Escapes from and returns to SAP planning

During several years of my career as a consultant supporting the implementation of the production planning and control module, I have often dealt with projects involving the restoration of the planning system in SAP ERP. Only in a select few cases was it decided in advance specifically not to implement these functions. In most cases, such functions were launched during the initial execution but, for various reasons, were later abandoned.

The question of why the decision  to not install these processes in the IT system and whether there are common reasons that lead companies to work in parallel in both SAP and Excel will be explored. Planning is certainly a vital component in any business practice. With that in mind, we will also explore the reasons for the return to the SAP planning system and how the adverse scenario of breakups and comebacks, experienced by a large number of companies, can be avoided.

In this article, the common term “SAP planning” covers the functions supported by the SAP ERP system. This may include long-term demand forecasting, sales and operations planning, simulation planning, independent demand management in make-to-stock and make-to-order production, a combination of these two strategies, master production scheduling, material requirements planning, and detailed order scheduling at workstations.

Withdrawal from planning – the causes

Typically, there are various reasons to stop planning within an integrated system and, in particular cases, several of those reasons usually lead to a decision to switch to an alternative method of planning. One reason is a frequent change in the planner job position. When a person steps into this position, they usually didn’t participate in the original implementation of the system and their new duties and responsibilities are inherited from their predecessor. While it is easy to learn to execute transactions, it is difficult to explain to another person the reasons why a particular solution was adopted. Therefore, each subsequent planner (and there have been cases of frequent turnover in these positions) understands their role in the system to an increasingly lesser degree. In such situations, it is very easy to negate the sense of “being bothered” with the system by switching to an easier planning method, such as with the use of a spreadsheet.

A significant reason for the ERP implementation projects carried out in Poland, in particular SAP rollouts from international corporations, is the pursuit of success. This is defined as a system which is readily working ‘straight out of the box’ at the lowest possible cost. Unfortunately, one of the easiest ways to cut costs is through training. I have heard many times that training courses, especially those conducted by internal consultants, come down to the delivery of some basic instructions on how to execute individual transactions. However, repetitive execution of a sequence of activities is only a small part of a planner’s duty. The planner’s job is about tackling multiple problems related to the provision of products in the expected amounts while meeting deadlines, often with limited resources. It requires a deep understanding of the company’s business processes, knowledge of the system, and an ability to use it to prepare a reliable plan that’s feasible and in accordance with the wishes of company management.  It requires a flexible response to changes in planning situations, such as sudden growth or drops in demand, shortages of raw materials, machinery failures or an unavailability of the workforce. A planner who does not know how to cope with these problems using the integrated system, often decides to use a simpler, clearer and more flexible solution like Excel.

More recently, companies operate in a rapidly changing environment. This forces them to constantly adapt to changing market demands. After a system is implemented, if companies rely on their recognition (which is a feature of many deployments) and do not develop the system by adjusting it to the environment and internal organisational changes, their capabilities will no longer meet requirements. Without continuous improvements in SAP, people slowly stop using it under the assumption that the system is incapable of meeting current demands. After all, it is much easier to do it in the familiar Microsoft Office environment.

A condition to achieve the right results in planning processes, and in particular MRP, is to maintain updated data on inventory, planned requirements and receipts. All departments handling the company’s logistics, such as planning, construction and technology, purchasing, warehouse management and customer service, have to cooperate to achieve this. However, it is rare that they are all aware of the consequences of maintaining out-dated customer orders, orders to suppliers, redundant production orders, and a lack of continuous stocktaking within the system.  It is absolutely essential to have correct and relevant master data on goods and their components, the production cycle, the availability of machinery and the workforce, and other relevant information. Often, when it is the Chief Financial Officer who has a decisive voice in the company, the system is designed to allow for proper planning and recording of costs while neglecting logistics processes. As a consequence of this negligence, the results of planning in the system differ from the expectations of the planner, and what’s more, they are not able to correct it. So once again, redemption lies in Excel, in which a planner can omit all inconvenient data without consequence.

The least common reason is the mismatch between the system and reality, a result of mistakes made during the initial implementation. The problem, far more commonly, is that the conditions in which the company had operated have changed, and these changes have not been reflected through any adjustment of processes within the system.

It’s curious that it seems easier to abandon SAP planning instead of, for example, inventory management, purchasing, and customer service or costing functions. Planning is the only area in a company’s activity which does not have any direct consequences in accounting. In planning, no receipts or material consumption are posted and no working time is recorded that would have an impact on the balance sheet and the profit and loss statement of the company. Therefore, a departure from planning in an integrated system is not questioned by other departments. It is often done so in a way that goes unnoticed by others and is even approved by management, if the planner convincingly explains the alleged ‘inefficiency’ of the system.

