Integrated Business

Planning (IBP)
Demand Planning
Content :
❖ Need for IBP
❖ Overview of IBP
❖ Demand Management in IBP
❖ Case study : Dabur
Why Integrated
Business Planning
The Digital Disruption is Here….

96% of people are influenced 83% of companies uses public

Sophisticated customers expect
by social media even before cloud
100% Service experience
buying 51% workload through cloud today

Data explosion : 90% of data 51% of commerce transactions Can your old traditional supply
generated in last 2 years through mobile chain withstand it
 What is Supply Chain ?
A Supply chain is a coordinated network of organizations, people, activities,
information, cash and resources involved in moving product or services, either
virtually or physically, from supplier to customer and back.
Make
Ful
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Sou

Lo
n

gi
a
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sti
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Challenges in today's Supply Chain

Individualized Project Higher Collaboration

Customer Centricity Easier Integration
Sharing Economy User Friendliness
Resource Scarcity

Complexity

Just in Time
Improve
Responsiveness
“Failing to Plan is …
Planning to Fail”
 Integrated Business Planning (IBP)
Supply Chain Control Tower
Exception Handling and Business Network Collaboration

Sales and Operations

Strategic and Tactical Decision Processes

Demand Response & Supply

Inventory
Demand Sensing, Allocation & Deployment,
Multi-Stage
Statistical, Forecasting Order Rescheduling,
Inventory
& Consensus Unconstrained & Constrained
Optimization
Planning Supply Planning

SAP HANA
 SAP IBP Overview
SAP IBP DATA/INTEGRATION ARCHITECTURE: HANA CLOUD INTEGRATION HCI BASED
 Supply Chain Control Tower ER
P
SAP Supply Chain Control Tower provides end to
end supply chain visibility, to big data analytics and
trend reversal, so the companies can uncover
exception easily and respond faster at the level of Integrated
granularity they need. Supply Chain Control Tower Business
Enable companies to segment, analyse, and simulate Supply Chain Control Tower Planning
the supply chain in real time. The Segmentation of
the supply chain allows to gather parts, regarding the
cbusiness requirements for easier viewing and
understanding. Supply Chain Control Tower is the
business work bench and centralizes all data flow.
This user home page includes for example:

● KPI dashboard
● Predictive analytics
Event Transportation Advance Supply Network
● Alerts Monitor Planning &
Management Management Collaboration
● Simulation & recommendations Optimization
● Collaboration between User
 Manage cases
Analyze KPIs Check alerts
and tasks

Key Features: Key Benefits:

❖ Smart alerts: Deviations are analyzed and ❖ Increased End–to-End Visibility.

related to the end customer. Smart alerts ❖ Internal and external information is provided from
provide information and suggestions in planning and execution systems in one view, close to real-
consumable context. time.
❖ Analytics: Supply chain and financial metrics, ❖ Increased On-Time Delivery Performance to Customer.
for example, the expected cost of lost sales, Focus on the customer by aligning operations towards high
are calculated in the alert context and provide customer service. Shortages are related to customer
significant guidance on what area to focus on. demands and a high degree of visibility is established.
❖ What-if simulation capabilities ❖ Decreased Overall Inventory Levels While Reducing Risk.
❖ Task and case management (solve issues in a View current stock in one system, as opposed to many
structured and aligned way) different systems that have data, which is not synced.
 Sales And Operations

ERP
Sales/Marketing
CRM

BPC Demand Planning

APO

BW Finance

Any
Other
Supply Chain
System

Excel
Executives

S&OP process is the core of Integrated Business Planning process. This process aligns demand and supply to drive a business
outcome. The SAP Integrated Business Planning solution for Sales & Operations helps you engage key stakeholders in an
efficient, integrated planning process that profitably aligns demand and supply.Based on the strategic and business plans, S&OP
is a set of decision making processes through which the management team will be able to handle his business to achieve the
company’s objectives. To set up the S&OP process, information coming from different areas such as Finance, Sales, Supply and
Production are requested.
 Sales & Operations Planning Process
Demand Executiv
Product Demand Supply
Review Review Review
Supply e
Balancing decision

Key Features:
❖ The IBP Sales & Operation Planning (S&OP) solution provides a unified model of demand, supply chain, and financial data for real-time
analysis and simulation.

