sap retail forecasting and replenishment overview

Solution in Detail

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Retail

Integrated Demand and Replenishment

Executive Summary Solution Overview Contact Us


2 / 23 © 2013 SAP AG or an SAP affiliate company.

All rights reserved.

Serving a New Generation of Consumers

The new generation of shoppers is mobile and

well informed, wanting to make purchases

quickly and easily. If one retailer cannot satisfy

their demand, they switch to another that can.

In reality, however, retailers are often faced

with empty shelves for some products while

others are overstocked. This is the costly result

of ineffective inventory management.

Consumer loyalty is declining, and consumer

demand is increasingly difficult to predict. Many

traditional forecasting approaches cannot effec-

tively incorporate relevant factors and trends in

real time, do not feed into automated planning

systems, and cannot manage growing data

volumes.

Fragmented supply chains and a lack of collab-

oration represent another challenge. To be truly

demand driven, operational replenishment

planning must be integrated at each level of the

supply chain and distribution network in order

to reduce logistics costs and optimize inven-

tory. It also involves anticipating the impact of

potential changes and aligning a company’s

operations with business strategy.

Retail companies need sophisticated demand

and replenishment planning approaches based

on real-time consumer data in a multilevel

supply network. Such approaches can support

pull and push scenarios.

In today’s fast-paced world, consumers want access to products at all times and

across all channels. Retail companies need to accurately forecast and manage

their inventory while satisfying consumer demands in this competitive environment. Integrated Demand and

Supply

Smart and Informed

Consumers

SAP Innovations

Optimized Costs




Changing consumer behavior and the

increasing pace of business require accurate

forecasting of demand to retain customers and

maximize sales. Manual and disconnected

planning systems cannot cope with the

changes in the market and do not support the

necessary alignment within the company itself.

Thus, they need to be replaced by integrated

solutions that accurately predict and align

demand and ensure optimal stock levels

throughout the supply chain.

Automated allocation and replenishment

strategies are key to increasing productivity

and lowering costs. Collaborative supplier

relationships within an integrated, sustainable

supply chain are essential for reducing trans-

port costs and minimizing waste. And, finally,

high-level strategic plans have to be linked with

day-to-day operations.

Solutions for integrated demand and replenish-

ment planning from SAP help retailers meet

shopper demand while optimizing stock

availability and reducing costs.

Integrating Demand and Supply Planning

Ensure aligned and flexible replenishment and allocations

Integrated Demand and

Supply

Smart and Informed

Consumers

SAP Innovations

Optimized Costs




The benefits of integrating demand and replenishment planning for retail

companies are huge. Best-run companies can expect significant cost savings

through optimized inventory as well as increased sales and improved service

levels by integrating people, processes, and systems in a cross-functional manner.

SAP solutions facilitate forecasting and demand planning as well as multilevel

replenishment and allocations, resulting in:

Meet Shopper Demand and Optimize Costs

Increased forecasting accuracy through sophisticated algorithms and aligned numbers

Maximized sales through greater product availability

Reduced inventory costs due to optimization and automation across the supply chain

Reduced ordering and transport costs due to optimized logistics

Understanding of future trends and their impact on plans

23%

Lower inventory carrying cost

for organizations with higher

forecast accuracy

Source: SAP Performance

Benchmarking

Integrated Demand and

Supply

Smart and Informed

Consumers

SAP Innovations

Optimized Costs




Database and technology solutions from SAP

enable retail companies to manage Big Data.

These solutions provide the foundation for

executing integrated demand-driven planning

and replenishment based on transactions at

SKU and store levels. SAP provides solutions

that are developed specifically for retail

companies and are closely integrated with

powerful logistics execution functionalities.

Analytics solutions powered by the SAP HANA

platform enable advanced monitoring of every

aspect of supply chain planning. The analytical

data is used to align strategic objectives with

operational execution.

Cloud-based software, such as the SAP Sales

and Operations Planning application, powered

by SAP HANA, allow for fast, low-risk

deployment that minimizes the IT footprint.

Mobile solutions give supply chain profes-

sionals anytime, anywhere access to status

reporting and exceptions and alerts.

