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White Paper Series

Volume 1 / Issue 1

Velocity & Vola lity: Challenges In Your Supply Chain


SAP APO Transi on to IBP

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.

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 SAPs 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).
SAPs 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 SAPs 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 SAPs 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 SAPs 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 lets look at SAPs 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 companys 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, midterm and long-term.

Our four-step process for migration to the Integrated Business Planning Platform from SAP is as follows:STEP 1: TRANSITION TO SALES AND OPERATIONS PLANNING

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

STEP 3: TRULY INTEGRATED BUSINESS PLAN

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 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