Sales and operations planning (S&OP) is a periodic business process that involves focusing on and synchronizing financial, demand, and supply planning. Most organizations follow a monthly process that consists of the following steps: demand review, supply review, pre-S&OP review, and executive review (Figure 1).
A sales and operations planning process cycle
Organizations may have many process steps according to their requirements. The S&OP planning process requires up-to-date forecast data to plan sales, production, inventory, customer lead time, customer back orders, new product developments, strategic initiatives, and financial plans. The planning horizon and frequency vary based on specific industry.
SAP S&OP is built on SAP HANA’s aggregation and planning engine. The solution is based on SAP HANA, which can handle large data and calculations with high performance. SAP S&OP features standard modelling for demand, supply, finance, and supply chain planning. Various planners can plan what-if simulations in real time and plan very quickly at all levels due to the in-memory computing platform. SAP S&OP enables real-time collaboration with various stakeholders to take input and consensus with transparent data to achieve an organization’s common goal — volume, revenue, and profitability. SAP S&OP’s user interface is based on Excel and web services.
In the demand review of the SAP S&OP business process, review of forecast accuracy is an important step.
I cover advanced demand planning of SAP S&OP powered by SAP HANA, configuration and execution of advanced demand planning for statistical forecasting, and challenges of integration. I also list a few tips for you to use in the “Tips” section.
Supply Chain Planning Options with SAP S&OP and SAP HANA
SAP S&OP integrates with other applications in the SAP Supply Chain Management suite. Figure 2 is a diagram of SAP S&OP system architecture.
System architecture of SAP S&OP 3.0
In most organizations, supply chain planning is performed in SAP’s Advanced Planning and Organization (APO) system or JDA Software Group, Oracle, or another supply chain planning application. Execution is performed in SAP ERP Central Component (ECC) or other systems. SAP S&OP powered by SAP HANA is for review of S&OP processes of demand, supply, and finance.
For example, consider a scenario in which an organization implements and uses SAP APO demand planning for statistical forecasting monthly or periodic demand at the product level. Once all the stakeholders give consensus on the statistical forecast, it is released to SAP Supply Network Planning for supply planning and for executing to ECC.
During execution, changes may occur for an increase in demand or a shortage of inventory. These changes require corrective action and decision making. SAP S&OP’s business solution can be leveraged for real-time decision making and corrective action by involving and collaborating with various stakeholders.
SAP S&OP 3.0 powered by SAP HANA, Support Package 01 includes functionalities and options for various processes. For demand processes, SAP S&OP 3.0 powered by SAP HANA, Support Package 01 offers the following functionalities:
- Consensus demand plan review
- Sales forecasting — Quantity and price, revenue
- New products review
- Product life cycle management — new product, end-of-life products
- Statistical forecasting
For supply processes, SAP S&OP 3.0 powered by SAP HANA 3.0, Support Package 01 offers:
- Unconstrained supply plan
- Unconstrained capacity plan
- Demand sourcing
- Constrained plan — Single-level and multilevel supply planning
For finance, SAP S&OP 3.0, Support Package 01 offers functionality for budget or annual operational plan review planning and profitability planning. SAP S&OP can do supply chain planning with a few functionalities provided all the related supply chain data is maintained or integrated in SAP S&OP (e.g., consensus demand planning or collaboration with an internal team).
SAP does not recommend doing supply chain planning in SAP S&OP. As of now (release 3.01 of S&OP powered by SAP HANA), SAP recommends that you do the supply chain planning activities in SAP Advanced Planning and Optimization (APO) or any other planning applications you are now using in your organization and only do the adjustment of the planning data during the review in SAP S&OP for consensus demand plan, supply plan.
(Note: APO is used for supply chain planning and SAP S&OP powered by SAP HANA is used to review planning results for decision making. Simulation is done in SAP S&OP.)
