Understanding Principles and Tools for Demand Planning

Forecasting can be performed in different tools. For example, forecasting can be performed in SAP Supply Chain Management (SCM) or SAP Integrated Business Planning (IBP). The result of the forecasting can be transferred to SAP S/4HANA as a planned independent requirement.

SAP S/4HANA offers the following planning tools for sales and Operations planning tasks:

• Flexible planning

• Standard SOP

These planning tools are not strategic for SAP S/4HANA and are replaced by SAP IBP functionality.

Demand management is the management of independent requirements. The behavior of independent requirements in MRP (for example, whether they are effective or consume other requirements) is determined by the type of requirements or the planning strategy.

Planned independent requirements are stock requirements that can be derived from a forecast of future demand. In make-to-stock production, you start procurement of the affected materials without waiting for specific sales orders. This procedure allows you to reduce delivery times. Moreover, you can use forecast planning to spread the burden evenly across your production resources.

You can create sales orders (customer independent requirements) in Sales and Distribution (SD). For example, while planning for specific customers, it is necessary that customer requirements are considered by requirements planning directly, depending on their requirement type.

Sales orders can be used as exclusive requirement sources for which procurement is specifically triggered (make-to-order production). Alternatively, you can group sales orders with planned independent requirements to create the total requirements. Consumption is possible with Planned Independent Requirements (PIRs).

Supply chain planning is divided into several steps, some of which are executed by components in SAP S/4HANA and others by other components. These days, these components are usually components that are part of SAP Integrated Business Planning (IBP). For reference, and since in this course we are dealing with PP/DS, the slide shows the components traditionally available in SAP SCM. It is possible and advisable to integrate SAP S/4HANA with SAP IBP and then you could use this in combination with PP/DS for planning. System integration of SAP S/4HANA with respect to PP/DS takes place (partly) using the Core Interface (CIF).

The traditional planning components of SAP SCM (and now SAP IBP) supported the following processes:

• Demand Planning (DP)

• Global Available-to-Promise check (ATP check)

• Supply Network Planning (SNP)

• Production Planning and Detailed Scheduling (PP/DS), if not used directly within S/4HANA Enterprise Management

Forecasting future customer requirements using past sales figures and other inputs generates PIRs. They can be consumed using requirements strategies in SAP S/4HANA.

SAP IBP is a state-of-the art platform for real-time, integrated supply chain planning. It is built on SAP HANA as a Cloud deployed planning tool. SAP IBP delivers integrated unified planning, across sales and operations, demand, inventory, supply and response planning, as well as the supply chain control tower for dashboard analytics and monitoring.

SAP IBP delivers a paradigm of user experience and efficiency, leveraging real-time dashboards, advanced predictive analytics, interactive simulation, embedded social collaboration, and Microsoft Excel-enabled planning tables.

The usage of SAP IBP (IBP for Demand) is the strategic alternative side-by-side scenario for Demand Planning.

Demand planning is a method to forecast future demands. You can create both quantity-based plans and value-based plans. You can choose any planning level. This means that you can plan future demand for specific customers, regions, or sales organizations. You can also define time bucket profiles for planning.

Planning levels are defined using characteristics in the system. Characteristic values are the objects for which you aggregate, disaggregated, and evaluate business data. Planning data is stored in the form of key figures. Key figures contain numerical values that signify either a quantity or a value. For example, the projected sales value in Euros or projected sales quantity in pallets.

You can choose the type of historical data that you want to forecast. You can use any key figure. You can forecast material consumptions, incoming order quantities, invoiced quantities, or sales revenues.

The system uses different forecasting models to determine the future pattern of the key figure in question.

You can use various constant models for products with historical data that changes little over time.

You can use seasonal models for seasonal products, such as ice cream, Easter candies, or Christmas lights.

There are options for smoothing and time-dependent weighting of historical data, as well as outlier corrections.

The figure, Demand Planning Process Flow, shows the DP cycle. The past sales order quantities provide the basis for forecasting future demands. In addition, market intelligence or one-off events such as trade fairs are included in the forecast. As a result of this forecast, the demand plan is released as PIR. Release provides the basis for procurement and production planning and may be consumed by the current sales orders.