Was Integrated Planning a Hoax?

by Lora Cecere on June 20, 2014 · 9 comments

Hoax: An act intended to deceive or trick.

Integrated Planning: Tight Coupling of Enterprise Resource Planning (ERP) to Supply Chain Planning (SCP)

Was it intentional? Or accidental? We will never know. However, what is clear from our recent study of 73 manufacturers using supply chain planning is that companies using best-of-breed solutions implement faster, achieve a quicker Return-on-Investment (ROI), and are more satisfied. When companies tell me that they need to exchange their current Supply Chain Planning (SCP) from a best-of-breed provider to get a leg-up, I ask, “Why?” It makes no sense to me. In this post, I want to make my argument and stir a debate.

Let’s start with a definition. The term integrated planning, as used in this blog, defines the relationship between Enterprise Resource Planning (ERP ) and Supply Chain Planning (SCP). (It should not be confused with the term Integrated Business Planning (IBP) which is the process and technology integration of business and supply planning in S&OP.) Over the last decade, many supply chain experts advocated that tighter integration of SCP with ERP would deliver higher value. However, this is not supported by the facts of a recent study. (At Supply Chain Insights, we conduct twenty quantitative studies a year to understand the impact of technology and process decisions on business results. This is one of the studies in this series.)


Background: My Personal Experience

In the period of 1985-2000, the SCP market was defined by a list of best-of-breed vendors that included names like American Software, Chesapeake, Demantra, Fygir, i2 Technologies, Logility, Manugistics, Mercia, Numetrix, Red Pepper…. The list is long, and most are history. Today, in many organizations, these solutions are legacy.

The SCP market has consolidated. These companies were merged into other entities and/or changed their names. JDA acquired Manugistics and i2 Technologies; Fygir and Mercia rolled up into the INFOR platform, and Oracle combined the assets of Demantra, Red Pepper, and Numetrix through their multiple acquisitions. Webplan changed names to Kinaxis. Only Logility and American Software have the same name and business structure. We now have new technology players entering the market like AIMMS, Enterra Solutions, OM Partners, Quintiq, ToolsGroup, and Terra Technology. For many, it is confusing. It keeps old gals like me in business.

The period of 2000-2010 was turbulent for these best-of-breed APS technologies. Their available market contracted. There were several forces:

  • M&A: Through many mergers and acquisitions, the available market for solutions shrunk. This is a barrier for innovation.
  • Competition: The aggressive marketing of the Enterprise Resource Planning (ERP) vendors introducing planning suites (led by SAP with a product named SAP APO) took the market off course. As SAP APO skyrocketed to capture the dominant market share, the best-of-breed vendors could not shake the perception that an “integrated solution” was better. It did not matter that most of them had integrated to SAP suites for over a decade.

During this time, I worked for Manugistics. As I watched the hype of “integrated planning” swell, I asked, “Why?” It did not make sense to me. After Manugistics, I worked for two analyst firms; Gartner and AMR Research, and I continued to question if the extended ERP platform that included SCP delivered greater value. I did not see it. The implementations were longer, the purchase costs were higher, and the functionality was less robust and lacking flexibility. Yet, the positive market perception continued. It was largely sustained by consulting partners that made more money on the implementation of larger, and more costly projects of less capable solutions.

During this period of time, I tried to highlight the gap in my writing. However, it is tough for an analyst to take a stand against the larger ERP vendors. The ERP public relations machines are mighty; and they invest heavily in the larger, more established analyst firms. As a result, it is hard to take a tough stand in the more established analyst worlds. Not so today, I am independent. I can voice the truth. I can call a spade a spade. I have raised the ire of both Oracle and SAP multiple times in an effort to help businesses identify the best partner for SCP to propel their supply chains forward.

 Study Results

In early 2014, using the principles of open research, we at Supply Chain Insights hosted a study on Supply Chain Planning. We currently have 73 company respondents, representing 133 planning instances. We have left the study open, and would love to hear from you. If you share the data from your implementation, we promise to never share your or your company’s name. All of the results are reported in aggregate. Here are some of the results that we have collected so far:

