Functions in Detail

SAP Advanced Planner & Optimizer

Demand Planning

Contents

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Contents Demand Planning 1 1 2 3 4 4 5 5 6 6 6 9 9 11 11 11 12 13 Demand Planning: State-of-the-Art Forecasting Introduction Overview of SAP Advanced Planner & Optimizer The SAP Business Framework Benefits of SAP Advanced Planner & Optimizer Key Features of SAP Advanced Planner & Optimizer Demand Planning The SAP APO Demand Planning Architecture An Integrated Demand Planning Solution Demand Planning Features and Functions Data Storage and Representation Planning Environment Consensus-Based Forecasting Multiple Views Causal Analysis Multitier Forecasting Statistical Forecasting Toolbox Forecast Accuracy Analysis Conclusion iii .

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shorter product life cycles. decreased customer loyalty. Failing to meet promised delivery dates can drive away customers. The SAP Advanced Planner and Optimizer (SAP APO) is an important part. You can configure SAP APO to provide task-specific. and real-time event notification to the underlying business processes. Data-Driven Process Huge amounts of data drive these planning and scheduling processes. The SAP APO server also integrates with the SAP Business Information Warehouse using this same mechanism providing unprecedented access to vital business decision data. partners. and company-specific optimization. but only at an enormously high cost. To handle these challenges. Much of it comes from the organization itself. This can work. The stakes are high. Until now. Unlike the data models used by existing Enterprise Resource Planning (ERP) systems. manufacturers are turning to new. SAP refers to this technique as ”semantic synchronization”. SAP APO can gain immediate and seamless access to Online Transaction Processing (OLTP) business data. but other data comes from outside the organization – from suppliers. while still remaining competitive and profitable. one of the SAP APO components. This brochure provides an introduction to SAP APO and discusses in depth Demand Planing. Miscalculations in forecasting that result in excess inventory can prove fatal. and tougher global competition. if you wanted an end-to-end solution. organizations need an information infrastructure that allows them to make accurate decisions in real time and to make customer satisfaction a top priority. they remain synchronized through a series of real-time triggers and messaging. advanced planning and scheduling techniques that generate optimized executable plans in response to rapid changes in supply or demand. Figure 1: SAP APO Overview 1 . automated decision. With SAP APO. The SAP Supply Chain Management Solution SAP has introduced the Supply Chain Management solution to meet the challenges of managing the entire supply chain from end to end. structurally optimized instances of OLTP data. To survive. you had to integrate specialized software with your existing ERP system and built custom interfaces to handle outside data sources. Robust Integration Layer Because SAP has built a robust integration layer between SAP APO and the underlying execution system. supply chain decision support systems require a new breed of memory resident data model that can handle vast amounts of complex data in real time.Demand Planning Demand Planning: State-of-the-Art Forecasting Introduction Problems and Challenges of the Supply Chain The hallmarks of today’s business environment are volatile demand. SAP APO uses a library of advanced optimization algorithms and a high performance. memory resident data processor to perform planning and optimization. in most instances. a task that is seamlessly accomplished through the integration services of the Business Framework. industry-specific. Advanced Optimization Techniques and Technology In addition to highly specialized data objects. and even customers. While the data objects contained within SAP APO are. SAP has combined the ERP execution power of the SAP R/3 System with advanced data analysis and supply chain management tools.

