I have been in the advanced planning and scheduling (APS) space since 1995 when I joined i2 Technologies in Europe. Before that I was in management consulting doing what would be called supply chain design or reengineering today.
While MRP and S&OP were defined as early as the 1980s, these provided rough cut analysis at the aggregate level, nowhere near the level of detail that is possible today. The diagram below by Oliver Wight, with some enhancements by me, captures the progression of capabilities since the 1970s. My enhancements were to add the underlying technology and company information at the bottom which gives some context.
The key point is that I have spent a lot of my working life focused on the value generated by more advanced planning solutions.
It has been with some shock, therefore, that over the past few months I have come across a number of prospects, partners, and analysts that question whether any real value has been generated by all the investments in technology over the past 25 years. I have come to the conclusion that this needs some further analysis, which I won’t be able to complete in a single blog.
Let me start with the confusion between planning and execution. I was on a call last week with a large company in the food and beverage space that has spent $100s of millions, and many years, on an ERP deployment. And of course during the deployment their organizational structure has changed and they have gone through some M&A activity in that time. Needless to say they have a continued multi-year deployment of the supply chain planning system provided by the ERP vendor. And they are still a long way from complete from deploying the ERP modules let alone the supply chain planning modules. Now they want to deploy an S&OP process. They have piloted the process in Excel and know that they need an enterprise level solution for a global roll-out of S&OP. The issue is that none of their IT investments in the last 10 years have moved the needle on operational metrics such as inventory levels, case fill rates, and other operational metrics. Their words. As a consequence they are looking for tangible evidence of value before progressing with a global deployment.
About a week before that I was at dinner with Mo Hajibashi of Accenture. Mo has been around this space about as long as I have and has seen all the changes. We were reminiscing about the trade exchanges that were so much part of the discussion in the late 1990s. Of course these largely went the same way as the rest of the dot com bubble. But Mo went on to say that many companies have struggled to quantify value from their investments in supply chain systems. We were there to discuss other topics so we did not dig too deep into his statement, but it stuck, and came roaring back when I was in discussion with the company I mention above.
In July, Lora Cecere of Supply Chain Insights kicked this all off with a blog on the Forbes web site titled “My Quest to Know …” in which she seemed to question the value of IT in driving value in corporate performance. She states that
As technologies evolved over the course of the last decade, there was a promise that investments in software like Enterprise Resource Planning (ERP), Supply Chain Planning (SCP) or Business Intelligence (BI) would improve corporate performance. I was a research analyst in the throes of this movement, writing article after article on how IT projects will drive corporate performance improvements. I believed it. I was a prolific writer and a committed disciple. I thought it would transform organizational capabilities.
While Lora and my paths are different, our trajectories are the same. I studied Industrial Engineering and Operations Research focusing on Optimization Theory. I lost faith in optimization early when I realized that the uncertainty in our knowledge of true capacity, yield, lead times, and hundreds of other variables drowned out the promise of optimization. And that is assuming that we have a good handle on demand, which we don’t. However, I still believe in the promise of greater productivity through replacement of slow and manual processes with fast and agile digital processes.