What are SAP S/4HANA Lines of Business (SAP LoB)?

With the introduction of SAP S/4HANA, fundamental terminology has also changed. This article examines the SAP S/4HANA Lines of Business (LoB), compares them with the previous term SAP ERP modules and brings clarity to the topic.

What are the SAP S/4HANA Lines of Business (SAP LoB)?

SAP S/4HANA Lines of Business (SAP S/4HANA LoB or SAP LoB for short) are function modules in SAP S/4HANA. The best way to translate "Line of Business" is "business area". This translation also describes very well what a Line of Business is: Each SAP LoB comprises business processes and functions for a specific business area of a company. An SAP LoB is therefore a logical structural unit or grouping of S/4HANA.

Important to know: In SAP ERP, the function modules were still referred to as modules. Although the term persists, it is no longer part of the official language used by the software manufacturer in SAP S/4HANA.

What lines of business are there in SAP S/4HANA and what do they contain?

Since the release of SAP S/4HANA, new lines of business have been continuously added to the software. Today (as of 2023), the on-premises version of the system comprises the following LOBs

• Asset Management
• Finance
• Human Resources
• Manufacturing
• R&D and Engineering
• Sales
• Sourcing and Procurement
• Supply Chain

These SAP S/4HANA business areas, including their advantages over the previous SAP ERP modules, are described in more detail below.

Asset Management

As the name suggests, LoB Asset Management deals with the management of a company's assets (fixed assets). In addition to machinery, equipment and tools, these assets also include buildings and land. Asset Management also includes functions for the maintenance and servicing of production facilities (Plant Maintenance) as well as features for environment, health and safety management (Environment, Health and Safety Management).

At a glance, this line of business offers the following options:

• Comprehensive management of all types of assets
• Efficient planning of maintenance work
• Intelligent (data-based) maintenance
• Options for (live) monitoring of machine statuses
• Safe working conditions
• Minimization of the risk of accidents at work

Finance

Finance was the first Line of Business in SAP/S4HANA and is also one of the most complex business areas. LoB offers functions relating to all financial aspects in a company. This includes financial accounting (including the general ledger), accounts receivable and accounts payable, controlling, financial planning and analysis, treasury, risk management, consolidation and financial statements.

Financial accounting was covered by SAP FI/CO in the former SAP ERP. In contrast, SAP S/4HANA Finance offers the following features and benefits:

• Detailed analyses of financial issues (e.g. cost management and profits and losses)
• Simple processes in accounting and financial statements
• Qualitatively better and more flexible revenue accounting
• Optimized reporting, including real-time reporting
• Improved treasury and risk management
• Automation of transactions
• Integrated compliance processes
• Optimized asset accounting

Human Resources

SAP LoB Human Resources provides all the necessary processes and functions for human resources management. These include personnel administration, payroll, time and attendance management and self-service access to HR data for employees.

Compared to the previous module in SAP ERP (SAP HCM), this line of business has the following advantages:

• More options for evaluating employee performance
• Features for employee retention
• Automation of administrative HR processes to reduce costs
• Automated reports and analyses

Manufacturing

This SAP S/4HANA Line of Business bundles all important applications and scenarios relating to production. The central functions are production planning and control (PPC), manufacturing execution and quality management.

Many functions have been transferred from the predecessor system to SAP S/4HANA. However, SAP has added some improvements in the new suite:

• Features for responsive, flexible manufacturing
• Improved, data-based production planning
• Support for complex assembly processes
• Optimization of the material flow and production process
• New ways to improve product quality
• Automation and improvement of production logistics

R&D and Engineering

The R&D and Engineering division provides companies with all relevant features relating to product lifecycle management, i.e. the management of the product lifecycle. This includes functions for defining product structures and parts lists, revisions, costing, project and portfolio management and investment management. Furthermore, this line of business supports compliance with product-related health and safety regulations.

