SAP IBP for Sales & Operations Planning: Demand Driven Supply Chains

Lower stock, better service levels, working more efficiently and making choices based on the correct and always available data. It almost sounds too good to be true. Or is it closer than everyone thinks? All this succeeds or falls with proper planning and therefore a smoothly running S&OP process (Sales & Operations Planning).

Almost everyone sees the benefit of a smoothly running S&OP process, you can even make money with it. but the implementation often proves to be a difficult task. S&OP is sometimes wrongly regarded as the implementation of a software solution and thus as providing information within a company and between the different departments and stakeholders.

S&OP is actually only the first step in a growth path towards supply chain integration and thus integrated business planning. SAP's planning platform called SAP IBP (Integrated Business Planning) helps and makes possible to achieve these goals.

What is SAP IBP for S&OP?

SAP IBP S&OP helps companies optimize their demand and supply planning. It provides an integrated view of demand and supply data, enabling better decision-making.

Companies can view all relevant data in one place, allowing them to see the bigger picture and identify problems or opportunities. S&OP consists of four phases:

• Demand review

• Supply review

• Reconciliation review

• Management review

The solution helps to make accurate demand forecasts with six forecasting techniques, even in dynamic markets. It helps companies determine how much they can produce, what raw materials they need, and when they need to procure them. IBP optimizes supply planning to meet demand, taking into account lead times, costs, and risks. S&OP also offers scenario planning, allowing companies to test different scenarios and see how they affect demand and supply.

This enables them to respond to unexpected events or market changes. In the fourth phase of S&OP, it is determined whether the proposal aligns with the company's financial objectives and key performance indicators.

The first step to a Demand Driven Supply Chain

SAP IBP is much more than just a technical solution, it is about achieving processes and chain integration and making the right choices based on reliable information. It provides the tools to go through a structured process every month which covers the different departments and functions. A process driven by people and leadership instead of driven by supply chain or sales. 

The Gartner model measures the maturity of S&OP using 5 stages. The maximum achievable is stage 5, where companies conduct their business operations based on profitability and maximum customer satisfaction. If companies want to grow up to stage 3 and beyond, using the right technology is a must and even a requirement.

SAP IBP S&OP according to Gartner

The diagram below shows the stages where SAP IBP plays an important role and its translation to the goal and mindset according to Gartner. Only a few companies can achieve stage 5 at the moment, for example companies like Apple or Coca-Cola, because they are advanced enough in their S&OP processes.

The first step will always be to reach stage 3, which translates into a properly functioning S&OP process where demand and supply are aligned. Subsequently, there will be an iterative path to grow towards a fully demand driven supply chain with a focus on the customer and achieving maximum profitability and minimizing costs.

It is still Human Work

Ultimately, logistics is of course human work: it is about making the right decisions and interacting between different departments and interests. SAP IBP basically provides the structure that will serve to optimize the process. It is not the solution to all problems, however it does help identify them quickly and make the right decisions. Just take the “What-if” functionality of IBP as an example: it can quickly calculate and save the result of different scenarios and by combining those volumes with financial data, the right choice can be quickly made in each meeting based on validated data and the comparison of possible scenarios.

How do we achieve a Demand Driven Supply Chain?

With our approach and vision, based on the current maturity and complexity of the supply chain, we will set a feasible goal and achieve this iteratively and as a team. We also want to make objectives measurable and monitor them during and after the implementation of IBP. In this way we can provide insight into the added value of the project and make it clear prior to a project where the 'Return of Investment' lies for IBP.

All this and much more is part of our Intelligent Planning concept. Also curious about where your company currently stands according to the Gartner concept and you want to know where the added value of SAP IBP lies for your company?