Posts Tagged ‘human judgment’

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By Trevor Miles, Director, Product Marketing, Kinaxis

There’s an excellent article here at Supply Chain Management Review identifying the challenges with deploying supply chain Advanced Planning & Scheduling (APS) software. Ihave worked for 3 APS vendors and agree that the characteristics outlined in the article are accurate. I have been on both the deployment side and the sales side. It is an uncomfortable dance between the expectations of “ideal” benefits during the sales cycle and “realistic” results during the implementation cycle.

The part of the article which prompted me to respond was the section on the correct level of modeling. Having studied optimization techniques in an Operations Research graduate program and worked for i2 for many years, I was steeped in the belief that optimization was the answer. Over the years I have come to the conclusion that optimization can provide direction but not the ultimate answer. The reason is captured in the article under the headlines of:

• Complexity of the Underlying Model
• Data Quality
• “The Business has Changed”

Without accurate representation of the business (Complexity of the Underlying Model), it is not possible to generate an optimum. One may get close, but a small change in the assumptions or model can have a big effect on the results, especially at the detail level. Yet the level of information required to model the business accurately is massive (Data Quality). More importantly, it also changes constantly (The Business has Changed). Not only does the physical structure of the supply chain — suppliers, items, locations, customers - but so do the business rules and objectives.

The solution is to provide “enough” detail in the model that an optimization/search engine can get one into the region of the optimum and then have people evaluate the results in a collaborative manner in order to provide the human judgment and compromise necessary to adapt to the latest business conditions. This is a lot more efficient than trying to capture and modify constantly the business rules used to guide the optimization.

To take the paradigm of human judgment further, the speed of business has increased dramatically over the past two decades, when many of the APS solutions where designed and constructed. At that time it was sufficient to run and APS engine once a month or once a week. Coupled with the knowledge that the optimzation does not provide an exact answer (nor is the forecast 100% accurate), this leads to the requirement for a system in which people can create scenarios in a rapid and effective manner in order to evaluate the organizations response to reality. Human judgment and compromise is used to select the “best” option amongst the scenarios.

It would be remiss of me not to point out that I work for a vendor that provides an on-demand service with integrated demand-supply planning, monitoring and collaborative response capabilities.