The advantages of this LoB are

• More efficient product design
• Comprehensive management of the entire project and product development process
• Optimization opportunities for the product life cycle
• Greater transparency regarding the investment attractiveness of projects
• Process design based on individual needs

Sales

SAP LoB Sales combines all the important functions for sales. It supports classic tasks such as costing, quotations, orders, picking, packing, returns and invoicing. CRM, customer service and commerce, on the other hand, are not part of this SAP business area. If you want to cover these sectors, you also need SAP C/4HANA (formerly SAP Hybris). This is SAP's CRM suite, which bundles solutions from the areas of customer experience (CX), marketing, customer relationship management (CRM) and e-commerce. SAP C/4HANA is deeply integrated with the Sales LoB in S/4HANA and therefore fits seamlessly into the system landscape.

Notable advantages of this SAP Line of Business are:

• Automation options for pricing and order processing
• Improved (real-time) analysis options thanks to new database technology
• Options for tracking customer journeys and sales funnels
• Optimized tools for collaboration in sales and marketing

Sourcing and Procurement

Sourcing and Procurement supports business processes in the areas of procurement and purchasing. The functions of the former MM and SRM modules have been transferred to this SAP LoB and extended. Purchasing and procurement processes can be mapped end-to-end with the module. All processes are closely interlinked with the adjacent LoB (Supply Chain and Manufacturing). The most important LoB functions include supplier and product group management, ordering, contract management, service contract management, spend analyses and the management of supplier invoices.

The benefits of LoB at a glance:

• Wide range of analysis options for orders, contracts and invoices
• Features for better organization of procurement processes
• Improved risk management for the supply chain
• Automation of spend-related activities

Supply Chain

Companies use this SAP S/4HANA Line of Business to design, monitor and optimize their supply chain. The LoB is therefore particularly relevant for the industrial and retail sectors. The aim is to optimize all activities along the entire supply chain - from suppliers to production to the end customer. Important information such as sales forecasts, production planning and demand planning are continuously incorporated.

The main benefits of the supply chain LoB are

• Improved transportation
• Optimized warehousing
• Better inventory management

How do the LoBs in SAP S/4HANA differ from the modules in SAP ERP?

In previous SAP versions, the functional areas were referred to as modules. This changed with the introduction of SAP S/4HANA. The software group no longer refers to them as modules, but as lines of business. This does not change the basic approach of dividing applications, functions and processes into areas that make business sense.

The functions of the classic modules from SAP ECC still largely exist. They can now be found in various places in S/4HANA. The following overview provides information on how the core modules have been reassigned:

What will change with the division into LoB instead of modules?

The new structure changes relatively little for users. Only the navigation paths are now slightly different. If you wanted to create a purchase order in SAP ECC in the past, for example, you would navigate to the Materials Management (MM) module via Logistics, then to the Purchase Order area and finally to the Create Purchase Order transaction. Today, if you want to create a purchase order, you enter via the "Sourcing and Procurement" line of business.

From a technical perspective, however, the change from modules to lines of business is by no means trivial. This is because SAP S/4HANA has been given a completely new solution architecture in this context. In contrast to the classic module structure, this is now much more strongly oriented towards business processes in companies. In some cases, functional areas that were previously combined within one module have been split across several LoBs. This includes purchasing and inventory management, which were previously combined in the MM module. In SAP S/4HANA, purchasing is now located in the Sourcing and Procurement LoB, while inventory management has been moved to the Supply Chain business unit.

In addition, there are modules that did not even exist in the core of SAP ECC and were only available in the extended functional area of the SAP Business Suite. One example of this is SAP EWM (Extended Warehouse Management). This can be found in SAP S/4HANA in the "Supply Chain" LoB. The same applies to PLM (Product Lifecycle Management), which has been transferred to the "R&D and Engineering" LoB.

The implementation of SAP S/4HANA therefore provides companies with an ERP system that is significantly more process-oriented than its predecessors SAP ECC and SAP R3. This underlines SAP's approach of increasingly mapping, digitalizing, optimizing and automating processes end-to-end with SAP S/4HANA.