SAP Innovations

Solutions for integrated demand and replenishment planning from SAP help

retailers respond quickly to consumer trends and are scalable for retail volumes.

Flexible deployment options and tight integration with logistics provide a better total

cost of ownership. Integrated Demand and

Supply

Smart and Informed

Consumers

SAP Innovations

Optimized Costs




Enable Customer-Driven Supply Planning

Forecasting and Multilevel Replenishment

Create optimized demand plans using sophisticated forecasting algorithms.

Define optimal supply plans across the supply chain based on anticipated

customer demand and cost aspects.

Allocation

Accurately plan, monitor, and control the distribution of merchandise across all

locations.

Sales and Operations Planning

Align demand and supply plans with financial goals, and synchronize operations

with the rest of the business.

Forecasting and

Replenishment

Solution Overview

Sales and Operations

Planning

Allocation

Demand and Replenishment

Plan


97% Lower revenue loss due

to stock-outs for top 25%

retailers as compared to

average retailers


Benchmarking



Integrated demand and

replenishment planning is a

comprehensive solution for

retailers that enables demand

and supply planning in a

multilevel supply network.

Integrated Demand and Replenishment Planning


Forecasting and

Replenishment

Solution Overview


Planning

Allocation

Demand and Replenishment

Plan

Merchandising

Buying,

Sourcing, and

Manufacturing

Supply Chain

Customer

Finance

People

Forecasting and Multilevel Replenishment Allocation

Collaborative

Planning,

Forecasting,

and

Replenishment

Demand

Forecasting

and Planning

Requirements

Calculation

Quantity

Optimization

Order Proposal

Management

Initial

Allocation

In-Season

Allocation

Buying

Merchandise

and Assortment

Planning

Sales

Transactions

Demand

Review

Demand and

Supply

Alignment

Supply

Review


Planning

Financial

Planning



Retailers need solutions that optimize their

inventory requirements.

The solutions from SAP enable retailers to

accurately forecast customer demand and

integrate this key information into all levels of

the supply chain. Combined with automated

replenishment, this helps ensure optimal order

quantities for stores and distribution centers

within the supply chain.

Using information at store and SKU levels,

advanced forecasting analytics automatically

adjust for trends, seasons, and events. The

time spent on routine tasks is greatly reduced,

enabling employees to dedicate more time to

customers.

Solutions for forecasting and multilevel

replenishment from SAP integrate

algorithms to analyze and predict

customer demand with automated

functions to optimize inventory across

the supply chain.

Forecasting and Replenishment

71% Of retailers have limited to

no capability to establish

accountability for forecast

accuracy, explain forecast

variances, and analyze root

causes


Benchmarking

Capabilities

Forecasting and

Replenishment

Benefits

Technology Innovation

Solution Overview




Demand forecasting and planning uses

advanced modeling techniques incorporating

factors such as holidays, promotions, price

changes, and even external impacts such as

weather. Automated functionality eliminates

time-consuming manual forecasting.

Automated replenishment calculations support

store and distribution center processes,

enabling retailers to calculate optimal quantities

for each product and location. Through multi-

level replenishment, retailers can synchronize

all levels of the supply chain by rolling up store

order forecasts and can become truly demand

driven.

Quantity optimization balances fill-up quantities

with transport costs and can include logistical

restrictions such as advanced truck load

optimization.

Order proposal management enables an

exception-based approach for suggested

quantities and provides transparency of all

calculation steps.

Collaborative planning, forecasting, and

replenishment help retailers achieve sustain-

able reductions along the supply chain.

16% Lower inventory carrying cost

for organizations where

forecasts are dynamic and

updated frequently


Benchmarking

Drive The Supply Chain Based on Demand

Capabilities

Forecasting and

Replenishment

Benefits



Solution Overview



Retail supply chains can include millions of prod-

ucts. Intelligent, automated demand modeling and

forecasting replace the time-consuming manual

analysis of sales patterns, which vary by location

and are impacted by promotions, sales events,

and seasonal trends.

Automated forecasting and replenishment

software from SAP selects relevant forecasting

algorithms based on a product’s selling behavior.

