PUTTING INSIGHTS INTO ACTION
In a retail environment, there’s an endless list of products that are commonly bought in pairs. Peanut butter and jelly. Coffee beans and filters. Hammers and nails. And so on, and so on, and so on…
From a supply chain perspective, it makes sense to put this knowledge to use for demand planning purposes. Say I want to analyze sales data for a retail store, and I observe that last year I sold 1,000 hammers and 500 boxes of nails, resulting in a 2:1 ratio of hammers to nails sales.
For creating my forecast for these products, I want to maintain this ratio in the future for supply chain planning purposes. That’s where the Demand Planning Bill of Materials comes into play.
DEMAND PLANNING BILL OF MATERIALS
The Demand Planning Bill of Materials functionality in SAP IBP allows demand planners to maintain sales ratios (aka attach rates) between two products for forecasting products where sales are highly correlated.
In this example, I can tell IBP to produce a dependent demand forecast for nails to be 50% of the forecast for hammer sales in each time bucket. IBP produces the nails forecast on the fly, and adjusting the sales ratios is simple as can be. There’s no need to maintain these ratios in the supply side of planning, where batch jobs have to be executed, and demand planners no longer need to “trick” the system. Demand Planning Bill of Materials puts the dependent forecast into the demand planners’ hands, giving them greater visibility into their forecasts.
Take a look at the video below to see SAP IBP Demand Planning Bill of Materials in action.