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© SAP 2007-2008 / 0

How to Improve Forecast


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Accuracy with SAP APO
Demand Planning _________________________________
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Dr. Gerald Heisig _________________________________
SAP AG _________________________________
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In This Session, You’ll Get An


Overview About ... _________________________________
_________________________________
„ SAP APO Demand Planning (DP) basic
architecture _________________________________
„ Key DP features _________________________________
„ Promotion Planning
_________________________________
„ Lifecycle Management
„ Seasonal Planning _________________________________
„ Etc. _________________________________
„ The broad range of statistical forecasting methods _________________________________
in DP and guidelines for selecting the right method
„ Integration of DP into other SAP solutions and SAP _________________________________
APO modules _________________________________

© SAP 2007-2008 / 2
What We’ll Cover …
_________________________________
_________________________________
_________________________________
Introduction to Demand Planning _________________________________
Understanding the basic structures and architecture
_________________________________
Tapping into Demand Planning features
_________________________________
Looking at different forecasting techniques
_________________________________
Demonstration: Demand Planning
Wrap-up _________________________________
_________________________________
_________________________________

© SAP 2007-2008 / 3

Pain Points in Demand Planning


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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
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Actual Planned

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8 Differences in planned demand and actual sales _________________________________
8 Incorporation of all necessary demand information _________________________________
like promotions, product lifecycles, or other events
in your demand plan
_________________________________
8 Demand visibility and consistency across all your
departments and users _________________________________
8 Sophisticated statistical forecasting _________________________________

© SAP 2007-2008 / 4

Implications for Your Demand


Management _________________________________
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
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Actual Pla nned

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8 Bad forecast quality _________________________________
8 Incomplete and inaccurate demand
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8 High number of stock outs
8 High inventory levels _________________________________
8 Slow response to changing market _________________________________
8 Lack of information for right planning decisions
_________________________________

© SAP 2007-2008 / 5
SAP APO Demand Planning (DP)
_________________________________
Calculates future demand as accurate as possible _________________________________
_________________________________
Features Key Benefits

„ Comprehensive forecasting toolset „ Improved forecast quality _________________________________


„ Statistical forecasting with causal „ One tool for power and business user
and time-series methods „ Consolidated demand plan (different _________________________________
„ Automatic outlier detection available regions, countries, departments, … )
„ Highly configurable planning books _________________________________
with macro functionality
„ Supporting aggregation/ _________________________________
disaggregation logic
„ Lifecycle Planning _________________________________
„ Plan promotions separately from the
rest of your forecast _________________________________
„ Offline Planning
„ Seasonal Planning
_________________________________
„ Collaborative Demand Planning

© SAP 2007-2008 / 6

DP Interactive Planning
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© SAP 2007-2008 / 7

What We’ll Cover …


_________________________________
_________________________________
_________________________________
Introduction to Demand Planning _________________________________
Understanding the basic structures and architecture
_________________________________
Tapping into Demand Planning features
_________________________________
Looking at different forecasting techniques
_________________________________
Demonstration: Demand Planning
Wrap-up _________________________________
_________________________________
_________________________________

© SAP 2007-2008 / 8
Integration Between SAP SCM and SAP NetWeaver
Business Intelligence (SAP NetWeaver BI) _________________________________
SAP SCM _________________________________

With
External _________________________________
SAP BI
internal
SAP BI _________________________________

Central data _________________________________


Forecasting results InfoCube store for
APO reporting and _________________________________
analyzing
Demand Planning
_________________________________
Demand POS data
Demand Cost information
History
History
Order and shipping data
_________________________________
Source systems include: _________________________________
Demand History SAP ERP
InfoCube Excel _________________________________
Non-SAP systems

© SAP 2007-2008 / 9

Data in SAP Supply Chain


Management (SAP SCM) _________________________________
SAP ERP SAP SCM _________________________________