  • Extended ERP Solution Implementations Are Longer with a Less Favorable ROI. The implementations of extended ERP solutions for demand and tactical supply planning is 20 months while the best-of-breed solution deployments are averaging 11 months. (The predominate ERP SCP solution for the respondent in the survey is SAP APO. There are few implementations of Infor and Oracle.) The time to achieve ROI averages seven months for a best-of-breed provider and over 13 months for the extended ERP solution.
  •  Demand Planning Implementations Are Faster with Fewer Issues Than Supply. Demand planning is less industry specific than supply. While 67% of the demand planning implementations were at and under budget, 55% of the implementations of supply planning are over budget. My take? Supply planning requires a more detailed understanding of SCP. The models are industry specific. These solutions require greater insights and understanding by the manufacturer and implementing company. Over the last decade, many consulting partners have not been equal to this challenge.
  •  Does Integrated Planning Make Sense? Really? The average company greater than $5 billion has five ERP instances, three instances of demand, and three instances of supply planning. The enterprise environment is complex. It is not as simple as one ERP instance connected to a single SCP implementation. As a result, there is a greater and greater need for a visualization layer and planning master data system. As a result, the basic tenants and assumptions of integrated planning dissolve and become less relevant. The argument is becoming less and less germane.
  • Organizations Are Not Static. If this is not complicated enough, just when many IT managers build a system for tightly integrated planning, there is an M&A event making the IT environment even more heterogeneous. In addition, with over 30% of manufacturing and 55% of logistics outsourced, it is now a business network, not an enterprise, planning problem.
  • Ability to Use Data. While the extended ERP solution architectures make look nice on paper, the reality is that line-of-business users struggle to use the data for “what-if” analysis or business analytics. The supporting analytics around the extended ERP packages have not been equal to the business requirements.

What Should You Do?

This post is part of my series of “Do No Harm” which is a focused series to help line-of-business leaders get their supply chains unstuck. (In prior posts, I have written how nine out of ten supply chains are stuck in their ability to improve operating performance on the Effective Frontier of managing growth, profitability, inventory turns and business complexity.) To move forward, I recommend the following:

-Recognize the Facts. Each of the ERP providers is at a very different place.

  • SAP. The SAP team has built an incredible system of record to enable flows from ERP to SCP, but has failed to deliver a solution to deliver SCP planning excellence. In companies with an SAP APO environment, companies should use SAP APO as a system of record and buy other optimization solutions that are industry-specific to improve decision support. In addition, line-of-business leaders should push for clarity on the SCP footprint and the supporting business intelligence strategy to ensure that they can get data in, do “what-if” analysis, and get data out. Question the consultants that come to your door stating that, “… 80% is good enough.” The study clearly shows that it is not.
  • Oracle. The Oracle solution is strong in demand and transportation, but weak in tactical supply and production planning. It is not a good system of record. Oracle has cobbled together the acquired assets from the SCP market. Oracle has delivered neither a system of record, nor differentiation. It is integrated only by the words on the contract. Instead, what you have is one throat to choke; but, by and large, the references are unfavorable.
  • Infor. In contrast, Infor has done a better job. The ION integration layer attempts to provide a system of record and the many SCP solutions acquired through their mergers are being rolled up into a framework that is starting to make progress.

-Don’t Wait. A ROI in less than a year in today’s market is an opportunity. Why wait?

-Use Talent from the Technology Provider to Implement. The participants in the study that use consulting talent from the solution providers are more satisfied than those that implement using larger consulting firms. Use the large firms for program management and change management, but let the SCP providers tune  and implement the technologies in the SCP market.

Next Steps:

Is this a fluke, or a market reality? We are trying to gather more data. We would love to hear from you. If you fill out our survey on integrated planning, we will be glad to share the results with you and your team. Your responses on our survey are always kept confidential. We do not share the survey results of any individual. All of the responses are reported in aggregate. In addition, with more responses, we want to correlate these results to the corporate financial ratios to see the impact of supply chain planning choice. We hope to hear from you!

In addition, at our Global Supply Chain Summit in Scottsdale Arizona, on September 10th and 11th, we will have a facilitated breakout session for business leaders to network with each other on the future of demand and supply planning. It is a closed-door session with no technology or consulting partners. With SAP APO moving to a HANA architecture, the business leaders have requested this, and we want to help. We would love to see you there!

This week, we also kicked off our Supply Chain Planning Benchmarking Service with a webinar yesterday. We have five customers signed up and we are hoping for another twenty. We want to kick-off this project during the summer to gather more data around “What Drives Supply Chain Planning Excellence.”  Let us know if you are interested.


Raving, Ranting, and Craving

by Lora Cecere on July 18, 2011 · 0 comments

They call it Base Camp.  I shun boots on this hot day and I do not have the inclination to camp. I want to go anywhere but to a Base Camp. I am tired and cranky.

As the alarm rings, my experience last year hangs heavy in my mind. I struggle to get out of bed at 4:00 AM.   The day is a scorcher. As I travel to the SAP headquarters, I watch the sun come up. I am a late night person, and rarely see a sunrise. I am a bigger fan of sunsets. I question if this will be a waste of my time.