❖ SAP HANA based Integrated Platform: IBP S&OP enables a complete enterprise model, which spans commercial, operations, and
finance functions to model demand, supply, and finance constraints and targets simultaneously.

❖ The model is easy to reconfigure and is based on SAP HANA, which provides scalability and the ability to handle large data volumes
and calculations.

❖ Intuitive UIs via Web, Microsoft Excel, and Mobile support, which are quick, accessible, have real-time visibility, and flexible planning. It
is a flexible model that provides easy access using the analytic capabilities of Microsoft Excel.

❖ Scenario planning and comparison with multiple plans is possible in real-time at both a detailed and an aggregate level due to SAP
HANA. SAP also offers what-if simulation capability, which is available to a planner at any time and across the entire model. SAP HANA
provides a dramatically faster in-memory computing platform than any other on the market.

❖ SAP JAM based Collaboration: Social collaboration is embedded throughout the application, which allows you to engage with business
functions and to have transparent information sharing and decision making during the Integrated Business Planning process
 Key Benefits: Screenshot of S&OP
❖ Enterprises can use this solution to deliver a Home page
cross-departmental S&OP balancing that
impacts enterprise inventory, service levels,
and profitability positively.

❖ Creates the optimal business plan to drive

revenue growth and increase market share.

❖ Effectively balances demand and supply, and

attain financial targets.

❖ Increases speed and agility of planning and

drive the most profitable responses.

❖ Improves forecast accuracy and on-time

delivery.
SAP IBP Inventory Management
❖ SAP Integrated Business Planning for Inventory
can be used to optimize multi-stage inventory
targets to meet or exceed customer service
levels, while considering uncertainties like
forecast errors and supply uncertainty.
❖ Demand side is not 100% predictable and
suppliers are rarely reliable. Based upon these
facts inventory targets must also consider
variability and uncertainties in Supply and SAP
IBP Inventory help organization to manage
uncertainty and drive S&OP decisions to reality.
❖ IBP Inventory is a decision taking tool, to
optimize safety stocks across the entire
distribution network, based on customer
demand and replenishment parameters like
forecast error, lead times, variability,
replenishment frequency, lot sizes and target
service level.
Inventory Planning Process

Run and review Approve and update

Validate Data Inputs What-if analysis
inventory plan inventory plan

What makes Inventory planning difficult

How much inventory do I How much inventory do I

need at Manufacturing need at Distribution
location? center?
Service level Targets Lead times
Forecast Lead-time uncertainty
DEMAND

Forecast error Internal service levels

SUPPLY
Consistently over or under forecasting Schedule attainment variability
Intermittent Demand Production/Distribution batch sizes
Outlier sales or forecasts Supply reliability
Multiple service levels and inventory thresholds Capacity restrictions
Seasonality/Promotions Frozen production/planning periods
Internal and external demand Multiple supply sources
Key Features: Key Benefits:
❖ Improves customer service levels
❖ SAP Integrated Business Planning ❖ Maximizes the efficiency of inventory and working
for Inventory allows you to deal capital
❖ Improves planner productivity by standardizing the
with supply chain uncertainty in planning processes
planning. It sets inventory targets ❖ Standardizes the inventory target-setting process at
each tier to feed operational plans
across complex supply chains so ❖ Reduces production and distribution costs
that an inventory is most efficiently
deployed. Screenshot of inventory dashboard
❖ SAP Integrated Business Planning
for Inventory uses different
methods than traditional planning
systems. It combines these new
methods with true multi-stage
(multi-echelon) inventory
optimization and full detection and
consideration of multiple demand
 Response and Supply Management
SAP IBP Response & Supply allows quick adaptation to changes in demand, considering the full supply chain model. It helps simulating plans
for production, for distribution, and for procurement, to meet customer needs. Both infinite and finite capacity mode are available, like
advanced planning system. With What-If analysis, Integrated Business Planning for Response and Supply provides visibility versus potential
scenarios.

As APO SNP the data repository is organized according to supply dimensions (product, location, resource, sourcing…) and key figures
reflecting quantities and values. This module also allows you planning using an Optimization engine that considers many constraints and cost.

