getting started with ibp ebook from scm connections1

An Introductory Guide

Bright Ideas for Complex Supply Chains

SCM ConnectionsPresents

Contents

2 Getting Started with IBP The SCM Connections Guide

INTRODUCTIONWHAT IS IBP ANYWAY?..............

DEMAND SIDE IBP SUPPLY SIDE IBPIBP vs. APO....WHY DO YOU NEED IBP?..........

WHERE TO BEGIN. CONSIDERATIONS PARTING WORDS.....

3

4

5

7

8

9

10

11

12

Introduction

B


-

y now you know its coming: IBP: the Integrated . l Business Planning Platform offered by SAP. Youre - probably already seeing plenty of PowerPoints,

diagrams and acronyms. Terms like HANA and cloud

are starting to appear so often theyve lost all meaning. But beyond the hype is an application with

real tasks, actual configuration, testing, interfaces and

training.

This eBook is intended to give you an overview of

Integrated Business Planning. Its not an end-all, be-all, because the product and the solutions are still evolving.

We want to introduce you to what the tool does, what it

doesnt do, hows its different from APO and provide you with a better understanding of how it can impact

your company.

Who are we to tell you about this new tool? Were a team of supply chain nerds. We focus on SAP SCM

APO, but lately weve gotten pretty excited about IBP and what it can do. So read on and if youre still not sure at the end what all this means, drop us a line.

What is IBP

anyway?An overview.

The game

changer here is

the ability to

seamlessly

integrate

demand

planning, supply

planning, and

financial data in

a single planning

area.

4

Getting Started with IBP The SCM Connections Guide

Our crafty marketing team, (Mike Raftery) developed an elevator pitch that we think

covers IBP nicely. SAPs S&OP solution on IBP is a cross functional application built to show the financial and operational impact of different demand and supply

scenarios at any level of analysis in the supply chain.

OK great, but now you get off the elevator and you dont want awkward silence. So what does it really do? The game changer here is the ability to seamlessly integrate

demand planning, supply planning, and financial data in a single planning area.

That translates to truly integrated planning across the entire organization.

The single integrated planning area data structure provides the ability to plan your

supply chain in real time from customer, to component, and every hop in between.

Each application (seen below) applies its own functionality to this framework to

provide a fully integrated planning suite to the entire

supply chain organization:

S&OP Provides immediate what-if functionality to support the integrated supply and demand

implications of different scenarios as a predictive

analytical tool.

Supply Production supply planning with real time analysis of capacity and demand implications on a

given set of resources in a supply chain.

Demand Demand planning at any level, free of the restrictions of traditional hierarchies by being able to

cascade changes at any level throughout the entire

network.

Inventory Shows the true cost of inventory and service to the entire organization by demonstrating

the actual implications of maintaining specific

service levels against the variability of the supply

chain.

4

5 Getting Started with IBP - The SCM Connections Guide

The creation of a demand plan is not an easy journey, mostly because it is a journey

with no real end or destination. For supply planners, once the supply has been balanced with the demand, then their job is fairly complete. So lets break it down:

How does IBP work?Now that you have an idea of what IBP is and what it does,

lets break it down further into how it works. Well look first at the demand side and then at the supply.

Inbound Data

Historical Data

Manipulation

Generation of the

Statistical Forecast

Demand: How it works

IBP uses the Hana Cloud Integrator (or

HCI) to import all of the data required

to drive the demand generation

process. This tool maps data sources

from any required system (SAP

systems, non-SAP systems, flat files,

etc.)

Once the historical data has been

delivered to the IBP system, that data

needs to be analyzed to determine if

there are any outliers that needs to be

adjusted in order to ensure that the

statistical forecast is not unduly

influenced by this data. IBP makes

this a bit easier through the use of

defaulting logic in the key figures. Example: you have a KF for

Sales History and a KF for Sales

History Overrides that feed into the

Statistical History KF. A calculation is

then written to have the Statistical

History KF default to the Sales History KF only when the Sales History

Overrides KF is blank.

Once the historical data has been

integrated and cleansed, the statistical

forecast can be generated

in IBP. There are currently only a few

choices for forecast algorithms (1st,

2nd, and 3rd order exponential

smoothing, and weighted average), but

for most companies, these are enough

to model the majority of their

portfolios. One thing that IBP offers

that APO does not is the ability to

create a table of the alpha, beta, and

gamma factor values and have the

system iterate through these value

sets and determine the best forecast

profile with the right factors, based on

forecast accuracy.


It is at this point that the real business

process of creating a demand plan comes

into play. This is where the various groups in

the business get to make their cases as to why

their numbers should be used before the

demand planner shows them the error of their

ways (literally) and goes with the statistical forecast.

It is here that the following inputs can be

taken into consideration:

Marketing and Promotional adjustments Sales and Customer Input adjustments New Product (and product phase out) adjustments

POS influenced short term adjustments

One of the major advantages

that IBP has over APO Demand Planning in

this particular area is its ability to handle the

override logic in a more elegant fashion and

not have disaggregation be such an issue.

