SAP Demand Management is comprised of two solutions - SAP Price Optimization and SAP Markdown Optimization. Demand management functionality is fueled by data from SAP ERP 6.0 and SAP NetWeaver Business Intelligence (SAP NetWeaver BI). The Demand Management ES bundle provides enterprise services that connect SAP Demand Management with the treasure trove of information stored in SAP ERP 6.0 and SAP NetWeaver BI. The enterprise services in the Demand Management ES bundle have been designed in a generic way so that they can be used to interface with other demand management tools if desired.
It will help readers of this wiki to understand the following terminology:
- A price is simply the price at which an item will be sold to the public.
- A price optimization is used to price goods for maximum revenue by aligning pricing with customer demand and business objectives.
- A markdown is a permanent price reduction. Markdowns are used to move seasonal merchandise or simply to increase the volume of sales for a certain type of merchandise, using a permanent price reduction.
Creating a Demand Model in SAP Demand Management
In order to use SAP Demand Management, a demand model must be created using master data and transactional data from SAP ERP 6.0 and sales data from SAP NetWeaver BI. Based on the demand model created within SAP Demand Management, the actual optimizations (price optimization and markdown optimization) are carried out. This information is then carried back to SAP ERP 6.0. The Demand Management ES bundle provides the interface between these critical elements of the demand management solution.
Benefits of the Demand Management ES Bundle
Using the Demand Management ES bundle to connect SAP ERP 6.0 with SAP Demand Management provides the following benefits:
- Follow-on processes in SAP ERP 6.0 can be used
- Data consistency between the systems involved is ensured
- Major integration work and correct value mapping is already done, reducing implementation time for retailers
The Demand Management ES bundle leverages enterprise SOA by interfacing key information such as product and store data from SAP ERP 6.0 and sales data from SAP NetWeaver BI with SAP Demand Management and delivering SAP Demand Management's recommendations back to the user working with SAP ERP 6.0, all via enterprise services.
Retailers who want to optimize regular prices and markdowns, streamline pricing, and increase profitability will benefit from using the Demand Management ES bundle as a means to interface SAP Demand Management with SAP backend systems. Most retailers could use this bundle, though it was created to target grocery and hard-line retailers.
For details on Service Operations, Business Objects and Process Components, please check the ES Workplace.
How to Use This ES Bundle
Since the dawn of retail, business owners have sought ways to sell the most merchandise using optimal pricing. The key is to move inventory at the most favorable prices while keeping selection fresh. Once upon a time, prices were determined by gut instinct, some rudimentary calculations based on historical data and, often, a guess (sometimes educated, sometimes not).
Today's highly competitive market, mushrooming selection, and boom of retail organizations means that finding that ever-evolving price sweet spot is tougher - and more important - than ever. Factors including market whims, logistics variables, and competition from other retailers and within product categories must all be constantly monitored, analyzed, and acted upon to sell merchandise at the best price. This might also include raising prices of products that are less monitored price-wise by the consumer while substantially lowering prices of products with a high price elasticity. Demand management software tools, like SAP Demand Management, offer the most powerful tool on the market to accomplish this task in the most systematic, accurate, and timely fashion. Similar price optimization applications have been on the market for a number of years. What SAP Demand Management does best is generate and deliver actionable suggested prices, price reductions, and start and end times for promotional events that can easily be used by pricing or category managers.
How SAP Demand Management and the Demand Management ES Bundle Work Together
The best way to use SAP Demand Management is to link it to SAP backend systems using the enterprise services offered by the Demand Management ES bundle. Custom integrations are also possible, but enterprise services offer a standards-based approach with ease of integration. Furthermore, because the services have been designed generically, they could also be used to interface SAP backend systems with other demand management tools.
Users for the Demand Management ES Bundle
Two distinct types of users will use the Demand Management ES bundle to interface SAP ERP 6.0 with SAP Demand Management.
- System administrators will be responsible for using enterprise services to copy data from SAP ERP 6.0 and SAP NetWeaver BI to SAP Demand Management. At specific intervals, the system administrator will update the demand model in SAP Demand Management, using enterprise services to send the latest information from SAP ERP 6.0 and SAP NetWeaver BI so that SAP Demand Management's suggestions can be based on the most up-to-date information available.
