Should you be Demanding IBP?
In the world of ‘Internet of Things’ and Digital Transformation, where companies want to respond faster to customer needs, we have all read about SAP’s vision to enable businesses to transform from what were previously Supply Chains into Demand Networks.
But where does Integrated Business Planning (IBP) Demand fit in to this? And as a Planner, should you be Demanding IBP?
In order to remove some of the uncertainty and puzzlement as to what exactly IBP Demand can offer, in this post I intend to explain some key differences between SAP APO and IBP Demand.
For the Demand Planning community, it is fair to say to that there have been no major developments in SAP APO since SCM 5.0 was released. The statistical algorithms/functionality have remained largely the same (have you ever used Re-Initialization!), and the user interface experience in both planning and alert management has fallen behind the expected standards in the 21st Century. Yet, Demand Planners are expected to forecast more Product/Location combinations with normally only a token understanding of what statistics is all about.
Released as part of IBP v5.0, the IBP Demand module is SAP’s next generation forecasting application. Since SAP Integrated Business Planning was developed natively on the SAP HANA platform, its performance outpaces that of systems that have merely been modified to use in-memory technology.
New to IBP in v5.0, the web client is now based on the SAP Fiori launchpad. Giving a seamless, responsive and cross device user experience, Fiori now gives the Planner a very clear home page/task orientated navigation option. Refer to the Demand Sensing section below for a screenshot of the Fiori look and feel.
But what is IBP Demand?
IBP Demand = Traditional DP + Demand Sensing + Predictive Analytics
In contrast to SAP APO, IBP Demand comes with new predictive procedures — ARIMA models* (Autoregressive integrated moving average), for instance — and special pattern-recognition mechanisms that can look ahead and render forecasts on product sales for specific time periods. For further information on ARIMA, please refer to the Wiki link.
As of IBP v5.0, one could say there is minimal improvement in the range of univariate statistical forecasting algorithms available used to derive the medium term forecast compared to APO. Pre-Processing algorithms are now included to substitute missing values, and the inclusion of interquartile range and variance tests as part of Outlier Correction are standard. The major technological advancement compared to APO is the inclusion of a Demand Sensing algorithm for the short-term.
Within SAP IBP Demand, Demand Sensing is available. Running at Product/Location/Customer level only, Demand Sensing is a short-term forecasting process based on demand signals such as open sales orders, EPoS, weather etc.
You can set up regular demand sensing in the SAP IBP Excel add-in for Microsoft Excel. The outcome of the process is the sensed demand, which can be compared with the mid- or long-term consensus demand. If significant deviations are found, you can see and resolve them in the “Manage Demand Sensing Issues” app.
Initial results from a Proof of Concept that compared the forecast accuracy using “Traditional DP” forecasting methods with the inclusion of short-term Demand Sensing within IBP Demand, showed compelling improvements in forecast accuracy.
Planning with Microsoft Excel
The SAP Integrated Business Planning add-in for Microsoft Excel allows you to review and modify your planning data and run simulations.
Depending on the IBP applications that your company has licensed and configured, it also provides advanced planning functions, such as inventory optimization, and statistical forecasting methods for creating accurate forecast data from historical sales figures.
In future IBP releases we expect to see further developments in IBP Demand around;
- – Forecast optimization & automation
- – External collaboration
- – Advanced attached rate based forecasting
- – Promotion integration
- – Enhanced disaggregation methods
Should you be Demanding IBP?
The two main questions to be answered are, “Why would I implement IBP Demand?”, and, “Does it replace APO”? Although APO continues to remain an important part of SAP’s SCM portfolio, and will be in mainstream maintenance until at least 2025, ultimately, IBP Demand will become the preferred SAP Demand Planning application.
IBP Demand is not simply a copy/paste of SAP APO on to a new technology platform. SAP have taken learnings from the APO past, and in the drive towards real-time information, better analytics and simplification, not all of the previous APO attributes have been, or more importantly, will be duplicated.
For those customers currently thinking of upgrading/merging existing APO landscapes to SCM 7.0, then the advice here would definitely be to pause and to look at the benefits going straight to IBP Demand would give. To give SAP credit for IBP Demand and HANA technology, the technology does not feel like the early bleeding edge days of APO 3.0/3.1, with thousands of customers having already implemented SAP HANA solutions.
For those customers already on SCM 7.0, IBP Demand should still be on your Planning Strategy Roadmap in assessing the value add that Demand Sensing functionality within IBP can bring. An initial stride in to IBP could be to leverage existing APO systems and processes to provide a feed in to IBP Demand, whose output would then provide SNP (or other 3rd Party systems) a Demand Sensed forecast. The ultimate goal would be to then fully migrate the APO DP solution on to IBP Demand.
Developing a better understanding
Whether it be assisting with the creation of your IBP Roadmap, giving IBP awareness training to your key business users, or hosting a Proof of Concept on our internal IBP system, our team at Olivehorse can assist you on every step of your IBP journey, and I hope this has been a useful read.
Ian Brister – Demand Practice Lead
+44 (0) 7415 353356
* Planned for future IBP Release
Many Thanks Ian. Nicely articulated, Useful information.