The future of Enterprise Planning: Extended Planning & Analysis (xP&A)

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Summary. This article is part of the xP&A Business Content Suite series and used in the series “Give Data Purpose Weekly” . In this article, I share how we position, understand, and realize the vision of Extended Planning and Analysis (xP&A) with focus on the business challenges to be addressed and the importance of cross-solution integration in a holistic planning framework.

Credit: I’m working closely on the topic Extended Planning and Analysis with Michael Fox. Together we are leading a new effort at SAP to showcase Extended Planning and Analysis best practices in a pre-built Business Content Suite .

Our world is hit by many unpredictable events. Oil prices explode, supply chains collapse, currencies…. As well companies have to plan for the future capacities to be able to take investment decisions…. Just ignoring the unpredictable events and hope for the best?

Please do not! Just ignoring the unpredictable events and hope for the best?

In the following examples I show who and what needs to be involved to enable situational planning as well as creating a more robust companywide plan. It is necessary to include the different plans across departments and stakeholder to reflect dependencies as well as impacts of decisions done out of the scope by every single planning persona. Extended Planning and Analysis aims for a enterprise wide regular planning process in which each department individual planning process is reflected. While incorporating the planning in a broader inter-department context even when facing sudden changes or risks the planner must be able to create effective and correct plans to help steer the decision making process. To emphasize this necessity the following two examples, help to describe a normal business problem statement.

Business Problem Statement

– Sudden oil price increase –

A consumer goods company wants to roll out a new Yoghurt product line globally. Unexpectedly oil prices increase significantly. The different involved personas

  • Supply Chain Planner
  • Commercial Planner
  • Financial Planner
  • Top Management

are now trying to assess the situation independently and fix their problems in the context of their departmental functions. Thereby they each arrive at different solutions.

  • Supply Chain Planner
    • The assessment: My transport cost will increase by at least 15%, therefore I am sure the costs will increase per Yoghurt. Yet I don’t know if it is within budget or if my company can absorb the cost increase differently. Maybe we need to share the costs with the customers?

“I will produce more Yoghurt and try to limit impact on the inboundprices . Let’s hope that a lower cost increase per Yoghurt by increasing the amount of Yoghurts is not too high for the customer?!”

  • Commercial Planner
    • The assessment: How will this impact my planned deliveries of yoghurt? Can we run our promotions as planned and will we achieve the gross margin which I am asked to deliver?

“I will run all campaigns as scheduled and continue to plan with the original margin estimates. What else could I do? Let’s hope supply can keep up?!”

  • Financial Planner
    • The assessment: The increased transport cost will impact the Cost of goods sold (COGS), therefore I need to absorb the decrease of margin. My problem is that this will expose the company to higher cash flow risks.

“To be on the safe side, I will lower the financial outlook for free cash flow by 5%. Let’s hope this will work out?!”

  • Top Management
    • The assessment: My individual teams work independent and manually. Thereby all of them are having different assumptions and data sets upon which to base their decisions. I have no transparency on potential scenarios and their tradeoffs. Such visibility could be helpful in my decision-making. I am unclear what effect the oil price increase will have on the whole company and thus cannot provide guidance on how best to mitigate this risk?

“Due to the lack of collaboration between the teams and lack of integration of their respective data and plans, nobody can provide a comprehensive perspective of how the oil price increase will affect us. Nevertheless, I need to take a decision, therefore Let’s continue the launch as planned and pray?!”

Persona Assessment Reaction
Supply Chain Planner
  • Product price is increasing.
  • Within Budget?
  • Share costs with customer

Produce more Yoghurt to have a lower cost impact per unit

Commercial Planner
  • Impact to my promotion plans & can we run the campaign as planned
  • Impact on gross margin

Don’t react, Supply Chain needs to deliver despite their cost challenges.

