Advanced Planning and Scheduling: Is It as Goods as It Sounds? · • Supply chain network design:...

The Report on Supply Chain ManagementMARCH 1998 • © 1998 Advanced Manufacturing Research

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M A R C H 1 9 9 8

Advanced Planning and Scheduling:Is It as Goods as It Sounds?

CONTENTS

T H E R E P O RT O N S U P P LY C H A I N M A N A G E M E N T

ACRONYM LIST 24

THE AMR INSIDER 19

Sneak Preview: Who Bought APS Systems in 1997?

by Janet SuleskiFor this month’s Insider, AMR surveyed the top 12 APS vendors to get an early

idea of where their sales came from during the last 12 months. By comparing

these preliminary findings to our market data from 1996, we have identified

some of the trends that market watchers should look for in 1998.

FRONTLINE 3

Advanced Planning and Scheduling:Is It as Goods as It Sounds?

by John BermudezThis month’s Frontline closely examines the Advanced Planning and Scheduling

Market, reviewing the scope of current APS solutions and providing findings

from an in-depth look at existing implementations in a variety of industries.

AMR spoke with more than 40 companies about their APS experiences to gauge

whether the predominant enthusiasm about APS is warranted.


2


3

What is APS? . . . . . . . . . . . . . . . . 3

The Scope of APS . . . . . . . . . . . . . 5

How Do All of These Planning

Functions Fit Together? . . . . . . . 8

Less Than the Vision but Better

Than Expected . . . . . . . . . . . . . . 13

Conclusion . . . . . . . . . . . . . . . . . 18

FRONTLINE

Advanced Planning and Scheduling:Is It as Goods as It Sounds?by John Bermudez

SNAPSHOTAdvanced Planning and Scheduling (APS) has been the hottest segment of the

enterprise applications market for the last two years, with a 70% compound

annual growth rate (CAGR). Fueling this growth, manufacturers faced with the

challenges of simultaneously reducing costs and improving customer service

have been early adopters of APS as part of their supply chain management

strategies. Early results are spectacular as APS technology takes on previously

unsolvable planning problems. While many more manufacturers are interested

in APS, the too-good-to-be-true claims and high product costs have caused most

companies to proceed cautiously. In this Report, AMR reviews the scope of

current APS solutions and provides findings from an in-depth look at existing

implementations in a variety of industries.

WHAT IS APS?

From its humble beginnings in fast materials requirements planning (MRP) and

constrained production scheduling programs, APS technology has blossomed

into one the most important advances in business applications. Its impact on the

manufacturing planning and scheduling process is more revolutionary than

evolutionary. For the first time, manufacturers have planning tools that can

absorb vast complexities to produce optimal plans. More importantly, APS

leverages the planner’s knowledge with responsive decision support tools rather

than enslaving him or her with an endless barrage of exception messages.

Sound too good to be true? It is, until you consider that this is a revolutionary

improvement in enterprise planning, not an incremental one. The key to

understanding APS is that it is a new technology, not a rehash of 30-year-old

MRP programs. In much the same way that the microwave oven revolutionized

cooking and CDs changed the way we listen to music, APS technology is chang-

ing the way manufacturers plan. APS leverages the incredible advances in

computer technology over the last 10 years. Today’s PC and UNIX workstations

are capable of storing up to 4 GB of data and supporting the complex models of

manufacturing operations. (With 64-bit workstations, storage capacity could

reach 1,000 GB.) To put 4 GB in perspective, 10 years ago most large manufac-

turing plants did not have this much storage capacity (disk and CPU memory) in

their entire data center.

Generally, an APS application utilizes this memory capacity to store models or

representations of the business environment against which it runs specially

4 The Report on Supply Chain ManagementMARCH 1998 • © 1998 Advanced Manufacturing Research

designed algorithms to solve for the best plan. Often the APS application is the

only program running on this computer. In contrast, the MRP and master

production schedule (MPS) programs, at the heart of most ERP systems, are

designed to run on multi-user computers tuned for heavy-duty transaction

processing, where most of the planning data resides on disk storage. This means

the MRP program spends 80% to 95% of its total runtime reading and writing to

the disk storage device. With APS, most if not all this read/write time is elimi-

nated. In short, APS vendors, unconstrained by the limits of transaction

processing systems, apply computer technology to manufacturing planning from

a fresh perspective more akin to the way workstations were applied to computer-

aided design (CAD) applications. In this context, APS can also be regarded as

among the first manufacturing applications to deliver on the promise of distrib-

uted computing beyond supporting graphical user interfaces on the desktop.

More important than advances in computer technology, APS utilizes new

planning and scheduling techniques that consider a wide range of constraints to

produce an optimized plan:

• Material availability

• Machine and labor capacity

• Customer service level requirements (due dates)

• Inventory safety stock levels

• Cost

• Distribution requirements

• Sequencing for setup efficiency

The concept of optimization means that APS weighs the constraints and other

business rules to find the optimal use of available material and plant capacity.

This enables the business to meet such objectives as minimizing total cost (often

from inventory and setup reductions) and maximizing overall plant operations

to fill the most customer orders on time.

During the optimization process, APS engines often look for the bast plan by

making multiple passes through the planning data. In contrast, MRP programs

make a single pass through the data, assuming infinite plant capacity and material

availability and simply time-phase production and purchase orders based on

customer due dates. Material allocation is done on a first-come-first-served basis,

which often results in suboptimal plans. For example, consider two customer orders

for the same product: one order is due Monday for 100 units and the other for 1,000

units on Tuesday. Only 1,000 pieces of a critical component are on-hand and

neither customer will accept a partial shipment. MRP will allocate 100 of the critical

components to the order due on Monday and indicate a shortage on the larger

order. Obviously, it’s usually advantageous to ship the larger order. A good

optimization algorithm can be taught to find these opportunities.

The concept of optimization means

that APS weighs the constraints and

other business rules to find the

optimal use of available material

and plant capacity.