Advanced Demand Planning with SAP S&OP
SAP S&OP demand review provides users with all the details required for demand review, such as details of demand quantity and price on the time period horizon at all the planning levels. This data helps stakeholders collaborating with each other to enable sales, marketing, and finance teams to develop a consensual demand plan and achieve their organizations’ goals. Preparation of an unconstrained demand plan requires statistical forecast, sales forecast, marketing promotions, demand planning data with quantity, price, revenue, and profit.
SAP S&OP has provided standard models and calculations that you can use during S&OP demand review. These models are SAPMODEL1 and SAPMODEL2. SAPMODEL1 covers SAP S&OP’s main functionalities, such as sales and marketing forecasting, consensus demand planning, inventory planning, and executive review.
SAPMODEL2 covers SAP S&OP’s multilevel supply planning. With SAPMODEL2, you model and plan a deep level network of locations and production steps using master data sourcing rules, resources, and bills of material using supply planning algorithms to develop the plan for your supply chain network.
Some of the SAP-delivered planning views include templates and analytics that you can use or copy for modification per the business requirement for demand review. I discuss some of these views in this section. If the SAP-delivered template does not meet the business requirements, then the implementation team needs to configure the templates and analytics per the business requirements (e.g., any additional key figure to be added).
Consensus Demand is used for viewing details of demand data to discuss and come up with a consensus regarding a demand plan. To reach the screen, log on to the SAP S&OP HANA Excel add-in with your credentials (user ID, password, and your organization’s web connection that you have already configured on your SAP S&OP HANA Excel add-in). After a successful log-in, select Templates from the Excel S&OP ribbon and then choose Consensus Demand from the drop-down list of templates. On the screen, you see the Planning view of Consensus Demand per the predefined template (Figure 3).
The Consensus Demand planning view
After viewing the data, click the save data icon from the Excel S&OP ribbon.
Sales Input enables sales managers to provide their input. To reach the screen, log on to the S&OP HANA Excel add-in according to the instructions above. Select Templates from the Excel S&OP ribbon and click Sales Input from the drop-down list of templates. On the screen, you see the Planning view of Sales Input per the predefined template (Figure 4).
After viewing the data, click the save data icon from the Excel S&OP ribbon or close the planning view by clicking the close Excel icon .
The Sales Input planning view
Sales Manager enables sales managers to review the demand data (Figure 5). To reach the screen, log on to the S&OP HANA Excel add-in according to the steps I have already described. Select Templates from the Excel S&OP ribbon and choose ZA_Sales Manager from the drop-down list of templates. On the screen, you see the Planning view of ZA Sales Manager per the predefined template. After viewing the data, click the Save Data button from the Excel S&OP ribbon or close the planning view by clicking the close Excel icon.
The Sales Manager planning view
New Product Transaction is used especially for checking the new products transition effect on marketing forecasts, price, and revenue (Figure 6). After logging in to the S&OP HANA Excel Add-in, Select Templates from the Excel S&OP ribbon and choose New Product Transition from the drop-down list of templates. On the screen, you see the Planning view of New Product Transition per the predefined template.
After viewing the data, click the save data icon from the Excel S&OP ribbon or close the planning view by clicking the close Excel icon.
The New Product Transition planning view
Now you can view the statistical forecast data. To do so, log on to the S&OP HANA Excel add-in. Select Templates from the Excel S&OP ribbon and choose Statistical Forecast from the list of templates. In the screen, you see the Planning view of the statistical forecast per the predefined template (Figure 7). After viewing the data, click the save data icon from the Excel S&OP ribbon or close the planning view by clicking the close window Excel icon.
The Statistical Forecast planning view
To reach the screen to view forecast accuracy, log on to the S&OP HANA Excel Add-In. Select Templates from the Excel S&OP ribbon and choose Forecast Accuracy. In the screen, you see the Planning view of Forecast Accuracy as per the predefined template (Figure 8).
After viewing the data, click the save data icon from the Excel S&OP ribbon or close the planning view by clicking the close Excel icon.
