Sap Demand Planning (DP) 26125070 PDF

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SAP Demand Planning (DP):

Features, Functions, Best
Practices, and Infrastructure
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Tom Cassell
IBM Global Business Services
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2008 Wellesley Information Services. All rights reserved.
Why Were Here Today ...
Demand Planning is usually a critical

process in a planning environment
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5. S&OP
Meeting
3. Cost
Impact
Assess
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Supply
4. Collection
&
Aggregation
of Inputs
S&OP
Cycle
1.
Demand
Functional
Planning
Analysis
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2.
Integrated
Analysis
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Understand what SAP Demand Planning

can do to support your forecasting
process
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Get some best practices for

implementing SAP APO in your
organization
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1
What Well Cover
The importance of a good forecast

SAP Demand Planning (DP) What it can do
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Demand Planning overview

Creating a forecast using DPs Statistical Models
Enhancing a forecast with key DP tools
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SAP Demand Planning How to implement it
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Planning and designing your DP solution

Configuring and testing your DP solution
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Wrap-up
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2
Modern Enterprises Have Unique Forecasting Challenges
Satisfy all customer requests (right product, right

quantity, right time) without carrying excess inventory
Create and analyze forecast data at different levels
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Sales might want to create a forecast for customers

Operations might want to create a forecast for a plant
Marketing might want to create a forecast for product brands
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Enable communication across business units within

an organization
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Forecasts should not be produced in isolated silos
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Incorporate forecast data from supply chain partners

into the demand planning process
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Share data with customers, suppliers, contractors, etc.

3
But There Are Compelling Reasons to Improve
In a recent article, Gartner says that using a robust

forecasting process:
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Improves forecast accuracy by 54%

Increases inventory turns by 33%
Reduces inventory safety stock by 25%
Increases profit margins by reducing discounts
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In another article, AMR Research comes to similar

conclusions:
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Organizations can expect a 10-25% improvement in forecast

accuracy through the implementation of better forecasting
tools and processes
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4
The Value Proposition Reduced Forecast Error
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Reducing forecast error has a positive financial impact that

propagates throughout the entire supply chain
Customer Service
Fill rates
Percentage of orders
shipped complete
Back orders leading to
customer service issues
On-time shipment
performance
Customer complaints
Finance
Inventory carrying cost
Forecast
Error
Input
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Manufacturing
Production schedule
disruptions through rush
orders
Increased outsourcing
Increased overtime expense
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Warehousing
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Excess space/storage cost

Inconsistent shipping/
receiving volumes
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Inventory Management
Supply not aligned with
demand
Low inventory turns
High obsolescence
Transportation
Sales and Marketing
Lost sales opportunities
Tarnished brand image and
questionable customer
loyalty
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Inconsistent shipment
volumes and sizes
Heavy use of premium/
expensive space/storage cost
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5
Some Organizations Still Dont Get It
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Despite this potential benefit, many demand planning

processes suffer from these symptoms
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Demand planning is isolated, and not well integrated with

other planning and execution processes
Planning and execution processes do not explicitly account
for forecast errors
The demand planning system is reactive, due to limited
information and visibility of future demand
Multiple systems used for forecasting, planning, and
execution and are not integrated
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6
Modern Demand Planning Processes
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Drive all planning and

scheduling activities in the Demand Planning
downstream supply chain
Are fully integrated with
Supply Network
Planning
other forecasting processes,
driving a consensusProduction
oriented approach
Planning
Measure and track accuracy/
error accurately and frequently to drive improvement
Are tightly integrated with other forecasting, planning,
and execution systems in an operational environment
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7
What Well Cover

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Wrap-up
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8
SAP Demand Planning Is Part of SAP SCM 5.0

DP
SNP
PP/DS
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gATP
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TP/VS
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Demand Planning Supply Network
Planning (SNP)
Forecasting
Production
Planning/
Detailed
Scheduling
Simulating
Network Modeling
Collaboration
Master Scheduling
Monitoring
Deployment
Scheduling
Trans. Load Builder
Monitoring
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Global Available- Transportation

to-Promise
Planning/
Vehicle
Capable-to-Promise
Scheduling
Planning
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Allocation
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Route Optimization
Substitution
Consolidation
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Carrier Selection
Vendor Managed
Inventory (VMI)
Tendering
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SAP SCM
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SAP Demand Planning The 50,000 Foot View

Planned Orders
(Production, Transport)
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SAP ERP
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SAP APO
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SNP/PP/DS
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BW
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DP
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Historical Data
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(Shipments, Orders)
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Non-SAP
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SAP Demand Planning The 5,000 Foot View
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Demand
DemandPlanning
PlanningTools:
Tools:
Collaborative
CollaborativeForecasting
Forecasting
Consensus-based
Consensus-basedForecasting
Forecasting
Promotional
Planning
Promotional Planning
Lifecycle
LifecycleManagement
Management
Advanced
AdvancedMacros
Macros
Accuracy
AccuracyReporting
Reporting
Anticipation of
Future Demand
Demand Planning Data Mart
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Input Data
Collaborative
Forecasts
History Orders/
Shipments, etc.
Point of Sale
(POS) Data
Nielsen/Information
Resources, Inc.
(IRI) Data
Statistical Methods:
Multi-Model Approach
Average Models
Seasonal
Causal Factors
Trend, Seasonal Trend
Composite Models
Pick Best
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Flat File
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SAP Demand Planning Requirements and Misconceptions

REQUIREMENTS
REQUIREMENTS
Good,
clean
Good, cleandata
data
DEV,
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andPROD
PRODservers
servers
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IfIfusing
usingwith
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SAPERP
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SNP/PP/DS,
integration
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generated
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SAPERP
ERPand
andall
allneeded
needed
master
data
must
be
transported
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SAP
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APO
IfIfusing
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system
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becreated
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asaasource
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ininSAP
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(samefor
forSAP
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ERP)
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MISCONCEPTIONS
MISCONCEPTIONS
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I Ineed
needBW
BWininorder
ordertotouse
useDP
DP
I Ineed
needSAP
SAPERP
ERPininorder
ordertotouse
useDP
DP
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APO
APOmodules
modulesininorder
ordertotouse
useDP
DP
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based
basedforecast
forecast
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I Ineed
needtotoimplement
implementthe
theother
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createaaquantityquantity I Icant
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anyreporting
reportingout
outofofDP
DP
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12
SAP Demand Planning Comparison

Area
Forecasting
Accuracy
Lifecycle Planning
Promotion Planning
Reporting
Functionality
Basic Methods (trend, seasonality, etc.)

