SAP01 Analytics and Strategic Planning

May 2012

The illustration on the screen shows how reporting and analytics is done in SAP.

The type of processing usually performed in an SAP ERP system is called Online Transaction Processing (OLTP). This system offers reports on information for everyday work. You can request a listing of documents or master data information, as well as combinations of these objects. These reports, called List displays, are generated directly from online transactions.

The data stored in tables is either given to the Information Systems or taken by the SAP NetWeaver BI System to produce an output.

The major difference between the Information Systems and the SAP NetWeaver BI system is that while the information system in SAP uses tables in the ERP system to collect data the BI has its own database.

We discussed about OLTP in the previous slide, now let us see what Online Analytical Processing (OLAP) is and the differences between OLTP and OLAP.

The reporting used in an OLAP environment significantly varies from the reporting in OLTP. The reports in the analytical system provide information about the important factors that the management of an enterprise requires for making its business decisions.

As shown in the illustration, reporting in OLTP revolves around business functions in an Operative Environment. It provides information on various transactions stored in various databases.

On the other hand, the reporting in OLAP deals with the data called from the operative environment to an informative environment. From various sources, key figures are derived and aggregated in a data warehouse. By selection, assignation and aggregation of information taken from the operative environment, the key figure system can be customized to meet specific reporting and analytical requirements of an enterprise.

The major differences between an OLTP environment and an OLAP environment are:

1.      Data stored in OLTP layer is in a very high level of detail while data in the data warehouse is compressed for high-performance access.

2.     Data in OLTP has minimal history while that in OLAP has comprehensive historical data.

3.      There are frequent data changes in OLTP while data is frozen after a certain point in OLAP.

4.      The requests for wide-spread integrated information are higher in OLAP.

5.      Normalization is high for OLTP due to reduction in data redundancy, while there is less normalization in OLAP because of data staging and lower performance.

6.      An OLAP environment only has read access while in OLTP you can modify data.

SAP NetWeaver BI is a very flexible reporting and analysis tool. It enables strategic analysis and help with the decision-making within the organization. Historic and current data is available for evaluation in various levels of details.

The architecture of the SAP NetWeaver BI can be portrayed by three layers:

·         Extraction

·         Staging and storage

·         Presentation and analysis

Both SAP systems and external systems are considered as data sources. SAP NetWeaver BI activates, controls, and monitors data extraction. This data transfer is highly programmed. The metadata preconfigured by SAP systems is managed in the Enterprise Data Warehouse which works on a separate database. Also, application data from various source systems is staged and stored in multidimensional relational tables.

 

 

 

 

SAP’s Strategic Enterprise Management system and SAP NetWeaver BI together provide a complete solution for all types of reporting and decision-support.

As shown on the screen:

1.      The first step is to analyze the standing of the organization.

2.      The performance of the company is assessed in terms of competitors and stakeholders. The data is extracted from the operational systems of the company and its value chain partners. Then it is consolidated and compared with targets to create management information.

3.      Strategies are now modeled out of the result of the analysis.

4.      Using simulation and scenario modeling, the information from the analysis is transformed into knowledge to form the basis of strategic planning to reach future targets.

5.      These strategies are then executed.

6.      The plans are translated into targets and operational rolling forecasts, supported by appropriate key performance indicators and incentives at all levels.

7.      Finally, the success of the implementation is measured.

The implementation of the strategies is monitored by a continuous feedback loop, so that adjustments in tactics can be made if and when required.

Through such a system, corporate strategy is connected with operations. But the actual value of this system is the execution of management plans, and in many cases, it makes the time and resource-intensive annual budgeting process obsolete.

 

Business planning is most essential for setting up organizational goals and to achieve the objectives.

In the planning process you define planning forms, standards, approval procedures, planning areas, and objects.

Then you set the consolidation procedures and include the planning interdependencies Finally, you match the planning periods of the individual planning areas and staff.

On the screen the various levels of business planning is depicted:

·         Strategic Planning

·         Operational Planning

·         Execution Planning

 

·        As shown here, the strategic planning is done first. Strategic planning is the defining of the future course of the company, for instance; product/service offering, return on investment, company growth, and so on. Different scenarios are modeled and evaluated to break the high-level strategic goals down to targets on the execution level.

·        This is then followed up by an operational planning and budgeting. This means allocating resources necessary for target fulfillment and reconciling the resources across operational units.

·        Finally a plan evaluation is done for the given period.

·        After this only the Execution planning is done on the basis of the outcomes of Operational Planning which can be used for planning and scheduling.

SAP NetWeaver BI Business Planning and Simulation (BW-BPS) is a tool for broad-based planning. It supports a planning process that allows the construction of a planning model. This model is integrated with global strategic planning and specific operational planning problems while keeping the focus on business processes throughout the organization.

The BW-BPS process helps you plan, budget, and forecast by providing the functions shown on the screen. These functions help you in modeling, manual planning and analysis, automatic planning and process control.

Modeling function is the creation and maintenance of planning framework, which is the main working environment for sales and profit planning. This framework contains all the possible settings for your planning architecture. You can carry out the actual planning from this framework screen. The essential elements for planning and editing the data to build the planning framework are planning level, planning package, planning method, and the planning set.

