Analyzing Planning Levels and Key Figures

SAP Integrated Business Planning (IBP) for inventory recommends total inventory targets to maximize profit while buffering for uncertainty and maintaining customer service levels. Using SAP IBP for inventory optimization positions stock to absorb uncertainties, such as the following:

• Forecast error
• Demand Variability
• Supply uncertainty

Uncertainties multiply across the supply chain due to the interdependency between suppliers, plants, warehouses, and customer sites. If you only consider one portion of a supply chain, you may hold too much safety stock at one location, which leads to increased holding costs, or holding too little safety stock at one location, which leads to stock-outs that either cause lower customer service levels or increased cost due to expedited orders.

Inventory optimization helps manage uncertainty in the supply chain by determining the amount of safety stock to hold at stocking locations within the supply chain. Safety stock absorbs uncertainty, allowing you to maintain customer service levels. Inventory optimization determines the optimal safety stock for each stocking location and recommends targets, based on the following:

• Demand from customers and demand uncertainty (direct demand), and the impact that has on internal replenishment orders (indirect demand and indirect demand uncertainty).

• Forecast error and its impact across the supply chain.

• Lead times and their variability, replenishment frequency, and lot sizes.

• Target service levels at customers.

Optimal inventory placement is based on inventory forms and purposes, that is, on inventory components. Inventory components comprise the total inventory for a given product.

Calculating inventory components and their targets strengthens inventory optimization. Inventory components include estimates, targets, average quantities, and currency values. An example of inventory components include the following:

• On-hand stock – inventory that is physically in the supply chain, that is cycle stock and safety stock

• Cycle stock – inventory that is used to fulfill orders

• Pipeline stock – stock on order

• Safety stock – stock kept in reserve to meet unexpected demand and prevent stock-outs

  The following figure illustrates the inventory replenishment process and the components involved:

The correct target inventory position (TIP) for a location is the amount of inventory needed to:

• Meet current demand

• Meet future demand until the next order is received

• Cover demand uncertainty

Key figures are a series of numbers over time, where each number corresponds to a particular time period value. The following main characteristics are to be highlighted:

• Key figures have a business context: In SAP Integrated Business Planning (IBP) for Supply Chain, end users view and use key figures in the planning views or in Analytics.
• Key Figures represent transactional data.
• Every key figure has a base planning level.
• Key figures are associated with a key, which is a combination of attributes from one or more master data objects.
• Key figures represent variables that are associated with attributes (master data types), and can be imported into the SAP IBP system, calculated, and/or manually edited.

Examples of key figures are sales forecast, marketing forecast, consensus demand plan, projected inventory, capacity plans, or actual data such as sales orders and shipment history.

Once you have created your attributes, master data types, time profiles, and planning areas and levels, you define the key figures you want to include in your planning model.

An attribute as a key figure is a specially configured master data attribute. It can be used to create planning data such as planning objects or key figure values for specific use cases. The planning data is created when master data is created or updated for the master data type.

The configuration as an attribute as key figure is an optional configuration that can be used for attributes of data type DECIMAL. Depending on how this attribute as key figure is configured, either planning objects only or planning objects and key figure data are created when master data is created or updated for the master data type.

You can use this configuration for attributes that are assigned to a simple, a compound, or an external master data type, that is, to a master data type that you can load data into.

If you define an attribute as key figure in a planning area, the definition for the attribute is specific to that planning area. It does not make an attribute as key figure in other planning areas. This also gives you the option to define an attribute as key figure differently in every planning area.

Irrespective of the kind of planning data you want to create, you need to specify a base planning level. The planning data is then created on that base planning level.

Key figures are used by the inventory optimization algorithms and consist of the following:

• Input key figures

  Either enter values for input key figures during a planning session or upload them from an external system.

• Intermediate output key figures

  The single-stage optimization algorithm uses intermediate output key figures from the multistage optimization algorithms as input key figures.

• Helper key figures for input key figures

  These key figures support unit of measure conversion for specific input key figures.

• Helper key figures for output key figures

  These key figures support unit of measure conversion for specific output key figures.

• Output key figures

  The inventory optimization algorithms use the input key figure values and intermediate output key figures in their calculations and populate the results into the output key figures. As well as viewing the output key figures, you can copy them into another key figure (for example, using a copy operator).

The type of algorithm determines which input key figures are used. The type of algorithm also determines which key output figures are calculated; some algorithm types only compute values for a subset of output key figures.

We recommend using the names shown on the images. The names are used in the product documentation, but you can change them to suit your own requirements.

The following figures provide input values for the inventory optimization algorithms, and are delivered with the sample planning areas of SAP IBP.