Hoax: An act intended to deceive or trick.
Was it intentional? Or accidental? We will never know. However, what is clear from our recent study of 73 manufacturers using supply chain planning is that companies using best-of-breed solutions implement faster, achieve a quicker Return-on-Investment (ROI), and are more satisfied. When companies tell me that they need to exchange their current Supply Chain Planning (SCP) from a best-of-breed provider to get a leg-up, I ask, “Why?” It makes no sense to me. In this post, I want to make my argument and stir a debate.
In the market, there is a false belief that an SCP system which is tightly integrated to Enterprise Resource Planning (ERP) delivers greater value. However, this is not supported by the facts of the study.
Background: My Personal Experience
In the period of 1985-2000, the SCP market was defined by a list of best-of-breed vendors that included names like American Software, Chesapeake, Demantra, Fygir, i2 Technologies, Logility, Manugistics, Mercia, Numetrix, Red Pepper…. The list is long, and most are history. Today, in many organizations, these solutions are legacy.
The SCP market has consolidated. These companies were merged into other entities and/or changed their names. JDA acquired Manugistics and i2 Technologies; Fygir and Mercia rolled up into the INFOR platform, and Oracle combined the assets of Demantra, Red Pepper, and Numetrix through their multiple acquisitions. Webplan changed names to Kinaxis. Only Logility and American Software have the same name and business structure. We now have new technology players entering the market like AIMMS, Enterra Solutions, OM Partners, Quintiq, ToolsGroup, and Terra Technology. For many, it is confusing. It keeps old gals like me in business.
The period of 2000-2010 was turbulent for these best-of-breed APS technologies. Their available market contracted. There were several forces:
- M&A: Through many mergers and acquisitions, the available market for solutions shrunk. This is a barrier for innovation.
- Competition: The aggressive marketing of the Enterprise Resource Planning (ERP) vendors introducing planning suites (led by SAP with a product named SAP APO) took the market off course. As SAP APO skyrocketed to capture the dominant market share, the best-of-breed vendors could not shake the perception that an “integrated solution” was better. It did not matter that most of them had integrated to SAP suites for over a decade.
During this time, I worked for Manugistics. As I watched the hype of “integrated planning" swell, I asked, "Why?" It did not make sense to me. After Manugistics, I worked for two analyst firms; Gartner and AMR Research, and I continued to question if the extended ERP platform that included SCP delivered greater value. I did not see it. The implementations were longer, the purchase costs were higher, and the functionality was less robust and lacking flexibility. Yet, the positive market perception continued. It was largely sustained by consulting partners that made more money on the implementation of larger, and more costly projects of less capable solutions.
During this period of time, I tried to highlight the gap in my writing. However, it is tough for an analyst to take a stand against the larger ERP vendors. The ERP public relations machines are mighty; and they invest heavily in the larger, more established analyst firms. As a result, it is hard to take a tough stand in the more established analyst worlds. Not so today, I am independent. I can voice the truth. I can call a spade a spade. I have raised the ire of both Oracle and SAP multiple times in an effort to help businesses identify the best partner for SCP to propel their supply chains forward.
In early 2014, using the principles of open research, we at Supply Chain Insights hosted a study on Supply Chain Planning. We currently have 73 company respondents, representing 133 planning instances. We have left the study open, and would love to hear from you. If you share the data from your implementation, we promise to never share your or your company's name. All of the results are reported in aggregate. Here are some of the results that we have collected so far:
- Extended ERP Solution Implementations Are Longer with a Less Favorable ROI. The implementations of extended ERP solutions for demand and tactical supply planning is 20 months while the best-of-breed solution deployments are averaging 11 months. (The predominate ERP SCP solution for the respondent in the survey is SAP APO. There are few implementations of Infor and Oracle.) The time to achieve ROI averages seven months for a best-of-breed provider and over 13 months for the extended ERP solution.