5The Report on Supply Chain ManagementMARCH 1998 • © 1998 Advanced Manufacturing Research

THE SCOPE OF APS

AMR views APS as an umbrella technology embracing the following concepts:

• Simultaneous consideration material and plant resources

• Optimization algorithms that incorporate constraints and business goals

• Leverage for memory-resident programs and databases to provide real-time

plan and schedule creation with net change regeneration

• Real-time decision support

• Real-time available-to-promise

The scope of APS is not limited to factory planning and scheduling, but has

grown rapidly to include the full spectrum of enterprise and inter-enterprise

planning and scheduling functions (See Figure 1 on page 7):

• Strategic and long-term planning addressing such issues as the following:

– Which products should be made?

– What markets should the company pursue?

– How should conflicting goals be resolved?

– How should assets be deployed for the best rate of ROI?

Currently, none of the major APS vendors offers strategic planning as part of

its product suite. Time horizon: 2+ years

• Supply chain network design: Optimizes the use of resources across the

current network of suppliers, customers, manufacturing locations, and

distribution centers. It is helpful for locating new facilities within an existing

supply chain network and determining the optimal way to fulfill customer

demand. What-if analysis can be performed to test the impact of closing or

moving facilities on profits and customer service levels. Supply chain

network design tools are often applied to optimize the balance between

stocking locations and transportation costs. Time horizon: 1+ years.

• Demand planning and forecasting: Demand planning addresses creation of

demand through promotions and external events. Demand forecasting uses

statistical and time-series mathematics to forecast future demand from sales

history. Demand forecasts are often considered unconstrained as they reflect

what customers want, not necessarily what can be produced. Time horizon:

6 to 18 months.

• Sales and operations planning (SOP) : Loosely defined by most vendors,

SOP is the process of converting the demand forecast into a set of operation

plans for sales and manufacturing. This process may include the use of

manufacturing planning or supply chain network optimizers to determine if

forecast demand can be met. Time horizon: 6 to 18 months.

• Inventory planning: Determines optimal levels and location of finished

goods inventory to achieve the desired customer service levels. Essentially, it

calculates the optimal level of safety stock. Time horizon: 6 to 12 months.

The scope of APS is not limited to

factory planning and scheduling, but

has grown rapidly to include the full

spectrum of enterprise and inter-

enterprise planning and scheduling

functions

Loosely defined by most vendors,

SOP is the process of converting the

demand forecast into a set of

operations plans for sales and

manufacturing.


• Supply chain planning (SCP): Optimizes the use of manufacturing, distri-

bution, and transportation resources (including materials) to meet forecast

and actual demand. Generally, SCP works with aggregate-level resources and

critical materials to develop a constrained production plan. SCP generally

spans multiple manufacturing and distribution sites and may provide some

level of supply chain synchronization. Time horizon: 3 to 6 months.

• Available-to-promise (ATP): Determines whether a customer’s request date

can be met and/or the next best date from existing inventory and production

orders. A subset of ATP functionality, often called capable-to-promise, looks

at available plant capacity and determines whether an order can be inserted

into the schedule to meet the customer’s request date. In current APS

products, ATP may be an explicit function or a capability supported by what-

if analysis. ATP may take place at the SCP, manufacturing planning, or

production scheduling levels. Time horizon: 2 days to 6 months

• Manufacturing planning: Develops a master schedule constrained by

material availability, plant capacity, and other business objectives. This is

generally done for a single plant. Manufacturing planning may include a

complete MRP explosion or work with only critical materials. The depth of

material planning often depends on the complexity of the bill of materials

and the desired replanning time. Time horizon: 2 weeks to 3 months.

• Distribution planning: Determines the best deployment of finished goods

inventory to meet forecast and actual demand. May consider actual trans-

portation costs and material allocation requirements and support vendor

managed inventory (VMI). Time horizon: 2 weeks to 3 months.

• Transportation planning: Optimizes outbound and inbound material flow

to minimize transportation costs and/or maximize the utilization of private

truck fleets by consolidating shipments into full truckloads, when possible,

planning routes and sequencing delivery/pickup locations. It often uses

current carrier freight rates in order to support lowest cost shipping calcula-

tions. Time horizon: 1 week to 3 months

• Production scheduling: Determines the optimal sequencing and routing of

orders on the plant floor based on detailed product attributes, work center

capabilities, and material flow. Time horizon: 1 shift to 1 month

• Shipment scheduling: Determines the optimal time and method to ship an

order to meet a customer due date. Time horizon: 1 shift to 1 week

• Intercompany collaboration: Provides the ability for planners to collaborate

with customers and suppliers via the Internet in the development of the

demand plan for the purchase of materials or synchronization of feeder

plants. Time horizon: 1 day to 6 months

Generally, the planning process is divided into these levels because they are

performed by different parts of the organization at different times. From a

practical standpoint, even today’s most powerful computers cannot simulta-

neously optimize all of these planning levels. Several years ago, as APS technol-

Shipment scheduling determines the

optimal time and method to ship an

order to meet a customer due date.

A subset of ATP functionality, often

called capable-to-promise, looks at

available plant capacity and

determines whether an order can be

inserted into the schedule to meet

the customer’s request date.


ogy was evolving, some vendors gave prospective customers the impression that

single-solver engines would be able to optimize entire supply chains. This has

not happened, nor is it even possible or required at this time. In fact, none of the

surveyed manufacturers had implemented all of these levels. Most manufactur-

ers had implemented only one or two of these planning functions in APS

technology, yet dramatic results were achieved in most cases.

From a process perspective, combining multiple levels of planning in a single

application presents organizational challenges, as it often cuts across departmen-

tal and/or divisional boundaries. While APS will support reengineering of the

overall planning process, making this a requirement of the initial implementa-

tion can cause insurmountable resistance from parts of the organization.

Implementing APS at just one or a couple of planning levels lets the manufac-

turer gain confidence in the technology before making organizational changes.