Predict events and promotional uplifts and combine

these with other key influential factors to obtain

accurate and reliable demand forecasts, to eliminate

manual clusters of data and configurations.

To leverage the full potential of inventory savings,

integrate rolled-up customer demand into all levels

of the supply chain and implement optimized

replenishment processes and automated

functionality.

Build acceptance of automatically generated order

quantities through accurate and transparent

calculation steps, which in turn can increase

employee productivity.

Merchandise inventory is a retailer’s

greatest controllable asset. Implement

the right technology to help reduce

inventory levels, and optimize product

availability to meet consumer demand.

Automated Replenishment Prevents Stock-Outs and

Reduces Costs

26% Lower revenue loss due to

stock-outs in organizations

where forecasting incorpor-

ates demand history and

adjustments for bad data and

past promotions


Benchmarking

Capabilities

Forecasting and

Replenishment

Benefits



Solution Overview



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image #

here

Big Data

The SAP Forecasting and Replenishment

application provides a robust and scalable

architecture for processing retail data volumes.

This solution can process tens of millions of

data records each day. Forecasting and

replenishment software from SAP can be

integrated with merchandising software from

SAP or operated as stand-alone software.

Innovations for Forecasting and Multilevel

Replenishment

Analytics

Analytics solutions powered by the SAP HANA

platform enable monitoring of investments and

strategic controlling of forecasting and

replenishment processes.

Mobile

Use SAP Mobile Platform to build intuitive apps

enabling store employees to access and

process information such as order proposals

and exceptions on the shelf.

30% Less revenue loss due to

stock-outs in organizations

where forecasting is per-

formed for all combinations

of SKUs and inventory

locations


Benchmarking

Innovations by SAP improve forecasting

accuracy by analyzing customer

demand and optimizing inventory in the

supply chain. Capabilities

Forecasting and

Replenishment

Benefits



Solution Overview



Allocation software from SAP helps retailers

plan, coordinate, and monitor the allocation of

merchandise to a large number of recipients.

Allocation strategies based on key performance

indicators enable a high degree of automation,

leading to improved productivity. The software

supports business processes such as allocation

of promotional merchandise, allocation of

initial stock, in-season allocation, and store

stock balancing. By providing the right

merchandise in the right quantity at the right

location, retailers can eliminate unnecessary

markdowns, improve customer loyalty, and

reduce inventory carrying costs.

Allocate retail merchandise to multiple

customers or stores. Replace manual

processes with streamlined, automated,

and flexible strategies, and align

inventory levels with customer demand.

Allocation

23% Lower inventory carrying cost

for organizations that gain

visibility into customer

demand and actual sales


Benchmarking

Capabilities

Allocation

Benefits



Solution Overview



Software for initial allocation supports forward

planning and subsequent logistics processes,

particularly for seasonal merchandise with a

short lifecycle and long lead time. Merchandise

is allocated from the distribution center to the

stores or customers based on defined rules.

Retailers can allocate an initial quantity to the

stores and the remaining items to key locations

later in the season, based on forecasted

demand or actual sales.

Allocations also support distribution of non-

seasonal merchandise, such as for promotions

and events, or new products. Multiple

scenarios, including product recalls and

returns, are enabled through flexible rules

and a high degree of automation.

Over- and understocking of products is avoided

through inventory planning and real-time stock

management, and stock clearance activities

can be initiated via the distribution center.

Close integration with logistics execution

enables the automatic generation of follow-on

documents such as for deliveries.


stock-outs for organizations

that selectively use buffers to

manage variability


Benchmarking

Enable Flexible Allocation Scenarios

Capabilities

Allocation

Benefits



Solution Overview



Strategies for initial allocation transform the

assortment plan into operational steps based

on actual purchasing situations and logistical

conditions. Base strategies for in-season

allocations on data derived from analytical

queries such as historical sales or extrapolated

demands. Integrate planning, reporting, and

logistics execution to allow informed decisions

based on one consistent data model,

eliminating insular and incoherent planning

approaches.

