The Struggle is Real—Discerning Realignment vs. Lifecycle Planning
Consider Your Forecasting Purpose to Determine Which Process to Apply
By Ryan Rickard, Director SCMO2
Have you ever found yourself trying to decide when to use SAP’s realignment functionality versus lifecycle planning? Typically you just want to leverage the data from a former planning object to help plan for a new one. It’s always easier to just move or merge the data to a new planning object and begin planning it, right?
But what if you just need some of the data—say two customers and not all five? What if the new planning object is similar to two or three former objects? What if the new SKU has customers that previously purchased from multiple other similar items? And what if you want to save the old (planning object) for later because you know every year a new and similar item is introduced; can they be chained together?
Ah, the challenging questions many of us face in new product forecasting!
In SAP APO, and now in SAP IBP, the functionalities of realignment and lifecycle planning can assist you, but each has it’s own purpose and proper usage. Realignment is intended to help planning when major organizational changes occur. Lifecycle planning is intended for new product introductions or discontinuations.
What is Realignment?
There are often key operational, organizational or customer changes that require you to adjust your supporting planning data. As defined by SAP, realignment is the process of adjusting planning data (such as planning objects, master data and key figure values) to reflect such business changes. When using realignment, the data is copied and moved to a new planning object. Typically you choose to delete the data when moving so that you don’t have duplicate or double data (on the old and new) in your planning system. A potential downside to realignment is that when you move the data you lose visibility to its original state. You cannot undo the realignment or data deletion; however, you could realign it back if the state of the data hasn’t changed since the initial move.
When to Use Realignment
Realignment is good for cases where data visibility is never needed again on the old planning object. For example, a customer acquires another customer. In this example you may no longer need to see the old customer data and want it merged with the acquiring customer so that you can begin planning all as one. Another common situation is when a distribution center is closed or moved and you need to begin planning the fulfillment at another location.
Realignment works well in this example because you no longer want to plan on the old DC, yet want to plan on the new DC. But, let’s say you realign product data to a new product and one year later want to reference back to the old product to see what the seasonality was for four of the seven customers. If realigned, you may not be able to easily see the data on the old material and the four customers.
What is Lifecycle Planning?
When using the lifecycle planning capability in SAP APO or IBP, you can reference the historic data from one planning object to plan another. When planning a new product, which has no historical data or limited historical data, you can reference the volume and data pattern of another to generate a statistical forecast. You can also reference multiple products or specify which customers or locations to reference and indicate a percent increase or decrease of the reference product’s volume.
As an example, let’s assume we have a new product that we expect to sell at a rate 30% higher than the old, and for only three customers. Your lifecycle product will reference the old product at a rate of 130% for the three specific customers. When you generate a statistical forecast on the new product, the history of the three customers will be read and lifted by 30% when the algorithm considers and outputs a forecast.
When to Use Lifecycle Planning
Lifecycle planning allows you to keep the original data and link planning combinations together to reference the historical data for future statistical forecasting. By leaving the data on the original planning object you have full visibility of its original state, which is often important for year-over-year analysis and comparison. Using lifecycle planning along with phase-in allows you to set start times for each planning object so that the statistical forecast being created references the old, on the date specified. The start dates can be different for different customers or locations. Using phase-out planning allows you to discontinue or phase-out the forecasting of the old item.
To properly utilize lifecycle planning it should become a regular step in your Demand Planning and S&OP process. After identifying that a new product needs to be planned for, you simply create a lifecycle profile with the reference product, percentage of history to reference, customers and/or locations to consider and the anticipated phase-in time. The next time a statistical forecast is generated the new planning combinations will now have a forecast.
Choose Carefully for Each Purpose
We often hear of situations where realignment is used and later, planners wish to have visibility of the original planning data. It’s important to consider the purpose of the data migration for the sake of planning and long-term analysis. If there is a major business or organizational change and you never need to refer to the original state of the data, realignment is a good option. If you simply want to link or reference combinations together to create a future forecast, lifecycle planning is the functionality to utilize.
The struggle doesn’t have to be real! SAP has provided the functionality to support both common planning needs. If used correctly, it can help you build a forecast and still give the proper visibility for long-term analysis and year-over-year comparison.