’shareholder value’ and in the stock price. The type of communication can be customized for the particular shareholder groups and their specific interests. If for example, an initiative is undertaken to improve productivity through rationalization, the employees have different information requirements to those of shareholders or suppliers. It may also make sense to distinguish between the different information requirements amongst the shareholders themselves, for example private and institutional investors. The SEM-SRM functions support both specific communication to the stakeholder groups and organized collection of feedback from the individual groups. The strategic management process has developed from a markedly seasonal activity to a continuous top-down and bottom-up process. Therefore, stakeholder communication is a constant requirement. The capital market in

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particular has tended to reward an enterprise’s efforts towards open and regular communication by assigning it a low level of risk. This results in lower capital costs and increased shareholder value. Besides the value-based management procedure illustrated in this example, SAP SEM can support all other management philosophies.

Description of Functions Integration Through the Unified SAP SEM Data Basis SAP Business Information Warehouse as Basis The technical basis for SAP SEM is the SAP Business Information Warehouse (SAP BW). The SAP BW stores the metadata and application data for all SAP SEM components and provides the mechanisms for read and write access, and data collection. Because of this, SAP SEM is independent of the ERP system implemented. SAP SEM uses the facilities provided by the SAP BW to collect data from ERP systems (see SEM-BIC). SAP SEM users can take advantage of the Business Content delivered with the SAP BW. It contains predefined data structures for the principal business processes in the enterprise and also linked report definitions for comprehensive enterprise reporting with SAP BW’s Business Explorer. You can use this for example, to immediately drill down from a SEM Balanced Scorecard / KPI view to access more detailed information. R/3 users also benefit from the preconfigured extraction mechanisms delivered with the Business Content. They allow a fast supply of master data and transaction data from R/3 Systems to the data structures of the Business Content. By having the SAP BW as its technical basis, SAP SEM benefits automatically from the continued development of data access, data modeling and reporting mechanisms in the SAP BW.

Integration of Metadata and Application Data An important characteristic of SAP SEM is the integration of the metadata and application data of all SAP SEM components in a unified data basis. All components read their working data from there and also write the resulting data there. This ensures that you can have a cross-component usage of the SAP SEM functionality. It is possible for example, to apply consolidation functions to planning results and to visualize the consolidated results in the Management Cockpit, all without any data transfer or conversion. The integration of the SAP SEM components is not only provided by the common set of data in the SAP SEM data basis, but also via functional interfaces between the

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components during runtime. For example, to consolidate a planning model consisting of several organizational units, SEM-BPS uses the SEM-BCS consolidation engine. The enterprise-specific data model is created during the implementation. You can make adaptations to changing requirements at any time. These include restatements of transaction data through retrospective changes to organizational structures. You can, however, maintain the old structures parallel to the new ones.

Central Master Data Definition for all SAP SEM Components Key Figures Key figures from all areas of the enterprise form the basis for planning and reporting. Through the integration of the SAP BW Business Content, SAP SEM can avail of a large number of predefined key figures from all enterprise areas. In addition, the selection of appropriate key figures from the delivered industry-specific SEM KPI templates is supported by a special workbench (see SEM-CPM). Examples of frequently used key figures:

q q q q

balance sheet items, income statement items, cash flow items Contribution margin

Examples from the finance area

q q q q q q q q

Material usage Working time Relationship of processing time to lead time On time delivery Scrap Percentage availability of the production facilities Energy consumption / output Parts per million failures

Examples from the logistics and production area

q q q q q q

Headcount Average length of service Employee satisfaction Training / employee / year Time absent Fluctuation

Examples from the human resources are

q q q

Proportion of new customers Customer satisfaction Customer profitability

Examples from the sales department

q

Market share

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Examples from external sources

q q q q q

Share of individual customer’s purchases Competitors’ market share Brand awareness level Number of press reports (positive / negative) Capital market growth expectations

Charts of Accounts Charts of accounts combine financial statement items in a hierarchical arrangement with a calculation rule. Charts of accounts are required for the:

q q q q

Balance sheet Income statement Cash flow statement Calculation scheme for contribution margin

You may have several parallel charts of accounts.

Characteristics Examples of organizational characteristic

Examples of regional characteristics

Examples of product-related characteristics

Characteristics structure the data basis. They determine the dimensions for evaluations and what types of drilldown you can perform within the evaluations.

q q q q q

Subgroup Companies Business area Profit center Process (ABC/M)

q q q

World zone Country Sales district

q q q q

Division Brand Product group, product line Product

Characteristic Hierarchies The characteristic values of some dimensions are arranged logically in hierarchies. If you have a geographical hierarchy for the characteristic ’country’, you can create a report with the drilldown characteristic ’country’. This sorts the countries according to the hierarchy and also produces the continental totals and world zone totals as subtotals. You can create several parallel hierarchies for one characteristic.

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Examples of hierarchies are:

q q q

Profit center hierarchies Product hierarchies Country hierarchies

Version Concept SAP SEM has a version concept. Versions enable you to:

q q q q

Work with actual and plan figures Create different plan versions Carry out simulations Consolidate according to different legislative rules

Integration with the Data in the ERP System Transfer of master data and metadata from the ERP system The automatic copying from the ERP system greatly simplifies the implementation. The following are copied:

q q q

Data structures Characteristics and values Characteristic hierarchies

Integration with R/3 master data R/3 users can set up very close integration of master data between SAP SEM and the ERP system. You could for example, integrate the SAP SEM organizational units and their hierarchies with the organizational hierarchies in the R/3 component HRORG.

Components of SAP SEM Business Planning and Simulation (SEM-BPS) Classical planning systems start with a strictly sequential planning process: The various company controlling departments prepare planning premises, planning standards and planning default values once a year. They then pass these plan sections on to the decision makers. The decision makers usually have a lot of experience in their planning areas and can, therefore, determine plan figures for the coming period based on expected determining factors. As a second step the plans from specific regions are coordinated in regional review meetings. After this the operational plan sections must be revised and modified.