Transactional _________________________________
Data SAP BI extraction SAP BI
structures _________________________________
DP master
Master
Data: CVCs _________________________________
Data
ATP DP _________________________________
LC _________________________________
Transactional PP/DS SNP
_________________________________
Data
CIF „ Location _________________________________
Master „ Product
Data „ Resource _________________________________
„ PPM/PDS
ATP = Available-to-Promise, SAP BI = SAP NetWeaver BI, CVCs = Characteristic Value Combinations, CIF = Core Interface, DP = Demand
Planning, LC = liveCache, SNP = Supply Network Planning, PP/DS = Production Planning and Detailed Scheduling, PPM = Production Process
Model,
© SAP PDS /=10Product Data Structure
2007-2008

Demand Planning Master Data:


Characteristic Value Combinations _________________________________

Characteristic Characteristic
_________________________________
Characteristics
values value combinations
(CVCs) _________________________________
_________________________________
„ Prod01 „ Prod01, DC01, Cust01
„ Product „ Prod02 „ Prod01, DC01, Cust02 _________________________________
„ Prod03 „ Prod01, DC01, Cust03
„ Prod01, DC02, Cust01 _________________________________
„ DC01 „ Prod01, DC03, Cust02
„ Location „ DC02 „ Prod01, DC03, Cust03 _________________________________
„ DC03 „ … Planning
Object _________________________________
Structure
„ Cust01 _________________________________
„ Customer „ Cust02
„ Cust03 _________________________________

© SAP 2007-2008 / 11
Planning Object Structure and
Planning Area _________________________________
_________________________________
„ The planning object structure is an APO InfoCube saved in
the database of the internal SAP NetWeaver® BI system _________________________________
„ The characteristic value combinations can be created
automatically _________________________________
„ Optionally, for better _________________________________
performance you can
create additional _________________________________
aggregates
_________________________________
„ The planning object
structure with the _________________________________
relevant characteristic
value combinations _________________________________
(DP master data) is _________________________________
assigned to a planning
area
© SAP 2007-2008 / 12

Planning Area
_________________________________
_________________________________
A planning area is the central Interactive Planning
data structure for saving _________________________________
planning data for Demand _________________________________
Planning and Supply Network Planning book
Planning _________________________________
„ Characteristics and key figures _________________________________
Characteristics Key figures
and their functions for planning
are determined here _________________________________
„ It groups together the central Planning area _________________________________
parameters that define the
scope of the planning activities _________________________________
Characteristics Key Planning
„ It also determines whether figures version _________________________________
planning results are to be
saved as orders or time series
© SAP 2007-2008 / 13

Planning Book
_________________________________

„ A planning book is based on _________________________________


information or a subgroup of Sales Rep Sales Manager
information from a planning area Data View Data View _________________________________
„ In the planning book, select the _________________________________
characteristics and key figures Key figures Key figures
required for the demand planner’s _________________________________
individual tasks
Planning book
„ Each planning book can contain _________________________________
several views where you can store
key figures for detailed analyses Characteristics Key figures _________________________________
and planning tasks
„ In each view you must also Planning area _________________________________
determine the planning horizon
and time buckets profile _________________________________
„ A planning area can have more Characteristics Key figures Planning
than one planning book, but a version _________________________________
planning book can be linked to only
one planning area
© SAP 2007-2008 / 14
SAP NetWeaver BI and Demand
Planning Reporting _________________________________
Reporting for Demand Planner and Sales Reps _________________________________
Regional Forecast Planned Actual _________________________________
Reporting Deviation
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Top 10 Deviations Forecast
Planned/Actual Accuracy _________________________________
_________________________________
SAP APO
Demand Planning _________________________________
D Historical
M
I Planned
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„ DP delivers planning data through Data Mart Interface (DMI) _________________________________
„ SAP NetWeaver BI InfoCube for information consumers

© SAP 2007-2008 / 15

What We’ll Cover …


_________________________________
_________________________________
_________________________________
Introduction to Demand Planning _________________________________
Understanding the basic structures and architecture _________________________________
Tapping into Demand Planning features
_________________________________
Looking at different forecasting techniques
_________________________________
Demonstration: Demand Planning
_________________________________
Wrap-up
_________________________________
_________________________________