(Anyone who has executed an APO drill

down macro and then watched the lights

dim will tell you that that really is an

issue.) The defaulting here really shines and allows users to all input their versions of the

truth while the massive speed of HANA allows

the forecast accuracy of each business area

to be calculated in real time to determine if

their version should be considered.

Demand: How it works (continued)

Incorporation of Forecast

Influencing Factors

Pass to Supply Planning

The term pass is really a bit of a misnomer here, due to the fact

that the IBP demand, supply, and

finance areas all share the same

databaseso there is no actual pass. Once the forecast has been

saved, it is available to the supply

team to start their planning. It is

this point that really takes IBP from

being just another S&OP tool to a

tool that can truly transform your

S&OP process into what it was

always meant to be; a catalyst to

turn strategy into reality.

How does IBP work?

How does IBP work?


Once all the master data is set up and

the consensus demand is saved, running

the Supply side of the equation is a

simple matter of running your heuristic of

choice from within the Excel application

(yes: no more weekly batch jobs to wait

for).

If the user likes the results of the heuristic

(and has the security to publish those

results), it's a simple matter of saving the

data and/or promoting a version to

production for all to see.

The output from supply is extensive, but

in broad terms, it's your MRP, resource

capacity plans, planned production

quantities, and inventory levels, along

with all the financially relevant costs and

revenues based on your constraints and

master data.

The process starts like any other SAP

application with master data. The data

requirements are beyond the scope of

this eBook, but just think of everything

that's needed to run your supply chain -

costs, resources, recipes, BOMs,

transportation lanes, customer sourcing,

inventory levels, material list, etc.

Fortunately, data is easily migrated with

SAP's HCI, and tweaks to the data can

occur directly from within Excel.

The heuristics will take your consensus

demand and figure out where the

products need to be made and how

much demand is going against each

resource. If you're familiar with APO -

especially SNP, then the IBP key figures

should be second nature to you. And of

course, customizing the standard data

model to meet your company's and

industry's needs is not only possible but

expected.

And we really cant stress enough the power of this tool: it's in Excel and the

financials are also integrated into every

calculation. Being able to change key

information (e.g. a resource's efficiency

or a components cost) and then almost

immediately seeing the financial impact

is a powerful tool that will only grow in

power over time.

Hey, just give us a call or shoot us an email

at [email protected] and we can

talk 1:1 to dive into your specific

requirements and how IBP could meet

them. Or check out our videos where we'll

walk you through all of IBP in 30 minutes."

Supply: How it works

How does IBP differ from APO?

Now that youve seen how the demand and the supply side work, youre probably wondering how this compares to APO. Heres the answer: the S&OP application is incremental functionality to your existing APO footprint; there is nothing like it in APO today.

Even though IBP will eventually replace APO on the SAP roster in 2025, it is not a version

upgrade, not even close. This is nothing like your typical version upgrades in ECC and APO

with the lift and shift type of project plan. This is a reimplementation. The technological impact of HANA on a planning platform like IBP means more than a new application, it

means a new planning process. The limitations of the R/3 architecture of BW, APO and ECC

created a world that revolved around batch jobs and data loads. That world no longer

exists.

All IBP applications run on the same database and share the same information. The HCI

interface connects systems in real time. No more data loads.

The solve time of HANA enabled applications means networks can be re-planned in

seconds. No more batch jobs.

Blows your mind a little, doesnt it? So lets break it down further. How does IBP differ from APO Demand Planning? Lets take a look.


Why do you need IBP?


Since APO came out around the turn of the century, expectations have changed.

People demand answers right now. In a world where you can find any answer on

your phone via Professor Google (or maybe his Assistant T.A. Bing) it is not acceptable to answer what if questions in days. The workplace today demands answers right now.

With S&OP on HANA, not only can you simulate any scenario in seconds, you can

also drill down and segment that data at any level required. So, with this

application, you can remove the aggregation restrictions of BI and the

performance limitations of APO. That means the first time your users sit in an S&OP

meeting and can answer a question immediately with the facts to back it up, you

can also share in that smug feeling of self-satisfaction theyll have.

If your organization runs on the cloud, you get the benefit of a shovel readyapplication, and the accompanying expectations of speedy delivery. An

application like S&OP running on IBP in the cloud is great because it comes ready to

configure, and fully supported. This light footprint is a perfect fit for the agile project

management methodology. The iterative incremental approach to delivery allows

you to focus on the deliverables and get quick wins right away. Since your

organization is free from the back office tasks associated with most applications,

you can focus everyones efforts directly on the application itself, and the processes it will support.

Agile methodology is great because it allows for incremental builds and features

along the way. For a new software package with functionality as advanced as

SAPs HANA platform, your organization will find new uses and new features as you get more experienced with the capabilities. There is no way to get it all right away.

SAP is continuing to roll out new features

that you will want to take advantage of. And your users will ask for new data, better

dashboards and deeper analysis as you all start to comprehend what a real time

S&OP process can bring to your business.

t

Because you need answers now

Because its shovel ready

Because you can build incrementally and

evolve as new features evolve

So.

