May 18, 2016

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A Structured Approach for a Modern and Mature Supply Chain

This second part of a two-part blog series explains how companies are achieving a next-generation supply chain using SAP Integrated Business Planning applications. The first part of this blog series explored the macro factors due to which companies are forced to upgrade their supply chain maturity to the next level and also emphasized on the HCL Responsive Financial and Business Planning framework.

The most asked question by clients interested in SAP Integrated Business Planning is what the applications suite means for Advanced Planning and Optimization (SAP APO). SAP APO is being utilized by companies since years for order fulfilment (SAP GATP), production planning and scheduling (SAP PPDS), demand management (SAP DP), supply planning (SAP SNP).

Customers are intrigued to know whether the suite is a SAP APO replacement, given that forecasting and planning capabilities are a focal point SAP Integrated Business applications. If not, would the applications supplement the planning and forecasting models already existing in SAP APO.

To elucidate on the answers, it is important to note that SAP Integrated Business Planning started as a S&OP layer on top of SAP APO. With release of new models within the past two years, customers have come to understand that IBO would become a plausible alternative to APO SNP and APO DP with multifarious added benefits.

As an example, SAP Integrated Business Planning for Demand has become a good substitute for APO DP with key benefits. These benefits include a demand sensing engine and a predictive analytics library of forecasting models. The engine is able to precisely restate the monthly forecast to daily and weekly buckets within the short term. Consumer goods and wholesale distribution companies requiring accuracy in the short term horizon can leverage this capability to optimize the short term replenishment process in customer facing warehouses.

The introduction of a scenario capability in SAP Integrated Business Planning makes it far superior to SAP SNP, empowering the user to create multiple on-demand what-if scenarios. True financial based optimization (i.e. optimizing a profit figure defined in currency and maximizing revenue defined in currency) was not possible before with SNP Optimizer and is of immense value to industries such as oil refineries. Also, a best in class inventory optimization solution is offered by SAP Integrated Business Planning. This was a result of the acquisition of SmartOps by SAP and has filled a wide gap which APO SNP was unable to close.

The combines functionalities of a modern user interface and processing speeds provided by SAP HANA, make the above elements a strong substitute for SAP SNP and SAP DP. The caveat being that SAP APO is mature solution offering seamless integration with SAP ERP, and a customer has to probably satisfy many requirements not yet fulfilled by SAP Integrated Business Planning for supply. Presently, SAP PPDS and SAP GATP are not in scope of SAP Integrated Business Planning and would most likely never be.

For most of our customers wanting to raise their supply chain maturity level using SAP Integrated Business Planning applications, the most common adoption scenario would be implementation of inventory optimization and demand sensing applications. Organizations with a large distribution network would find great use of this, to further refine inventory service levels to the same or next day.

Another common adoption scenario pertains to companies having revenues ranging from $1 to $3 billion and also those already having a SAP implementation but never felt the need for a SAP APO since they are satisfied with MRP solution within SAP ERP or they are using a non-SAP advanced planning solution bolt-on SAP ERP.

Such companies usually have a need to transition their supply chain maturity to the next level by investing in well integrated supply chain planning solution and SAP Integrated Business Planning is their primary choice. Moreover, SAP Supply Chain Control Tower, part of the SAP Integrated Business Planning applications, is pivotal as a real time monitoring tool that offers end-to-end supply chain visibility, alerting customer to issues in real time.

To contact HCL, email integrated.applications@hcl.com.