Demand Prioritization in SAP IBP Order Based Planning

Posted by Ravish Kumar on 05-Aug-2020 12:19:37

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(3-4 min read)

In today’s competitive business environment, Sales Managers manage complex demand streams spread across various geographies. These demand streams can have different priorities; and based on the highest priority demand, business wants to allocate first available constrained resource and supplies to this highest priority demand.

In my following Blog we will see how the Demand Prioritization function provided by SAP IBP will help businesses planning their resources based on the prioritization logic.

What is Demand Prioritization and Why it is needed?

There can be planning situations where supplies are constrained, in that case planners would necessarily be using production quantities to satisfy all important demand, for example satisfying Sales Order demand from Class A Customers than Sales Order demand from Class B Customers and above all other forecast demands.

There is a need in various businesses where they need to execute prioritization of their demands so that system can allocate resources and supplies based on FIFO (First-In, First-Out), to most important demands.

Demand Prioritization is function which provides leverage to planners to match their existing supplies and available capacity with all important demands. This helps planners to balance organization’s demand and supply as they optimize demands across all supply networks and in-turns realize increased customer service levels, better profits and sales revenue.

How Demand Prioritization in SAP IBP Order Based Planning can help business planners?

In this blog, we will explore the demand prioritization capabilities offered in SAP IBP Order Based Planning.

Let us start by considering an example where based on the business requirements, in some situations, sales orders are to be prioritized over forecasts; and within different sales orders, sales order demand with ‘A’ Class customers are assigned higher Priority as against the sales order demand with customers classified with ‘B’ Classification segment.

Refer to the below screenshot where I have tried to represent an illustration containing sales orders from different business units which are required to be prioritized based on Customer Classification and requested date of the sales orders.

Pic 1

Develop Business Rules for Demand Prioritization

This is important to note that different organizations have different business requirements. Some business requirements state to prioritize their sales orders (firmed demands) over forecast demands.

Hence it becomes very critical to define the set business rules for the demand prioritization logic to be developed. For example, as mentioned above, an organization need to prioritize all the sales orders and forecast for all the customers belonging to Customer Class = A over the sales orders and forecast belonging to ‘B’ Class customers; followed by further demand elements generated by ‘C’ Class customers. A classic example is from the automobile industry where the sales order creation date plays a very important role in determining demand prioritization logic.

In SAP IBP Order based planning, we are provided with an App called ‘Planning Run Profiles’ using with Demand Prioritization logics can be defined.

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Pic 2

Once demand prioritized logic is defined, they can be checked and verified in another app ‘View Demands by Priority’ where you would be to view the demand prioritization logic in action and it will then generate the input for supply planning in SAP IBP order-based planning.

Pic 3

These demand prioritization rules are called during execution of both type of order-based planning algorithm – Constrained Forecast Run and Confirmation Run.

Once the confirmation planning run is executed, it updates the confirmation status which can be viewed using app ‘View Confirmation’ as shown in the below screenshot.

Pic 4

These results can be transferred to SAP ECC/S4H via SAP SDI where the actual execution sales order takes place.

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RavishRavish Kumar is a Senior SCM consultant. In total, he has over 19 years of experience. Ravish is a highly skilled Supply Chain Consultant with an expertise in business process mapping and leveraging advanced technologies to implement these business processes.