“Boost your Enterprise Business Planning with SAP IBP + SAP Analytics Cloud” Part 2
“Boost your Enterprise Business Planning with SAP IBP integrated with SAP Analytics Cloud”
Part 2, SAP IBP and SAP Analytics planning model
In this part of the article/blog we describe process & technical solution for financial planning fully integrated with integrated business planning enabled with SAP IBP and SAP Analytics Cloud. We deep dive into technical aspects of process explained in article/blog part 1:
Let’s start with recap on solution architecture and assignment of the lead systems, which considers SAP IBP and SAP Analytics at its heart, enriched with integration of operational system required to complete planning as per fig 1 and fig 2.
Fig 1. Overview of EBP architecture
What we observe in this architecture is that single system does not hold data relevant for planning, therefore mapping of the process and definition of master & slave system on process step/object level is critical for technical design of the solution. Model was created on the foundation to use the best of relevant system, see fig 2.
Fig 2. Main part of EBP process model, IBP combined with financial planning
Model captured on Fig. 2 will be explained mostly through diagrams in more detail according to presented numbering of process steps.
Ad 1. Product Review → enabled with Portfolio Planning
This process step aims to: Manage portfolio lifecycle, connect stage gate process, effectively manage usage of segmentation to increase planning effectiveness.
Management of product introduction considers planning based on data of like products, understanding key demand drivers and calculation of price and costs for new products and products which need to be withdrawn.
Functional flow of the product portfolio planning cross SAP IBP + SAC + S/4+ Other systems is explained in fig 3.
Fig 3. Product Review functional flow
Integrated 2 parts (in SAP IBP and SAC) of this process steps deliver full view on portfolio lifecycle, its performance versus budget, plans considering like product history, segmentation enabling aggregated performance measurement and improvement of the focus in planning. Examples of the model enabled in SAP IBP + SAC are shown in fig 4.
Fig 4. Product Review model examples on SAP IBP + SAP Analytics Cloud
Ad 2. Demand Review → enabled with Demand and Revenue Planning
This process step aims to: Align commercial, marketing, finance, demand planning function on demand streams predictions, monetize product, services, licenses, plan other sources of revenue & commercial provisions. Agree volume and net revenue plan compared to budget net revenue.
Flow articulates that baseline stat. forecast will be enriched by predicting drivers sometimes channel, customer grp. specific. Driver predictions provided by judgmental input or predictive functions are as well valid for revenue planning side of this process.
Functional flow of demand and revenue planning cross SAP IBP + SAC + S/4+Other systems is explained in fig 5.
Fig 5. Demand Review functional flow
Demand planning and revenue planning must consider business model characteristics particularly how you sell products, services and what are other sources of revenue and cost of sales. This will determine if you should create like in our model flows per channel and plan them with relevant drivers (provided by experts or predictive functions). Each demand stream would end up into revenue stream, there will be some purely financial drivers like provisions as well.
Once all consolidated into net revenue it will be compared with budget net revenue, to understand how far you from the strategic objectives are (note, this is still not constrained plan), see fig 6.
Fig 6. Demand Review channel & driver planning in volume and net revenue
We use SAP IBP and its reach Demand planning functionality like statistical forecasting, driver planning, top down& bottom up planning. We complement it with SAC driver tree planning more on aggregated levels, with more detail planning per specific hierarchy level and time horizon in SAC stories, all bring aggregates and details together. Its critical to success of deployment to define master and slave system for specific part of the process and objects.
Examples of the model enabled in SAP IBP + SAC are shown in fig 7. To see demo of the model, watch the webinar or video provided on the bottom of the article/blog.
Fig 7. Demand Review model examples on SAP IBP + SAP Analytics Cloud
Ad 3. Supply review → enabled with Supply and Cost Planning
This process step aims to: Provide supply plan for internal and external resources, optimize inventory availability and levels, optimize sourcing, plan utilization of asset & manpower, optimize & plan costs, and cost elements, which are fixed and variable. Agree volume and cost plan compared to budgeted costs.
Flow below outlines need to plan supply stream separately in order to plan relevant cost rates separately but based on SAP IBP optimization input data. Functional flow of supply and cost planning cross SAP IBP + SAC + S/4 is explained in fig 8.
Fig 8. Supply Review functional flow
Supply planning and cost planning must consider supply chain & operations network set up, where & how you produce / procure products, how you distribute products, how you plan and build inventory cross network and BoM levels, how you plan material supplies, finally how you plan all SC&O costs and COGS elements. This will determine if you should create like in our model flows per functional supply element e.g. per material requirement, labor, machine … and plan them with drivers if appropriate. Labor requirements may be driven by number of shifts operators need to work at line/site and will need to be combined with additional costs in summer period for temporary works (as example). This volumetric/capacity/inventory/distribution plan need to be combined with planning of the supply stream relevant rates (labor, machine, material ….). Calculations would need to consider needs to optimize future costs of operations.
Once all costs are consolidated into COGS then would need to be compared with budgeted COGS, to understand how far you from the strategic objectives are, see fig 9.
Fig 9. Supply Review elements & driver planning in volume and costs
We use SAP IBP and its reach Supply optimization functionality like supply heuristics, supply optimizer, multi-echelon inventory optimization, integration with SAP ARIBA for realistic supply planning of raw materials & components, planning capacity for internal and external manufacturing, planning distribution/transportation requirements. We complement it with SAC driver tree planning more on aggregated levels, with more detail planning per specific level and time horizon of costs in SAC stories. We also modelled fixed cost planning where SAP IBP provides data for allocation keys. Its critical to success of deployment to define master and slave system for specific part of the process and objects.
