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In the last blogs, you learned about the different assets of SAP Best Practices for SAP Integrated Business Planning for Supply Chain (SAP IBP) delivered as part of the sample planning areas or downloadable from Process Navigator. This information lets you set up a system with various solution processes and sample data. But how do the processes fit together, how do they interact, how do they depend on each other?
We combined the most important processes into a unified planning process flow, explaining the relationship of the processes to each other and the outside world (means outside of SAP IBP).
So, what is the unified planning process all about?
It's an exemplary, integrated, end-to-end planning process that crosses all SAP IBP applications. It's based on comprehensive sample planning areas - SAPIBP1 and SAP7F - supporting planning at different times and data granularity. The SAP Best Practices for SAP IBP package delivers corresponding preconfigured and validated content like planning views in Excel, analytics stories, alerts, and sample data. In an implementation project, often not all SAP IBP applications and processes are relevant. For example, you want to start with sales and operations planning (S&OP) and demand first. But even in this case, the related part of the unified planning process can be used.
The process covers
- Tactical planning, which is normally done monthly for a 1 to 3 years horizon
- Weekly mid-term operational planning is usually done for the next 1 to 12 months
- Short-term operational planning is done on a daily frequency for the upcoming 1 to 12 weeks
The process starts with the demand planning. The goal of this step is to gain full demand transparency for the upcoming demands. Based on historical sales data, the statistical forecast is the base for local demand planners to create the local demand plan, typically for a specific location product or product group. Based on the local demand plan and the last final sensed demand, the global demand planner creates a global demand plan.
In demand sensing, the sensed demand is calculated based on daily considering delivered quantities. The demand sensing forecast can be fed back into the collaborative demand planning process to allow demand planners to change the demand plans.
The next step, the demand review, is part of the Sales and operations planning process (S&OP). During demand review, representatives from sales, marketing, finance, and demand planning gather and review their various demand inputs. Examples of such data are the marketing plan, the sales plan, and the annual operating plan retrieved from external sources such as SAP S/4HANA. In the second step, they jointly define a single, combined consensus demand plan for measuring current volume and financial target achievement.
Inventory optimization is done weekly and optimize multi-stage inventory targets and inventory components to efficiently meet customer service levels. To do so, it calculates inventory targets like recommended safety stock for each material at each location in a supply chain. It also calculates the types of inventory that comprise the total inventory for a given item to support a more granular inventory optimization calculation. Examples here are target cycle stock or target onhand stock. It also considers and compensates for uncertainties like forecast error and supply uncertainty. The inventory plan serves as an input to the sales and operations planning process.
In the sales and operations process, the next step is the supply review. Here the supply planner creates a complete supply plan for the consensus demand. This plan defines for each product how much needs to be purchased, produced, or shipped at each location in the supply chain and in which period of the planning horizon. Using the time-series-based supply planning heuristic planning algorithm, the supply planner can generate an infinite supply plan with no shortages to identify supply and capacity bottlenecks.
As another option, the time-series-based supply planning optimizer planning algorithm generates a cost-optimized production, distribution, and procurement plan for the entire supply chain network, considering certain constraints. The result of the supply review, the constrained demand plan is then taken into the reconciliation review.
During the reconciliation review, representatives from sales, finance, marketing, production, and demand planning discuss deviations between constrained demand and consensus demand. They agree on one executive proposal and prepare a list of issues for escalation. Next, the executive management will decide on an executive proposal during the management business review.
The last step in Sales and Operations process is the management business review.
During management business review, the executive management of the involved business units determines if the presented proposal aligns with the company's financial targets and key performance indicators. They evaluate and decide on the presented list of escalated issues. The review results in an approved, final consensus demand and supply plan. This plan ultimately drive revenue growth and increase market share, optimize product and customer profitability, minimize inventory costs, and overcome capacity constraints.
Let's go back to the midterm operational layer and let's take a closer look at the supply and allocations planning. The supply and allocations planning creates a feasible supply plan and an allocation plan based on demand priority rules and supply chain constraints like resource capacity, supplier committed quantities, and safety stock targets. The planner use what-if analysis and root-cause analysis to understand why the demand is not fulfilled. The system shows, for example, the projected stocks for all location materials and their corresponding supply elements and gating factors.
Response planning allows the planner to react quickly to incoming customer orders. The planner creates order confirmations and an adopted supply plan based on prioritized demands, allocations, and supply chain constraints. Issues like stock shortages can be identified by reviewing the order-relevant planning information, like a detailed sequential view of the demand, or delays and gating factors. Simulation and collaboration capabilities are applied for further review and finalization of the supply plan. The creation of scenarios allows what-if analysis to simulate potential options. Based on a decision for a scenario, data can be updated in the back-end system to make the simulation model real.
Deployment planning allows the planner to create a reliable short-term distribution plan considering also unforeseeable events in the supply chain. Alerts, for example for each location product when the value of the projected stock is negative, draw attention to a potential issue. The deployment run considers all customer demands (sales orders), all confirmed component demands, all forecasted customer demands, and safety stock. The run then tries to satisfy the demands with the existing supply elements. The stock transfer requisitions that are pegged to supply elements that are considered available to deploy become deployment stock transfer requisitions. These requisitions represent the short-term deployment plan.
Transportation load building (TLB) helps to group planned distribution receipts for products with the same transportation lane, transportation group, and delivery data. There are two different use cases. In the first use case, TLB is a subsequent planning step after deployment planning. As a distribution planner, you first schedule the transportation load building job. This job generates transportation loads for deployable products that are to be transported between locations and consolidates deployment requisitions into loads. In the next step, the planner can review the loads in the Planner Workspace. The second use case consolidates purchased products into loads that are to be transported from suppliers to plants. The planner first creates a purchase requisition and then creates the load manually in the Planner Workspace.
You might recognize that not all solution processes available in SAP Best Practices for SAP IBP are captured in the unified planning process flow. For example, the integration solution processes, ABC/XYZ segmentation, forecast error calculation, time-series analysis, and so on are not represented here. These processes are important and needed to run the complete story, but it would make the picture too crowded and distract from the main flow. If you want to know the order of all solution processes, you can use the Solution Process flow slides in the Best Practices Scope presentation - you can find them in the appendix. Here's the slide for SAPIBP1-based solution processes - the numbers in the grey circle indicate the order in which the solution processes should be executed.
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