Advanced Methods (multiple linear
regression)
Collaborative Forecasting (over Internet)
Characteristics-Based Forecasting (CBF)
Multiple Levels of Forecasting (Top Down,
Bottom Up, Middle Out)
Ease of Consensus Forecasting
Predefined Metrics
Ex-post Analysis
Outlier Corrections
Phase In
Phase Out
Like Profiles
Basic Promotions
Cannibalization
Standard SAP BW Connection
Ad Hoc BEx Analyzer
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SAP
Demand
Planning
SAP ERP
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13
What Well Cover

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Wrap-up
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14
Creating a Forecast Using DPs Statistical Models
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1 Univariate/Time Series models

2 Multivariate/Causal analysis
3 Composite models
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1 Univariate/Time Series Forecasting Models
Univariate forecasting is better known as time series

forecasting
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A time series consists of data collected, recorded, or

observed over successive increments of time
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Univariate models detect and project the following

statistical patterns
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Constant
Trend
Seasonal
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1 Univariate/Time Series Forecasting Models (cont.)
Univariate models use only one independent and one

dependent variable
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The independent variable is time (day, week, month, etc.)

The dependent variable is something like sales or shipments
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Time series are analyzed to discover past patterns of

variability that can be used to forecast future values
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The assumption is that past patterns will continue in the

future
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1 Univariate/Time Series Forecasting Models (cont.)
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The purpose is to model the patterns of past demands in

order to project them into the future
Good in very short-term horizon
Requires past, internal data to forecast the future
Most cost effective and easily systematized
Forecaster should have an understanding of statistics
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Poor for products that have long lead times, are promotion
driven, are competitor influenced, or are new products
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Fair for products that have low or sporadic sales
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Good for products that are inherently seasonal

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1 Univariate/Time Series Models: Types of Approaches
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Types of time series approaches in SAP Demand Planning
Constant
Varies very little from a stable mean value
Trend
Falls or rises constantly over a long period of time with
only occasional deviations
Seasonal
Periodically recurring peaks and troughs differ
significantly from a stable mean value
Seasonal trend
Periodically recurring peaks and troughs, but with a
continual increase or decrease in the mean value
Intermittent
Demand is sporadic
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1 Selecting the Right Univariate/Time Series Model
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General criteria for time series model selection

Pattern of Data
No Trend, No Seasonality
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Model to Select
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Moving Average
Exponential Smoothing
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Trend, No Seasonality
Holts Model
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Trend and Seasonality
Winters Model
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No Knowledge of Patterns in Auto Model Selection 1

Historical Data
Auto Model Selection 2
With Sporadic/Intermittent
Demand
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Crostons Model
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1 Univariate/Time Series Forecast Strategies
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1 Univariate/Time Series Forecasting Models: Advantages
Well suited to situations where sales forecast is needed

for a large number of products
Work very well for products with fairly stable sales
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Can smooth out small random fluctuations, however
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Easy to understand and use, and can easily be

automated
Good for short-term forecasting
Only requires past observations of demand
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1 Univariate/Time Series Forecasting Models:

Disadvantages
Require a large amount of historical data

Adjust slowly to changes in sales
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This can cause significant forecast error if large fluctuations

exist in current data
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Not well suited for forecasts with long-term horizons
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2 Multivariate/Causal Forecasting Models
Try to mathematically quantify the relationship between

a dependant variable and one or more independent
variables (e.g., batteries and hurricanes)
Data requirements
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Actuals for all variables

Forecast for all independent variables
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Uses statistical technique called Multiple Linear

Regression (MLR) and the following equation:
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Coefficients
Constant
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Yi = o + 1X1 + 2X2... + n Xn
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Causal
Factor
Sales
History
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2 Multivariate/Causal Forecasting Models (MLR)
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Make projections of the future by modeling the

relationship between demand and other external
variables (model causes of demand)
More time-intensive and less easily systematized
Forecaster should have solid training in statistics
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N/A
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Fair for products that have low or sporadic sales,

or are new products
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Good for products that are inherently seasonal, have long

lead times, are promotion-driven, or are competitor-influenced
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2 Multivariate/Causal Forecasting Models: Example

History
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Future
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Feb.
Mar.
Calculation
of sales
using
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$1,500
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$1,000
$2,000
Calculation
of
April
Actual
Advertising
Budget
May
June
July
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$800
Unit Sales
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Aug.
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Sept.
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Planned
Advertising
Budget
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2 Multivariate/Causal Models: Advantages
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Support what-if analysis

Can provide accurate short, medium, and long-term
forecast given good leading indicators
It allows you to incorporate seemingly unrelated data
into your demand plan
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MORE INPUTS = BETTER FORECAST!
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2 Multivariate/Causal Models: Disadvantages
Accuracy depends on a consistent relationship between

independent and dependent variables
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And an accurate estimate of the independent variable
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Can be time-consuming to develop and maintain

Require strong understanding of statistics
Require larger data storage than time series models
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3 Composite Forecast Models
Combine forecasts from different statistical models
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Time series, causal, judgmental
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Can combine forecasts by:
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Averaging the forecasts giving each one equal or different

weights
Varying the weightings assigned to each forecast over time
Constant Model Forecast
Seasonal Model Forecast
Causal Model Forecast
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= 30% Weighting
= 30%
= 40%
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3 Composite Forecast Models (cont.)
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Composite forecasting can be carried out in two ways:
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Standard
Carry out forecasts with specified profiles and then total
the results, taking the weighting factors/profiles into
account
Automatic selection
You can specify that the system automatically selects the
best profile based on one measure of error
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3 Composite Forecast Profile
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3 Composite Forecast Profile (cont.)
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3 Creating a Forecast Using DPs Statistical Models Tips
Think carefully about which levels you want to forecast
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E.g., Local Brand, Product Group, Product Category,

Customer
Your decision affects system performance, aggregation/
disaggregation, InfoCube design, etc.
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Causal analysis cannot determine which independent

variables are relevant
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It will, however, tell you how well an independent variable

explains changes in the dependent variable
MLR measures of fit
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Make sure that the data you want to use in causal

analysis is not only readily available, but of sound
quality
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3 Creating a Forecast Using DPs Statistical Models

Tips (cont.)
You can manually select the error metric you wish to

use as the basis for comparing forecast strategies
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E.g., MAD, MEAD, etc.

Used by the automatic selection models
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Beware of spikes in historical data
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They can produce inaccurate spikes in the corresponding

forecast
Outlier correction
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What Well Cover

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Wrap-up
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Forecasting and Simulating Demand: Four Key Tools
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1 Consensus-based forecasting
2 Collaborative forecasting
3 Promotions planning
4 Lifecycle Planning
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1 Consensus-Based Forecasting
Allows different organizational units to generate their

own demand plans
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According to their unique goals, time horizons, and

forecasting philosophies
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Each forecast can then intelligently be reconciled into a

single consensus forecast
The result is a one-number demand plan that has been
agreed to and is owned by all stakeholders
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1 Consensus-Based Forecasting (cont.)

