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Process documentationDemand Planning and Forecasting

 

You can use this business process to perform your Demand Planning and Forecasting in SAP Supply Chain Management (SCM). Demand Planning is often the starting point of the entire supply chain planning process and is used to create a forecast of market demand for your company's products.

The business process Demand Planning and Forecasting contains the following major planning processes:

  • Consensus Demand Planning

  • Forecasting and Lifecycle Planning

  • Promotion Planning

Consensus Demand Planning

Consensus demand planning brings together all available information and enables a collaborative planning process that includes all partners. Forecasts and promotion plans are included automatically. Various calculations can be carried out to combine all information or to check for critical situations that are highlighted as alerts.

The result of consensus demand planning is a final demand plan that can be transferred to:

Supply planning for further planning

Execution (in the ERP System and in SAP R/3) to trigger production or procurement

SAP Business Intelligence (SAP BI) for archiving, reporting, or integration to other systems and solutions

Consensus demand planning includes the following areas:

  • Data handling

  • Collaborative demand planning

  • Macro calculation

Data Handling

Demand Planning should include all available information regarding historical sales, budgets, strategic company plans, or sales targets. This data can be obtained from different sources. Then, it can be transferred from any source to InfoCubes of SAP Business Intelligence (SAP BI). From there, the data can be read directly or transferred first to the liveCache to improve performance.

Furthermore, the data can be restructured to generate characteristic combinations to be used as a planning basis. For aggregated planning, the results often need to be disaggregated to lower levels of detail. In this case, the historical data can be used to calculate the corresponding proportions of all details.

Planned data (such as forecasts or a demand plan) is stored in liveCache. From there it can be extracted to InfoCubes for reporting, archiving, or integration into other systems or solutions.

Collaborative Demand Planning

Demand Planning includes a very flexible interactive planning interface to enable manual planning, simulation, forecasting, and work on critical situations for all involved planners.

Furthermore, all Demand Planning data is available on the web so as to include internal and external partners in the planning process. This ensures that all partners agree on the defined quantities, horizons, and conditions.

Macro Calculation

Macros enable calculation on the planning grid. They can be freely defined by planners using a simple macro language in the easy-to-use MacroBuilder.

Macros can be executed during background processing and on the planning grid. In particular, they are used to combine different kinds of information, to derive dependent measures, or to calculate alerts based on any check.

More sophisticated macros can also add new planning logic, which increases the flexibility and strength of the application.

Forecasting and Lifecycle Planning

A company's product portfolio probably includes a variety of products that are in different stages of their lifecycle and have different demand types. Unfortunately, a single forecasting method that creates accurate statistical forecasts for mature, slow-moving or new products does not exist. Therefore, various methods have to be used to get the right answers. Forecasting and Lifecycle Planning offers a toolbox for practical, proven forecasting that can be divided into three methods:

  • Statistical Forecasting

  • Causal Forecasting

  • Composite Forecasting

Lifecycle Planning can be combined with each of these methods.

Promotion Planning

In Demand Planning, you can plan promotions or other special events separately. You can use promotion planning to record either one-time events or repeated events, such as quarterly advertising campaigns. Other examples of promotions are trade fairs, trade discounts, dealer allowances, product displays, coupons, contests, free-standing inserts, as well as non-sales-related events, such as competitors' activities, market intelligence, upward/ downward economic trends, strikes, and natural disasters, such as hurricanes or earthquakes.

Prerequisites

  • The planning object structure and the planning area exist.

  • The complete planning environment exists.

  • The ITS (Internet Transaction Server) is installed for web collaboration.

  • The required macros must exist.

  • For example, to create a macro that calculates the final demand plan as the sum of the forecast, the promotions, and some manual adjustments, see the SAP Library under mySAP Business Suite SAP Supply Chain Management (SAP SCM) SAP Advanced Planning and Optimization (SAP APO) Demand Planning Demand Planning Process Planning Book Design Advanced Macros.

  • The corresponding master data and environment exist.

  • The settings for the data transfer are maintained.

