Has Optimization within SAP APO Failed? - Brightwork Research & Analysis

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Executive Summary

Optimization in SAP APO has failed in both SNP and PP/DS.
There are repeated problems with cost settings, and this failure is widely censored by SAP consulting companies that prefer to bill customers for what is a dead solution.

An Appraisal of the True State of Optimization in SAP APO

If one looks at PP/DS implementations – the optimizer is rarely used in production. Those that do use it end up using it infrequently. I recently heard of PP/DS being run with the optimizer, but the source is very pro-SAP and very pro-IT (meaning they are not going care about the planning output) — and its a bit like a unicorn sighting. Without seeing it myself, I have too much information on failed PP/DS optimization projects to believe it. However, I had a large number of data points of clients that that tried the optimizer but turned it off because of the bizarre results and the fact that they could not get the results to make any sense. Some clients don’t even use PP/DS heuristics. That is, they only use the application for manual movements with the detailed scheduling planning board.

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Notice of Lack of Financial Bias: We have no financial ties to SAP or any other entity mentioned in this article.

This is published by a research entity, not some lowbrow entity that is part of the SAP ecosystem.
Second, no one paid for this article to be written, and it is not pretending to inform you while being rigged to sell you software or consulting services. Unlike nearly every other article you will find from Google on this topic, it has had no input from any company's marketing or sales department. As you are reading this article, consider how rare this is. The vast majority of information on the Internet on SAP is provided by SAP, which is filled with false claims and sleazy consulting companies and SAP consultants who will tell any lie for personal benefit. Furthermore, SAP pays off all IT analysts -- who have the same concern for accuracy as SAP. Not one of these entities will disclose their pro-SAP financial bias to their readers.

The other place that an optimizer is used is in their transportation suite — which is so lightly installed I won’t discuss it. Just came off a project with what is now TM implemented, and the application is as buggy as SPP & EWM. Clients are still trying to get it to work rather than evaluating things like the optimization results or whether it is delivering any value — and SNP is the third. However, while a lot of clients have SNP live with the optimizer, I have yet to meet one that is happy with it. It is costly to implement and never seems to get adequately tuned. I show up two years after implementation, and the configuration is still not right.

Failures with Cost Setting

I have tried getting clients to invest in making the costs more proportional — but they keep setting the service penalty costs at astronomical levels. I cover this topic in this article. SAP APO projects have a severe flaw in that because the application is so technically challenging, only IT people can get it to work. But pure IT resources don’t have the business knowledge and do a poor job of revealing the configuration so the users can decide. Thus so most APO implementations are determined mostly by pure technology resources. The vast majority of the APO implementations I have seen don’t embody the business requirements. Neither these resources nor SAP seems to care whether the optimizer output is useful for the business. As long as SAP is used as the solution, and the optimizer is used, that checks the boxes, and is good enough for IT.

We have gotten to a point where brains are being collectively turned off — and where as long as “standard solutions” like SAP are used, and fancy methods are employed (optimization in this instance), what else is there left to prove? And it is not just SAP promoting the use of half-baked optimization configurations, but IT departments as well.

Broad Scale Failure of APO in Optimization

This is a fantastic revelation because it means that neither optimization is essentially infeasible – practically speaking – from within APO. Most of the optimization discussion happens during the sales phase, which is as “optimal” as APO ever gets.

I started in planning with i2 Technologies before APO existed. If I think of the objectives of planning systems, I can say that APO has failed to meet any of them concerning optimization. APO clients do not have better planning outcomes — and this is true regardless of how much money is spent — than before they put in APO. The more complex functionality in each module generally cannot be implemented. So this means the final live system looks nothing like the system that was presented during the sales process. Both SAP and the major consulting companies hide the scope of optimization failures from clients to get them to continue to implement the optimizer.

Conclusion

Neither the large consulting company nor SAP seems interested in changing optimization to make it more likely to succeed. Both seem happy to continually market the potential of optimization without making even the slightest adjustments to the optimization approach. For SAP and the major consulting companies, “optimization” is just a sales tool. It has no translation to anything tangible in terms of added business value. The fact that so many companies that do not have even elementary master parameters set for their current MRP system think that optimization will come to the rescue is a serious problem.

Let us think for a moment what the optimizer will use for lot sizing, safety stock, rounding values, etc… that is right, the same parameters that are currently improperly set in the MRP system.

Despite an enormous number of failures in optimization globally, SAP has shown little interest in making adjustments to the application. Instead, they offer very weak band-aids to clients by providing band-aids like the COPT10 parameters and the deployment optimizer patch (neither of which do much, but of each which will run clients roughly $50,000). I have tested both of these add-ons, and they are ineffective. Both add-ons should have been implemented within APO and provided for free.

Although the fact that neither of them works is also an important issue.