Why SAP DP Should Not be Used for Consensus Based Forecasting

The need for consensus based forecasting is great, however, attempting to do this with SAP only is a recipe for failure.

What This Article Covers

• Why there is no real consensus based forecasting functionality in SAP.
• Making CBF work.
• Stopping SAP from selecting software for you.

No Consensus Forecasting Functionality in SAP

If you do a search for SAP and consensus based forecasting you can find a smattering of hits, however no real substance. I cover what real CBF functionality is in my book “Supply Chain Forecasting Software.” The only related functionality that SAP APO DP offers is to allow different people to enter their forecasts into the planning book. This gets into the next topic.

Planning Book Problems and Limitations

The planning book is a rigid planning view with difficult to configure selection criteria (which are hidden during the viewing), and a series of measures, which are on rows while the columns show the planning buckets. The planning book has not been improved in any substantial way in at least 5 years and becomes very sluggish at high volumes. It is also uncompetitive with the great interfaces which are available from some of the best of breed vendors in CBF. In fact, managing CBF SaaS solutions is something that we have decided to offer as a service at OutsourceMySCP. Companies are often not comfortable with managing consensus based processes or how to integrate the consensus forecast into the statistical forecast. We help with both of these needs.

Making CBF Work

Consensus based forecasting (CBF) means getting people to enter their forecasts and in a timely manner, and being able to control the way the forecasts are combined to produce the final consensus forecast. However, the DP Planning Book was never designed to do any of this. Which is why I recommend other tools that have actually been designed for this task. However, not being able to do it, does not stop SAP being used to try to perform consensus based forecasting on projects. One of the reasons for this is that I have now concluded that most clients and the vast majority of big consulting firms just don’t understand how the right software can enable CBF. They essentially think that CBF can use the same tools and approach as non-CBF. A few of the requirements for CBF include the following:

1. The user interface must be extremely simple to use and extremely easy to show both selections criteria and drill downs.
2. The CBF process must be “gated.” That is the tool must allow for the various forecast inputs to be centrally managed and have their contribution to the final consensus forecast increased and decreased flexibly, based upon previous performance and without the individual forecasting groups knowing.
3. The product used must have fast response times, and needs to provide analytics. This draws the forecasters in to using the system and investing in its use. It serves to both inform them and motivate them to provide their best forecast. Very badly designed interfaces are tolerated by corporate buyers because they neither use the system themselves nor appreciate how poor interfaces inhibit software implementation success.
4. While not an absolutely necessity, there is some evidence that perhaps the traditional way of performing consensus based forecasting is not the best approach, and that the field of study of prediction markets has a lot of offer.

It is inadvisable to let SAP or any other software vendor select other software vendors for you. This is a clear conflict of interest which should not be watered down by the repeated use of the term “partnership.”

Putting The Kibosh on SAP Selected Software

If SAP eventually wakes up to the concept of CBF they may attempt to “partner” with a firm and offer them as a selected partner. I would very much recommend against having SAP select your software for you. These partnership arrangements primarily entail making the partner subordinate to SAP and all that is really provided to the client is some extremely hastily developed adapters that SAP can use to say the systems are “integrated.” They then present that vendor as the best vendor in the space, which more accurately should be described as the vendor that agreed to sign an extremely one-sided partnership agreement with them. Finally, the client pays SAP and then SAP pays the other software company and keeps between 40% and 70% of the money, greatly reducing the money available for further enhancing the product or even supporting it. To find more about this program see this link.

As I said the large consulting companies don’t understand this, and will continue to push SAP DP or even SAP ERP Demand Management to do CBF. For this reason I have decided to add selection and advisement services in CBF software and how to integrate this software functionally and technically to SAP so SAP clients can have real CBF.

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Tagged as: Forecasting, Planning Book