The Forecast Accuracy planning view
When demand planners and stakeholders log on to the web UI, they see a dashboard that is preconfigured. You can set this dashboard per your requirements to view the dashboard. You can configure the settings for the dashboard by clicking the analytics icon from the menu bar on the left side of the screen shown in Figure 9. Select the Chart from the list to configure the settings (e.g., forecast versus actuals by family) and click the Explore button.
Select data for Scenarios, Key Figures, Attributes and Time. For a graphical view of the data, select a bar type from the following options in the drop-down list:
- Horizontal Bar
- Horizontal Bar Stacked
- Vertical Bar Stacked
- Vertical Bar Cluster
Click the save data icon to save the settings.
Configuration settings for a sample analytics chart
To configure settings for the dashboard shown in Figure 10, click the analytics icon and select Dashboard. Select the Edit Dashboard button, and from the available charts, select charts to view on the dashboard. (You can select a maximum of four charts to view on the dashboard.) For example, select the SAP-delivered dashboard Demand Review from the list (Figure 10).
A sample analytics dashboard with configuration settings
The dashboard is the place from which SAP S&OP users receive the first set of data to make decisions. A sample dashboard is shown in Figure 11.
An example of an SAP S&OP dashboard
Demand Planning Functionality Options
SAP S&OP has provided options for planning functionalities, such as demand planning and supply planning. In this section, I explain demand planning functionality supported by SAP S&OP 3.0 powered by SAP HANA, Support Package 01.
Consensus demand planning: Consensus demand planning is integrated with SAP S&OP from APO (or JDA, Oracle, other systems) and adjusted in an SAP S&OP system for various scenarios or simulations. A demand plan is integrated in an SAP S&OP system with quantity and it is converted to revenue.
Standard planning views are available to view the aggregated and details levels using SAP S&OP and an Excel add-in. Analytics are available to view a consensus demand plan at an aggregated level, at a planning level, by market share, by responsible person, by revenue, or by profit using the web UI. You develop or customize a planning view and analytics per the business requirements.
Sales forecasting: The initial sales forecast comes to SAP S&OP from an APO or ECC system. The sales manager has standard planning views for sales input and sales forecast quantity. In SAP S&OP you can view sales forecast quantity, price, and revenue. Analytics are available for sales forecast and for the sales manager to do offline sales forecasting.
Statistical forecasting: Statistical forecasting input comes from an APO system by integrating APO and SAP S&OP. The planner can also download an APO statistical forecast in an Excel sheet and upload it to the SAP S&OP system via data integration to SAP S&OP.
In SAP S&OP, you can do long-term forecasting, revenue or price forecasting, or scenario forecasting with the Excel add-in. You can also execute an attached rate forecast run with the Excel add-in.
An SAP HANA Predictive Analytics Library (PAL) native to SAP HANA is available that includes statistical forecast methods that can be integrated with SAP S&OP defining with planning operators.
SAP S&OP has standard statistical forecast methods as single, double, triple exponential smoothing, and N-month moving average. To calculate the statistical forecast, you need to define the statistical forecast parameters, such as alpha, beta, and gamma values, required to define in the web UI. Users can use pick the best option to optimize all parameters across multiple methods based on minimum forecast error for a defined time.
Various users such as sales planners, demand planners, and business analysts can use statistical forecasting using an Excel add-in.
Product life cycle management: New product introduction and end-of-life product details are mainly done in an APO system. Details can be integrated with SAP S&OP.
Standard planning views are available for new product introduction, end-of life product, curve-fit modeling, and like modeling. Master data, combinations for a new product, and end-of-life can easily be maintained in an SAP S&OP Excel add-in.
Users can perform the supply chain planning of SAP S&OP business processes easily using the Excel add-in’s advanced functionality (Figure 12).
S&OP HANA Excel add-in view
As of now, advanced functionality for Demand Planning includes statistical forecasting and ABC classification. ABC classification is in the beta stage as of the writing of this article, so I concentrate on elaborate statistical forecasting.