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As a third step there is a divisional meeting with subsequent revision of the regional plans and the operational plan sections. As a final step the executive board reviews the plans and reconciles them with the enterprise strategy. After this the complete tactical, operational and strategic business plan for all levels of the enterprise is concluded. Experience shows that enterprises require several months to complete this annual event. In view of the ever more dynamic enterprise environments with shortening accounting cycles and shortening product lifecycles, this procedure is no longer adequate. Business planning can no longer occur in isolation from the stakeholders and market developments. It must incorporate their expectations and take account of them. What is required is dynamic and simultaneous business planning that specifically includes external stakeholder expectations and market developments in the planning process. The planning process should no longer be regarded as an sequential annual event, but rather as an ongoing, self-renewing and learning process concerning future strategies and risks, and their effects on shareholder value. We must close the divide between classical strategic planning and operational planning and blend both together as one simultaneous planning process. SEM-BPS satisfies this requirement with its multidimensional modeling of planning structures based on the user-defined SAP SEM data model. You can standardize modeling and planning of the classical planning areas such as the balance sheet, the financial budget, the ABC plan or headcount planning in SEM-BPS. You can combine these areas logically in one total context. You can carry out model-based simulations in this total context to demonstrate the effects of operational variables such as price changes, process optimizations, investments or reorganizations on the total plan and on the key performance indicators.

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Figure 7: Integration of multidimensional planning with system dynamics modeling in SEM-BCS

Strategic Simulation in SEM-BPS Besides the potential for improvement in the general planning process, there is also potential at the level of the planners themselves: their collective know-how usually exists neither on paper nor in the system, but in their heads. The plan is influenced to a large extent by personal experiences and it depends on the planning model that the planners consider to represent reality for their planning area. What is lacking is a planning model that is communicable and open to question. It must be capable of being constantly extended and improved. The model should be easy to understand, and be easily modifiable. It should not be seen as a substitute for gained through experience, but rather as support to complement that knowledge. With SEM-BPS, SAP provides a flexible planning system of the next generation. It fulfills all the requirements of modern planning. SEM-BPS has comprehensive modeling and simulation techniques which go well beyond spreadsheet-based planning. Depending on your needs, you can model simple linear relationships such as a linear price elasticity, or much more complex, time dependent and non-linear relationships such as competitor behavior or risks associated with research and development. When the management team agrees on a planning model, it can carry out model-based simulations in the Management Cockpit. It can discuss the results immediately and make a decision. ’What-if’ analyses,

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multidimensional target value searches and structure simulations with ’onthe-fly’ financial consolidations are also possible with SEM-BPS. Plan figures generated in this way are posted in the integrated SAP SEM plan data basis and they thus update the entire picture of where the enterprise and its sub-units want to be in the future. With respect to usability and flexibility, SEM-BPS combines ergonomic design and the familiar Microsoft Excel environment. It fits seamlessly into the overall SAP SEM package.

Figure 8: SEM-BCS planning layout using MS Excel as frontend

Overview of Functionality Modeling of Planning Structures

The planning modeling functions will portray the planning objects, for example, functional sub-plans or organizational sub-plans, and the relationships between them. The modeling is based on the generation techniques generally used in SAP SEM with corresponding processing of key figures and currencies.

q q q q q q

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Multidimensional data model Key figure model Currency model: incl. planning in group, domestic and foreign currency Plan versions Data transfer tools from ERP to SAP SEM and back again Global Parameters

SEM-BPS supports the most common corporate planning strategies. Using it you can also combine different planning strategies with each other. Planning strategies, together with the planning models make up the constituent characteristics for the overall enterprise planning process.

q q q q q

Top-down planning Bottom-up planning Mixed top-down/bottom-up planning Decentralized or distributed planning Rolling forecast

Planning methods represent business procedures for modifying plan data (for example revaluation), generating plan data (for example forecasting) or allocating plan data (for example top-down distribution). You can adapt planning methods provided in SEM-BPS to your own plan model and you can use them both online or in the background. Examples of planning methods are:

q q q q q q q q

Planning Strategies

Planning Methods

Copying data within the data basis Percentage revaluation Transfer of data within the data basis Top-down distribution / allocation Discounting Depreciation Trend analysis / statistical forecast Plan consolidation

SEM-BPS provides flexible facilities for defining other user-specific planning methods. SEM-BPS uses SEM-BIC functionality to import plan data from various sources and to edit it:

q q q

Planning Integration

R/3 System plan sections Non-SAP system plan sections PC-based planning tools

SEM-BPS also provides functionality to transfer planning results from SAP-SEM into ERP systems such as R/3. You can use the Web-based Editorial Workbench to search for planningrelevant information that is available externally in unstructured form (for example analysts’ reports, competitors’ press announcements). You can then index and store this information and make it available for the planning process. SEM-BPS provides functionality to draw up sales and profit plans, financial budgets and balance sheet plans for the enterprise’s organizational units.

Sales and Profit Plans, Financial Budgets and Balance Sheet Planning

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Examples for possible plan sections are:

q q q q q q q q

Quantity and sales planning Material requirement planning Cost planning Headcount planning Capacity planning Profit and loss planning Financial planning Balance sheet planning

Planning is done activity-related and takes account of business and accounting logic. The user can define which charts of accounts are used for the planning.

Dynamic Simulations

With dynamic modeling (system dynamics) the causal relationships between cross-period factors not usually taken into account in planning are shown, for example business risks or competitor behavior. The effect these factors have on plan elements is then determined (for example the effect of crude oil price increases on automobile sales). The planner becomes aware of new interrelationships and can incorporate them transparently into planning.