and it can handle such metrics as delivery performance. Demand Planning gives you a sound understanding of all the Supply Network Planning and Deployment Model Your Entire Supply Chain Using the Supply Network Planning and Deployment component you can develop a model of your entire supply network and all of its constraints. so you can use advanced Online Analytical Processing techniques to drill down to detailed levels of data and analyze historical. You can even predict how price increases or decreases will affect future demand. Demand Planning is tightly linked to the SAP Business Information Warehouse. n Manage product life cycles You can manage the life cycles of your products according to such factors as product supersession. 2 . transportation. logistics. navigating. manufacturing. and incorporate causal factors such as price. and controlling all the links in the supply chain. using this model. It’s the command center – the cockpit from which you manage your supply chain. and transportation and to closely match supply and demand. advanced planning. and social or political factors affect demand for your products.Demand Planning Overview of SAP Advanced Planner & Optimizer The SAP Advanced Planner and Optimizer builds on the SAP Business Framework to improve information flow by incorporating real-time collaborative decision support. Using Demand Planning. SAP APO uses a powerful memory resident analytical engine and highly specialized. You can monitor the launch of a new product and the end of a product’s life using point-of-sale data. you can synchronize activities and plan the flow of material along the entire length of the supply chain. like orders that exceed forecasts or orders that fall short of forecast and therefore may lead to excess inventory if production is not adjusted accordingly. and storage constraints. Then. This allows you to create feasible plans for purchasing. and optimization into the SAP R/3 System. you can: n Perform collaborative forecasting You can collect forecast data from multiple sources and store it in a common repository so planners from marketing. n Perform causal analysis You can identify and predict how such factors as demographic changes. substitution. Demand Planning uses the Alert Monitor to report exceptions. It gives you a complete view of the entire length of the supply chain. and other factors. and historical patterns. capacity. It can also monitor material. which raises forecasting to a new level of sophistication and accuracy. Using a series of event triggers and alarm conditions. Using the Supply Chain Engineer. product availability. such as multiple linear regression. planning. You can model promotional demand based on profitability goals. inventory. Demand Planning Accurate Forecasting The Demand Planning component is a toolkit of statistical forecasting techniques and demand planning features that helps you create accurate forecasts and plans. Because it integrates such a wide set of data. You can analyze actual demand using a variety of tools. Like the Supply Chain Cockpit. n Plan promotions Supply Chain Cockpit Graphical Command Center The Supply Chain Cockpit component is a graphical instrument panel for modeling. and throughput. environmental variables. and even third-party vendors and suppliers can work together on a consensus forecast. Once you have built a map of the supply chain. you can select any part of it and zoom in to a detailed level. delivering context-based demand planning. and cannibalization. you can build an elaborate graphical representation of even the most complex supply chain. the Alert Monitor can automatically identify problems in the supply chain. highly configurable data objects that offer major new components: n Supply Chain Cockpit n Demand Planning n Supply Network Planning and Deployment n Production Planning and Detailed Scheduling n Global Available-to-Promise factors that affect demand. demand histories. cost flow. n Forecast new product demand You can develop accurate forecasts for new products based on models from similar products. and business intelligence. sales.

Using this component. multiple levels n Perform detailed capacity planning and material The SAP Business Framework Integrate New Technology and Legacy Systems SAP APO is a separate SAP solution with its own release cycle. to operate through standardized Business Application Programming Interfaces (BAPIs). can be implemented as a stand-alone product or as an integrated part of the Business Framework. It also helps you dynamically determine how and when to distribute inventory. so you can be confident that you can meet your delivery commitments. and policies.Demand Planning Drawing on data in liveCache. and so on. Using this component. immediate access to product availability along the supply chain. a high-performance memory-resident technology. Global ATP draws on a number of criteria to arrive at a commitment. Global ATP maintains simultaneous. The component offers optimization based on state-of-the-art methods. user-developed rules. the system automatically selects a substitute using rules-based selection criteria. The ATP calculation and response take these allocations into consideration. Global ATP performs multilevel component and capacity checks in real time and in simulation mode to ensure that you can match supply and demand. such as Demand Planning. planning simultaneously n Synchronize schedules and make scheduling changes at multiple levels of the bill of materials (BOM) n Use what-if scenarios to simulate actual conditions and consider the effect of various constraints n Perform interactive scheduling and plan optimization using a Gantt chart n Integrate sales and distribution backorder scheduling into the manufacturing process 3 . markets. you can generate production plans and schedules that optimize resources. orders. Global ATP can source materials from alternative locations. n Selection of alternative locations As with product substitution. including: n Product substitution product substitutions n Use vendor-managed inventory techniques n Determine the optimum distribution of supply to meet short-term demand Production Planning and Detailed Scheduling Generate Production Plans Rapidly The Production Planning and Detailed Scheduling component is an integrated set of tools that helps you respond rapidly to changing market conditions. and using algorithms. such as the theory of constraints and optimization libraries. n Allocation You can allocate products or components that are in short supply to customers. Each of the SAP APO components. You can also integrate this logic with the product substitution rules. memory-resident data for even better performance. you can: n Model plans at aggregate and detailed levels n Perform what-if analysis n Dynamically match supply and demand using Global Available-to-Promise Match Supply and Demand with Global Available-to-Promise The Global Available-to-Promise (ATP) component uses a rules-based strategy to ensure you can deliver what you promise to your customers. SAP’s strategic product architecture. It is a Business Component of the Business Framework. which is designed to facilitate the seamless and rapid integration of new business functions and information technology into existing environments. you can: n Perform forward and backward scheduling on If a finished product or component is not available. You can also perform these ATP checks against aggregated. The Business Framework provides an open architecture. allowing its basic elements. the Business Components. the Deployment component helps you dynamically rebalance and optimize your distribution network. Using the Supply Network Planning and Deployment component.

