Summary of VIDEO SERIES “Boost your Planning with SAP IBP + SAP Analytics Cloud”
Context: Many companies struggle to get clarity on what planning should do and how. Current trend to deploy modern digital technologies for planning, exposes need to define vision state, some call it “North Star”. As part of this video series we explain selected but key elements of the vision/design for planning transformation and huge number of insights for deployment:
- process which delivers “one set of figures”,
- transformation, especially competency change,
- usage of SAP technology,
- rich set of insights,
- demonstration of SAP IBP and SAC system use cases.
We leverage well established integrated business planning (IBP) process framework with 5 process step, which aim to develop cross functional alignment and plan cross commercial, supply chain & operations, from product trough demand to supply. We combined IBP process with financial planning process to leverage synergies between the two, create stronger “one set of numbers” mindset driving business, unlock value of embedding finance function into common planning process. When creating the model we have considered how it should be connected to strategic planning like budgeting, and to short term operational planning. Obviously we shall have cascade of KPIs but as well connector roles and interlocked processes around common planning calendar. Presented model (process & systems) was developed on basis of own experience, publications, workshops with customers, selected projects.
VIDEO 1: PROCESS AND TRANSFORMATION
We start video series from positioning of Integrated Business Planning combined with Financial Planning process as critical and essential element of EBP (Enterprise Business Planning) framework.
EBP covers complete planning horizon from short to long term. It helps to deploy strategy trough planning to operations. There are 3 major integration challenges 1) IBP to be combined with FP&A, 2) how to integrate operational planning with IBP and 3) define close loops between planning processes. We see IBP combined with financial as the one which addressed first can make tangible impact on business performance.
IBP combined with Financial Planning consists of
- Product Planning / Product Review
- Demand Planning / Demand Review & Revenue Planning
- Supply Planning / Supply Review & Cost Planning
- Integrated Reconciliation / Gross profit planning
- Lean Financial Forecasting / Operating expenses planning
- Management Business Review / P&L Planning
This process aims in rolling mode to deliver plan which is x-functionally aligned, and fits P&L structure and its elements.
- We connected IBP with Financial planning to Strategic planning trough bi-directional connection to Budget. Budget is integrated into the IBP as reference / comparison data set , IBP with Financial planning data is integrated to Budgeting as baseline later enriched with targets from Strategy/Market & Portfolio growth plans.
We highlight key elements of the TRANSFORMATION like:
- New role of Financial controllers – in decision making forums called review meetings and enabling processes like planning of revenues based on demand plan, planning costs based on supply planning. Controllers can gain business acumen trough involvement in monetization of enabling processes for IBP review meetings.
- Design and deployment of common planning calendar – which will ensure all process steps & reporting are aligned to goal to develop P&L.
- Mapping process activities, meetings and their goals on time line – to adjust meetings / activities scope to align with required financial activities per IBP steps.
- Backward scheduling review meetings from financial reporting dates (monthly updates and quarterly financial outlook planning) and use re-aligned set of meetings to build P&L.
- Leverage leading planning technologies – to build comprehensive data model, align commercial/supply chain/financial master data hierarchies, leverage predictive and optimization functions, use scenario planning to understand drivers impacting business
VIDEO 2: FUNCTIONAL AND TECHNICAL ARCHITECTURE
- In this video we bring high level system architecture between SAP IBP, SAP Analytics Cloud, Operational Systems (like S/4). To run this tightly integrated process at least 3 systems would need to be integrated bi-directionally, with different granularity and frequency. We should recognize that part of the e2e process require different granularity therefore differentiated planning levels, and very effective aggregation/disaggregation is needed.
- When planning the volume and value jointly you should consider to design integrated data model cross SAP IBP + SAC which will include planning data, historical and master data needed by commercial, supply chain, finance. One of the key challenges will be to define planning hierarchies.
- Business model impacts technical design cross systems. Many examples are brought in, just to say about 1) how you sell product trough which channels will impact what type of drivers, data need to be modelled 2) SC network of own and external resources will impact master data, way supply needs to be calculated and monetized. See examples in demo of SAP IBP and SAC.
- We deep dive into details of how to connect volumetric planning with revenue , cost , gross profit planning cross 5 IBP process steps. In each of the process step we combine volume & value planning, views from various stakeholders. We do not talk about separate processes for volume and value but we talk about ONE SINGLE PROCESS enabled with COHERANT IT SOLUTION .
- We explain how important is to run assignment of leading/master system (SAP IBP, SAC, S/4) per process step / process activities in order to enabled flexibility where is needed. Assignment of leading system should aim to ensure coherent and cohesive data flows / data model cross systems which are used to enable different monetization/valuations methods per flow. Sometimes you will need more details and in other case just aggregates. See examples in demo of SAP IBP and SAC.
