Overview and benefits of the SAP Integrated Business Planning solution

Onespire Ltd.

Introduction

SAP IBP, a complex enterprise management solution flexibly extends the processes of Sales & Operation Planning to the entire supply chain.

In our post we provide a short overview of the main functional units of the cloud-based software, the advantages of the application, and our company’s related services.

The SAP Integrated Business Planning solution

The SAP Integrated Business Planning (SAP IBP) is a cloud-based supply chain planning solution that integrates key aspects of the planning process including demand, supply, inventory, and sales and operations planning (S&OP). It creates an integrated connection between the strategic, tactical, and operational planning levels.

The SAP IBP solution is based on SAP S/4HANA.

Our company’s SAP IBP expertise and services

The Production & Planning competence center of Onespire Ltd. focuses on various planning solutions, including SAP Integrated Business Planning. Over the past years, the experts of our company have accumulated a lot of valuable experience in the field of supply chain and logistics planning. By using this, we can successfully provide support even with the implementation of SAP IBP. Our consultants have not only theoretical, but also practical experience regarding the utilization of SAP IBP.

In addition to implementing SAP Integrated Business Planning (IBP), our company also has experience in planning, using, supporting, and optimizing the solution. Our accumulated expertise over the past years allows us to effectively assist our clients in the entire life cycle of IBP, starting with planning, then implementation and use of the system, as well as support and optimization processes.

Modules of the SAP Integrated Business Planning solution

The SAP IBP contains the following six modules:

SAP IBP for Demand
SAP IBP for Inventory
SAP IBP for Demand-Driven Replenishment / Material Requirements Planning (DDMRP)
SAP IBP for Response & Supply
SAP IBP for Sales and Operations
SAP Supply Chain Control Tower

1. figure: SAP Integrated Business Planning

SAP IBP for Demand

The Demand Planning is the starting point of the entire supply chain planning process, that’s why it is extremely important due to the efficiency of the following processes. SAP IBP for Demand inherited many useful features from its predecessor SAP APO (SAP Advanced Planning and Optimization), such as a powerful set of statistical algorithms, outlier detection, forecast alerts, and forecast error measurements. These tools help to create the appropriate mid- and long-term demand forecast.

However, the accuracy of the forecast can be improved not only by sophisticated statistical methods, but also by using demand sensing and forecasts from other departments (sales, marketing, etc.). This is called collaborative forecast. SAP IBP for Demand offers excellent opportunities for these.

In relation to the SAP IBP for Demand module, our company’s experts can provide assistance in the efficient operation of demand planning and the optimization of forecasts, significantly improving accuracy, using short-term demand sensing.

2. figure: Demand planning & Demand Sensing

SAP IBP for Inventory

In SAP products different inventory optimization solutions have been available for a long time, but they usually worked in isolation from each other, so they did not provide optimal results in terms of the entire supply chain. SAP IBP for Inventory also helps in the optimization of inventory and service levels in the world of today’s complex supply networks. In addition, SAP IBP for Inventory supports decision-making several visualization options.

SAP IBP for Inventory categorizes stocks based on several criteria, so it can manage them according to specific needs. On the one hand, according to the nature of use, such as raw material, semi-finished or intermediate product, finished product, maintenance material.

On the other hand, they can also be classified according to the role played by the stock in the process:

Safety stock,
Cycle stock,
Pipeline stock,
On-hand inventory,
Target inventory.

3. figure: Inventory optimization

During the process of inventory optimization, the safety stock, the cycle stock, and the target inventory are determined. For this, IBP for Inventory can consider many factors, such as the fluctuations of historical demands, lead time, and planned sales.

During the implementation and use of the SAP IBP for Inventory module, our consultants can provide support in optimizing stocks and service levels, while supporting decision-making with visualization tools.

SAP IBP for Demand Driven Replenishment

In today’s rapidly changing business environment, traditional MRP solutions often lead to inadequate inventory and service levels. On the one hand, too much stock of some products accumulates, while at the same time there is a shortage of other products. This is supported by SAP IBP for Demand Driven Replenishment, which uses the Demand-Driven MRP (DDMRP, Demand Driven Material Requirements Planning) methodology to reduce inventory while improving product availability.

