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Author's profile photo Lingaiah Vanam

SAP Integrated Business Planning Demand Sensing Functionality

Demand planning provides you with several tools to generate forecasts for various scenarios or for specific parts of your business. Using historical data and scientifically based statistical algorithms, it allows you to improve the accuracy of revenue forecasts, align inventory levels with predictable changes in demand, and enhance profitability for a given channel or product.

We are all known about the statistical forecasting process in a standard manner, which means loading the sales data and sales history-cleansing process, finally, execute the statistical forecast methods identify the better forecast error method adopt to business data. This process may vary but an overall goal to achieve a consensus plan, during this process multiple business stakeholders involve like sales, marketing, region and global teams. This process deal with mid-long term planning (12,18,24 months)

Now SAP introduced a demand sensing algorithm to do a better forecast for short-term planning (4-8 Weeks).

What is Demand Sensing?

Demand sensing is a forecasting method that leverages new mathematical techniques and near real-time information to create an accurate forecast of demand, based on the current realities of the supply chain. Gartner, Inc. insight on-demand sensing can be found in its report, “Supply Chain Strategy for Manufacturing Leaders: The Handbook for Becoming Demand Driven.

Traditionally, forecasting accuracy was based on time series techniques that create a forecast based on prior sales history and draws on several years of data to provide insights into predictable seasonal patterns. However, past sales are frequently a poor predictor of future sales. Demand sensing is fundamentally different in that it uses a much broader range of demand signals (including current data from the supply chain) and different mathematics to create a more accurate forecast that responds to real-world events such as market shifts, weather changes, natural disasters, consumer buying behavior etc

Demand sensing will support the tactical plan of business needs.

Where Demand Sensing fit in SAP IBP?

Demand sensing is a part of the SAP IBP demand module and it is a very effective impact on business to generate short term forecasts considering multiple inputs.

Who Benefits from Demand Sensing?

Basically, every company that wants to achieve a more accurate short-term demand plan can benefit from Demand Sensing. The use cases are widespread.

Below are some examples, e.g. companies that…

  • Struggle with volatile markets and demand shifts
  • Already applied demand-driven business strategies but want to further improve
  • Capable of adjusting their production plan within a short term horizon and want to further improve on
  • Capable of adjusting their transport plan within a short term horizon and want to further improve on
  • Want to close the gap between a monthly demand planning cycle and daily or weekly demand requirements for the short term horizon

What planning processes does the Demand Sensing impact?

Difference between Demand sensing and normal Statistical Forecasting?

Demand Sensing Proof of Concept Results–Two Examples

Customer who did not have a demand sensing process before

  • Reduction in forecast error across the demand sensing horizon: 18% -49 %
  • Weekly consensus demand forecast error across the demand sensing horizon: 50% -68%

Customer who had a demand sensing process before

  • Reduction in forecast error across the demand sensing horizon: 4% -6%
  • Weekly consensus demand forecast error across the demand sensing horizon: 40% -43%

How to run demand sensing the first time?

 

Conclusion

SAP Integrated Business Planning Demand Sensing is one of the best application in the market to cover short term forecast planning based on pattern recognition to improves the forecast accuracy and lower the inventory levels.

Additional Documentation

https://help.sap.com/viewer/feae3cea3cc549aaa9d9de7d363a83e6/2002/en-US/c4143c55a5ef9a2de10000000a174cb4.html

I would very much appreciate your comments and suggestions.

Best Regards,

SAP Community

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      12 Comments
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      Author's profile photo Ravikiran Tanikella
      Ravikiran Tanikella

      Nice Blog Lingaiah Vanam

      Author's profile photo Lingaiah Vanam
      Lingaiah Vanam
      Blog Post Author

      Thank you Ravikiran Tanikella

      Author's profile photo Ravinder Bada Narayana
      Ravinder Bada Narayana

      Good blog Lingaiah

      Author's profile photo Lingaiah Vanam
      Lingaiah Vanam
      Blog Post Author

      Thank you Ravinder!

      Author's profile photo Domnic Savio Benedict
      Domnic Savio Benedict

      Very well described Lingaiah !!

      Author's profile photo Lingaiah Vanam
      Lingaiah Vanam
      Blog Post Author

      Thank you!

      Author's profile photo venkatasaivijay vasireddy
      venkatasaivijay vasireddy

      Very good blog Lingaiah!

      It is really helpful to sense demand for shorter periods.

      Vijay

      Author's profile photo Lingaiah Vanam
      Lingaiah Vanam
      Blog Post Author

      Thank you Vijay!

      Author's profile photo Johnny Muñoz
      Johnny Muñoz

      Hi Lingaiah,

      Are there any restrictions on the tool regarding the size of the inventory to be controlled? For example, 4MM of spare parts distributed in 100 warehouses (400MM of records), plus equipment inventory, would it be supported?

      Best regards,

      Johnny

      Author's profile photo Lingaiah Vanam
      Lingaiah Vanam
      Blog Post Author

      Hi Johnny,

      While implementation of IBP application sizing to be evaluated based planning combinations.

      Based on that volume of planning combinations sizing tool provides the appropriate database requirements.

      For IBP, HANA systems are available from 256 GB to 6 TB.

      The sizing spreadsheet should be completed and submitted 4 weeks in advance in the following cases:

      Please refer to SAP note – 2423668

      Please refer to the following Wiki page for details: Procedure for IBP memory sizing

      • Before an upcoming go-live, if the data volume managed in the test tenant is insufficient to estimate the memory needed in the production tenant.
      • For additional memory estimation, if a customer is already productive and plans an additional roll-out. Such requirement can relate to increased regional scope, the addition of divisions, or the extension of the functional scope (for example, the implementation of additional IBP applications).
      • If a customer wants to buy an additional test tenant, and the HANA memory size needs to be estimated.

      I hope it clarifies your question

      Best Regards,

      Lingaiah

      Author's profile photo Sundhu M
      Sundhu M

      Lingaiah,

      Thank you for the great blog!!

       

      It really helped me to understand the difference between Demand Sensing and Demand Planning.

       

      Thanks,

      Sundhu

      Author's profile photo Lingaiah Vanam
      Lingaiah Vanam
      Blog Post Author

      Hi Sundhu M

       

      Thanks for your message.

       

      Best Regards,

      Lingaiah