Financial Planner
  • COGS is higher than expected, need to handle the lower margins
  • Higher Cash flow risk

Lower the financial free cash flow outlook  by 5%

Top Management
  • Teams act independently and manually
  • Different assumptions are driving planner decisions
  • No transparency about reaction scenarios and impact

Continue as planned originally and hope for the best

– Sudden opportunity to sell more –

A tool company can sell significantly more screwdrivers on short notice than it planned for originally. The manufacturing department of the company is asked to deliver the quantity that can be sold. In a quarterly cycle the financial planner is checking his plans compared to the actuals. The involved personas

  • Sales Representative
  • Supply Chain Planner
  • Financial Planner

are representing their individual point of view. They are now trying to assess the situation independently and fix their problems in the context of their departmental functions. Thereby they each arrive at different solutions.

  • Sales Representative
    • The assessment: If I overachieve my annual goal already this quarter, it should be good for the company.
    • I seize this sales opportunity and sign a contract with the customer. Our manufacturing now needs to produce and deliver more to fulfill the order. I help the company earn more money.

  • Supply Chain Planner
    • The assessment: The demand has increased last minute, which is not covered by the contracts with suppliers and transportation partners. Asking for more supply on short notice is not covered by the standard cost rates and is rather costly.
    • I need to ask the suppliers to deliver more parts and materials than originally negotiated. The extra transportation demand is as well not covered by the signed contract with the delivery partner. Therefore, I need to pay an extra premium for getting more delivery capacity short notice.

  • Financial Planner
    • The assessment: The complete cost of goods sold are again above the planed value. What has happened here? Transportation costs seems to be the driver for the cost explosion.
    • I need to ensure that transportation costs are not that high the next quarter. We need to have a better contract with the transportation partner.

Persona Assessment Reaction
Seller
  • Overachieve goal should be good for the company

Take the sales opportunity and sign a contract with the customer

Supply Chain Planner
  • demand is increased last minute but not covered by the contracts
  • need more short notice supply

Pay an extra premium for getting more delivery capacity short notice

Financial Planner
  • COGS is higher than planned
  • Driver is Transportation Costs

Sign future Transportation Contract for higher volume

Learning

Different planners have different objectives and tend to use their own data and make their own assumptions. This is good and correct as each Line of Business (LoB) has its own requirements as well as subject matter expertise for planning. Nevertheless, the lack of collaboration amongst the planners and lack of alignment of their resulting plans leads to disjoint plans and no holistic transparency across the business in regards to  impact of changes or unexpected events and their related costs and problems. To address this missing synchronization and support planners with their own relevant data, as well as data that may impact them from other departmental plans,  the planning tools deployed need to be able to integrate and exchange information. This solution scope is described with the term Extended Planning and Analysis (xP&A), where the scope of planning is extended beyond individual departments. It is not sufficient to only focus on single LoB perspectives, or only define targets for Business Units driven by Finance. What is required is a solution which fosters and actively addresses the need of communication, enables inter-departmental sharing of information, and can clearly depict the expected outcomes of plans originating from different perspectives, even when facing sudden changes or risks. Furthermore the solution should support the measuring of progress over time and allow to understand where adjustments are needed. With this solution design it is relevant to follow a regular sequence, as the planning process never ends but rather is a cycle.

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Insight to Action cycle – the best just keep getting better.

Aimed Benefits of xP&A

  • Real-time, holistic business visibility: xP&A breaks down departmental silos and creates a single view of plans and performance in real time.
  • Single source of truth: xP&A creates a single source of truth, so planners can all work with the same set of numbers.
  • Full business alignment: xP&A makes it clear how one department’s activities impact another, which encourages teams to collaborate and align on priorities.
  • Greater agility: Tight business alignment helps rapidly seize new opportunities, and move as nimbly as a start-up.
  • Automated, continuous planning: Continuous planning minimizes manual work and keeps everything in synch, even in times of rapid change.