© SAP 2007-2008 / 16

Interactive Planning
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Flexibility
„ Free definition of planning books and data views _________________________________
„ Creation of data groups (selections) and user-specific assignment
„ Multi-level planning with full visibility (drill up/down)
_________________________________
„ Supporting different aggregation/disaggregation logic _________________________________
„ Data representation on different periodicities and horizons
„ Text can be added to any cell _________________________________
(notes management)
_________________________________
„ Copy and paste (within grid
and from/to Microsoft Excel) _________________________________
„ Graphic with data manipulation
possibilities _________________________________
„ User-specific customization _________________________________

© SAP 2007-2008 / 17
Interactive Planning (cont.)
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Macros
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„ Enable any kind of calculation
„ Can be started any time on any level _________________________________
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© SAP 2007-2008 / 18

Interactive Planning – Alerts


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„ Alerts can be customized user specific
„ Alerts are triggered during batch processing or _________________________________
interactive planning for: _________________________________
„ Forecast errors exceeding borders defined by the user
„ Any kind of check carried out by a macro _________________________________
„ Alerts are _________________________________
communicated
to the user by: _________________________________
„ Visualization in _________________________________
the alert monitor
„ Mail _________________________________
„ SMS message _________________________________

© SAP 2007-2008 / 19

Lifecycle Management
_________________________________

Actuals for old product „ Lifecycle Planning simulates the launch, _________________________________
growth, maturity, and discontinuation
phases of different products _________________________________
„ Mimics the sales curve that you expect _________________________________
the product to display during the following
phases:
_________________________________
„ Launch and growth
„ Discontinuation _________________________________
Forecast for new product
_________________________________
Like Modeling _________________________________
Lifecycle
_________________________________
_________________________________
Phase-in profile Phase-out profile
© SAP 2007-2008 / 20
Realignment
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„ Generate new characteristic value combinations based on
existing combinations _________________________________
„ The key figures for _________________________________
realignment can be
selected _________________________________
„ An empty Excel file can _________________________________
be created with the
structure of the required _________________________________
realignment steps to _________________________________
upload and execute
realignment _________________________________
_________________________________

© SAP 2007-2008 / 21

Promotion Planning
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„ Attempts to predict the outcome of the effect of an event,
e.g., an annual promotion or advertising campaign _________________________________
„ Characteristics of promotion planning include:
„ Separation of base sales data from changes caused by the event _________________________________
„ Evaluating the effect of the promotional spending
Corrected forecast
_________________________________
+ promotions
_________________________________
History _________________________________
(with promotions)
_________________________________
_________________________________
Corrected forecast Forecast
_________________________________
Past Future

© SAP 2007-2008 / 22
Promotions can be imported from SAP CRM Marketing Planner

Cannibalization
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You use cannibalization groups to model the impact of
a promotion on sales of related products _________________________________
_________________________________
Sales for special Corrected forecast
offer product
_________________________________
Original forecast
_________________________________
M M M M Time _________________________________
Sales for similar 07/03 08/03 09/03 10/03
product
_________________________________
Original forecast _________________________________
Corrected forecast
Time
_________________________________
M M M M
07/03 08/03 09/03 10/03

© SAP 2007-2008 / 23
Seasonal Planning
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2003 2004 2005 _________________________________
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
_________________________________
Product A
SRING '03 SUMMER '03 FALL '03 HOLIDAY '03 SRING '04 SUMMER '04 FALL '04 HOLIDAY '04
(Apparel)
_________________________________
Product B
SRING '03 SUMMER '03 FALL '03 HOLIDAY '03 SRING '04 SUMMER '04 FALL '04 HOLIDAY '04
(Apparel) _________________________________
Product 1
SEASON C '02 SEASON A '03 SEASON B '03 SEASON C '03 SEASON A '04 SEASON B '04
(Footwear) _________________________________
Product 2
(Footwear)
SEASON C '02 SEASON A '03 SEASON B '03 SEASON C '03 SEASON A '04 SEASON B '04 _________________________________
Apparel Planning Year _________________________________
Footwear Planning Year

