White  Paper  SeriesVolume  1  /  Issue  1

SAP  products  and  services  men oned  are  registered  trademarks  of  SAP  AG  in  Germany  and  elsewhere  worldwide.All  ideas  expressed  within  the  content  of  this  white  paper  are  exclusive  to  Intrigo  Systems  Inc.©  2014  Intrigo  Systems  Inc.    All  rights  reserved.

Velocity  &  Vola lity:    Challenges  In  Your  Supply  Chain

                                                                                                         –  SAP  APO  Transi on  to  IBP

EXECUTIVE SUMMARY In April 2014, SAP announced its supply chain strategy that enables companies to transition from supply chains to demand networks. One pillar of this strategy is the introduction of solutions for Integrated Business Planning (IBP). With the new strategy, SAP takes on the comprehensive needs of a modern supply chain and creates a demand-centric framework by providing efficient demand and supply planning that addresses market volatility and customer centricity. With real-time data monitoring of demand and supply and a flexible planning cadence, the new responsive solution increases the agility of business functions and accelerates response times in fast-changing market environments. The new strategy is built around the customer and speed of delivery. The presumption is that if demand sensing is sped up, then supply chain planning and execution will become more aligned with short-term changes in the market. As  SAP’s  Integrated  Business  Planning (IBP) platform rolls out, APO will remain accessible during the transition period till 2020 and may continue beyond that with an extended maintenance. New functionalities of IBP will be made available and can be adopted by organizations as these components are deployed in incremental phases. This paper evaluates how one should take advantage of the new capabilities SAP brings to the planning arena and also elaborates on how one can mitigate any risk inherent during this transition process. SAP is stepping up its offering beyond the traditional static planning denizens that they have occupied over the last 18 years. One should understand that APO was delivered for a static planning paradigm, and current requirements in business demand additional capabilities which IBP will address; hence this is not a technology swap but an enhancement of core planning capabilities. The underlying message is that the new capabilities are required as supply chains evolve into demand networks. This transition will enable users to take advantage of modern technology and the new functionalities to support emerging business needs. Lastly, the paper will also explain SAP APO constructs that exist in many implementations, and will then propose a methodology with a stepwise process to move to the new platform by leveraging the existing environment, model, and supply chain planning processes. BACKGROUND In  a  recent  article,  “The Time to Move to a Demand Network Has Come,”  Hans  Thalbauer  from  SAP  wrote: “In  light  of  this  inflection  point,  companies  will  differentiate themselves through the responsiveness of their supply chain, introducing highly complex multi-channel ordering and fulfillment strategies across an already expansive logistics network. The leaders realize now is the time to imagine an entirely new supply chain that leverages the latest technology platforms to enable real-time decision making and visibility to drive predictive demand planning and response orchestration. In essence, the supply chains of the future will not be chains at all, but will transform into demand networks.”

The main force in a demand network is the customer. Hence building a supply chain in response to the demand signals gives more opportunities for sharing and collaborating information with all the partners in the supply chain network. The Demand Network integrates all of the functions of the company to fulfill the demands of the customers and allows the company to stay competitive, efficient and profitable.

The complete solution suite is architected under the framework of Integrated Business Planning (IBP). SAP’s  IBP  capabilities  aims  to  balance  product  demand  plans  with  supply  constraints, identify flows across the network, and orchestrate response mechanisms for fulfilment and execution. In essence, any platform must accommodate many-to-many supply chain control tower capability along with response orchestration. Customers will also be able to leverage the SAP HANA platform immediately with SAP Cloud and potentially a future on-premise option.

A transformation of such a broad collection of SAP’s supply chain management and applications is a journey; a journey that might take many years to accomplish. Although this is a time for difficult decision making for the SAP focused supply chain business and IT teams, one must not lose sight of productive benefits that organizations can reap from this new platform.

