How to Understand The Differences Between SAP ERP and Advanced Planning

Table of Contents: Select a Link to be Taken to That Section

Executive Summary

External planning has important distinct differences between planning and ERP.
ERP is a transactional processing system with just a few planning procedures.
SAP developed APO for surprising reasons.

Introduction to ERP vs. Advanced or External Planning

Understanding the difference between planning and execution is critical to implementing or managing these types of projects. Many think this is straightforward; however, people unfamiliar with this topic come into contact with SAP APO and SAP ERP all the time. Experience from many projects indicates that people can benefit from a brief overview of the distinctions. This article is for those who either have the question or are questioned on the differences between traditional ERP and advanced planning.

Supply Chain Planning vs. Advanced Planning

It’s important to distinguish between supply chain planning and advanced planning. Supply chain planning is covered by the modules of SAP ERP Sales and Distribution (SD), Materials Management (MM), and Production Planning (PP).

These SAP ERP modules provide supply chain execution functionality along with some basic planning functionality (safety stock and MRP, basic forecasting, availability checking, and production planning, among a few others). However, none of these modules cover advanced planning. Advanced planning is future based and deals in different scenarios, presenting them to planners, picking the best alternative. In advanced planning, the plan may be recreated several times before it is firmed and sent to the execution system. True advanced planning systems cannot execute recommendations; they can only make recommendations.

The plan may be recreated several times before it’s firmed and sent to the execution system in advanced planning. True advanced planning systems can’t execute recommendations; they can only make recommendations. While SAP had supply chain applications for some time before SAP APO, SAP APO was SAP’s first venture into advanced planning.

Thus while SAP had supply chain applications for some time before APO, APO was SAP’s first venture into advanced planning.

Why Did SAP Develop APO?

Generally, software companies like to increase their scope; however, SAP APO’s case is a bit more complicated than simply a vendor looking for new markets. Looking historically back as SAP’s motivation for creating SAP, APO tells an interesting story that is not often told or even discussed.

Going Back in Time

SAP at the time was being pressured by analyst firms and Wall Street to create a separate set of applications rather than incorporate advanced planning within SAP ERP. Planning systems work fundamentally differently from transaction processing systems. At one point, SAP felt that advanced planning was overly esoteric and would only ever be desired by a small fraction of their customer base.

Around the late 1990s, analysts like Gartner said that ERP was old technology and that the future would be planning and ERP would become far less relevant. In fact, SAP appears to have been driven to advanced planning by market expectations. However, SAP’s focus at companies continues to be far more ERP focused than advanced planning focused. And in fact, ERP remained far more relevant, and the heavy emphasis on planning that was evident in the late 1990s eventually subsided.