When I arrive, I am crowded into the back of a packed room of analysts with a promise to hear about innovation. I am skeptical. To my pleasant surprise,  I was wrong.  I think that I witnessed two suns rising last week: the one on the east coast from my car window as I traveled to Newtown Square and the promise of a new SAP. While the event failed to deliver for me on many fronts, my mind is reeling with all the possibilities of what SAP could become (especially if SAP can get out of its own way). I feel strongly about this. So, I have broken this blog into my thoughts into three areas: Raving, Ranting and Craving.


Let me start with the positive. 

Content. Wow! My mind, post event, is spinning about the possibilities for SAP. I am full of thoughts of what can happen at the intersection of mobility, analytics and the redefinition of enterprise applications. I feel that SAP is teetering on a tipping point equivalent to the mainframe to client server push or the launch of ecommerce. While I gave SAP tough love last year on last year’s event of not having “enough there there”,  I left this year’s event questioning if SAP truly understands the impact of what their new push means for them, the market, and the potential to help companies address enterprise application problems. Unlike SAP Netweaver or Oracle Fusion, I think that this thinking could redefine enterprise applications.

Last year, I left the event feeling empty and frustrated. This year, I leave feeling full and excited. I went to the event thinking that SAP would become the ERP dinosaur.  I leave the event thinking about the world of possibilities. This is a good thing…. (I reflected hard today on the evolution of the ERP market with Lawson announcing their layoffs with the acquisition by INFOR. Who would have predicted this event five years ago? The technology market is not kind to companies that do not keep up.)

Wisdom. Hidden throughout the standard presentations were a number of gems. My favorites:

  • “When it comes to mobility, we need to think about the design of mobile applications first before we think about the enterprise delivery.” I agree. Effective mobile applications cannot be built from the enterprise out. In fact, enterprise applications need to be built from the outside-in as well.
  • “In-memory computing is analogous to an 8-track music tape powering iTunes.” It is an amusing, but effective analogy. While we can laugh, we should cry. The fact that our sophisticated enterprise application stacks are dependent on a mechanical disc drives is sad irony.
  • “The mistake that many make in talking to us about HANA is that they believe that it is an application migration path. They are better off, if we can start anew.” For clients this is good news and bad news. I write more about this below.
  • “We need to think about commodity management differently. ” I say, AMEN! Bring it on! It cannot come fast enough.  Companies are struggling. Supply chains are in a constrained supply environment. Commodity prices are rising and enterprise applications have no real goo solutions to translate go-to-market strategies to buy-side commodity strategies. Organizations badly need applications that span the organization horizontally. I strongly believe that this shift will outdate conventional Customer Relationship Management (CRM) and Supplier Relationship Management (SRM) applications.

Thanks. We, as analysts, do not often say thanks publicly. My hat is off: the team at SAP did a great job yesterday. I want to start by saying, “thanks!”

As an analyst, it is hard to get good information about SAP. I shun SAP’s Sapphire event and I have found SAP Insider to be less valuable as the years have passed. This creates a dilemma. I struggle with how to get the right level of information easily. I think SAP also struggles with how to effectively communicate to folks like me. So, I want to start by giving kudos to SAP for taking the time and making the effort to host an analyst day for industry thought leaders. It was unique event and shows a commitment to the market that is unequaled by any other technology provider that I cover. I also want to commend the speakers from SAP for side-stepping normal vendor posturing and hubris to be more open, honest and giving in their views. This takes courage. As an analyst, it is tough to sit through eight hours of marketing hype and positioning that does not help to answer client questions. I value honesty, and I have never seen SAP executives more honest, real and giving. It was a gift. Thanks.


Technology disruption is a classic case of “who moved my cheese?”Change in applications happens faster than organizations can absorb upgrades, enhancements and new releases. The political dynamics have pitted the Chief Information Officer against Line of Business leaders that are frustrated. IT costs are high, systems are inflexible, and for many, the latest releases did not deliver against expectations. For many SAP clients, this is the unfortunate reality. Clients are tired. The release of Netweaver, the acquisition of Business Objects, and the increases in maintenance costs have not gone down well, many line of business leaders in organizations that I work with are MAD.  Today, they just don’t want to buy anything that SAP is selling, but this will dissipate if the technology shift warrants the investment. In the “base camp”, there was no reflection of this world reality.  (This is an industry trend.  The sentiment with Oracle users is worse, but reflects the same themes of expense, inflexibility and failed promises.)