Demand Planning

Execution System

Shipment Scheduling

Production Scheduling

Transportation Planning

Manufacturing Planning

Distribution Planning

Inventory Planning

Available-to-Promise

Supply Chain Planning

Sales and Operations Planning

Strategic Planning

Seconds/ Minutes

Hours/Days

Weeks/Months

Quarters Years

Time Horizon

PlanningDetail

Supply Chain Network Design

Figure 1: Supply Chain Planning Time HorizonSource: AMR, 1998

Table 1 on the following page provides an overview of the various planning

functions addressed by the leading APS vendors. As indicated in the table, most

vendors provide only a few of the planning functions at this time. Generally,

vendors focus on the planning functions that are most important to their target

vertical industries. For example, vendors that target Chemicals and Consumer

Packaged Goods (CPG) usually include production scheduling, demand forecast-

ing, and distribution planning. Vendors focused on discrete manufacturers must

have a strong manufacturing planning function. Although market leaders i2

Technologies (Irving, TX) and Manugistics (Rockville, MD) are close to covering

all of the functions, the depth of the applications within their suites varies widely

and is not appropriate across all verticals.

From a process perspective,

combining multiple levels of

planning in a single application

presents organizational challenges,

as it often cuts across departmental

and/or divisional boundaries.


Table 1: APS Vendors Coverage of the Planning FunctionsSource: AMR, 1998

Advanced Planning System VendorStrategic Planning

Supply Chain

Network Design

Demand Planning

Sales & Opera-tions

Planning

Supply Chain

Planning

Available To

PromiseInventory Planning

Distri-bution

Planning

Manu-facturing Planning

Transpor-tation

Planning

Prod-uction

Schedul-ing

Shipment Schedul-

ing

Acacia Technologies No No No No No Yes No No Yes No Yes No

Adpapta/DynaSys No No Some Some Some Yes No No Yes No Partner No

Advanced Planning Systems No No No No No Yes No No Yes No No No

AutoSimulations No No No No No Yes No No Yes NoYes-Semicon. No

Baan/Berclain No No Partner No No Yes No Some Yes NoYes-Discrete No

Bridgeware No No Yes Some Some Yes Yes Yes Yes No No No

C-Way Systems No No No No No Yes No No No No Yes No

Chesapeake Decision Sciences Some Yes Yes Yes Yes Yes Yes Yes Yes Some Yes Some

Disctinction Software No No Yes No Some Yes No No Yes No Partner No

Enterprise Planning Systems No No No Some Some Yes No No Yes No Some No

Fygir No No Partner Some Yes Yes No Some Yes NoYes-Process No

i2 Technologies Some Partner Yes Yes Yes Yes Yes Yes Yes Partner Yes Yes

ILOG NoSolver Only No No Solver No No

Solver Only

Solver Only

Solver Only

Solver Only Solver

Logility No Partner Yes Yes Some Yes Yes YesYes-Process Yes

Yes-Process Yes

Manugistics Some Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

Mercia No No Yes Some Some No Yes Some No No No No

Numetrix Some Yes Partner Yes Yes Yes Yes Yes Some SomeYes-Process Yes

Ortems No No No No Partner Yes No No Yes No Yes No

Paragon Management Systems No Yes No Yes Yes Yes No Yes Yes Some Yes No

PeopleSoft/Red Pepper No No Yes Some Yes Yes Yes No Yes NoYes-Discrete No

PRI Automation/Interval Logic No No No Some No Yes No No Yes NoYes-Seimcon. No

Scheduling Technology Group No Some No Some Yes Yes No No Yes No Yes No

Symix/Pritsker Corp. No No No No No Yes No No Yes No Yes No

SynQuest, Inc. Some Yes Yes Yes Yes Yes Yes Yes Yes YesYes-Discrete No

Taylor Manufacturing Systems No No No No No Yes No No Some No Yes No

Thru-Put Technologies No No No Some Yes Yes No No Yes NoYes-Discrete No

Tyecin No No No No Some Yes No No Yes NoYes-Semicon. No

Vishal (formerly ShivaSoft) No No No No No Yes No No Yes No Yes No

HOW DO ALL OF THESE PLANNING FUNCTIONSFIT TOGETHER?

Although a dozen levels are identified above, APS falls roughly into three levels of

planning:

• SCP

• Manufacturing planning

• Production scheduling

SCP takes forecast and actual demand to create a constrained operations plan for

manufacturing and distribution. In industries such as CPG and Consumer


Table 2: APS Vendors By Vertical IndustrySource: AMR, 1998

Durables the forecast is often supplied to the SCP function by a demand fore-

casting application. For manufacturing, the output of the SCP process is a

multiple-plant, constrained master schedule considering aggregate material

availability and plant capacity. Depending on the industry, this master schedule

may have also considered transportation requirements (common in CPG and

Chemicals) and setup sequencing (common in Food & Beverage and Chemicals).

Although the SCP function may look out over a one to six month horizon, it is

often run between one and three times per week. In some cases, manufacturers

execute the SCP engine on daily basis to catch changes in demand immediately.

Why run SCP so often? Quite simply because 1- to 20-minute net change plan

regeneration runtimes support such frequent execution.

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Acacia Technologies (APS Only) Adapta/DynaSysAdvanced Planning Systems AutoSimulations Baan/Berclain Bridgeware C-Way Systems Chesapeake Decision Sciences Distinction Software Enterprise Planning Systems Fygir i2 Technologies Logility Manugistics Mercia Numetrix Ortems Paragon Management Systems PeopleSoft–Red Pepper PRI Automation/Interval LogicScheduling Technology Corp. Symix/Pritsker SynQuest Taylor Manufacturing Systems Thru-Put Technologies Tyecin Vishal (formerly ShivaSoft)

Indicates good fit for typical industry requirements Some support for typical industry requirementsNo support for this vertical industry


From our recent discussions with manufacturers, AMR finds that the level of

detail processed in SCP varies widely. The most frequent application of SCP is to

create constrained multi-plant master schedules. In many cases, these master

schedules are sent directly to the plant to serve as the weekly or monthly produc-

tion schedule. The depth of this planning process, measured by the level of

material planning also done during SCP, generally varies depending on the

product being manufactured. Products with shallow bills of materials (few

components) such as packaging materials or fan belts may incorporate procure-

ment planning (MRP) into the SCP process. Products with deep bills of materi-

als (numerous components and subassemblies) such as farm machinery or

electronics must rely on a separate MRP process for procurement planning.