Scenario Manager

The Scenario Manager lets you work with different plan scenarios.

q

q q q

Coordination of the planning process

The planning workbench enables the planning departments to monitor the completion of the enterprise-specific fixed steps for plan data collection and also the actual planning process itself. Even with numerous planning units, the planning department retains the overview.

q q

q

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You can for example create scenarios for: Worst case Best case Most likely case. You can weight plan scenarios with probabilities Monte Carlo simulations Structure simulations with different enterprise structures etc.

The data monitor and planning monitor contain all planning enterprise units in a hierarchical structure The status of the enterprise-specific defined steps for plan data collection or of the actual planning process itself is displayed for individual units or for entire areas of the group (from manual plan data entry in the subsidiaries to automatic plan consolidation) You can assign planning tasks to nodes in a user-defined planning workflow. This way you can coordinate and largely automate the flow of planning information.

The Capital Market Interpreter is a special function to support value-based management.

Capital Market Interpreter

The capital market expectations reveal themselves in the current stock price, in buy and sell recommendations from broker firms, and also in direct form in financial analysts’ research reports. The Capital Market Interpreter helps you to convert capital market expectations into targets for the enterprise’s key value drivers. ABM is a decision support system for operational and strategic resource optimization problems, more accurate cost estimates and strategic cost management. It helps the user to interpret information and, on the basis of models, to establish hypotheses and interrelationships. You can implement it quickly due to its simplicity and flexibility.

q q q q q q

Activity Based Management

Resource modeling Activity modeling Cost object modeling Budgeting and planning Simulation Decision support

Corporate Performance Monitor (SEM-CPM) The objectives of an enterprise are stated in its Mission Statement or its Vision. Depending on these objectives, management makes decisions on the strategy required to realize the Mission. Choosing one particular strategy usually means having a set of strategic goals and at the same time making a set of assumptions on suitable ways of achieving these goals. As part of the strategic management process, the strategic objectives must be converted into operational targets at the various levels of the enterprise hierarchy. These targets must be made planable and measurable by assigning appropriate key figures to them. Effective Performance Measurement is the bridge between the operational goals developed in Business Planning and the reality of the operational processes. Only if variances are recognized early and analyzed correctly, can the loop between Performance Measurement and Business Planning become active and corrective measures be taken in time. Performance Measurement today no longer concentrates exclusively on the traditional core areas of finance and internal logistics, but now includes processes in all areas of the enterprise and also external success factors that are relevant to the enterprise. Performance Measurement is based on enterprise-specific Key Performance Indicators (KPI). KPIs are both financial and non-financial key figures which allow you to determine the extent of achievement of the enterprise goals. The delivered SAP BW Business Content already contains many basic key figures. You can define additional calculated key figures using the Measure Builder. A comprehensive catalog of key figures defined with the Measure Builder is delivered as SAP SEM Business Content. These include for

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example, Discounted Cash Flow (DCF), Cash Flow Return on Investment (CFROI), EVA and industry-specific KPI templates. You can make enterprise-specific changes with the Measure Builder. Apart from the real time recording of the enterprise-specific KPIs, it is critical that the results are analyzed correctly and interpreted. The Corporate Performance Monitor (SEM-CPM) provides innovative concepts in this area which go well beyond the familiar Management Reporting. KPI driver trees visualize the causal relationships between key figures. They display the fixed quantifiable dependencies that are apparent in the context of calculated key figures such as EVA. A quantitative sensitivity analysis will be possible with this type of driver tree. They also display the causal relationships between factors that are not easily quantifiable, for example the relationship between customer satisfaction and sales growth. SEM-CPM provides comprehensive functionality to support the Balanced Scorecard. This program section was developed in cooperation with The Balanced Scorecard Collaborative, Inc. of Boston, founded by Professor Robert S. Kaplan and David P. Norton. The Balanced Scorecard is a management instrument . Its associated procedures support management in formulating the enterprise strategy in a clear, quantitative and balanced way. As a second step, the Scorecard methodology also provides support when converting the strategic objectives into operational targets for the individual business units down right to the profit centers, or even to the ’personal scorecard’ for individual managers. The SAP SEM Business Content contains industry-specific, predefined scorecard templates that support the introduction of a Balanced Scorecard.

Figure 9: Entry screen of the Balanced Scorecard (conceptual design)

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Another part of SAP SEM is the software component of the Management Cockpit. The Management Cockpit is an innovative concept from SAP and N.E.T. Research for the ergonomic presentation of management information using easy-to-understand graphic visualizations on the walls of a specially equipped meeting room. The Management Cockpit concept includes a corresponding work methodology which optimizes the advantages of the concept. The aim with the Management Cockpit is to improve the communication of decision-relevant information within the management team, to support decision-making, and to make management meetings more effective and productive. You can use the Management Cockpit for several purposes, for example for Board meetings, for management meetings of Business Units or other organizational units, or to support team meetings in strategic projects. For project teams that are working together temporarily, but whose members are physically and hierarchically distributed throughout the enterprise, the Management Cockpit offers an effective facility for communication and integration.

Figure 10: Logical View of the Management Cockpit (conceptual design)

With the newspaper-style reports, SEM-CPM contains a function that lets you set up a reporting system in the style of a newspaper. You can create specially designed layouts with texts, graphics and tabular displays for the various receiver groups and information requirements. The SEM-CPM then supplies these layouts with current information during runtime.

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The newspaper-style reports are web-based and enable both animated displays and return flow of information. Besides the innovative concepts for Performance Management described above, SAP-SEM contains the complete reporting functionality of the Business Information Warehouse in connection with the Business Explorer. This includes multidimensional drilldown reporting starting from a Balanced Scorecard perspective for example, simple creation of reports with graphical query definition, and the facility to format and further process the report results with MS Excel functions. Numerous predefined standard reports for all areas of the enterprise are included in the SAP BW Business Content delivered with SAP SEM.

End user environment for ...

