Success Impaired: Common Pitfalls of S&OP and Supply Chain Planning Technologies...And How To Avoid Them
Part 6: Why Ill-Fitting Selections Happen and How to Avoid Them
Why Ill-Fitting Technology Selections Happen
There is no single organization or party that these ill-fitting technologies selections can be pinned on, although some may be more culpable than others. Granted, I highlighted Gartner and SAP along with a few other vendors in earlier sections because of the outsized influence that they possess and to provide concrete examples. However, there are several additional parties and circumstances that contribute to this trend.
At the very foundation, is a widespread lack of understanding of the importance of ensuring an accurate, robust modeling “fit” and a lack of and appreciation of how it can negatively impact operational and financial outcomes. This opens the door to a multitude of ways that requirements and corresponding vendor capabilities are overlooked, minimized, or misrepresented leading to a buyer making an ill-fitting supply chain planning technology selection. These are the 8 leading reasons such ill-fitting selections continue to happen.
- The factors that distinguish well-fitting technologies from ill-fitting ones are often abstract and steeped in highly technical concepts like multi-factor optimization and software design. They can be challenging to explain on their own to non-technical stakeholders. Drawing the connection between these concepts and real-world operational and financial impacts in a way that non-technical stakeholders and decision makers fully appreciate adds another challenge.
- Some of the largest, most revered IT advisory and rating companies are frequently silent on this realm of requirements, the risks of overlooking them, and the wide range in vendors’ ability to address them. This makes vendors with substantial and potentially critical limitations in this area appear to be on par with, and sometimes better than, vendors that address these requirements well.
- Vendor marketing and customer-facing sales teams often gloss over their limitations even if those limitations are addressed in carefully crafted requirement questionnaires or discussed in face-to-face meetings. This is often successful and goes unchallenged since many stakeholders do not fully appreciate these details or the major impacts they have. While I have observed some vendor sales teams knowingly and willfully obscure their limitations or misrepresent their capabilities, I think it is about as common that vendor sales representatives do this unwittingly. Being the quintessential salespeople they are, some sales reps are commonly focused on conveying the big picture and may genuinely, but incorrectly, consider seemingly nuanced limitations as minor details that the technical folks will be able to sufficiently address.
- An opposite vendor dynamic that I have seen more often than I care to admit is the marketing and sales teams for vendors that have well-fitting, highly capable solutions for a complex manufacturing environment do not adequately convey their distinctive strengths and how that translates into real value. This is another factor that makes substantial and potentially critical variances in vendor capabilities disappear in the eyes of vendor screening teams and decision-makers.
- Many of the screening and selection teams, stakeholders, and leaders in the buying organization do not fully appreciate modeling and optimization nuances and the inherent limitations that cascade into real-world business impacts when ill-fitting technologies are used. This applies even more so to supply chain leadership as this person (or group) is usually responsible for driving these technology initiatives and justifying the desired vendor and solution. When the driver of the initiative is not fully aware of these factors, then making a sound technology selection well-suited to the operating environment will almost come down to luck.
- Similar to the large IT advisory and rating companies, large consultancies that also act as major implementation partners for select vendors can behave more so as extensions of the vendor’s marketing and sales team rather than impartial advisors.
- The abstract and technical nature of these factors combined with the common lack of appreciation of what they entail, leads to “linguistic drift”—a word desensitization where widespread imprecise or incorrect use of terms becomes normalized. This incorrect use of terms ultimately acts as a major source of misunderstanding around what a requirement or objective really means. As examples:
- Heuristics-based and linear (or “forward-only”) solving approaches are commonly and incorrectly referred to as “optimization” or as providing “optimized” results.
- “Bi-directional” (or “forward and reverse”) planning is commonly but incorrectly interpreted as the ability of a system to provide an order promise date and to schedule accordingly.
This dynamic also underscores why requirements lists are not entirely reliable since the language used to articulate the requirements may be interpreted loosely enough, either intentionally or unwittingly, to render a requirement met even when it is not.
- IT Leadership commonly prioritizes use of a single vendor (usually the ERP vendor) over “best-of-breed” and best-fit solutions. In the spirit of vendor management and perceived integration simplicity, IT leaders commonly have a strong preference to standardize around as few technology vendors as possible. This usually gives the existing ERP vendor a significant advantage since vendor selection then becomes a question of why the ERP vendor solution is not suitable rather than an open question of which vendor solution is best. In addition, the integration advantage of using a standardized vendor for supply chain planning solutions is usually overstated as there is a similar level of integration that must occur whether using solutions provided by the existing ERP vendor or a different vendor. Even so, I can’t place the blame entirely on IT Leadership as many, in my experience, have been at least open to understanding why the ERP vendor is not suitable. In this situation, the ability of supply chain leaders and other stakeholders to convey these limitations, risks, and benefits is front and center again.
Tips to Avoid Selection Pitfalls
If you are a supply chain or business leader seeking to implement detailed scheduling and S&OP/IBP/scenario modeling solutions, it will be well worth your time to invest some time and effort into ensuring you make a choice that will allow you to get the most out of your supply chain planning implementation from Day 1 through Year 10 and beyond.