1
Planning Creates
Statistical/Causal
Forecast for All
SKUs Using
Historical Data
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Marketing Adjusts
Statistical Forecast
and Plans Promotions
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5
Forecasts Are Reconciled

into a Single Consensus
Forecast
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Sales Adjusts
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Customer Adjusts
via Internet
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1 Consensus-Based Forecasting (cont.)
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Tips
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When reconciling all of your different forecasts, start with a

simple technique (like average or weighted average)
You can then progress to more advanced methods, like
weighting based on forecast accuracy
Properly designing planning book/data views is critical
Key figures used in the consensus process must be
assigned to each planning book/data view involved
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2 Collaborative Forecasting: Typical Process

CHANNEL PARTNER
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MANUFACTURER
Account
Manager
ale
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Demand
Planner
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rt
5
review
forecasts
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fore
br
oa
dc
as
cas
t ad
Internet
tin
g(
jus
t
e.g
., e
me
nt
insert forecast
Internet
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ma
il
create
consensus
forecast
SAP
SAP Demand
Demand
Planning
Planning
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Tips
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2 Collaborative Forecasting
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create
statistical
forecast
Source: SAP
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Agree on the process

Define role of each partner
Establish confidentiality of shared info
Commit resources
Agree on exception handling and performance
measurement
Create a joint business plan and establish products
To be jointly managed, including category role, strategy,
and tactics
Jointly agree on control techniques
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3 Promotions Planning
Lets you create, monitor, and include promotional

activities into your demand planning process
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Promotional activities can be one-time events or repeated

events
Examples of one-time events include the 2000 Millennium
Examples of repeated events include coupon campaigns, new
advertising spots, and price cuts
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Can model promotions at a variety of different levels
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For specific customers or a group of customers

For specific products or a subset of products
For a specific region of a national sales campaign
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3 Promotions Planning (cont.)
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The advantages of planning promotions separately are:
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You can compare forecasts with promotions to those without

promotions
You can correct the sales history by extracting past
promotions from it
Thus obtaining unpromoted historical data for the
baseline forecast
The processes of interactive planning and promotion
planning can be kept completely separate
E.g., the sales force might be responsible for interactive
planning while marketing is responsible for promotions
planning
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3 Promotions Planning: Cannibalization
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Cannibalization is the negative impact that promoting

one material can have on similar materials
In Demand Planning, we use Cannibalization Groups to
model these effects
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4 Lifecycle Planning
Like Modeling
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Use historical sales

patterns for new
products
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Actuals of the old product
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Phase In/Out
Sales
Ramp down for

discontinued products
Ramp up for newer products
Forecasting of the new product
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Like
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Lifecycle
Time
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Actuals
Product A
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Product B
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What Well Cover

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Wrap-up
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Some SAP Demand Planning Facts
Hundreds and hundreds of companies are using it
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It offers some limited industry-specific functionality
SAP Demand Planning can be used with SAP ERP, with SAP
BW, or both
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Its very mature, very stable
SAP Demand Planning has been implemented in nearly all

industries
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It can also be used in a standalone environment with no other SAP

applications
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But: You do NOT have to be using SAP BW/BI to use SAP

Demand Planning
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SAP Demand Planning comes with an embedded SAP BW/BI that

can be used to do some basic DP reporting (with the BEx
Analyzer/Explorer)
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DP projects generally take between 3-6 months, depending on

complexity, scope, etc.
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Common Pitfalls on SAP Demand Planning Projects
Not enough attention given to the business process
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Focus should be on improving how you do demand planing

SAP Demand Planning is an enabler it wont fix the problems
by itself
Project is owned by IT, not the business users

Inadequate resourcing
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Not having enough capacity

Missed deadlines, overworked resources, poor quality
Not having the right mix of skills
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Common Pitfalls on SAP Demand Planning Projects (cont.)
Poor InfoCube design
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Affects system performance, synchronization with other

systems (SAP BW/BI), availability of needed data, format of
needed data, etc.
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Inadequate time given to understanding statistics

behind SAP Demand Planning
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Can lead to using wrong forecast models, coefficients, etc.
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49
Planning and Designing Your Demand Planning Solution
There are many implementation options to consider
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Functional scope
Which parts of SAP Demand Planning to implement
Organizational scope
Which parts of the business to implement
Which products to include
Timing
When each part of the organization will implement it
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So, how do I figure this out?
Blueprint/Design phase
Value Assessments
Prototypes
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Developing a prototype of your

proposed DP solution BEFORE
the realization phase of your
project is a great way to validate
your overall design
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Planning and Designing Your Demand Planning

Solution (cont.)
Another way to compare

implementation options
is to assess each one
against (four) key
factors:
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Cost
The total cost of implementing the solution
(process and technology); key variables are the
lapsed time and mix of external versus internal
resources
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Risk
The probability that significant issues delay
project progress and/or result in additional
cost; key drivers are usually the number of
concurrent tasks, interdependencies, and
resources
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Time-to-Benefit
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Time required to achieve full benefit potential; is

impacted by technology, processes adherence,
data quality, and organization alignment
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Project Duration
The elapsed time required to implement the
solution throughout the business; key drivers
are usually the resource skill sets and mix, use
of accelerators, and business acceptance
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51
Evaluating SAP Demand Planning Implementation Options
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Cost
1. DP Pilot, then BU
Low
Risk
High
Cost savings from

smaller scope are offset
by longer timeline
Low
Time-to-Benefit
High
Short
Least amount of change

management risk
Long
Benefits realization
could begin sooner than
alternative number two
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Duration
Short
Long
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Longer duration due to

staged implementation
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2. DP Pilot, then Product
Line
3. No Pilot, full DP
Low
High
Cost savings from

smaller scope off-set by
longer timeline
Low
High
Higher external support

partially offset by
compressed timeline
Low
High
Higher change
management risk
Short
Long
Projected longest time to

benefit
Short
Long
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Longer duration due to

staged implementation
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Low
Higher business risk