Viewing results

Locating reports

Analyzing information

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Power user environment for ...

Publishing reports

Ad-hoc reporting

Definition of company-standard reports

Figure 11: Business Explorer screens

The SAP-SEM version concept in conjunction with the integrated data model for all functional components enables you to use the display and analysis functions of SEM-CPM not only for actual data, but also to analyze strategic initiatives and to compare simulated business scenarios.

Overview of Functionality Measure Builder Besides the existing key figures in the data basis, you can define formulas to calculate other key figures using the Measure Builder. The key figures themselves are then calculated during runtime.

Definition of Calculated Key Figures

Calculated key figures range from simple ratios like sales per employee to complex shareholder value measures such as EVA, DCF, CFROI, etc.. The principal key figure definitions for Value Reporting are delivered as SEM Business Content; enterprise-specific adjustments can be made at any time.

Visualization SAP SEM offers a catalog of visuals that you can use to look at key figures in the Interpretation Models described below.

Visualization of Measures

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These include the Management Cockpit visuals:

q q q q

Tachometer graphics Horizontal bar charts Four-quadrant matrices Portfolio graphics

Other visuals are currently being developed in cooperation with the International Institute of Human Intelligence Management at the HEC School of Management in Paris. The extension of the visuals catalog is part of the ongoing development of SAP SEM.

Interpretation Models Key Figure Trees

Key figure trees display clearly the calculation rules for key figures defined by the Measure Builder. Besides displaying the individual values and mathematical relationships, the key figure trees enable you to change individual key figures within the tree and therefore to carry out ’what-if’ and sensitivity analyses.

KPI Driver Trees

Driver trees visualize the factors influencing a KPI. A significant aspect of driver trees in contrast to key figure trees (see above) is the display of mathematically non-quantifiable, causal relationships between measures. Driver trees are frequently used to display Value Driver Trees for the value drivers in value-based management.

Balanced Scorecard

SEM-CPM contains the functionality required to define and operate an enterprise-specific Balanced Scorecard. The definition of both the fundamental software design and the functional requirements was undertaken in cooperation with The Balanced Scorecard Collaborative, Inc., Boston.

q q q q q q q q

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Definition of strategic objectives and assignment to the Balanced Scorecard perspectives and strategic themes Definition and visualization of causal relationships between the strategic objectives Assignment of KPIs to the strategic objectives Assignment of initiatives to strategic objectives Assignment of owners to objectives, KPIs and initiatives Progress and achievement monitoring through owner assessments Mail and comment functions for assessments Visualization of target achievement with traffic light reporting

In cooperation with The Balanced Scorecard Collaborative and other consultants, SAP is currently developing industry-specific Scorecard templates.

Industry-Specific Balanced Scorecard Templates

The templates contain industry-specific

q q q q

Strategic themes Strategic objectives KPIs Causal relationships between strategic objectives

A special workbench (wizard functionality) guides you by dialog through the definition of enterprise-specific KPI sets. The Management Cockpit software is included in the SEM delivery package. The software’s features include:

q q q q q q q

q q q

Management Cockpit Software

Definition of numerous Cockpits scenarios which can be called up from a hierarchical tree Management of access authorizations for Cockpit configurations Structuring of performance indicators on four walls for four perspectives Each wall covering one topic and having an assigned color Assignment of up to six Logical Views per wall Assignment of up to six Frames per Logical View Frames visualizing performance indicators using - Tachometer graphics - Horizontal bar charts - Four-quadrant matrices - Portfolio graphics - Standard business graphics Views for Frames, Logical Views and Walls Print functions for Frames, Logical Views and Walls Traffic light reporting

The ergonomics of both the Management Cockpit and the available visuals continue to be developed in cooperation with N.E.T Research and the International Institute of Human Intelligence Management at the HEC School of Management in Paris. The Management Cockpit room is an optional extra. It uses the SAP SEM Management Cockpit software.

Management Cockpit Room (Optional)

It is delivered and installed by SAP in cooperation with N.E.T. Research. The Management Cockpit room consists of:

q q q q q

An ergonomically configured meeting room A wall display system for visualizing performance indicators A flight deck (PC desk with six flat screens for online analysis) A concept for structuring and visualizing the enterprise-specific performance indicators designed by N.E.T Research (company specific Cockpit design) Executive training by N.E.T Research for efficient use of the Cockpit by the management team

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q

Newspaper-Style Reports

Cockpit maintenance for periodic modifications to the Cockpit to keep in line with the enterprise requirements and new ergonomic research results

SEM-CPM enables you to set up periodic reporting in the style of a newspaper. You define report templates that combine text, graphic and table elements in a newspaper-type layout. Examples of elements in these reports:

q q q q q q q

A chart showing the sales trends during the year A tabular display of balance sheet, income statement and cash flow statement for the month just ended A Business Unit manager’s report on the quarterly accounts for his BU A Product Manager’s presentation of a new product A picture of the new product A list of headlines from press reports concerning competitors (incl. links to the complete text in the Internet or Intranet) A list of headlines from press reports concerning your own enterprise (incl. links to the complete text in the Internet or Intranet)

Depending on the definition of the individual report elements, the report contents are updated automatically or manually. You can make the reports accessible to authorized users via their Web Browsers.

SAP BW Reporting Business Explorer

The Business Explorer from the Business Information Warehouse is available for regular tabular reporting:

q q q q

Business Content of SAP BW

The Business Content delivered with the Business Information Warehouse contains a large number of predefined standard reports from all areas of the enterprise.

q q q q q q q q q

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Multidimensional drilldown reporting Simple query definition with graphical user interface Formatting and further processing of the reports with Microsoft Excel functions Drilldown from the aggregated display in the Balanced Scorecard and the Management Cockpit to the detailed information

Financial Accounting Treasury Controlling Investment management Personnel Administration Recruitment Time Management Payroll Accounting Event management

q q q q q

Sales and Distribution Materials Management Quality Management Plant Maintenance and Service Production Planning and Control

You can use the predefined reports with the Business Explorer immediately or modify them to suit your enterprise-specific requirements. Further developments in the SAP BW Business Content can be used immediately in SAP SEM also.

Business Consolidation (SEM-BCS) You use SEM-BCS for both the statutory (external) consolidation and the management (internal) consolidation. The statutory consolidation requirements depend on the legal and taxation regulations in the country of the parent company. In complex structures of corporate groups, these requirements may differ from group level to group level. In many cases it is sufficient to include the legal entities as consolidation units. For groups that report according to US GAAP or IAS, business segment reporting is also required. Most domestic accounting principles also demand business segment reporting from companies listed on a stock exchange. The management consolidation runs in parallel with the external consolidation. It depends not on legal regulations, but on the management’s information requirements. The most common criterion for deciding on the consolidation dimensions is the management structure of the enterprise. For enterprises with a matrix organizational structure therefore, at least two dimensions are mutually perpendicular. Example: consolidation by q World zone, country and company in the regional hierarchy, and by q Division, strategic business unit and product group in the product-based hierarchy.

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Hierarchy 1 Group

Hierarchy 2 Group by Division

Group by Company

Division Company Company / Division

Chemicals

France

USA

USA / Non-Food

...

Paints ...

...

USA / Chemicals

Business Area Company / Business Area

Non-Food

USA / Paints

USA /Tensides

Tensides UK / Paints

Figure 12: Parallel consolidation hierarchies

SEM-BCS is based on the uniform data basis of the SEM System and benefits, therefore, from the flexibility of the entire system when defining organizational units and hierarchical structures. Consolidations units can also be defined below the level of legal entities and may be consolidated in any number of parallel hierarchies. The multidimensional database also provides further levels of detail that can be used for internal analyses (customer groups, distribution channels, etc.). Besides the requirement for a high level of flexibility, it is also desirable to be able to reconcile the different consolidation methods. The internal consolidation only becomes a reliable means of decision support for enterprise management when the figures can be easily reconciled with those of the statutory consolidation i.e. those that are communicated externally. SEM-BCS stores the data for all possible consolidation types in the same SEM data basis. If you wish, and if it is legally permissible, you can maintain similar processing methods for all consolidation types, for example currency translation methods and methods for handling differences etc. Depending on the consolidation type, different detail levels of the data are accessed. The integrated data basis, guarantees this reconcilability of the totals. For parallel sets of data based on different valuations or methods, the reconcilability is given by customer-defined validation rules and exception reporting. The consolidation process itself is a relatively complex sequence of individual steps which must be executed correctly and completely for each consolidation unit. With the data and consolidation monitor, SEM-BCS provides a powerful instrument for controlling the consolidation process. This enables you to monitor each individual step for each individual consolidation unit, and also lets you review the consolidation progress for the entire group or subgroup. Headquarter departments, which are responsible for the consolidation of several thousand units, can keep control by means of the data and consolidation monitor. You can automate the consolidation processes to a large extent by determining appropriate rules and methods.

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SEM-BCS supports the application of value-based management methods. For EVA reporting of non-accounting organizational units such as profit centers, SEM-BCS provides functionality for automatic allocation of balance sheet items using user-defined allocation criteria. This way the entire invested capital can be allocated, for example to the profit center level. You can use stored rules to automatically make EVA adjustments to balance sheet and profit & loss accounts. Examples include capitalization of research and development expenses, or marketing expenses incurred in establishing a brand name. You then depreciate the capitalized expenses over a specific period of time. You can make the adjustments either in the financial data of the individual consolidation units or in the consolidated financial statements themselves. The kinds of adjustments required are industry and enterprisespecific. SEM-BCS is delivered with templates for industry-specific EVA adjustments.

Overview of Functionality SEM-BCS Application Areas SEM-BCS supports all required functions for the legal consolidation according to existing statutory accounting requirements US-GAAP, IAS, local GAAPs etc, which may also be used in parallel.

Consolidated Financial Statements

Changes to the legal requirements are integrated immediately into the software. SEM-BCS is delivered with charts of accounts templates and methods specific to the different statutory accounting requirements. Profit centers or business areas as organizational units in internal accounting serve as a basis for management criteria-based consolidation.

Management Consolidation

Furthermore, consolidation supports any number of other criteria, for example, to produce consolidated market segment profitability accounting. The internal consolidation can make use of the same processes (for example, currency translation, handling of differences) as the external consolidation. You can also simplify such processes, for example, for the treatment of partner units.

Data Model Consolidation units are the smallest organizational units that report consolidation-relevant data and have relationships with partner units (such as receivables or sales revenue).

Consolidation Units

The organizational units defined in the SAP SEM data model (or combinations thereof) are used as consolidation units (see section on Data Integration). Common examples are: - companies - combinations of business area / company - combinations of profit center / company

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The type of consolidation unit determines the consolidation dimension. Examples are the company dimension or the profit center dimension. If internal and external consolidation are fully integrated, the same consolidation dimension is used internally and externally.

Custom Characteristics

Information relevant for regional segment reporting or for management consolidation, but not related to partner units – such as products, customer groups, customer regions, distribution channels – are generally not represented as consolidation units. Instead, this type of information can be defined as custom characteristics with their own respective hierarchies of characteristics.

Consolidation Groups, Hierarchies

The allocation of consolidation units to their consolidation groups is version and date-sensitive. Consolidation groups are the building blocks of consolidation hierarchies. The organizational characteristic hierarchies defined in the SAP SEM data model are used as consolidation hierarchies (see section on Data Integration). The hierarchy nodes represent the consolidation groups for SEM-BCS. SEMBCS enriches the SAP SEM master data hierarchies with additional consolidation-specific master data (such as the date of first consolidation or divestiture accounting of a particular consolidation unit). Examples of consolidation groups:

q q q

Companies in a world zone, Pharmaceutical division of all companies, Automobiles profit center of all companies in USA

You can set up several parallel hierarchies within a consolidation view.

