"Lean services are not an adequate replacement for MM-SRV, not even with item hierarchies."

The new service purchasing in S/4HANA is called "Lean Service Procurement" in order to distinguish it from the classic service procurement (MM-SRV). In 2022, the architecture of Lean Services was expanded by so-called "Item Hierarchies", – and it still differs significantly, even though SAP describes this addition as an equivalent alternative to the SAP MM-SRV module and its multi-level item lists. Since our last blog post in October 2022, Lean Services have now become part of the daily purchasing routine for many of our customers. Managing director Hartmut Schwadtke talks about the consequences.

With what promise did SAP launch the new architecture model?

Hartmut Schwadtke: SAP sells this approach as an advantage and describes MM-SRV as a kind of complex management of services, whereas Lean Service Procurement has a collaborative approach. And this is precisely where the problem lies, because the exact opposite is the case: SAP's Lean Service Procurement is not designed to exchange data with partners. Everyone may be able to work together by using the "lean" data model in the cloud, but when it comes to procurement and collaboration with suppliers, this approach is pure theory.

SAP claims that you "work" together with the supplier in the cloud, but that is nonsense, at least for the purchaser. Item lists, as we know them today, are created by engineering offices or planning departments and they don't necessarily have an affinity for SAP. The offices or departments are using special GAEB-compliant software and deliver the result in GAEB XML format.

Why does MM-SRV play such an important role?

Hartmut Schwadtke: The SAP MM-SRV module is popular with customers who have digitalized their service procurement and simultaneously follow SAP's Digital Core approach. SAP Digital Core means managing all data and information in detail and also mapping it directly in SAP for analysis – not just as an attachment. This is exactly what MM-SRV helps you do.

The special feature is the mapping of multi-level item lists with item category "D" on the one hand and on the other – this is crucial – the conformity and compatibility with GAEB, the established standard for data exchange with item lists par excellence. Only this enables "collaboration" and exchange with suppliers and planners.

Which industrial sectors are using the GAEB standard?

Hartmut Schwadtke:GAEB has been an integral part of the daily routine in the construction sector for over 50 years – from the construction and building materials industry, the housing industry through to engineers and architects and even engineering. The use of GAEB is spreading even abroad. GAEB is virtually synonymous with data exchange for planning, requests for quotation, awarding and billing processes.

And why does SAP want to abandon the MM-SRV module rather sooner than later?

Hartmut Schwadtke: I think there are several reasons for this. One fundamental aspect may well be SAP Ariba, the cloud solution for purchasing and procurement in the SAP portfolio. SAP Ariba and the Supplier Network are used to process requests for quotation. Ariba was acquired by SAP in 2012 and has since been more or less integrated into the SAP backend – however, Ariba was and is not suitable for mapping these item lists.

The method of sending GAEB-based item lists as attachments via e-mail, which is frequently used for this reason, does not really go along with the concept of seamless and consistent digitalization. Especially not with the digital core claim. Besides, where is the compliance in purchasing if requests for quotation are sent via e-mail?

Does this mean that MM-SRV does not (or does no longer) fit in with SAP's strategic orientation?

Hartmut Schwadtke: One might assume so, because SAP naturally has an eye on global customers and in this context the requirements of supporting the GAEB format probably play no role. Conversely, however, for customers who currently use MM-SRV with item category "D" and use it to map their services, this means that SAP is leaving them to twist in the wind with the Lean Service Procurement. Even with item hierarchies, lean services are not an adequate replacement for service procurement with MM-SRV – even if SAP claims the opposite. As the saying goes, it's like comparing apples and oranges.

How should we assess the expansion of Lean Services by means of "Item Hierarchies"?

Hartmut Schwadtke : Lean Services started out as a new, simplified process flow. The differentiation between materials and services was only to be made by using the product type – this was the birth of the "SERV" material type. At almost the same time, however, various SAP customers initiated the requirement for "Multi Level Purchase Requisition" as part of the SAP Customer Engagement Initiative (CEI) 2019.

This ultimately led to the data structure of "item hierarchies", which have been introduced in S/4HANA On Prem since the 2022 release. However, operational experience is still lacking; one of our customers wants to be the first company worldwide to use Lean Services with item hierarchies productively in early 2024.

What is the structure of "lean services with item hierarchies" based on?