Higher change
management risk
High
Short
Long
Shortest time-to-benefit
Steep benefits realization
curve expected
Short
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Long
Shortest duration
Single implementation
phase
_________________________________
_________________________________
52
Planning and Designing Your Demand Planning Solution
_________________________________
Three most important things to consider (once scoping

decisions have been made):
_________________________________
_________________________________
1 Your team
2 Your methodology and timeline
3 Your process
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
53
1 Your Team
_________________________________
Ideally, your project team should consist of

representatives from management, the business, and IT
This ensures the proper mix of skills/experiences
_________________________________
_________________________________
Management skills
Project sponsorship, project management
Business skills
Statistical forecasting methods
Product/brand specialists
Communication and
Technical skills
knowledge transfer are
CRITICAL. Small,
Basis
isolated teams keep
SAP BW, SAP ERP
internal knowledge and
expertise concentrated
Existing systems
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
to a few individuals.
54
2 Your Methodology and Timeline
_________________________________
Typical methodology
Phase 1 Analysis/Blueprint
Requirements gathering
Process definition
Process blueprinting
Phase 2 Pilot Design
System build
System configuration
Phase 3 Final Design Build
Final design build
Final design configuration
_________________________________
Phase 4 Testing
Unit Testing
Integration Testing
Training
Documentation
Phase 5 Go-Live
Prep/Go-Live
Phase 6 Post Go-Live
Support
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
55
2 Your Methodology and Timeline (cont.)
_________________________________
A typical project timeline
_________________________________
_________________________________
Phase
Task
Blueprint
Definition
Realization: Prototype
Functional Pilot
Realization: Integration
System Pilot
User & System Acceptance
Testing
Final Prep & Go-live
Integrate and Go-live
Activities
Confirm business requirements
Application workshops
Integration workshops
Process and role models
APO DP build
Integration design
Functional unit configuration
Build value-adding scenarios
Build interfaces
Build data conversion
Complete unit test scripts
Complete integration test scripts
Complete stress tests
Data conversion and testing
Detailed cutover and go-live prep
Final end-user training
Go-live and support
Month 1
Month 2
Month 3
Month 4
Month 5
Month 6
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
56
3 Your Process
_________________________________
Remember SAP
Demand Planning is
being implemented to
support a business
process
Properly analyzing
the as-is and
designing the to-be
demand planning
process drives how
much value youll get
out of a DP project
_________________________________
InfoCube/Planning
InfoCube/PlanningArea
Area
Design/Maintenance
Design/Maintenance
Create
Createnew
new
master
masterdata
data
_________________________________
Evaluate/Update
Evaluate/Update
Planning
PlanningArea/Planning
Area/PlanningBooks
Books
Generate
Generatenew
new
CVCs/prop
CVCs/propfactors
factors
Planning
PlanningBook
Book
Design/Maintenance
Design/Maintenance
Load
Loadnew
new
master
masterdata
datatoto
planning
planningarea
area
Forecast
ForecastProfiles
Profiles
Design/Maintenance
Design/Maintenance
Monitoring
Monitoring
forecast
forecastaccuracy
accuracy
_________________________________
Data Maintenance
Activities
_________________________________
Creation
Creationofof
Statistical
Statisticalforecast
forecast
Historical
Historicaldata
data
updates
updates
_________________________________
Creation
Creationofof
promotions
promotions
Release
Releaseofof
demand
demandplan
plan
_________________________________
_________________________________
Manual
Manual
adjustments
adjustments
Reconciliation
Reconciliationofof
demand
demandplans
plans
_________________________________
Business Process
Activities
_________________________________
57
A Typical Demand Planning Process

Create
Createnew
new
master
masterdata
data
InfoCube/Planning
Area
Design/Maintenance
Design/Maintenance
Generate
Generatenew
new
CVCs/prop
CVCs/propfactors
factors
_________________________________
_________________________________
Evaluate/Update
Evaluate/Update
Planning
Area/PlanningBooks
Books
_________________________________
Planning
PlanningBook
Book
Design/Maintenance
Design/Maintenance
Load
Loadnew
new
master
masterdata
datatoto
planning
planningarea
area
Forecast
ForecastProfiles
Profiles
Design/Maintenance
Design/Maintenance
_________________________________
Data Maintenance
Activities
_________________________________
_________________________________
Monitoring
Monitoring
forecast
forecastaccuracy
accuracy
Creation
Creationofof
Statistical
Statisticalforecast
forecast
Historical
Historicaldata
data
updates
updates
_________________________________
_________________________________
Creation
Creationofof
promotions
promotions
_________________________________
Release
Releaseofofdemand
demand
plan
plan
Manual
Manual
adjustments
adjustments
Reconciliation
Reconciliationofof
demand
demandplans
plans
Business Process
Activities
_________________________________
58
InfoCube/Planning Area Design/Maintenance

DP
DPDataMart
DataMart
Sales
Actuals
Field Sales
Forecast
Cube
_________________________________
InfoCubes are multi-dimensional

relational database structures that store
planning data for use in demand planning
InfoCubes consist of:
Marketing
Forecast
Cube
Characteristics Planning objects that

represent levels at which a forecast might be
created
Product brand, Region, Customer Group
Key Figures Planning objects that contain
data representing a numerical value
Historical orders, Statistical Forecast
Time Buckets Represent periods of time in
the InfoCube
Months, weeks
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
59
InfoCube/Planning Area Design/Maintenance (cont.)
Field Sales
Forecast
Cube
Marketing
Forecast
Cube
_________________________________
SAP Demand Planning

Planning Object Structure
DP
DPDataMart
DataMart
Sales
Actuals
_________________________________
Contains plannable characteristics and

aggregates for use in liveCache
Characteristics determine the levels on

which you can plan and save data
Can be either standard characteristics

and/or ones that you have created
yourself in the Administrator
Workbench
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
60
_________________________________
SAP Demand Planning

DP
DPDataMart
DataMart
Sales
Actuals
_________________________________
_________________________________
_________________________________
Generate characteristic
combinations
Field Sales
Forecast
Cube
_________________________________
Marketing
Forecast
Cube
_________________________________
Product Group
100, 101, 102
Product Family
Liquids, Gels
Customer Group
Retail, Internet
Region
South, North
Sales Organization
3000, 3005
Product Group
100, 101, 102
Product Family
Liquids, Gels
Customer Group
Retail, Internet
Region
South, North
Sales Organization
3000, 3005
_________________________________
_________________________________
_________________________________
_________________________________
61
Marketing
Forecast
Cube
_________________________________
SAP Demand Planning

DP
DPDataMart
DataMart
Sales
Actuals
_________________________________
_________________________________
DP Planning Area(s)
[liveCache]
Field Sales
Forecast
Cube
_________________________________
_________________________________
Central structures for Demand Planning

used to store current planning data
Specifies the following:
_________________________________
Key figures to be used

Unit of measure in which data is planned
Currency in which data is planned
Storage buckets profile that determines
buckets in which data is stored
Aggregate levels on which data can be
stored in addition to the lowest level
To enhance performance
Settings for how each key figure is
disaggregated, aggregated, and saved
_________________________________
_________________________________
_________________________________
_________________________________
62
_________________________________
_________________________________
SAP Demand Planning

DP
DPDataMart
DataMart
_________________________________
DP Planning Area(s)
[liveCache]
Sales
Actuals
Field Sales
Forecast
Cube
Marketing
Forecast
Cube
_________________________________
_________________________________
DP
DP Planning
Planning Book(s)
Book(s)
Very configurable tabular and

graphical presentations of
forecast data
Each planning book can have
multiple data views
Data views present planning book
data in different ways
Time periods
Specific key figures
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
63
DP
DPDataMart
DataMart
_________________________________
_________________________________
SAP Demand Planning

_________________________________
DP Planning Area(s)
[liveCache]
Sales
Actuals
Field Sales
Forecast
Cube
Marketing
Forecast
Cube
_________________________________
_________________________________
DP
DP Planning
Planning Book(s)
Book(s)
Field Sales View
Historical Orders
Historical Shipments
Sales Final Forecast
KAF LAG 1
KAF LAG 2
KAF LAG 3
PS S&OP View
Historical Orders
Historical Returns
Product Supply View

Historical Orders
Marketing View
Historical Orders
Financial Forecast
Marketing Final Forecast
LE LAG 1
LE LAG 2
LE LAG 3
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
64
_________________________________
Important things to consider
_________________________________
At what levels do I want to forecast?

