Considering ILOG Inventory Optimization and Multi Echelon

Executive Summary

  • What is ILOG?
  • How do the Products that IBM Acquired Work, and How are they Different from other Inventory Optimization and Multi Echelon Planning Offerings?
  • What is the Problem with the ILOG Acquisition by IBM?

What Is ILOG?

IBM ILOG, formerly just ILOG, which includes the merged LogicTools which ILOG purchased in 2007, is a company that provides advanced supply chain software.

“ILOG was created in 2007 and is a major supplier of software products in three areas: optimization, visualization, and business rules. The optimization products are ILOG CPLEX for LP (Linear Programming), and MIP (Mixed Integer Programming) and ILOG Solver for constraint programming.” – Real Optimization with SAP APO

They also offer products in the areas of network design to inventory optimization. The inventory optimization and multi echelon product are called IBM ILOG Inventory Analyst.

How Does Inventory Analyst Work?

ILOG Inventory Analyst is according to IBM material, the only product they have that does both strategic and tactical planning. However, like SmartOps, it does not create transaction recommendations (i.e. purchase requisitions, stock transport requisitions). After evaluating Inventory Analyst, it sounds as if it has a duplicate footprint to the SmartOps inventory optimization product called MIPO.

What is the Scope of Inventory Analyst?

A quotation from IBM collateral gives one pause. The quote is the following:

“Training and implementation can be completed in seven to 10 business days, with a total project timeline of around 60 days. Companies report operational improvement within90 days.”IBM

This brings up the question of what this solution is. No planning system that I am aware of can be implemented in two weeks, so Inventory Analyst may not be a planning system at all, but a parameter and safety stock calculator. This approach can add value, however, in the view of this author, taking this approach creates a smaller footprint for the inventory optimization and multi echelon functionality than should exist. Inventory optimization and multi echelon should not be an offline adjunct to the planning system, updating its parameters, but rather should be deeply integrated and central to it.

Is Being Acquired by IBM Good for Software?

The problem is that these large companies like IBM are very bureaucratic, so being acquired by them can be like being acquired by the Department of Motor Vehicles. Endless meetings and bureaucracy, as well as obligatory rah rah session, tend to suck the life out of creative types who often move off to less structured pastures. This is one reason why so little innovation is generated by large companies, despite all the hype to the contrary.

Thus the main point of acquiring software is to pitch it to IBM’s current client base, so it’s a financial consideration over a product solution. However, this brings up a separate issue…

Conflicts of Interest

“How objective can IBM be when it is comparing ILOG vs. SmartOps? IBM is paid by companies to perform vendor evaluations and recommendations, which is already bad enough with its extensive involvement with SAP, which is a company they do not own. However, this has an added dimension of bias when they are pitching software that they do own. For instance, would it be wise to hire Oracle to perform an evaluation as to whether to install Oracle or a competitor? Even if Larry Ellison sent you a letter promising to be unbiased?Gartner, not known for calling out conflicts of interests even brought up the following:

This provides a logical “home” for SCM solutions focused on process innovation, although it does bring into question the independence of IBM consulting when it will likely be intended, in some fashion, toward using IBM SCM tools to help clients manage their supply chains.”Gartner

Reference Accounts for Optimization

I wrote this article to possibly evaluate the Inventory Analyst for a possible project. I had heard of ILOG previously (and even used to drive past their Palo Alto office for several years). However, I had been unaware that they had an inventory optimization project (note I am saying inventory optimization, not cost-based optimization for which they are well-known). After researching, I found that ILOG’s most popular tool historically had been their network design tools and their CPLEX generalized optimizer. (the user manual for which is available at this article.)

CPLEX is used to teach optimization at universities around the world. As for inventory optimization, it does not appear that ILOG has many reference accounts in stock optimization. This is not to say the solution should be discounted out of hand, but that the added risk needs to be considered and taken into account by the purchasing company.

What is ILOG’s Sweet Spot?

This blog is to at least some degree being able to differentiate the various MEIO software. This can allow customers to make more informed decisions. In that vein, I found this quote from Gartner interesting…

The center of gravity, however, is focused on SCM process innovation, so users should be aware of this. The result means that IBM is not targeting the broad, wider market where SCM packaged applications reside (where LogicTools had primarily focused in the past), but is better oriented where configuration, and even customization, are sought.