SAP IBP Supply and IBP Response allow generation of mid-term and short-term supply plan based on prioritized and categorized demand.

The added value of IBP Supply is to utilize

14% Higher on-time delivery performance. From “best run”
supply chains when compared to peers
optimization algorithm, with capacity and
material constraints, to develop a tactical supply
plan but also the ability to run multiple
Lower order fulfillment lead time in companies where simulations and comparisons, as part of an
15% concurrent material and capacity constraint plans are
generated
extension of the sales and operations process.
Supply & Response Planning

Sequence Finalize
Capture Constrained Scenario supply/response
demands by
Inputs planning run Planning plan
priority

Key Benefits:

❖ Generate Feasible supply plans to meet demand with minimum inventory and
efficient capacity utilization.

❖ Gain upside revenue and competitive advantage by rapidly adjusting plans to

seize demand opportunities and respond to supply disruptions
❖ Provide a constrained demand plan as an output for further supply processing in
another planning system like SAP Advanced Planning & Optimization APO or SAP
Enterprise Central Component ECC.
 Key Functionalities
Rough Cut Planning
Multi Level Planning Time-series based rough cut capacity plan,
Ability to model cross locations and can consider capacity and material
multi level Bill of Materials to cover the constraints simultaneously
entire supply chain

Embedded analytics Supply Planning

Utilize a heuristic based or
Create visualizations of any key figure or
optimization technique to determine
KPI in the IBP for supply model
supply plan

Exception Management
Planners can identify and address problem
materials and resources, then determine
best course of action for resolution of the
situation
 SAP IBP Demand : Combine demand sensing in the
short term with medium to long term forecasting

In the world of “internet of Things” and digital transformation the market is changing rapidly. Now the top business
have to manage high market volatility, variation in demand, shorter product life cycle, whereas delivery lead time must
reduce to remain competitive. On the other hand considering a few facts like daily work challenges, poor forecast
accuracy, inefficient operations, unwanted low service level and excess inventory, the demand forecasting has become
an impossible task to perform with satisfactory results. SAP IBP Demand proposes new opportunities to adapt the
new normal context !

SAP IBP Demand (Integrated Business Planning) is an end to end

demand planning engine, combining “traditional” mid-to long term
planning based on statistical methods with the possibility to run more
Days of
-12 % Inventory
accurate demand sensing models to improve your forecast accuracy for
your short term planning horizon. The solution combines automated,
exception-based planning processes as well as manual planning
Outbound
-35 % Expediting
capabilities, powered by the speed of SAP HANA, and based on a user-
friendly Microsoft Excel interface. the main SAP IBP Demand goal is to
deliver more accurate demand plans for better planning and execution
processes.
SAP Integrated Business
Planning for demand Supply Chain Control Tower

Develop more accurate Sales & Operations Inventory

mid-term statistical
forecast Demand Response & Supply
React Faster to short term
demand changes with
pattern recognition based
algorithm
Collaborate to ensure the
most accurate demand plan
Drive more accurate
deployment of product
based on short term
demand
 ❖ Demand Sensing SAP IBP Demand Scope
Refining short-term forecasts to drive better
fulfillment and inventory reduction. What IBP Demand
answered
❖ Robust Statistical Models
Time-series and regression based models as well as
pre- and post-processing algorithms.

❖ Embedded analytics
Create visualizations of any key figure or KPI in the
IBP for demand model.

❖ Demand Planning
Integration of multiple demand streams to provide
more accurate forecasts

❖ Exception Management
Focus planners on problem materials and identify
opportunities for improving the forecast
IBP : Demand Module Overview

Monitoring & Controlling of the planning process

Segmentati
on CONSENSUS DEMAND PLANNING
Statistical
Forecasting
Manual
Input
Time Series
Analysis Forecast Accuracy
Calculation
 ABC / XYZ Segmentation

A-X A-Y A-Z

High Imp - Easy Forecast High Imp - Harder Forecast High Imp - Hardest Forecast
Volume

B-X B-Y B-Z

Medium Imp - Easy Forecast Medium Imp - Harder Forecast Medium Imp - Hardest Forecast