Financial Statement Items and Charts of Accounts

SEM-BCS uses the general charts of accounts defined in SAP SEM (see section on Data Integration). Different charts of accounts or different item hierarchies in a chart of accounts cover the different statutory accounting requirements, cost of sales accounting, and period accounting etc. You may have as many parallel charts of accounts as you wish. You can break down the postings for any item using various criteria (according to the configuration of the SAP SEM database), for example by function area, transaction type, partner unit, year of acquisition or transaction currency.

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SEM-BCS uses the SAP SEM version concept.

Version Concept

Versions make it possible to:

q q q q

Consolidate actual and plan figures Consolidate according to different legal regulations Carry out simulations with, for example, different currency translation methods or different consolidation rules Carry out reporting including or excluding EVA adjustments

Data Transfer BCS uses the functions of BIC for collecting financial statement data of the subsidiaries (balance sheet, income statement, notes to financial statements, cash flow statement), and for collecting additional statistical data and comments.

Data Collection

The data collection is based on the local and/or corporate rules for financial statement reporting. When both valuations are supplied, the system posts automatic standardizing entries in BCS. All of the data can be transferred from other R/3 systems and non-SAP systems, and can also be manually entered directly in SEM. BCS features user-friendly, graphical programs for defining customerspecific validation rules. This is useful for reconciling balance sheet and income statement items with statistical data, or for reconciling different dimensions for external and internal accounting.

Validation

The system can react to non-compliant data with the use of straightforward messages (warnings, errors), automatic adjustment entries, or customerdesigned workflows. Validation processing can be called up at any point of the consolidation process, and provides an interactive analysis of the problems incurred.

Consolidation Functions The definition of currency translation methods is totally flexible. A method is assigned to every consolidation unit. BCS fully meets all requirements encountered in the field (e.g., the functional method).

Currency Translation

Each financial statement item can be assigned to any exchange rate (e.g., current, average, historical) and any currency translation key (e.g., translation of cumulative or period value, or translation from the transaction currency or the local currency). BCS automatically detects any translation differences and posts these to preselected FS items and other characteristics. BCS separately records translation and transaction effects for each FS item, thus enabling the creation of reports that are purged of currency translation effects (e.g., cash flow statements).

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Interunit Elimination

Elimination of Interunit Profit And Los

Consolidation Of Investments

Elimination processor for two-sided eliminations, including:

q q q q

Elimination of interunit payables and receivables Elimination of investment income Elimination of interunit revenue and expense Elimination of provisions

q q q

In transferred assets In transferred inventory Transfers between inventory and other assets

Accounting techniques:

q q q q q

Purchase method Proportional consolidation Equity method Pooling of interests method Mutual stock method

All required activities are supported:

Deferred Taxes

q q q q q q q q q q q q

First consolidation Subsequent consolidation Step acquisition Partial divestiture Total divestiture Transfer of organizational units Investment write-up/write-down Increase/reduction in capitalization Change in indirect investment Change of method in the hierarchy Change of method in the time flow Business combinations and splits of consolidation units

q

Fair value adjustments

Both manual posting and automatic posting feature an option to automatically calculate and post deferred taxes. BCS supports the liability method for automatic adjustments to account for changing tax rates.

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Figure 13: Data Monitor screen of SEM-BCS

General Functionality Monitors and executes all steps starting with the initial acquisition of data from the individual consolidation units over to the availability of standardized financial statement data that has been validated, translated and adjusted to meet the group’s accounting rules.

q q q q q q q q

Carrying forward of balances Data entry Manual standardizing entries Automatic reclassifications Validations in local and group currency Currency translations Automatic posting of EVA adjustments Allocation of balance sheet accounts to other consolidation units

Monitors and executes all elimination and consolidation tasks at the consolidation group level.

q q q q q q q q q

Data Monitor

Consolidation Monitor

Elimination of interunit payables and receivables Elimination of investment income Elimination of interunit revenue and expense Other interunit eliminations Elimination of IU profit and loss in transferred assets and transferred inventory Consolidation of investments Reclassification Manual closing entries User-defined validations

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Functionality For EVA Reporting q q q

Automatic posting of adjustments to balance sheet and profit & loss items of the consolidation units in separate versions Automatic depreciation of capitalized expenses (see above) over their economic life and maintenance of their remaining values Automatic allocation of the balance sheet accounts from accounting consolidation units (for example, companies) to non-accounting consolidation units (for example, profit centers) in order to make EVA reporting possible for the latter.

Business Information Collection (SEM-BIC) A critical prerequisite for the support of the strategic management process using SEM is an appropriate information basis. The required information can be classified into structured and unstructured information. Structured information is typically numerical information that is available in a fixed data record structure (for example data from the ERP system, or stock price time series from an external business database). SEM-BIC uses the generic functionality of the SAP Business Information Warehouse to collect structured data. With this type of data it is relatively easy to automate its collection and further processing. For this reason structured data has been preferred in decision support systems up to now. Structured data usually originates from within the enterprise itself. The structured data, for example from the ERP system, continues to form the basis for the information supply for the strategic management process. However, many steps in the process require external information that is typically available in unstructured form: When constructing a dynamic planning model of the market development, you must base it on as much concrete information as possible. This includes information on current market share, competitors, their products, their patents, industry sector development, economic developments in the target markets, current political developments etc. It can also be useful to include the number of press reports (split into favorable and unfavorable) concerning the enterprise or its products as a key figure in Performance Management. Capital market expectations of the enterprise can be determined from broker reports. Investigations have shown that for strategic decisions, external information tends to be more relevant than internal information. For the most part external information exists as unstructured information. There are numerous sources for information of this type. The press, business databases, experts, conferences, and other discussion forums can provide relevant information. Information sources can be addressed using various means of access. The Internet is already one of the most important media and it will continue to

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grow in significance. Most of the commercial information providers already allow access via the Internet. Almost every enterprise maintains a comprehensive homepage on the World Wide Web containing product information, press releases etc. The Internet or World Wide Web appears to be the preferred medium for accessing external information.