you can navigate through these multidimensional structures. Forecasting and Replenishment (CPFR). n Integration SAP APO is seamlessly integrated with the R/3 System so you can integrate all the links in your supply chain. such as VendorManaged-Inventory (VMI). and compare different planning versions. A robust and sophisticated integration layer facilitates the use of SAP APO with additional optimization and forecasting algorithms. thirdparty. Using tree selection and drill-down capabilities. It includes a data mart based on the star schema and an easy-to-use front end with powerful planning and analysis tools. n Performance The SAP liveCache memory resident computing technology enables forecasting. It supports supply chain partnerships. simply. It interoperates with SAP R/3. Internet Communications Using the SAP APO OpenForecast tool. SAP built SAP APO to function in heterogeneous environments. n Independence SAP APO performs planning functions and processes outside of the OLTP system. and compare and resolve variances within forecasts. You can implement SAP APO Demand Planning quickly. planning. you can collaborate with your business partners using Internetbased interfaces and technology. and legacy OLTP systems. SAP APO Demand Planning uses multidimensional data structures that support many different levels and dimensions. and optimization functions to be executed in real time. and cost-effectively. n Openness Best-of-Breed Solution SAP APO Demand Planning embodies all of the advantages of a best-of-breed demand planning solution with the following features: n Multilevel planning n Life cycle management n Promotion planning n Causal analysis n Multitier forecasting n Phase-in and phase-out forecasting n The Statistical Forecasting Toolbox n Forecast accuracy reporting. Key Features of SAP Advanced Planner & Optimizer Demand Planning A Ready-to-Run Solution SAP APO Demand Planning is a state-of-the-art. 4 .0 the Notes Management tool enables the documentation of planning activities by multiple users. such as promotions and store openings. store. Efficient Consumer Response (ECR).Demand Planning Benefits of SAP Advanced Planner & Optimizer SAP APO provides a number of benefits. In Release 2. and Collaborative Planning. Data can be automatically transferred between SAP BW and SAP APO Demand Planning. share event information. readyto-go demand planning solution. including the following: n Completeness SAP APO Demand Planning is integrated with the R/3 System and the SAP Business Information Warehouse. SAP APO supports all of the key supply chain planning and optimization functions and processes traditionally found in stand-alone advanced planning and scheduling solutions. SAP APO Demand Planning’s decision-support tools allows you to perform what-if analysis and online simulation to create. ensuring greater flexibility and high availability of the SAP APO server.

