SAP APO Benefit

SAP APO
Overview
SAP (APO) is the planning component within the mySAP SCM solution. APO is an acronym for
Advanced Planner and Optimizer. This is a large component of SAP's New Dimension products. APO
is an entire suite of supply chain planner applications that increase overall knowledge of the supply
chain and provide forecasting, planning, and optimization. There are eight application levels within
SAP APO: network design, supply network planning, demand planning, production planning and
detailed scheduling, transportation planning and vehicle scheduling, global availability and supply
chain collaboration.
The SAP APO is not a standalone application and requires a backend ERP system such as SAP R/3 for
the execution. SAP R/3 communicate with SAP APO using the APO Core Interface (CIF) which
supplies SAP APO with the master and the transaction data in the real time. Interaction between the
SAP R/3 at backend and the SAP APO is in real time and any data related to the production, the sales
or the supplies is immediately transferred from one system to another without requiring any batch
processing.
The efficient way of installing some standard SAP APO scenarios is by reference to the SAP Best
Practices for Supply Chain Management.
Modules within SAP APO

 Supply Chain Cockpit
 Demand Planning – a toolkit of statistical and collaborative forecasting techniques.
 Supply Network Planning – used to calculate quantities to be delivered to a location in order
to match customer demand and maintain the desired service level.
 Global Available to Promise – uses a rule based strategy to ensure you can deliver what you
promise to your customers.
 Transportation Planning/ Vehicle Scheduling – optimizes transportation route and schedules
vehicle resources.
 Service Parts Planning
 Production Plan/ Detailed Scheduling – create procurement proposals for in house production
or external procurement to cover product requirements and optimizes the same.
APO Product Allocation

Materials in R/3 are known as Products in APO.
Allocations in APO are a way of controlling the stock levels permitted to be confirmed to a spesific
transactional requirement in R/3; e.g. A sales order.
e.g. If an allocation is set up (via the APO planning book) to restrict the quantity of a product for a
specific customer to a quantity of 10, when the actual unrestricted stock (ATP quantity) is 100, the
second step of the ATP (Available To Promise) check will only allow that customer for this specific
material to confirm a maximum of 10.
Key features :
 Allocations can be set up at different levels of an organization's structure through characteristic
combinations
 Allocations can be controlled periodically
 Allocations can be proportionate
 Allocations can be amended manually to satisfy the business's requirements during economic
climate change or due to seasonal factors
 Allocations do not have a direct link to stock in R/3
Sales and Operation Planning

Overview
Sales and Operations Planning or S&OP is a strategic initiative in the SCM (Supply Chain
Management) that aims at enabling the business enterprise to respond effectively to the demand and
supply variability with application of the optimal market deployment and most profitable supply chain
mix by using appropriate technologies and bringing about radical changes in the business processes.
S&OP is the process with which we bring together all the plans for the business (customers, sales,
marketing, development, manufacturing, sourcing, and financial) into one integrated set of plans.
S&OP Process Benefits

Applying S&OP in right earnest can have a positive impact on profitability, performance, customer
satisfaction, and the product portfolio enabling the business enterprise to yield prompt realization in
return on investment. Application of the S&OP can definitely mitigate the significant business
challenges that include shrinking profit margins, decreasing customer loyalty, augmenting business
rivalry and increased supply chain velocity. Improvement in the S&OP practices can particularly drive
benefits holistically in the key business performance areas across the value chain such as in sales and
marketing, distribution, manufacturing, and procurement.
Sales and Operations Planning, as taught by APICS, is a process where the executives of an
organization gather monthly to review previous performance against plans and if necessary create new
plans. The input to the process is the forecast and the output of the S&OP is the production plan, the
demand plan, as well as the many other plans that are derived from these.
The objective of Sales & Operations Planning is to arrive at a business “Game Plan” to help manage
and allocate critical resources to meet the needs of the customer at the least cost to do so.
S&OP works on pre-agreed Key Performance Indicators. It helps the Manager to identify the area for
improvements through these KPI and track the plan vs actual performance.
If implemented and used effectively, S&OP will yield major benefits to the firm.
Benefits
 improved customer services
 reduced inventory
 lower manufacturing & distribution costs
 better control of overall business performance
 increased team work within and across function
It brings in Sales, Marketing, Finance, Production, Materials and Logistics department together for
reconciling their individual plans and create a ONE NUMBER plan which will be agreed by all the
stakeholders in the Organization.
Sales & Operations Planning is a FIVE step process
 collect historical sales data and generate a statistical forecast.
 Compare forecast vs demand plan vs marketing plan and reconcile the plans for realistic
demand number.
 Generate the supply plan/ production plan.
 Pre-S&OP Meeting : Compare & Check for realistic Demand vs supply plan within the
Financial boundarie. Any changes in supply & demand plan can be incorporated and finalized
for the month.
 S&OP meeting : actual vs plan performance; Exceptions and issues with recommendations are
recorded for further root cause analysis in the next meeting
Crux of Sales & Operations Planning

