SAP IBP: The heir to SAP APO or a new approach to planning?

SAP IBP - Integrated Business Planning - is being considered as the heir to SAP APO. A little history: IBP is first and foremost a concept proposed by Oliver White, a supply chain strategy consulting firm, who invented S&OP. IBP responds to the limitations of S&OP as more operational than financial, not collaborative enough and poorly equipped.

SAP IBP, a new version of APO?

Not quite, APO being an APS, integrated with ERP via the Core Interface, was well thought out to do transactional work, because since the planning results, it is to offer the ERP supply orders or production orders using sophisticated functionalities, or inter-company or intra-company transfer orders by responding to a DRP result, or even a calculation result for stock rebalancing between the different storage locations of an organization. However, APO reached its limits, as standard, to help Managers manage the supply chain. SAP IBP offers an alternative to this, in an analytical approach by exploiting a large database made available on HANA technology, with advanced planning functionalities based on 5 modules:

• IBP for S&OP: to cover the tactical level by including, in addition to quantitative analyses, possibilities to integrate financial indicators such as turnover or profit before tax. It is easy to perform simulations and also to drill down on aggregated data in real time.
• IBP for demand: sales forecast management tool with demand sensing and statistical modeling features for calculating sales forecasts that are more advanced than those available on APO-DP. Demand modelling up to the point of sale.
• IBP for Inventory: multi-scale inventory planning with supply chain modeling.
• IBP for Response & Supply: a more operational vision of planning, including demand prioritization functionalities and the possibility of linking demand elements to supply elements (pegging), which could also be transmitted to the ERP.
• IBP Control Tower: a cockpit for supply chain management by exception thanks to alert management.

In addition, SAP reintegrates two APO modules into the ERP: PP/DS for production planning and scheduling and Global ATP by renaming it Advanced ATP for advanced availability control.

On paper, it is a nice tool, however, it still needs to evolve, SAP offers two versions: a Cloud version and an On premise version. The cloud is updated every quarter, the On premise version, once a year. Two things can be deduced from this:

• The product is not yet mature enough, knowing that some planned evolutions are major.
• If features are missing on an acquired version It is assumed that it would take another year to get it on a new version.

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The advantages of SAP IBP

The interface with Excel: the graphical interface proposed by SAP is either in Fiori or Excel. This facilitates manipulation and collaboration within an organization.

Simpler management of simulation models during sessions. Indeed, basic data and parameters can be prepared for several scenarios; during demand, supply or business reviews meetings, or in smaller committees for other analytical needs, they will make it possible to simulate planning calculations and reassess an organization's ability to respond to fluctuations in demand, while analyzing the financial impacts of the changes made.

Speaking of finance, it is easier with this tool to introduce relevant financial concepts for a better reading of simulation scenarios and operational decisions that could ultimately be costly.

What areas for improvement? 

Integration with ERP, today, SAP IBP does not work on the same data model as the ERP, an evolution that could make IBP have a competitive advantage is to be able to activate it on SAP S4HANA as one would activate a business function like eWM or TM on the latest version of SAP 1709.

The clear migration strategy with concrete ROI proposal: given the variety of configurations that SAP customers or potential SAP prospects have in the information system landscape, it is necessary to be able to respond effectively to the best way to bring and integrate SAP IBP.

The readability of the Roadmap: in order to allow customers to plan ahead and above all to find the right way forward after SAP APO, which will no longer be maintained by 2025.

SAP IBP vs SAP APO?

SAP IBP was designed to help managers and especially to remedy what was criticized in particular by SAP APO:

• The lack of flexibility once configured: IBP with RDS is already preconfigured to already run in plug & play (the cloud version is also available as a trial version)
• The slowness of its calculations, which for some customers exceed the batch night, SAP took advantage of the power of HANA to build IBP
• Its implementation projects, which are reputed to be long and expensive: SAP would propose with RDS a production launch only a few weeks only, and especially the obvious lack of restitution and reporting tools: SAP started from the obvious observation that an APS and tool-based planning processes had a primary function of decision support, therefore, reporting and the simplified construction of planning tables or analysis report with the possibility of a drill down on all levels is of a power and efficiency that will seduce managers and C-level.
• Unavailability of collaboration tools: IBP offers the SAP JAM sharing platform allowing you to animate without being in a meeting, to share and communicate without worrying about the mailing list. A tool that has been so well adopted, could be essential for increasingly global organizations.
• The latest versions of IBP increasingly fill the gaps of the first versions, such as planning with order (in addition to the time series) making it easier to integrate with the ERP, or future innovations in integration with ARIBA for supply or Hybris for demand.

What about implementation on SAP IBP?

Obviously, even best of breed tools can fail in integration, in the sense that the tool's power and functionality do not do everything for the success of a project. According to my experiences and also what can be found in the various publications, there are 4 important axes to consider when an organization engages in an SAP IBP project before, during and after implementation:

• The evaluation of the maturity of the Supply Chain organization: an important element in addressing an SAP IBP project, because above all, IBP is a transversal process that will have to be mastered. Giving yourself the time to implement it and then deploy it to the business units is an essential prerequisite.
• Definition of the project objective: which process to cover and for what purpose to implement it? What are the challenges and difficulties that the implementation of SAP IBP should address?
• During implementation: start by defining the scope to be covered as a priority, make it simple and efficient, be inspired by the proposed project methodologies
• After the first production launch: establish the indicators that will be used to assess the situation, in order to better plan the upgrade of the functional version.

SAP IBP, an opportunity for 2018?

For the time being, in addition to the lack of perspective given the tool's youth, according to some supply chain experts, rewriting a supply chain planning tool would take a 6 to 7 year cycle of construction before reaching a level of maturity that is most likely to bring value to the organization that would implement it. The first solid version of IBP was S&OP on HANA or IBP for S&OP in 2012, which would mean that the optimal version of IBP would be planned for 2018/2019.

In conclusion, as IBP becomes more and more solid, 2018 would be the right time to start a discussion with SAP.