SAP IBP explained
What is SAP Integrated Business Planning
What is SAP Integrated Business Planning (SAP IBP)
SAP Integrated Business Planning (IBP) is a cloud-based solution for supply chain planning designed to help companies streamline and improve their planning processes. IBP offers a single platform for collaboration and data-driven decision-making, enabling companies to better respond to market changes and achieve their business objectives.
The IBP solution consists of six components that cover all processes within the supply chain.
Supply Chain Control Tower
IBP for Sales & Operations Planning
IBP for Demand
IBP for Response & Supply
IBP for Inventory
Vraaggestuurde aanvulling
SAP Integrated Business Planning is the successor ofSAP APO (Advanced Planning and Optimization)en. While SAP APO primarily focused on optimizing supply chain planning, SAP IBP goes further and offers a more comprehensive and advanced solution for planning and managing the supply chain in a single solution.
Challenges in the Supply Chain
In your company, many departments are involved in making the planning successful: demand, supply, marketing, finance, management... and they all need to be aligned. However, this is very difficult if you do not have a system that can give everyone a voice.
Additionally, you must also consider different perspectives: strategic, tactical, and operational. The strategic level sets directions and goals for the long term, the tactical level creates aggregated plans to meet the strategic objectives, balances supply and demand, optimizes inventory, and creates allocations. Finally, the operational level translates the aggregated plans into detailed plans for the short term (such as priorities for deliveries or confirmations).
SAP IBP for Sales and Operations Planning (S&OP)
In today's rapidly changing world, it is more important than ever for companies to have a clear understanding of supply and demand. With the right planning tools, companies can ensure that they have the right products in the right place at the right time to meet customer demand.
The main component, S&OP (Sales and Operations Planning), helps companies optimize their demand and supply planning processes. The solution provides one complete, integrated view of demand and supply data, enabling companies to make better decisions.
By having all relevant data in one place, companies can more easily see the bigger picture and identify potential problems or opportunities. S&OP consists of four phases:
Vraag om beoordeling
Supply review
Reconciliatiebeoordeling
Management Review
In this way, the solution helps companies make accurate demand forecasts. S&OP uses six different forecasting techniques to make accurate demand predictions, even in dynamic markets. Additionally, it helps companies determine how much they can produce, what raw materials they need, and when to procure them. IBP optimizes supply-side planning to meet demand, taking into account factors such as lead times, costs, and risks. S&OP also offers scenario planning capabilities, meaning that companies can create and test different scenarios to see how they would affect demand and supply.
This makes it possible to respond to unexpected events or changes in the market. In the fourth phase of S&OP, it can be determined whether the submitted proposal aligns with the company's financial objectives and key performance indicators.
Curious for more information about the S&OP module? Then watch the McCoy TV below:
SAP IBP for Demand Planning
For many companies, it is crucial to understand the demand for their products and services well. When a company can thoroughly comprehend its demand patterns, it can ensure that they have exactly the right amount of products and services to meet customer demand.
The SAP IBP for Demand module can play an important role in this by supporting companies in optimizing their Demand planning processes. With a range of features and benefits, this solution enables companies to make better-informed decisions about their operations.
The SAP IBP for Demand module takes demand forecasting a step further than S&OP and uses advanced algorithms to generate even more accurate demand forecasts. By leveraging these powerful algorithms, companies can benefit from improved accuracy and reliability in anticipating demand patterns.SAP even enables the user to incorporate external algorithms (from, for example, Python)ento apply, which further expands the possibilities.
The ability to collaboratively improve forecasts is a central advantage of SAP IBP for Demand. Different teams can work together to refine forecasts, allowing input from various departments to be integrated. These collaboration capabilities lead to more accurate and realistic forecasts, enabling companies to respond more flexibly to changing market conditions.
Demand planning with SAP IBP also enables 'demand sensing'. This provides deep insight into order patterns, allowing companies to refine their forecasts based on historical and current order data. By understanding these patterns, organizations can better respond to specific customer demands, adapt to changing trends, and above all, optimize their demand forecasts.
SAP IBP for Response & Supply Planning
The concept of a "Dynamic Market" is one that has increasingly appeared over the last 20 years. Demand fluctuations, supply chain disruptions, and unforeseen events require flexible and proactive planning.
The Response & Supply (R&S) module of SAP IBP offers the ability to manage this in the supply chain, optimize it, and thus anticipate changing market conditions.
In this way, supply and demand can be synchronized. With the help of advanced algorithms and real-time data insights, the module enables the user to optimize their supply chain. Planners are enabled to apply multi-level supply planning. This way, an effective supply plan for the entire network can be created by modeling across locations and multi-level bill of materials. This allows the planner to decide what should be included in the model and where the supply plan should be constrained. Within R&S, three algorithms are available, including the unconstrained heuristic, prioritization, and optimization. The prioritization and optimization algorithms ensure that the system delivers a feasible and constrained supply plan that takes the modeled constraints into account.
Another strong aspect of Response & Supply is that it can reduce supply chain risks through tactical rough cut planning. R&S makes it possible to balance demand and supply while taking material constraints into account. Planners can impose limitations on essential resources such as production, transportation, and storage, thereby preventing potential bottlenecks.
Operational response management also enables the user to act flexibly. For example, it becomes possible to address challenges related to material scarcity by using an operational supply plan. This allows for supply allocations to be made when material is scarce and sales orders to be reconfirmed to determine realistic availability dates with the delivery run.