Product group? Customer?
Characteristics vs. navigational attributes
What time buckets do I want to forecast in?
Months, weeks, quarters?
What data do I need to support the process?
Historical shipments, marketing forecast
Where will this data come from?
How large must the server be to support this process?
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
65
InfoCube/Planning Area Design/Maintenance Tips
Fixing key figures
_________________________________
To be able to fix values, key figures must be configured to

be fixable when created as InfoObjects
You must also specify another key figure to which these
fixed values are stored
_________________________________
_________________________________
_________________________________
Aggregates help improve performance
_________________________________
_________________________________
By fixing/saving data at a specific level of aggregation

The system then reads only the aggregation level
Note: It is recommended that any aggregates you create in
SAP Demand Planning also be created in any synchronized
SAP BW/BI system
_________________________________
_________________________________
_________________________________
Think hard about how key figures should aggregate and

disaggregate data (statistical forecast vs. unit price)
_________________________________
66
InfoCube/Planning Area Design/Maintenance Tips (cont.)
_________________________________
Using Navigational Attributes
_________________________________
Try to boost performance by acting as a substitute

characteristic
You cant plan at the attribute level, but you can select
and navigate with them
Example:
For characteristic Customer you might assign
attributes of Sales Rep and Priority
You then specify master data for these, like John
Smith or Bob Jones
Attributes also help speed up the realignment process
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
67
InfoCube/Planning Area Design/Maintenance Tips (cont.)
When using navigational attributes, however:
_________________________________
_________________________________
BE CAREFUL!
They can actually adversely affect performance during
data selection and navigation in interactive planning
Attributes read a large number of tables from the
associated InfoObject master data
This can increase processing time
My advice: Find the right balance
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
Dont initialize planning areas that arent needed
_________________________________
Once a planning area is initialized, it consumes liveCache

memory
_________________________________
_________________________________
68
_________________________________
InfoCube/Planning
Area
Design/Maintenance
Design/Maintenance
Create
Createnew
new
master
masterdata
data
Generate
Generatenew
new
CVCs/prop
CVCs/propfactors
factors
Load
Loadnew
new
master
masterdata
datatoto
planning
planningarea
area
_________________________________
Evaluate/Update
Evaluate/Update
Planning
Area/PlanningBooks
Books
_________________________________
Planning
PlanningBook
Book
Design/Maintenance
Design/Maintenance
_________________________________
Data Maintenance
Activities
Forecast
ForecastProfiles
Profiles
Design/Maintenance
Design/Maintenance
_________________________________
_________________________________
Monitoring
Monitoring
forecast
forecastaccuracy
accuracy
Creation
Creationofof
Statistical
Statisticalforecast
forecast
Historical
Historicaldata
data
updates
updates
_________________________________
_________________________________
Creation
Creationofof
promotions
promotions
_________________________________
Release
Releaseofofdemand
demand
plan
plan
Manual
Manual
Adjustments
Adjustments
Reconciliation
Reconciliationofof
demand
demandplans
plans
_________________________________
Business Process
Activities
69
Planning Book Design/Maintenance
Planning books are very configurable interfaces to your

DP planning data
_________________________________
_________________________________
_________________________________
They act as the main tool for viewing and modifying plans in
SAP Demand Planning
They are usually designed from scratch for each project
Although there are many SAP-delivered ones
Can show any key figure from a planning area sliced and
diced (using any characteristics in the associated planning
object structure)
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
SAP APO supports multiple books per planning area,

with multiple views per book
_________________________________
_________________________________
70
Planning Book Design/Maintenance (cont.)
_________________________________
_________________________________
Shuffler
Header
_________________________________
_________________________________
Standard
Selections
_________________________________
_________________________________
Switch to other
book/views
_________________________________
_________________________________
_________________________________
_________________________________
Grid
Macros
71
Planning Book Design/Maintenance (cont.)
_________________________________
_________________________________
Which organizational groups need planning books?

Marketing, sales, etc.
Do these groups need to share data, or will they generate
their own?
Consensus forecasting process
Are any special calculations needed to support the
forecasting process? (macros)
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
72
Planning Book Design/Maintenance Tips
SAP provides a wizard to guide you step-by-step

through the process of creating planning books and
data views
A good way to start is to copy a standard SAP planning
book and modify it to meet your needs
You can edit the layout and format of a data view
directly from DP Interactive Planning
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
Click the Design icon located on the planning table toolbar
_________________________________
To help improve performance
Keep the number of key figures in each planning book/data

view to a minimum
Try not to use Default macros these automatically
execute whenever data is changed
_________________________________
_________________________________
73

InfoCube/Planning
Area
Design/Maintenance
Design/Maintenance
Create
Createnew
new
master
masterdata
data
Generate
Generatenew
new
CVCs/Prop
CVCs/Propfactors
factors
Load
Loadnew
new
master
masterdata
datatoto
Planning
PlanningArea
Area
_________________________________
_________________________________
Evaluate/Update
Evaluate/Update
Planning
Area/PlanningBooks
Books
_________________________________
Planning
PlanningBook
Book
Design/Maintenance
Design/Maintenance
Forecast
ForecastProfiles
Profiles
Design/Maintenance
Design/Maintenance
Monitoring
Monitoring
forecast
forecastaccuracy
accuracy
_________________________________
Data Maintenance
Activities
_________________________________
_________________________________
Creation
Creationofof
Statistical
Statisticalforecast
forecast
Historical
Historicaldata
data
updates
updates
_________________________________
Creation
Creationofof
promotions
promotions
_________________________________
_________________________________
Release
Releaseofofdemand
demand
plan
plan
Manual
Manual
Adjustments
Adjustments
Reconciliation
Reconciliationofof
demand
demandplans
plans
Business Process
Activities
_________________________________
74
Creation of Statistical Forecast
_________________________________
_________________________________
How often do the statistical models need to run?