Apply flexible allocation strategies and recipient

determination logic to support multiple business

processes. Use standard and customized

strategies to support the automatic calculation

of optimal quantities and can include figures

such as stock on order, available stock, and

minimum or maximum restrictions.

Defining rules that are dynamically updated by

transactional processes significantly reduces

the level of manual input while maximizing

inventory availability.

Integrate planning processes across all

departments, and transform them into

operational logistical processes.

Use Integrated Plans and Automate the Allocation

Process

36% Lower overall supply chain

planning cost for

organizations that align

supply to demand


Benchmarking

Capabilities

Allocation

Benefits



Solution Overview



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image #

here

Database and Technology

The solution offers proven performance and

scalability for managing huge retail data

volumes to support allocation planning and

efficient supply chain operations.

Analytics

Key figures and analytical functionality powered

by the SAP HANA platform allow retailers to

connect the supply chain view with customer

Innovations for Allocation

demand, to support strategic planning and

deliver operational excellence. Data from

analytical applications is closely integrated

with operational logistics to support decision

making. The result is a flexible allocation tool

that can actively respond to changing demand

situations, current purchase order status, and

logistical constraints.

53% Of organizations report a big

gap between the availability of

Big Data and their ability to

analyze it for insights


Benchmarking

Capabilities

Allocation

Benefits


Innovations from SAP enable allocation

decisions and follow-on logistics

activities through a single consistent

model.


Solution Overview



The SAP Sales and Operations Planning

application, powered by SAP HANA, supports

the complex task of aligning planning and

execution. In the fashion industry, for example,

planning takes place well in advance to ensure

production activities can be fulfilled. The appli-

cation enables continuous replanning due to

short-term trends that arise in the meantime.

The sharing of data and alignment of plans

between departments and across company

borders enables retailers to prepare for

changes and their impacts.

Top-down financial plans and bottom-up

demand plans are reconciled to drive the

business with one ”plan of truth.”

Sales and operations planning (S&OP)

engages stakeholders in an integrated

planning process that profitably aligns

demand and supply. It helps mitigate

risks of demand and supply chain

disruptions.

Sales and Operations Planning

14% Lower inventory write-offs in

companies where monthly,

collaborative S&OP pro-

cesses lead to alignment of

plans for sales, procurement,

and so on


Benchmarking

Capabilities


Planning

Benefits



Solution Overview



Sales and operations planning supports

consensus demand planning and enables

the creation of one single, trusted sales and

operations plan, which retailers can quickly

adapt in line with changing market conditions.

Financial planning forms the basis for achieving

corporate goals for the overall sales and

operations planning process and enables

retailers to implement top-down strategic

financial plans. Supply chain planning focuses

on a bottom-up operational execution.

Demand review provides a unified view of

demand from all sources including finance,

merchandising, and supply chain and facilitates

consensus demand planning in line with

strategic goals. The supply and inventory

review is based on the agreed plan and

determines the impact of decisions on long-

term constraints in the distribution network.

These inputs feed into an executive review with a

real-time what-if analysis, which enables delivery

of one aligned plan across the organization

through demand and supply alignment.

23% Lower inventory carrying

cost for organizations that

implement a collaborative

demand planning process


Benchmarking

Implement Consensus Demand Planning

Capabilities


Planning

Benefits



Solution Overview



Provide all relevant demand and supply

information in a unified environment with

complete visibility for all stakeholders.

Implement the SAP Sales and Operations

Planning application, powered by SAP HANA,

to plan and analyze data in real time using a

unified model for all demand, supply chain, and

financial data. This data can be imported

directly from SAP and non-SAP software.

Leverage the SAP HANA platform to instantly

analyze large volumes of internal and external,

qualitative and quantitative demand data to

support demand and supply balancing

simulations and decision making.

The application’s social collaboration platform

also allows retailers to track planning progress,

see who has been assigned a key action item,

and review process performance. By enabling

team members to collaborate more quickly and

easily, SAP Sales and Operations Planning

helps accelerate planning and decision making,

drive greater engagement, and achieve greater

acceptance of the plan across the organization.

Create an aligned business plan that

links strategy and operations by

merging demand, supply, and financial

plans in a shared environment that

enables planning, analysis, and

real-time simulations.