Effective S&OP meetings require a one paged single document which tabulates Demand, Supply,
Inventory and the financial capabilities of the Organization. The single document should enable
Executives to take decisions on the fact and decide upon further action plans. S&OP should be a
driving force for Strategic Plans in an Organization.
S&OP meeting primarily is not about matching the supply & demand, but to analyze the root cause of
problems araising on matching the same. Its a place for evaluating the opportunity & risks and to
decide how profitability one can match demand & supply.
S&OP is all about focusing on the issues proactively. It helps the team to compare the plans devised
and set revised goals and objects if there is any deviation. It drives the “Management by Exception”
engaging the executive team only on those issues which are critical and adds value to the stakeholders.
Wrong perception about S&OP

S&OP primarily focuses on demand availability and transparency for taking decisions with reducing
variability and inventory across the demand. It should NOT be treated as extended Demand Planning.
Pros of Using SAP APO for S&OP

 APO being the Planning software could give a near realtime access to the simulated data
 No additional integration required from other systems.
Cons of Using SAP APO for S&OP

Organization that use SAP APO's DP and SNP modules in conjunction to implement S&OP face the
following limitations:
 Lots of new S&OP specific KPI's that have to be defined, designed, and implemented.
 The APO DP and SNP planning books become highly cluttered (and non-intuitive for what-if
analysis purposes) if you try to fit in too many functional and financial KPI's into them.
 APO does not have an S&OP process modeling/automation capability in order to enable the
S&OP cycle to get executed in a disciplined fashion and with unambiguous ownership assigned
to the key participants.
 APO also does not allow for the critical S&OP documentation (spreadsheet etc) to be uploaded
into it for all concerned stakeholders to view the documented risks, assumptions, key
findings/recommendations from analysis etc.
Typically APO is used to do planning for critical products in the portfolio as it uses higher resource.
This doesn't allow the Organization to do a complete S&OP at higher level and might lead to a wrong
information during S&OP meeting.
Alternatives
In order to overcome these crucial S&OP specific shortcomings in APO, there is a new SAP xApp
called xSOP which has been launched about 5 months ago. It is quite capable in enabling an
organization's S&OP process end-to-end when used in conjunction with a back end SCM system,
which includes APO.
Pros of SAP xSOP

 xSOP has pre-defined KPI's listed making it easier to implement with less customization and
TCO.
 Analytic Dashboards for specific plans and overview gives the ONE SHOT visibility to all the
required KPI's across functions.
 Data aggregation happens at different level enabling the executives to take decisions based on
Volume & Value than mix. Thus helps in driving the organization profitability, not just match
supply & demand.
 Process Management brings in discipline to the process by providing both responsibility and
accountability to the users to drive the process.
 The version Management capability allows the user to have visibility across all the plans.
 As SAP claims for any other products, xSOP has a seamless integration capability with SAP
SCM, ERP and BI systems. Apart from these it also allows the users to upload data through
Flat Files which are obtained from legacy planning systems.
XSOP can be considered as an on-top-of tool. Simply implementing the tool will not provide you with
a correct S&OP process. XSOP supports the S&OP process in a better way than APO's DP and SNP
BUT it still requires its underlying data and processes. Ergo, you still need to setup DP and SNP to be
able to present its results via the xSOP tool. Please bear in mind that it's more important to construct a
stable process, fitted to the needs of all persons involved than to implement the tool.
Therefore, it's probably better to focus first on setting up a stable S&OP process supported by APO DP
and SNP before thinking of implementing the xSOP tool. The successful implementation of SAP APO
particularly for S&OP would depend upon appropriate configuring of the modules like Demand
Planning, Supply Network Planning, Production Planning and Detailed Scheduling, Global Available
to Promise, and Transportation Planning/Vehicle Scheduling.

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SAP APO

Modules within SAP APO

APO Product Allocation

Sales and Operation Planning

S&OP Process Benefits

Crux of Sales & Operations Planning

Wrong perception about S&OP

Pros of Using SAP APO for S&OP

Cons of Using SAP APO for S&OP

Pros of SAP xSOP

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