This is about SAP IBP (Integrated Business Planning).
You’ll learn:
- What IBP is
- How SAP IBP is structured
- The features of SAP IBP
- Lots more
So, if you want to know what SAP IBP is and what it can do for you, you are at the right place.
Let’s jump right in!
What Is SAP IBP (Integrated Business Planning)?
Did you ever wonder how big companies manage their most important processes?
For example, how does a multinational company with more than 50,000 employees, 5,000 retail stores, and thousands of warehouses manage its payroll, inventory, supply and demand, and production?
Years ago, these companies conceded a certain level of inefficiencies and disjointed planning, but today’s companies are powered by digital transformation.
Today businesses can find insights into data on their financial, operational, and sales plans thanks to smart software solutions and modern planning processes. This allows them to make more informed decisions and come up with better overall strategies.
To do this, companies can use Integrated Business Planning—a digital platform that helps them organize all of these processes.
SAP IBP is one of the most popular such platforms. Let’s take a look at SAP’s Integrated Business Planning solution:
- Its history
- Structure
- Benefits
- And much more
What Is Integrated Business Planning?
Integrated business planning is an advanced approach to business organization that merges operational and financial data across the whole business. It allows organizations to maximize results by connecting sales, financial, operational, and other sectors. It also gives businesses greater visibility of their whole process, from the entire supply chain to sales operations.
You can use Integrated Business Planning to manage different parts of a company such as:
- Finance and operations
- Supply and demand
- Cash flow, cost, and revenue
- Business strategy
- Inventory optimization
An IBP process is used to balance all these (and more) objectives so that the company achieves the best results going forward.
To ensure this happens, IBP uses prescriptive analytics, which is the application of mathematical sciences and statistics to suggest business decisions based on data.
This goes one step further than predictive analytics which uses mathematical data to predict what’s going to happen.
Simply put, using prescriptive analytics, IBP tries to answer the question of what is likely to happen, tells you why it’s going to happen, and suggests actions you can take to benefit from these predictions.
While IBP is an organizational approach, it can also be referred to as software. In this case, we’re talking about a digital platform that uses advanced analytics to help you manage all these processes like:
- Supply planning
- Inventory optimization
- Supply chain management
- Operations planning
Before IBP: Sales & Operations Planning (S&OP)
As a process, Integrated Business Planning is an heir to Sales and Operations Planning (S&OP).
In fact, IBP has been criticized for not being all that different from S&OP—it’s even been called a marketing hoax.
IBP, however, is a broader term than Sales & Operations planning. It combines S&OP with EPM (Enterprise Performance Management) to give companies both a financial and an operational overview of the business.
IBP allows organizations to create what-if scenarios that boost the responsiveness of the supply chain and improve the way that manufacturers govern and plan the business.
Source: Semantic Scholar
Here are some ways in which IBP differs from S&OP:
- Financial performance management: IBP helps you express business goals in financial terms. So you can set financial targets and see how well your company is doing relative to those targets. It helps you measure the impact of different scenarios through a financial lens.
- Supply chain planning: With IBP, you can not only plan your supply chain, but also measure its performance. This means you can use IBP to find those decisions that increase your profitability and create production plans based on valuable information.
- Long-term planning: S&OP usually supports medium-term planning (for around two years). IBP aligns with long-term strategies while also supporting shorter-term operational plans. Also, since you can use it to measure financial performance, you can also use it to determine long-term budget needs.
What’s Wrong With Traditional Planning?
Before we get into SAP IBP and its features, let’s answer one important question:
What’s wrong with traditional business planning?
In other words, why do companies need IBP software at all?
First, without IBP there is only the bare minimum of information about how each department is functioning and the corresponding impact on the bottom line.
Second, in traditional planning, there’s often a disconnect between your strategies and operations. This results in lower competitiveness because the business is slow at reacting to market changes.
Third, IBP promotes collaboration. Without it, departments tend to only focus on their own activities and results, rather than feel like part of a larger company team.