StarCom

StarCom

StarCom

StarCom StarCom StarCom

StarCom

StarCom StarCom

Figure 14: Example screen of SEM-BIC (conceptual design)

With the Editorial Workbench as part of the SEM-BIC component, SAP now provides for the first time extensive IT support for collecting, processing, structured storing and evaluating unstructured information. The software is primarily intended for use in connection with the Internet. It can also, however, access other media and can be coupled with databases from special information providers. SEM-BIC models the information requirements of individuals and groups using information requirement profiles. Profiles are also maintained for the information sources. These are used in a mapping procedure to automatically select suitable sources for a query. The results of queries are processed in the Editorial Workbench. The relevant facts are identified in the documents found and these facts are copied as numerical, textual or multimedia information. The information extracted is then linked with the corresponding evaluation object in the SEM data basis. For example, you might copy a sales estimate for a product for a particular time period from a broker’s report and then link this with the actual figures for the same time period. This information can then also be used in SEM-CPM or SEM-BPS.

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External/internal key figures + External/internal information

1998

1999 Spare parts Trucks

2000

Cars Europe

USA

Asia

Figure 15: Assigning unstructured information to evaluation objects in the SEM database

For the most part the Editorial Workbench will not be used directly by the information seekers themselves but by "information brokers", for example in the enterprise’s press office. They will edit the documents found and link the facts with the evaluation objects in the SEM data basis. The information is then available for the receivers in top management, controlling, marketing, etc. The search for information can be carried out almost automatically using information requirement profiles. SAP is working in cooperation with the Forwiss Institute at the University of Erlangen, Germany, not only in automating the information search, but also in further automating the editing of the information found.

Overview of Functionality Collection of Structured Information using the Techniques of the Business Information Warehouse Collection from R/3

Data is collected from R/3 using extraction programs delivered by SAP. The extractors supply data from all R/3 components. For example from:

q q q q q q q q q q

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Financial Accounting Treasury Controlling Investment Management Human Resources Sales and Distribution Materials Management Quality Management Plant Maintenance and Service Production Planning and Control

A significant advantage of data transfer from R/3 lies in the fact that the delivered extraction programs guarantee the business integrity of transferred data. It is much simpler to set up comprehensive data transfer between an installed R/3 System and SAP SEM than between a third-party system and SAP SEM. To collect data from third-party systems, you can use third party tools or develop and apply your own programs to handle the SAP BW interface (staging BAPI).

Collection from third-party systems

SEM-BIC allows you to import files with fixed or variable data record length.

Importing files

SEM-BIC supports the structured and organized decentralized collection of financial data for example, in the group.

Manual Entry

Collection of Non-Structured Information with the Editorial Workbench Information requirement profiles are created and administered here for individuals or groups.

Information Requirements Profile Builder

The requirement profiles contain entries that describe the information requirements and also serve to form search strings. A further parameter determines when a search query is to be generated from the requirement profiles. You can initiate a query periodically, ad hoc, or dependent on specific events. The Source Profile Builder administers the information sources that the enterprise uses.

Source Profile Builder

The source profiles contain the category of information provided, the type of information source, the access medium, access procedures and the costs of a query. When a requirements profile is active and generates a query, a mapping process is used to determine which sources are most likely to provide the required information.

Mapping Rules

The query is then automatically directed to these sources. The system can generate a search string from the selected SEM objects and use it for the query. Either all sources are consulted simultaneously to obtain a wide range of information on the same subject, or the sources are consulted in sequence until the required information is found. The Editorial Workbench supports the information brokers in editorially processing the information found and in archiving it in the SEM data basis.

Editorial Workbench

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q q q q q

q q

Possible access methods to information sources

Clearly listed display of the headlines from all documents found with a query and the corresponding source Display of the complete individual documents or only those sections likely to contain relevant information (identified using the search strings) Automatic identification and color coding of relevant information in the document using the search strings Easy copying of relevant information and simultaneous classification as a key figure, text or multimedia Assignment of classifying attributes to archived documents (for example, ’favorable’ or ’unfavorable’ for all press reports concerning a product, ’overvalued’ or ’undervalued’ for brokers’ reports concerning the enterprise’s stock price) Assignment of qualifying attributes to the information source, depending on the relevance of the data found Automatic retention of the source, the date and the active search query for any information obtained

q

Internet services: World Wide Web File transfer protocol e-mail

q q q

Push services Upload of local files Free text entry

Stakeholder Relationship Management (SEM-SRM) Enterprises should constantly interact with their stakeholders. These include shareholders, employees, customers, suppliers, partners, state institutions and the general public. Each interest group has different expectations of the enterprise. Shareholders look for value appreciation and expect to have a certain say in the business. Employees expect fair remuneration, varied tasks, training, co-determination and job security. Customers want innovative, high-quality products with good service at attractive prices. They also look for an enterprise strategy that will allow a long lasting business relationship. The same applies for suppliers and other business partners. Regulatory authorities press for obligations to be fulfilled. Financial authorities claim taxes, levies and fees. The general public demands environmentally friendly polices and that the public welfare is taken into account. Enterprises attempt to satisfy these, at times, contradictory interests. They have to manage the stakeholder network and the expectations of the stakeholders. The SEM-SRM process supports this management task.