Align The Organization


stock-outs for organizations

with higher maturity of sales

and operations planning

processes


Benchmarking

Capabilities


Planning

Benefits



Solution Overview



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image #

here

Database and Technology

The SAP HANA platform enables real-time plan-

ning and analysis of Big Data, plus a unified model

of demand, supply chain, and financial data. Use of

SAP Data Services software enables integration of

the SAP Sales and Operations Planning applica-

tion with other SAP software and allows retailers to

speed up planning and decision making.

Analytics

Key figures and analytical functionality powered

by the SAP HANA platform allow retailers to

Innovations for Sales and Operations Planning

connect the supply chain view with customer

demand.

Cloud

The SAP HANA application cloud provides

delivery, consumption, and interaction that is

extremely intuitive to implement.

Mobile

Users can access sales and operations planning

software via mobile devices such as smart

phones and tablets.

36% Higher operating margin

where organizations use IT

to enable strategic and

competitive advantages


Benchmarking

Capabilities


Planning

Benefits


Innovations support real-time planning,

analysis, and social collaboration,

speeding up processes and decision

making.


Solution Overview



Customer-Driven Supply Chain Value Map

Forecasting and

Replenishment


Planning

Demand and

Replenishment Planning

Allocation


Solution Overview

Customer

Insight and

Analytics

Demand

and Supply

Analytics

Inventory

Analytics

Fulfillment

Analytics

Forecasting

and Multilevel

Replenishment

Allocation

Sales and

Operations

Planning

Inventory

Management

Track and

Trace

Multichannel

Order

Fulfillment

Warehouse

Management

Transportation

Management

Real-Time

Customer and

Supply Chain

Analytics

Optimized

Logistics and

Fulfillment

Execution

Integrated

Demand and

Replenishment

Planning



Why SAP?

Integrated demand and replenishment planning balances inventory ownership with

customer service to determine and execute accurate, flexible, and automated

replenishment and allocation plans.

Customer-Driven Demand Planning

Improve sales and customer service levels, and significantly reduce the number of out-of-stocks by

accurately forecasting and satisfying customer demand. Align and balance demand and supply as

market conditions change.

Inventory Optimization with Multilevel Replenishment and Allocation

Lower inventory levels in stores and distribution centers through targeted multilevel replenishment

and flexible initial and in-season allocation strategies.

Sustainable Supply Chain

Streamline the company’s supply chain operations by reducing waste and optimizing deliveries

and logistics activities.

Forecasting and

Replenishment

Allocation


Planning

Demand and

Replenishment Planning


stock-outs for organiza-

tions that transition to a

pull supply model to align

supply plans to actual

demand


Benchmarking


Solution Overview




Benchmark Your Performance

Position your organization for dominance in this new economy with the business performance

benchmarking program from SAP – available free to SAP customers and select prospects.

The SAP benchmarking program has helped more than 3,000 organizations assess their

strengths, uncover areas for improvement, and identify best practices and IT strategies that

generate clear, tangible value – not someday, but today.

Go Live in Weeks

Here’s the fastest way to run your business better: our rapid-deployment solutions. In one

package, you get everything you need to be up and running quickly – including preconfigured

software and implementation services – in just weeks. With a defined scope and predictable

costs, there are no surprises.

Join Your Community of Practices

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It lets members help one another solve problems, learn, and invent new ways to get things

done – faster. Find out how to connect with people, content, and resources.

Find Out More About How Your Organization Can

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Solution in Detail


Retail

SAP for Retail on SAP® Community Network: http://scn.sap.com/community/retail

Retail wiki on SAP Community Network:

http://wiki.sdn.sap.com/wiki/display/retail/IS-Retail

SAP for Retail on Facebook:

http://www.facebook.com/SAPRetail/82783264322

SAP for Retail on Twitter: https://twitter.com/SAP_Retail

SAP for Retail on LinkedIn: http://www.linkedin.com/groups/SAP-Retail-4022601

SAP for Retail on YouTube: http://www.youtube.com/user/SAP4Retail


CMP 23497 (13/03)



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