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SAP Integrated Business Planning Explained (SAP IBP)
SAP Integrated Business Planning (IBP) is a Cloud Based solution for supply chain planning designed to help companies streamline and enhance their planning processes. IBP provides 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
Demand-Driven Replenishment
SAP Integrated Business Planning is the successor to SAP APO (Advanced Planning and Optimization). Where SAP APO primarily focused on optimizing supply chain planning, SAP IBP goes further, providing a more comprehensive and advanced solution for planning and managing the supply chain in one solution.
Supply Chain Challenges
In your company, there are many departments 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.
In addition, you also need to take into account 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 demand and supply, optimizes inventory and creates allocations. And 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 demand and supply. 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 a single, integrated view of demand and supply data, enabling companies to make better decisions.
As companies can see all relevant data in one place, it becomes easier to see the bigger picture and identify potential problems or opportunities. S&OP is built up of four phases:
Demand review
Supply review
Reconciliation review
Management Review
This way, the solution helps companies make accurate demand forecasts. S&OP uses six different forecasting techniques to make accurate demand forecasts, even in dynamic markets. It also helps companies determine how much they can produce, which raw materials they need, and when they need to purchase 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 companies can create and test different scenarios to see how these would affect demand and supply.
This allows for responding to unexpected events or changes in the market. In the fourth phase of S&OP, it can be determined whether the submitted proposal is in line with the financial objectives and key performance indicators of the company.
Curious about more information on the S&OP module, check out the McCoy TV below.
SAP IBP for Demand Planning
It is crucial for many companies to understand the demand for their products and services. When a company can understand its demand patterns well, it can ensure that it has exactly the right amount of products and services to meet customer demand.
The SAP IBP for Demand module can play a key 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 goes beyond S&OP in demand forecasting 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 allows the user to apply external algorithms (from, for example, Python), which further expands possibilities.
The ability to improve forecasts together is a central benefit of SAP IBP for Demand. Different teams can work together to refine forecasts, allowing input from different departments to be integrated.
These collaboration capabilities lead to more accurate and realistic forecasts, enabling companies to respond more flexibly to changing market conditions.
Also, demand planning with SAP IBP makes 'demand sensing' possible. 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 requirements, adapt to changing trends, and above all, optimize their demand forecasts.
SAP IBP for Response & Supply Planning
The term "Dynamic market" is one that has been mentioned more and more often in 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 possibility to deal with these in the supply chain, to optimize it, and to anticipate changing market conditions in this way.
In this way, demand and supply can be synchronized. With the help of advanced algorithms and real-time data insights, the module enables the user to optimize their supply chain. It enables planners to apply Multi level supply planning. In this way, an effective supply plan for the entire network can be created by modeling across locations and multilevel bill of materials. This enables the planner to decide what should be included in the model and where the supply plan should be limited. Within R&S, three algorithms are available including the unlimited heuristic, prioritization, and optimization. The prioritization and optimization algorithms ensure that the system delivers a feasible and constrained supply plan that takes into account the modeled constraints.
Another strong part 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 constraints on essential resources such as production, transport, and storage, preventing potential bottlenecks.
It also enables the user to act flexibly through operational response management. For example, it becomes possible to tackle challenges related to material scarcity by using an operational supply plan. This allows 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 also gets the opportunity to set up an internal deployment plan based on controlled quantities available for deployment, allowing for prioritization and optimization. With operational response management, 'gating factors' can be investigated, providing insight into the main causes of delays and shortages. The user can then use the web-based interactive planning to adjust the plan and work in a targeted manner. This approach promotes the company's agility and prepares it for success in a dynamic environment.
SAP IBP for Inventory Optimization (IO)
Efficient inventory management is no longer a strange wish 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 and at the same time not too much inventory to minimize inventory costs.
IBP for Inventory optimization (IO) provides a solution for optimizing inventory levels and achieving high service levels at the lowest possible costs. With the help of 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 whole 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 deals with these problems by buffering errors in the forecast, demand risks, and efficiently managing the uncertainty in the supply chain. This way, the right quantities of inventory can be calculated for different products from finished product to raw material and it can be analyzed how these influence each other.
Because IBP is one integrated solution, it enables companies to collaborate with all departments and suppliers to avoid too much inventory, guarantee service levels, and optimize inventory costs. IO component enables planners to tackle complexity and various constraints, such as service level objectives, batch sizes, and lead times. By using simulations and scenarios, planners can assess the impact of different decisions and constraints.
IO also makes it possible for companies to gain insight into the product network and the geographical distribution of the inventory through built-in analyses. This insight allows IO to enable the user to evaluate 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 great addition to all the components discussed above. The name Control Tower somewhat implies the function of this IBP component. It gives you a complete picture of your digital supply chain, shows how different domains are connected, 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 provides end-to-end monitoring of the supply chain by analyzing current and historical performance, it creates alerts to quickly identify potential problems, it enables you to set up procedure playbooks to follow procedures, view supply network lanes, it offers dashboards with KPIs and intelligent tools for managing custom alerts and issues within the supply chain, and offers the ability to use analyses to address problems in your supply chain.
Another major benefit of the Control tower is that it connects you to your external supply chain partners via the SAP Business Network. This allows you to plan better by taking into account the constraints of your suppliers and quickly respond to alerts. This results in cost savings and improved service levels within your entire supply chain thanks to a responsive planning approach made possible by the Control tower.
SAP IBP - Demand-Driven Replenishment
Finally, the IBP for Demand-Driven Replenishment calculates decoupling 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 under stocking. 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 required protection at decoupling points to absorb fluctuations in demand and supply. 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 custom alerts are checked to manage the execution of the supply chain. 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 the bullwhip effects, optimize inventory levels, and improve the overall performance of the supply chain.
Advantages 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 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 aid 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's not a static system, as it follows a roadmap with constant improvements.
SAP IBP Consultancy
As 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. Continue reading to discover how we do this.
SAP IBP Releases Updates
SAP IBP releases quarterly updates to ensure that the platform remains up-to-date with the latest features, improvements, 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:
Other SAP IBP Content
Improve your Supply Chain Planning with SAP IBP
Discover how SAP IBP can further assist you in transforming your supply chain planning and optimizing your business processes.