C-X C-Y C-Z

Low Imp - Easy Forecast Low Imp - Harder Forecast Low Imp - Hardest Forecast

Volatility
 Benefits of Segment specific job chains to

Segmentation optimize the process of various

segments

Segment specific analytics and

dashboard to gain segment
specific insights

Segment specific alerts for

exception based planning

Manual filtering on segment to

increase planner productivity
Demand pattern
identified by the time
Resulting demand
properties to be stored Time Series Analysis
series analysis as attribute value Screenshots of Actual
module

CONSTANT

SEASONAL

SPORADIC

TREND
 Tactical & Operational Demand Management
Building Blocks and Key Use Cases

New product Create and

introduction : Phase- Collaborate on a
In, Phase-Out, and consensus demand
Like Modelling Consensus plan
Demand
Create Statistical Planning Planning Based on
forecast with Priorities &
sophisticated Demand segmentation
algorithms Management
resultsCalculate,
Run daily
forecast & Demand
analyze
Statistical
Demand Sensing Forecasting And manage
Sensing forecast
accuracy
 Demand Planning Process

Data Data Statistical Demand Market Publish

Preparation Cleansing forecast sensing input forecast

Business Benefits :

❖ Build a single, comprehensive demand plan, integrated with the consensus

forecasting process.
❖ Reduce safety stock levels by lowering forecast errors.
❖ Improve service levels , reduce stock-outs and lower expediting costs trough
more accurate forecast.
IBP for Demand planning Key Functionality
Screenshot of Actual ★ Gather and cleanse historical data
module with system support and
automation.
★ Statistical forecasting with a wide
selection of tried and tested
algorithms.
★ Demand sensing with modern and
advance algorithm.
★ Combine forecast results and define
own calculations in a flexible way.
★ Adjusts forecasts easily in the excel
front end at flexible levels of
hierarchy with automatic
reconciliation.
★ Generate demand scenarios for
further analysis.
Statistical Forecasting
Increasing Forecast Accuracy over time

Long Term Medium Term Short Term (Demand

Horizon (Demand Planning) Sensing)
(S&OP)

➔ Micro- ➔ Statistical ➔ Order Patterns

economic Forecasts ➔ Short term
Drivers Indicators. ➔ Sales Input trends
➔ Global/
➔ Key customer
Regional
activities
trends
IBP for S&OP ➔ Mid term trends
IBP for Demand
➔ Marketing
Inputs IBP
 Statistical Forecasting Methods in IBP
Pre-Processing Regression
Time Series algorithms
algorithms based algorithms
➢ Substitute missing values ➢ Single Exponential Smoothing ➢ Multiple Linear Regression
➢ Outlier correction ➢ Adaptive Response Rate Single (MLR)
➢ Promotion Exponential Smoothing ➢ ….
Elimination(Demand Sensing ➢ Double Exponential Smoothing
only) ➢ Triple Exponential Smoothing
➢ Automated Exponential Smoothing
with parameter optimization
➢ Croston’s Method
➢ Simple Average
➢ Simple Moving Average
➢ Weighted Average
➢ Weighted Moving Average
➢ ARIMA models
➢ Brown’s Exponential Smoothing
➢ Gradient Boosting
 Forecast Error Calculations
Flexible definition of forecast error calculations Determine what is most accurate :
➔ Any Key figure as input ➔ Stat forecast vs Actuals

➔ Calculations based on any lag ➔ Consensus vs Actuals

➔ Error Measurements : ➔ Sales Plan vs Actuals
◆ Bias
Screenshot of Actual Forecast Error
◆ Coefficient of Variability
Dashboard
◆ MAPE
◆ WMAPE
◆ MPE
◆ MSE
◆ RMSE
◆ MASE
◆ MAD
➔ Executed using KPI_PROFILE
From Statistical Forecasting to a Consensus Demand Plan
Granularity : Demand Planning or S&OP (Weekly or Monthly)

Sales History Statistical Forecast

Consensus
and other (o/p from
Demand Plan
historic data algorithms)

Inputs from Input from Input from local

sales marketing demand
departments departments planners
 From Statistical Forecasting to a Consensus Demand Plan
Granularity : Daily

