Supply Chain Planning Blog

Not All Planning Systems are Created Equal!

Posted by Bill Green on Tue, Apr 11, 2017

not-equal.jpgMost planning systems deploy more of a reactive strategy than a predictive one. In the former category, when a problem is identified regarding a capacity shortage, material shortage, or arrival of a high priority order, the system addresses the issue by rearranging the plan. There is nothing wrong with this except that it is not optimal and it is a Band-Aid solution that could have been avoided in the first place! Let me illustrate this using a simple example. If you release too many jobs to your resources (or factory), you build a big queue in front of resources creating much WIP adding to your inventory and delaying delivery dates. In addition, you diminish your capability to address inevitable but unforeseen problems such as shortages, equipment breakdowns, and arrival of surprise orders. But the interesting part is that, most people try to resolve this issue by having better sequencing rules for each resource. As you can see a problem that could have been avoided was created and now we are trying to reactively resolve it by locally expediting, which is almost impossible. This type of strategy is prominent in many S&OP solutions which tend to operate at a high level not knowing how the plan can be executed. They assume a fixed lead-time and assume maybe ONE bottleneck resource for the entire plan for every site, and then expect to have an accurate plan! However, when it comes to executing such plans there will be a lot of expediting and adding shifts and delays to name a few. Such an approach is no different than the use of spreadsheets for planning and use of fixed lead-times, which really implies infinite capacity planning. I remember MRP systems did that really well! Are we back to the technology of 80’s?

We believe that predictive planning avoids the problems in the first place and diminishes the need for reactive solutions. We also believe that any plan generated by the system has to be accurate enough so that it is executable. Spreadsheet type of planning (pre-defined bottlenecks, fixed lead-times and bucketed capacity) deployed by most S&OP solutions are simply NOT accurate enough! They give you a false sense of hope and control as well as poor visibility into what can be accomplished; resulting in erroneous delivery dates. By performing predictive planning, you can account for potential issues of shortages and breakdowns or even quality issues in advance. Furthermore, one can “release” the orders (virtually in subcontractor facilities or actually in your own) in a way that they do not have to wait for a long time in front of resources, reducing WIP and at the same time maximizing utilization. By producing realistic plans based on “shifting bottlenecks,” one can also ensure realistic due dates maximizing on-time delivery. Predictive planning is performed by having an accurate model of your supply chain (yours and your suppliers’) and understanding the mix of products that need to be built and how they compete for resources in a dynamic manner. In addition, making sure that we account for probability of breakdowns, demand variations, maintenance schedules, supplier lead-time variations and so on. By taking into account all such variations, one has a realistic model of the supply chain and can precisely predict the behavior and how each order can be delivered through different choices of the Supply, Make and Distribution. The key is to take all such combinations into account and optimize the use of resources and inventory using an optimal order release strategy that maximizes delivery performance, minimizes inventory and optimizes the utilization of resources. For additional information, please refer to Adexa Whitepapers on this topic by clicking HERE

Topics: Supply Chain Planning, Planning, best of breed planning systems, Sales & Operations Planning, S&OP

Cost of ERP vs. Best-of-Breed Supply Chain Planning Systems

Posted by Bill Green on Wed, Jul 22, 2009
Cost of Supply Chain PlanningWe have posted before about comparing the costs of Best-of-Breed vs. ERP's supply chain planning systems and readers are asking for more specifics on what to look for when doing the comparison.  Here are three of the top issues to consider when comparing the cost of implementing SAP APO and ORACLE SCP with B-o-B offerings.

Data Integration

The majority of the cost associated with integrating ERP systems with supply chain planning systems comes from the effort of getting the data out of the core ERP system.  This has to be done even if the supply chain system is being provided by the ERP vendor, itself (e.g. data from SAP R/3 to SAP APO).  A much smaller effort goes into getting the data mapped into the planning system.  The reason for this is that the ERP systems are usually customized and each customized transaction can cause a hole in the integration.  Also ERP's transactional interfaces are more expensive to set up than interfaces that run in batch.  Before deciding on using a transactional interface (such as SAP's CIF Interface) make sure that you really need it.  Ask how often will the planning system run?  And how fast you need the data to transfer in order to run it?  With the exception of real-time Available-to-Promise capability, most planning modules will work fine with batch integration.   

Planning Analytics

A second overlooked but costly area in implementing a planning system is the use of analytic views (bucketed views of the plan that can be aggregated, sliced, and diced).  They are very important for analyzing a plan, but they are not part of the core ERP-based supply chain planning systems.  Both ORACLE and SAP rely on their generic business warehouse for analytic views since they are not part of their supply chain planning module.  In both demand planning and supply planning, users require accurate analytical views to make timely decisions.  Make sure you understand the cost of setting up SAP Business Warehouse or ORACLE Analytics.  Not only do the views need to be set up in the warehouse, but you also need to integrate to it.  Typically best-of-breed systems include analytics views as a memory resident capability.  To pick the right planning system you have to find out what information is most important to your users and what it takes, in terms of cost and effort, to provide it to them.    

Configuration Costs

One of the biggest cost areas in setting up a planning system is the configuration of the algorithm parameters and business logic, i.e. your business model.  This is where the rubber hits the road for a planning system.  If the system is not set up to properly handle the key business constraints you could easily end up with a useless plan and serious consequences, e.g. rising inventory, or bad commit dates.  The configuration effort involves getting the knowledge out of your head and into the system. Think of all the constraints and business rules that you need to incorporate, and ask how they will be managed within the planning system.  Ask how to customize the planning logic and enter custom constraints.  Naturally, the system with the most flexibility and ease in setting up your business rules and constraints will be the one that will be most useful and least costly in terms of implementation.   

We have noticed many times that companies struggle with a decision to go with either a Bolt-on planning system or their own ERP's planning system.  Are there any other points that you are concerned about when it comes to this dicision?

For information about the author please click on Bill Green, VP of Solutions, at Adexa.  Or email him at wgreen@adexa.com. Or visit www.adexa.com.

Topics: Planning Analytics, Planning Data Integration, Implmentation Cost, ERP Planning systems, best of breed planning systems, b-o-b, Configuration costs