The option of executing statistical forecasting in SAP S&OP is mainly used during a demand review, an ad hoc SAP S&OP meeting, or an executive SAP S&OP review in which stakeholders want to see what-if scenarios. You can see if any data changes are required during a review meeting and make a quick decision.
SAP S&OP offers the following standard statistical forecasting methods:
- Moving average (MA)
- Single exponential smoothing (SES)
- Double exponential smoothing (DES)
- Triple exponential smoothing (TES)
They are optimized for all methods.
SAP S&OP offers the following statistical forecasting parameters:
- Alpha (applicable for SES, DES, and TES)
- Beta (applicable for SES and TES)
- Gamma (applicable for TES)
- No of periods (applicable for MA)
SAP HANA PAL statistical forecasting is also available. PAL defines functions that can be called from within SQLScript procedure to perform analytic algorithms. As of now PAL includes classic and universal predictive analysis algorithms and has the data-mining categories shown in Table 1.
SAP HANA PAL algorithms
Statistical forecasting configuration has to be done in the web UI to set a statistical forecast profile. After this configuration is completed, execution of the statistical forecast is done in the Excel add-in.
Configuration of a Statistical Forecast via the Web UI
To enable statistical forecast planning in SAP S&OP, required configuration has to be done via the web UI. A system administrator of the SAP S&OP system has to assign the correct role to provide permission for statistical forecasting execution and configuration to the user. If you have a role assigned to configure statistical forecasting, then that person can configure the system for execution of a statistical forecasting run in the Excel add-in.
Statistical Forecast Profile
To reach the configuration settings for the statistical forecast profile, log on to the Web UI with your credentials (user ID and password). If you have authorization to perform the configuration, click the configuration icon from the left panel of the screen. On the screen you see all the configuration options. Select Manage Statistical Forecast Profile from the Miscellaneous Settings area and click it. The screen shown in Figure 13 displays details for managing the Statistical Forecast Profile.
You need to select a planning area for statistical forecasting from the drop-down menu in the Statistical Forecast Profiles in Planning Area (e.g., SAP2). You also choose forecast methods to use for a forecast process in the planning area. Maintain the Input Keyfigure, Output Keyfigure, Historical Periods, Future Periods, Periods Per Season, Historical Error Periods, Past Period Offset, and Forecast Period Offset fields. In the Statistical Forecast Methods section, select a check box beside a method. In my example I selected Double Exponential Smoothing and entered Double Exponential Smoothing – Trend in the Profile Description field. I also populated the other fields as shown in Figure 13. Click the save icon to save your entries.
Configuration settings for a Statistical Forecast Profile
A statistical forecast can be done on price by following all the steps explained above. In the Input Keyfigure field of Figure 13, select Actuals Price, and in the Output Keyfigure field, select Statistical Fcst Price. In the screen shown in Figure 14, enter Optimize All Methods in the Profile Description field. Populate the other fields in this screen per your requirements. In the Statistical Forecast Methods section, select all the check boxes in the All column.
Sample configuration for statistical forecast profile – OPTIMIZEALLMETHODS
Click the create icon to forecast profiles per the business requirement and click the save icon.
Manage Statistical Forecast Method Parameters
Statistical forecast process methods enable the planning area for forecasting. When you run statistical forecasting for a forecast process having more than one forecast method, SAP S&OP automatically uses the method with the least errors.
Maintain value sets alpha, beta, gamma, K for forecast methods for the planning area — for example, SAP2 (Figure 15). Forecast methods results differently with different parameters. The number of value sets can be maintained for each forecast method. When you run statistical forecasting for a forecast process having a forecast method with several parameter value sets, SAP S&OP automatically uses the method and parameter value set with the least error.
To reach the configuration settings for statistical forecast profile, log on to the web UI. If you have authorization to do the configuration, click the configuration icon from the left panel of the screen. On the screen you see all the configuration options. Select Manage Statistical Forecast Method Parameters from the Miscellaneous Settings area and click it. You see the details in the screen for managing the Statistical Forecast method parameters (Figure 15).
Sample configuration setting for Statistical Forecast Method – Parameters
Most of the time business requirements have different statistical forecast method parameters. In that case, based on the business requirement, maintain any new combinations by clicking the create icon. After maintaining the new combinations, click the Save button.
By maintaining Planning Operators – FORECAST, users are able to view advanced planning options in the SAP S&OP Excel add-in ribbon and enable a statistical forecast (Figure 16).
To reach the configuration settings for statistical forecast profile, log on to the web UI. If you have authorization to perform the configuration, click the configuration icon from the left panel of the screen. On the screen you see all the configuration options. Select Manage Planning Operators from the Miscellaneous Settings area. After you click Manage Planning Operators, the screen displays details for managing the Planning Operators (Figure 16).
Sample configuration settings – Manage Planning Operator – FORECAST
In case you are not able to view the option of statistical forecasting in your Excel add-in in the Advanced section (Figure 17), notify the system administrator.
The statistical forecast is not visible on the Excel S&OP ribbon
If the Statistical Forecast Option is not visible in the Advanced’ section of the S&OP ribbon, the system administrator needs to create the Planning Operator Type FORECAST to get the statistical forecast option on the Excel S&OP ribbon per the planning operator for the forecast value and description value shown in Table 2.
Planning operator forecast definition and description values
To create the New Planning Operator Type FORECAST, click the configuration icon from the left panel of the screen. On the screen you see all the configuration options. Select Manage Planning Operators from the Miscellaneous Settings area. By clicking Manage Planning Operators, you see the details on the screen for managing the Planning Operators. On this screen select the create icon to create a new planning Operator Type. A pop-up screen prompts you to enter the details. Enter the value as FORECAST and click the OK button.
In the screen that appears, enter the details as shown in Figure 18.
Enter details for the planning operators
In the model planning area, you can view assigned planning area operators (Figure 19).
Sample configurations to assign a planning operator to a planning area
Execution of a Statistical Forecast via the Excel Add-In
After the configuration setting is completed, you can execute the statistical forecast run via the Excel add-in under the advanced ribbon.
Select the template for the statistical forecast that has key figures for Adjusted actuals Qty and Statistical Fcst Qty. The history period is Aug’13 to Apr’14 to run the forecast in interactive mode. After choosing the planning view of the statistical forecast, select the run option from the statistical forecast that is under the advanced ribbon (Figure 20).
Execution of the statistical forecast run
After selecting Run, the screen shown in Figure 21 appears.
Sample execution of a statistical forecast run selection of data
Set the Filter as required (product or product family). Click the Next button to go to the next screen for the run (Figure 22).
Sample execution of the statistical forecast run – selection data
Click the Run button. In the next screen (Figure 23), you see the information to check the status of the job.
Sample execution of statistical forecast run – selection data – run information
Click the OK button. To check the status of the job, go to Statistical Forecasting and click the down arrow. From the drop-down list of options, select Status (Figure 24).
Sample execution of a statistical forecast – job status check – ribbon
Click the Status to check the details of the status of the statistical forecast job run (Figure 25). Check details of the job log.
Sample execution of statistical forecast – job status check details
To view the statistical forecast results, choose the statistical forecast planning view/template. Select the statistical forecast planning view from the Excel S&OP ribbon under planning view section > Favorites > Statistical Forecast. This action opens the screen shown in Figure 26. Check the result of the forecast result for analysis.
Sample execution of statistical forecast – result
You can also schedule a statistical forecast run in the background (Figure 27). From the Excel S&OP HANA ribbon, go to the Advanced section and select Statistical Forecasting. From the drop-down list select Schedule Option. This action opens the screen shown in Figure 27 in which you select and set the parameters to schedule a statistical forecasting schedule job.
Schedule a statistical forecast run
Based on the requirements, users can choose the Job name, Profile, Scenarios, Filter (Selection of Data), and Recurrence (a time to schedule a job on the monthly or periodic planning cycle). You can also check the status of the scheduled job in the status of the statistical forecast. From the Excel S&OP ribbon follow menu path Advanced > Statistical Forecasting > Status.