As  supply  chain  experts  who  have  been  associated  with  the  definition  and  design  of  SAP’s  Advanced  Planning and Optimization (APO) at its inception, we at Intrigo Systems foresee changing market dynamics and can help APO customers adapt to  this  market  by  switching  to  SAP’s  new  demand  driven  strategy. We have experience in over more than one hundred supply chain management design and implementations worldwide, and in the last eighteen months have been involved in the shaping of the framework and deployment of S&OP on HANA application for multiple clients. OVERVIEW AND PLANNING YOUR TRANSITION

Now  let’s  look  at  SAP’s  new  architecture  for  ‘Demand Networks’. The following solution components for Monitoring, Planning, Risk Management and Execution layers are included:

Supply Chain Monitoring: this area focuses on customers, products, and supplier to improve efficiency, speed, and profitability, to predict issues and to ensure integrity of the demand network. Integrated Business Planning: IBP creates demand transparency by offering demand sensing, collaboration and statistical forecasting. The advanced supply planning brings the capabilities of APO supply network planning and is further improved with newer planning algorithms for supply simulation. Inventory planning brings in opportunities to optimize the stock and service level across the supply network. In addition, IBP provides Sales and Operation Planning to balance the impact on inventory optimization, service levels, and profitability. It also empowers the company to transition from a fragmented order system to a unified ordering system. With demand networks, customers can use their expensive logistics network to enable them to streamline business processes, improve order cycle times, improve customer service, and reduce cost. Demand network allows us to achieve real-time decision making, which in-turn improves business responsiveness. Furthermore, it provides mature capabilities on supply chains that can have a significant impact  towards  a  company’s  business  and  financial  performance.  Transitioning  to  demand  network also provides companies with mature and responsive supply chain that are more resilient to supply disruptions. It allows the companies to apply the most effective enablers of supply chain risk reduction (e.g., flexibility, risk governance, alignment, integration, information sharing, data, models and analytics, and rationalization) and allows the company stand out in relation to its competition and the rest of the industry. Demand Driven Supply Networks: this area provides a supply chain collaboration process and response orchestration to coordinate and orchestrate demand fulfillment. It also senses and shapes demand according to market fluctuations for more near time changes to true demand. Logistics & Order Fulfillment: Lastly, these tools help align distribution and fulfillment process and connect all the participants of the logistics to make informed decisions and to improve the level of customer service. TRANSITIONING TO IBP PLATFORM Most of the current APO installed base has been using the SCM suite of products over the last 16 years since SAP released APO 1.0 in June 1998. The predominant focus during the deployment over these last years have been in areas of Supplier Network Collaboration (SNC) and Event Management (EM), as well as in the APO modules which include Demand Planning (DP), Supply Network Planning (SNP), Global Available to Promise (GATP) or Production Planning Detailed Scheduling (PPDS), and Service Parts Planning (SPP). This paper will primarily focus on these components. The Transportation Management (TM) or Extended Warehouse Management (EWM) components of the Supply Chain Execution (SCE) will be covered in a different paper. The announcement from SAP should make every installed customer evaluate and strategize about how it wants to move from where it is today and where SAP and the world of SCM will be in the next four to six years. Intrigo has a set of steps which it recommends to its clients to take advantage of the SAP roadmap without trying to overanalyze options and ideas. Given the timeline provided, one needs to estimate the time window available to you for getting the capabilities needed in the near-term, mid-term and long-term.

Our four-step process for migration to the Integrated Business Planning Platform from SAP is as follows:-

If you are currently using SAP SCM components like DP or SNP, we recommend you to take the first step and deploy SAP Integrated Business Planning for sales and operations (formerly known as SAP Sales and Operations Planning). The fundamental integration between these systems will be driven by HANA Cloud Integration (HCI). SAP Integrated Business Planning for sales and operations is the HANA based platform on which future enablement of IBP will be developed. This step allows you to build the necessary talent and technical ability to integrate either your on-premise APO environment to a cloud solution or an on-premise version of S&OP.

SAP Integrated Business Planning for sales and operations is a mature planning tool in its 3rd release since General Availability (GA) that provides a real time demand and supply constrained model. It provides unlimited simulations and advanced scenario comparison for the planners. If you have simplistic Demand Planning in APO, this might be an easy migration to the SAP Integrated Business Planning for sales and operations platform. For customers with Stock Keeping Unit (SKU) proliferation and complex Demand Forecasting (Consumer Product Groups (CPG) or Consumer Electronics) models, we recommend you run SAP Integrated Business Planning for sales and operations in conjunction with SAP APO DP.