Deficiencies of planning in Excel

In light of the above mentioned reasons to switch to planning within MS Excel, the question arises of whether or not it’s a good direction. Perhaps SAP is indeed not flexible enough, using it takes too much time and changes are costly, whereas Excel will satisfy our needs in a faster and less stressful way. To agree with this statement would be to admit our failure, rather, let us examine arguments in favour of keeping or restoring the planning functions as a vital component of the integrated system.

The implementation of an ERP system integrates the operations of many company departments within processes focused on the best possible customer service, the achievement of expected financial results and optimal use of resources. Such integration allows the company to achieve a higher organizational level, although many employees find it difficult to master. The system ruthlessly reveals all mistakes, lack of regularity and dishonest performance. Planning is the area which is most sensitive to such errors and shortcomings. On the other hand, it is a verifier of the level of a company’s organisational culture. We strongly believe that businesses, in which the planning works smoothly, have achieved excellence in their operations. The ERP system ensures data integration and consistency. All master data and transactional data having direct impact on the performance of the company are stored in the system. Switching to another tool outside the integrated system, e.g. Excel, makes some of this data unavailable to other company employees. The planning data becomes  “secret knowledge” that can be freely manipulated. It doesn’t mean, however, that people working in Excel commit fraud, but the temptation to ‘improve’ the results is certainly there as it is difficult to verify the data calculated in a spreadsheet. The data stored in Excel is not transparent to other departments working with SAP on a daily basis. When several planners use a spreadsheet in their work it is difficult to maintain common working standards.

Improvement comes from analysis of current performance, its critical evaluation and the appropriate administration of corrective actions. Reliable and historical data is necessary for this process. Among other things, proper planning is about comparing the plan and its implementation for subsequent accounting periods and calculating performance indicators. Storage and use of this information in only one system provides a stronger guarantee that it will be used in a better way than when it is scattered across multiple tools, including Excel spreadsheets.

Finally, using Excel in planning creates the necessity to enter planning results into the ERP system, for example as production orders to be fulfilled. This requires the preparation of interfaces or manual executions of functions that could otherwise be automated in the integrated system.

Initiative to return to ERP

The withdrawal from the use of planning functions – a slow erosion of the system, which  step by step eliminates certain SAP planning functions or transfers them for execution in an Excel spreadsheet – is mostly a bottom-up activity, though the decision to return to the integrated system usually comes from the top. The company management typically become concerned about their inability to gather plans from different sites or departments into one place. They become frustrated when the purchasing plan is carried out independently of the sales or production plan, and with the difficulty in verifying plan consistency. They are concerned about the fact that, although the integrated system has been bought and implemented, they cannot make full use of the integration. The observations show that the initiative to restore or organize SAP planning functions anew comes from the company’s management or results from personnel changes in management positions which are responsible for logistics.

How to avoid repetition?

Making the decision to return to planning in this way is extremely valuable. However, from the point of making that decision and onwards, companies will need to take multiple, often time consuming, steps, which could take several months. First of all, it is necessary to examine the situation of the company from the very beginning and make sure that the environmental conditions, the number of finished products sold, and available resources have not changed significantly since the initial implementation of the system. The documentation and, in particular the previous business blueprint, can still be used again. However, the usefulness of decisions taken at that time should always be critically evaluated as they may no longer apply or may no longer be relevant.  Errors made during the initial implementation of the system were listed as one of the reasons planning was abandoned and so it’s very important that those errors are not repeated.

The departure from planning in SAP usually results in the system being incapable of taking on planning functions again. This includes both the master data – which couldn’t be verified through planning functions – and the transactional data, including the aforementioned failure to update the planning situation and shortcomings in stock reconciliation procedures. All of this data needs to be updated.

In order to avoid repeating the same mistakes, the company needs to show a greater commitment to training courses and workshops addressed to not only the planners, but everyone involved. In most cases, it is about making sure employees are aware of the impact that all involved in the customer service process have on the planning system – from accepting an order to the dispatch of a finished product.

Finally, bearing in mind changeability, which has become a feature of almost any business activity, it is necessary to introduce mechanisms for verifying procedures and their continuous improvements. The IT system should be a living structure and should change not only as a result of the launch of new functions, but also through the adjustment of pre-existing functions.

The scenario of departing from and returning to planning in the ERP system presented above is a result of observations made in several companies. The number of these observations proves that this is a common phenomenon. Knowing the cause and being aware of how difficult it is to return to planning, this problem can be avoided. It requires high awareness of the company’s management, as well as a methodical approach, determination and conviction that the solutions adopted by the planning system users were the right ones.