Understanding APO and Sales and Operations Planning

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Executive Summary

There is an important connection between reports and S&OP.
We cover how APO feeds the S&OP process with data.
APO was originally intended to manage constraints, but APO does not help companies in constraints in practice.

Introduction to S&OP and APO

Many times clients ask about how SAP APO supports the S&OP process. As an aggregated planning tool with supply, demand, and production modeling capabilities, sometimes it is expected that SAP APO has S&OP capabilities.

Is SAP APO Used for APO?

In fact, APO is not itself an S&OP tool. But as is most often the case, the supply planning, demand planning, and production planning applications perform the heavy lifting and then provide extracts to an S&OP tool like Steelwedge or a series of spreadsheets used in the S&OP process.

Some projects are that data feeds such as the constrained long-term plan are being exported from SNP into a real S&OP application, and the S&OP process is managed there.

The Connection Between Reports and S&OP

S&OP also leverages several of the reports used by supply planning, including the master production schedule (MPS) and the days of inventory on hand report (DIOH). These reports are generally created by the business intelligence/report building team, with input from the business users and APO applications experts. The S&OP team essentially piggybacks off of these reports after they have been designed.

Extracts

Thus using SAP APO for S&OP essentially means extracting the data from another solution.

Standard Story from SAP and Big Consulting Firms on How the BW Supports S&OP

SAP and many large consulting companies have tried to position SAP BW as a solution for S&OP. This is a reach solution because the SAP BW has no specific S&OP functionality, so exporting data from APO to BW is the same as exporting to, says Teradata, or another data warehouse, which is illogical. SAP and the large consulting companies – which primarily parrot whatever SAP says, propose that one will cut the time to implementation because there are standard adapters that run between APO and BW, so it will “all be integrated.”

I have checked these adapters, and there is little there. So the argument that one can easily export data to BW and a non-existent S&OP solution due to adapters that barely exist is a feeble argument. This means that the solution will be a terrible one, but it will be 100% SAP, which seems to make many VPs feel better for some reason.

Opting for a Real S&OP Application

Using adapters and BW may feel good in the short-term, but projects put in quickly that fail still don’t add value to the business or pay for themselves. SAP and companies like IBM that dishonestly recommend this solution to clients are setting clients up for failure in their S&OP process, and failure combined with a great deal of work and maintenance effort.

Dealing with Constraints

The Sales and Operations Planning process is designed to ensure that adequate capital expenditures have been made to allow the supply chain to operate at the stocking levels determined by the supply planning engine.

However, the software of S&OP is just aggregation and extraction software; the heavy lifting is provided by the supply planning, production planning, and demand planning systems.

Focusing on S&OP Applications

There tends to be a lot of focus on the S&OP “application”; however, up to this point, I have seen very little in S&OP applications compared to the systems that they leverage, and few companies use a specific S&OP system. Secondly, for analysis like this, it unclear why an S&OP “application” is necessary. Some good analyses can be performed even within some demand and supply applications, such as Demand Works Smoothie, because of its ability to “dollarize” its supply and demand planning output and flexibly adjust the values graphically for use presentations and GoToMeeting/LiveMeetings. Although this is quite rare, in most supply, production, and demand planning applications, one must extract the data.

Running software in simulation mode can provide significant inputs to the S&OP process. Another method is to perform sensitivity analysis, usually with a general optimizer. General optimizers and how they differ from enterprise optimize are covered in this article.

Details on sensitivity analysis are described in this article.

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Conclusion

SAP APO supports the S&OP process or application the same way other supplies, production, and demand planning systems provide extracts for meta-analysis. This meta-analysis can be performed in anything from spreadsheets to an application like SteelWedge. Keeping the S&OP application simple is of primary importance because companies need to see other systems’ extracts understandably. Bringing BW into it will mean extra complexity and minimal value-add. Also, very little in the way of reports come out of BW regardless of the amount of effort that goes into it, so it is always better to circumvent the BW when possible. BW’s productivity problems are covered in this article.

Furthermore, it has nothing special to offer over spreadsheets to the S&OP process, and in fact, considerable flexibility is lost when going to the BW from spreadsheets.