Within SAP Analytics Cloud, business content can be leveraged as a starting point for planning projects and activities. . Currently planning and reporting content is available for specific Lines of Business. Next to these LOB-specific content packages we are developing a Business Content Suite, focusing on the above described xP&A scenarios. Thereby some content packages are branded as xP&A Business Content Suite . With this brand we emphasize certain points for the design and build of the content:

  1. Cross Product integration

A content package within the xP&A Business Content Suite must come with an integration objective for different LoBs. We design and build the content in a way that you can focus your planning tasks on the main addressed LoB, and as well can leverage the built-in integration functionality to synchronize with other content packages.

  1. Planning Time Horizon

We define three planning time horizons and tailor each content package within the xP&A Business Content Suite for the time horizon it addresses:

    1. Short Term Scheduling (0-8 Month)
    2. Operational Planning (6-24 Month)
    3. Strategic Planning (24+ Month)
  1. Flexibility and Modularity

Understanding that every company has unique processes that provide them competitive differentiation, the xP&A Business Content Suite aims to cover 80% of a holistic, best-practice planning framework which includes standard LoB planning processes.  To allow for easy enhancements and adaptations for the remaining 20% of your requirements, we design the content with flexibility and modularity as top priorities.   This is achieved by focusing on the individual use cases of involved personas within the standard planning process per LoB.

  1. Planning perspective

There are two primary approaches always required in an end-to-end planning process: top-down (decomposition) and bottom-up (aggregation). Therefore, we build the content with  the possibility to enter the planning with your desired planning perspective per persona and use case, yet store the results in a single data model to allow for easy synchronization between both top-down and bottom-up perspectives. This is done in a modular fashion allowing for easy selections of the relevant personas and use cases for your specific requirements during the project implementation. The content is then presented with a comprehensive launchpad that brings the included personas and use cases together into a clear sequence of activities to follow.

  1. Process Documentation

The absolute most important step on your journey to xP&A is understanding the full scope of the planning processes across your company and how they are interrelated. That’s why you will find interactive documentation and process flows in our Signavio Process Library for the planning process addressed by each of the content packages in the xP&A Business Content Suite.

The long term vision for the xP&A Business Content Suite  is to create and reuse LoB specific content, which are based on the strong SAP enterprise applications. We are leveraging the planning capabilities within SAP Analytics Cloud and use it as the central place for connecting and sharing information between the different planning perspectives as well as aligning and including the different planning outcomes

– In short collaboration is key-

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Collaboration is key!

Currently the Content Suite covers three LoBs for the operational planning, while we are working on integrating a fourth LoB in the second half of this year. To get more details on the already existing content please review our xP&A Community page. The three areas already covered are:

  1. Total workforce planning (internal & external) focusing on the HR related planning activities as well as the resulting costs for these HR resources. The results can be integrated into the financial planning. Furthermore, we provide an Insight-To-Action functionality to push the results into SAP SuccessFactors Employee Central and automatically create new positions based on the approved headcount plans.
  2. Sales Planning for Consumer Products focusing on top-down sales and trade budget planning along the Sales hierarchy and enhancing the existing Trade Promotion Management solution. The results can be integrated into the financial planning.
  3. Financial Planning for a holistic integrated financial plan for all financial planning activites as P&L, investment, cost. The different focus areas play together seamlessly. The results of Sales Planning and Workforce Planning can be integrated on the highlighted level.


For more information about Extended Planning and Analysis

A few words about the SAP Business Content Suite for Extended Planning and Analysis: 

In order to keep up with the disruptions to a globalized economy, we recognize that companies need to be more agile than ever and prepare for the unexpected.  To support such a monumental challenge, we provide the SAP Business Content Suite for Extended Planning and Analysis (xP&A) within SAP Analytics Cloud. This content suite is free of charge for SAP Analytics Cloud customers and is designed to help you accelerate your time to value by providing a pre-defined framework for connecting various planning processes across the enterprise.  Recognizing that every business is different, the planning content, reporting stories, and data models within the SAP Business Content Suite for xP&A are built in a modular fashion and fully intended for you to configure and customize to meet your specific needs.