48
10 min
How major Agribusiness reached more than 75% forecast accuracy on SKU-day level by implementing Integrated Business Planning
Natalia Morozova
IBP Expert, TeamIdea Group
This case study details the digital transformation of Integrated Business Planning for Major Agriculture Holding and Diary producer in 2021-2022. Discover how the company moved to data-driven planning process, successfully faced all project challenges and dramatically improved forecast accuracy. Case study is addressed to FMCG companies, interested in Integrated Business Planning and supply chain operations excellence.
The case covers digital transformation for major Agriculture Holding, part of TOP-10 in Agriculture companies and TOP-6 in Poultry production in CIS. The company covers end-to-end cycle from crops cultivation to meet processing and diary production and has around $2 billion revenue.
Apart from agriculture traditional business the Holding also owns branded store chain of 80 small stores for selling own sausages, delicacies, fresh meat and meat products.
In 2021 company faced significant challenges related to planning operations:
The key departments taking part in planning: Marketing, Commerce, Production, Finance worked in separate Excel spreadsheets. As a result the process of Sales and Operations planning was disconnected, fragmented and effort-consuming. One singe error in formula of sending wrong version of Excel file to colleague could lead to planning inconsistency and loss of margin due to penalties of Grocery chains for non-delivery or spoilage of stock. Important part of assortment was formed by ULTRA-FRESH categories with shelf-life of 3-4 days.
So, it became clear that business process change in S&OP and digital transformation of planning are strategic necessities for the company.
The initiative of digital transformation came from Deputy General Director for Economics and Finance as a main project sponsor. The key objective of the project was stated as supporting revenue and margin growth by increasing forecast accuracy and enhancing sales and operations planning process. The project covered several areas:
Integrated business planning solution from SAP was chosen as an IT-tool for supporting these aims. Demand module was the core of the project.
Functional and organizational scope of the project
Guided by TeamIdea the 12-month project followed structured waterfall methodology due to complex and non-standard requirements to ensure optimal functional architecture. The project included 5 phases: preparation, blueprinting, realization, testing and go-live preparation, go-live. The business requirements of Marketing, Commerce, Operations and Finance were gathered, analyzed and mapped with system capabilities.
Main trading house of the holding and 28 branches, three sales channels and 1500 key SKUs were covered by the project.
During blueprint phase S&OP and Demand planning business processes were redesigned using S&OP Best Practices and TO BE processes were illustrated on schemes using BPMN notation. The project included integration of IBP system with ERP and this integration also required detailed blueprinting for developing interfaces with correct ETL and data enrichment procedures.
Forecasting was set up using advanced algorithms such as SARIMA and gradient boosting, which were applied on SKU-day level, minimum granularity for FMCG demand planning. It’s especially challenging to fight for forecast accuracy on detailed SKU level because of fluctuations, which are smoothed on aggregated level. But exactly SKU-day level of forecasting gives better base for further supply planning for products with short shelf-life.
Automated sales history cleansing was configured for better baseline forecasting of regular demand. Promotion uplifts in the past should be marked and removed on day level. It was a hard project work related to data analytics and data transformation to catch up all past promotions.
Once baseline forecast is calculated system should take into account future promotions and its potential effect on demand shape. Promotion-related business requirements were very complex since there was more than 200 types of trade marketing activities. Promo effect was calculated based on discount, promo type, store format and other characteristics.
Different planning views based on SAP IBP Excel Add-in were created for key roles in IBP process. Scenario planning and analysis were supported by custom reports and preconfigured dashboards.
The process of demand plan review and approval, responsible person notifications also were managed within same IBP system to ensure single point of truth.
Finally, after demand plan is approved outbound deliveries from DC on SKU-day-target location were calculated using lead time shifts and taking into account required minimum remaining shelf-life.
The project transformed end-to-end processes from statistical forecasting to outbound deliveries planning and demand & promotion plan approval. Advanced features of implemented IBP platform allowed to reach following advantages:
After the project end the center of competence of the company continued to work on forecasting excellence and building enhanced planning views for Demand planning using IBP platform tools.
The case proves that FMCG companies with complex promotion planning processes and multiple distribution channels can benefit from implementation of modern IBP solutions.
When choosing the solution company should focus on powerful IBP platforms with advanced features of constructing planning views and data model in a flexible way by configuration because out-of-the box preconfigured solution hardly will match complex business requirements. Also target platform should support ML techniques such as Gradient Boosting for Sales Forecasting to be capable to reach high forecast accuracy.
Of course, planning input data quality and proper integration with ERP and other data sources is crucial for project success and therefore should be focused from the 1st day of the project. Key advice is to keep especially assigned planning data responsible person leading data team from business of IT of the company.
A project sponsor from the managing board is vital for driving IBP system implementation project. The sponsor should take active part in regular steering committees at least on monthly bases. This helps to solve project issues effectively and make fast business transformation decisions mitigating plenty of project risks.
To learn more about this implementation or to explore how you can achieve comparable demand planning excellence, please get in touch. We are ready to schedule a detailed discovery session to map out your optimal IBP transformation path.
About the Agriculture Holding and its challenges
The case covers digital transformation for major Agriculture Holding, part of TOP-10 in Agriculture companies and TOP-6 in Poultry production in CIS. The company covers end-to-end cycle from crops cultivation to meet processing and diary production and has around $2 billion revenue.
Apart from agriculture traditional business the Holding also owns branded store chain of 80 small stores for selling own sausages, delicacies, fresh meat and meat products.
In 2021 company faced significant challenges related to planning operations:
- Complex demand planning through multiple sales channels: major retail chains, own stores, B2B small customers segment like partner stores and wholesale.
