Implementing SAP IBP for inventory within SAP IBP for Supply Chain

What are the key requirements for a state-of-the-art supply chain solution?

Customers knows that a single data model is required to swiftly drive collaboration and action in their business. Therefore, SAP works closely with thousands of companies worldwide to rethink supply chain management, attacking this question for new perspectives.

We need to address the lack of visibility and provide an end-to-end monitoring solution. This needs to go beyond the boundaries of the enterprise and also include visibility into customers and suppliers. Furthermore, this needs to be combined with true real-time, what-if simulation capabilities to support the supply chain professional. Next, we need to rethink planning and provide intuitive and predictive planning and response management solutions.

A mix of techniques from optimization to simulation and predictive analytics is necessary to solve complexity in the supply chain. At the same time, the results need to be transparent and comprehensible. Then, we need an easier way to connect business partners and eliminate the heavy IT burden of onboarding and offboarding constantly changing business partners. For example, we need to create a flexible and reliable business network for supply chain collaboration. Finally, we need to provide a best-in-class supply chain execution environment that provides multimode and multirole capabilities, to flexibly adjust distribution networks for efficiency.

An inventory planning process should include the following steps seen as a system: input (previous steps); throughput (optimization, exception management and review); and finally, outputs (inventory targets):

Previous steps:

• Segmentation by value, quantity, or frequency (ABC-XYZ Classification) of product portfolio.
• Setting service level targets according to business requirements.
• Forecast error calculation.
• Bill of materials construction.
• Supply and vendor sourcing lead time and variability determination.

Inventory optimization steps:

• Multistage inventory optimization
• Target inventory components
• Single-stage simulation

These steps can be interconnected with:

• Management by Exception Process
• Analytics and Dashboards to review data model assumptions and target outputs

As expected, the consequent outputs for upcoming processes will be:

• Inventory Targets
• Inventory Targets for Operational Planning

How to position SAP IBP for inventory? There are several perspectives to address this question, for instance:

1. Implement SAP IBP for inventory as stand-alone, this is the fastest path to multistage inventory optimization. Assuming that SAP APO DP is in place, data will be integrated from this solution into SAP IBP for inventory. Finally, results of inventory optimization will be delivered to SAP APO SNP or SAP ECC.
2. Implement SAP IBP for inventory with SAP IBP for demand. Within this option, you will realize a greater benefit by integrating Demand Sensing and Inventory optimization. In this case, results of inventory optimization can be passed to SAP APO SNP or SAP ECC. This configuration is being supported by SAP IBP tactical planning processes.
3. With SAP IBP for sales and operations, implement Sales and Operations process for a full picture of working capital. Results of inventory optimization will be passed to Supply Heuristic to determine total inventory projection.
4. With SAP Supply Chain Control Tower, results of inventory optimization will be passed to SAP Supply Chain Control Tower, for example, a minimum inventory level, for setting alerts, exceptions, key performance indicators, cases, tasks and Analytics and Dashboards.

Balance costs of inventory reaching the highest customer service level. This optimization step implies inventory reduction or expansion by SKUs, guarantying an optimal inventory mix.

You can achieve the right balance between inventory and service levels to:

• Provide management visibility into the trade-off between inventory investment and service objectives.
• Ensure that customer service becomes a corporate objective, as opposed to an outcome of the planning process.
• Allow scenario capability for exploration of root-cause improvements.
• Reduce inventory, which is not just across-the-board for many stocking points.

The net impact is a significant reduction in inventory requirements, while maintaining, or even improving, customer service.

SAP IBP for inventory turns sales and operations decisions into reality by calculating inventory targets for planners. It provides:

• An SAP IBP integrated data model, using real-time ERP data
• A familiar SAP IBP, add-in for Microsoft Excel for consistency
• Inputs for forecast accuracy, lead time variability, and supply uncertainty

You can efficiently position inventory considering uncertainty, target service levels, and profit. The following activities are fully consistent with other SAP IBP applications, processes, and information:

• Show inventory drivers with a SAP IBP data model and analytics.
• Run what-if scenarios to determine root cause, and explore alternatives.
• Drive consistent processes and information across the enterprise.
• Planned productivity improves, data becomes information, and decisions improve.
• Complete consistency from strategy (sales and operations) to tactics (SAP IBP for inventory) to transactions using SAP IBP for inventory (inventory targets).