SAP S&OP HANA version 3.0, Support Package 01, is mainly for S&OP business processes for reviews and decision making. Supply chain planning is done in APO, and execution is done in ECC. The required data source is form SAP’s applications such as APO and ECC.
In this article, I concentrate on integration with SAP APO (up to SCM 7.0 enhancement pack 2 and ECC 6.0 enhancement pack 4. When you integrate these two modules, consider these points:
- The interface has to be established within S&OP and SAP APO Demand Planning for demand data. There are various options available, but using SAP HANA Cloud Integration (data services on-demand) is more feasible as SAP has provided three standard templates: general purpose templates, master data templates, and key figure templates. General purpose templates contain the SAP application data sources. Use of the templates reduces the integration development time.
- Data integration options are as below:
- SAP HANA Cloud Integration using an extract, transfer, and load (ETL) tool
- Self-service data upload via the S&OP web UI
- In the interface you have to set up once which data is to be chosen from SAP APO Demand Planning demand data to flow to S&OP HANA. Execute the SAP APO Demand Planning cycle in SAP APO Demand Planning, and based on the transformation rule set in the SAP HANA database, data flows to S&OP HANA.
- The statistical forecasting run is taken in SAP APO and the results are transferred to S&OP and analyzed (if you opt not to use S&OP HANA statistical forecasting).
- The aggregation and planning levels need to be defined the same in APO and S&OP. It has to be match for validation of the results.
- Statistical forecasting can be done in SAP APO with or without life cycle planning. Statistical forecasting in S&OP powered by SAP HANA does not include life cycle planning for calculation of a statistical forecast. S&OP powered by SAP HANA has new product introduction and end-of-life planning as life cycle planning. These components consist of separate functionalities and algorithms. The structure and parameters of the statistical forecast profile are different in APO and S&OP powered by SAP HANA, and therefore, it is an integration challenge if any organization uses a statistical forecast with life cycle planning in SAP APO.
- SAP HANA PAL has a large library of statistical forecast methods. To take advantage of SAP HANA PAL algorithims and their integration with S&OP HANA, an organization has to decide which available methods to choose for S&OP HANA integration with SAP HANA PAL.
As of now a very simple statistical forecast method, Time Series, is available in SAP S&OP HANA 3.0, Support Package 01, which is required for S&OP process. Based on my experience with S&OP powered by SAP HANA, I list the following tips for implementing a statistical forecast:
- SAP HANA PAL forecast methods can be integrated and made available in S&OP HANA by defining a planning operator .
- For triple exponential smoothing, historical periods and historical error period, select twice the number of seasonal periods.
- For single and double exponential smoothing, at least two historical periods are required.
- Historical error periods should be less than historical periods.
- In the statistical forecast job log, users face difficulty reading the error. To do the error analysis they need help from an SAP HANA developer. To read the errors, an organization may need to develop custom-defined reports.
- S&OP powered by SAP HANA’s planning cycle performance has improved, and now the demand planning cycle time can be shortened.
- New product introduction impact on supply requirement, manufacturing, profitability decision can be taken in the S&OP meetings quickly by collaborating with the demand planner, supply planner, and finance manager.
- Integration testing and customer acceptance testing have to be done regressively.
Now S&OP HANA is a part of SAP’s Integrated Business Planning application . Integrated Business Planning version 4.0 Featured Pack (FP) 1 is available for SAP’s customers. Customers can license the following applications of SAP Integrated Business Planning 4.0 FP1 separately:
- SAP Integrated Business Planning for Sales and Operations
- SAP Integrated Business Planning for Supply
- SAP Integrated Business Planning for Inventory
- SAP Supply Chain Control Tower
If customers want to use only applications related to Sales and Operations Planning, then they can opt for a license of SAP Integrated Business Planning for Sales and Operations.