How Do

We Begin?


START small

Dont be scared to bring in users and business partners early and often. Help them to envision the process as they want it to be, not as they have today.

Many requirements of today stem from system limitations of yesterday. So constructively question requirements. Get to the root of the process, not the

clicks of the system. By making your users partners, not customers, you can

ensure a much more relevant and useful application. This is especially so with

the dramatic difference of the IBP platform. Running in real time, in excel, in a

collaborative manner is going to be a new world for your users. Hold hands

and go there together.

Its surprising to realize how much process has been defined by technology, or more specifically the limitations imposed by technology. Batch jobs, for

example, are a classic system limitation that have defined a generation of

business processes. But what if batch jobs just go away? What does your

process look like then? IBP and its enabling technologies give you the ability

to see just that.

Move quickly and move often. The infrastructure-lite approach to the IBP

solution, and the ability to quickly run and evaluate the solutions give

incentive to incremental improvement. The light footprint of the application

allows for added and changed features with a quick turnaround. Customers

are happy and IT is creative, who can lose?

DONT CONFINE YOURSELF TO THE PAST

Start with one business unit, one segment. Build, learn, adjust and build again.

This approach allows for small wins and multiple waves of features to keep your

user base happy. Unlike long lead time projects with big bang go lives in which

the features arent known until its too late, an agile approach can build on the features that work and abandon those that dont. A perfect fit for a cloud based solution. With this approach, you can realize return on your investment

early and often in the project.

PUT PROCESS FIRST


Releases Will Come Fast and FuriouslyThis is an application constantly under construction. Bug fixes of course, but more

importantly, new features pop up with each new release. A few times weve thought, It would have been nice if. And then that feature was in the next release. New capabilities are available with each release as well. None of the IBP

applications are fully established as SAPs rollout schedule demonstrates. That means new toys with each new version; its like Christmas for nerds.

With New Functionality Comes More Issues.Sure, there are fixes with each new release, but you find bugs as well. If you have

the patience, its actually not that bad. You realize youre on the cutting edge of something and this is the price you pay for pushing the envelope.

Were All LearningEveryone is ready to help: there is a rejuvenated community out there. With the

aforementioned issues and new releases coming regularly, everyone is looking for

the same answers and there are plenty of people trying to provide them. Since IBP

is relatively new, the quality of answers varies widely, as does the level of

support. However, as a community, there seems to be quite a bit of patience and

at the same time plenty of energy focused on getting this right. Theres a fraternal feel to it (less the hazing) and that makes it an exciting time to be a part of the

extended SAP supply chain planning community.

You Have to Get Used to an Application on the CloudFor us, this is a first: working with an application in the cloud. After using it for a bit of

time, were convinced its the future of IT, but there needs to be answers to quite a few questions before it can be used without a second thought. Basically, you end

up trading control for a lower TCO and speed. This is a fair trade. However, a few

questions need to be ironed out ahead of time. For example, how much say do

you have over a release calendar? What happens to the date after you stop using

the application? What is your recourse if the data is lost? How do you manage

customization, if at all? The list goes on. However, questions like this need to be

considered and answered before moving to the cloud can be the default

position. We have no doubt all these issues and concerns will be addressed, and

the cloud is the future, but were not there yet.

This Is Really Stinkin PowerfulYeah its pretty cool. The data model, the performance, the reporting, the fact that IBP uses Excel as a front end. Im all in. This is going to change the game for SAP, and their customers. Not quite today, or even maybe the near future. But it is

coming and organizations that plan with IBP sooner rather than later will see those

benefits quickly and become that much better than the competition. Theres a delicate balance around when to move to IBP and in what order to migrate. Done

properly, it will truly accelerate a supply chain organization by removing the barriers

created by years and years of IT limitations. The hardware and applications

inherent in SAPs HANA solution architecture provide a business application in IBP that users will barely notice. And isnt that the whole point to begin with?

Things to consider

IBP running on HANA will change your organization. The

question is, will it add confusion and frustration, or will it act as

an accelerator for your supply chain? If you treat the migration

to IBP as an IT project, odds are everyone will end up

frustrated. If you work hand in hand, supply chain and IT, to

understand, design and build a process that takes advantage

of the IBP application, the return on investment will be

enormous. It sounds easy, but change is hard. Challenge your

company to take a hard look at its processes and use IBP to

change the game, starting with S&OP this year. Youll thank us in 2025.

For more information, check out our blog and videos

at www.SCMConnections.com. You can also give us a call or

shoot us an email at [email protected]. As always,

wed love to talk.

-The SCM Connections Team

SCM Connections47 S. Meridian St., #410

Indianapolis, IN 46204

(888) SCM-2514

[email protected]

www.scmconnections.com

A few parting words

Contributing Authors: Mike Raftery, Sean Mawhorter, Wade Smith. Book design by Chris Raftery. Copyright 2015 SCM Connections.

getting started with ibp ebook from scm connections1

Documents