Manage Lifecycle Planning in SAP APO
- by Alok Jaiswal, Consultant, Infosys Limited
- May 18, 2016
Learn how lifecycle planning can be configured in SAP Advanced Planning and Optimization (SAP APO) to forecast a new product, manage the introduction of the new product (phase-in), phase out the old product being replaced, and integrate it with forecasting techniques. Follow a step-by-step procedure to configure and run the associated master data objects, run simulations, and interpret the results.
By reading this article, you will learn about:
- Lifecycle planning in SAP Advanced Planning and Optimization (SAP APO)
- A business scenario used for demonstration purposes
- Basic configuration of objects in SAP APO
- Configuration for lifecycle planning
- Creation of various profiles for lifecycle planning
- Integration of statistical forecasting with lifecycle planning
- Forecast generation for lifecycle planning and results interpretation
The lifecycle of a product consists of different phases: launch, growth, maturity, and decline. Demand for a product also varies in different phases. Generally demand increases with each period in the early phases, while it declines towards the end of the lifecycle. Like modeling allows you to create a forecast for a new product using historical data of a product for which demand behavior is similar. Phase-in/phase-out modeling allows the results of the statistical forecast to be multiplied by a time-dependent factor to arrive at the final forecast.
SAP Advanced Planning and Optimization (SAP APO) Demand Planning (DP) helps to forecast demand for a particular product. Forecasting can be carried out at any level depending on the business requirement, and the product demand forecast is an example of one of the levels. Generally, forecasting is carried out based on past data. However, you would not necessarily have past data available to use as the basis for forecasting algorithms in all practical scenarios. Lifecycle planning within SAP APO provides several tools you can use to model a product’s lifecycle if you do not have past data available.
For example, suppose you are introducing an existing model of motorcycle into a new location. You could use like profiles to use the historical data from the current location to create a forecast at the new location. Similarly, phase-in and phase-out profiles can be used to manage the forecast volume for different phases in the product’s lifecycle. Like modeling can be used for products that have short lifecycles and also for products without sufficient historical data. Also one like profile can be used for multiple products.
Whenever a new product is introduced in the market or an old product is phased out, the demand for that product differs from the demand during its maturity phase. For a new product, demand increases exponentially with each period and for a product that is in a decline phase, the demand decreases exponentially with each period. However, this behavior may not be exhibited by all products in general. Therefore, a statistical forecast that is based on a maturity phase won’t accurately predict this kind of behavior. For such products, the statistical forecast that is generated from DP needs some factor by which it will adjust the forecast. These adjustments can be made by phase-in and phase-out modeling.
Figure 1 shows the general product lifecycle trend and where phase-in and phase-out profiles play a role.
A possible product lifecycle
Consider an example of an electronics manufacturer that manufactures and sells multiple models of televisions around the globe. For my business scenario in this article, the company is planning to launch a new model of the television (MODEL2), which is an improved version of the existing model (MODEL1). The company plans to roll out MODEL2 initially in the US and then to other countries. No historical forecast data exists for the new model, and therefore, the company is planning to base its forecast on the existing MODEL1 and to incorporate demands as per product lifecycle stages.
Figure 2 shows the business scenario discussed above. I also describe other scenarios highlighting different situations and how to map them within the system.
A sample business scenario
Basic Configuration of Objects in SAP APO
Before using lifecycle planning, you need to set up some objects. I assume that the reader knows how to set up master data in SAP APO and how to configure basic DP objects. For this article, I show screenprints of the major DP objects highlighting configurations specific to lifecycle planning.
Master Planning Object Structure (MPOS)
MPOS is created via transaction /SAPAPO/MSDP_ADMIN. For the example discussed in this article, MPOS contains Product, Location, Product Group, Customer, and Country/Market as shown in Figure 3.
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