Attempts to incorporate detailed material planning in SCP have resulted in

unsatisfactory plan regeneration times that can be hours long. The frequent

solution for limiting plan regeneration runtimes in environments with complex

process or material requirements is to create aggregated resource models that

capture the critical constraints. This allows SCP to solve a broad planning

problem that may include thousands of stock keeping units (SKUs) across

numerous plants and distribution centers. In some cases, even individual SKUs

must be aggregated into product families in order to get short response times.

The need for aggregation will decrease, if not disappear entirely as CPU speeds

and memory sizes increase.

Conceptually, most APS vendors have designed the SCP application to feed its

output, the constrained master schedule, back to the ERP system as input to

MRP or into a another application of their suite for more detailed manufactur-

Figure 2: Relationship of Major Planning Functions With Typical Data FlowsSource: AMR, 1998

Supply Chain Planning

Manufacturing Planning

Production Scheduling

Actual Demand

Master Schedule

Production Plan

ERP

MRP II

In-House

Systems

Inventory Balances

Work Orders Due Dates

Frequent interface points Other interface/common interface points

Products with shallow bills of

materials (few components) such as

packaging materials or fan belts

may incorporate procurement

planning (MRP) into the SCP

process.


ing planning and scheduling. Several vendors with larger APS suites, including i2

Technologies, Manugistics, and Paragon Management Systems (Los Angeles,

CA), have designed their SCP applications to produce a multiplant plan to be

passed to a manufacturing planning application that produces a more detailed,

constrained master schedule, with or without MRP. Vendors that focus on CPG

and Chemicals, such as Numetrix (Toronto, ON), Logility (Atlanta, GA), and

Fygir (Burlington, MA), often combine the manufacturing planning step with

SCP and pass the output to a production scheduling application.

Manufacturing Planning Is the Most Frequently UsedAPS Application

The most frequently used APS application, manufacturing planning, is generally

used to produce a constrained master schedule for a single plant or group of

similar plants. The difference between multi-plant manufacturing planning and

SCP is often a matter of semantics. Generally, SCP as designed by i2 Technolo-

gies and Manugistics is for use by a centralized planning function to balance a

supply chain, especially where distribution plays a critical role. While manufac-

turing planning can be implemented as a centralized function across multiple

plants, it generally focuses on developing the detailed master schedule for a single

plant. To put this another way:

• SCP determines what should be made given the available resources to

achieve business goals.

• Manufacturing planning determines how and when it should be made based

on material and resource constraints to meet customer demand.

The master schedule developed by manufacturing planning generally considers

more detailed capacity constraints and may include a full MRP explosion. In

practice, while MRP explosion capability exists in many vendors’ manufacturing

planning products, most users still rely on the ERP system for detailed material

requirements planning, especially component and raw materials procurement.

Similar to SCP, the amount of material requirement planning done in APS often

depends on the complexity of the product. Manufacturers with less complex bills of

material may generate a full procurement plan during the process of generating the

master schedule. Ironically, this tradeoff occurs most often among the vendors that

claim to have the most sophisticated optimization algorithms:

• i2 Technologies

• PeopleSoft/Red Pepper (Pleasanton, CA)

• SynQuest (Atlanta, GA).

In practice, this tradeoff is less of an issue because most manufacturers still rely

on ERP for material planning. Several vendors offer exceptions to the tradeoff:

• ProMIRA (Ottawa, ON)

• Thru-Put Technologies (San Jose, CA)

• Symix (formerly Pritsker, Columbus, OH)

While MRP explosion capability

exists in many vendors’ manufactur-

ing planning products, most users

still rely on the ERP system for

detailed material requirements

planning.

Vendors that focus on CPG and

Chemicals often combine the

manufacturing planning step with

SCP and pass the output to a

production scheduling application.


The above vendors have designed their manufacturing planning functions to

incorporate MRP for complex material environments. To accommodate detailed

material planning, these vendors may sacrifice some of the more sophisticated

constraint and rules logic found in other products. Still other vendors, such as

those below, avoid the tradeoff issue altogether by focusing more on efficiently

creating a constrained master schedule and less on material planning.

• Bridgeware (Hayward, CA)

• Distinction Software (Atlanta, GA)

• Adapta Solutions (Hawthorne, NY)

Production Scheduling Often Used Instead Of ManufacturingPlanning

Regardless of how the manufacturing planning generates the master schedule,

the output of this process usually is sent to the plant as the a daily, weekly, or

monthly production schedule. According to our survey, this plan is not usually

fed back to the ERP system, but it is often maintained separately. Although a

number of APS vendors, including those listed below, have incorporated produc-

tion scheduling into their APS suites as the next logical step in the planning

process, it is rarely utilized in practice:

• Numetrix

• i2 Technologies

• Chesapeake Decision Sciences (New Providence, NJ)

• Manugistics

• SynQuest

Manufacturers that need/buy detailed production scheduling fall roughly into

two groups:

• Discrete manufacturers with complex processes

• Process manufacturers with complex sequencing requirements

Manufacturers in the first group tend to select APS solutions capable of support-

ing a mixture of short-term material planning and detailed routings. These are

purchased from such vendors as the following:

• i2 Technologies (Factory Planner or Optiflex)

• Thru-Put Technologies

• Baan (Berclain MOOPI)

• SynQuest

• PeopleSoft (Red Pepper Production Response Agent)

Semiconductor manufacturing, which is essentially a variation on the first group,

is targeted by APS specialists and some generalists as follows:

Regardless of how the manufactur-

ing planning generates the master

schedule, the output of this process

usually is sent to the plant as the a

daily, weekly, or monthly production

schedule.