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The elementary steps of the SEM-SRM process are: q Identification of the stakeholder groups and important individual stakeholders, determination of the stakeholder expectations q Assessment of the stakeholder expectations and modeling of the relationships and trade-offs between the various interest groups q Integration of the stakeholder expectations into the enterprise strategy q Monitoring of the enterprise performance, analysis of variances and trends q Stakeholder Reporting and stakeholder feedback q Development of strategic planning scenarios and deciding on the future enterprise strategy The objective of SEM-SRM is to interactively communicate the effects of the enterprise strategy on stakeholder value, and to thereby convince the stakeholders that they have invested their trust and their stakes/resources in the right enterprise. In the context of the SEM-SRM process, the quality of the communication with the stakeholders plays a decisive role and directly influences the enterprise value.

Understand Stakeholder Expectations

Evaluate Stakeholder Expectations

Incorporate Stakeholder Expectations into Strategy

• Define stakeholders • Survey stakeholders‘ expectations • Collect information relevant to stakeholder expectations

• Model stakeholder expectations • Transform external figures into internal targets

• Translate expectations into strategy, performance targets and business scenarios

Monitor & Analyze Performance

• Monitor actual results against stakeholder expectations • Analyze variances & trends

Reporting on Achievement of Strategies

• Communicate results and performance variances

Take Action on Performance

• Establish new internal targets • Decide on alternative strategy and scenario

Stakeholders

Figure 16: Stakeholder communication process with SEM-SRM

All phases of the communication process are supported by SEM-SRM functions. These can be summarized in a process-function matrix: The first four steps are supported by the function blocks Stakeholder Profile Builder and Stakeholder Communication Processor. The last two steps make use of the function blocks Stakeholder Communication Processor and Stakeholder Report Builder.

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Overview of Functionality Stakeholder Profile Builder Stakeholder Map / Relevance Matrix

You use the Stakeholder Map to define, identify and analyze the stakeholders. The stakeholders are classified according to their risk structure (degree of commitment/stake), their objectives (interests, expectations) and their power structure (extent of their influence). The stakeholders are weighted in the relevance matrix according to their expectations, their potential influence and their investment risk. You can use this weighting as a basis to decide to what extent the interests of the various stakeholders need to be integrated into the objectives of the enterprise.

Stakeholder Questionnaire Generator

Stakeholder Database

The Stakeholder Questionnaire Generator supports analysis of the stakeholders’ expectations and interests. The function generates questionnaires, sends them to stakeholders, automates the evaluation of the returned information and saves the data for reports . The Stakeholder Questionnaire Generator uses SEM-BIC functions. The Stakeholder Database contains the following information:

q q q q q

Address and contact data The expectations (objective structure) of the stakeholders, The degree of influence (power structure) of the stakeholders, The degree of commitment/stake (risk structure) of the stakeholders and Notes and references.

The Stakeholder Contact Database contains the following information:

q q q

The stakeholders’ queries (what information [contact subject] was reported when [contact history], and how [contact type], to which stakeholders), The activities and initiatives undertaken for the benefit of the stakeholders (what was done [contact subject] when [contact history], how [contact type], and by whom) and also Notes and references.

The database serves as a basis for communication with the stakeholders and you can evaluate it as you wish.

Stakeholder Value Proposition Modeling

In this function you can model the relationships and trade-offs between the expectations of various stakeholders. This model allows you to weigh up the various stakeholder interests against each other.

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Stakeholder Communication Processor This function block enables automatic communication using different media such as print, fax, telephone, the Internet and e-mail.

Stakeholder Communication Processor

You can use the Stakeholder Communication Processor to regularly send information to the stakeholders. The Stakeholder Communication Processor also supports the automated processing of incoming information. Comments, questions or information requests from stakeholders are passed on by workflow to the relevant persons in the enterprise. The appropriate SEM-BIC functionality is used here. Using the SEM-BPS functionality, SEM-SRM enables you to produce interactive, dynamic enterprise models for stakeholder groups.

Stakeholder Simulation Processor

You can make these models available to the target group via the Internet. Stakeholders can analyze enterprise scenarios and simulate the effects of changes in exogenous data on the enterprise’s key figures. You could for example provide a model for financial analysts where they can simulate the effects of exchange rate fluctuations on the enterprise.

Stakeholder Report Builder The Stakeholder Window allows stakeholders controlled access to reporting and modeling tools in SAP SEM. It helps to meet their information requirements.

Stakeholder Window on SAP SEM

The Stakeholder Value Report Builder produces reports with special, target group-based information. SEM-SRM allows you to display available information in various ways so as to meet the needs of different stakeholders.

Stakeholder Value Report Builder

q q

Investors and analysts receive information from the enterprise regarding issues that may influence stock prices. They can request this information via the Internet. Employees, customers, partners and the general public receive information on the enterprise strategy and its value potential for the respective groups.

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Statement of Shareholder Value Achieved Sales and other income Cost of products sold Gross margin Selling, general, administration, and other expenses Other operating expenses , net of other income Operating earnings before interest , taxes, etc . (EBITDA) Capital expenditures required for normal operations Net operating profit before taxes Cash taxes Net operating profit after taxes (NOPAT)

Questions to the CFO

Capital charge for invested capital Net receivables and operating cash Inventories @FIFO Current working assets Accounts payable and accrued expenses Net operating working capital

1997

7,058 4,212 2,846 1,213 95 1,538 352 1,186 401 785

6,331 3,866 2,465 1,137 72 1,256 335 921 286 635

1,351 941 2,292 (1,104) 1,188

1,291 886 2,177 (1,034) 1,143

Net property, plant and equipment Other operating assets, net of other liabilitities

2,835 27

2,742 54

Net operating assets Weighted average cost of capital (WACC) Capital Charge (on beginning asset values)

4,050 11.3% 445

3,939 11.5% 454

Shareholder value achieved Net operating profit after tax (NOPAT) Capital Charge (on beginning asset values)

785 445

635 454

Economic profit/ shareholder value achieved

340

181

Figure 17: Example for a shareholder value report

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1998