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SAP IBP – The Next Epoch in Supply Chain Planning

SAP IBP – The Next Epoch in Supply Chain Planning
June 29, 2017

The manufacturing industry is in a state of flux, with large volumes of data flowing in through multiple touchpoints. This, along with the demand for individualized products and services have heightened the need for smarter and proactive supply chains.

The next-gen supply chain should be all-inclusive – involving a wide range of stakeholders and responding to a continually fluctuating market. Additionally, the mature supply chain model must align the sales and operations planning (S&OP) strategy with overall enterprise objectives, balancing the impact on inventory, service levels, and profitability.

SAP IBP – Next-Gen Technology Enabler for Supply Chain Planning

Recognizing the need for a single source of data across divergent stakeholders and a collaborative platform for planning, SAP Integrated Business Planning applications are being deployed to enable real-time data convergence across the extended enterprise value chain. Powered by SAP HANA, the SAP IBP suite comprises:

  • SAP Integrated Business Planning for Sales and Operation Planning
  • SAP Integrated Business Planning for Demand
  • SAP Integrated Business Planning for Response and Supply
  • SAP Integrated Business Planning for Inventory
  • Supply Chain Control Tower

The presence of a consolidated data model greatly enhances the S&OP framework. It helps align S&OP strategy with financials, include what-if simulations, and bring inventory optimization and demand sensing together on a single platform.

With tighter alignment between processes, strategy, and stakeholders, companies can more quickly and effectively respond to fluctuations in the market and improve customer experience while better leveraging vendor services.

SAP IBP – A compelling alternative to SAP APO DP & SNP

SAP IBP was initially implemented as an S&OP layer on top of SAP APO. However, with the release of multiple modules in the past 3 years, IBP has now emerged as a potent alternative to APO DP and APO SNP with a host of add-on benefits:

  • Improved forecast accuracy

The SAP IBP for Demand leverages a demand sensing engine and predictive analytics library of forecasting models to offer a more granular approach to forecast. By factoring in recent shipment history and order backlog, it converts monthly planning cycles to daily cycles. In a nutshell, SAP IBP helps close that gaps that exist in traditional planning applications such as APO by tying a company’s long-term S&OP objectives with tactical and operational S&OP concerns in real-time. Industries such as wholesale distribution and consumer goods reap benefits by optimizing the short-term replenishment process at the customer facing warehouses.

  • Long-term financial planning

Beyond the supply chain space, advanced frameworks such as the Responsive Financial and Business Planning solution deliver the flexibility to align supply chain strategies with long-term financial planning. Analysts can, for example, consume volume demand and supply data to accurately and effectively estimate cost absorption for multiple S&OP strategies, thereby improving visibility into profitable scenarios.

  • Responsive planning with advanced algorithms

SAP IBP’s ‘what-if’ simulation exceeds the capabilities of conventional SAP SNP by deploying a scenario functionality (different from a version copy). It enables users to seamlessly craft ‘what-if’ scenarios “on the fly”, helping organizations achieve their operational and financial objectives. Scenario modelling is available to a planner at any time and across the entire demand and supply spectrum.

  • Real-time sales order management

Supported by a heuristic engine, the SAP Integrated Business Planning for Response is now at par with APO SNP Capable-to-Match. SAP IBP for Response helps integrate order fulfillment and planning processes in real-time, allowing the review of all confirmed and unconfirmed sales orders against the supply constraints. The planner can effortlessly decide which demand element to confirm through ad-hoc simulations where supply constraints are adjusted.  Once a revised supply plan has been architected, the new sales order confirmation plan is pushed back to the ERP. SAP IBP for Response can be viewed as an equivalent to either a GATP backorder processing or a GATP Capable-to-Promise engine.

It is important to note that while other engines use period series based planning techniques, The SAP Integrated Business Planning integration to SAP ECC or SAP S/4HANA has attained a maturity level capable of supporting the complex requirements of large enterprise.

  • Safety stock transparency

SAP Integrated Business Planning for Inventory offers a best of breed inventory optimization solution to help users gain dynamic control of stocks along the entire supply chain, based on demand and related sales projections. It includes “multi-echelon” algorithms from SmartOps, a company acquired by SAP.

The road ahead

With SAP cloud strategy allowing for a fast pace release of new functionalities, IBP is closing fast on the multitude of small yet critical unique functionalities supported by the mature platform that SAP APO represents. In future, the distribution requirement planning space remains the major area of focus for the upcoming SAP IBP releases.

It is important to note that, other components of APO such as SAP PPDS and SAP GATP are not in the scope of SAP Integrated Business Planning applications and will, for SAP ECC customers, continue to be supported as an add-on application to the ERP core.

Scenarios for adoption

Organizations with complex distribution networks, or those that struggle to fine-tune inventory for same-day or next-day service levels, can embrace SAP IBP to manage high-volume, high-velocity, and narrow customer-facing lead times. In fact, there is even a probability for a full SAP APO DP replacement in the coming years.

SAP IBP is also poised to become the preferred choice for companies who feel the need for moving their supply chain maturity to the next level by investing in a closely integrated supply chain planning solutions.

In addition, SAP Supply Chain Control Tower is integral to next-generation supply chain planning as a real-time monitoring tool. It provides visibility into the end-to-end value chain, alerting customers to real-time issues that may arise in their plan.