The Advanced Planner and Optimizer was SAP's first supply chain planning tool, which with its components enables the complete supply chain management of the supply chain from start to finish. In particular, Supply Network Planning as the core component for cross-location network planning of all supply chain participants represents a function that did not exist in SAP R/3 and is still not provided for SAP ECC or S/4 HANA.
Anyone who is implementing S/4 today and does not yet use an SCM solution for planning the supply network, but would like to use it in the future, must fall back on either APO SNP or IBP.
As the predecessor of IBP, APO is very mature and reliable, but support and further development will expire in 2027 at the latest. Even today, practically no new functions are implemented in APO. However, some components will be retained and will be found on the ECC and S/4 HANA platforms in the future. More about the future of the individual APO components and a comparison between APO and IBP can be found further down on this page under "Comparison APO and IBP".
APO essentially consists of the following components:
The last link in the supply chain is the sale of the products or the demand for them. APO Demand Planning supports sales and demand planning. With this solution, sales can be planned in the medium to long term, thereby increasing production efficiency and saving costs by avoiding unnecessary stock-keeping. Orders can be fulfilled considerably faster and with more flexibility, delivery times are drastically reduced. In addition to numerous statistical forecasting methods, this component also allows for consideration of various causal factors that influence demands.
The APO component "Supply Network Planning" plans short- to medium-term demand dynamically and across companies. It accesses all relevant data of the entire logistics network: from purchasing to production to distribution and transport. This type of demand planning goes far beyond the comparatively simple material requirements planning of current ERP systems, as it functions across locations and can include all participants in the supply network. In addition to infinite planning heuristics, cost-based optimization algorithms are also available in this component.
With the PP/DS component for production and detailed scheduling, APO provides another core function. It takes into account capacity, material and procurement constraints and enables simultaneous planning for all production stages within a production site. This means that all important information from production is always available at a glance, the use of all available resources can be optimized and the effects of changes, e.g. on production lead times and on-time delivery performance, can be identified immediately.
SAP APO Transport Planning and Vehicle Scheduling plans and optimizes the distribution of goods in complex structures. The software makes it possible to determine the delivery requirements of multiple distribution centers for different delivery stages as well as the optimal itinerary for your shipments at short notice. Overall, this provides a detailed transportation plan for your inbound and outbound shipments and makes optimal use of all available capacities on the available means of transport. A more suitable distribution of goods among the company's locations reduces shortages and cuts shipping costs without increasing overall inventory.
The ATP or availability check ensures that the company can provide the desired product at the desired time in the quantity requested by the customer. It can be triggered from the connected ECC system and determine whether a demand can be confirmed or not based on the so-called ATP check procedures.
Availability checks with allocations, across multiple locations or for alternative products are also possible.
In addition to the APO core components, supplements have been added over the years and the entire solution has simply been renamed as SCM, what is now probably the final version number "7.0".
The three most important components for an overall supply chain management are briefly mentioned here:
Service Parts Planning offers special planning functions for spare parts and enables complete transparency in the supply chain from the occurrence of a demand to the delivery of the product. During planning, SAP SPP takes into account all characteristics of each product. This means that SPP differentiates between products with constant demand, demand that follows trend patterns, seasonal demand and products with sporadic demand. SPP optimally links inventories to the demands that occur and automates the majority of the processes of release, approval and call-off. This helps to reduce inventory and warehousing costs, increase service levels and shorten delivery times. The analysis and monitoring functions help to identify and eliminate weak points in the supply chain.
The Supply Network Collaboration application supports the participants in complex supply chain networks to enable efficient and seamless collaboration. Furthermore, SAP SNC supports inventory management by suppliers and customers, on-time shipping of replenishments, notification of deliveries in advance, as well as invoicing. It also supports the seamless flow of forecast processes and work orders.
Supply chains are highly complex and highly dynamic structures involving many different parties. In order for companies to still be able to react flexibly and promptly to unexpected events and regularly monitor ongoing business, they need a central tool that summarizes all events, documents them clearly and immediately informs them of exceptions.