Examples of the model enabled in SAP IBP + SAC are shown in fig 10. To see demo of the model, watch the webinar or video provided on the bottom of the article/blog.
Fig 10. Supply Review model examples on SAP IBP + SAP Analytics Cloud
Ad 4. Integrated reconciliation → enabled with Gross Profit planning
This process step aims to: Align functions on volume and value plan with risk and opportunities exposed in proceeding steps explained with assumptions, create full view (actuals plus plan) per scenario and propose most profitable ones for decision making. Prepare scenario recommendations for decisions making.
Flow considers goal to develop agreed scenario combining actuals and plan and fully understand drivers and its monetized impact.
Functional flow of the integrated reconciliation cross SAP IBP + SAC + S/4 + Other systems is explained in fig 11.
Fig 11. Integrated Reconciliation functional flow
Once demand plan and planned net revenues are combined with optimized supply plan and planned cost, gross profit would need to carefully be planned. Often it would require recalculation of the key drivers provided by experts or predictive functions. Often it would require changing constrained plan in volume due to optimized mix changes. That is why data from this process after approval would need to flow back to relevant for data streams source systems e.g. planned labor rates to S/4 and maybe SAP IBP. Finally, this process step generates validated and optimized scenarios addressing business risks & opportunities for decision making in MBR, see fig 11.
Examples of the model enabled in SAC are shown in fig 12. To see demo of the model, watch the webinar or video provided on the bottom of the article/blog.
Fig 12. Integrated Reconciliation model examples on SAP Analytics Cloud
Ad 6. Lean Financial Forecasting → enabled with fin. items planning
This process step aims to: Complement integrated plan with planning of financial items required to complete full P&L refresh. Align on SG&A, Capex planning, Depreciation/Amortization, and fin. gain and losses. Prepare all financial reporting based on month closing and aligned prediction from steps 1 to 5.
Functional flow of the lean fin. forecasting cross SAC + S/4 Other systems is explained in fig 13. In this particular step there is a lot flexibility and needs to integrate dedicated systems where you plan specific elements of P&L beyond gross profit.
Fig 13. Lean Financial Forecasting functional flow
In the model we envisage to use directly SAC to plan all items in P&L below Gross profit.
Examples of the model enabled in SAC are shown in fig 14. To see demo of the model, watch the webinar or video provided on the bottom of the article/blog.
Fig 14. Lean Financial Forecasting model examples on SAP Analytics Cloud
Ad 5. Management Business Review → enabled with decision making on full P&L
This process step aims to: Decide on scenarios prepared in volume and value, assess business risks & opportunities, validate assumptions, allocate resources to operationalize plans, compare to budget/AOP, communicate & cascade decisions.
Decision making is based on the model which considers information from SAP IBP, information planned directly in SAC or monetized SAC data from SAP IBP, actuals from S/4 and data from other systems. This information is being build up trough all process steps in coherent SAC data model. Final process step in the process called MBR will take decisions and allocate resource it to make it happen.
Once decision is taken relevant elements of model have to flow to relevant source systems, see fig 15.
Fig 15. Management Business Review cascade of decisions
Examples of the model enabled in SAC are shown in fig 16. To see demo of the model, watch the webinar or video provided on the bottom of the article/blog. As outlined, we use many sources of data to combine actuals and plans per scenario in P&L structure to fully understand financial impact of decisions taken.
Fig 16. Management Business Review model examples on SAP Analytics Cloud
Ad B. Enterprise Performance Overview → enabled cross functional analytics
This process step aims to: Provide analytical insights to whole company performance and respective functional areas. Enterprise performance overview gives a big picture analytical overview of company fin. situation based on actuals and latest integrated business plan combined with fin. forecast.
This process step was created in the model to meet expectations to hold key but complete and validated company performance KPIs, build analytics solution to get insights for planning and share in modern way company financial performance.
Examples of the model enabled in SAC are shown in fig 17. To see demo of the model, watch the webinar or video provided on the bottom of the article/blog.
Fig 17. Enterprise Performance Overview model examples on SAP Analytics Cloud
SAP IBP and SAP Analytics Cloud integrated together can enrich existing process framework and bring it to next level. Next level is about making business decisions in structured well recognized and stablished process with full financial impact behind. Model considers possibility to integrate more than just S/4 to planning (SAP IBP SAC) tools. Gartner coined recently term called xFA , others call it differently, but in essence combining in clear way SC Planning, Commercial Planning and Financial Planning is a new trend on the market, which will bring companies soon to possibility to operate planning for whole Enterprise in harmonized and synchronized manner.
This way of thinking, designing and deploying planning need to be reflected in changes in the processes, roles and transformation approach which i highlighted in the 1st part of this blog
Please comment and/or engage with us for discussion about the process, organizational and technical aspects of the model described in part 1 and part 2 of this blog.
- Above model of ” IBP combined with Financial planning” is critical for EBP and it was presented on webinar. Here is the link to recording and slides (register to get access) from webinar (which Jay Foster SAP, Alecsadra Dimofte SAP, and myself did): https://event.on24.com/wcc/r/3306350/6B1E4AD88D3BB997EFD85082DED75051
- Additionally, you can have a look on video where, Vasileios Ieronymakis and myself, present earlier but complete version of “IBP combined with Financials” model on SAP IBP+SAC: https://www.youtube.com/watch?v=Xsg40VkOcJc
- Editorial note: All the system images above are part of EY “IBP with financials” model.
Look forward to hear from you