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SCM Connections

Presents

An Introductory Guide

Bright Ideas for Complex Supply Chains

Contents
INTRODUCTION 3
WHAT IS IBP ANYWAY?..............4
DEMAND SIDE IBP5
SUPPLY SIDE IBP 7
IBP vs. APO....8
WHY DO YOU NEED IBP?.......... 9
WHERE TO BEGIN.10
CONSIDERATIONS11
PARTING WORDS.....12

Getting Started with IBP The SCM Connections Guide

Introduction
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.

Getting Started with IBP The SCM Connections Guide

What is IBP
anyway?
An overview.

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.

The game
changer here is
the ability to
seamlessly
integrate
demand
planning, supply
planning, and
financial data in
a single planning
area.

Getting Started with IBP The SCM Connections Guide

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.

Demand: How it works


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:

Inbound Data
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.)

Historical Data
Manipulation
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.

Generation of the
Statistical Forecast
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.

Getting Started with IBP - The SCM Connections Guide

How does
IBP work?

Demand: How it works (continued)


Incorporation of Forecast
Influencing Factors
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.

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.

Getting Started with IBP The SCM Connections Guide

How does
IBP work?

Supply: How it works

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.

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


at IBP@scmconnections.com 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."

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.

Getting Started with IBP The SCM Connections Guide

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.

Getting Started with IBP The SCM Connections Guide

Why do you need IBP?


Because you need answers now
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
t
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.

Because its shovel ready


If your organization runs on the cloud, you get the benefit of a shovel ready
application, 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.

Because you can build incrementally and


evolve as new features evolve
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.

Getting Started with IBP The SCM Connections Guide

So.
How Do
We Begin?
START small
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.

DONT CONFINE YOURSELF TO THE PAST


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.

PUT PROCESS FIRST


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?

10

Getting Started with IBP The SCM Connections Guide

Things to consider
Releases Will Come Fast and Furiously

This 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 Learning

Everyone 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 Cloud

For 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 Powerful

Yeah 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?
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Getting Started with IBP The SCM Connections Guide

A few parting words


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 IBP@scmconnections.com. As always,
wed love to talk.

-The SCM Connections Team

SCM Connections

47 S. Meridian St., #410


Indianapolis, IN 46204
(888) SCM-2514
info@scmconnections.com
www.scmconnections.com

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