Any statistical model could fit all data within an organization. As data will have different patterns of occurrence, it will need different models to forecast. For this reason, there are several forecasting algorithms available in SAP IBP for Time Series data.
This figure points out that while mid- or long-term forecasting using advanced algorithms to run traditional mathematical models and machine learning algorithms, it helps to cope with the uncertainty of the future based on trends calculated from historical data. Demand sensing tries to make these forecasts more accurate in the short-term horizon using machine learning.
Single exponential smoothing is used for forecasting demand for mature products with fairly stable sales numbers. The predicted outcome is a constant number.
The forecasting engine can use both SAP HANA-based forecasting algorithms leveraging Predictive Analytics Library (PAL) and Demand Sensing leveraging Supply Chain Algorithm Library (SCAL).
Running demand planning processes implies flows of information and materials. To save the information in real time within the system, SAP IBP has created a technical container to store relevant numbers which have a business meaning. In the previous slide, we see some examples of these containers called Key Figures. As per SAP Best Practices for SAP IBP for Supply, a company can use these key figures with the predefined business meaning or adjust them according to specific requirements.
A good example of key figures application is described as follows:
Demand Planners and Sales Planners have information that has not been incorporated into the statistical forecast. The statistical forecast must be adjusted to include this information, removing promotions and outliers. The adjustments can be due to a special event, promotions, and so on.
The preconfigured key figures on the slide can be used as the definition recommends on the image. As shown, key figures may represent hierarchies, aggregating or disaggregating data from one planning level to other. The use of the predefined key figures is broadly described on the SAP Best Practices for SAP Integrated Business Planning (IBP) site.
In the subsequent figure, Logical Progression of the Demand Planning Process, you will see the logical evolution of the demand planning process considering the usage of key figures and SAP Engines: