Supply Chain Planning Arena - Which product is better amongst the best
Every single day we are going through the product evaluation phase in our buying process for our personal/household needs. Consumer buying process normally involves - Problem recognition, information search, evaluation of different options, purchase decision, and finally post purchase behavior. Organizations are no exceptions to this process and are going through the same phases when it comes to the buying any products/solutions for either gaining the competitive advantage or for optimizing the current processes.
In the last few decades, supply chain planning area has gained paramount importance due to the incessant pressure to increase the shareholder value. Most of the fortune 200 companies - P&G, Best Buy, Unilever, Kraft, etc. had realized the need of the sophisticated supply chain planning solutions long back and have been reaping the benefit of the same for many years. This can also be attributed to the gigantic scale and tremendous complexity of the operations of these companies. In the last few years there have been two noticeable emerging trends in the supply chain planning area:
· Bigger companies are exploring the option of moving to SAP APO or Oracle APS (depending upon whether they have installed Oracle or SAP as an ERP system respectively) from the best-of-breed products Manugistics/i2 (now both under JDA umbrella)
· Mid-size and smaller companies are exploring the option of installing new Supply chain planning product, since their homegrown supply chain solutions are not able to address the needs of the supply chain due to the complexity of the growing business.
In both of these cases, companies are going through product evaluation phase. So, in nutshell, everyone wants to know - which one is the best?
Recently I was part of couple of such evaluation exercises and this is what I think. Every company has got different requirements - like scalability, complexity that application has to handle (planning of perishable items which is crucial in CPG industry), automatic truck load building after the planning engine's recommended shipments (by considering weight, units, volume of the products) and the disparate options available to optimize the truck load, capability to optimize on supplier costs, manufacturing costs and purchase costs by using sophisticated algorithms, user friendliness of the system, and the customer service, etc. Now, to get an answer for - "Which Product is better amongst the best", companies need to follow a step-by-step process to identify the best product to fulfill their needs. Firstly, they should identify the pain points and gather the business or technical requirements associated with it. Then they need to evaluate each of the product features by having a small demo or prototype and need to check whether the product can cater to all of their requirements or customizations would be required. They also need to compute Total Cost of Ownership (TCO) for each of the product under consideration. The final step will be - to perform a cost- benefit analysis of each option.
Here are the some of the considerations for the evaluation exercise - Firstly, the benefit of having one vendor (like SAP, Oracle) to solve the planning and execution issues Versus the benefits of rich functionalities offered by best-of-breed products. In addition, it is the common perception that with the best-of-breed products, TCO would be increased due to the integration cost and there also can be issues of having different information in planning and execution applications due to integration issues/batch job failures. Based on my experience with JDA, I can confidently mention that such occurrences are rare and are tackled almost instantaneously for maintaining data integrity. Even the cost of integration with ERP system is the one time cost and maintenance/support cost of the interfaces is often absorbed in the normal routine support cost. On the other hand, sometimes with SAP APO or Oracle APS, companies have to invest in the customization efforts to provide the capabilities similar to the off-the-shelf functionalities offered by best-of-breed packages(like JDA's Order optimization module for truck load building for the suppliers by considering the min quantity, weight, quantity, volume is not available in Oracle APS). Companies need to consider all such aspects while evaluating the cost/benefits.
Second factor to consider here is the perceived benefit of SAP APO/Oracle APS due to the seamless and real-time data transfer between planning engine and ERP systems to avoid data integrity issues. Based on my experience, majority of the planners use "manage by exception" approach, as they simply don't have time to check the data consistency between planning and execution systems. In case of best -of breed packages, cyclic run of the interfaces are able to ensure the data integrity, if it is very critical for the companies. So, the quantification of the benefit from having real time data transfer between planning engine and ERP systems is something that companies will have to assess for themselves.
Third and the most important factor to consider here is the learning curve of the planning community. All the market leaders in the supply chain planning category (be it SAP APO or Oracle APS or JDA or Logility) offer almost all basic supply chain functionalities. However I always experienced that no matter which planning product companies deploy, it is the "usage" of the product to the best of its ability, which is of the paramount importance to the companies to get the anticipated ROI. If Planners can understand and master the product quickly, then only they can use the product well and reap the benefits of it. If company does not have SAP or Oracle installed, then obviously planners will take a long time to get well-versed with SAP APO or Oracle APS. Compared to these, because of its high intuitiveness, planners quickly grasp the features of JDA application and use them to solve the numerous complex supply chain problems.
Fourth and the last point is the following/checking with the market leaders/competitors. To throw one example, JDA has been supply chain planning enabler of the world's no. 2 food and beverages company for more than 7 years now..
I am sure there are many other factors as well for the product evaluation exercise. However I would like to stop here and would want the esteemed readers to share their experience of similar trends or evaluation exercises being undertaken in their organizations. Awaiting replies/comments..