“Boost your Enterprise Business Planning with SAP IBP + SAP Analytics Cloud” Part 1
Part 1 Process, Organizational & Transformation Implications
What Enterprise Business Planning could mean?
Key challenge of planning is to connect key planning processes
- Strategic planning,
- Financial planning,
- Sales & operations planning or more mature version of it Integrated Business Planning,
- Operational planning & execution
into coherent planning framework see fig 1.
Enterprise wide planning framework should:
- address needs of Supply Chain, Commercial, Finance stakeholders on various organizational and management level,
- manage differences in processes granularity
- support business decisions in volume and value
- support management of risk and opportunities
- help to understand and predict drivers impacting business
- make sure strategies are deployed trough planning to execution
- ensure planning roles and competencies are in place
- increase efficiency by providing data modelling and best in class planning and automation functionalities
Fig. 1Key planning processes
Key planning processes have their characteristics, dimensions, needs those must be recognized and connected into one planning framework. Disconnection creates huge inefficiency and detaches strategy from planning and from execution. Connection creates ability to control business and its expected performance trough enabling strategies (commercial, product, sc&o, financial) in planning to execution, see fig 2.
Fig. 2 Planning processes and their horizon, dimensions
Building such an enterprise wide planning framework has some challenges ahead, most common are:
- lack of common planning calendars enabling routines to be connected
- low priority to build and expand existing planning (commercial, sc, financial) skills and competencies
- culture and designs supporting silo thinking and lack of clear ownership
- pure management ownership of planned change
- focus on sub optimization like supply chain planning or financial planning only
- commercial, sc, business and financial strategies stay on power point
- lack of digital strategies enabling wholistic view on planning, automation enabling EBP
- purely or too much IT driven transformation
Why Enterprise Business Planning is important?
Inefficiencies in performance, workload allocated to planning and execution, lack of alignments between functions are exposed as key drivers for change. Design and deployment of enterprise wide planning transformation brings substantial benefits. Key drivers and benefits are extracted from real projects, which aimed to improve one by one part of EBP framework, see fig 3.
Fig. 3 Drivers and potential benefits to transform key planning processes into enterprise wide planning process, organization, technology
How to enable EBP with process & capabilities change?
There are 3 integration challenges:
- Strategic planning to Financial Planning combined with IBP
- Combine Financial Planning with Integrated Business Planning
- IBP connected with Operational planning
In this small series of articles, we will focus on integration which would make sense to start with and which brings the biggest return. It’s about how to combine Financial Planning with Integrated Business Planning.
In large extend company culture is determined by designs of:
- organizational structures addressing ownership clarity,
- roles & competencies continuously improved to fit process needs,
- standardized processes enabling automation,
- comprehensive data models enabling various planning,
- reward & recognition systems driving behaviors towards common goals,
- clear decisions model with only one accountable per decision,
- servant leadership model which enables others to execute their tasks
- connection between business strategy and operations strategies
- continuous improvement embedded trough plan-do-check-act
- alignment of KPIs in service-cost-cash triangle
Let’s highlight key elements of process design for Financial planning combined with Integrated Business planning:
Fig. 4 Financial planning combined with Integrated Business Planning
Traditionally volume-based process should be complemented with activities which help to monetize all process and data streams (refer to fig. 4) e.g.:
- Product planning dates & volume connected to introduction costs and price, budgets and samples/marketing spend to boosts its sales
- Demand plans in volume complemented with gross to net conversion and its drivers, price tactics & discount planning, other sources of revenue, commercial provisions to calculate full view of net revenue
- Supply plans in volume/hours/km expended with planning of variable COGS elements based on supply planning engine data, planning fixed costs as additional overheads, planning supply provisions like write offs to end up with full view of supply chain and operations costs. COGS should be complemented with planning costs of sales e.g. cost of services.
- Connect in Integrated reconciliation product-demand-supply volumes with revenue, costs to propose most profitable scenarios on gross margin level.
- Finalize scenario-based P&L for purpose of approval in Management Business Review.
- Execute lean fin. forecasting (often prior MBR) to calculate financial items, SG&A costs, R&D costs, investments, fin. gain & losses …
Once you understand size of change and build business case, there would be time to define how to make it and what to consider.