the Business Planning Library. flows from profit-based promotional planning in SAP APO to SAP R/3. and demand data. you can upload the data back into Demand Planning to update the sales figures in the data mart. such as AC Nielsen data. When you’re finished. You create consensus forecasts in SAP APO Demand Planning and transfer them to the SAP Business Information Warehouse. Easy Data Transfer The APO Demand Planning data mart uses InfoCubes that have the same data structures as those that are used in the SAP Business Information Warehouse. This integration provides a continuous planning cycle in which actual data. This integration provides many benefits. Its integration with Demand Planning means accurate decision-support information is always at your fingertips. The planning and analysis engine contains the Online Analytical Processing processor. you can store syndicated point-of-sale data. You can use the SAP Business Information Warehouse to pull data from multiple heterogeneous data sources into the data mart. Ready Access to Data The SAP Business Information Warehouse is a product that combines state-of-the-art demand planning techniques and state-of-the-art data warehousing features in one consistent model. such as price information. the time series catalog. and the Statistical Forecasting Toolbox. Figure 3: SCM Cycle 5 . where users can work with them to create the reports and ad hoc analyses that drive the business. in the SAP Business Information Warehouse. Figure 2: SAP APO Demand Planning Architecture An Integrated Demand Planning Solution Seamless Integration You can directly link SAP APO Demand Planning to SAP R/3. such as orders and shipments. Integrate the Sales Force and Forecasting You can integrate the sales force into the forecasting process by using the SAP Mobile Sales solution on a laptop. The data mart contains infocubes.Demand Planning The SAP APO Demand Planning Architecture SAP APO Demand Planning is composed of three layers: n Graphical user interface n Planning and analysis engine n Data mart The graphical user interface contains the planning views. flows from SAP R/3 to SAP APO Demand Planning. the SAP Business Information Warehouse. and any legacy or external systems for a completely integrated system. and notes. It is therefore extremely easy to transfer data between the two applications. You can download account data from the data mart into the laptop and then use SAP Mobile Sales on the laptop to enter sales figures for the accounts offline. You then analyze this data in SAP APO Demand Planning and determine which of it should be used in causal analysis. The data mart stores different data types in different database structures using a relational database. For example.

SAP APO Demand Planning allows you to reuse time series. To make this possible. and drilling down. Characteristics determine the organizational levels at which you do aggregation and reporting. which are stored in separate tables. Key figures are quantifiable values. In each catalog. Notes Management Maintain an Audit Trail Figure 4: Example of an InfoCube Incorporate Business Rules The aggregational behavior of key figures must follow business rules.Demand Planning Demand Planning Features and Functions Data Storage and Representation Multidimensional Data Storage SAP APO Demand Planning allows you to view data. such as sales in units. and reporting. Planning Environment Easy Data Access with Planning Books You access the information in InfoCubes and Time Series Management using planning books and reports. Typical characteristics for sales are products and customers. products are generally grouped into product family hierarchies. Demand Planning provides you with a uniform planning 6 . which saves time and ensures consistency. They provide the ability to plan and view data at varying levels of detail. analysis. InfoCubes also share master data and descriptive text. You can use the notes to create an audit trail of all demand planning activities. and drill down from one level of detail to the next. The Online Analytical Processing processor guarantees that all business rules are met and that the computed views present valid results from a business point of view. such as promotional patterns and life cycles. InfoCubes An InfoCube is a multidimensional data structure and the primary container of data used in planning. POS. such as sales. which is especially helpful when multiple sources and people are involved. The Notes Management tool maintains all notes entered by planners. Demand Planning allows you to model a hierarchy over the value domain of one or more characteristics. Key figures. SAP APO Demand Planning allows you to model these properties. For example. SAP APO Demand Planning stores data in a multidimensional form in the SAP APO Demand Planning data mart. The InfoCubes allow you to store multiple key figures. such as orders. The notes discuss planning data. plan from many different perspectives. For example. Time Series Management Reusable Time Series Times Series Management is based on catalogs. Using slice-and-dice techniques. You can use these hierarchies as the basis for aggregation. In SAP APO. you can reuse a past promotional pattern to estimate the impact of a future promotion of the same type. might be summed by product and time. and related forecast components. shipments. as well as plans and causal factors. you can define how information is displayed in a planning book. you can store time series data with related attributes. you model hierarchies and networks as combinations of characteristic values. Hierarchies and Networks Develop Aggregation Hierarchies The hierarchical relationships of characteristics play an important role in planning and reporting. such as in consensus forecasting. InfoCubes contain two types of data: key figures and characteristics. such as promotions and consensus forecasts. disaggregation.