  • The forecast can be carried out on any level. However, the corresponding characteristic combinations or a grouping of them in selections exist.

  • The forecast profiles exist. Assignments are recommended, but not necessary.

  • For batch processing, the corresponding activities and jobs need to be created.

  • The life cycle profiles and their assignments exist.

  • The Lifecycle Planning Active flag is set in the Master forecast profile.

  • The promotion key figures, promotion base, promotion attribute types, and cannibalization groups exist.

Process

This graphic is explained in the accompanying text.

  1. Upload historical data to BI (SAP BI).

    Demand planning is based on historical information. Therefore, historical orders must be provided from the order entry system. Possible sources of this data are the ERP System, SAP CRM, non-SAP systems, or files.

    SAP BI can import the data from all these sources. If data is stored in BI InfoCubes, the consecutive steps are independent of the original source of the historical data.

    For more information, see the SAP Library under mySAP Business Suite SAP Supply Chain Management (SAP SCM) SAP Advanced Planning and Optimization (SAP APO) .Demand Planning Demand Planning Process Planning Area AdministrationDP Data Mart.

  2. Realign data structure (SAP SCM).

    For more information, see the SAP Library under mySAP Business Suite SAP Supply Chain Management (SAP SCM) SAP Advanced Planning and Optimization (SAP APO) Demand Planning Demand Planning Process Master Data Setup Maintenance of Characteristic Value Combinations Realignment and Copying of Data.

  3. Update characteristic combinations (SAP SCM).

    Characteristic combinations describe all the details to be planned. To facilitate this, new combinations can be loaded from planning object structures, InfoProviders (such as BI InfoCubes), or files to a worklist. Here they can be further maintained before the characteristic combinations are finally created. New combinations can also be added manually.

  4. Load data to LiveCache (SAP SCM).

    The historical data (or parts of it) is loaded to the SCM liveCache. Alternatively, it can be read directly from SAP BW during planning. For better performance, it is recommended to read all data from liveCache.

    For more information, see the SAP Library under mySAP Business Suite SAP Supply Chain Management (SAP SCM)SAP Advanced Planning and Optimization (SAP APO) Demand Planning Demand Planning Process Planning Area Administration DP Data Mart Exchange of Data Between InfoCubes and Planning Areas Loading Data from an InfoCube into a Planning Area.

  5. Calculate proportional factors (SAP SCM).

    Planning is often not carried out on a very detailed level. Therefore, the planning results on the aggregated level must be disaggregated. In most cases, proportional factors are used for this, that define the fraction for each detail. The factors can be calculated automatically based on recent historical data. However, manual maintenance is also possible.

    For more information, see the SAP Library under mySAP Business Suite SAP Supply Chain Management (SAP SCM) SAP Advanced Planning and Optimization (SAP APO) Demand Planning Demand Planning Process Master Data Setup Generation of Proportional Factors.

  6. Plan life cycle (SAP SCM).

    Lifecycle planning is taken into consideration during the forecast calculation to model the different demand patterns during the life cycle. A product's life cycle consists of different phases: launch, growth, maturity, and discontinuation.

    You can represent the launch, growth, and discontinuation phases by using so-called phase-in and phase-out profiles. A phase-in profile mimics the upward sales curve that you expect the product to display during its launch and growth phases; whereas a phase-out profile mimics the downward sales curve that you expect the product to display during its discontinuation phase.

    For new products, it is proven practice to use historical data of corresponding products (such as the predecessors) as the basis for forecasting. This can be done using what is known as like-modeling.

    Using the central maintenance transaction for interchangeability relationships, the above profiles can be generated and assigned automatically.

    Life cycle planning works on any level, detailed or aggregated.

    For more information, see the SAP Library under mySAP Business Suite SAP Supply Chain Management (SAP SCM) SAP Advanced Planning and Optimization (SAP APO) Demand Planning Demand Planning Process Lifecycle Planning.

  7. Execute forecasting (SAP SCM).

    • Statistical forecasting

      Statistical - or univariate - forecasting predicts future demand based on historical data. As opposed to causal forecasting, other factors are not taken into account. Univariate forecasting provides methods that recognize the basic time series patterns as a basis for the forecast:

      • Constant

        Demand varies very little from a stable mean value.

