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Integrated Business Planning for Demand Transparency

New Cloud Solutions Enable Companies to Quickly Create and Execute Integrated Plans for Demand Networks

by Martin Barkman | SAPinsider, Volume 15, Issue 4

October 1, 2014

Purchasing power and information are shifting to end consumers and customers, who increasingly demand individualized products and services delivered with a high sense of urgency. Read this article to learn how SAP’s cloud-based solutions for integrated business planning and supply chain monitoring enable companies to transform their supply chains by facilitating real-time decision making, providing visibility to drive predictive demand planning, and helping to orchestrate the right response.

 

Earlier this year, SAP introduced its strategy for enabling companies to transform their supply chains into demand networks, where demand information is captured through new signals and fulfilled through the orchestration of a complex network of internal and external partners. This strategy is driven by the changing business realities faced by companies today. For example, demand volatility is increasing due to the rising middle class in emerging markets, aging populations in traditional markets, and the “always-on” millennial generation, which is more informed, connected, and empowered. Innovative and disruptive technologies such as 3D printing, machine-to-machine connectivity,1 and the Internet of Things are forcing companies to rethink how they set up their supply chains. And as customer expectations change,logistics networks are becoming more complex.
 
SAP’s supply chain strategy is centered on four main pillars:

  1. Supply Chain Monitoring to enable end-to-end visibility and segmentation of customers, products, and suppliers
  2. Integrated Business Planning to gain full demand transparency for short-, mid-, and long-term periods to subsequently drive operational demand and supply planning processes downstream for true end-to-end planning
  3. Demand Driven Supply Networks to gain market and customer intelligence to facilitate supply chain processes across the network
  4. Logistics and Order Fulfillment to align integrated distribution and fulfillment processes around speed, efficiency, and sustainability

This article focuses on the first two pillars and the SAP solutions that enable them.

Integrated Business Planning and Supply Chain Monitoring

Purchasing power and information are shifting to end consumers and customers, who increasingly demand individualized products and services delivered with a high sense of urgency. To succeed, companies require the ability to capture, interpret, plan, and quickly act on real-time information in a fast, efficient, and profitable way. Supply chains must adapt by leveraging new technology platforms that facilitate real-time decision making, provide visibility to drive predictive demand planning, and orchestrate the right response.
 
In July 2014, SAP launched several new cloud-based solutions that enable companies to more quickly develop, orchestrate, and execute integrated business plans with real-time information. The new SAP integrated business planning and supply chain monitoring solutions are comprised of SAP Integrated Business Planning for sales and operations, SAP Integrated Business Planning for inventory, SAP Integrated Business Planning for supply, and SAP Supply Chain Control Tower (see Figure 1). These solutions contain a collaborative environment for sales and operations planning across global functions, new optimization algorithms, and supply chain monitoring capabilities. With the speed of SAP HANA and fast adoption through SAP Cloud, they enable analysis and alerts of real-time information across the end-to-end supply and demand network.

An overview  of the new SAP integrated business planning and supply chain monitoring solutions

Figure 1 — An overview of the new SAP integrated business planning and supply chain monitoring solutions

Transforming from a supply chain to a demand network requires end-to-end visibility and segmentation of customers, products, and suppliers. Think of SAP Supply Chain Control Tower as the overarching supply chain view with big data analytics as its primary engine to drive the acquisition, cleansing, and harmonization of data from the entire demand network in real time. The control tower not only monitors current activity, but also provides an environment for the what-if simulations and predictive analytics required by supply chain professionals. 
 
Aligning supply and demand is crucial to success, and a collaborative network not only facilitates the open exchange of data for sales and operations planning, but also drives enhanced communication among all of the stakeholders involved. This is especially important given the diminishing boundaries between supply chain professionals and other areas of the business such as finance, marketing, or sales. Supply chain professionals must have a clear understanding of the market situation, end-to-end visibility, and access to analytics and simulation capabilities. SAP Integrated Business Planning for sales and operations allows users to analyze the impact of different supply and demand scenarios, without the need to jump between systems (see Figure 2).

A dashboard view of SAP Integrated Business Planning for sales and operations

Figure 2 — A dashboard view of SAP Integrated Business Planning for sales and operations

SAP Integrated Business Planning for sales and operations utilizes a heuristic approach to create a feasible rough-cut capacity plan. As an alternative, customers can use SAP Integrated Business Planning for supply, which can determine the optimal plan from either a lowest cost or a maximum profitability standpoint.
 
To ensure that the agreed-upon plan is enacted, certain key output parameters from the plan, such as inventory, are fed to the operational systems. SAP Integrated Business Planning for inventory translates demand and supply plans into specific inventory targets for every item at every location for each time period in the future planning horizon. These inventory targets are then updated in the operational systems, thereby connecting the sales and operations plan to the execution processes.

