When it comes to your supply chain, accuracy, efficiency, swift and informed decision making, and timely responses and adjustments to market and business changes are critical — but a lack of communication between sales, marketing, finance, and operations can be a significant impediment to these goals. The ability to effectively and simultaneously evaluate data from across business functions and simulate various planning scenarios enables faster, more accurate sales and operations planning while reducing costs and increasing inventory efficiency.
During a recent, one-hour live chat with Logistics and SCM, Manufacturing, Procurement, and PLM 2016 speaker Christian Guldager, attendants learned how SAP Integrated Business Planning (SAP IBP) for sales and operations (S&OP), running on the SAP HANA platform, can help optimize demand and supply planning by connecting processes, people/mindset, and IT. Many wide-ranging questions were asked, such as:
- When does it make sense to consider an SAP IBP for S&OP implementation?
- How is SAP IBP for S&OP integrated with other IBP modules (and other SAP modules)?
- If we don't have any S&OP or IBP system in place now, where would be a good place to start? Specifically, what inputs would we need ready to go for such a system to work?
- Should we consider IBP as an alternative to the demand planning (DP) module? What will be the impact on our SAP Advanced Planning and Optimization (APO) installation?
- What finance data would you get from ERP to support the financial impact assessment in S&OP? Or is this data maintained locally in S&OP?
Natalie Miller, SAPinsider: Hi, everyone! Welcome and thank you for joining today’s live Q&A on SAP Integrated Business Planning for Sales and Operations. I’m Natalie Miller, features editor of SAPinsider and insiderPROFILES, and I’m pleased to introduce today’s panelist, Christian Guldager, Senior Management Consultant at Implement Consulting Group.
Christian is responsible for the IBP for inventory service line. His main focus areas are S&OP, inventory optimization, and tactical supply network planning. Within SAP, his focus areas are SAP APO SNP, SAP APO PP/DS, and SAP IBP. He will also be a speaker at our upcoming Logistics and SCM, Manufacturing, Procurement, and PLM event in Vienna!
Hi, Christian, thank you so much for being here today to answer readers’ questions!
Christian Guldager, Implement Consulting Group: Hi, everyone!
Comment from Anjali: How is SAP Integrated Business Planning for sales and operations (SAP IBP S&OP) integrated with its other modules, for example, demand, supply, and response, etc?
Christian Guldager: In IBP release 6.1 we’ll have a unified planning area where all modules are integrated in one data model — except supply and response (yet). This needs to be integrated via SAP HANA Cloud Integration (HCI).
Comment from Sueom: Can you provide some information on setting up forecasting models that are driven by an external factor such as rainfall, from the importing of the history of the external information through to setting up the forecasting algorithm and then using the algorithm?
Christian Guldager: That’s more relevant for demand sensing — not really in scope for this session. Here you can include external data sources, such as the weather forecast. But this functionality is only in the pipeline and has not yet been released.
Comment from Ricardo Duarte: Should we consider IBP as an alternative to the demand planning (DP) module? What will be the impact on our SAP Advanced Planning and Optimization (APO) installation?
Christian Guldager: The answer to this one is, ‘well, that depends.’ Would it improve your forecast process to replace APO DP with IBP for demand or IBP for S&OP? APO will still have some functionalities that are not in IBP for demand nor S&OP yet. And IBP has some functionalities that are not in APO. So the base rule is: Don’t go for new; go for better.
Comment from Sunil: Will the tool be able to give suppliers a requirement based on rules that come into play, say during capacity-constrained runs, and would it reflect a requirement date that might include a buffer based on the capacity constrained plan? This will help in ensuring that supplier commits and supplies will not impact manufacturing. Would the tool do the above in one planning run?
Christian Guldager: In IBP for supply we have a possibility to run optimization algorithms that could consider part of what you’re describing. But it would require more details to answer this question.
Comment from Ian Brister: IBP for demand is as good as APO DP. I wouldn’t say the same for response and supply compared to APO SNP. When do you think IBP could replace the APO SNP module?
Christian Guldager: I think that very much depends on your supply network set-up and your needs. APO has some strong functionalities within shelf life and maturation planning, but they are not yet available in IBP. A simple supply network planning set-up works just fine in IBP supply (and S&OP as well).
Comment from Joe: When does it make sense to consider an SAP IBP for S&OP implementation?
Christian Guldager: I would say that you need to have a fairly mature S&OP process established before the implementation can start — or at least that would ease up the implementation significantly. Also, if you decide to involve sales and finance in the process, it may turn out to be quite complex to start from scratch.