Should they be run interactively or in batch?
At what level is the forecast going to be run?
_________________________________
_________________________________
Tips
_________________________________
If you plan on executing your forecast by using a batch job,

be mindful of the sequence you run it in
Youll probably have multiple jobs that have to be run
with it
You can compare the results from different forecast runs
directly through the SAP Demand Planning Desktop
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
75

InfoCube/Planning
Area
Design/Maintenance
Design/Maintenance
Create
Createnew
new
master
masterdata
data
Generate
Generatenew
new
CVCs/Prop
CVCs/Propfactors
factors
Load
Loadnew
new
master
masterdata
datatoto
Planning
PlanningArea
Area
_________________________________
_________________________________
Evaluate/Update
Evaluate/Update
Planning
Area/PlanningBooks
Books
_________________________________
Planning
PlanningBook
Book
Design/Maintenance
Design/Maintenance
Forecast
ForecastProfiles
Profiles
Design/Maintenance
Design/Maintenance
_________________________________
Data Maintenance
Activities
_________________________________
_________________________________
Monitoring
Monitoring
forecast
forecastaccuracy
accuracy
Creation
Creationofof
Statistical
Statisticalforecast
forecast
Historical
Historicaldata
data
updates
updates
_________________________________
_________________________________
Creation
Creationofof
promotions
promotions
_________________________________
Release
Releaseofofdemand
demand
plan
plan
Manual
Manual
adjustments
adjustments
Reconciliation
Reconciliationofof
demand
demandplans
plans
Business Process
Activities
_________________________________
76
Release of Demand Plan
_________________________________
_________________________________
Where will the demand plan be sent?

SNP, SAP ERP Demand Management, Legacy
How often should forecasts be released?
_________________________________
_________________________________
Tips
To pass forecasts to SAP ERP, the Core Interface (CIF) must

be configured
As all material/location master data objects must exist in
SAP APO for the standard release transactions to work
SAP recommends that you use a separate data view for the
transfer process
This data view should contain only the key figure
containing the forecast data to be transferred, and a
forecast horizon only (no history)
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
77

InfoCube/Planning
Area
Design/
Design/Maintenance
Maintenance
Create
Createnew
new
master
masterdata
data
Generate
Generatenew
new
CVCs/Prop
CVCs/Propfactors
factors
_________________________________
_________________________________
Evaluate/Update
Evaluate/Update
Planning
Area/PlanningBooks
Books
_________________________________
Planning
PlanningBook
Book
Design/Maintenance
Design/Maintenance
Load
Loadnew
new
master
masterdata
datatoto
Planning
PlanningArea
Area
_________________________________
Data Maintenance
Activities
Forecast
ForecastProfiles
Profiles
Design/Maintenance
Design/Maintenance
_________________________________
_________________________________
Monitoring
Monitoring
forecast
forecastaccuracy
accuracy
Creation
Creationofof
Statistical
Statisticalforecast
forecast
Historical
Historicaldata
data
updates
updates
_________________________________
_________________________________
Creation
Creationofof
promotions
promotions
_________________________________
Release
Releaseofofdemand
demand
plan
plan
Manual
Manual
Adjustments
Adjustments
Reconciliation
Reconciliationofof
demand
demandplans
plans
_________________________________
Business Process
Activities
78
Historical Data Updates
_________________________________
Planned Orders
(Production, Transport)
_________________________________
SAP ERP
_________________________________
SAP APO
(part of SAP SCM)
_________________________________
SNP/PP/DS
_________________________________
_________________________________
SAP BW/BI
DP
_________________________________
_________________________________
Historical Data
_________________________________
(Shipments, Orders)
_________________________________
Non-SAP
79
Historical Data Updates (cont.)
_________________________________
_________________________________
What is Historical Data?

Actual ship date? Requested ship date? Customer
requested date? Order entry date?
At what level will historical data be kept?
How often should SAP Demand Planning be updated?
How are cross-period events handled?
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
Tips
CLEARLY define what constitutes historical data, and make

sure all groups (especially BI) understand this definition
SAP Demand Planning needs, in most cases, at least two
years of historical data for statistical models to produce
high quality results!
_________________________________
_________________________________
_________________________________
80

InfoCube/Planning
Area
Design/Maintenance
Design/Maintenance
Create
Createnew
new
master
masterdata
data
Generate
Generatenew
new
CVCs/Prop
CVCs/Propfactors
factors
Load
Loadnew
new
master
masterdata
datatoto
Planning
PlanningArea
Area
_________________________________
_________________________________
Evaluate/Update
Evaluate/Update
Planning
Area/PlanningBooks
Books
_________________________________
Planning
PlanningBook
Book
Design/Maintenance
Design/Maintenance
Forecast
ForecastProfiles
Profiles
Design/Maintenance
Design/Maintenance
_________________________________
Data Maintenance
Activities
_________________________________
_________________________________
Monitoring
Monitoring
forecast
forecastaccuracy
accuracy
Creation
Creationofof
Statistical
Statisticalforecast
forecast
Historical
Historicaldata
data
updates
updates
_________________________________
_________________________________
Creation
Creationofof
promotions
promotions
_________________________________
Release
Releaseofofdemand
demand
plan
plan
Manual
Manual
Adjustments
Adjustments
Reconciliation
Reconciliationofof
demand
demandplans
plans
Business Process
Activities
_________________________________
81
Monitoring Forecast Accuracy
You monitor forecast accuracy
_________________________________
_________________________________
To find out whether you are using the right forecast models
To identify what adjustments are needed to forecast models
To project expected deviation from the planned forecast
_________________________________
_________________________________
_________________________________
Whats your definition of Forecast Accuracy?

Example: FA = 1 ([Actual Forecast]/Actual)
How will you monitor Forecast Accuracy?
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
82
Four DP Methods with Which to Monitor Forecast Accuracy

1
2
3
4
Univariate forecast error measurements

Multiple Linear Regression model measures of fit
Planned/actual comparison using macros
Use an SAP BW/BI front end for forecast
accuracy reporting
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
83
1 Univariate Forecast Error Measurements
_________________________________
Univariate measures of error available in SAP Demand

Planning
MAD
Mean Absolute Deviation
Total Error
MAPE
MSE
RMSE
MPE
Total Forecast Error

Mean Absolute Percentage Error
Mean Square Error
Root of the Mean Square Error
Mean Percentage Error Bias
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
84
2 Multiple Linear Regression Model Measures of Fit
_________________________________
SAP Demand Planning offers you many ways to

measure how well an MLR model fits the available data
_________________________________
_________________________________
R-square
Adjusted R-square
Durbin-h
Durbin-Watson
T-test
Mean elasticity
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
85
3 Planned/Actual Comparison Using Macros
_________________________________
Macro automatically calculates forecast error, then

triggers an alert if that error exceeds preset levels
_________________________________
_________________________________
Information alert if 10% or less

