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AMR Research

For companies, SCP applications require the installation of software, as well as the implementation of new business processes.

After spending $10 billion over the past five years, enduring lengthy implementation processes, and scaling back business expectations, most customers are now satisfied with the value they receive from their supply-chain planning (SCP) systems. There has been much publicity about users' mixed results with SCP technologies — also known as advanced planning and scheduling (APS) — in terms of the real benefits received and implementation times. However, a recent AMR Research survey indicates that 80 percent of APS customers are satisfied with their SCP systems. Their satisfaction comes from successfully meeting customer expectations during implementation and performing well on key operating metrics:

• There is much less shelfware today than 18 months ago, as companies have slowly but surely implemented their past SCP application purchases.
• 60 percent of implementations took longer than nine months, yet 75 percent of users feel that their software vendor either met or exceeded expectations during the implementation process.
• Users are satisfied with their SCP systems in the three most important areas of project success: inventory management, customer satisfaction, and order fill rates.
• Two-thirds of users have implemented a suite of products comprising two or more SCP working modules.
• Users have learned that they need to apply more effort during implementations and get more support from their software vendor throughout the installation process.

Figure 1: Deployment State of Each SCP Functional Module

In contrast to when we last did this type of survey almost 18 months ago, the picture has changed relative to SCP software that was purchased but was not or is not being implemented. The results from the latest survey reveal the following:

• Demand planning is by far the most common SCP module, with 78 percent of the respondents purchasing it, 70 percent operational with it, and only 1 percent not having implemented it. This is likely because a demand planning application, as an enterprise-level system, requires less real-time integration with other enterprise systems.

   

• Manufacturing planning and scheduling modules have the highest rate of shelfware by far, with 73 percent of respondents purchasing it and 15 percent not yet implementing it. This type of application module is generally more difficult to implement due to real-time integration needs and plant operations that vary greatly among and within industries.

   

• Supply planning (multifacility planning) and replenishment also has a low rate of shelfware, with 75 percent of the respondents purchasing it, and only 3 percent that have not started to implement it. Like demand planning, this module is easier to implement because it is an enterprise system, typically requiring less real-time integration with other enterprise systems. Supply planning modules continue to gain acceptance with users because of the demand for order promising and multisite inventory planning.

Figure 2: Length of SCP Implementation

Generally, SCP modules do take longer to implement than users anticipate. Much of the reason for the length of these implementations stems from the fact that they require not only software to be installed, but that new business processes be put in place that are enabled by the software. These include processes such as sales and operations planning (S&OP), constraint-based production scheduling, incorporating resource and material limitations, and centralized master production planning.

Figure 3: Overall Level of Satisfaction With SCP system

While implementations took longer than expected, users were still relatively satisfied with the implementation experience, but certainly not enthusiastically so. For various aspects of the implementation process, 25 percent or less of users feel their supply chain vendor had not met expectations; however, less than 25 percent stated that the vendor exceeded expectations. Some details on implementations show the following:

• The length of implementation and overall consulting acumen of the SCP vendor were the areas of least implementation satisfaction, with 25 percent of users saying the software vendor fell below expectations.

   

• Integration during the implementation scored the lowest level of implementation satisfaction, with the vendor exceeding expectations for only 6 percent of respondents.

   

• The area in which users most feel the vendor exceeded their expectations was the overall consulting acumen of a systems integrator (SI), with 24 percent stating it exceeded expectations. Interestingly, another 24 percent stated that the SI fell below expectations, pointing to an inconsistent performance by SIs.

   

• The SCP vendor's ability to model and/or configure the software was the area of greatest satisfaction, with only 18 percent of respondents stating that it fell below expectations.

While users felt that their systems took longer than they expected to implement, overall they were satisfied: only 10 percent were dissatisfied or very dissatisfied with their SCP system.

Additionally, in rating the performance of their SCP system in meeting various project success factors, the results varied greatly. However, their system's performance rated well for the three most important project success factors:

• Inventory management: 92 percent rated it extremely or very important to project success
• Customer satisfaction: 89 percent rated it extremely or very important to project success
• Order fill rates: 79 percent rated it extremely or very important to project success.

For all these factors, users rated the performance of their SCP system from 3.2 to 3.5 out of 5.

When respondents were asked how many modules they had operational, 68 percent had implemented two or more modules. This is in contrast to the survey from 18 months ago, when only 25 percent of users were operational with two or more modules.

This indicates that while users have bought into the concept of an integrated SCP suite of products, it has taken some time before they could get multiple modules working since they were installing one module at a time.

In this regard, the survey also showed that 62 percent of users started their integrated SCP initiative by getting a demand-planning module operational first. This accounts for the fact that this module is the one that most users had already implemented or were implementing. It also makes the most sense to start with, because as companies become more demand-driven, a good demand forecast — the best representation of future customer needs — is needed to drive other tactical and operational planning, including supply planning and replenishment and production scheduling.

Demand planning is also the module that is most often operated at a central, sometimes enterprise level for tactical and strategic planning, hence it requires less real-time integration into legacy systems, making system implementation somewhat easier. However interesting all this is, it does not translate to substantially shorter implementation times: a breakdown of the survey results shows that 55 percent of demand planning implementations took longer than nine months, versus 64 percent for all other modules. Thus, while integration might be easier, process changes are still required.

As part of the survey, users were asked what one thing they would do differently if they were to start their SCP project over again. Three items topped the list:

• Develop more detailed in-house analysis and expertise of products up-front (28 percent of respondents).
• Dedicate more resources to handle overall implementation and integration of products (14 percent of respondents).
• Provide more training and user involvement (7 percent of respondents).

These all point to the fact that users feel they did not do enough up-front preparation, especially in product training, before a project was started. It also indicates that they did not have enough of their own (IT and business user) resources on the project. This is likely the result of implementations taking longer than expected and, partially, resource and project management problems.

Conclusion

Users interested in implementing SCP software must make sure to be realistically conservative and must fully understand what they are getting into. In this regard, our recommendations to users are:

• Focus heavily on project management throughout the implementation, as each SCP module can take from six months to longer than a year to install with the requisite business process changes. While there is wide variation in implementation times, these can be shortened with disciplined project management.

   

• Provide enough internal resources throughout the implementation, since SCP installations involve heavy doses of business process change and integration with legacy systems. These resources need to include both IT and business owners that are movers and shakers, unafraid to make the business process changes needed and willing to be involved for an extended period of time.

   

• Allow project team members extra time up-front to learn the software and how it needs to be integrated to existing systems. Work with your software vendor to get this training, or SI, if one is involved.

In the final analysis, SCP projects are a big deal in terms of what they can do, and while they may take longer than one would expect, they do yield significant benefits in the end.