In many cases. such as Europe. For example. If you edit data either in the grid. The information content of many types of data is greater when viewed on an aggregate level. such as forecast components and planning versions. Using these functions. Time-series functions include the time-phased merge of time series. you can initially select a general view. you can convert the data contained in the InfoCubes into relevant business information. These functions are essential for determining the difference between forecasts and actual results so you know quickly how far forecasts deviate from your actual results. You can make adjustments on the basis of absolutes and percentages. but switch views by displaying sales according to product group. jump to a view that is more detailed. ratio. you can use a wide range of demand planning and forecasting techniques. The planning book’s grid displays selected data. change to months. You can specify which unit of measure and calendar to display and used for planning. For example. time series averages. Time-series functions work with planning techniques. and then jump again to a more aggregated view. Planning Books Easy-to-Use Planning Books A planning book is an easy-to-use tree control for selecting data and a frame with a grid and a chart. the system automatically updates the data in the chart. The tree control in the planning books allows you to explore data easily and to change the perspective of the view by simply clicking the mouse.Demand Planning environment that supports full multilevel planning with top-down. and vice versa so you never need to worry about inconsistent data. and time-series weighted averages. These functions include: n Aggregate functions Jump Between Data Views You can also jump to a data view for completely different planning issues. 7 . Business Planning Library Library of Powerful Planning Functions The Business Planning Library is a collection of powerful planning and analysis functions. and these totals remain fixed as you scroll through the grid. You can also fix the values of certain data elements during the reconciliation process. You can also adjust values directly in the chart. percent. using slice-and-dice functions. For example. and then drill down to sales for individual countries within Europe. and bottom-up reconciliation strategies. n Disaggregate functions Disaggregate functions include disaggregation based on quotas. proportional distribution. If you change data on one level of aggregation. The manager can stay at this level of detail. which displays information from the grid in user-specific graph modes. a sales manager examining sales forecasts can look at sales for a particular continental region. such as composite forecasting. and so on. such as forecasts and promotions. You can total row and column with a mouse click. For example. the system automatically updates the data on other levels of aggregation. and equal distribution. and change again to quarters. n Time-series functions Graphical Data Display The grid is directly linked to a chart. Aggregate functions include SUM and AVERAGE. Demand Planning’s rich planning and forecasting functions are based on the Statistical Forecasting Toolbox and the Business Planning Library. and calendars allows you to mix multiple periods of time. Within this planning environment. product sales are most useful when viewed on a regional or national level. Tree control provides all data from the various dimensions and hierarchies that matches the given set of selection criteria. are output on an aggregate level and must be disaggregated to the detailed level. currency conversion. n Financial functions Financial functions include conversion from units into revenue. middle-out. The same is true of disaggregation changes. you can start with weeks. n Comparison functions Comparison functions include difference. planning results. and business period conversion.

or macros. statistical forecasting. causal analysis. column.Demand Planning Customizable Planning Books SAP APO Demand Planning Books are highly configurable. not the other way around. Using the macro tool. and so on. The macros are extremely flexible. or a cell n Write the results of one macro step to a row. you can: n Control how macro steps are processed using control instructions and conditions n Build a macro consisting of one or more steps n Control how macro results are calculated using control instructions and conditions n Use a wide range of functions and operators n Define offsets so that the result in one period is Preconfigured Planning Books for Quick Starts SAP APO Demand Planning comes with preconfigured planning books for promotional planning. or variable. and you can save different settings as profiles so the system works the way you do. You can run online simulations from the time that data is uploaded into the planning book until the changes are saved. a column. You can easily change the properties of the grid and the chart. life cycle management. so you can use them to model your planning environment based on your using special icons n Create context-specific and user-specific planning views n Trigger an alert in the Alert Monitor to inform you of particular business situations Figure 5: Example of Planning Book Design with Advanced Macros 8 . This allows you to see the effects of different judgmental techniques on the forecast. n Analyze forecasting or business data at a glance Advanced Macros Quick and Easy Macros You can use advanced macros to perform complex spreadsheet calculations quickly and easily. so you can get started right away. You can also use these as guides for customized planning books. macro steps. cell. determined by a value in the previous period n Restrict the execution of a macro to a specific period or periods n Write macro results to a row. and use them only in subsequent iterations. individual business tasks.