With the Event Manager, SAP provides an interface and a mediator between planning and execution. Here, current status information can be obtained at any time and interventions can be made in running processes. Subsequent changes to orders already in progress or exception handling can also be implemented without any difficulties.
The SAP EM serves as a tool for monitoring the entire supply chain of a company. It helps to identify possible disruptive factors, e.g. in the interaction of planning and execution, at an early stage and enables to react immediately to deviations and exceptions. All parties involved can track the internal and external processes in real time.
SAP APO is developed to enable supply chain planning at tactical and operational levels.
SAP IBP, on the other hand, is developed with the aim of involving the most important departments of a company for supply chain management, including the finance department, in an integrated and company-wide process of planning the supply chains at strategic, tactical and operational levels, always obtaining the most economical planning result possible, as explained under "SAP IBP".
In APO, it is difficult to integrate financial planning at all levels of the planning process, where, on the other hand, much more precise order-based planning is possible in the short-term operational area, for example through components such as PP/DS or TP/VS, for which there is no equivalent in IBP.
The SAP IBP solution is further developed in every release cycle, which is every 3 months. Innovative state-of-the-art planning solutions such as demand sensing, multi-echelon inventory optimisation and a supply chain control tower are only available in IBP.
SAP has discontinued further innovation in APO.
IBP for Demand
Demand planning, demand sensing, promotion planning, product life cycle planning, time series analysis, modern machine learning algorithms
IBP for Sales & Operations
Easy and collaborative SOP planning, advanced analytics and dashboards, scenario planning and what-if analyses
IBP for Response and Supply
Order-based supply planning, constraints-based confirmation of customer orders, quota allocation
IBP for Inventory
Inventory management and optimization across the entire supply chain
Supply Chain Control Tower
Supply chain monitoring with alerts, case management, KPIs and reporting
Demand Planing (DP)
Demand planning, promotion planning, product life cycle planning
Supply Network Planning (SNP)
Medium to long-term supply chain planning, both order-based and time series-based, short-term distribution planning
Global Available To Promise (gATP)
Global availability check
Transportation Planning and Vehicle Scheduling (TP/VS)
Short-term planning of transports and means of transport
Production Planning & Detailed Scheduling (PP/DS)
Detailed production planning of capacity and material requirements across all production stages (infinite planning, finite sequence planning, optimization algorithms)
The following figure roughly lists the most important SCM business processes with their APO components, starting from APO, and compares them with the corresponding IBP components.
IBP procedures or processes for which there is no solution in APO are not shown here (inventory optimization, supply chain control tower or an integrated S&OP process).
As can be seen, some of the planning components of SAP APO are also available in IBP. However, please note that the technical architecture of APO and IBP is very different. They work in different ways. Both have their own advantages and disadvantages. IBP has two user interfaces, web UI and Excel, for different purposes. User acceptance is usually better in the case of SAP IBP because of the simple Excel interface. Most IBP users use the Excel interface for their day-to-day work. On the other hand, since IBP is a cloud solution, there are some limitations from a custom solution development standpoint.
SAP IBP is the more modern solution and thus has some advanced functionalities, which reduce the time needed to plan and provides much more flexible methods to accomplish things more easily, e.g. what-if analysis using scenario based planning. IBP provides a platform to collaborate across different departments within your organisation as well as with external business partners such as suppliers and customers. Cross-departmental planning, e.g. for a continuous S&OP process, would be much harder to achieve using SAP APO.
Since SAP has stopped further development of APO and the solution will be phased out within a few years, many customers with existing APO solution are planning to migrate to SAP IBP. Customers who want an advanced supply chain planning system are evaluating SAP IBP instead of APO. Migration is possible. However, it may differ from customer to customer. Roughly speaking, it depends on which solutions from APO you are using. For example:
alphachain has supported many of its customers in implementing SAP IBP. Additionally, we can support you in developing a strategy and in migrating from an existing APO installation to a new SAP IBP solution.
Contact us for a no-obligation consultation.
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