Frequently Asked Questions

Many companies are asking SAP how they should adjust their supply chain planning roadmap given the introduction of SAP’s solutions for integrated business planning. Not only are the business users interested in the specific value that these solutions bring compared with SAP Advanced Planning and Optimization (SAP APO), but they also are interested in if and when these new solutions may in part supplant SAP APO. Here are some questions we are hearing from customers:

Q: Why did SAP choose to build a new solution set and not just enhance SAP APO?

A: Over the past few years, SAP has extended its planning footprint beyond SAP APO with the introduction of SAP Sales and Operations Planning, SAP Demand Signal Management, and SAP Enterprise Inventory and Service-Level Optimization. Based on the business drivers discussed at the beginning of this article, SAP envisions a state-of-the-art demand network that puts the customer at the center of all processes and connects all the business partners required to fulfill the demand with the speed customers are expecting, while meeting all efficiency and profitability goals. With this new approach, SAP decided to simplify the overall planning platform with speed, customer-centricity, and responsiveness in mind. The SAP approach leverages SAP HANA technology and enables a common data model, allowing for real-time data across supply chain planning solutions. Moving from an on-premise technology to a purpose-built, cloud-based technology gives customers multiple deployment options moving forward.

Q: Does this mean SAP APO is going away?

A: No, SAP APO remains an important part of SAP’s supply chain portfolio and delivers significant value to companies. This year SAP has significantly enhanced SAP APO in the areas of usability, analytics, performance, and total cost of ownership. It is a proven solution and has been adopted by thousands of customers around the world. Customers should continue to deploy and use SAP APO, considering that in the short term most new capabilities within SAP’s new supply chain strategy are incremental to SAP APO and will work with it rather than replace it. SAP’s solutions for integrated business planning create options that otherwise would not be available. Now companies can continue with SAP APO while deploying the different integrated business planning solutions in parallel as they become available and meet business requirements. SAP APO is part of SAP Business Suite and inherits the planned maintenance timeframes. On October 14, 2014, SAP announced that SAP is complementing its innovation commitment by prolonging mainstream maintenance until the end of 2025 for SAP Business Suite 7 core application releases, including SAP Supply Chain Management 7.0. 

Q: Will all of the features in SAP APO be included in the new integrated business planning solutions?

A: This is not a rewrite of SAP APO on a new platform. Over time, business needs have changed, new algorithms have evolved, and technology for decision support has advanced. SAP intends to support business’ current and future needs, taking advantage of new technologies and innovations and 20 years of experience. In the spirit of simplification for cloud-based solutions, not all SAP APO features will be replicated. It is also planned that additional new features and relevant industry-specific requirements will be included over time.

Q: How do I get started?

A: This depends on your business priorities and strategies. It is a journey and customers should develop a synchronized short- and long-term roadmap. We recommend a phased, step-by-step deployment approach. To ensure flexibility, each of the new modules can be deployed independently or together. In the short- to mid-term, customers should focus on new capabilities to enhance their existing supply chain management deployments.

Drive Tangible Business Value

The new solutions enable companies to transform their supply chains into demand networks by:

  • Simplifying and coordinating the planning experience for users across functions through a new user interface with embedded collaboration technology and the option for planners to work within Microsoft Excel
  • Reacting more quickly to changes in demand to capture more sales by leveraging SAP HANA to provide demand networks with real-time monitoring and a focus on short-term planning
  • Enabling more frequent planning cycles by avoiding any latency due to data transfer between different planning systems
  • Ensuring plans are executed in operational systems by incorporating predictive analytics (for example, demand sensing) algorithms in combination with optimization (for example, multi-echelon inventory optimization) to translate plans into operational systems
  • Reducing complexity and time to achieve business value through deployment in SAP Cloud
Future Development

Two additional modules are planned for development: SAP Integrated Business Planning for demand and SAP Integrated Business Planning for response. These will round out the integrated business planning solution set, enabling companies to plan end-to-end processes on a common, real-time SAP HANA platform. Leveraging the SAP Cloud platform, new versions of the solutions can be developed and released faster than is traditionally possible with on-premise solutions. For more details, visit www.sap.com/scm and www.sapscm-webcasts.com.

 

1 For more details, see “How Will the 4th Industrial Revolution Affect Your Business?” by Mike Lackey in the July-September 2014 issue of SAPinsider. [back]
 

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Martin Barkman
Martin Barkman

Martin Barkman (martin.barkman@sap.com) is Vice President and Head of Demand-Driven Business Planning in SAP’s Supply Chain Management group. He has global responsibility for strategy, alliances, go-to-market, and sales enablement for solution areas such as sales and operational planning, inventory planning, demand planning, demand sensing, and demand signal management.



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