- High volumes of spoilage due to minimum remaining shelf-life restrictions of grocery retailers, especially for ultra-fresh categories.
- Difficulties in planning deliveries from the DC taking into account lead times.
- Huge amount of manual planning activities and low level of Excel-based sales forecasting accuracy.
The key departments taking part in planning: Marketing, Commerce, Production, Finance worked in separate Excel spreadsheets. As a result the process of Sales and Operations planning was disconnected, fragmented and effort-consuming. One singe error in formula of sending wrong version of Excel file to colleague could lead to planning inconsistency and loss of margin due to penalties of Grocery chains for non-delivery or spoilage of stock. Important part of assortment was formed by ULTRA-FRESH categories with shelf-life of 3-4 days.
So, it became clear that business process change in S&OP and digital transformation of planning are strategic necessities for the company.
IBP project aims and approach
The initiative of digital transformation came from Deputy General Director for Economics and Finance as a main project sponsor. The key objective of the project was stated as supporting revenue and margin growth by increasing forecast accuracy and enhancing sales and operations planning process. The project covered several areas:
- Automated forecasting for all sales channels on SKU-day level
- Historical data cleansing for correct baseline forecasting
- Promotion planning to ensure proper demand shape
- Calculation of outbound deliveries from DC
- Building target S&OP process with all decision-makers involved and operating same data
Integrated business planning solution from SAP was chosen as an IT-tool for supporting these aims. Demand module was the core of the project.
Functional and organizational scope of the project 
Guided by TeamIdea the 12-month project followed structured waterfall methodology due to complex and non-standard requirements to ensure optimal functional architecture. The project included 5 phases: preparation, blueprinting, realization, testing and go-live preparation, go-live. The business requirements of Marketing, Commerce, Operations and Finance were gathered, analyzed and mapped with system capabilities.
Main trading house of the holding and 28 branches, three sales channels and 1500 key SKUs were covered by the project.
During blueprint phase S&OP and Demand planning business processes were redesigned using S&OP Best Practices and TO BE processes were illustrated on schemes using BPMN notation. The project included integration of IBP system with ERP and this integration also required detailed blueprinting for developing interfaces with correct ETL and data enrichment procedures.
Forecasting was set up using advanced algorithms such as SARIMA and gradient boosting, which were applied on SKU-day level, minimum granularity for FMCG demand planning. It’s especially challenging to fight for forecast accuracy on detailed SKU level because of fluctuations, which are smoothed on aggregated level. But exactly SKU-day level of forecasting gives better base for further supply planning for products with short shelf-life.
Automated sales history cleansing was configured for better baseline forecasting of regular demand. Promotion uplifts in the past should be marked and removed on day level. It was a hard project work related to data analytics and data transformation to catch up all past promotions.
Once baseline forecast is calculated system should take into account future promotions and its potential effect on demand shape. Promotion-related business requirements were very complex since there was more than 200 types of trade marketing activities. Promo effect was calculated based on discount, promo type, store format and other characteristics.
Different planning views based on SAP IBP Excel Add-in were created for key roles in IBP process. Scenario planning and analysis were supported by custom reports and preconfigured dashboards.
The process of demand plan review and approval, responsible person notifications also were managed within same IBP system to ensure single point of truth.
Finally, after demand plan is approved outbound deliveries from DC on SKU-day-target location were calculated using lead time shifts and taking into account required minimum remaining shelf-life.
Project results and business benefits
The project transformed end-to-end processes from statistical forecasting to outbound deliveries planning and demand & promotion plan approval. Advanced features of implemented IBP platform allowed to reach following advantages:
- > 75 % forecast accuracy of automated statistical forecast on SKU-day level
- Reduction of write-offs and price markdowns due to product expiration because of more careful outbound deliveries planning
- Convenience for key and end users in using IBP platform thanks to Web-UI and Excel Add-In
- Internal center of competence for IBP was set up during the project, assuring sustainable use of best practices of S&OP and IBP platform
- Automation of planning algorithms decreased manual efforts of planners allowing building multiple scenarios and choosing best options based on analytics and not only expert assumptions
After the project end the center of competence of the company continued to work on forecasting excellence and building enhanced planning views for Demand planning using IBP platform tools.
Lessons learned
The case proves that FMCG companies with complex promotion planning processes and multiple distribution channels can benefit from implementation of modern IBP solutions.
When choosing the solution company should focus on powerful IBP platforms with advanced features of constructing planning views and data model in a flexible way by configuration because out-of-the box preconfigured solution hardly will match complex business requirements. Also target platform should support ML techniques such as Gradient Boosting for Sales Forecasting to be capable to reach high forecast accuracy.
Of course, planning input data quality and proper integration with ERP and other data sources is crucial for project success and therefore should be focused from the 1st day of the project. Key advice is to keep especially assigned planning data responsible person leading data team from business of IT of the company.
A project sponsor from the managing board is vital for driving IBP system implementation project. The sponsor should take active part in regular steering committees at least on monthly bases. This helps to solve project issues effectively and make fast business transformation decisions mitigating plenty of project risks.
Next steps if you need more info
To learn more about this implementation or to explore how you can achieve comparable demand planning excellence, please get in touch. We are ready to schedule a detailed discovery session to map out your optimal IBP transformation path.
Key takeaways
- Major Agriculture Holding faced challenges in supply chain management area related to demand and promotion planning because of siloed IT-landscape and poor automation of IBP processes. Company implemented IBP platform for orchestrating S&OP processes.
- The project yielded significant, measurable results: 75% forecast accuracy on detailed planning level.
- This case offers several critical insights for other organizations: choose flexible IBP solution, adapt ML for forecasting, focus on data quality and involve the sponsor from management board.