The user is also given the opportunity to create an internal deployment plan based on controlled quantities available for deployment, allowing for prioritization and optimization. With operational response management, 'gating factors' can be examined, providing insight into the root causes of delays and shortages. Subsequently, the user can use the web-based interactive planning to adjust the plan and work purposefully. This approach enhances the company's agility and prepares it for success in a dynamic environment.
SAP IBP for Inventory Optimization
An efficient inventory management is no longer an unusual desire in a world where markets are constantly changing, competition is increasing, and costs are rising. For this, companies strive for enough inventory (of the right materials) to guarantee service levels while simultaneously not having too much inventory to minimize inventory costs.
IBP for Inventory Optimization (IO) offers a solution for optimizing inventory levels and achieving high service levels at the lowest possible costs. Using advanced algorithms, IBP IO calculates the optimal inventory levels based on various parameters, such as demand variability, service levels, and costs.
Companies are thus enabled to improve their inventories by looking at the entire supply chain, different situations, and types of customers. This allows them to find the right balance between inventory investments and service levels.
SAP IO has a multi-stage inventory optimization that effectively addresses these issues by buffering errors in forecasting, demand risks, and efficiently managing uncertainty in the supply chain. This way, the correct inventory quantities can be calculated for different products, from finished products to raw materials, and it allows for analysis of how they influence each other.
Because IBP is a single integrated solution, it enables companies to collaborate with all departments and suppliers to avoid excess inventory, ensure service levels, and optimize inventory costs.
The IO component enables planners to address complexity and various constraints, such as service level objectives, batch sizes, and lead times. By utilizing simulations and scenarios, planners can assess the impact of different decisions and constraints.
IO also enables companies to gain insights into the product network and the geographical distribution of inventory through built-in analyses. With this insight, IO allows the user to evaluate the causes of inventory levels and take targeted measures to minimize inventory costs and guarantee service levels.
SAP IBP - Supply Chain Control Tower
The supply chain control tower can be a significant addition to all the components discussed above. The name Control Tower already implies the function of this IBP component to a large extent. It provides you with a complete view of your digital supply chain, shows how different domains are interconnected, and allows you to easily navigate to other parts of SAP such as SAP S/4HANA and SAP Digital Manufacturing Cloud. The Control Tower also addresses the lack of visibility in your entire network. It offers end-to-end monitoring of the supply chain by analyzing current and historical performance, creates alerts to quickly identify potential issues, enables you to set up procedure playbooks to follow procedures, view supply network lanes, provides dashboards with KPIs and intelligent tools for managing custom alerts and issues within the supply chain, and offers the ability to use analytics to address problems in your supply chain.
Another major advantage of the Control Tower is that it connects you with your external supply chain partners via the SAP Business Network. This allows you to plan better by taking into account your suppliers' constraints and respond quickly to alerts. This results in cost savings and improved service levels throughout your entire supply chain thanks to a responsive planning approach enabled by the Control Tower.
SAP IBP - Demand-Driven Replenishment
Finally, the IBP calculates forVraaggestuurde aanvullingdecoupling points, average daily usage, and buffers for the positioning and sizing of materials to enable the material flow through your supply chain.
DDMRP (Demand Driven Material Requirements Planning) is an advanced planning technique that helps companies effectively manage their inventory levels. Unlike traditional planning systems, DDMRP uses actual demand data instead of forecasts to drive demand-driven replenishment. This ensures better planning accuracy and prevents over- or understocking.
DDMRP uses five core components:
Strategic inventory positioning: determines where decoupling points are placed to position inventory at strategic points in the supply chain.
Buffer profiles: defines the necessary protection at decoupling points to absorb fluctuations in supply and demand. It uses a color-coded buffer model with different zones.
Dynamic adjustments: ensures that buffers can be flexibly adjusted based on market changes and future events. This keeps the inventory level protection optimal.
Demand-driven planning: uses sales orders instead of planned orders to drive demand planning. This ensures better accuracy in planning and prevents overstocking.
Visible and collaborative execution: priorities are assessed, inventory forecasts are checked, and customized alerts are reviewed to manage supply chain execution. Dashboards in SAP IBP provide an overview of the results and analyses.
With SAP IBP, companies can implement DDMRP and benefit from better inventory balance, increased operational efficiency, and improved customer service. DDMRP helps companies reduce bullwhip effects, optimize inventory levels, and enhance overall supply chain performance.
Benefits of SAP IBP
In addition to the six main modules, IBP offers even more advantages. It is a cloud-based platform that runs on SAP HANA, which ensures easy integration with other SAP systems, but can also receive data from various sources at an aggregated or detailed level. Best practices are followed during the integration, but on the other hand, it is also a scalable and flexible model.
The user experience is optimal thanks to the Web UI and Excel UI. Planners can create various "what-if" scenarios and perform simulations that assist in the decision-making process. All results and information can be viewed in customizable charts and dashboards, and any required KPI can be calculated. And the best part is that it is not a static system, as it follows a roadmap with constant improvements.
SAP IBP Consultancy
At McCoy, we have a team of SAP IBP experts for all your planning issues. Our goal is to help you increase your revenue, reduce your inventory, and work more efficiently by using reliable and always available data.Read on to discover how we do this.
SAP IBP Releases Updates
SAP IBP issues quarterly updates to ensure that the platform remains up-to-date with the latest features, enhancements, and bug fixes. These release updates provide users with new capabilities and improved performance, enabling them to manage their supply chain planning processes even more effectively.
We have listed some of the releases for you with the most important updates. You can find them here.