Freely definable seasons and planning years are _________________________________


introduced that can be flexibly assigned to _________________________________
characteristic combinations
© SAP 2007-2008 / 24

Automatic Outlier Correction


_________________________________
8 _________________________________
7 _________________________________
6 _________________________________
5 _________________________________
4 _________________________________
Tolerance range
3 = ep ± σ *1.25* MAD _________________________________
2 _________________________________
ep = ex-post forecast
1 _________________________________
0 _________________________________
Today

© SAP 2007-2008 / 25

Batch Processing/Process Chains


_________________________________
_________________________________
A job scheduling tool for creation,
scheduling, and monitoring _________________________________
complex job chains is offered _________________________________
„ The SAP NetWeaver BI tool for
process chains is implemented as _________________________________
a framework
_________________________________
„ Most DP processes are enabled for
use by this framework _________________________________

Automatic parallelization is _________________________________


offered for most of the DP _________________________________
processes
_________________________________

© SAP 2007-2008 / 26
Offline Planning
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1. Download data
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2. Working on the file
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3. Upload file data
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© SAP 2007-2008 / 27

Collaborative Planning
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Any planning book can be accessed through the Internet
© SAP 2007-2008 / 28

Duet™ Demand Planning


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Duet™ Demand Planning enables sales and planners to utilize _________________________________
the full Microsoft Excel capabilities as an intuitive planning
frontend for SAP SCM _________________________________
„ Load data from APO Demand Planning _________________________________
„ Analyze and contribute to demand plan
„ Use MS Excel features like additional lines, columns, graphics, and formulae _________________________________
„ Save local file, distribute (e.g., by mail) with possibility for a later data
synchronization, work online or offline _________________________________
_________________________________
_________________________________
_________________________________
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© SAP 2007-2008 / 29
Consensus Demand Planning
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Objective
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„ Create a demand plan by integrating all available
information _________________________________
„ Collaborative process to gain “one number” consensus from _________________________________
sales, marketing, operations
„ Combine various data: _________________________________
– Forecast
_________________________________
– Promotions
– Budgets, sales plans, etc. _________________________________
– Manual changes
_________________________________
_________________________________

© SAP 2007-2008 / 30

What We’ll Cover …


_________________________________
_________________________________
_________________________________
Introduction to Demand Planning _________________________________
Understanding the basic structures and architecture _________________________________
Tapping into Demand Planning features
_________________________________
Looking at different forecasting techniques
_________________________________
Demonstration: Demand Planning
_________________________________
Wrap-up
_________________________________
_________________________________

© SAP 2007-2008 / 31

Forecasting
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_________________________________
„ Forecasting predicts future demand based on
historical and judgmental data _________________________________
„ Forecasts can be created in various ways _________________________________
„ Statistical methods _________________________________
„ Human judgment _________________________________
„ Combination of above
_________________________________
_________________________________
_________________________________
_________________________________

© SAP 2007-2008 / 32
Use of Statistical Methods
_________________________________

Demand Planning ≠ Forecasting _________________________________

„ Statistical methods can support the planning process _________________________________


but they cannot solve basic planning problems _________________________________
„ Powerful forecasting software can calculate millions of _________________________________
forecasts on the lowest level of detail but this is not
always the appropriate planning level _________________________________
„ Nobody can control/check millions of forecasts _________________________________
„ With millions of data sets everything happens (Murphy’s law)
_________________________________
„ It is sometimes better to plan on a higher (controllable) level
and break down the results into details using fixed rules _________________________________
_________________________________

© SAP 2007-2008 / 33

Data Preparation
_________________________________
_________________________________
„ Statistical methods can only run on appropriate
data _________________________________