Consensus Demand SAP’s Demanding Daily Sensed

Plan Sensing Algorithms Demand Plan

Trade Promotions POS Data

Shipments Sales Orders ….
(Planned) (Future)
What is Demand Sensing?
A short explanation

Demand Sensing is a forecasting method that leverages new

mathematical technique and near real time information (based on
current realities of the supply chain) to create a more accurate and
SAP Integrated Business Planning Demand Sensing
Key capabilities and benefits

❖ Demand Sensing creates short-term forecast :

➢ 4 - 8 weeks forecast in daily granularity
➢ Highly automated
➢ Using pattern recognition
➢ Leveraging multiple demand signals

❖ Improved short-term forecast and increased automation:

➢ Drives right deployment, allocation, and transportation
decision, which leads to reduced stock-outs and less ruch
orders
➢ Leads to lower safety stock due to higher forecast
accuracy(especially if run together with IBP inventory)
➢ Leads to lower cycle stock due to improved over/under
forecasting behaviour
Demand sensing bridges between planning and execution

Demand Sensing does not replace traditional demand planning process. It uses the consensus
forecast, which is in weekly buckets, as a key input to further optimize the demand plan in the
short term horizon. On SAP IBP Demand the Demand Sensing adjusts the mid-to long-term
forecast based on certain patterns, brings additional demand signals into consideration, and
break it down to the daily level.
 Increasing Supply Chain efficiency through
improved planning with SAP IBP

❖ Dabur India Limited is the fourth largest

Industry manufacturer of fast moving consumer
Consumer products goods in India.
Revenue
Rs 35 billion (US$750 million) ❖ The company uses the SAP® Advanced
Employees
2,527 Planning & Optimization component
Headquarters and SAP Supply Network Collaboration
Ghaziabad, India
Web Site application to forecast and plan for the
www.dabur.com needs of dealers and other parts of its
SAP® Solutions and Services
Demand planning with the SAP® Advanced supply chain more accurately.
Planning & Optimization component and supply
chain planning with the SAP Supply Network ❖ The result is fewer lost sales, more on-
Collaboration application time deliveries, and lower sourcing
costs.
 Challenges faced by Dabur :
➔ Forecasting is not through a comprehensive automated system.
➔ Month-end primary sales push skews & distort true demand
consumptions insights.
➔ Low forecast accuracy & fidelity
Why SAP Was Selected ➔ Promotion calendar not frozen in advance leading to last minute rush.
❖ Extensive experience in India ➔ High demand whiplash month-to-month.
❖ Use by Dabur’s competitors ➔ Low ability to systematically sense demand and drive supply chain.
❖ Strong supply chain management ➔ No scientific way of predicting new product demand.
❖ Functionality ➔ Sudden irregularities in historical data due to currency fluctuations/
❖ Integration with the SAP® ERP geo political issues for 2017 which made forecast difficult.
application ➔ Difficult to clean and organize data for different countries.
❖ Ability to optimize cost models for ➔ Effect of promotions not included because of lack of information.
product sourcing
➔ Hit/Miss not an ideal parameter for calculating forecast accuracy.
❖ Integration with dealer point-of-sale
portals As all SKU with 0 amount were considered as a HIT.
 Implementation Best Practices
Value-driven Results ★ Wrote solid business case for
implementation that included key
performance indicators

Financial and Strategic Benefits ★ Deconstructed historic sales data to derive

baseline sales and impact of sales
40% ★ Significant improvement in statistical promotions
Reduction of Lost sell forecast accuracy
★ Completed business process reengineering
★ Demand forecasting for all SKU stock prior to implementation
53% levels
★ Used experienced consultant with
Reduction in forecast ★ Reduced sourcing costs due to IT-driven understanding of business
errors
adherence to sourcing rules for multiple
countries Low Total Cost of Ownership
7% ★ Optimized revenue from prioritizing better
Increase in on-time ★ Use of existing investment in SAP ERP to
deliveries
selling SKUs in production and dispatch capture POS and non-POS data through
★ Greater agility due to increased availability dealer order portals
73% of weekly SKU forecasts ★ Use of the SAP Advanced Planning &
Increase in Rolling Optimization component to access data
production plan ★ Production forecasting that takes various
adherence constraints into account from other sources for forecasting,
production planning, and dispatch planning