4. figure: The effects of DDMRP

DDMRP consists of the following five steps:

Strategic decoupling: Determining the location of buffer stocks in the supply chain.
Buffer profiles and levels: Selection of the expected demand and safety stock levels.
Dynamic adjustments: Regular review of stock levels using heuristics.
Demand-driven planning: Preparation of production and order proposals based on the net flow position.
Visible and Collaborative Execution: Determining the points requiring intervention.

Using the demand-driven MRP methodology, our company’s experts can reduce stocks and improve product availability with the help of the SAP IBP for Demand-Driven Replenishment module.

SAP IBP for Response and Supply

No matter how good a forecast is, based on practical experience its accuracy usually does not exceed 80%, and in today’s turbulent economic environment there will always be unforeseen factors.

That is why it is necessary to develop as flexible processes as possible on the supply side, in which SAP IBP for Response and Supply provides effective assistance. The tools for this are supply optimization algorithms using multi-level heuristics, generous capacity planning and priority-based response planning.

5. figure: SAP IBP for Response & Supply planning process

The following three time series-based methods are available for medium-term planning:

Time series-based supply planning heuristic, which produces a plan that covers all needs without considering capacity limitations.
Time series-based supply propagation heuristic, which, unlike the previous one, does not cover all needs in the case of a lack of capacity, so its effect can also be examined.
Time series-based supply planning optimizer, which already takes capacity constraints into account and prepares a plan optimized for profit or delivery maximization for the entire supply network.

The first step in order-based planning is the prioritization of demand. This requires sorting customers and orders into groups, and then setting up prioritization rules. Based on these, the system can now recommend an optimal order of delivery. Based on the final supply plan, IBP for Response and Supply can automatically confirm orders that have already been received, as well as prepare accurate delivery plans.

In connection with the SAP IBP for Response & Supply module, our consultants support our clients in the development of flexible supply processes, adapting to forecast inaccuracies and optimizing capacity by planning priority-based measures.

SAP IBP for Sales and Operations

The supply chain can function effectively if its individual elements are not operated in isolation from each other but in an integrated manner from beginning to end. SAP IBP for Sales and Operations provides a solution for creating an optimal balance between the demand side and the supply side, as well as inventory, both at the tactical and operational levels.

SAP IBP contributes to the most efficient operation of S&OP with the following functions:

Scalable and flexible model: SAP IBP for sales and operations can manage the master and transaction data of demand planning, supply, and financial areas in a unified model, at any level of aggregation.
Scenario planning: The IBP provides an opportunity to compare the effects of different alternatives, and then depending on the results, choose the final one.
Collaboration: The final S&OP plan is ideally the result of the coordinated work of many areas, based on common databases, with real-time updates, so that all participants can work on a common plan. In addition, SAP IBP for sales and operations actively supports the sharing of information with the persons concerned, as well as effective decision preparation.
Advanced analytics: Accurate and clear information is essential for making the right decisions. In SAP IBP, there are many graphs and reports available to users for this.
Intuitive user interfaces: SAP IBP for sales and operations has several customizable user interfaces that can be accessed not only from a PC or laptop, but also from a mobile phone and tablet.

Our employees provide support for integrated tactical and operational planning in SAP IBP for Sales and Operations, with scalable models, scenario planning and effective collaboration.

SAP Supply Chain Control Tower

One of the biggest challenges in a complex supply chain is a quick overview of the entire process, the efficient analysis of the huge amount of data in order to make relevant decisions and find the root causes. SAP Supply Chain Control Tower gives users the opportunity to easily customize the user interface to their own needs. It helps in strategic and tactical decisions by relying on different types of data visualization tools and key indicators (KPIs).

SAP IBP offers users a lot of predefined KPIs, but of course it is also possible to create individual indicators. The following main KPIs are available in the system:

Order Fulfilment and Service Quality

OTIF (on time in full), which shows what percentage of orders were served in the requested time, in full quantity.
Fill rate, which shows the percentage of the quantity delivered in a period from the total quantity of orders placed.
Backorder, which refers to orders whose requested delivery date has already passed, but not yet shipped.

Demand forecasting

Forecast accuracy, which examines the difference between the forecasted and realized quantity compared to the realized quantity.
Bias, which, like the previous one, also examines the difference between the predicted and realized quantity, but also provides information about the direction of the deviation.
Forecast fidelity, which shows how much the final forecast for a given period differs from the amount previously predicted for the given period.

