Two- Tier ERP: Demand Planning with SAP IBP for Headquarter - Subsidiary model

[Kavyanshi]

SAP’s Two-Tier ERP strategy with SAP S/4HANA Cloud Public Edition offers headquarter-subsidiary, central services, supply chain ecosystem deployment models enabling business and IT to work together to build sustainable, scalable solutions providing all benefits of cloud deployment – agility, standardization and lower total cost of ownership (TCO) – while maximizing existing investments in their ERP systems.

The two-tier model can be adopted by businesses who already have SAP S4/HANA Cloud Private Edition as their tier 1 system and are planning to deploy SAP S4/HANA Cloud Public Edition as their tier 2 system.

Two-Tier ERP deployment options:

 Business Scenario:

Integrated Business planning (IBP) on a two-tier model can specifically be applied in scenarios where the headquarter (HQ) with its multiple sales subsidiaries is responsible for overall demand consolidation, while the regional subsidiaries handle local sales forecasts based on market conditions.

IBP uses the historical sales orders data from both the headquarters and subsidiaries and generates statistical forecasted demand based on various forecasting algorithms. The planners in subsidiaries can adjust this local forecasted demand based on special events, promotions etc. and generate a final consensus demand which is then translated to headquarters as Planned Independent Requirements (PIRs) for centralized procurement/production.

The use case for this could be with industries such as consumer electronics, automotive parts or consumer products where HQ maintains planning integrity, but subsidiaries influence local demand variations.

Process Steps:

One of the key criteria for a simple demand planning scenario in the 2-tier setup is the master data and transactional data sync with IBP.

Detailed steps are as follows:

1. Integrate master data such as product, location and customer master from the Headquarters (SAP S4/HANA Cloud Private) to IBP using SAP Cloud Platform Integration for data services (SAP CI-DS)
2. Integrate transactional data such as the historical sales order (fulfilled) from both the SAP S4/HANA Public and Private clouds to IBP using iflows (CI) and CI-DS respectively.
3. The consolidated sales order numbers (actuals sales quantity) from both headquarters and subsidiary are then used to run the statistical forecasting algorithm in IBP.
4. IBP captures the total forecasted demand quantity, which is translated as Planned Independent Requirements (PIRs) to the Headquarters for further production planning.

Business Benefits:

• Using the demand planning capabilities of SAP IBP, businesses can fight challenges of overstock and stockouts, slim down costs, and align planning with strategy.
• SAP IBP ensures a harmonized demand planning process, reducing inconsistencies between headquarters and subsidiaries.
• HQ and subsidiaries can collaborate in real time on the same planning data, enabling quick alignment.
• Streamlined forecasting processes using advanced forecasting algorithms in IBP freeing time for analysis for planners.
• Planning and collaboration features in SAP IBP (e.g., Excel add-in, job scheduling) allow faster alignment between HQ and subsidiaries on consensus forecast.

Integration Setup:

Reference links:

SAP ERP and SAP IBP technical integration using CI-DS.

Getting Started with iFlows in SAP Integration Sui... - SAP Community

Overview | SAP IBP - Integration with SAP S/4HANA Cloud Public Edition | SAP Business Accelerator Hu...

Conclusion:

In conclusion, the demand planning scenario with SAP IBP in a two-tier model can be adopted where product manufactured at the factory location or the headquarters, calls for end to end visibility of planning and timely execution of supply chain across all subsidiaries. Based on the demand forecasting/planning at the subsidiary side, manufacturer at headquarters can generate right production orders to prevent over/under supply scenarios.