Sunday, December 9, 2012

S&OP can be done using ERP only. But! It's very dangerous if your adviser does not know APO

There are people talking at SAP supply chain conferences about how Sales & Operations Planning is playing the most important role in your planning process. I do believe it is important and a good plan for the right product can save you money in inventory holdings and make your customers happy with great service levels and fill rates. It can also reduce noise in the supply chain and, with a good forecast, provide a great tool to anticipate demand and therefore inventory holdings of finished goods, help with decision making in regards to the resources you need to make available and allow you to simulate various version and effects of a corporate supply chain strategy.

The question is how do you get to a good plan in S&OP. For those of you whose company has purchased SAP software, the speaker should lay out good practices (if not the best) and give you valuable insight on how to best use that tool - SAP. And as we all know SAP software is comprised of an S&OP tool in its ERP version but they also sell advanced planning tools with APO. Now, if you get an adviser who tells you to use ERP or another one who tells you to use APO, then you know that neither one understands both. And that is a problem! Because you certainly don't want the knowledge (or lack thereof) of your adviser drive your use of SAP's Sales & Operations Planning.

I agree with the ERP proponents that, without a good basic data setup in ERP, any APO planning process is sub-optimized. So if your company has bought APO, you should make sure that your data basis in ERP is sound before you go use DP or SNP. That is mainly because your history (consumptions, sales etc.) is collected in an info structure in ERP and then loaded into an info cube in BI from where it can be used for Advanced Planning in Demand Planning in APO.

If your company did not make an investment in APO yet, it is an easy sell for the adviser to convince you to make use of ERP's S&OP (granted they know how it works). But beware! there is a lot of potential for a false setup that you will have a very hard time with later... especially when your company thinks about getting APO later. And they should, because in the long run and after getting more and more functions inside of SAP, APO should be the system of choice for your demand planning, distribution planning, production planning and procurement planning.

And if you don't set up your ERP S&OP with APO in mind, you will have a very hard time to make the switch later!

And if your adviser doesn't know APO, you can not setup your ERP S&OP with APO in mind!

Just as an example: in APO the Planner (an object) is independent of the location (plant or DC) whereas the MRP Controller in ERP is plant specific. So the product portfolio design should be setup with this in mind.

Also, in APO there are Characteristics Value Combinations. These are essentially the Planning Hierarchies used in ERP. You really don't want to redesign all that later.

Yes! You need to use what you have today. But! You will also have to prepare for the future. You can not ignore and dismiss what's possible for you tomorrow... just because your consultant doesn't know about it. Don't let anybody tell you that you are not ready for APO. It's like they sell you a Porsche and don't let you drive past second gear.