- SAP provides information on APO, however how accurate was this information?
- What is APO’s ROI and its history with constraint planning.
In this article, we will review SAP’s APO project page to check for accuracy.
SAP APO: Balance Supply and Demand?
Here is what SAP says about APO’s overall capabilities.
“Enhance supply chain management (SCM) with SAP Advanced Planning and Optimization (SAP APO). This solution offers integrated, best-in-class functionality for demand, supply, and production planning – as well as global available-to-promise (ATP). Maximize supply network efficiency, and take forecasting and demand management to the next level.”
It is widely known that APO does not provide best in class functionality for demand, supply and production planning and available to promise. For each of these application subcategories, there are far superior applications. The concept is that none of SAP’s applications in this area are best of breed or best in class, but the selling point is that they are integrated.
Why SAP Advanced Planning and Optimization?
Here is what SAP has to say about APO’s more detailed capabilities.
To stay a step ahead of demand, you need a powerful platform that supports and integrates all of your supply chain planning activities. With SAP Advanced Planning and Optimization you can:
- Improve supply and demand planning for both internal and external supply chains
- Tightly integrate with SAP ERP to access sales, material, and other data
- Increase forecast accuracy and minimize inventory buffers
- Align mid- to long-term demand plans with your overall supply capacity
- Create optimized production plans for all of your factories
- Provide reliable sales order confirmation dates
As a consultant who has seen many APO implementations, it is rare to see companies benefit very much from APO modules. APO is integrated to ERP, but the integration, called the CIF, has a high degree of overhead. And companies that use APO do not end up minimizing inventory.
The Problems with Constraining in APO
Mid to long range demand plans cannot be constrained by supply planning constraints because neither the SNP (supply planning module) optimizer really makes any sense, and CTM also is rather illogical and has many problems and a very high overhead on projects. These are the only two constraint-based methods in SNP, and they basically don’t work properly. Therefore, constraining in SNP is not particularly feasible, but even if it were, there are all manner of problems in now SNP maintains resource/constraint information. The abbreviated explanation is that the master data maintenance in APO is so time-consuming that few APO projects have updated constraint master data. We cover some of this complexity in the book Setting Up the Supply Network in SAP APO. We have covered other applications that do an exceptional job at master data maintenance in their applications, one of these is profiled in the book Superplant: Creating a Nimble Manufacturing Enterprise with Adaptive Planning Software.
One thing that it is impossible for APO or PP/DS (impossible in reality, not as per the advertised functionality), which is the module for production planning, is to create optimized production plans. This is because PP/DS’s optimizer cannot be taken live or should I say “kept live.” This is covered in the article The Failed PP/DS Optimizer. Yet while SAP has virtually no customers using the PP/DS optimizer, they continue to tout the ability to optimize in their sales literature, and SAP consulting companies continue to tell their customers that they can optimize their production plans, when if they investigated, they could learn that this does not happen on real projects.
In some cases available to promise dates can be provided to sales orders, but GATP, the module in APO that does this is so complex to set up, that in most cases the rules are simplified down to the point where they are not much more complex than what is in the Sales and Distribution module of ERP. However, the expense of setting up GATP is extremely high.
Here is SAP’s statement about APO’s ROI.
“Ensure a successful implementation and maximize your ROI with information resources that support the different phases of SAP Advanced Planning and Optimization – from planning and installation to operation.”
SAP has no studies that demonstrate any ROI with APO implementations. SAP has found that they can make any claim they like about TCO or ROI, because the vast majority of customers never ask for any evidence to support these claims. When SAP does fund a TCO study, as they did with Gartner (for HANA) is it engineering to show whatever SAP wanted to show as is covered in the article How Accurate is Forrester’s HANA TCO Study? SAP and their consulting surrogates want it both ways. They want to sell very expensive software, and to staff highly lucrative projects for a long period of time, but then they want to declare that they have the lowest TCO? How is that possible? As long as no one checks, it makes sense to continue to make the claim.
APO implementations have a hard time obtaining positive ROI for the following reasons:
- All of the modules in APO are overly complex and difficult to configure as well as difficult to use.
- APO is an expensive set of applications.
- APO is based upon a lot of concepts that harken back to the mid-1990s, and many of these concepts have been proven ineffective, but the software has not changed.
- APO is normally implemented by the large consulting companies. These consulting companies are so expensive, and they lengthen out the implementation by such a degree that the costs of implementation are very high. APO has the longest predicted implementation timelines of any supply chain application in any of the categories in which APO competes.
- APO, due to the fact it was developed by SAP and the fact that each module is so complicated and dated means that APO modules have the highest TCO of any set of modules in the planning space.
How are these things a recipe for lower TCO and higher ROI?
We have put a lot of work into estimating not only APO TCO (we don’t estimate ROI), but the TCO of many applications, and there is no way these claims by SAP can be true.
See the Brightwork TCO calculators at this article.
Consider a Faster (APO) Deployment Option?
Here is what SAP says about APO deployment.
“Get up and running even faster. SAP Advanced Planning and Optimization rapid-deployment solutions bring together software and services to speed go-live for a rich set of supply chain planning functionality.”
These are the so-called “RDSs.” There is little of value in any of the RDSs for any of the SAP products for which RDSs exist. In our view, the RDSs are simply sales and marketing constructs that create the false expectation that the RDS can allow the software to be implemented faster than it will be.
As none of the Rapid Deployment Solutions (RDS) solutions contain much of value, and none demonstrated any ability to actually implement SAP more quickly (their intended purpose) they seem to have petered out and have basically stopped being sold. Brightwork covers the RDSs in this article.
Even though they are essentially dead, SAP sales and marketing still enjoy referring to them as if they are a “thing.” However, the people who have to actually implement normally don’t appreciate them.
This page was an inaccurate take on APO that does not reflect the reality of what normally occurs on APO projects. If taken at face value, this information would lead to large expenditures of money to engage in implementations of functionalities within APO modules that have already failed at many SAP customers. The specifics mentioned by SAP simply don’t occur in real life. SAP’s presentation of APO has zero correlation with reality and does not match APO’s implementation history.
This article receives a Brightwork Accuracy Score of 2 out of 10, mostly for how much information it leaves out.