My refrigerator stopped making ice a few days ago. The rest of it works just fine, one side keeps things cold, the other keeps things frozen. It does the minimum that I need a refrigerator to do. But the line that dispenses filtered water to make ice, the “set it and forget it” functionality that made my life convenient and fast isn’t working. Suddenly my day to day isn’t quite as easy anymore.
As I sat at my kitchen table contemplating what I should do, my mind wandered to supply chain. Mainly because no matter what decision I make there are going to be pros and cons of that choice. Fixing it requires sourcing compatible new parts and a repairman, replacing it means I’ll have to wait 6-12 weeks for something to be in stock, and doing nothing means I have no ice. Each one gets me to an outcome, but how do I know which one is the best? Then I thought about a conversation I had with Simon Ellis, Program Vice President at IDC around the topic of SAP APO and old refrigerators.
During our discussion we delved into the analogy that SAP APO is like an old refrigerator. You bought it years ago or you inherited it with the house when you moved in. When it was new it was the latest and greatest option on the market. Now, decades later it’s old, does odd things you can’t quite explain but you have no other option than to live with it. It’s doing a “good enough” job but the needs of your family, the available functionality in modern fridges, as well as their energy efficiency have greatly evolved. This leaves you in a situation where, like most people who are financially responsible, you’ll cross your fingers and eke another few years of use before biting the bullet and replacing it. In the meantime, on a daily basis, you’ll pray that it doesn’t just stop working entirely, leaving you with a thawing freezer and a much bigger problem.
Simon added ‘For some manufacturers, a modern supply chain planning suite is a top priority; for others it is not. For the latter, what they have (almost certainly an older, on-premises application) may simply be good enough to meet their current business needs and thus their priorities are focused elsewhere. Furthering the refrigerator analogy, eventually, of course, every older supply chain planning application will need to be replaced and manufacturers will have to decide when is the right time’.
The reviews are in and they’re not good
This situation might sound familiar. This is the exact scenario thousands of companies are facing right now. The decision to replace APO is inevitable, but questions still linger about when and how APO should be replaced.
The answer is sooner rather than later if you value supply chain performance. And you don’t need to take our word for it. If we look at the Gartner Peer Insights reviews of SAP APO, it’s clear that the current functionality doesn’t match today’s needs. One reviewer said it’s an “old tool from the medieval ages” and another said “APO PP/DS was recently used in our company and it is generally designed for general objective functions. And the optimizer engine is a black box that you can not add anything else to. Although the results that were created seem to be satisfactory, the ability for changes in the process is not enough.”
This dated, inflexible planning solution can’t analyze data with the speed, flexibility and breadth companies need today. It is not possible to let it ingest new data streams that provide insight into real-time market dynamics, like demand and supply changes. It is not built to pivot quickly, to identify and evaluate new scenarios when volatility disrupts the supply chain. In short, it’s not powerful enough to keep pace with the current speed of businesses and has become a risk for organizations. Considering that according to a recent study by Vanson Bourne supply chain disruption costs a company, on average, $184 million dollars, it might be time to accept that trying to eke out value from a legacy SAP APO instance isn’t really an option for companies that value resiliency or profitability.
If it ain’t broke don’t fix it isn’t an option
Ultimately, replacing APO is a massive undertaking, and one that many organizations are delaying because it’s such a daunting task to determine where to start and what are the best options. But waiting has a big opportunity cost and that translates eventually in lost revenues, higher cost, and a lower service level.
The good news is that, as a supply chain leader, you don’t need to be tied to older technologies. The gap between yesterday’s solutions like SAP APO and next-generation planning platforms available today is such that the decision to switch is now an easy one to make. In fact, you should be excited. Embarking on a digital transformation of your supply chain planning platform has the ability to create a strategic advantage for your company.
In the next blog we’ll explore moving your supply chain to a cloud environment and the change management strategies that will help you be successful.