How to design &run transformation approach to combine Financial planning with IBP should consider:
- Map existing meetings and decision-making processes and levels
- Taking inventory of typical decisions / objectives / participants / frequency is a good starting point to decide what can be leveraged in your IBP with combined fin. planning journey and what can be jettisoned.
- Agree on vision “North Star” / degree of financial integration in process, organization/competencies, technology
- Run a set of workshops with senior stakeholders to define a Vision / “North star” of Integrated Business Planning and process steps. Also agree on design principles and fundamentals of the IBP with Fin. planning operating model (horizon, characteristics, roles of key decision makers, org. levels on which decisions should be taken and inputs provided)
- Leverage the five IBP review meetings framework and connect them with Financial Planning activities (see fig 5)
- Backward schedule your IBP review meetings from financial reporting dates (monthly updates and quarterly financial outlook planning), ensure focus of review meetings to consider financial simulations and impact, re-align existing meetings to new framework.
- Build P&L trough activities in IBP enabling processes not just review meetings e.g. monetization of demand plan combined with generation of net revenues plan, monetization of supply plans combined with generation of variable and fixed costs plan ….
Fig. 5 Common planning calendar approach and objective
- Connect short term weekly routines with IBP
- Establish connector role and process integration window (typically once per month in the week when integrated reconciliation takes place) between short term planning and monthly IBP process to enable escalations/cascading of decisions between processes.
- Re-define financial controllers’ role and activities in IBP review meetings
- Ensure fin. controllers participate and contribute in the five process review meetings by addressing required questions, capture assumptions to align with cross-functional stakeholders on financial impact. Financial controllers should own the integrated reconciliation step.
- Ensure fin. controllers support development of IBP review enabling processes e.g. Monetization of demand plan needed for net revenues
- Ensure that fin. controllers work jointly according to common planning calendar.
- Consider changing ownership of the IBP process from Supply Chain to Business Management and/or Finance
- Integrated Business Planning should no longer be considered as a Supply Chain Planning process but as process to manage business. Ownership and sponsorship from management is essential.
- Build process and change leads from Supply Chain & Finance to instate a link between supply chain, commercial and financial planning on decision making levels
- Establishing process lead as the whole (business unit/ divisional) and establish process step lead to manage improvements in the process-organizational-technology dimensions within this process, mature capabilities and keep community of stakeholders together/enable knowledge exchange.
- Design the data model and system integration to cover needs from finance
- Ensure that supporting technology provides master data, attributes, key figures, and planning levels to capture inputs from business “on the best insightful level” and build end to end scenarios with full financial impact.
- Define data integration between relevant systems, ensure that data objects are mapped as “master and slave” across the entire e2e process to timely execute IBP with combined fin. planning process and keep data models coherent.
- On level of IBP review meeting there must be a system which has “master set of figures”.
- Build and rollout SAP IBP + SAP Analytics Cloud technical solution (integrated with relevant operational systems) to enable full visibility and impact on P&L from cross-functionally aligned plan.
What to consider in SAP IBP integrated with SAC to enable EBP?
When planning the volume and value worlds at once, consider having a fully integrated data model composed of supply chain, commercial, financial, actuals + planning data, master data. Integrated data model helps you to better understand the impact of a given situation or the effects of a possible measure.
Enterprise wide planning process would use SAP IBP, SAP Analytics Cloud and Operational systems like S/4 for transactional (actuals and planning) and master data. Model considers following architecture, see fig 6.
Fig 6. Overview of EBP architecture
The most crucial process integration is about combining Financial Planning with Integrated Business Planning. We leverage well established 5 process step IBP process and enrich it with financial and analytical activities. As part of this model we assigned parts of the process to the SAP IBP or SAP Analytics to fit the purpose the best. This process model enabled on SAP IBP + SAC is shown on fig 7.
Fig 7. Main part of EBP process model, IBP combined with financial planning
Such a solution was presented in the webinar (including short demonstration of the SAP IBP + SAC model). Here is the link to recording and slides (register to get access) from webinar (which Jay Foster SAP, Alecsadra Dimofte SAP, and myself did):
In a meantime part 2 of this article/blog focused on functional aspects of the model deployed on SAP IBP and SAP Analytics Cloud was prepared
Look forward to hear from you