and if so. Multilevel Planning Synchronize Forecasts and Promotions Multilevel planning capabilities allow you to forecast and plan on any level and in any dimension. Life Cycle Management Life Cycle Management is a function of both the Demand Planning and the Supply Network Planning components. Analysis capabilities help you make decisions. which reduces errors and training costs. and equal distribution. Demand Planning provides consistent planning capabilities that synchronize forecasting and promotional data on any level in real time. Its planning and forecasting features allow you to create plans for different business goals (such as a strategic business plan. and an operational plan. Consensus-Based Forecasting Consensus Planning Drives the Business SAP APO Demand Planning supports consensus-based sales and operations planning. You can plan from the top down. so you can tailor them to individual situations and needs. you can maintain multiple demand plans. when? n Should a follow-up product be introduced? Consensus Plan Create Multiple Versions of Plans The forecasting techniques in SAP APO Demand Planning allow you to create many planning versions on any level and in any dimension using the same or similar data. including: n Product levels for marketing n Sales areas and accounts or channels for sales n Distribution centers and plants for operations n Business units for finance different stages? n Should the product be eliminated.Demand Planning Integration with Microsoft Excel Use Familiar Tools If you are already familiar with Microsoft Excel. n Should a product be relaunched and when? n Will introducing a new product cannibalize sales of existing products? Complete Life Cycle Management A product’s life cycle consists of different phases: n Launch n Growth n Maturity n Discontinuation 9 . proportional distribution relative to user-specified data streams. You can also store the content of the grid in Excel on a laptop. The planning books and reports help you gain consensus in meetings because they allow you to see the effects of your decisions. and the operative supply chain plan) and integrate them into one consensus plan that drives the business. You can base disaggregation of data on user-defined timephased quotas. Synchronize Multiple Plans Demand Planning can reconcile and combine different plans on the same level and it can synchronize plans created on different levels and different dimensions so you can always arrive at a consensus forecast. tactical sales plans. In the demand planning process. and from the middle out. the planning strategies for a product depend on the stage in its life cycle. using varying units of measure and degrees of granularity. you can use Excel to edit data before transferring the results back to the grid. a sales plan. Demand Planning helps you answer questions like: n Should a new product be introduced? n When should a new product be introduced? n How should a product be promoted during the Multiple Views View Data from Multiple Angles The multidimensional data structure of the InfoCubes allows you to view past sales and forecasts in many different dimensions. such as a marketing plan. This allows you to work in a familiar environment. from the bottom up. For example.

A phase-in profile reduces demand history by ever increasing percentages during a specified period or periods. Promotion Planning Factor Price into Promotional Projections Promotions of all kinds have a major impact on consumer sales behavior. Reporting capabilities allow you to track promotional activities and related costs and. Demand Planning extends classical volume-based promotional planning so that you can take prices into account when doing profitability analysis for promotional calendars. 10 . growth. a like profile. and discontinuation phases by using phasein and phase-out profiles. With like modeling. mimicking the downward sales curve that you expect the product to display during its discontinuation phase. therefore. or any combination of these. A phaseout profile reduces the demand forecast of a product by ever decreasing percentages during a specified period or periods. assess the efficiency of your company’s promotional campaigns. For any product. Figure 6: Example of Promotion Planning. you can use a phase-in profile.Demand Planning In Demand Planning. you can represent the launch. a phase-out profile. You can plan promotions on any level. and you can aggregate or disaggregate them using the Business Planning Library. Create Forecast with Minimal Data Some products do not have enough historical data to provide the basis for a forecast. The impact of promotions must be projected separately from standard forecast components that are based on historical sales data. Promotion-driven components are generated on top of a baseline forecast. You can use like modeling for new products and products with short life cycles. you can create a forecast using the historical data on a product with similar demand behavior. thus mimicking the upward sales curve that you expect the product to display during its launch and growth phases.