• i2 Technologies

• Chesapeake

• Paragon

• AutoSimulations (Bountiful, Utah)

• Tyecin (Los Altos, CA)

• Interval Logic (Sunnyvale, CA)—a unit of PRI Automation

Manufacturers in the second group, often producers of Semiconductors,

Chemicals, or Food & Beverages, frequently pass the output of the SCP process

directly to production scheduling solutions designed for process manufacturing.

Below are vendors with both the SCP and production scheduling functions in

their APS suites:

• Numetrix

• Paragon

• Logility

• Fygir

• Chesapeake

• Tyecin

Several vendors offer a variation on the separate SCP and production scheduling

applications in which the master scheduling, material planning, and production

sequencing function is attempted in one optimization solver. These solutions,

generally designed for process manufacturers with shallow bills of materials, are

available from several vendors, including those below:

• Ortems (Lisle, IL)

• STG (Dallas, TX)

While APS has some of its early roots in production scheduling, research

indicates that manufacturers tend to focus on manufacturing planning and

master scheduling first. As discussed in more detail later, the outstanding results

achieved from APS at the manufacturing planning level has reduced the need for

production scheduling and has cast a shadow over cost and benefit analysis.

AMR expects vendors that offer only production scheduling will find it increas-

ingly more difficult to sell against the vendors with broader suites that include

manufacturing and/or SCP.

LESS THAN THE VISION BUT BETTER THAN EXPECTED

As with every new methodology, technology, or philosophy that was supposed to

revolutionize manufacturing, APS has created much excitement and skepticism.

For this Report, AMR talked with more than 40 companies about their APS

experience to gauge whether more excitement or skepticism is warranted.

As with every new methodology,

technology, or philosophy that was

supposed to revolutionize manufac-

turing, APS has created much

excitement and skepticism.

Producers of Semiconductors,

Chemicals, or Food & Beverages,

frequently pass the output of the

SCP process directly to production

scheduling solutions designed for

process manufacturing.


The goal of the of survey is to determine whether manufacturers get significant

benefits to warrant the high cost of APS. AMR examined the following areas:

• Planning scope

• ROI

• Implementation experience

• Vendor support and ongoing maintenance

• Scalability

The purpose of the survey was to confirm that APS works, not to uncover any

dirty laundry from failed implementations. Every vendor has a failed implemen-

tation or two; it’s an inevitability of the software business. Some surveyed

manufacturers were referred by vendors; others were solicited directly by AMR.

Fortunately for prospects that must rely on vendor references, AMR found that

both groups reported good results.

Planning Scope Less Than Expected

Although most of the APS vendors offer products in two or more of the planning

functions displayed in Figure 1, the survey showed that most manufacturers have

not implemented the whole suite. In many cases, only one planning function has

been implemented. Vendors that were among the first to have broader APS suites

include the following:

• Manugistics

• Chesapeake

• Numetrix

These vendors were most likely to have clients using two or more planning

functions. Across all vendors, the newer clients (those that purchased in the last

12 months) tended to buy more of the vendor’s planning suite than early

adopters. The common thread between newer users and early adopters is that

both were most likely to start by implementing manufacturing planning or its

most significant subset, constrained master scheduling.

Although master scheduling is part of every ERP and manufacturing resource

planning (MRP II) system, most manufacturers were using PC spreadsheets or

manual methods prior to implementing APS. Most of the early users imple-

mented APS to provide more accurate and stable plans for the factory. Several

companies were at the brink of disaster before implementing APS. Constant

factory schedule changes that bloated work-in-process inventory and depressed

customer service levels and inflated costs were frequent problems. Several

manufacturers had customer service levels with 40% to 50% on-time perfor-

mance level and total inventory at less than three turns per year. For many of

these companies, lack of capacity was also a critical problem. Fortunately, these

manufacturers had planners and managers that realized that their poor planning

The common thread between newer

users and early adopters is that both

were most likely to start by imple-

menting manufacturing planning or

its most significant subset, con-

strained master scheduling.

The purpose of the survey was to

confirm that APS works, not to

uncover any dirty laundry from

failed implementations.


methods—not a shortage of plants and equipment—were contributing to the

capacity problems. Quite simply, they were making the wrong products at the

wrong time. As a result of implementing APS, many manufacturers found

additional capacity in their plants.

Focus on Master Scheduling Yields High ROI

Despite the narrow focus of many of the early APS applications, almost all

manufacturers found that results exceeded expectations. While many manufac-

turers did not do a formal justification based on a rate of ROI analysis prior to

purchasing APS, payback in three to six months is common. In one case, an

electronics distributor projected an $8M inventory savings but achieved a $50M

inventory in less than one year, yielding a project payback period of 40 days.

Some manufacturers have not bothered to calculate an ROI but credit APS with

essentially saving their business as customer service levels had deteriorated to

levels dangerously below industry medians. In several cases, customer service

levels were increased from 40% to better than 85% over a period of several months.

Is APS really this good? The answer is yes, but the data also indicates how bad

many manufacturers’ planning systems have become in the face of today’s short-

cycle, constantly changing manufacturing requirements. Interestingly, results did

not vary considerably between companies with relatively new ERP systems and

those with aging MRP II packages or in-house developed systems. Possibly based

on prior experiences with MRP II packages, many manufacturers did not

consider using their new ERP system for master scheduling. In one instance, an

APS system uncovered a problem in the ERP system’s MRP logic that was

causing the over-ordering of millions of dollars of inventory.

