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December 17, 2017
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Selecting supply chain planning software? Trust, but verify!

Comment
To determine which solution is best for your operation, have the vendors on your short list compete in a "proof of concept" test.

I frequently get calls from people who have been looking at supply chain planning software for months and cannot make a decision. They ask me, "Which vendor should I choose?" I never make the decision for them. Instead, I facilitate a discovery process.

When it comes to selecting the right supply chain planning software, buyers really should base their decision on whether the engine and the data model fit their particular operation. Unfortunately, many find it difficult to make this determination. That's because most technology vendor presentations sound alike, and the buyers' business teams cannot determine the important differences from demos.

So what's my recommendation? Selection teams need to adopt former U.S. President Ronald Reagan's slogan, "Trust, but verify." They need to ask software companies to demonstrate the proof of their claims.

How to verify
How do you get this verification? I recommend inviting your most promising technology providers to participate in a proof of concept. In other words, hold a series of "bake-offs" that tests the different software solutions against your particular use cases. Carefully provide the candidates with your requirements, and ensure that your team is clear and in alignment on what the success criteria will be.

Here are some suggestions for testing specific supply chain planning modules:

  • Forecasting/demand planning. Take four consecutive years of data and give the technology providers the prior years' data. For example, provide the vendors with monthly (or weekly) shipment and order data for 2012-2016, but do not share the data from 2017. Be sure to divide the data into demand flows, such as new product launches, trade promotions, line extensions, and seasonal builds. Also communicate the associated demand streams, year-over-year. Next, ask the technology providers to load the data into their engines and deliver what they believe is the forecast for 2017. Then calculate the error and bias for each of the demand streams. Pay close attention to how well the software's forecast or plan performed on items in the "long tail" (products that sell in small quantities).
  • Production planning. Take a year of orders and share them with the software vendors. Give them the characteristics of changeovers, constraints, and cycle planning, and ask them to provide you with a sample production plan. Pay close attention to the details of the production schedule plan and understand what drives schedule attainment. Evaluate the impact of the production schedule output on cycle stock, and make a comparison to the cycle-stock requirements of your company's prior year.
  • Transportation planning. Give the technology providers a year of orders along with your route assignments and pooling specifications. Ask them to provide you with a set of sample plans. Look for capabilities associated with load assignments, pooling, continuous moves, and backhaul definitions. Compare the impact of each software program's plan on cost.

The unfortunate news is that few companies do this type of testing. I believe that this lack of testing is one of the reasons why software satisfaction is so low. While there is a nominal fee and a requirement of time and energy, performing such tests makes a difference in the end.

Five more recommendations
In addition to testing, I have five more recommendations for companies looking to purchase a new supply chain planning suite. These suggestions are based on my 20 years of following this market.

  1. Triangulate the market. Triangulation refers to using more than one research method in order to eliminate as much bias as possible. Technology vendors usually supply only positive references. To get a more accurate assessment of the technology's capabilities, you need to go beyond the salesperson's references and try to find some along the entire spectrum—the good, the bad, and the neutral. You can learn from all three. I know of no software where every implementation was positive. Rather than seek perfection, the question the buyer should ask is, "What is the best fit for my company?"
  2. Look for deployments in like industries. While strategic network design technologies can be deployed across different types of industries, the more operational technologies, like demand sensing, production planning, deployment, transportation planning, and material planning, are very industry-specific. Do not try to cross the lines and apply one of these solutions that was developed for application outside of your industry.
  3. Know that an 80-percent "fit" is not good enough. Many times software sales teams want to gloss over the details of optimization, stating that software that works effectively for 80 percent of your processes is good enough. To drive business results, however, data model "fit" and engine design are more important than software integration. In the implementation of supply chain planning, integration is the easy part. Business-process optimization is the more difficult and critical element. Test and verify that the technology you're considering can do the job.
  4. Beware of "we don't have it now, but we can build it for you." Often if desired capabilities are not already included in the software, a vendor will claim that it can develop them for you. However, I have found that building new software generally takes nine to 16 months, and that companies are seldom satisfied with the results. In my 20 years as an analyst, I have only seen two cases where this type of co-development was successful. Avoid one-off software efforts.
  5. Be skeptical of software system integrators' recommendations. System integrators usually get a commission on the sale of the software. They are often not a neutral party. Ask your system integrator for details on its arrangement with the software provider.

In my experience, a little bit of healthy skepticism and some rigorous testing can go a long way toward making sure you don't end up like many supply chain software users: dissatisfied with your implementation.

Lora Cecere is founder and chief executive officer of the research firm Supply Chain Insights.

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