Warning alert if between 10% and 20%
Error alert if greater than 20%
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
86
4 Use an SAP BW/BI Front End for Forecast Accuracy

Reporting
_________________________________
You can use the BEx Analyzer/Explorer to extract data

directly from SAP Demand Planning identical to an
SAP BW/BI report
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
87
Monitoring Forecast Accuracy: Some Tips
Establish and communicate your organizations

definition of forecast accuracy
Set up effective ways of monitoring forecast accuracy
_________________________________
_________________________________
_________________________________
_________________________________
This is key to understanding how to adjust/change the

forecast process
_________________________________
Leverage DP data structures
_________________________________
They make it easy to analyze forecast accuracy at a variety of

different levels:
Specific product brands
Specific customers
_________________________________
_________________________________
_________________________________
_________________________________
88
Monitoring Forecast Accuracy: Some Tips (cont.)
_________________________________
Dedicate plenty of time/resources to figuring out which

statistical models are the most appropriate to use
Warning
_________________________________
_________________________________
It is not appropriate to use the same model for all items

A model should not be arbitrarily selected based on
presumptions alone
Model parameters should be tested and continually reviewed
Data should be analyzed for patterns or the absence thereof
Those closest to the business should be tapped for
domain knowledge
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
89
Monitoring Forecast Accuracy: Some Tips (cont.)
If you use the rolling error analysis format:
_________________________________
You must include key figures to which the past period data
can be written
_________________________________
You can report accuracy data directly out of SAP

Demand Planning
_________________________________
_________________________________
_________________________________
Prerequisites for ad hoc reporting out of a DP InfoCube:

A planning area in SAP APO
An extraction structure for the planning area
An InfoSource
A standard or remote Cube that reflects liveCache data
_________________________________
_________________________________
_________________________________
Using the standard error metrics generated by SAP APO

is a great way to judge forecast accuracy
_________________________________
_________________________________
MAPE is generally regarded as the best metric to use

90
Error Metrics MAPE vs. MPE
_________________________________
Forecast
Actual
Error
Absolute
Error
Absolute
Percent Error
Product 1
-2
200%
Product 2
50
50
50
100%
Product 3
25
75
50
50
67%
Product 4
75
74
-1
1%
Product 5
100
75
-25
25
33%
TOTAL
203
275
72
128
AVERAGE
40.6
55
14.4
25.6
80%
With Product
1
Without
Product 1
_________________________________
80%
50%
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
Mean Percent Error (MPE)
=avg(absolute percentage error)
_________________________________
Mean Absolute Percent Error (MAPE)
=sum(absolute errors) / sum(actuals)
47%
46%
91
Error Metrics
_________________________________
Implications
_________________________________
MPE is easily skewed by a single entry

Product 1 drives much of the error in the previous example
MAPE doesnt suffer from this, and is much more balanced,
and therefore offers a more practical metric for monitoring
forecast error/accuracy
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
You can enhance the usefulness of MAPE by adding

weighting factors (standard cost, list price) to the calculation.
_________________________________
This results in higher-value items having a greater influence

on the overall error than lower-value ones, and resolves one
of the drawbacks of using MAPE the assumption that the
absolute error of each item is equal.
_________________________________
_________________________________
92
Managing Planning Exceptions with Alerts
Notify users of exception situations occurring in the

demand planning process
An exception can be:
_________________________________
_________________________________
_________________________________
_________________________________
Changes in bias, new trends, unexpected demands

Orders exceed forecast
Orders fall short of forecast, which may lead to excess
inventory
Forecast accuracy is below a specified threshold
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Alerts can be filtered and prioritized based on severity

through configuration
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What Well Cover

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Wrap-up
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Realization/Configuration
This stage is critical for successful knowledge transfer!
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Standard approach is DEV, QA, PRODUCTION
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Common issues
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Overly complex data model

Too many characteristics, key figures, planning books,
macros doing complicated calculations, etc.
My advice Keep your initial model simple, because you
can always go back later and add stuff
Dont assume youre configuring a static model
Your business is dynamic, and so your DP environment
must be as well
Realignment
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System Sizing Is CRITICAL!
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Things that affect performance
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Amount of historical data

Dont keep 5+ years of data if you dont need it
Number of materials, characteristics, key figures, versions, etc.
Forecast for key materials at just a few levels
Number of macros and what they do
Be VERY careful here; macros are system hogs
Avoid Default macros
Levels of forecasting
Forecast at a high level and have system disaggregate
Time buckets
Forecast in week/month buckets, not days
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SAP QuickSizer and liveCache
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liveCache size = function (combinations, time buckets, versions)

This is multiplicative, non-linear, and difficult to predict!
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SAP QuickSizer and liveCache (cont.)
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Note that figures of 16-64Gb are to

be expected in production systems
Consider W2003 64-bit NT or Unix
for performance
Ideally, multi-way CPUs (at least
4-way min.)
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Great new feature of SAP SCM 5.0:

Ability to create time series objects
not only for specific key figures in a
planning area, but over specific time
horizons. This can greatly reduce
the overall amount of memory
needed for liveCache.
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Testing Your SAP Demand Planning Implementation
Testing SAP Demand Planning usually consists of:
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Design Unit test, System test, Data Migration test

Disaster Recovery test, Stress tests
Final Integration test, User Acceptance test
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Key: Analyze which statistical methods are appropriate
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Forecast errors
MAD, MAPE, etc.
Ex-post forecast
A forecast that is run in past periods for which actual
demand history is also available
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GOTCHA!
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Dont wait until the end to test with realistic data volumes!
101
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Development and Stress Test Considerations
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SAP APO
Dev*
SAP APO
QAS*
SAP APO
PRD
SAP APO
liveCache
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CIF
CIF
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CIF
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SAP ERP
Dev
SAP ERP
QAS
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SAP ERP
Copy
GOTCHA!
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SAP ERP
PRD
* Internal liveCache acceptable but must be 64-bit machine

for SAP APO 4.1 and later releases (UNIX or Windows 2003 64-bit)
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Go-Live
Training
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Train-the-Trainer approach
Instructor should be from client
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Support
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Who can users call for help?

Competency Center model
Consulting support
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Raging go-live party
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One of the more common problems in a DP project is user acceptance.