Does paying more for APS ensure a better ROI? Thus far, the answer appears to

be no. Manufacturers purchasing less expensive APS from vendors such as Thru-

Put Technologies and Bridgeware report results that rival or surpass those of

more expensive products from vendors like i2 Technologies, Manugistics, and

Numetrix. In fairness to the more expensive products, it is hard to compare

planning environments. Two manufacturers in the same industry can have

dramatically different planning needs and starting points. A manufacturer with

bad planning systems to start with will see big improvements from almost any

APS product. A manufacturer with adequate planning systems that is looking to

gain a competitive advantage may have to pay more get the desired level of

improvement. In some cases, the less expensive products might not have been

capable of meeting the variety of requirements at the enterprise level. In these

instances, manufacturers often bought from vendors offering a broad suite of

planning functions, which are typically more expensive. In short, manufacturers

should not assume that paying more means getting more. A vendor that

specializes in an industry may be able to offer a lower total cost with good results.

On the other hand, companies should not under-buy APS. In the more competi-

tive industries, this could be a bet-your-business decision.

Companies should not under-buy

APS; in the more competitive

industries, this could be a bet-your-

business decision.

Despite the narrow focus of many of

the early APS applications, almost

all manufacturers found that results

exceeded expectations.


Implementation Is Easier Than Expected

One factor that contributes to such outstanding ROI results is the relatively short

implementation time frames. Two to six months is common and requires

relatively few consulting and information technology (IT) resources, especially

compared with ERP implementations. Short implementations have three very

important benefits:

• Improved planning results are achieved much sooner.

• Failure from a protracted implementation is less likely.

• Lower total project costs help achieve better ROI.

This does not mean that all APS applications live up to vendors’ claims and

promises. Many early users report having to work with the vendor to get their

products to understand the manufacturers’ particular planning requirements.

Generally, manufacturers report that vendors work aggressively to repair

software quality problems or fill functional gaps so that projects are not delayed.

Most manufacturers dedicate one or more employees to work alongside the

vendor’s consultant, ensuring a complete knowledge transfer during the imple-

mentation process. Overall, most manufacturers are pleasantly surprised that the

implementation is easier than expected.

Integration, however, seems to be one of the sacrificial lambs of the implementa-

tion process. The promise of real-time, two-way data transfer between host

systems and APS has rarely been achieved. While most manufacturers indicate

that finding the data and creating the extract to feed the APS system is not a big

problem, putting the results back into host systems often presents a number of

challenges. These challenges were reported by both manufacturers using ERP

and APS system combinations that offer certified interfaces and those using APS

products that rely on simpler file transfers to legacy systems. In addition to the

problem of moving data, some manufacturers, especially those with older legacy

MRP systems, report that bringing the data accuracy up to the level required by

APS is a major task. Data not found in host systems is often maintained directly

in the APS system. Some users of APS products that rely completely on memory

resident databases (such as i2 Technologies’ system) have created external data

warehouses to manage this data. Fortunately, manufacturers have worked

around the integration issues by using the APS system rather than the ERP

system as the source of the production schedule.

APS Vendors Support Their Customers

In rapidly expanding market segments, the vendors’ ability to maintain high

customer support levels is always a concern. Generally, APS users give vendors

high marks for customer support during and after implementation. This

satisfaction is consistent from market leaders to smaller vendors. While several

i2 Technologies and Manugistics users report that the level of consulting exper-

tise has been strained by rapid growth, both companies get high marks for

Generally, APS users give vendors

high marks for customer support

during and after implementation.

Generally, manufacturers report that

vendors work aggressively to repair

software quality problems or fill

functional gaps so that projects are

not delayed.


quickly responding to customer concerns, even if it means jockeying multiple

consultants to fill gaps in product knowledge. The market leaders are not alone

in the struggle to keep up with demand for technical support personnel and field

consultants. Customers of several of the high growth, smaller vendors report

that support personnel sometimes know less about the product than the user. In

most cases, manufacturers feel confident about the vendor’s plans to address

these temporary personnel issues.

While vendors currently get high marks, prospects must consider that most

reference accounts went through the implementation process when the vendor

had considerably fewer customers. Although AMR believes most vendors

recognize that their golden opportunity for success depends on high customer

satisfaction, the world has a limited supply of planning experts who want to

become consulting road warriors. Prospects wading into today’s explosive APS

market should look at the vendor’s internal training programs. These should be

separate from customer training and should include third party consultants.

APS Scales To Handle Large Planning Environments

One early concern about APS was its ability to handle planning environments

with thousands of SKUs or complex bills of material. Some of these concerns

were warranted, as early APS products were sometimes misapplied to the wrong

environment. These early problems were exacerbated by competing vendors’

claims that other technology was not as scalable. Partly a result of today’s

powerful computers and partly a result of more realistic product positioning,

APS is capable of handling large planning requirements. One manufacturer was

planning more than 64 thousand items across 4 PCs in 20 minutes. In most

cases, manufacturers could create a satisfactory planning model that provided

runtimes short enough to enable frequent rescheduling and what-if analysis.

Once again, however, paying more for APS does not necessarily ensure it will

scale to handle a specific problem. The 64 thousand items example was per-

formed by one of the least expensive APS products in the survey, while a more

costly APS system, about 9 times more expensive, took 3 hours to solve a slightly

smaller problem. In all fairness, the more costly system was attempting to find

an optimal schedule while the less expensive system was only aiming at a

constrained master schedule. Overall, however, the manufacturer using the less

expensive system reported greater improvement to its planning process. Does

this mean less expensive systems are more scalable? Absolutely not. Manufactur-

ers, however, must weigh the benefits of products promising optimization

against the time and cost. In many cases, a constrained master scheduling solver,

typically found in the less expensive APS, will produce dramatic improvements

over current planning systems and scale more easily to large environments.

Generally, optimization solvers require much more computer horsepower and

may or may not provide a significant enough improvement to warrant its cost.

