Yesterday, I presented to 700 global attendees on an APICS webinar. In the presentation, I shared data on the evolution of supply chain planning and the results on user satisfaction. The results confound me. They are not consistent with market perception. Let me share the story.
As shown in Figure 1, users are more satisfied, the implementations are shorter and there is greater Return on Investment of solutions from Best-of-Breed solution providers—especially if the best-of-breed solution providers used are industry-specific. However, in the polling data in the APICS webinar, we found that over 70% of the respondents had deployed solutions from the ERP-expansionists (either SAP or Oracle). The use of best-of-breed planning technologies was small at 15%. Today, SAP and Oracle have market share dominance; however, the data is clear. Neither technology vendor is an industry leader in delivering a solution that fits the needs of the supply chain planner.
So, why would a company deploy a solution that is more costly, with a longer time to value, to drive lower satisfaction ratings by the planner? The answer is interesting. The facts are 180 degrees out of sync with perception. The common perception is that SAP and Oracle supply chain planning solutions are superior to best-of-breed Advanced Planning Solutions. There is also a belief that SAP and Oracle provide a solution that is more 'integrated'. I don't think either statement is true. User interviews do not support the market perception; but, this is a case where perception becomes reality.
Figure 1. Summary Data of User Satisfaction with Supply Chain Planning Applications
Using quantitative surveys, we collected the data in Figure 1 in 2014. The data reflects user feedback from 93 companies with over 180 demand and supply chain planning instances. In the table, the figures in red are statistically significant at a 90% confidence level.
The study is primarily a comparison of best-of -breed solution providers (Logility, JDA, Kinaxis and OM Partners) versus SAP and Oracle. Unlike many research studies, it is a panel that is known. We have validated each respondent as a user of supply chain planning. (This is unlike many studies that are fielded to B2B panel groups where the identity of the respondents cannot be ascertained.)
The research is a study of large manufacturers. Companies were disqualified if they were not mature in the use of planning, or if they were less than $1 billion in revenue.
Five Lessons to Learn
So, why would companies implement solutions that cost more, were longer to deploy, and had lower user satisfaction? Here are my thoughts:
1) Failure of the Industry Analyst Model. Buying these solutions is far more complicated than is represented in a simple four-box quadrant. It is complex. There are many parameters. There is greater satisfaction with demand planning than supply.
The fit of the data model to adequately reflect a feasible plan drives success. This requires an industry-specific data model. (The modeling of materials in Kinaxis is quite different than JDA, and the modeling of reverse bill of materials and co-products in Logility and OM Partners.) To have this discussion with the buyer of technology requires a mature analyst and a research methodology that analyzes user satisfaction. I struggle to find both in today's market.
The SAP and Oracle analyst relations groups are big machines. Taking a stance against a vendor and calling a spade a spade takes courage by the analyst. It is uncomfortable. The bigger the vendor, the tougher it is to publish a critical article. An old analyst, like me, has scars. I can tell you many stories.
This week, I am finishing two reports: Sales and Operations Planning, and Inventory Optimization. These two reports will make all the vendors in the industry angry. The phone calls to review factual accuracy will be tough. I will hate my job for about a month, and then the smoke will clear. Through it all I have to remind myself that my job is not to be liked. Instead, I will remind myself that I write independent advice for the line-of-business leader. It is more important to be respected than to be liked.
2. Follow the Money. Consultants recommended the solutions by SAP and Oracle. The reason? The implementations better fit their models. The implementations were longer and more expensive. They had enough scale to invest resources and build a bench of expertise. The best-of-breed solutions were not as lucrative for the consultants. The implementations were smaller and the costs were less, and best implemented by the vendor.
The data tells us that independent of the solution, the worst scenario is to have a large system integrator implement a supply chain planning solution. Why? They are not good at it. For all vendor solutions (including SAP and Oracle), companies are better to have the technology implemented by the technology solutions vendor. While there are some exceptions (Cap Gemini has a strong practice in the implementation of Oracle transportation planning and E&Y has built some great technologies to augment the gaps in APO demand planning, and KPMG has some great knowledge of business networks), in general, big consultants are not good at implementing supply chain planning. I recommend the smaller, and more focused, firms like Bristlecone, MEI, Optilon, SCM02, Smartchain, Solventure, and Spinnaker.
3. Definitions Matter. The business leader wants an integrated solution. Likewise, the Information Technology director wants an integrated solution. However, when you ask each group for a definition of "integrated" the definitions are different. IT's definition focused on the movement of data with a defined context through an API, while the business leader wants a solution that can represent the end-to-end supply chain. Both groups believe that if the solution comes from the same vendor, that it is integrated. Nothing could be further from the truth. In many cases, the best-of-breed solutions are more integrated than the ERP Expansionist solution using both definitions. Definitions matter.
4. Overhyped Market with Bad Behavior. The solutions were expensive, and attracted a well-paid sales team that overhyped the solution and then under-delivered. The market is littered with stories of bad behavior. The buyer was wary: they wanted a new approach.
5. Best Software Does Not Always Win. It is now clear that SAP APO was inferior to the i2 Technologies' SCM suite (now owned by JDA), but that was not market perception. In parallel, we now know that the Demantra solution purchased by Oracle lacks scalability and usability, but the perception is that it is well-integrated into the Oracle suite. Perception is reality. In the absence of data, marketing perception wins.
These are my thoughts. I would love to hear yours. I welcome your comments.
As we move towards 'The Third Act of Supply Chain Planning Software', my focus is helping the line-of-business user make data-driven decisions. This is why we continue to fund surveys which we share openly and freely. Our mantra is "You give to us, and we give to you." If you are interested in seeing a similar analysis of S&OP and Inventory Management technologies, take our surveys. We never share the names of respondents, and we always share the results. Both of these studies will be shared in open roundtables with supply chain leaders. Here are the links to the studies:
Lora Cecere is the Founder of Supply Chain Insights. She is trying to redefine the industry analyst model to make it friendlier and more useful for supply chain leaders. Lora has written the books Supply Chain Metrics That Matter and Bricks Matter, and is currently working on her third book, Leadership Matters. She also actively blogs on her Supply Chain Insights website, at the Supply Chain Shaman blog, and for Forbes. When not writing or running her company, Lora is training for a triathlon, taking classes for her DBA degree in research, knitting and quilting for her new granddaughter, and doing tendu (s) and Dégagé (s) to dome her feet for pointe work at the ballet barre. Lora thinks that we are never too old to learn or to push for excellence.