Overall, IBP promotes a holistic approach that helps you see the bigger picture and make smart decisions with all aspects of your company in mind.
Who Is SAP?
Let’s get to the details: SAP SE and its IBP platform.
SAP SE, simply known as SAP, is an international software company based in Germany. They make ERP (Enterprise Resource Planning) software that helps companies manage and gather data from all parts of their business.
The definition of SAP is:
SAP (Systems, Applications, and Products in Data Processing) SE (Societas Europaea) is a European worldwide operating software company that makes software for the management of business processes suitable for organizations of any size and industry.
It’s the largest software company outside of the U.S. by revenue.
What Is SAP IBP?
Let’s take everything we’ve learned and put it all together: SAP IBP is an Integrated Business Platform developed by the company SAP SE.
Like most other business applications from SAP, the platform runs on SAP HANA.
SAP IBP lets you plan all kinds of business activities.
Thanks to the in-memory processing functions of SAP HANA, their IBP platform provides companies with end-to-end visibility of:
- Demand
- Finance
- Supply chain data
This helps departments such as sales, finance, and C-level management to create plans and business strategies.
Source: SAP
Let’s put it like this: companies conduct periodic reviews of their supply, demand, sales performance, budgeting, and other processes to identify potential issues that can affect their business targets.
SAP IBP lets companies do more frequent reviews, compare planned figures to actual ones, and take a more active approach to planning.
Furthermore, SAP HANA’s processing capability allows companies to run what-if scenarios with real-time data in order to get statistical input and make smarter decisions.
The Capabilities of SAP IBP
More specifically, SAP IBP allows you to do the following:
- Predict and meet customer expectations: You can use SAP IBP’s predictive modeling and demand sensing to improve your responsiveness and forecast accuracy. The platform makes it easy to react to demand changes and promise deliveries based on commitments.
- Make better planning decisions: As mentioned, SAP IBP uses advanced analytics and machine learning algorithms. You can use these to do effective top-down and bottom-up forecasts. You can also leverage supply planning and set inventory targets.
- Align planning processes: IBP’s simulations and analytics can help you manage planning processes at operational, strategic, and tactical levels. What-if scenarios enable you to make better decisions and increase business predictability.
- Improve supply chain visibility: IBP gives you actionable insights from your entire supply chain that enable you to make timely adjustments. You can take into account data like risk, weather, and sustainability. The platform also allows you to work with your suppliers and manufacturers for easier planning.
The Structure of SAP IBP: The Five Components
SAP Integrated Business Planning is composed of four key components, plus a fifth that serves as a centralized visual interface. Each component is an independent component so you can just use what you need.
Source: Salt-solutions.de
This is a quick overview of those components:
- Sales and Operations: Provides a sales plan to help you get the best business results according to your corporate strategy. You can align your short-term and long-term strategies to increase sales, improve market share, or achieve any other financial goal.
- Demand: Predicting product demand is one of the most important success factors in business planning. The SAP IBP for Demand allows you to leverage machine learning to get demand forecasts, including temporary fluctuations.
- Inventory: The Inventory component sets forward-looking inventory targets across your supply chains. You get real-time data so you can see where your products are in the supply chain at any time. You can optimize the stock targets for your whole supply chain.
- Response and Supply: This module lets you react to any ad-hoc changes. Using what-if scenarios and simulations, you can predict changes and make adjustments accordingly. Response planning calculates demand variability and helps you meet your fill rate while keeping track of your costs.
- Supply Chain Control Tower. The Tower acts as your dashboard—an analytics platform that gives you real-time data. It provides end-to-end supply chain visibility. The module also allows you to set up alerts when there are potential interruptions in your supply chain.
Now, let’s dig into each of these modules or component:
SAP IBP for Sales and Operations
SAP Integrated Business Planning for S&OP is at the very core of the whole platform. It’s also a starting point for many companies using SAP IBP—in many cases, companies start out with long-term sales planning which they then need to synchronize with the rest of the organization like:
- Production
- Logistics
- Procurement
This module provides a holistic view of your supply chain network by simulating financial, supply, and demand models.