Can we start over? In the area, of supply chain planning, can we just start again and build it on HANA? While it is promising to see some new supply chain applications –Demand Signal Repository and Sales and Operations Planning—released on HANA, the supply chain market hungers for a leader like SAP to change the game and drive dramatic supply chain improvements.   Consider the current state….. In the supply chain world, companies wish that there was more “O” in APO. It was late entrant in an established market. When it came to functionality, it was largely an “inferior me-too” release in a market (Advanced Planning Solutions) that has moved on. Its strength is architectural.

Supply chain management is a market with no good option for a second generation solution. Currently, companies in multi-year roll-outs and infrastructure design are evolving to SAP APO. It is not because it is an ideal release, but because of issues with other alternatives. In many ways, it is winning the ugliest baby beauty contest. Even though it is hard to use, and lacks depth of functionality of best of breed, it is built to last. Today, I have five clients that are migrating from JDA/Manugistics to SAP APO.  It has become the defacto standard.  When SAP knows what to build, they do it well. The journey to APO has been layered by fits and starts in the evolution of the APS market. HANA is a good excuse start again. It is the opportunity to build the second generation supply chain planning application that the market needs and wants, and who is better to write it than SAP?

Doesn’t it take a village?  During the session, there was an elephant in the room. The session yesterday was largely devoid of discussions on partnerships. While sales executives late in the day give SAP an “A” on partnership execution, I give them a D-. The only partnerships that have been successful in the software space are small, industry-specific technology vendors that are sold by SAP sales teams to extend deals. When asked the question, “of who are your successful software partnerships?” They listed ICON, Open Text, Smartops, Vendovo, Vistex…. I smiled. What happened to the Microsoft work on Duet, the Teradata work on enterprise data management, the SAS work on predictive analytics? I wish that SAP knew how to dance better in the ecosystem. Sadly, most SAP partnerships are sales driven. When it comes to tackling the opportunity in front of us, I think that it requires the mobilization of the ecosystem. (My score for Oracle for this would be far worse….)

The greatest issue may be SAP itself.  Within SAP, there are two main drivers: license sales and delivering on the maintenance revenue promise to customers. Both of these drivers run the risk of strangling discontinuous innovation. This tipping point also includes software as a service (SaaS) as the delivery model. It is incongruous with the SAP license delivery model. And, I don’t feel that maintenance customers and the system of industry councils will drive this forward. In the words of Henry Ford, “If I had asked my customers what they wanted, they would have asked for a faster horse.” We are dealing with discontinuous technology here.

What about costs?  Can we ask the line of business user to fund this development? The primary push back on SAP today is the cost of running a SAP architecture. The average client has three ERP instances, and has stomached higher maintenance costs and the purchase of Business Objects. Companies want these costs to go down not up. The discussion last week did not address this.


I live want to know more. I want to talk about how we can redefine applications based on in-memory processing. I am fascinated by what could be at the intersection of mobility, in-memory processing and the redefinition of enterprise applications. I want to move on. Not with my boots at a Boot Camp, but with my running shoes….

What I think that this means for you….

If you are the average supply chain executive that is stunned by the ERP quagmire–escalating costs, inflexibility, and failed expectations– and is struggling with what this means for multi-year roll-outs, these recommendations are written for you:

Don’t get diverted by bright and shiny objects. The market push of mobility platforms, in-memory processing and enterprise application redefinition is compelling. However, don’t get fascinated by bright and shiny objects. The upcoming Demand Signal Repository and Sales and Operations Planning releases planned for the fall on HANA are new and early. As such, it should be treated as should be evaluated as co-development. Instead of jumping with your check book quickly, work in industry councils to guide the development teams. Watch it evolve and shape the future, spend enough to drive the innovation, but it is not ready for swan dive.

The new concepts of SAP may not be a migration.We have a migration mentality. R3 to ECC6.0. APO 3.0 to 7.1. I feel that companies that will get the most value will not tackle this as a  migration discussion. Instead, this is a discussion of what could be. When you have the opportunity to discuss this with SAP, unconstrain your thinking by today’s application definitions, enterprise software limitations, and yesterday’s thinking.

Learn from the past, but be open for the future. Think hard about the areas that do not work well in today’s enterprise applications, but don’t throw away the goodness of what we have learned in the evolution of packaged applications. While the code may not be a migration, the lessons learned are.

All the best to you and your team on this summer afternoon.

Let me know if you have any questions. I am busy finishing up my report on Sales and Operations Planning (S&OP) and have an extensive road trip next week planned with clients.  Look for my tales from the road and may you have safe travels