In many cases, a constrained master

scheduling solver, typically found in

the less expensive APS, will produce

dramatic improvements over current

planning systems and scale more

easily to large environments.

While vendors currently get high

marks, prospects must consider that

most reference accounts went

through the implementation process

when the vendor had considerably

fewer customers.


18

When Does Vision Become Reality?

Although many manufacturers get good results from APS, some struggle with

long and complex implementations. In some of these cases, user expectations

and product capabilities are out of synch. Some of this may be due to the

vendors’ propensity for presenting future development plans that include visions

of synchronized supply chains, while they deliver products with far less function-

ality. While vendors have gotten better about delineating the functionality of

current releases, prospects (and sometimes salespeople) often find it difficult to

determine where the product stops and the vision begins. A current example of

this fuzzy line is the vision of the integrated APS suite that ranges from supply

chain network design to production scheduling. Although it sounds great, not a

single vendor has a reference that has actually implemented the full suite, nor has

the development been completed to make all the pieces work together. The

goods news is that APS vendors will likely invest more in research and develop-

ment in 1998 than was invested in all of the previous years combined. This will

help close the gap between vision and reality.

Not all of the burden of the synchronized supply chain vision rests on the APS

vendors. AMR believes manufacturers will have to take an active role in helping

APS achieve some of its loftier goals. In some cases, manufacturers will have to

reengineer planning processes around the vastly superior capabilities of APS. For

example, many vendors now offer a variation of their ATP function that allows

new orders to be dropped into the production schedule. For this to work in

many companies, customer service and the production planning process may

need to be integrated. On the intercompany collaboration front, vendors have

built a number of prototype products for sharing demand and planning infor-

mation across the supply chain. To go forward, however, vendors need feedback

from early adopters to determine what works and what doesn’t.

CONCLUSION

Quite simply, APS is a planning revolution. APS will do to MRP what the PC did

to typewriters. It’s a technology that leverages the planner’s knowledge with the

tremendous capabilities of today’s distributed computing. For manufacturers,

the question is not whether APS is necessary, but how soon it should be imple-

mented. Thus far, the results have been great, even at companies that by their

own admission had lousy planning processes. Early adopters of APS have

dramatically improved the competitiveness of their companies with only limited

implementations. With well financed vendors quickly expanding product suites

to reach new industries and further stretches of the supply chain, no manufac-

turing or distribution concern is beyond the onslaught of a competitor armed

with APS. How would your company react to a competitor that raised customer

service levels 40% above the industry median while lowering transportation costs

and offering instantaneous accurate delivery quotations?

Early adopters of APS have dramati-

cally improved the competitiveness

of their companies with only limited

implementations.

While vendors have gotten better

about delineating the functionality

of current releases, prospects (and

sometimes salespeople) often find it

difficult to determine where the

product stops and the vision begins.


19

Review of Activity in 1996 . . . . . 19

Preview of Activity in 1997 . . . . 20

What to Look for in 1998 . . . . . 22

Sneak Preview:Who Bought APS Systems in 1997?by Janet Suleski

SNAPSHOT

THE AMR INSIDER

The Advanced Planning and Scheduling (APS) software market in 1997 grew

even more rapidly than expected. Early in 1997, AMR estimated that the APS

market would grow by 54%. Later in the year, this growth rate was raised to

70%, and it is possible that the final calculations will reveal an even higher

growth rate. Which companies bought these systems in 1997? How is this

different from 1996, and where should observers look for growth in 1998?

In order to answer these questions, AMR surveyed the top 12 APS vendors to get

an early idea of where their sales came from during the last 12 months. By

comparing these preliminary findings to our market data from 1996, we identi-

fied some of the trends that market watchers can expect in 1998.

Review of Activity in 1996

Table 1 shows the license revenue distribution across the vertical industry

segments of purchased APS in 1996, the most recent year for which AMR has

complete data. Revenue share refers to these industries’ purchases of APS

software licenses, excluding maintenance and services.

Table 1: APS License Revenue Shares by 15 Vertical Markets, 1996Source: AMR, 1997

Vertical Industry Revenue 1996 ($M) Market Share 1996Food & Beverage/CPG 50 19%Electronics 40 15%Mills 28 11%Semiconductor 26 10%Pharmaceuticals/Biotech 25 10%Industrial Products 14 5%Aerospace & Defense 13 5%Automotive Assembly 12 5%Chemicals 12 5%Other Assembly 10 4%Transportation 8 3%Apparel 5 2%Medical Devices 4 1%Oil and Gas 3 1%Utilities 2 1%Other Industries 7 3%

Total 258 100%


In 1996, APS companies focused on selling to the largest companies worldwide.

More than half of APS software license sales were made to companies with more

than $1B in annual revenue. Table 2 provides the breakdown of APS license

revenue shares by customer revenue for 1996.

Table 2: APS License Revenue Shares by Customer Revenue, 1996Source: AMR, 1997

Revenue Range Revenue 1996 ($M) Market Share 1996

Less than $50M 10 4%$50M-$249M 26 10%$250M-$999M 82 32%$1B or More 140 54%

Total 258 100%

Preview of Activity in 1997

In 1997, many of the same markets remained the most actively targeted by APS

vendors. Table 3 outlines which verticals individual vendors sold to during 1997.

The black boxes represent the top one or two vertical markets for each vendor

during 1997, the gray boxes represent other verticals the vendors sold to, and the

white boxes represent verticals in which the individual vendor had little or no

sales activity.

Table 3 shows the most frequently targeted industries in 1997:

• Electronics/High Technology/Telecommunications

• Mills, including Paper, Textile, Metals, and Building Materials

• Food & Beverage/CPG, Automotive Assembly, and Industrial Products

• Pharmaceuticals/Biotechnology

The least frequently targeted verticals include the following:

• Utilities

• Transportation

• Apparel

• Medical Devices

i2 Technologies (Irving, TX), Manugistics (Rockville, MD), and Logility

(Atlanta, GA) have sold into the Apparel and Medical Devices markets.