Comment from Laurel: If we don’t have an S&OP or IBP system in place now, where would be a good place to start? Specifically, what inputs would we need ready to go for such a system to work if we were to go down that path?
Christian Guldager: I would start with the process before the system. And then you, of course, need to have the required data available (e.g., forecast, capacities, master data, etc.).
Comment from Anjali: In terms of unified planning area, what is your experience while setting up S&OP-related processes? How can we restrict the technical data structure usage (e.g., key figures, etc.)?
Christian Guldager: Our experience is that you really have to spend time on the data model in the analysis phase. It is important to get the design right in order to utilize the unified planning area in the best possible way.
Comment from nsrinivaasprakash: SAP is hedging heavily on IBP; what is the customer acceptance in the market, and when will we see demand for implementation consultants?
Christian Guldager: We have already started.
Comment from Adrian: Not sure if this is in scope for this Q&A, but does the new 6.1, namely response, offer order integration with SAP ERP (SAP ECC or EM)?
Christian Guldager: Do you mean online integration like the CIF? Then yes. In earlier releases the HCI was handled as scheduled batch jobs.
Comment from Steve: With the unified planning area in 6.1, will it still allow for custom attributes and key figures? How will they have to relate to the standard objects provided for planning?
Christian Guldager: Not sure if I understand the question correctly, but you will create a copy of the SAP planning area, and then you are free to create your own attributes, master data types, key figures, planning levels, etc.
Comment from Steve: That’s perfect; thank you. Just like SNP.
Christian Guldager: Yeah, more or less. Though with differences with regards to flexibility.
Comment from Ingrid: Does SAP IBP for S&OP link to other IBP modules (and other SAP modules)? If so, how does it? What are best practices?
Christian Guldager: IBP S&OP links to all other IBP modules (same data model in R6.1). The integration to SAP APO and SAP ECC is still via HCI. But do not consider HCI as you consider the CIF: It might not be the same data you want to send in both directions. HCI provides standard mapping templates, and you can also do your own mapping and apply rules as well.
Comment from Hurley: I’m new to this solution. Speaking broadly, what are the differences between SAP IBP versus SAP Business Planning and Consolidation (BPC)?
Christian Guldager: Without knowing too much about BPC, I guess that BPC is mostly focused on finance, whereas IBP covers operation, sales, and finance.
Comment from Pier: I appreciate that it very much depends on business requirements, operating model, and scope of a company, but do you think that SAP IBP would make sense without having had SAP SCM (APO) implemented (e.g., DP/SNP and GATP), with the company using SAP ERP as its back-end system? Or is SAP IBP more the next step up for mature clients that have had APO for few years? Consider a situation where the company would need some of the functionality delivered by APO, for example complex product substitution, enhanced shortage management like interactive backorder processing, fair share allocations, etc. Or would it still be recommended to have SAP ERP, SAP APO, and SAP IBP to deliver some of those functionalities? Therefore, is IBP the evolution of demand planning more than the other components?
Christian Guldager: APO is not dead for sure. However, APO is not required in order to implement IBP. IBP could work on top of ECC (or Microsoft Dynamics). Keep in mind that IBP does not include all APO functionalities. And right now it is hard to say how many of the APO functionalities we will see in IBP — and when.
Comment from Guest: Do you think APO will disappear? If yes, when?
Christian Guldager: APO is not dead — and the only thing SAP has stated is that it will be supported at least to 2025, probably extended.
Comment from Sanjeev: With the kind of push SAP is giving IBP, will it mean that DP and SNP are on the verge of being phased out in the near future?
Christian Guldager: I will give the same answer to this one as well: APO is not dead! But no doubt, SAP will have a lot of focus on IBP development.
Comment from Adrian: What finance data would you get from ERP to support the financial impact assessment in S&OP? (Or is this data maintained locally in S&OP?)
Christian Guldager: Here are some examples: prices, cost prices, and sales prices budgets. These can be loaded from ECC. But you can also supplement with data directly in IBP S&OP (or from other sources).
Comment from Guest: Does IBP cover production planning as well?
Christian Guldager: Yes; depending on the requirements, it is covered in IBP S&OP and IBP for supply, where you have different kinds of heuristics and optimization algorithms.
Comment from Guest: Is SAP IBP a good solution if there is a requirement to plan sales by product and channel at a daily (365 days) level?