STEP 1: TRANSITION TO SALES AND OPERATIONS PLANNING

STEP 2: DEMAND PLANNING/INVENTORY AND SUPPLY SIMULATIONS

Four new cloud application components are now available along with S&OP. They are SAP Integrated Business Planning for sales and operations, SAP Integrated Business Planning for supply, SAP Integrated Business Planning for inventory SAP Supply Chain Control Tower. Companies looking to enhance their current capabilities can start with any of these IBP components as they naturally converge to a broader IBP Platform.

Companies can evaluate the following new components for their unique needs:

x Companies with distributed manufacturing and planning – Integrated Business Planning (IBP) for inventory

x Companies with distributed planning and execution engines – Supply Chain Control Tower (SCT) x Companies with rapid supply changes – Integrated Business Planning (IBP) for supply

This step in our opinion is the area most APO users around the world will look at untangling with the

most care. Because of the tight integration between ECC and APO through CIF, this process will have to

be planned carefully. The  first  release  of  ‘Integrated  Business Planning for  Supply’  was made available in

July 2014 (however, this will only handle simple processes and not replace APO Supply Planning). HANA

then becomes the unifying layer and location of a single Supply chain data model. Most APO users will

have to time this migration in line with their BIZ Suites migration to HANA.

With the introduction of Advanced Supply Chain Planning, components of single unit planning, shelf life

and safety stock planning will be mature offerings. Latency introduced by the CIF and Live Cache

components will be removed and more flexibility will be provided for the decoupled planning

environment. User will be able to plan multiple scenarios and continue to maintain all engines as

currently used in APO.

STEP 3: TRULY INTEGRATED BUSINESS PLAN

STEP 4: THE END STATE

This will be the last component of your migration to an enhanced platform from SAP on HANA and a slightly challenging one. Those who use GATP and PPDS will have to wait at least until 2016 to start this migration because it is mainly driven by the fact that quite a few components are moving across SAP BIZ Suite Modules. For example: current SAP plans call for PPDS to move to ECC.

This challenge extends to Data models in ECC, and currently SAP is thinking of providing data model extensibility to mitigate some of the rigidity of ECC data model. In the near term, PPDS or GATP solutions are the only options available on the APO stack.

ADDITIONAL COMPONENTS SNC This component will be integrated to Ariba Business Network. While this gives the procurement and outsourced manufacturing much needed collaboration platforms, the execution of the plan and orchestration of delivery of goods and data must land in the planning platform. As of now we have not seen how this integration will play out but HCI can be a bet one takes with regard to integration problem. RESPONSE MANAGEMENT SAP is busy working and co-innovating with a number of parties to bring a rapid response solution built on the same platform as the rest of the components. We would venture that any solution that SAP brings may be too simplistic for companies with large set of required response models. The expected component will be available in 2015. SPP This component will be migrated during the SNP migration. Those with very large deployments may want to see how SNP migration occurs. EM This component is either moving to BIZ Suite or being embedded in the platform. Customers who have used this to develop Transport events and inbound logistics might want to understand how TM is evolving and whether the Event trapping module is included. CONCLUSION The new platform, through a powerful and singular data model, transforms the planning cadence for companies into a more agile system within which planners can access real-time granular data, allowing them to make up-to-the minute decisions. The high level of responsiveness creates resiliency and the optimization of order fulfillment and logistics network utilization.

The four-step transition process created by Intrigo Systems provides the platform for forward-looking companies that realize the need to start their supply chain transformation. The first step, which is the implementation of the SAP Integrated Business Planning on the HANA platform, enables companies to establish themselves for the future enablement of developing capabilities that will utilize the in-memory computing platform. The subsequent three steps move companies from their current landscape into the future while allowing them to keep applications, models, and processes in place. The transition will not replace Advance Planning and Optimization (APO). It will simply allow its transformation into a planning environment more conducive to the future of commerce. Intrigo Systems, in its subsequent papers will explore multiple options on how the hybrid network of SAP on HANA can be deployed for different businesses. CONTACTS For questions about this paper, please contact Intrigo Systems Inc. For comments and feedback, please mail to info@intrigosys.com. Intrigo Systems Inc. 42808 Christy Street, Suite 221, Fremont, CA 94538 Phone: 800-440-2137 Fax: 800-440-2832 http://www.intrigosys.com