Manugistics and Logility have also sold into the Transportation market. Other

vendors will likely follow these three leading players as these markets become

more firmly established.

Companies returned to their existing client bases to sell new and expanded

products in 1997. For the seven companies that provided data, an average of

29% of application license revenue was generated from new sales to existing

For the seven companies that

provided data, an average of 29%

of application license revenue was

generated from new sales to

existing clients.

More than half of 1996 APS

software license sales were made to

companies with more than $1B in

annual revenue.


VENDOR Ae

rosp

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& D

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Ap

pa

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tom

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e A

sse

mb

ly

Ch

em

/Pe

tro

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Ele

ctro

nic

s/H

igh

T

ech

Fo

od

/Be

vera

ge

/CP

G

Ind

ust

ria

l P

rod

uct

s

Me

dic

al

De

vice

s

Mill

s

Oil

& G

as

Oth

er

Ass

em

bly

Oth

er

Ind

ust

rie

s

Ph

arm

ace

uti

cal/

Bio

tech

Se

mic

on

du

cto

r

Tra

nsp

ort

atio

n

Uti

litie

s

Oth

er

Acacia Technologies (APS Only) 2Advanced Planning Systems 2 2AutoSimulations 2Berclain, Ltd. 2 2Bridgeware, Inc. 2 2C-Way Systems 2 2Chesapeake Decision Sciences, Inc. 2Distinction Software, Inc. 2Enterprise Planning Systems, Inc. 2Fygir 2i2 Technologies, Inc. 2 2ILOG 2 2Logility, Inc. 2 2Manugistics, Inc. 2 2Numetrix, Inc. 2 2Ortems, S.A. 2 2 2Paragon Management Systems, Inc. 2 2PeopleSoft–Red Pepper 2 2Pritsker Corp. 2 2ProMIRA Software Inc. 2 2Scheduling Technology Corp. 2ShivaSoft, Inc. 2 2SynQuest, Inc. 2 2Taylor Manufacturing Systems 2 2Thru-Put Technologies 2 2Tyecin 2

Indicates significant sales activity in this vertical in 1997Indicates some sales activity in this vertical in 1997Indicates little or no sales activity in this vertical in 1997

clients. The notable exception to this average is i2 Technologies. The company

estimates that in 1997, fully 63% of its application license revenue came from

add-on sales to existing clients. i2 has had by far the most success in returning to

its existing clients with expanded offerings, a skill which contributed to its

becoming the first $100M and then the first $200M APS company, both in the

same fiscal year.

In 1997, APS vendors made inroads into the middle market, defined by AMR as

companies with annual revenue between $50M and $1B. For example, Thru-Put

Technologies (San Jose, CA) estimates that 70% of its application license revenue

came from the middle tier, while Numetrix (Toronto, ON) had 40% and Logility

had 24%. Additionally, i2 Technologies announced plans for an APS product

called Rhythm Lite, which will be targeted towards the middle tier, but the

company has not yet focused any effort on launching this product. The trend

toward selling to the middle market is expected to speed up as companies move

down-market in their current verticals, seeking to maintain their double- or

triple-figure growth rates.

Table 3: APS Vendors by Target VerticalsSource: AMR, 1998

i2 has had the most success in

returning to its existing clients with

expanded offerings, a skill which

contributed to its becoming the first

$100M and then the first $200M

APS company in the same year.


What to Look for in 1998

A number of trends will shape the market in 1998:

• More interest in the Apparel, Medical Devices, and Transportation industry

verticals. More vendors will target these markets, and those already there will

develop additional functionality to better serve these vertical markets.

• An increasing percentage of application license revenues, generated by sales

to existing client bases, as vendors offer new modules that they have either

built or acquired to expand their product suites.

• Expansion of sales efforts targeted toward the middle market, with the

possibility of one or more vendors offering partially configured “APS lite”

products.

• The creation of indirect sales channels designed to penetrate the middle-tier

markets in verticals.

• More companies deciding to buy the complete suite of modules versus one

or some of the modules. The completion of many suites and/or the tighter

integration between modules in the suite will drive this trend.

AMR will publish a more detailed Report, our Market Analysis and Review

Series, Supply Chain Management Software Report, in June 1998. This Report

will contain extensive data on the performance of the leading vendors in the

APS market.

Trends in 1998 will include the

creation of indirect sales channels

designed to penetrate the middle-

tier markets in verticals.


NOTES


24

Read

er’s

Acro

nym

List

Founded in 1986, Boston-based

Advanced Manufacturing Research

(AMR) is the preeminent industry and

market analysis firm specializing in

enterprise applications and related

trends and technologies. Tracking more

than 400 leading software and service

providers, AMR helps Global 1000

companies evaluate, select, and

manage new systems for every part of

the enterprise, including logistics and

supply-chain management, Enterprise

Resource Planning (ERP), Manufactur-

ing Execution Systems (MES), and

electronic/Internet commerce.

Your comments are welcome. Reprints

are available. Send any comments or

questions to:

Advanced Manufacturing Research, Inc.

Two Oliver Street, 5th floor

Boston, MA 02109

Tel: 617-542-6600

Fax: 617-542-5670

www.advmfg.com

West Coast Office:

1920 Main Street, Suite 210

Irvine, CA 92614

714-477-5353

Fax: 714-477-5350

ACRONYM DEFINITION

APS Advanced Planning and Scheduling

ATP Available-to-Promise

CAD Computer-Aided Design

CPG Consumer Packaged Goods

CPU Central Processing Unit

GUI Graphical User Interface

IT Information Technology

MPS Master Production Schedule

MRP Materials Requirements Planning

MRP II Manufacturing Resource Planning

PC Personal Computer

ROI Return On Investment

SCP Supply Chain Planning

SKU Stock-Keeping Unit

SOP Sales and Operations Planning

VMI Vendor Managed Inventory

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