Supply, Response, and Transportation

Days of coverage, how many days of average demand the existing stock covers.
Percentage resource capacity utilization, which shows the percentage of a given resource over time. This can help to identify bottlenecks too.
Production achievement percentage, like the previous one, but here we can see quantitative capacity utilization.
Supply shortage, which shows when the demands of a given period exceed the stock of available supplies.
Schedule disruption, the percentage of schedules that were modified at the last minute.
Premium freight percentage, the ratio of expedited, for example, air transport deliveries compared to all shipments.
Sourcing performance, which shows the proportion of purchase orders that arrived on time and in full quantity.

Inventory

Inventory turn, which shows how many times the average inventory value turns over in a year.
Non-moving inventory, the amount of inventory that has been in place for longer than a specified time (e.g., 6 months) and for which there is no apparent demand (order or forecast) in the future.
Inventory at risk, that can only be used for a short time, for example due to expiration.
Inventory value, which can be analyzed at any level of aggregation, at any location.

In connection with the SAP Supply Chain Control Tower module, we provide support for our clients in the quick overview of complex supply chains and data analysis to make relevant decisions.

SAP IBP User interfaces

SAP IBP offers users the following interfaces: the web-based SAP Fiori, Microsoft Excel add-in, and certain functions are also available in a mobile version.

SAP Fiori is a customizable web interface through which the user can access all available functions. The so-called tiles marking transactions can be rearranged, grouped, and renamed as desired. It is also possible to run various analytical and data visualization elements here.

The SAP IBP Excel add-in provides an opportunity to work with a familiar user interface. We can choose from pre-made templates, or we can customize them to our own needs. We can work with data at any level of aggregation in any time interval, and of course it is also possible to apply different filters.

6. figure: SAP IBP Excel user interface

Additional functions of SAP IBP

Multiple scenarios can be easily created on the planning interfaces of SAP IBP; thus, the effect of an expected event can be easily analyzed. We can work with permanent design versions that are available to all planners, but their creation requires IT support, or we can use scenarios that users can create for themselves. In the case of the latter, deletion is also much safer, as it does not affect the work of other planners in any way.

Larger amounts of data are not easy to review manually. Setting up so-called alerts can help with this. This is an indication to the planner which areas (e.g., products, periods) need to be analyzed in more detailed way, because based on the pre-defined parameters, there may causes problems. Either through the web interface or with the help of the Excel add-in, we can easily respond to predefined warnings, or we can even create new ones ourselves.

One of the most important resources in today’s fast changing world is information and the cooperation based on it. Within the framework of SAP IBP, SAP JAM offers a solution for this. Here, users can delegate tasks, create polls, share decisions, knowledge, and links in a formal, verifiable way.

7. figure: SAP IBP JAM

Summarizing the benefits of the SAP IBP solution

As we have seen, SAP Integrated Business Planning is a complex solution that flexibly extends the processes of Sales & Operation Planning to the entire supply chain, from demand planning through inventory planning to supply planning.

Over the past years, our company, Onespire Ltd. has accumulated a lot of valuable experience in the field of supply chain and logistics planning. By using these, we can successfully provide support even with the implementation of SAP IBP as well.
The main activity of Onespire Ltd. is providing SAP support to its domestic and European clients, with particular emphasis on the markets of Belgium, Germany, Austria, the Netherlands, Luxembourg, and Switzerland. Another advantage of our company is that in addition to Budapest, it also has an office in Belgium, which enables us to effectively represent and support our European activities.

In addition to green-field implementations of SAP applications, we actively participate in the continuous development of our clients’ existing processes, as well as help in the development of future strategic foundations. Our consultants have outstanding professional experience in traditional logistics, production, financial and BI modules.

In addition, we are constantly expanding our knowledge and understanding of new SAP products and are proud of our many unique project experiences. In addition, we also offer our clients self-developed applications and products in addition to our services, further increasing the company’s efficiency and competitiveness.

Author: Máté Turóczi

If you have any questions about our SAP IBP related services, please contact our competence center’s manager!

References:

1. Sandy Markin, Amit Sinha: SAP Integrated Business Planning, Functionality and Implementation, Rheinwerk Publishing, [2018]

2. IBP100, SAP IBP Overview, [2021]