- Data flows for demand per channel will give you an opportunity to define different methods how to calculate revenues (with predictive functions, expert input, aggregated or detail) and to align it to significance of those revenues in business model. See demo for examples.
- Data flows for supply element like material, labor, machine …. will give you an opportunity to define different methods how to calculate costs (with predictive functions, expert input, aggregated or detail) and to align it to significance of those costs in business model. See demo for examples.
- Differences in process granularities (commercial-supply chain-finance) are presented in SAP IBP and SAC demo, should be taken into account by architect in the design phase. Such input for design will help you to build e2e integration schedule, flows.
- Calculation method for values (aggregated/detail, driver vs stories, predictive function / expert input / combined) should be aligned to significance of the element in business model.
- We describe that we leveraged specific functionalities of SAP IBP + SAP Analytics and take the best of those systems, and do not overuse any of them e.g. SAP IBP is not for Financial Planning and SAC not for SC Planning.
VIDEO 3: PRODUCT, DEMAND, REVENUE PLANNING
- In this video we explain Product, Demand, Revenue planning with rich set of insights use cases demonstrated in SAP IBP and SAP Analytics cloud.
In Product Planning, Product introduction we explain
- Specific part of the Product planning process needs to be assign to master/leading system, like NPI revenue to be planned in SAC, planned GtN defined in SAC, finalization of sales price and costs planning in SAC.
- Product planning (NPI , revenue, cost) process flow connection to systems like using data from like product on any organizational hierarchy level should be done in SAP IBP, cost/price planning should happen in SAC with data from S/4, agreement on consensus demand plan for NPI should happen in SAP IBP.
- We demonstrate in SAP IBP – 1) new product implementation planning, derivation of data from like product and 2) samples planning to boost sales of new product.
- We demonstrate in SAP Analytics Cloud – 1) samples planning in commercial provisions 2) assessment of portfolio health.
In Demand Planning & Revenue Planning we explain
- Specific part of the Demand & Revenue planning process needs to be assign to master/leading system, like statistical forecasting for products to be done in SAP IBP but other sources of revenue than products to be planned directly in SAC.
- Demand & revenue planning process flow connection to systems like baselin stat forecasting should be done in SAP IBP, planning product / volume drivers for channel like e-commerce supplemented with external data for No of PoS should happen in SAP IBP, tender driver planning as well in SAP IBP, but revenue drivers like commodity price impact on sales price and surcharges and/or hedging should happen in SAC. Consensus demand plan for products should happen in SAP IBP complemented with monetization in SAC but ret of revenue streams planning should be done in SAC directly.
- Sales channels and its drivers will require differentiated approach to complexity and sophistication to be deployed. Significance of channel / driver in the business model should help to determine the method. More strategic / significant channels and its drivers will require combination of predictive function & expert input, maybe smaller channels and its drivers will require planning on aggregated level with use of more automation and predictive functions or simple aggregated expert input. Note that specific channel and driver may require external data like weather data, Nielsen data. See some examples in presented demo.
- We plan revenues as 1) volume come from SAP IBP and price planning in SAC (based on standard price integrated from S/4) which is valid mostly for products 2) other revenue streams are planned in SAC directly.
- We demonstrate in SAP IBP – 1) base line statistical forecasting & outlier detection/correction , 2) product and volume related demand drivers, 3) differentiated planning levels – bottom up, top down forecasting 4) consensus demand plan for products, 5) Forecast Value Add analysis.
- We demonstrate in SAP Analytics Cloud – 1) Gross to Net Conversion – off invoice, on invoice discounts drivers, 2) Driver based planning for net revenues streams on aggregated & detail level with use of expert input and/or predictive functions, 3) Other sources of revenue Licenses, Services, 4) Planning and analytics combined on Product revenue streams like tenders, e-commerce, 5) How data from SAP IBP can enrich insights for Net revenue planning, 6) Cost of Sales planning, Write off provisions, Direct marketing spend, Warranties, Cost of Services & licenses.
VIDEO 4: SUPPLY, COST PLANNING, GROSS PROFIT PLANNING
- In this video we explain Supply, Costs Planning (for Variable and Fixed part) supporting Supply Review and Gross Profit Planning as part of Integrated Reconciliation, with rich set of insights and use cases demonstrated in SAP IBP and SAP Analytics cloud.
In Supply, Costs Planning we explain
- We discuss that differences in processes granularity (between commercial, sc, finance) will require special detail tech design and integration to source systems will play important role to synchronize data cross systems after decision making.
- Specific parts of the supply-cost planning process need to be assigned to master/leading system like material planning, capacity planning for labor/machine own/machine external/Inventories/transportation should happen in SAP IBP, but planning of variable costs linked to it, planning fixed costs and its allocations should happen in SAC.