„ Adaptations may be necessary for: _________________________________


„ Start of real history _________________________________
„ Negative/zero values _________________________________
„ Missing values
_________________________________
„ Special events (e.g., strike, promotions, …)
„ Causal effects _________________________________
_________________________________
_________________________________

© SAP 2007-2008 / 34

Different Demand Patterns


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© SAP 2007-2008 / 35
Statistical Forecasting Methods
_________________________________
Constant Causal Analysis _________________________________
„ Exponential smoothing
A „ Moving average „ Multiple Linear Regression _________________________________
U „ Weighted moving average (MLR)
T
O Trend „ Influence variables _________________________________
M „ Exponential smoothing „ Climate (e.g., temperature)
A
T
„ Linear regression „ Price _________________________________
„ Advertising
E Season (without trend)
D
„ Exponential smoothing
„ Distribution _________________________________
„ ...
P
I
Trend – Season _________________________________
C „ Exponential smoothing
K „ Manual forecasting
Composite Forecast _________________________________
„ Seasonal linear regression
B „ Combine different
E Others forecasts _________________________________
S „ Croston method (sporadic demand)
T „ Weight each forecast (time
„ History independent or dynamic) _________________________________
„ No forecast
„ External forecast

© SAP 2007-2008 / 36

Selection of Forecasting Methods


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_________________________________
„ It is not appropriate to use the same forecasting method for
all items _________________________________
„ Basic classifications include:
„ Forecast/Planning – Horizon: short ↔ medium ↔ long _________________________________
„ Linear ↔ Nonlinear development of the trend
„ Univariate forecast ↔ Causal analysis (MLR) _________________________________
„ Product type: New, mature, sporadic
„ Different parameter settings
_________________________________
„ The assignment can be based on: _________________________________
„ Logical reasons
– Product classification (e.g., spare part, standard product) _________________________________
– Planning purpose/business requirements
„ Pilot study _________________________________
– Grouping of products
– Assignment of parameters _________________________________
„ Ex-post error measures, but should not be the only criteria
„ The assignment should be checked in regular intervals
© SAP 2007-2008 / 37

(Weighted) Moving Average


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_________________________________
„ Only suitable for constant demand patterns (with no
trend-like or season-like patterns) _________________________________
n
(Weighted) Moving Average: Gt+1 = Σ (Wt-j+1) Vt-j+1 / n _________________________________
j=1

Moving Average
Period
1
Demand
95,1
Forecast (M)
_________________________________
2 94,9 97
3 94,6
4
5
94,7
95,2
95,1
95,2
96,5 _________________________________
6 95,6 95,3
7 95,7 95,4 96
8 95,6 95,5 _________________________________
9 95,5 95,7 95,5
10 95,3 95,8 Demand
11
12
95,9
96,2
95,9
96,0
95
Forecast
_________________________________
13 96,4 96,0
14 96,3 94,5
15
16
96,1
95,9 n=7
_________________________________
94

93,5 _________________________________
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Periods

© SAP 2007-2008 / 38
First-Order Exponential Smoothing
_________________________________
_________________________________
„ Only suitable for constant demand patterns (with no
trend-like or season-like patterns) _________________________________
Gt+1(t) = (1- α)Gt(t-1) + αVt for all t = 2,…..,n ; G1 = V1 _________________________________
Period
1
Demand
20
Forecast Forecast
Exponential Smoothing
_________________________________
2 22 20,0 20,0
3 18 20,6 20,2
4
5
23
19
19,8
20,8
20,0
20,3
30 _________________________________
6 17 20,8 20,3
7 20 19,6 20,0 25
8 24 19,7 20,0 _________________________________
9 23 21,0 20,4 20
10 18 21,6 20,6
Demand
11
12
16
23
20,5
19,2
20,4
19,9 15 Forecast (alpha = 0.3)
_________________________________
13 22 20,3 20,2 Forecast (alpha = 0.1)
14 17 20,8 20,4
15
16
20
21
19,7
19,8
20,1
20,1
10
_________________________________
5
α = 0.3 α = 0.1 _________________________________
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Periods

