This is the second of a two-part blog that examines how SAP Integrated Business Planning applications help companies achieve a next-generation supply chain. Part 1 focused on the macro trends that pressure companies to take their supply chain maturity to the next level, and looked at the HCL Responsive Financial and Business Planning framework.
The question I am most often asked from clients who are looking into SAP Integrated Business Planning is what the suite of applications means for SAP Advanced Planning and Optimization (SAP APO). After all, companies have successfully been using SAP APO for years for demand management (SAP DP) and supply planning (SAP SNP), order fulfillment (SAP GATP) and production planning and scheduling (SAP PPDS). With forecasting and planning functionalities being a cornerstone of the SAP Integrated Business Planning applications, customers are curious if the suite is intended as an SAP APO replacement. Or, if not, how the applications complement existing planning and forecasting models in SAP APO.
To better understand the answers to these questions, it’s worth noting that SAP Integrated Business Planning began as an S&OP layer on top of SAP APO. However, with the release of new modules within the past two years, customers soon realized that IBP will become a compelling alternative to APO DP and APO SNP with a lot of add-on benefits.
In demand planning, for example, SAP Integrated Business Planning for Demand has become a solid alternative to APO DP with few key additional benefits. These include a predictive analytics library of forecasting models as well as a demand sensing engine. This engine accurately restates the monthly forecast into daily or weekly buckets within the short term horizon. Such a capability is of great benefit in industries such as wholesale distribution, Consumer goods, where forecast accuracy in the near term horizon is extremely valuable to optimize the short term replenishment process at the customer facing warehouses.
On the rough-cut capacity planning and supply side of the supply chain, what-if simulation functionality in SAP Integrated Business Planning is far superior to the capabilities of SAP SNP with the introduction of a scenario functionality (different from a version copy). It gives the user the ability to seamlessly create a what-if scenario “on the fly”. The optimizer delivered with SAP Integrated Business Planning for Supply is capable of true financial-based optimization (i.e., optimizing a profit key figure defined in currency or maximizing the revenue defined in currency). This was never possible before with the SNP Optimizer and this can be extremely valuable in industries like oil refineries. Furthermore, SAP Integrated Business Planning for Inventory offers a best of breed multi-echelon inventory optimization solution. It has been developed following the acquisition of SmartOps by SAP. This fills a huge gap which was never closed in APO SNP.
However, some noticeable functionality available in APO is not yet available in SAP Integrated Business Planning. This includes an order series based integration to SAP ERP or SAP APO (i.e., no APO CIF like solution yet), but this might be resolved with the release of SAP Integrated Business Planning for Response expected early 2016. SAP Integrated Business Planning also does not include any Capable to Match (CTM) type planning engine.
In totality, the above elements – combined with a modern user interface and the processing speed of SAP HANA – make for a strong alternative to SAP SNP and SAP DP. The caveat is that SAP APO is a mature solution that offers seamless integration to SAP ERP, and a customer likely has to satisfy many specific unique functionalities not yet supported by SAP Integrated Business Planning for supply. Looking at the other components of APO, as of today, SAP PPDS and SAP GATP are not inside the scope of SAP Integrated Business Planning applications, and may never be.
With a better side-by-side understanding of SAP Integrated Business Planning and SAP APO, let’s explore a few of the more common adoption scenarios. For the majority of HCL customers who are looking at SAP Integrated Business Planning applications to raise their supply chain maturity level, the adoption scenario that most resonates is implementing the applications for demand sensing and inventory optimization. This adds tremendous value for any organization with a large distribution network, or that needs to fine-tune inventory for same-day or next-day service levels. For companies of all sizes that cope with high-volume, high-velocity, and narrow customer-facing lead times we even see them considering the full replacement of SAP APO DP currently used for long-term forecasts
Another common scenario we see for adoption is specific to companies with revenues of roughly $1 to $3 billion, and those who though they may have been running SAP for some time but never felt the need for SAP APO because they are either doing fine with the MRP solution within SAP ERP or they are running a non-SAP advanced planning solution bolt-on on SAP ERP.. These companies generally feel the need for moving their supply chain maturity to the next level by investing into a closely integrated supply chain planning solution and SAP Integrated Business Planning is quickly seen as their number one choice. In addition, SAP Supply Chain Control Tower, which is part of the SAP Integrated Business Planning applications, is central to the next-generation supply chain as a real-time monitoring tool that provides visibility into the end-to-end supply chain, alerting customers to real-time issues that may arise. To contact HCL, email firstname.lastname@example.org.
Sylvain Faure is a senior supply chain professional with 20 years of experience focused on supply chain process transformation. As a manager and an expert in the field of supply chain, he possesses both business strategy breadth and tactical depth to successfully execute a multi-faceted supply chain vision.