In this modern era of globalisation where geographical boundaries are no longer a limitation, with shrinking lead times and increasing speed of business, organisations have a greater need for efficient supply chains than ever before.
In this blog I will explore the collaboration features allowing organisations to plan their supply chains effectively and efficiently.
Where is your Supply Chain heading?
The figure below depicts the stages of supply chain maturity for enterprises. With increasing speed of doing business, reaching 'Stage 4’ maturity for your supply chain is no longer a vision, but a necessity. Organisations strive to get the most value from their Supply Chain partners and SAP IBP Forecast Collaboration with SAP Ariba is a step towards this goal.
What is Forecast Collaboration?
SAP Integrated Business Planning (IBP) and SAP Ariba are the next generation products offered by SAP which allow organisations to plan their supply chains effectively and efficiently.
SAP IBP is a planning application which provides organisations with a cloud solution to support their Demand, Sales &Operations Planning (S&OP), Supply and Inventory planning processes. SAP Ariba provides the world’s largest business network, cloud procurement solutions, and innovative business models. Collectively they help organisations with their digital journey and match pace with this rapidly changing world.
Forecast Collaboration is a process where an organisation shares their forecast with suppliers for better visibility and planning and receives commitments to supply back from the suppliers and accordingly have a handshaking mechanism between organisations and their suppliers for better collaborative planning.
So how does it work?
Let me explain using our Olivehorse demo company - “Applied Paints”.
Applied Paints is a company based in the UK which manufactures and sells paints across Europe.
Applied Paints have four Distribution Centres spread over Europe and has two manufacturing facilities - one in the UK and the other in Germany. Applied Paints procures raw and semi-finished materials from vendors based out of China. The diagram below displays a simplistic view of the Applied Paints network.
Here, we have customers on the left who are being fulfilled by their Regional Distribution Centres. The demand for the DCs are being fulfilled by the manufacturing facilities. We can also see the production activities at the factory which consumes semi-finished materials, raw and packaging materials and turns them into finished goods.
The factory procures the raw materials from external vendors – for example Applied Paints procures packaging materials from vendor “Tier A Packaging” who are based out of China.
So, as part of monthly cycle Applied Paints generates a long term 24 month forecast for the vendor in SAP IBP.
The forecast is then shared to the vendor using SAP IBP data sharing plans as shown below.
Vendors receive this forecast in the SAP Ariba Supplier view. Here, the supplier can see the forecast in a daily, weekly or monthly view and can also provide commits in daily, weekly and monthly view.
In this view, a vendor can provide a forecast commit to the 24 months plan requested from Applied Paints. Once the vendor has finished entering his commit to the forecast, they submit the forecast to share it back with Applied Paints.
This committed forecast is now updated back in IBP as a “Supplier Commit”, highlighted in blue below.
Based on this commit, Applied Paints supply planners can accordingly adjust the plans and create a supply plan which is based on the commitments agreed by the suppliers.
This ensures increased visibility and decreased uncertainties for fulfilling this demand. It also helps both Applied Paints and vendors create an efficient supply chain.
So what? The benefits...
In all of the below references to the ‘Buyer’ refers to the ‘Applied Paints’ and ‘Supplier’ to vendors such as ‘Tier A Packaging Ltd’.
Forecast collaboration Benefits for Buyers;
- Increased visibility of demands that supplier can fulfil
- Better planning of manufacturing and scheduling activities based on the availability of raw and packaging materials
- Effective planning of long lead time and shelf life materials.
- Efficient vendor planning and vendor performance measurements.
Forecast Collaboration Benefits for Suppliers;
- Increased visibility on the expected demand from buyer
- Better inventory and operations planning to ensure that materials are available when the buyer requested them
- Maintaining continuous long-term relationships by ensuring that the demand from buyers are met on time
- Exception and alert monitors for quicker response to inability to meet the demands of the buyer
The technical part....
Applied Paints uses IBP for S&OP heuristics planning for generating the vendor forecast. Applied Paints then uses ‘SAP IBP – Ariba forecast collaboration’ to share the rolling 24 months forecast with suppliers. Suppliers are then responsible to provide 24 months supplier forecast commits back to the buyer.
As seen above, here we have two SAP Ariba realms. The Ariba buyer realm which is accessed by Buyers and allows connectivity of all buyer systems and acts as intermediary to transact messages with Suppliers.
SAP Ariba Supplier Realm – which is accessed by suppliers. Here, suppliers can see the forecast submitted by the buyer and can commit to forecasts.
Buyer – Supplier relationship
There are various buyer to supplier relationships that IBP – Ariba Forecast collaboration can support:
- Ongoing Relationship
- Strategic alliances
- Mergers and Acquisitions
Who can be a supplier?
Suppliers can be any business partner with whom the organisation needs to share the information. Some of examples of suppliers are as mentioned below:
- Raw Material or Component Suppliers
- Contract Manufacturer
- Sub Assembly Suppliers
- Logistics Providers
Apart from standard Forecast collaboration, we also have fully integrated demo scenarios that support configuration of the additional scenarios mentioned below;
- Inventory Collaboration
- Sub-Contracting Scenario
- Multi-Tier Procurement
- Contract Manufacturing
Contact me to discuss any queries you may have, or to arrange your free taster session on SAP IBP – SAP Ariba forecast collaboration.
To learn more about how you can transform your supply chain to gain a competitive advantage, download our Point of View paper via the link on the image below.
Principal Consultant - Olivehorse Consulting