© SAP 2007-2008 / 39

Exponential Smoothing
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In a trend, seasonal, or seasonal trend model
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© SAP 2007-2008 / 40

Linear Regression
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For demand patterns _________________________________


yt = b0 + b1* t
„ With trend _________________________________
yt = b0 + b1* t + Smod, t
„ With trend + season
seasonal adjustment factor for each period within the season _________________________________
∑ (t − t )(y i − y )
n

i
b1 = i =1
_________________________________
∑ (t − t)
n

i
2
b0 = y −b1t
i =1
_________________________________
t y Linear Regression
1 1048,35
2
3
1102,06
1155,77
2100
2000
_________________________________
4 1209,48 1900
5 1263,19 1800
6
7
1316,90
1370,60
1700
1600
_________________________________
8 1424,31 1500
9 1478,02
y

10
11
1531,73
1585,44
1400
1300 _________________________________
1200
12 1639,15 1100
13 1692,86
14 1746,57
1000
900
_________________________________
15 1800,28 800
16 1853,99 0 2 4 6 8 10 12 14 16 18
17 1907,70
Periods
18 1961,41
© SAP 2007-2008 / 41
Croston Method
_________________________________
_________________________________
Useful for intermittent, erratic, or slow-moving demand
_________________________________
„ Example: When demand is zero most of the time (say 2/3 of
the time) _________________________________
„ Might be caused by: _________________________________
„ Short forecasting intervals (e.g., daily)
„ A handful of customers that order periodically _________________________________
„ Aggregation of demand An intermittent Demand Series
_________________________________
elsewhere (e.g., reorder 3.5

points) 3
_________________________________
2.5

2
De m a nd

1.5 _________________________________
1

0.5

0
_________________________________
1
14
27
40
53
66
79
92
105
118
131
144
157
170
183
196
209
222
235
248
261
274
287
300
313
326
339
352
365
378
391
Period

© SAP 2007-2008 / 42

Choose Forecasting Model –


Overview _________________________________
_________________________________
„ Different Regular Demand Intermittent Demand
univariate _________________________________
forecasting Constant Trend Trend Life-
methods can be + Season cycle _________________________________
assigned based
Second Order Expon. Sm. (Holt)
(Weighted) Moving Average
First Order Exponential Sm.

on regular and _________________________________


First Order Expon. Sm. (Winters)

Exponential Sm. (Croston)


Seasonal Linear Regression

Phase-In/Out

intermittent
demand patterns _________________________________
„ Additionally, life- _________________________________
Linear Regression

cycle profiles can


be added to _________________________________
simulate phase-
in/out of products _________________________________
_________________________________

© SAP 2007-2008 / 43

Automatic Model Selection


_________________________________
_________________________________
You can choose Automatic Model Selection if there is
no knowledge of the patterns in the historical data _________________________________
„ The historical data are checked for constant, trend, _________________________________
seasonal, and seasonal trend patterns
„ The forecasting model that corresponds most closely to the _________________________________
pattern detected is applied
„ If no regular pattern is detected, the system runs the forecast as if _________________________________
the data revealed a constant pattern
_________________________________
You can also restrict the Automatic Model Selection to:
„ Test for trend _________________________________
„ Test for season _________________________________
„ Test for trend and season
„ Seasonal model and test for trend _________________________________
„ Trend model and test for seasonal pattern
© SAP 2007-2008 / 44
Automatic Model Selection (cont.)
_________________________________
_________________________________
Procedure 1
„ The relevant forecast parameters (alpha, beta, and gamma) _________________________________
are constant
„ No consideration of error measure _________________________________
_________________________________
Procedure 2
„ Tests for constant, trend, seasonal, and seasonal trend _________________________________
patterns, using all possible combinations for the alpha, beta,
and gamma smoothing factors _________________________________
„ The model with the lowest error measure customized (e.g., _________________________________
Mean Absolute Deviation [MAD]) is chosen
_________________________________
Procedure 2 is more precise than Procedure 1, but it
takes longer _________________________________