- Supply, Cost planning process flow is connected to systems like cost planning will take requirements for capacity (machine, labor), materials from SAP IBP, will take standard cost elements from S/ç and finalize planning of changes of cost element rates in SAC.
- Supply elements (Material, Material overheads, Labor, Machine, Transportation, Inventory, External manufacturing) has to mapped to costing flows, planned together with cost flows. Specific flow may have different methods (predictive function, expert input, calculation, combination of options) and consider different drivers. This will need to be considered in tech design of e2e solution, especially that managing of planned costs is so important those days.
- Complete view of planned costs and actual costs on aggregated and selected details should be available in SAC.
- We plan costs as 1) volume, hours, km come from SAP IBP and planning of relevant costs rate is done in SAC, based on standard cost elements rates integrated from S/4, which mostly valid for products 2) fixed costs planned directly in SAC.
- We demonstrate in SAP IBP: 1) Own & external Capacity planning, 2) Materials requirement planning & inventory projections, 3) Safety stock planning with MEIO, 4) Transportation/distribution planning.
- We demonstrate in SAP Analytics Cloud 1) Supply data from SAP IBP to enrich insights for cost planning, 2) Variable COGS value driver planning on aggregated level, detail level with expert & predictive function input for e.g. Material, Labor, Machine, Transportation variable costs, 3) Fixed cost planning with cost allocation based on data from supply planning.
In Gross Profit Planning we explain
- Specific parts of Gross profit planning are assigned to master/leading system e.g. finalization of integrated plan up to GP to be done in SAC, finalization of selected driver based on revenue/cost reconciliation should be done in SAC even though it may sometimes mean to adjust product volume in SAC and back integrated into SAP IBP.
- We outline Gross profit process flow with connection to systems (SAP IBP, SAC, S/4) like standard cost rates come from S/4 but planned cost rates will be calculated in SAC and used for complete cost planning in SAC.
- We demonstrate in SAP Analytics Cloud 1) Gross profit planning with selected and key value drivers on aggregated level and connection to detail cost /revenue/price re-planning, 2) Gap to Budget exposure and monitoring 3) Revenue at risk with dynamic navigation.
VIDEO 5: P&L PLANNING, LEAN FINANCIAL FORECASTING
- In this video we deep dive into how to align, build P&L based on proceeding IBP steps expanded with Financial Planning activities. Bond all together into scenario based “actuals + plan” P&L structure comparable to budget, equip your teams with view which is build in monthly process but from one main source, SAC. Process design should enable definition of the flows / streams which can be separately planned with its drivers and monetized on aggregated on detail level depending of its importance.
- We share that process elements and data elements need to back integrated to the source system and when. Data from SAP Analytics Cloud would need to be sent back to source systems once decisions are taken in Management Business Review (at minimum). Specific data elements for specific horizons and granularity need to be back integrated to source system to ensure consistency and finalize processes for next cycle like planned net revenue for products for next cycle of demand planning in SAP IBP.
- We explain that creation of lean financial forecasting is possible if in proceeding review meetings and their enabling processes financial controllers monetize volume plans or plan financials directly in SAC.
In Lean financial forecasting we explain
- Assignment of master/leading system is explained for Enterprise Analytics, Lean fin. forecasting, P&L planning like planning of capex/amortization/depreciation, workforce/head count planning, other SG&A cost to be planned in SAC.
- We go trough Lean financial planning high level process flow (SG&A, R&D, Operating expenses, Investments, …) connect it to systems to enable e2e tech design incl. data integration architecture.
- We demonstrate SAP Analytics Cloud – 1) Selected capabilities from Capex, Commodity price hedging, Operating expenses planning.
In Profit and Loss planning we explain
- If we established ,as explained in 1st video about process, common planning calendar (cross commercial, supply chain, finance) we will be able to build full P&L with use of IBP combined with financial planning. We will be able to assign which part of P&L come from which system, which drivers are to be done with higher sophisticaion and automation and finally which data from SAC should go back to source system once decisions are taken.
- We demonstrate SAP Analytics Cloud – 1) P&L structure resulting from process & data streams from various systems 2) “Actuals + plan” on scenario level, process/data streams coming to P&L 3) P&L gap assessment
- Finally we explain critical element which is – design model for back integration of data from SAC to source systems SAP IBP, S/4, to be used once decision are taken and captured in SAC.
- We finish video series with short recap of the e2e planning process on SAP IBP + SAP Analytics Cloud.
Videos have time line (chapters) to make it easier for you to jump into topic of most interest.
Videos have playlist on top/at the end to make selected process step available at your fingertips.
Look forward to hear from you