Planning is an integral part of the management cycle.Companies are situated in complex environments (competitive landscape, political situation, geographical location…). Different companies follow different business models (e.g. public sector vs. private owned companies). Depending on their overall company goal (certain percentage of profitability, maximizing the public welfare…) they must consider the environmental situation in which they operate.
The management cycle helps companies to position themselves in complex environments and to keep on track in reaching their overall companies goal.The company mission is the framework to which all the operations in the company are supposed to contribute.Planning supports the decision making, the coordination of different divisions toward a common goal and defines general conditions for the operations. Execution involves all steps necessary for the actual value creation of the company.
Reporting tracks all transactions incurred by the execution processes.Analysis is focusing on calculation the achievement of objectives, seeking out causes for deviations or opportunities to put more focus on. The result of the analysis is measured versus the company mission and leads to an evaluation of overall goals and actions to be taken in order to steer the course.
Business Planning covers different levels:
•Strategic planning is about defining the future direction of an enterprise; e.g. product/service offering, return on investment, company growth...
Strategic planning is a stimulative process in which different scenarios are modeled and subsequently evaluated in order to calculate the expected value to be created. Strategy evaluation leads to target setting for the operational units, which means breaking down the high-level strategic goals to targets on the execution level (e.g. expected net revenue, sales growth rate...)
•Operational planning means allocating the resources (labor, capital, assets) necessary to fulfill the targets and reconciling the resources across operational units (e.g. sales volume has to be reconciled with production volume – if you have production capacity to produce 200 bottles of sunscreen per month but you can sell 1000 bottles in August, you must produce at least 800 bottles of sunscreen in the months prior to August....)
•The results of the operational planning process may be used for detailed planning and scheduling in execution planning.
Top-Down and Bottom-Up
Top-down and bottom-up are directions used to coordinate the vertical planning process. Usually these directions are following hierarchical structures.
Bottom up means the data flow from detail planning on different sub levels to an aggregated perspective.
In SAP Top down is the opposite direction, where strategies and targets that were defined on higher levels are translated to operational targets. The "counter current" method is a combination of both. Different versions separate different plan assumptions and may be used to compare different perspectives (CFO – Sales representatives). The final version is usually the base for execution planning (e.g. detailed scheduling)
Rolling Forecast
•In the past planning very often was a static process carried out once a year intended to be the basis for the next years execution and budgets.
•Dynamic environments and fast changing business situations force companies to think of strategies to react to changing conditions. Buzzwords heard in this context are: Beyond Budgeting, Better Budgeting, Active Planning….
•Usually those concepts evolve around the necessity for change management in regard to the planning process and the people involved in it. Part of this change is the need for a constant process that allows to react to changes in the companies environment in a timely manner.
•Rolling Forecasting is an ongoing process which compares the plan with the actual and derives an expected further evolution of the plan figures. If the deviation of plan and forecast extends a certain range the strategy has to be reevaluated in order to take appropriate measures or adjust the strategy.
Types of Plans
• The example shows how strategic planning directly influences different plans and how those feed into other plans which are based on assumptions made in previous steps.
• Strategic planning involves what-if analysis, simulation and comparison of different scenarios. The strategic targets must be mapped to key figures of operational planning steps in order to ensure the connection between strategic and operational plans. Example: ROI can be broken down into Sales (net sales), Production (product costs) and Investment Planning (e.g. investments in new plants) targets.
• In addition to amount and quantity based planning, strategic planning involves the definition of "soft" targets, such as training, employee motivation, customer satisfaction,… The balanced scorecard is an instrument which allows to translate soft targets into executable steps.
• Planning processes are usually complex - large numbers of staff from different parts of the enterprise can be involved in the planning operation.
• Planning forms, standards, approval procedures, planning areas, and planning objects need to the defined. Consolidation procedures must be created, and planning inter dependencies included.
How does SAP Net Weaver BI support Business Planning?
• BW-BPS is a part of SAP NetWeaver BI, which is SAP’s platform for Business Analytics.
• BW-BPS is a generic planning tool which supports various types of strategic and operational planning and allows planning on any level of detail
• User interfaces and business rules may be defined to the needs of any type of plan.
• BW-BPS offers comfortable process support
• BW-BPS offers tools to close the loop to operational processes through loading and distribution from and to transactional systems.
• BW-BPS is a generic planning tool which supports various types of strategic and operational planning and allows planning on any level of detail
• User interfaces and business rules may be defined to the needs of any type of plan.
• BW-BPS offers comfortable process support
• BW-BPS offers tools to close the loop to operational processes through loading and distribution from and to transactional systems.
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