The Probability of Success of Different Supply Planning Methods

Executive Summary

  • What are the Different Supply Planning Methods?
  • How does each Supply Planning Method Stack up in Terms of Implementation Success?
  • What does the Complexity of the Supply Planning Method used Have to do with Implementation Success?

Selecting software, and the method within the software primarily by both brand and simply the hypothetical capability of the software, without considering the company’s ability to implement complex systems, and the experiences and difficulties that other companies have had with the more complex supply planning methods do not make a lot of sense.

Introduction

The various methods of supply planning for advanced planning and scheduling are very different from one another. These methods, which are heuristics, allocation and cost optimization also differ greatly in their likelihood of being implemented successfully. During the software selection phase, typically a method is selected based on how well it meets the business requirements. Something which is left out of this analysis is the probability of success of the methods.

If one method provides all the things your business wants, but the company lacks the funding or expertise, or sustainable orientation to bring up a solution, it makes more sense to select a solution which can be implemented. It is extremely rare that I find that companies correctly estimate their abilities to bring up complex solutions. For instance, in the area of support, it is becoming increasingly common for companies to outsource support to India. 

However, the outsourced model was never designed for complex solutions like supply planning APS solutions which are some of the most complex systems that a company has.

Resolving issues requires a detailed understanding of the issues, domain expertise, the configuration history, etc.. It is not simply performing a password reset. Therefore, if a company wants to use outsourced support, to also not provide sufficient internal personnel for the implementation, etc…then the company should move towards an easier APS method and one which has a higher probability of success.

How the Different APS Methods Compare in Terms of Probability of Success

Heuristic

Heuristics have a very high success rate. The SAP SNP Network Heuristic is about as easy to use as MRP but has extra settings that require some analysis and troubleshooting. The SNP Heuristic is extremely fast and can be run as many times as per day because the heuristic provides the same result if it is run for the overall network as it does if it is run for a single location or a single product location combination. The SNP heuristic can also be run interactively which allows it to provide an instant update on the new situation.

CTM and Cost Optimization

However, there is a significant drop off in the success of the more complex methods which include allocation and cost optimization. Few companies have success with allocation or cost optimization. This is because this method is complex. There are both many screens of settings on each of these methods, but also these methods require detailed configuration and master data maintenance in the area of resources, as most companies that select these methods are interested in performing constraint-based planning.

Additionally, allocation requires the development and maintenance of a table which declares which customers should receive inventory over others. In cost optimization, costs must be developed and maintained for the transportation costs between locations, the storage costs at a location, the costs of violating (dipping into) safety stock, the cost of production, and the costs of missing a demand.

All of this entails work, and this work must be appropriately staffed. It also requires a clear understanding and clear declaration of the policies and communication of these policies to the individuals who are maintaining the configuration and master data.

Conclusion

While APS offers many more settings and more functionality, it has not had as high implementation success rates as MRP/DRP, which at this point are nearly universal within companies of any substantial size. The reasons why can vary as much as the specific method of APS implemented (heuristic, cost-based optimization, or allocation), and the probability of success differs very significantly between with heuristics being on one side of the continuum, and cost-based optimization and allocation being on the other.

However, as a general statement, the APS has been criticized for being overly complex, which I also agree with. Part of the complexity is due to the method. However, the fact that some solutions like SAP SNP are so complex has to do with the decision made by a development organization. This is connected to another topic, which is that companies do not seem to be selecting for software that has been naturally designed to be easily implemented.

Companies that try to reach for a more complex method, without providing the necessary preconditions, are worse off than if they had selected a more simple method. This is why it is so important to understand the differences in the probability of success between the different methods. It is also important to know how easy or difficult the particular software application is to configure and maintain and relating this back to an honest appraisal of how effective the company has been in the past in implementing complex systems before making a software selection decision.

Search Our Supply Planning Articles

Supply Planning Research Contact

  • Interested in Our Supply Planning Research?

    The software space is controlled by vendors, consulting firms and IT analysts who often provide self-serving and incorrect advice at the top rates.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, contact us and we will be in touch.

References

Supply Planning Book

SUPPLY

Supply Planning with MRP, DRP and APS Software

Showing the Pathway for Improvement

Supply planning software, and by extension supply planning itself, could be used much more efficiently than it currently is. Why aren’t things better?

Providing an Overall Understanding of Supply Planning in Software

Unlike most books about software, this book showcases more than one vendor. Focusing an entire book on a single software application is beneficial for those that want to use the application in question solely. However, this book is designed for people that want to understand supply planning in systems.

  • What methods fall into APS?
  • How do the different methods work and how do they differ in how they generate output?
  • What is the sequence of supply planning runs?

These types of questions are answered for readers in this book.

This book explains the primary methods that are used for supply planning, the supply planning parameters that control the planning output as well as how they relate to one another.

Who is This Book For?

This book as a practical primer for anyone looking to perform a supply planning software selection, any person beginning a supply planning project, or anyone who just wants to understand supply planning software simply better.

Chapters

  • Chapter 1: Introduction
  • Chapter 2: Where Supply Planning Fits Within the Supply Chain Planning Footprint
  • Chapter 3: MRP Explained
  • Chapter 4: DRP Explained
  • Chapter 5: APS Supply Planning Methods
  • Chapter 6: APS for Deployment
  • Chapter 7: Constraint-based Planning
  • Chapter 8: Reorder Point Planning
  • Chapter 9: Planning Parameters
  • Chapter 10: How MRP, DRP, and APS Relate to One Another
  • Chapter 11: Supply Planning Visibility and Master Data Management
  • Chapter 12: Understanding the Difference Between Production Versus Simulation