- Demand Planning Implementations Are Faster with Fewer Issues Than Supply. Demand planning is less industry specific than supply. While 67% of the demand planning implementations were at and under budget, 55% of the implementations of supply planning are over budget. My take? Supply planning requires a more detailed understanding of SCP. The models are industry specific. These solutions require greater insights and understanding by the manufacturer and implementing company. Over the last decade, many consulting partners have not been equal to this challenge.
- Does Integrated Planning Make Sense? Really? The average company greater than $5 billion has five ERP instances, three instances of demand, and three instances of supply planning. The enterprise environment is complex. It is not as simple as one ERP instance connected to a single SCP implementation. As a result, there is a greater and greater need for a visualization layer and planning master data system. As a result, the basic tenants and assumptions of integrated planning dissolve and become less relevant. The argument is becoming less and less germane.
- Organizations Are Not Static. If this is not complicated enough, just when many IT managers build a system for tightly integrated planning, there is an M&A event making the IT environment even more heterogeneous. In addition, with over 30% of manufacturing and 55% of logistics outsourced, it is now a business network, not an enterprise, planning problem.
- Ability to Use Data. While the extended ERP solution architectures make look nice on paper, the reality is that line-of-business users struggle to use the data for "what-if" analysis or business analytics. The supporting analytics around the extended ERP packages have not been equal to the business requirements.
What Should You Do?
This post is part of my series of “Do No Harm” which is a focused series to help line-of-business leaders get their supply chains unstuck. (In prior posts, I have written how nine out of ten supply chains are stuck in their ability to improve operating performance on the Effective Frontier of managing growth, profitability, inventory turns and business complexity.) To move forward, I recommend the following:
-Recognize the Facts. Each of the ERP providers is at a very different place.
- SAP. The SAP team has built an incredible system of record to enable flows from ERP to SCP, but has failed to deliver a solution to deliver SCP planning excellence. In companies with an SAP APO environment, companies should use SAP APO as a system of record and buy other optimization solutions that are industry-specific to improve decision support. In addition, line-of-business leaders should push for clarity on the SCP footprint and the supporting business intelligence strategy to ensure that they can get data in, do "what-if" analysis, and get data out. Question the consultants that come to your door stating that, "... 80% is good enough." The study clearly shows that it is not.
- Oracle. The Oracle solution is strong in demand and transportation, but weak in tactical supply and production planning. It is not a good system of record. Oracle has cobbled together the acquired assets from the SCP market. Oracle has delivered neither a system of record, nor differentiation. It is integrated only by the words on the contract. Instead, what you have is one throat to choke; but, by and large, the references are unfavorable.
- Infor. In contrast, Infor has done a better job. The ION integration layer attempts to provide a system of record and the many SCP solutions acquired through their mergers are being rolled up into a framework that is starting to make progress.
-Don't Wait. A ROI in less than a year in today's market is an opportunity. Why wait?
-Use Talent from the Technology Provider to Implement. The participants in the study that use consulting talent from the solution providers are more satisfied than those that implement using larger consulting firms. Use the large firms for program management and change management, but let the SCP providers tune and implement the technologies in the SCP market.
Is this a fluke, or a market reality? We are trying to gather more data. We would love to hear from you. If you fill out our survey on integrated planning, we will be glad to share the results with you and your team. Your responses on our survey are always kept confidential. We do not share the survey results of any individual. All of the responses are reported in aggregate. In addition, with more responses, we want to correlate these results to the corporate financial ratios to see the impact of supply chain planning choice. We hope to hear from you!
In addition, at our Global Supply Chain Summit in Scottsdale Arizona, on September 10th and 11th, we will have a facilitated breakout session for business leaders to network with each other on the future of demand and supply planning. It is a closed-door session with no technology or consulting partners. With SAP APO moving to a HANA architecture, the business leaders have requested this, and we want to help. We would love to see you there!
This week, we also kicked off our Supply Chain Planning Benchmarking Service with a webinar yesterday. We have five customers signed up and we are hoping for another twenty. We want to kick-off this project during the summer to gather more data around "What Drives Supply Chain Planning Excellence." Let us know if you are interested.