      • Trend

        Demand falls or rises constantly over a long period of time with only occasional deviations.

      • Seasonal

        Demand shows periodically recurring peaks that differ significantly from a stable mean value.

      • Seasonal-trend

        Demand shows periodically recurring peaks, but with a continual increase or decrease in the mean value.

      • Intermittent

        Demand occurs only in some periods.

        The system can automatically identify the optimal method for any item to be forecasted. If freely definable borders are exceeded, different error measures are calculated by the system and alert planners.

        Statistical forecasting needs historical information. The corresponding key figure is defined in the univariate forecast profile.

        A forecast is created and stored in the key figure defined in the master forecast profile.

        Alerts are generated if the error measures exceed the borders defined in the diagnosis group.

    • Causal forecasting

      Multiple Linear Regression (MLR) enables you to include causal variables (such as climatic conditions, price, or advertising) in the forecasting process. MLR investigates the historical influence of these variables on demand to produce a forecast.

      You can set up different scenarios for causal variables to simulate possible developments in order to identify possible risks and opportunities.

      Causal forecasting needs historical information not only for the item to be forecasted, but also for all causal variables (such as temperature or price). The corresponding key figures or time series must be included in the MLR profile.

      A forecast is created and stored in the key figure defined in the master forecast profile.

      Alerts are generated if the error measures exceed the borders defined in the diagnosis group.

    • Composite forecasting

      Different individual forecasts (statistical or causal forecasts) are combined. Thus, each forecast is based on the same historical data, but different techniques are used. You can average the forecasts by giving weights to each forecast. The weights can be fixed or can vary over time.

      The underlying objective is to take advantage of the strengths of each method to create a single "one number" forecast. By combining the forecasts, the business analyst's objective is to develop the best forecast possible. Composite forecasts that use several methods have been proven to out-perform individual forecasts that use any one of the methods used to generate the composite.

      However, the planner can also let the system automatically select the individual forecast that delivers the lowest statistical error.

      Composite forecasting combines different statistical and causal forecasts. Therefore the historical information has to exist for all forecast methods considered.

      A forecast is created and stored in the key figure defined in the Master forecast profile.

    For more information, see the SAP Library under mySAP Business Suite SAP Supply Chain Management (SAP SCM) SAP Advanced Planning and Optimization (SAP APO) Demand Planning Demand Planning Process Creation of the Demand Forecast.

  8. Plan promotion (SAP SCM).

    Promotion planning is used to model marketing activities that influence the normal demand. Promotions can be created on various levels. They are used for two purposes:

    • To correct the historical sales history to receive a representative level that can be used as the basis for forecasting.

    • To include the expected demand changes in the planning to secure enough supply.

    Promotions can be defined on any level. Predefined levels can be used to separate them or to assign different disaggregation rules. Promotions can be defined in absolute quantities or in percentages for any periodicity and horizon. Cannibalization groups can be used to model the effect on other products. Promotion patterns can be identified and stored for future use in similar promotions.

    Promotions can also be created in the SAP CRM Marketing Planner. These promotions can be transferred directly to SAP APO Promotion Planning using BAPI technology.

    The created promotions are directly integrated in Demand Planning. However, the way they are combined with other information, such as forecast or manual adjustments, can be freely defined using macro calculations. Alternatively, the correction of historical data can be defined in the univariate forecast profile.

    For more information, see the SAP Library under mySAP Business Suite SAP Supply Chain Management (SAP SCM) SAP Advanced Planning and Optimization (SAP APO) Demand Planning Demand Planning Process Promotion PlanningPromotion Planning Desktop.

    Promotions are available on the web for a review by customers, retailers, or distributors. This ensures that all partners agree on the defined quantities, horizons, and conditions.

    A partner can accept or reject a promotion on a web screen. The user logs on to the web and defines a horizon. Then the system selects all promotions in these periods. The planner can select single promotions and confirm or reject them.