Christian Guldager: In IBP for demand you can plan on a daily level. In S&OP, the lowest aggregation is weeks. You decide the level of planning yourself, and this is one of the main strengths of IBP in my mind.
Comment from Sanjeev: So what is the compulsive factor to choose between the decision to implement APO vis-a-vis IBP?
Christian Guldager: That is a quite broad question, and my quick answer would be: flexibility and speed in planning on different aggregation levels.
Comment from Guest: What additional functionalities does IBP have that we don’t see in APO?
Christian Guldager: There are many. Some of the main functionalities are the flexibility to freely create attributes, master data types, and planning levels. This helps to create one overall S&OP, where sales, finance, and operations can see their numbers on desired levels. And then of course the Excel front end!
Comment from Babloo: Suppose a customer has decided to implement IBP S&OP in place of APO DP and SNP. What would be the implementation approach? Is there any way to copy all information in the object data structure from existing APO, or do we have to create it new for IBP S&OP?
Christian Guldager: Not that I know of. And would you anyway? If you’re deciding to implement IBP, it should not be a copy of APO.
Comment from John: Please expand on your experience: In addition to the level of planning, what other strengths do you see in IBP compared to DP and SNP?
Christian Guldager: The strengths are flexibility in planning structure, real time calculations and scenarios, and the Excel front end.
Comment from John: What was the hardest issue you’ve had to solve in an IBP implementation?
Christian Guldager: If you think of the system, then a challenge is to get the data model design right from start. But, actually, the biggest challenge is the change management part. Process and people should have 80% of the attention and the system 20%.
Comment from Pier: Are the concept and functionality of product allocation (quota management) (available in SCM and APO GATP and DP, and in that is working for both STO and sales order flows and can be used to constrain allocations for certain time buckets) already part of SAP IBP response? If not, are there any plans to include that functionality?
Christian Guldager: There are some advanced prioritization rules in IBP response and supply. And SAP S/4HANA will provide some advanced ATP functionalities in the future.
Comment from Anjali: Will it be beneficial for SAP IBP S&OP to integrate with BPC for SAP S/4HANA to do optimized and profitable S&OP?
Christian Guldager: A broad question, but yes. SAP definitely strives to integrate S/4HANA to IBP to optimize the planning functionalities in general.
Comment from Babloo: If IBP and APO have two different implementation processes, then why not focus on improvement in APO performance? Are there any challenges? Please share your experience. We are facing a lot of issues in planning book performance, like drill-down on characteristics level, so will IBP solve this?
Christian Guldager: IBP definitely has some strong features when it comes to aggregation and disaggregation. Also, with regards to performance, the poor performance in APO can be caused by different things that can probably also be solved.
Comment from Anjali: Thanks, Christian, for your valuable inputs. Now it looks like we will have to spend more time on the design phase to use the unified planning area to get proper results to fit the customer requirements mapping.
Christian Guldager: Great!
Comment from Dinesh Goyal: Currently, when IBP targets planning for mid-term to long-term, APO will be used for short-term planning, is this correct? If yes, then should we implement both APO and IBP?
Christian Guldager: For supply planning, yes. PP/DS will move to ECC, by the way. IBP for demand can actually also plan on very short horizon (daily buckets, week 1-3).
Comment from Dinesh Goyal: Is it correct to say that with the current set up, we need both APO and IBP? Can we map all constrains in IBP that we can in APO?
Christian Guldager: I definitely think APO and IBP support each other very well. And you should only move to IBP what makes sense. So yes, it’s good to do a mapping and decide accordingly.
Comment from Emily: What is some advice you would give for dealing with change management issues that arise as a result of an integrated S&OP initiative?
Christian Guldager: Involvement, stakeholder enforcement, involvement, and involvement! I have also written an article on 7 viewpoints on IBP for S&OP implementation.
Natalie Miller: What an informational hour! I’d like to thank you all again for joining us today and for all these great questions! And a big thanks to Christian for his insightful answers!
Meet the panelist:
Christian Guldager, Senior Management Consultant, Implement Consulting Group
Christian is responsible for the IBP for inventory service line at Implement Consulting Group and is part of the overall service line for IBP. His main focus areas are S&OP, inventory optimization and tactical supply network planning. Within SAP, his focus areas are SAP APO SNP, SAP APO PP/DS, and SAP IBP. The ICG Planning Excellence team is one of the leading SCM-APO/IBP implementation partners in Europe, delivering projects globally.