Challenges of migration to S/4

Our client is a globally operating company in the new technology industry, headquartered in the Netherlands. It operates in more than 30 countries worldwide, with several manufacturing plants across Europe and Asia, and employs over 34,000 people.

SAP serves as a central transactional system for this international corporation. The migration to the new version covered a wide range of functional areas, including finance and controlling, materials management, production planning and quality management, as well as warehouse management and sales and distribution. Additionally, the project scope included the implementation and harmonization of the Business Partner, as well as the New General Ledger.

The scale of the enterprise and the scope of the project determine its complexity. To reduce the migration time and the workload required from key users – and, consequently, to lower the overall project cost – the decision was made to adopt the Bluefield approach and leverage the CrystalBridge transformation platform.

In the Bluefield approach, SAP S/4HANA is launched with new functions, along with availability of historical data, which can be selected based on various complex criteria. Additionally, other business and technological transformations can be carried out as part of the same project (a chart of accounts change, group consolidation, migration to the cloud).

Collaboration with experienced partners specializing in SAP system transformation, combined with the use of the CrystalBridge platform, enabled the entire migration project to be completed within a relatively short period – from 2022 to 2024.

The scale of the initiative, the client’s specific requirements, and the need to take previous system extensions into account resulted in numerous challenges. In the finance area, the implementation of complex processes was handled by consultants from the SAP Transformation Center, a department of All for One Poland that specializes in SAP environment transformation projects. As part of the project work, they prepared and implemented four custom solutions:

• Introducing dual valuation (local and group) into the existing system
• Changing the structure of investment projects
• Changing existing valuation calculations for tax purposes
• Pricing adjustments: the material ledger, material valuation, and transactional data.

In this article, we will take a closer look at solutions related to material valuation and the material ledger.

In the SAP system, the Material Valuation and Material Ledger solutions are used for material valuation. Material Valuation integrates the MM (Materials Management) and FI (Financial Accounting) modules, while the Material Ledger additionally integrates the CO (Controlling) module. Both solutions are related to inventory accounting, however they serve different purposes and have different functions. Let’s take a closer look.

The Material Valuation functionality is responsible for the inventory valuation methods used in accounting. Its primary role is to calculate the value of inventory based on the selected valuation methods. The valuation methods used include:

• Standard Price (S) – the material value is fixed and does not change with new purchases
• Moving Average Price (V) – the material value is updated based on new purchase prices
• Actual Costing (requires Material Ledger) – adjusts material costs based on the actual costs of components.

The Material Valuation tool integrates with MM (Materials Management) and FI (Financial Accounting) to ensure accurate inventory valuation.

The Material Ledger is an additional SAP tool that provides support for actual costing and multi-currency valuation. It enables tracking of material costs based on actual values instead of just standard prices or moving average. The key functions of the tool include:

• Multi-Currency Valuation – supports valuation in multiple currencies
• Actual Costing – enables cost adjustments based on actual expenses, taking into account purchase price variances, production variances, etc.
• Period-End Closing – the material ledger calculates actual costs at the end of the period.

The Material Ledger works in conjunction with controlling, materials management, and financial accounting functions to deliver more accurate cost information. In SAP S/4HANA, the Material Ledger is a mandatory component that streamlines inventory valuation, cost tracking, and financial reporting.

The key differences between Material Valuation and the Material Ledger are illustrated in the table below.

The Material Valuation is the core concept for determining material costs in SAP.

The Material Ledger extends inventory valuation by providing actual cost calculations and multi-currency support. The material ledger is mandatory for companies using SAP S/4HANA, whereas it remains optional in the ECC system.

One of multiple project objectives for our client was the support during the conversion to S/4HANA in the material ledger area, and the change to valuations for multiple currencies. SAP does not recommend migrating from ECC to S/4HANA without launching the full functionality in the legacy system.

All for One specialists from the SAP Transformation Center team were asked to support the project for an international client using the CrystalBridge transformation tools.

The core task of the migration team was to define data selection and conversion rules in order to make this task possible. The scale of the changes introduced was impressive – they covered 56 company codes and more than 370 plants.  Typically, projects involve 1 or 2 company codes, but in this case the project was planned as one implementation for the entire company.

In the inventory valuation tables (such as MBEW) and the material ledger tables (CKML*), we were dealing with millions of data points, with some tables exceeding one billion records.

The data changes and adjustments involved close collaboration with the client and the partner supporting such a large project. The All for One transformation consultants were in active contact with the client to establish the complex data migration rules. Below are some facts from this project:

• In the proof of concept phase for a single table, the simplest migration rule was written in just 1 line of ABAP code.
• During go-live, such tables contained even as many as 2,000 lines of ABAP code to support migration scenarios (for 56 company codes and over 370 plants).
• 12 new migration objects were created in the ML area to complete this task.
• In the transformation logs, we processed or created billions of data points to change valuations for both current and historical data.
• Valuations were transferred from CNY to USD and from EUR to USD.
• Valuation types used in the ECC system (legacy system) were modified and adjusted on the fly to the required data in S/4HANA.
  • Company Code Currency
  • Group Currency
  • Hard-coded Currency
• Support for multiple currency conversion scenarios divided into variants depending on organizational units and the valuation area was prepared;
• Migration rules for changing multiple tables were prepared:
  • tables from the ML area: CKMLCR, CKMLPR, CKLMHD;
  • tables from the MM area: MLBECR, MLCR, EKBE, EKBZ, MSEG, MATDOC, RESB, ISEG, MBEW, MBEWH, EBEW, EBEWH;
  • controlling CO tables: KEKO, KEPH, CKIS, COSP, COSB.

The solution for SAP S/4HANA for the material ledger simplifies data structures by consolidating data from the ECC system (located in the MLHD, MLIT, and MLPP tables) into the ACDOCA table to improve performance and provide better support for reporting.

One of our challenges was also the adjustment of actual costing. This task was overseen by the CO migration consultant.

The go-live took place during the last weekend of December 2023. Consultants performed tasks in a hybrid mode (on-site at the client’s premises and remotely).

During the migration weekend and throughout the entire HyperCare period, the number of errors in the material ledger area was 0 (zero), which further confirms the dedication and the dozens of hours spent on the proper preparation of the tailor-made solution.

The SAP Transformation Center team at All for One Poland is ready to undertake highly complex projects, even when SAP’s official recommendation states that it cannot be done. Our over 7 years of experience in conversion projects and access to the expertise of consultants from our group and partners allow us to leverage nearly 30 years of experience in SAP projects.