© SAP 2007-2008 / 45

Multiple Linear Regression (MLR)


_________________________________
_________________________________
„ MLR can assess how the development of one (dependent) variable can
be explained by several (independent) variables (and a constant value) _________________________________
„ For a causal analysis, MLR does the final calculation of the regression
coefficients _________________________________
„ The input data for the MLR (i.e., the modeling of the causal effects) is _________________________________
the key issue
„ Typical variables: _________________________________
„ Trend
„ Seasonality _________________________________
„ Climatic conditions (e.g., temperature, precipitation) _________________________________
„ Economy (e.g., GDP, inflation, unemployment rate)
„ Product specific (e.g., price/costs, new model/version, marketing activities) _________________________________
„ Demography (e.g., population in age classes)
„ Others (e.g., lifecycle, replacement demand, distribution)
_________________________________
„ Substantial experience is required for modeling causal effects!
© SAP 2007-2008 / 46

Composite Forecast
_________________________________

„ Combine different forecasts _________________________________


„ Own defined model selection based on error measure _________________________________
„ Weight each forecast (time independent or dynamic) _________________________________
„ Enables the combination of different forecasts with a
constant or time-dependent weighting _________________________________
„ The weighting will, in general, be purely arbitrary _________________________________
Univariate _________________________________
1
Forecast
_________________________________
Univariate
Combine
Combine
... and
and
Result _________________________________
MLR Reconcile
Reconcile MLR
n
_________________________________

© SAP 2007-2008 / 47
Forecasting and Forecast Errors
_________________________________
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_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________

© SAP 2007-2008 / 48

Error Measures
_________________________________
_________________________________
„ Look at errors over time
„ Cumulative measures summed or averaged over all data _________________________________
„ Error Total (ET) _________________________________
„ Mean Percentage Error (MPE)
„ Mean Absolute Percentage Error (MAPE)
_________________________________
„ Mean Squared Error (MSE)
Measure Bias _________________________________
„ Root Mean Squared Error (RMSE)
_________________________________
„ Smoothed measures reflects errors in the recent past
„ Mean Absolute Deviation (MAD) _________________________________
_________________________________
_________________________________

© SAP 2007-2008 / 49

Error Measures (cont.)


_________________________________
_________________________________
„ Look at errors over time
„ Cumulative measures summed or averaged over all data _________________________________
„ Error Total (ET) _________________________________
„ Mean Percentage Error (MPE)
„ Mean Absolute Percentage Error (MAPE) _________________________________
„ Mean Squared Error (MSE) _________________________________
„ Root Mean Squared Error (RMSE)
„ Smoothed measures reflects errors in the recent past
_________________________________
„ Mean Absolute Deviation (MAD) _________________________________
_________________________________
Measure error
_________________________________
magnitude
© SAP 2007-2008 / 50
Evaluation
_________________________________
_________________________________
The planning/forecasting process has to be reviewed
permanently/in regular intervals _________________________________
„ This can include the analysis of: _________________________________
„ KPIs (e.g., service level, out of stock)
_________________________________
„ Financial data (e.g., turnover, profit)
„ Promotions/advertising _________________________________
„ Special influences (e.g., strike)
_________________________________
„ Causal effects
_________________________________
The results should be documented and archived _________________________________
_________________________________

© SAP 2007-2008 / 51

What We’ll Cover …


_________________________________
_________________________________
_________________________________
Introduction to Demand Planning _________________________________
Understanding the basic structures and architecture _________________________________
Tapping into Demand Planning features
_________________________________
Looking at different forecasting techniques
_________________________________
Demonstration: Demand Planning
_________________________________
Wrap-up
_________________________________
_________________________________

© SAP 2007-2008 / 52

Demonstration: Demand Planning


_________________________________
_________________________________
1. DP Interactive Planning _________________________________
2. DP Features and Forecasting Run _________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________