Statistical Forecasting Toolbox Multiple Tools for Multiple Forecasting Needs Your company’s product portfolio probably includes a variety of products that are in different stages of their life cycle and have different demand types. you can include all significant causal factors in your models and determine how they affect your customers’ behavior. such as multiple linear regression with or without a trend or seasonality. Demand Planning provides several techniques for estimating the effect of a promotion. Using historical sales or estimates. Use Proven Methods Demand Planning provides the proven forecasting method of multiple linear regression to model the impact of causal factors. Composite forecasting extends the idea of picking the best method. number of stores. like shipments. like pointof-sale data. such as forward buys and trade promotions. ”like regions”. You can use a causal model based on all significant causal factors to forecast POS. you can identify missing values and outliers in the data that drives the forecast and adjust the data or the applied forecasting method. Multitier Forecasting Multitier forecasting integrates sell-in data. the system can automatically detect a promotion pattern that occurred in the past.Demand Planning Promotion Patterns Isolate Promotional Patterns You can define promotional uplifts in units or percentages with promotion patterns. 11 . proven forecasting methods. You can also consider other causal factors. slow-moving products. temperature. The promotion catalog has a copy function that you can use to model ”like products”. allowing you to combine forecasting methods. Unfortunately. you must first understand all the factors that influence it. You can even forecast the unknown future of causal factors using Demand Planning forecasting techniques. Approaches that attempt to cover most of such demand types are very complex and tend to be a black box for planners. You then use a second causal model to forecast shipments. This improves the quality of the statistical forecast. into the process of forecasting sell-through data. The shipment model uses past POS data and the POS forecast as the main causal factor while taking the time lag between POS and shipments into account. The Statistical Forecasting Toolbox provides all the tools you need to efficiently create accurate forecasts. Breaking down sales to determine the impact of causal variables allows you to model the virtual consumer and simulate sales development according to the mix of causal factors. including data analysis using time series models and multiple linear regression. number of displays. Demand Planning offers a toolbox of all practical. Data Analysis Identify Missing Values With Demand Planning. and so on. Figure 7: Example of Multi-Tier Forecasting Causal Analysis Include Causal Factors in Forecasts To predict consumer behavior. and hot new products does not exist. You can choose the best method for a specific type of demand. With Demand Planning. and working days. a single forecasting method that creates accurate statistical forecasts for mature products. Causal factors include price. You have to use different methods to get the right answers. You can archive a promotion pattern in a promotion catalog. so you can reuse it if you repeat the promotion at a later date.

and cash flow. You can determine the weights as equal (simple average) or using multiple linear regression by taking the residuals of the multiple forecasts into account. or long-term forecasting goals. This visualization of expected deviation not only places the forecast in context. For example. trend changes. You can either adjust the applied forecasting method. and Holt-Winters so you always have the right tool for the job. Using correlation analysis. it also enables what-if planning. You can intervene manually. you can correct variables. you can also measure the accuracy of the forecast using the following forecast errors: n Mean absolute deviation (MAD) n Error total (ET) n Mean percentage error (MPE) n Mean absolute percentage error (MAPE) n Mean square error (MSE) n Square root of the mean squared error (RMSE) Stochastic Models Accurate Forecast with Sporadic Demand When sporadic demands exist. moving average. The primary technique is to store a series of forecasts for a particular period and to compare each deviation of this series to the actual values for the same period. The Crosten method accounts for this inaccuracy by using exponential smoothing to estimate the size of demand during periods in which demands occur as well as the demand frequency. or you can replace it with a more suitable method.Demand Planning Intervene as Changes Occur Structural changes in established patterns. Composite Forecasting Composite forecasting creates a weighted average of the forecasts of multiple forecasting methods to create one forecast. trend. medium-term. simple linear regression. dummy variables. including adjusted R-squared and Durbin-Watson. Pick-The-Best Option With the pick-the-best option. planned and minimum production volumes. In Demand Planning. Demand Planning allows you to take corrective action. or the system can do it automatically. The system provides several statistics. 12 . You can specify the horizon for the fit criteria based on short-term. and seasonal patterns as a basis for creating future projections. You can also integrate life cycle patterns into the time series models using special profiles. Time Series Models Time series models are techniques that use past sales to identify level. You can then project the deviation into the future. must be identified. The real impact of forecast accuracy reporting is realized when you couple it with a simulation at the significant nodes of the supply chain. life cycle patterns. you can apply a dampening of the trend. such as naive models. In addition. stock. Brown’s exponential smoothing. the time series models always produce inappropriate stock levels as a result of the high mean absolute deviation from periods without demands. this enables a business to evaluate future scenarios for maximum. the system either runs all of the available forecasting methods or uses the planner-specified forecasting methods and applies the best one. You can choose from a variety of options to model linear and nonlinear trends. and changes from unstable to stable behavior. Multiple Linear Regression Causal techniques are based on relationships between past sales and other causal factors. such as level changes. and time lags. By automatically detecting structural changes using a tracking signal. amplitude changes. sales revenue. Forecast Accuracy Analysis Track Forecast Accuracy Forecast accuracy reporting helps companies assess the accuracy of past forecasts and integrate this knowledge into projections for the future. Multiple linear regression allows you to estimate these relationships by performing a least squares fit. The final forecast values are determined by distributing the size of demand according to the demand frequency. including seasonal patterns. The Statistical Forecasting Toolbox provides all of the most important models. For time series models with a linear trend. you can time-phase the combination so that short-term and medium-term forecasts are combined with respect to their horizons.