These problems usually manifest themselves most prominently during
the go-live phase.
To help alleviate this, provide users with some temporary means of
feeling comfortable with the system (e.g., Override key figure).
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103
Some DP Project Horror Stories
Historical data Whats an Order?
Develop clear definitions early in the process
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Get users involved early

Develop a prototype
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Performance
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User acceptance I aint usin that thing!
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Ive executed the forecast model see you on Monday

Figure out data scale early how many materials, etc.
Use QuickSizer, SAP, Consulting Partners
Perform multiple sizing checks
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Forecast Models Just use the Constant model
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Educate users on statistics

104
Some Success Stories
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Pharma
Beverage
The first implementation in the pharmaceutical sector of a single

global functional collaborative solution (using SAP APO)
Implementing APO Demand Planning (DP) and Supply Network
Planning (SNP)
Higher inventory turn rates and reduced stocks
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Implementation of SAP Demand Planning, SNP, PP/DS

Implementation of SAP BW/BI and Planning related KPIs
Improved product quality and customer service for exports
Improved resource utilization
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Beverage
Chemicals
Implementation of SAP APO (SAP Demand Planning, SNP,
PP/DS, gATP)
Global Rollout for all European Production sites
Dev. of solutions for sourcing, realignment, and allocation shift
Realization of a global Demand Planning approach
Crop Science
Implementation of SAP APO (SAP Demand Planning, SNP, PP/DS)
Complete project lifecycle: Design, management, implementation,
and support
Realization of a global network planning approach
Health Care Products

Supply Chain Diagnostic Project:
Phase I: Collaborative Sales and Operations Planning (SAP
Demand Planning)
Phase II: Implementation of SAP APO SNP, PP/DS in parallel
to SAP ERP
Optimization of the Customer Order Process and stocks
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Implementation of SAP Demand Planning and SNP

IBMs first Smartrac client
Roll-out (60 countries and 9 production sites)
Improved visibility and communication
Better supply chain performance (e.g., Allocation Rules)
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Consumer Goods
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Implementation of SAP Demand Planning, SNP,

PP/DS
Largest SNP implementation in 2001
Established an integrated planning process (from annual via
operational to detailed scheduling) using SAP APO
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Food and Beverage
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Consolidation of the IT landscape and development of a

global template
Roll-out of the GLOBE Solution including SAP ERP core, SAP HR,
SAP MDM, SAP CRM, SAP APO, SAP EBP, SAP BW, SAP ITS
Source: SAP
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What Well Cover

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Wrap-up
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106
Resources
Web links
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International Institute of Forecasting

www.forecasters.org
SAP SCM documentation
http://help.sap.com SAP Business Suite SAP Supply
Chain Management)
The Institute for Forecasting Education
www.forecastingeducation.com
Books
John E. Hanke and Arthur G. Reitsch, Business Forecasting

(Prentice Hall, 1995).
Wolfgang Eddigehausen, The SAP APO Knowledge Book
Supply and Demand Planning (Wolfgang Eddigehausen, 2002).
ISBN 0-9581791-0-7
107
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Resources (cont.)
Great SAP APO Discussion Group
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http://supplychain.ittoolbox.com/groups/technicalfunctional/sap-r3-SAP APO
_________________________________
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SCM Expert
Hayrettin Cil and Mehmet Nizamoglu, 23 Ways to Squeeze

Better Performance from APO DP Processing and Reporting
(SCM Expert, August/September, 2004).
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108
7 Key Points to Take Home
SAP Demand Planning offers strong functionality in the

following areas:
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Sound forecasting methods (Basic and Advanced)

Collaborative forecasting methods
Lifecycle and promotion planning
Excellent way of monitoring accuracy
Quick reporting using Business Explorer (BEx Analyzer)
Superior integration with other modules of SAP APO
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SAP Demand Planning is extremely flexible so proper

planning is the key to a successful DP environment!
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109
7 Key Points to Take Home (cont.)
SAP Demand Planning offers several powerful

forecasting tools
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Univariate/time series models where constant, trend, or

seasonal patterns exist
Causal models to investigate relationships between variables
Composite models combine forecasts to reduce error
Causal forecasting can be very effective when used in

conjunction with Time Series forecasting
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But understand what it actually does, and that its more

demanding to set up and maintain
DP supports a business process getting the process
right is therefore critical
_________________________________
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110
7 Key Points to Take Home (cont.)
Keep your design simple, but be careful
_________________________________
Detail may grow exponentially as you go DP SNP

PP/DS
If you build a data monster, you will have to maintain
the monster
_________________________________
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Develop clear definitions of your data and mappings of

where theyre coming from/going to
_________________________________
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Historical data to the DP team may mean something

different than to the SAP BW team
_________________________________
Assembling the right team and the right mix of

business and technical skills can make or break your
SAP APO project
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111
Your Turn!
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Tom Cassell
Associate Partner
_________________________________
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404-434-5346
tom.cassell@us.ibm.com
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SAP Demand Planning (DP):

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Why Were Here Today ...

Demand Planning is usually a critical

Understand what SAP Demand Planning

Get some best practices for

What Well Cover

The importance of a good forecast

Demand Planning overview

SAP Demand Planning How to implement it

Planning and designing your DP solution

Modern Enterprises Have Unique Forecasting Challenges

Satisfy all customer requests (right product, right

Sales might want to create a forecast for customers

Enable communication across business units within

Forecasts should not be produced in isolated silos

Incorporate forecast data from supply chain partners

Share data with customers, suppliers, contractors, etc.

But There Are Compelling Reasons to Improve

In a recent article, Gartner says that using a robust

Improves forecast accuracy by 54%

In another article, AMR Research comes to similar

Organizations can expect a 10-25% improvement in forecast

The Value Proposition Reduced Forecast Error

Reducing forecast error has a positive financial impact that

Excess space/storage cost

Some Organizations Still Dont Get It

Despite this potential benefit, many demand planning

Demand planning is isolated, and not well integrated with

Modern Demand Planning Processes

Drive all planning and

What Well Cover

The importance of a good forecast

Demand Planning overview

SAP Demand Planning How to implement it

Planning and designing your DP solution

SAP Demand Planning Is Part of SAP SCM 5.0

Trans. Load Builder

Global Available- Transportation

SAP Demand Planning The 50,000 Foot View

SAP Demand Planning The 5,000 Foot View

Demand Planning Data Mart

SAP Demand Planning Requirements and Misconceptions

SAP Demand Planning Comparison

Basic Methods (trend, seasonality, etc.)

What Well Cover

The importance of a good forecast

Demand Planning overview

SAP Demand Planning How to implement it

Planning and designing your DP solution

Creating a Forecast Using DPs Statistical Models

1 Univariate/Time Series models

1 Univariate/Time Series Forecasting Models

Univariate forecasting is better known as time series

A time series consists of data collected, recorded, or

Univariate models detect and project the following

1 Univariate/Time Series Forecasting Models (cont.)

Univariate models use only one independent and one

The independent variable is time (day, week, month, etc.)

Time series are analyzed to discover past patterns of

The assumption is that past patterns will continue in the