You can see everything in the supply chain, from manufacturing and suppliers to customers and distribution units.
The S&OP component also provides you with all the tools you need to create supply plans across all departments. You can use it to balance your product mix, service levels, inventory, and financial operations.
The module uses the familiar Microsoft Excel interface, so that everyone feels comfortable with the system. Supply chain management is usually handled through spreadsheets, so this is a natural transition for most managers.
SAP IBP for Demand
This module combines demand sensing models that use real-time data with traditional demand planning tools.
Using machine learning, historical data, trends, and seasonal patterns, the demand planning module excels at long-term demand forecasting.
Like the previous module, this one also uses a Microsoft Excel interface.
Besides that, you can also access some other apps based on the SAP HANA database like the SAP ERP and SAP APO. These can be useful if you want to access transactional and master data.
The SAP IBP for Demand module also has demand sensors. The sensors monitor your incoming data on a regular basis and notify you when a forecast target isn’t being met. This way you always have the latest info and can adjust your approach accordingly.
SAP IBP for Inventory
SAP IBP for Inventory component lets you to model your whole inventory network, from your supplier to your customers. It gives you inventory management tools and lets you identify key drivers so that you always have the right amount of inventory.
So, how does that work in practice?
For example, let’s say a company is working in a multisourcing environment—they have multiple suppliers and multiple warehouses all over the country.
The IBP for Inventory component would use all the transportation costs, targeted service levels, and fill rates to determine how much of each product’s inventory it should have in each location.
Like other components in the SAP IBP suite, this one uses real-time data, so you’ll always know where your products are in the supply chain.
You can also use inventory planning simulations that take into account economic shifts, changes in demand, and differing customer expectations. This technique uses real-time what-ifs to help you figure out where your weaknesses are and how to strengthen them.
SAP IBP for Response and Supply Planning
This component helps you simulate and evaluate planning scenarios so that you can achieve a balance between supply, demand, and capacity. It also considers inventory, procurement, production, and warehousing costs so you can get a financial insight into your supply planning as well.
The keyword here is response, meaning that the Response and Supply Planning component enables you to adapt quickly to your supply chain model. You can use what-if analyses to predict potential uncertainty and plan for it.
This module takes into account the demand variability and helps you allocate supplies to achieve the highest service level and fill rate.
Since you can use SAP IBP to get measurable financial outcomes, the Response and Supply Planning module can help you perform all of these actions while keeping costs as low as possible.
The component has pre-made templates for what-if analysis to make things easier, but you can make your own in no time.
SAP Supply Chain Control Tower
The last component is an analytics tool, a dashboard that allows for a real-time, end-to-end overview of your entire supply chain.
Not only can the component alert you any time there’s a potential supply chain disruption—it can dig deep and tell you where it came from.
Source: Mccoy partners
The Supply Chain Control Tower provides what-if analyses to help you make quick, informed decisions. This data isn’t only available to you: partners in your supply chain can also have access to real-time alerts that might lead to delivery delays or exceptions.
All the tools in this component are highly visual, so you can share the tables and charts with others without them having to be great at numbers or tables.
Ultimately, the Control Tower ensures your company can make timely deliveries with better inventory management and fewer operational risks.
The Benefits of SAP IBP
Here are a few reasons companies might consider using SAP IBP for supply chain management, inventory optimization, production planning, and other processes:
- Better data collection: Companies using old S&OP technology often have to collect data manually from sources like third-party applications and spreadsheets. SAP IBP lets you collect data more quickly and more efficiently, saving you and your team time.
- Managing fluid data: The biggest challenge with Integrated Business Tools, in general, is that inventory levels change constantly—they’re fluid. SAP IBP lets you view those levels as dynamic data, rather than just static data about how many items you’ve got in stock.