Inventory Analyst

Inventory Analyst seems like a possible solution for clients looking for an offline parameter calculator and simulation engine. I do not consider it a planning engine because it does not make recommendations that are sent to the ERP system, but rather interact with either the advanced planning or ERP system by overwriting master data.

Gartner’s View

As a general point, while Gartner stated that they found the rationalization between previous IBM products like DIOS and the new ILOG products now under IBM’s umbrella to be rational, I really didn’t. (Let’s just say Gartner gets a check from IBM ever year to see things IBM’s way, which explains why they are so inaccurate when predicting the future of the products from the large vendors, which is described in this article.)

Getting back to ILOG, It seems that there is significant overlap between different products and that the purchase had more to do with buying a customer base rather than any inherent product logic for the acquisition.

IBM Product Mishmash

Clearly, several of the product need to be merged into fewer products and the marketing literature needs to be cleaned up with this pruning process. These are fundamental questions of product management — “who is doing what?”, “what are the demarcations between the solutions?” and so on. It is likely that this process is underway.

However, how long can IBM continue to develop ILOG within IBM? Many of the developers never wanted to work for a large bureaucracy, and after a year, many are already probably chafing at the yoke. While Gartner is optimistic about how much money IBM is paying them to write articles about their products, it is not axiomatic that these products will continue to be developed with the type of concentration that they have been in the past.

Conclusion

IBM seems to have a lightweight solution, however, unless IBM is already the implementation partner on the account, it would be difficult for me to recommend IBM’s Inventory Analyst because the product comes with all the IBM baggage, which will mean being slowly extracted from by IBM’s consulting division. IBM simply can not play well with other consulting companies or independent contractors, and often even their clients. And they are a bad vendor to have in your building.

The purchase of ILOG has simply made the situation worse and even less trustworthy than they were before. All of these things makes ILOG a solution that I would not recommend to clients. There are many excellent alternatives from higher quality vendors available.

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Brightwork Explorer for Service Level & Stock Management

Faster and More Straightforward Approach than Inventory Optimization

Inventory optimization started with a bang but failed to live up to the hype that was built up for it. Inventory optimization software is normally overly complex and while the idea is right, successes with inventory optimization are rare.

After seeing many failed inventory optimization projects we developed a simpler and less invasive way of modeling service levels and inventory. The Brightwork Explorer is free to access until it sees “serious usage” and is free for academics and students. Select the image below for more details.

References

“Real Optimization with SAP APO,” Josef Kallrath, Thomas I. Maindl, Springer Press, 2006

MEIO Book

What is MEIO?

This book explains the emerging technology of inventory optimization and multi-echelon (MEIO) supply planning. The book takes a complex subject and effectively communicates what MEIO is about in plain English terms. This is the only book currently available that describes MEIO for practitioners, rather for mathematicians or academics.

The Interaction with Service Levels

The this book explains how inventory optimization allows the entire supply plan to be controlled with service levels, and how multi-echelon technology answers the question of where to locate inventory in the supply network.
This is the only book on inventory optimization and multi echelon planning which compares how different best of breed vendors apply MEIO technology to their products. It also explains why this technology is so important for supply planning and why companies should be actively investigating this method.
The book moves smoothly between concepts to screen shots and descriptions of how the screens are configured and used. This provides the reader with some of the most intriguing areas of functionality within a variety of applications.
Chapters
  • Chapter 1: Introduction
  • Chapter 2: Where Inventory Optimization and Multi-Echelon Planning
  • Fit within the Supply Chain Planning Footprint
  • Chapter 3: Inventory Optimization Explained
  • Chapter 4: Multi-Echelon Planning Explained
  • Chapter 5: How Inventory Optimization and Multi-Echelon Work
  • Together to Optimize the Supply Plan
  • Chapter 6: MEIO Versus Cost Optimization
  • Chapter 7: MEIO and Simulation
  • Chapter 8: MEIO and Service Level Agreements
  • Chapter 9: How MEIO is Different from APS and MRP/DRP
  • Chapter 10: Conclusion
  • References
  • Vendor Acknowledgements and Profiles
  • Author Profile
  • Abbreviations
  • Links in the Book
  • Appendix A: MEIO Visibility and Analytics
  • Appendix B: The History of Development of MEIO Versus MRP/DRP