Hartmut Schwadtke: The basis was actually a German standard, DIN SPEC 77229, which deals with service categories and content for technical services and industrial processing plants. The DIN SPEC, i.e., DIN specifications, are developed by project-related committees with advice provided by DIN. They are faster and more cost-effective than issuing a standard.

Under the DIN SPEC 77229 umbrella, there are currently nine different committees and documentations on the topic of construction, including, for example, for pipeline construction and metal construction, both in 2019, or for scaffolding in 2021 and most recently for cold, thermal and sound insulation or electrical trace heating in 2022.

The aim is to develop item lists with a standardized structure and standardized service categories with detailed service descriptions in order to cope with the enormous number of variants of standard item lists. We have been dealing with the issue in this specialist area for years, and now things are moving forward.

GAEB actually took this step years ago.

Hartmut Schwadtke: Yes, exactly. And not only that: It's not about describing the structure of an item list with service categories, but about the exchange with partners, such as suppliers, otherwise purchasing and procurement won't work – in other words, the focus is on the data exchange. The DIN specifications do not take this into account. Nor do the standard service books for the construction industry, which are inextricably linked to a GAEB structure: The contents of the services specified in this DIN SPEC do not comply with the German Construction Tendering and Contract Regulations (Vergabe- und Vertragsordnung für Bauleistungen, abbreviated as VOB). They are not intended to be used for building construction, civil engineering, hydraulic engineering and transportation construction services, says the scope of application of the respective business plans of DIN SPEC 77229.

So we have GAEB and MM-SRV on the one hand and SAP Item Hierarchies and DIN SPEC 77229 on the other – how shall we put all that together?

Hartmut Schwadtke: That's quite simple: Not at all. What they have in common is the description of services. The difference is the use cases and data structures. Basically, the structure of lean services with item hierarchies is not compatible with GAEB. One might think that Lean Service Procurement is focused on industrial maintenance. And yet it would have been easy to achieve "GAEB conformity" if SAP had thought outside the box and considered the GAEB standard.

Where exactly does the lack of GAEB compatibility occur?

Hartmut Schwadtke: In many areas, in fact, and especially in the construction sector, where it hurts in purchasing. For example, the lot, also called building lot, which can be used to award parts of a measure to different contractors, is missing. With GAEB, the 4 title levels and the lot are counted as a level, the items are added – according to the SAP counting method, there would therefore be 6 levels. However, Item Hierarchies can only map 5 levels.

It is therefore evident that a GAEB-based item list with lots and 4 title levels cannot be transferred to SAP with Item Hierarchies. The numbering is also handled differently. The result: Even without the use of lots, there is no reference between the original GAEB-based item list and the SAP Item Hierarchy.

Earlier you mentioned the engineering office and also the construction department. What happens now with the GAEB XML formats created there?

Hartmut Schwadtke: Such item lists cannot be read into the item hierarchies because, as already mentioned, the structures do not match. The only solution is to send the GAEB file as an attachment to the request for quotation, which is a considerable step backwards for all digitalization efforts.

And where else will there be a hitch in the process?

Hartmut Schwadtke: The topic of "supplements" is certainly worth mentioning here, a tiresome but omnipresent fact in the construction industry. In MM-SRV, a supplement is simply mapped under another item of the same purchase order. This is not possible with Item Hierarchies.

If the purchasing department has to work with 10 purchase orders instead of one purchase order and 10 supplements which amount to 10 purchase order items, then you can hardly speak of active controlling and the purchasers will certainly not like that. As a result, the practicality is also lacking when Item Hierarchies are used to map investment measures, for example.

What does this mean for SAP customers?

Hartmut Schwadtke: Now, without MM-SRV and without the GAEB compatibility of Lean Services, the only option for SAP customers is to scale back the digitalization of SAP-based procurement of construction services. In other words, the item lists posted via FUTURA remain in FUTURA and a cumulative 1 SU is created in SAP.

And that means: Without item list details in SAP, there are no service entries, no purchasing and project controlling and bye-bye to the SAP Digital Core – at least with this type of service procurement. This needs to be said quite clearly.

What is your conclusion?

Hartmut Schwadtke: Basically, as a German SAP customer, you have to assert your interests vis-à-vis SAP, because the fees that SAP demands are not small. After all, a function that previously supported a standard, namely GAEB, is about to be cut. One approach would be for customers to push for a further development of the Item Hierarchies to ensure GAEB compatibility.

The structure and the number of levels to be mapped will not be the decisive factor, what matters is how supplements and purchase order changes are handled.

Thank you for the interview.