Manual planning and analysis allows you to enter the plan in excel, web or in ALV and upload them to the SAP system. The user interface shows the documents that are invoked and the hierarchies in rows for easy manipulation of data for planning and analysis purposes.

Automatic planning function automatically generates planning data. Using this function you can copy plan values for processes that can be programmed to a plan, thus creating alternative to copy plan values for other processes that can be mechanically planned. This helps in creating alternative plan versions. You can also edit data in the process.

The system offers functions for process control, which is tracking and monitoring the status of the plans.

The BW-BPS functionality brings planning, budgeting, forecasting, along with monitoring, reporting and analysis in a single software installation.

Organizations focus on their capability to earn revenue from the products or services they sell. In order to maximize their profits they have been concentrating on their in-house practices of the logistic chain. Systems like SAP ERP enables automation of back-office processes in organizations. This integration helps them in getting a clearer picture of the revenues and costs.

SAP Strategic Enterprise Management (SAP SEM) aids strategic enterprise management processes of an organization on all relevant levels. SAP SEM is based on SAP NetWeaver BI and all of its functions can run on one or many SAP NetWeaver BI InfoCubes. The application contains five functional software components for the compact integration of SEM processes or component architecture.

1.      Strategy Management offers tools like:

Balanced scorecard which is an instrument to convert business strategies into understandable, communicable and meaningful targets.

Risk Management helps you show the effects that an identified risk would have on specific measures.

2.      Performance Measurement provides tools like:

Management Cockpit: The visual information unit which enables management to grasp complex situations at a glance and thus help facilitate and accelerate decision-making.

Value Driver Tree – Every measure in a balance scorecard can be linked to a value driver tree.

Measure Builder – The measure builder is used for defining, calculating and describing key figures, such as the sales per employee, or shareholder value indicators such as economic profit.

3.      Business Planning and Simulation – The BPS component provides functions to convert investor/stakeholder expectations into value-based goals and then incorporates them in an enterprise plan. They include the functions for market modeling and for creating dynamic and linear business modes; simulation of different scenarios and their evaluation, taking into account the business risks; linking to an integrated execution of enterprise planning and forecasting.

1.      Business Consolidation – The Business consolidation component provides functions for financial consolidation and for value-based accounting. These include functions for automated value based adjustment postings, currency conversions, inter-unit eliminations, consolidation of investments and parallel valuation systems according to different internal procedures.

2.      Stakeholder Relationship Management – The SRM Component provides functions to support the stakeholder communication process. It helps to inform the stakeholders (investors, employees, customers, partners, social groups) regularly about the business strategy – for example, over the internet – and its effect on their stakeholder value. Also, it helps to obtain organized feedback from the stakeholders and to structure it in such a way, that this information can be processed within the other SEM components (BPS, CPM).

Corporate Performance Monitor provides tools for the strategy management areas and performance measurement areas. These tools in SAP SEM facilitate quick implementation of strategies and the supervision of business performance across the entire concern.

The tools for strategy management are Balanced Scorecard, Strategy Templates, Value Driver Tree, Risk Controlling, and Value Based Management.

The Balanced Scorecard primarily provides a framework to translate and communicate strategy throughout the business.

The main tools in performance measurement are Management Cockpit, Measure Builder, Benchmarking, and Measure Catalog.

The Management Cockpit is more focused on the analysis of a wider set of indicators, both of strategic and operational performance.

There are some similarities between Balanced Scorecard and Management Cockpit and can be used together for good effect. We will discuss about them in detail in the next slides.

The balanced scorecard is a strategic planning and management instrument to align business activities to the vision and approach of the business.

It also improves internal and external communication, and scrutinizes organization performance against strategic goals.

It is used extensively in business and industry, government, and nonprofit organizations worldwide.

The balanced scorecard coverts business strategies into targets which are assigned to certain perspectives of the organization to develop metrics, collect data, and analyze it with respect to them. These perspectives are:

·        The Financial Perspective examines the growth and profitability strategy from the shareholder point of view.

·        The Internal Business Process Perspective Here the organization prioritizes to excel in various business processes to increase customer and shareholder satisfaction.

·        The Learning and Growth Perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. It measures to create an environment that supports organizational change, innovation, and growth.

·        The Customer Perspective defines the value proposition that an organization will apply for customer’s satisfaction. It is, thus, an approach for creating value and differentiation from the customer’s point of view.

Thus all the four scorecard perspectives shown here with their respective focus area contain strategic purposes, with their assigned measures and strategic plan.

The Management Cockpit tool allows you to process data on which you base your business decision, with the use of high-quality graphics. The visual representation of even complex situations helps management to understand situations and speed up decision making.

As shown on the screen, Management Cockpit room has four walls.

·        The black wall is for financial key figures and critical success factors.

·        The red wall is for markets, customers, and competitor analysis.

·        The blue wall for monitoring internal processes and

·        the white wall for monitoring strategic projects.

Hence each wall is a logical grouping of measures.

Each wall consists of six logical views.

A Logical view is the display level of the cockpit and consists of six frames.

Frame is the lowest level of individual measure display. A logical view contains six frames. Every frame defines a general factor such as product quality.

SAP ERP provides a management cockpit interface, the ideal framework for reporting performance results.