The cost of implementing a poorly fitting solution can vary widely based on the specific production environment, the specific technology used, and the gaps that result, but it will usually not be an insignificant figure. In general terms, for every $1 invested to license and implement a bad solution, it can easily cost your business $2 through lost opportunity, continued inefficient operations, and workarounds even after some improvement may have been realized. This is also before factoring in the cost of re-implementation if a different system is ultimately required or desired to address the shortfalls.If you are a supply chain or business leader seeking to implement detailed scheduling and S&OP/IBP/scenario modeling solutions, it will be well worth your time to invest some time and effort into ensuring you make a choice that will allow you to get the most out of your supply chain planning implementation from Day 1 through Year 10 and beyond.
Selecting a well-fitting technology will help avoid both direct costs and opportunity costs of a poor modeling fit and enable your organization’s supply chain performance to push to increasingly greater heights for the foreseeable future, fully unleashing the benefits that flexible, responsive, and highly effective supply chain planning and optimization can offer.
Five suggestions to help avoid these pitfalls and select a supply chain planning solution that will enable maximum benefits include:
- Ensure the selection team appreciates modeling concepts and solving logic as they apply to your production environment.
Ensure you have someone on your team who understands the following modeling and optimization concepts as they apply to your production environment and business results—or invest the time to fully appreciate them yourself. Ensure that person begins to socialize other stakeholders on the concepts and business impacts at the start of the process. These concepts include:
- Actual constraints and options in your production environment and how they are (or are not) represented in a given planning technology to support accurate supply chain modeling and optimization
- Optimization vs. heuristics and the implications
- Forward-only/linear planning vs. bi-directional/synchronous planning and the implications
- How each point relates to scenario modeling flexibility, result accuracy, and profitability
If you don’t have a person with this knowledge on your team and you cannot invest the time yourself, consider bringing in an expert that understands these concepts as they apply to your manufacturing operations. The benefits of getting this right far out-weigh the time and cost invested to properly account for them.
- When discussing requirements, use precise language precisely.
Be precise in articulating vendor requirements and assessing capabilities, particularly where modeling and optimization is involved.
- Remain diligent in ensuring that vendors, stakeholders, and others are using accurate terms to describe requirements and capabilities. Immediately address any misunderstandings or misuse of terms.
- Listen to and read responses carefully. Clarify any “wiggle words” and loosely used terms and phrases in the vendor’s oral and written responses.
- Where there is a question about the vendor’s modeling logic, optimization approach, or any other approach in creating scenarios, request that the vendor show you precisely how their solution works in that the situation using either a demonstration model. Watch the data sets that it relies on for the operation and be sure you follow the logic and solving methodology that the system is using to ensure that it is sufficient for your operation.
- Don’t assume the solutions from the largest vendors will serve your needs well, verify the most important claims and capabilities.
You would be safer to assume vendors may not serve your needs well and have them demonstrate to you beyond a doubt that they can—especially for process industry manufacturers or those with complex constraints and options. As discussed in earlier sections, it is currently the exception rather than the norm that plant scheduling, S&OP/IBP, and scenario modeling solutions can adeptly handle complex manufacturing environments. Many S&OP users experience shortcomings in scenario analysis, risk analysis, and profitability analysis even after supply chain planning technology implementations largely because there is a common misperception that some of the most well-known vendors offer safe S&OP and scenario modeling solutions for a given environment. In reality, many of those same solutions often lack important capabilities and “under-the-hood” functionality that can insidiously limit the ability to model and optimize many manufacturing environments.
While these limitations are easy to mask with higher-level concepts and imprecise questions, the right penetrating questions surrounding modeling, solving logic, and adaptability across all portions of your production environment will quickly highlight the strengths and limitations of a given solution.
- Consider the full production span and all plants even if you do not plan to address them immediately.
Be certain to consider all plants and the full production span of each plan that you expect to address whether now or in the next 10-15 years. Any operating nuances or exceptions that exist at any plant should be addressable by the planning logic as the inability to do so at even one plant will adversely affect scenario and optimization results across the entire company when multiple plants are involved.
Once the technology is in place, your team can dedicate their time and skills over the following months and years to perfecting your supply chain processes, scenario modeling, and business results across the organization rather than wasting valuable time and intellectual horsepower on plugs and workarounds that will still yield inferior business results.
- Fully appreciate and be prepared to explain the costs and risks of making an ill-fitting technology selection.
In addition to understanding the business benefits of selecting a well-fitting solution, it will be essential to fully understand the hidden implications, likely costs, and business risks of an ill-fitting solution. It is likely that you will need to communicate these risks to other stakeholders who may not initially appreciate the implications and to parties who may, by default, view using the ERP vendor as the best technological approach.
Be prepared to explain that the supply chain impacts and operational costs of a bad technology fit can far outweigh the contracting, vendor management, and perceived integration benefits of sticking with a single vendor. When most stakeholders recognize and fully appreciate these impacts, they are typically more prone to support the best-fit technology selection as it will also provide the most profitable results.
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