SAP IBP: Clear Up The Confusion

SAP heavily invested in IBP as part of new supply chain solutions roadmap. The goal of this article is to help our consultants and customers to clear up the confusion (or myth) about IBP.

In April 1, 2014, SAP announced its new supply chain solutions strategy at an SAP event in Las Vegas. Later SAP officially launched the cloud-based Integrated Business Planning solutions focusing on S&OP, Inventory and Supply. There are a lot of speculations on SAP’s SCM suite of applications including APO. Will IBP replace APO? When SAP will sunset and stop the support for APO?

SAP never officially announce the sunset of APO. It also affirmed the support of SCM 7 will be until 2025 at least. On IBP front, SAP’s Supply Chain Roadmap is evolving. We do not exactly know the functionality in each release until it is released. All these created confusions among consulting and user communities. Some criticize SAP’s strategy and believe SAP’s unsettled Supply Chain Roadmap is a risk to the business. Others are simply switching to other software vendors.

What is SAP’s Strategy?

As SAP/SCM consultant for more than 20 years, I understand the challenge facing SAP right now. In the era of Big Data (Analytics) and Internet of Things (IoT), SAP feel the need to compete in the Cloud (On Demand, SaaS). IBP was released before it is ready for prime time. In other hand, SAP may lost the competitive advantage if IBP is released later. For this reason, SAP changed the release strategy to quarterly shipments.

“We offer companies investment protection for their existing on-premise solutions and help them increase innovation and the potential to run simpler and to shift to the cloud at their own pace.”Bernd Leukert, SAP SE

SAP will continue support SCM/APO through enhancement packs. At the same time. SAP will also simplify the system landscape requirements and enable customers to integrate the SAP portfolio of cloud solutions (including IBP) at their preferred speed and with reduced costs. In simple terms, IBP is a complement to APO and not a replacement as of now.

Complement, not Replacement

SAP’s initial intention may be to replace APO with IBP and push the customers to migrate to IBP as soon as possible. However, they changed course quickly to allow customer to migrate at their own pace. IBP simply does not have functionality and maturity to replace APO. In my opinion, IBP is not even APO 2.0 at current state. IBP is designed to close the gap on Sales & Operation Planning (S&OP) process. SAP is hoping that the technology advancement (SAP HANA and Cloud) will help to close the gap.

The success of SAP since early 90s is because of the proven business processes (Best Practices) associated with the applications. When APO was introduced, other SCM applications such as i2 and Manugistics had clear advantage over APO. The recession may have helped SAP to fend off the competitions. The steady and integrated planning processes was the key to the APO’s success for past 10 years. Whether IBP will prevail and ultimately replace APO will be determined by the underneath business process – Integrated Business Planning.

IBP as a Business Process

The term IBP was introduced in Garner’s 5-stage S&OP Maturity model wherein IBP is referred to as the Phased 4 & 5. The goal of IBP is to have Finance, Sales, Operation and other corporate functions to provide incremental capabilities that neither provides individually. In other words, IBP is an integrated S&OP that are well balanced and in harmony.

However, IBP is still evolving due to lack of academic and industry standards. Most companies do not have formal S&OP process or a S&OP process without bias.

After existing for over 30 years, the development of S&OP as an end to end business management process method has come to a standstill. This standstill is threatening the very existence of S&OP. The only way to further mature S&OP is to academically define it, govern it and integrate it with other academic disciplines.Niels, Supply Chain Trends

Conclusion

Just like IBP process, SAP IBP is not a mature product. This does not mean it cannot be used to complement current Supply Planning process. As the on-demand model of SAP IBP reduces the TCO (Total cost of ownership), IBP will certainly help the companies without a systematic planning process. For companies who already implemented planning system such as APO, IBP will be a nice complement to the existing systems. I will discuss some usage cases in the IBP series.

Leave a Comment