Using open interfaces. n Batch forecasting Conclusion Demand Planning provides multiple benefits that help you match supply and demand and manage the entire length of your supply chain. such as MAD and tracking signals. This allows you to take action quickly when it can do the most good. n An open solution You can sort reports by forecast error or restrict them to products with a forecast error greater than a userspecified threshold. n A function-rich solution Performance Performance is of vital importance in any demand planning solution if users are to benefit fully from available information. You can also add multiple application servers as the number of users increases. 13 . They compare: n Actual versus forecast n Actual versus time-lagged forecast n Actual versus different planning versions. and enable collaborative forecasting with business partners. integrate processes that drive the forecast. share information. minimizing query response time. Demand Planning is: n A fast solution baseline forecast or consensus forecast n Actual versus budget Because Demand Planning is a component of the SAP Business Framework. Demand Planning can improve forecast quality. n An adaptable solution If your needs or your IT environment change – and they will – SAP APO Demand Planning can adapt to these changes. SAP APO Demand Planning does not limit you to using SAP R/3 or R/2. model consumer sales behavior and market dynamics. The star schema is a structure that supports efficient use of storage space and of CPU cycles. n A robust. there are a number of configuration options to provide highly scalable performance as the number of users increases. or trend changes occur or orders exceed the forecast. reliably and effectively. Demand Planning is built to answer the specific demand planning and information requirements of planners and forecasters in all industries. or you can place the database on a dedicated database server. Demand Planning architecture includes several features that ensure high performance: n Dedicated server SAP APO resides on its own dedicated server. you can integrate SAP APO Demand Planning with nonSAP data sources and non-SAP tools to create the best solution for your business. You can define exception conditions based on thresholds for special statistics. You can update long-running mass forecast updates as a batch process so you do not impede online performance. Forecast accuracy reports show forecast errors at any level and dimension. Like the SAP R/3 System. SAP APO takes full advantage of the flexibility of SAP R/3’s three-tier client/server technology. you can implement it rapidly and at a low cost. specialized software packages. SAP APO Demand Planning has the tools you need so you don’t need to assemble them from multiple.Demand Planning Real-Time Alerts to Exceptions In addition. All SAP APO server components can reside on the same hardware system. outliers. such as n Multidimensional data mart The data mart is based on the star schema. so that the system alerts you if bias. business-driven solution Based on SAP’s proven expertise in SAP R/3 client/ server technology and in real-world business processes. the SAP APO Alert Monitor informs you in real time via e-mail or an exception message in an exception window if an exception occurs in Demand Planning.

Demand Planning For your note: 14 .

Demand Planning 15 .

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