- Better data presentation: Many old S&OP tools present data in tables that can be confusing to make sense of. SAP IBP offers dashboards and similar analytics tools that make it easier to interpret data in moments. These tools also make it easier to share data across departments.
- Quick installation: SAP IBP is a cloud solution, which means that you don’t have to order hardware or have data warehouses. SAP IBP implementations typically don’t take more than a few days.
SAP IBP Implementation
Let’s see what SAP IBP implementation methodologies you can use:
The go-to model for SAP implementation has been ASAP (Accelerated SAP). This methodology uses the waterfall model which employs a linear structure where the deliverables in each phase depend on the previous one.
The model has five stages:
1. Project Preparation: at this stage, it’s important to identify goals and get stakeholder support. SAP and the client also work together on establishing a reliable process for making decisions.
2. Business Blueprint: at this point, SAP needs to get relevant information about the company. These blueprints come in the form of questionnaires to determine the company’s future business goals and processes.
3. Realization: the SAP team configures what’s called the baseline configuration, which is the basic setup based on the business blueprint the company delivered. Then, the company’s implementation team fine-tunes the system to make it perfectly suited to their business needs.
4. Final Preparation: preventative maintenance checks are performed to make sure the SAP system performs as it should. Now is the time to do workload testing (daily load, peak volume, and similar types of stress testing), along with integration or functional testing.
5. Go-Live and support: the final stage is less important—going live is just a matter of minutes. However, ensuring that the Go-live stage goes smoothly and without any hiccups will depend on the attention you paid during the previous phases.
A possible problem with this model is that all of the documentation goes on earlier in the process, culminating in the business blueprint document. This means that the company gets to see and use SAP IBP later in the process, which can lead to a mismatch between the company’s expectations and the actual implementation.
To overcome this, some companies use an adaptive planning model like the agile methodology to implement SAP IBP. This is a more iterative process, in which the SAP team engages the company to share its business requirements (called user stories in Agile). They then capture these stories and deliver them iteratively (called sprint cycles) in SAP applications.
You can use a hybrid approach to IBP implementation, where the five stages are combined with Agile methodology.
Frequently Asked Questions About SAP IBP
Finally, here are some frequently asked questions about SAP IBP:
What Is The Difference Between SAP IBP and SAP APO?
SAP IBP is a much more advanced solution that addresses some of SAP APO’s weaknesses and is meant to replace the solution. Standard support for SAP APO will be maintained until 2025.
SAP IBP is superior to SAP APO for multiple reasons. For example, in SAP IBP, the data is presented in a more coherent way, with graphs and dashboards. It also has a Microsoft Excel interface that makes it easier for planners to perform familiar actions.
SAP APO also doesn’t have demand sensing and multi-echelon inventory optimization that are included in the SAP IBP for Demand and SAP IBP for Inventory, respectively.
Is SAP IBP Available as an on-Premise solution?
According to the SAP Answers forum, SAP IBP as a whole is restricted to the cloud only. On the other hand, the Sales and Operation Planning module is available as an on-premise solution.
However, the SAP Support seems to suggest how implementation on an on-premise system is possible.
To get the most accurate information, you’ll want to contact SAP directly and ask them about your particular business and its needs.
What Are SAP IBP’s Competitors?
There are several software solutions that offer similar solutions to SAP’s Integrated Business Planning platform.
Here are some of them:
- Oracle S&OP Cloud. This cloud-based solution from Oracle aligns supply, demand, and product plans with the financial targets of a company.
- Kinaxis RapidResponse S&OP. This S&OP platform allows you to create a sales and operations plan that you can collaborate on. You can also align that plan with your financial goals.
- NetSuite. The software from NetSuite lets you set up your inventory storing locations and improve your on-time delivery metrics.
- Demand Works Smoothie. This solution is browser-based, which makes it easily deployable. Much like SAP IBP, they use a highly graphical and interactive interface.
The ERP market is incredibly competitive. There are dozens of other solutions that do what SAP IBP does:
- Production planning
- Statistical forecasting
- Scenario planning
- Inventory management
- And others