© SAP 2007-2008 / 53
What We’ll Cover …
_________________________________
_________________________________
_________________________________
Introduction to Demand Planning _________________________________
Understanding the basic structures and architecture
_________________________________
Tapping into Demand Planning features
_________________________________
Looking at different forecasting techniques
_________________________________
Demonstration: Demand Planning
Wrap-up _________________________________
_________________________________
_________________________________

© SAP 2007-2008 / 54

Resources
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help.sap.com
„ SAP Business Suite Æ SAP Supply Chain Management Æ SAP SCM _________________________________
5.0 Æ Application Help Æ EN Æ SAP Advanced Planning and
Optimization (SAP APO) Æ Demand Planning Æ Demand Planning _________________________________
Process
„ Comparison of the Planning Methods _________________________________
„ SAP Business Suite Æ SAP Supply Chain Management Æ SAP SCM
5.0 Æ Application Help Æ EN Æ SAP Advanced Planning and _________________________________
Optimization (SAP APO) Æ Demand Planning Æ Technical Aspects of
Demand Planning _________________________________
SAP Notes _________________________________
„ SAP Note 832393 (Release Restrictions for SCM 5.0) _________________________________
„ SAP Note 576015 (Collective Consulting Note for Demand Planning)
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© SAP 2007-2008 / 55

7 Key Points to Take Home


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„ Demand Planning (DP) is mid- to long-term planning that
will help you to create forecasts for your products _________________________________
„ Demand Management is not just forecasting – data
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preparation is key to getting reasonable forecasts
„ DP offers a broad range of features for demand _________________________________
management like promotion or lifecycle management
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„ DP offers a broad range of statistical forecasting methods
that are applicable for all kinds of demand patterns _________________________________
„ Usually, the same statistical forecasting method cannot be _________________________________
used for all products
„ Quality of resulting forecasts should be evaluated regularly _________________________________
„ DP is tightly integrated to SAP NetWeaver BI, SAP ERP, _________________________________
and other SAP APO modules like SNP, PP/DS, and GATP
© SAP 2007-2008 / 56
Your Turn!
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How to contact me:
Gerald Heisig _________________________________
gerald.heisig@sap.com
© SAP 2007-2008 / 57

Copyright 2007-2008 SAP AG


All Rights Reserved _________________________________
No part of this publication may be reproduced or transmitted in any form or for any purpose without the express permission of
SAP AG. The information contained herein may be changed without prior notice.
_________________________________
Some software products marketed by SAP AG and its distributors contain proprietary software components of other software
vendors. _________________________________
SAP, R/3, mySAP, mySAP.com, xApps, xApp, SAP NetWeaver, Duet, Business ByDesign, ByDesign, PartnerEdge and other
SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP
AG in Germany and in several other countries all over the world. All other product and service names mentioned and associated
logos displayed are the trademarks of their respective companies. Data contained in this document serves informational _________________________________
purposes only. National product specifications may vary.

The information in this document is proprietary to SAP. This document is a preliminary version and not subject to your license
_________________________________
agreement or any other agreement with SAP. This document contains only intended strategies, developments, and
functionalities of the SAP® product and is not intended to be binding upon SAP to any particular course of business, product
strategy, and/or development. SAP assumes no responsibility for errors or omissions in this document. SAP does not warrant
the accuracy or completeness of the information, text, graphics, links, or other items contained within this material. This _________________________________
document is provided without a warranty of any kind, either express or implied, including but not limited to the implied warranties
of merchantability, fitness for a particular purpose, or non-infringement.
SAP shall have no liability for damages of any kind including without limitation direct, special, indirect, or consequential damages
that may result from the use of these materials. This limitation shall not apply in cases of intent or gross negligence.
_________________________________
The statutory liability for personal injury and defective products is not affected. SAP has no control over the information that you
may access through the use of hot links contained in these materials and does not endorse your use of third-party Web pages
nor provide any warranty whatsoever relating to third-party Web pages.
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© SAP 2007-2008 / 58
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