- Business users will interact with the demand model that is created in SAP Demand Management and decide which of its suggestions (for pricing or markdown optimizations) to act upon. Business users will use enterprise services to transfer those suggestions that should executed to SAP ERP 6.0.
This section will explore a series of use cases for the integration of SAP backend systems with SAP Demand Management using the Demand Management ES bundle. Each use case will show how different outcomes can be achieved by using the enterprise services in different combinations. While these examples illustrate a few of the ways that this bundle could be used, the intention is to show the flexibility and reusability of these business objects and enterprise service operations so that you will have a clearer understanding of how to best deploy them in your own environment. This wiki is also a space for you to share knowledge and collaborate with others who are implementing the Demand Management ES bundle.
Use Case 1: Moving Data into SAP Demand Management
This use case focuses on the system administrator's role in using this ES bundle. The system administrator uses the enterprise services provided in this bundle to move data from SAP backend systems to SAP Demand Management in order to create a demand model. The system administrator also establishes a regular transfer of updated data from the backend systems to SAP Demand Management so that the demand model can be refined on a regular basis using actual sales and product data.
Fictitious health food store chain Green Grocer recently purchased SAP Demand Management in response to growth in store numbers and the fact most of its locations are experiencing increasing competition from other health food chains as well as general grocery stores that are beefing up their own organic and natural food selections. The chain decided on a complete integration between SAP Demand Management and their data in SAP ERP 6.0 and SAP NetWeaver BI, so they are implementing the Demand Management ES bundle to perform this integration.
Integrating SAP ERP and SAP NetWeaver BI with SAP Demand Management
The initial step in using the Demand Management ES bundle is to send data housed in SAP ERP 6.0 and SAP NetWeaver BI to SAP Demand Management so that SAP Demand Management can be used to create a demand model.
Selecting Processes to Optimize
Green Grocer's system administrator is in charge of moving the data and performing the setup of SAP Demand Management using enterprise services provided in the Demand Management ES bundle. In consultation with Green Grocer's category and pricing managers, the system administrator specifies which processes (regular price optimization and markdown optimization) the company wants to use for their business and which of the service operations will be used to transfer the data needed by SAP Demand Management.
Transferring Key Data to SAP Demand Management
The business user specifies which distribution chains, merchandise categories/article hierarchy nodes, products and store groups (implemented via price zones) will be sent to SAP Demand Management to build the base for setting up the demand model.
The Role of Key Business Objects
The system administrator uses the enterprise services in the Demand Management ES bundle to send information about the following business objects from SAP ERP 6.0. These business objects enable price optimization:
- Material: This business object is used to communicate information about all the products sold by Green Grocer that are eligible for an optimization process. In addition to information about each product, this business object also provides further information such the merchandise category hierarchy/article hierarchy, the manufacturer, and the brand. The system administrator invokes the Request Material Retail Demand Management as Bulk enterprise service, which loads this data into SAP Demand Management.
- Store: This business object holds information about all the stores owned by Green Grocer that are eligible for an optimization process. This service also provides organizational data, such as the distribution chains used by the retailer. The system administrator uses the Request Store Retail Demand Management as Bulk enterprise service operation to copy information from SAP ERP 6.0 to SAP Demand Management.
The Price Level node of the Store business object holds information about how stores are grouped that share the same regular price for a product or group of products. The system administrator uses the Request Store Price Level as Bulk service operation to copy information from SAP ERP 6.0 to SAP Demand Management.
- Sales Price Information: This business object holds information about the current regular price and cost of each product at each store that is eligible for an optimization process. Data sent provides a snapshot of the current regular pricing (not promotion pricing) and provides the point from which price changes will be recommended. The system administrator uses the Request Sales Price Information as Bulk service operation to copy information from SAP ERP 6.0 to SAP Demand Management.
Green Grocer's management wants to be able to use markdowns to move out seasonal merchandise and products they are eliminating from their stores. As a result, the system administrator moves several more types of data into SAP Demand Management using the enterprise services provided in the Demand Management ES bundle.
The Inventory business object holds several types of information that are needed for markdowns:
- Store inventory is a snapshot of the inventory quantity that is available for sale for a given product within a given store on a given date.
- Distribution center inventory represents a snapshot of the inventory quantity that is available for supplying the stores with a given product within a given distribution center on a given date.