    For more information, see the SAP Library under mySAP Business Suite SAP Supply Chain Management (SAP SCM) SAP Advanced Planning and Optimization (SAP APO) Demand Planning Demand Planning Process Promotion Planning Collaborative Promotion Planning.

  9. Plan and calculate interactively (SAP SCM).

    Plans needs to be modified manually for various reasons. The interactive planning screen supports this with various alternatives. This includes Management by Exception that is supported by the alert concept of SAP SCM.

    A business partner can see and maintain data on a web screen.

    For more information, see the SAP Library under mySAP Business Suite SAP Supply Chain Management (SAP SCM) SAP Advanced Planning and Optimization (SAP APO) Demand Planning Demand Planning Process Creation of the Demand Forecast Interactive Demand Planning Interactive Demand Planning Desktop.

    Interactive Planning should normally be carried out for critical items only. For this purpose a Management by Exception process should be developed that is based on alerts created in various ways.

    For more information, see the SAP Library under mySAP Business Suite SAP Supply Chain Management (SAP SCM) SAP Advanced Planning and Optimization (SAP APO) Demand Planning Demand Planning Process Monitoring Alerts for Demand Planning (DP).

    Each data view is also available on the web, but offers fewer functions than the interactive planning transaction.

    For more information, see the SAP Library under mySAP Business Suite SAP Supply Chain Management (SAP SCM) SAP Advanced Planning and Optimization (SAP APO) Supply Chain Processes with SAP APO Demand and Supply Planning Collaborative Supply and Demand Planning.

    A final demand plan is calculated based on the forecast, the promotion plan, and sometimes manual adjustments. Here, macros are used to carry out the necessary calculations.

    For more information, see the SAP Library under mySAP Business Suite SAP Supply Chain Management (SAP SCM) SAP Advanced Planning and Optimization (SAP APO) Demand Planning Demand Planning Process Fine-Tuning of the Demand Plan.

  10. Transfer consensus demand plan (SAP SCM).

    After finalizing the demand plan, it must be transferred for processing by other applications. There are 3 basic alternatives:

    • Create orders of type independent requirements

      The demand plan is converted to orders of type-independent requirements to be used by Supply Network Planning (APO-SNP) or Production Planning and Detailed Scheduling (APO-PP/DS). The release functionality will create the corresponding orders in the SCM liveCache.

      For more information, see the SAP Library under mySAP Business Suite SAP Supply Chain Management (SAP SCM) SAP Advanced Planning and Optimization (SAP APO) Demand Planning Demand Planning Process Release of the Demand Plan to SNP.

    • Extraction to SAP BI

      Data can be extracted to SAP BI for reporting or archiving. The data can also be used by other systems that are connected to SAP BI.

      For more information, see the SAP Library under mySAP Business Suite SAP Supply Chain Management (SAP SCM)SAP Advanced Planning and Optimization (SAP APO) Demand Planning Demand Planning Process Forecast Storage and Further Processing in Other Systems Extracting Data from a Planning Area.

    • Release to the ERP System or SAP R/3

      The final demand plan can be transferred to the ERP System or SAP R/3 for MRP (Multiple Resource Planning), for example. This is especially the case for situations in which the demand plan is created on a plant level and no supply network planning is needed.

      For more information, see the SAP Library under mySAP Business Suite SAP Supply Chain Management (SAP SCM)SAP Advanced Planning and Optimization (SAP APO) Demand Planning Demand Planning Process Transfer of the Demand Plan to R/3 Demand Management.

  11. Analyze planning / forecasting accuracy (SAP BI).

    If the data has been extracted and stored in SAP BI, the quality and accuracy of the planning/forecasting, can be checked. The accuracy of the prognosis is analyzed in comparison with the reality and deviations identified. The objective is to achieve improved planning in the future.

    For more information, see the SAP Library under mySAP Business Suite SAP Supply Chain Management (SAP SCM)SAP Advanced Planning and Optimization (SAP APO) Demand Planning Demand Planning Process Forecast Storage and Further Processing in Other Systems.

Process