Any business selling goods or services is to some extent required to predict the future. Many businesses are predicated on the assumption that this is possible.
While it is impossible to predict future events with complete accuracy, with the help of modern technology it is possible for businesses to predict trends and events to the extent that they can be somewhat prepared for changes in supply and demand and other economic conditions.
We have been predicting weather events for hundreds of years and although stock markets are almost infinitely complex, many fortunes have been made based on assessments of how events may change in the future. The structure of worldwide investment networks is based on probabilities and the balance of risk.
With increasing computing power and using technologies like machine learning and AI, greater accuracy is being achieved by taking into account ever increasing amounts of data. Historical and current data can now be combined to provide a practical assessment of how a business should act in the present in order to prepare for expected future supply and demand with substantially less risk.
If IT consultants can offer businesses the ability to predict the future with greater accuracy with ERP systems like SAP, their skills will always be highly desirable and they will be compensated accordingly for their time.
This week IgniteSAP is exploring some of the ways in which IT consultants can use SAP solutions to help reduce the level of uncertainty facing businesses and investors.
Businesses use demand forecasting to predict the amount of goods and materials required to achieve optimum profitability. Supply chains and customer demands are now facing unprecedented volatility as they are subject to the combined influence of long term technological and environmental change, as well as global events such as the war in Ukraine and the Coronavirus pandemic.
Quantitive and empirical data can be gathered by supply chain managers from the extended integrated ERP system, and this can be informed by qualitative contextual data like news reports, and economic and cultural trends. This data can then be subjected to analysis using a variety of methods, including the application of AI and machine learning technologies.
The flow of goods, materials and revenue, as well as customer demands (whether individuals or businesses) are of course as important and also the sources of those products they require. While individual customers cannot be made to buy goods or services (no matter what advertising executives would have us believe), demand planners can make forecasts according to contexts and conditions. Some of these might be within the power of influence of the company like the expected spike after a prominent advertising campaign. In these cases we can say that the probability of an increase in demand has gone up.
As well as taking into account large scale economic events, these forecasts can be specific to a product or geographical region so that demand spikes can be prepared for in advance. One obvious example would be sales of gift wrapping around Christmas.
Demand forecasts can also be for the short term or long term. Long term forecasting will be intended to inform the expansion of the company whereas short term is mainly concerned with the financial performance for that quarter or that year.
SAP Professionals working in the area of demand forecasting will be working with or implementing SAP Integrated Business Planning. It is a cloud-based solution for managing the strategic objectives and operational processes of an enterprise.
SAP IBP consists of five related applications: IBP for Sales and Operations, IBP for Demand, IBP for Response and Supply, IBP for Inventory and SAP Supply Chain Control Tower.
SAP IBP for Sales and Operations allows companies to synchronise sales planning objectives with business operations like production, procurement and logistics. It utilises forecasting models and simulations to provide an overarching view of sales and operations as they would play out in various scenarios. In this way managers are able to predict and visualise before deciding on a particular strategy.
IBP for Demand gives users the ability to forecast product demand and reverse engineer from this point to derive the necessary material planning requirements based on demand signals like purchase orders.
IBP for Response and Supply is also a demand-driven materials planning application. It provides simulations and assessments of different planning scenarios according to supply and demand limitations, as well as costs such as procurement and warehousing. The resulting information can then be imported to IBP Sales and Operations. Response planning allows users to allocate supplies based on a range of demand signals.
IBP for Inventory models the extended business network from raw materials to customer. Inventory can be balanced with service levels at every link in the supply chain network, taking into account material, product and amounts required at each geographical location.
SAP Supply Chain Control Tower is a centralised dashboard with analytics tools that integrates the other applications in the SAP IBP solution. This means users have real time visibility of the whole supply network, and can set up event triggered alerts. Supply Chain Control Tower also integrates with other SAP supply chain and logistics solutions.
Sales and supply chain networks are not the only area where businesses will want to forecast, and SAP IBP is not the only SAP solution that helps businesses assess their operations and processes with a view to predicting the outcome of changes to the business before committing working capital to them.
SAP has now provided a variety of solutions which not only integrate business data in real time, but also allow simulation of different scenarios: in effect, predicting the result of a current or proposed business strategy.
Predictive planning is possible with SAP Analytics Cloud, which combines this feature with business intelligence capabilities. Forecasting and planning in Analytics Cloud begins with data reporting. This is used for visualisation of the current business situation and from here users can plan what they want to happen based on the visualised model of what is actually happening. The ideal scenario is compared with forecasts based on the current business intelligence and this difference can help managers to make informed decisions on what business operations need attention in order to bring the ideal scenario into reality.
SAP Analytics Cloud uses the combination of a variety of interpretive tools to reveal aspects of business operations which would not otherwise become apparent. This augmented analytics includes standard data reporting, visualisation, AI, machine learning and automation to create a deep analysis that is oriented towards providing alternative and better business operations.
SAP Signavio process mining fulfils a similar function but goes a little further along the road of interpretation. Or to put it another way, process mining attempts to reveal the “why” as well as the “what” and “when” that business intelligence addresses, and BI assumes that everything plays out according to the modelled behaviour but process mining deals with the reality of flawed processes.
Process mining can help to reveal the extent to which the current business processes match intended business outcomes. Both solutions can be said to contribute to an understanding of what will happen if a business plan is followed through. Process mining shows more clearly why some aspect of a business process needs to change in order to bring the ideal scenario into reality.
Business intelligence and process mining are some of the most recent additions to the SAP portfolio and yet they help to fulfil some of the most basic needs of business: to be able to assess the current status of the business, to analyse the moving parts of that business and to discover what needs to change in order to bring about a more efficient and profitable business. To some extent we can say that this is the role of the business manager or executive, and these people (along with their finance teams) have been doing that job without the help of software solutions for decades. However, modern methods of managing and planning a business do not rely on intuition and gut instinct and they are far less prone to risk because of that.
These newer SAP solutions are beginning to make it possible to also model, simulate and predict what will happen without taking risks, and these activities can take place continuously so that external shocks can also be absorbed.
The value to a business of an executive who can manage, plan, strategise for the long term growth of the business is high, so the value of SAP consultant who can carry out the same requirements for an enterprise is also high: particularly as there is less opportunity for human error when potential options are explored ahead of heavy investment of working capital in assets and materials.
Management of a company requires that planning decisions are made, and planning requires predictions. Prediction is inherently risky and anyone who can help a company reduce that risk will be rewarded so if you are currently working as an SAP consultant, now is the time to explore this fascinating and profoundly influential new development in the IT services industry.
Are you looking for a new role in the SAP ecosystem? Our dedicated team can help you find the career and compensation that suits you so join us at IgniteSAP.