To transfer both types of data, the system administrator uses the Request Inventory as Bulk service operation to copy this information to SAP Demand Management.
The Store business object also holds additional attributes needed for calculating markdowns. For example, store supplying branch holds information about which distribution centers deliver products to the given store. The system administrator uses the Request Store Supplying Branch as Bulk enterprise service to transfer this data.
Transferring Sales Data
The next step is for the system administrator to transfer sales data from SAP NetWeaver BI to SAP Demand Management.
Weekly Sales: The system administrator transfers weekly aggregated sales data from SAP NetWeaver BI to SAP Demand Management using SAP NetWeaver Process Integration using a mapping between data in SAP NetWeaver BI and SAP Demand Management.
The Result: A Demand Model
Based on this information, a demand model within SAP Demand Management will be set up and ready for category and price managers to work with to decide on specific optimizations to run, whether regular, promotional, or markdown price.
Keeping the Information Updated
The system administrator also schedules the frequency of retransmitting data changes from SAP ERP 6.0 to SAP Demand Management. To keep sales data updated, the system administrator also prepares this data transfer and schedules the transfer of weekly aggregated sales data from SAP NetWeaver BI to SAP Demand Management using SAP NetWeaver Process Integration.
Use Case 2: Price Optimization
Now that the demand model is created in SAP Demand Management, the category manager and price managers can select product and store group combinations for specific optimizations. SAP Demand Management produces the optimization results and the business user decides which results to transfer to SAP ERP 6.0 using the enterprise services in the Demand Management ES bundle.
How Price Optimization Works
Performing these transfers uses the Create Retail Event enterprise service and the Retail Event business object. This enterprise service transfers data to SAP ERP 6.0 and is invoked application-to-application.
Using Price Optimization to Move More Product
Here's an example of how such price optimization might work in practice. At Green Grocer, the first priority is to move more yogurt. Specialty yogurt has a high-profit ratio, but the price may be a little too high right now. Using SAP Demand Management, the business process expert decides to perform a price optimization on yogurt in urban stores and finds that lowering the price on a container of yogurt just 10 cents could improve sales as much as 35%. He decides to try this optimization and the results are transferred back to SAP ERP 6.0 automatically using the Create Sales Price Specification Calculation enterprise service operation. Initially the price lowering goes relatively unnoticed by consumers, so Green Grocer follows up with a "new low price" advertisement using SAP Promotion Management for Retail capabilities, which is described in use case 5. At this point, sales increase by 45%, exceeding initial expectations.
Use Case 3: Markdown Optimization
Markdowns help clear out seasonal merchandise, while still generating a profit. In the case of Green Grocer, it is now the middle of the summer season and it's time to clear out all that summer merchandise to make way for recycled paper school supplies. Green Grocer's category manager decides to use a markdown optimization in SAP Demand Management.
Selecting Products to Markdown and Determining Inventory Levels
The category manager selects the summer products in SAP ERP 6.0 and asks his system administrator to send updated inventory information for each store using the Request Inventory as Bulk enterprise service. Furthermore, information about the distribution center is sent via the Request Location as Bulk enterprise service. The category manager executes the markdown optimization in SAP Demand Management and approves the results.
Optimized markdowns are sent back to SAP ERP 6.0. With the help of the data sent back, sales prices are automatically changed/updated for the respective validity dates, products, and stores.
Clearing Out Merchandise from the Distribution Center
Furthermore, the category manager has the option to receive information how to optimally allocate the on-hand inventory of a product of a distribution center to its assigned stores. This information will be sent back to SAP ERP using the Create Retail Allocation enterprise service, which uses the Retail Allocation business object. Corresponding allocation tables will be created in SAP ERP to initiate the procurement process.
The Demand Management ES bundle provides connectivity between SAP ERP 6.0 and SAP Demand Management and SAP Promotion Management for Retail.
- SAP ERP 6.0
- SAP enhancement package 2 for SAP ERP 6.0
- SAP NetWeaver Business Intelligence (SAP NetWeaver BI) Content Add-on 3 FP2 (SP04)
- SAP NetWeaver Process Integration (formerly called XI) 7.0 plus XI Content of software components:
- DEMAND MANAGEMENT 1.0
- BI CONT 7.03
- EA-Retail 602
- SAP APPL 6.02