How Accurate is SAP's Page on APO? - Brightwork Research & Analysis

Table of Contents: Select a Link to be Taken to That Section

Executive Summary

SAP provides information on APO; however, how accurate was this information?
What is APO’s ROI and its history with constraint planning?

Introduction

SAP has a page on their website which explains and markets SAP APO. We review this page for accuracy.

Our References for This Article

If you want to see our references for this article and other related Brightwork articles, see this link.

Notice of Lack of Financial Bias: We have no financial ties to SAP or any other entity mentioned in this article.

This is published by a research entity, not some lowbrow entity that is part of the SAP ecosystem.
Second, no one paid for this article to be written, and it is not pretending to inform you while being rigged to sell you software or consulting services. Unlike nearly every other article you will find from Google on this topic, it has had no input from any company's marketing or sales department. As you are reading this article, consider how rare this is. The vast majority of information on the Internet on SAP is provided by SAP, which is filled with false claims and sleazy consulting companies and SAP consultants who will tell any lie for personal benefit. Furthermore, SAP pays off all IT analysts -- who have the same concern for accuracy as SAP. Not one of these entities will disclose their pro-SAP financial bias to their readers.

SAP APO: Balance Supply and Demand?

Here is what SAP says about APO’s overall capabilities.

“Enhance supply chain management (SCM) with SAP Advanced Planning and Optimization (SAP APO). This solution offers integrated, best-in-class functionality for demand, supply, and production planning – as well as global available-to-promise (ATP). Maximize supply network efficiency, and take forecasting and demand management to the next level.”

It is widely known that APO does not provide the best in class functionality for demand, supply, and production planning and available to promise. For each of these application subcategories, there are far superior applications. The concept is that none of SAP’s applications in this area are best of breed or best in class, but the selling point is that they are integrated.

Why SAP Advanced Planning and Optimization?

Here is what SAP has to say about APO’s more comprehensive capabilities.

To stay a step ahead of demand, you need a powerful platform that supports and integrates all of your supply chain planning activities. With SAP Advanced Planning and Optimization you can:

Improve supply and demand planning for both internal and external supply chains
Tightly integrate with SAP ERP to access sales, material, and other data
Increase forecast accuracy and minimize inventory buffers
Align mid-to long-term demand plans with your overall supply capacity
Create optimized production plans for all of your factories
Provide reliable sales order confirmation dates

As a consultant who has seen many APO implementations, it is rare to see companies benefit very much from APO modules. APO is integrated into ERP, but the integration, called the CIF, has a high degree of overhead. And companies that use APO do not end up minimizing inventory.

The Problems with Constraining in APO

Supply planning constraints cannot constrain mid to long range demand plans because neither the SNP (supply planning module) optimizer makes any sense. CTM also is somewhat illogical and has many problems and a very high overhead on projects. These are the only two constraint-based methods in SNP, and they basically don’t work correctly. Therefore, constraining in SNP is not particularly feasible, but even if it were, there are all manner of problems in now SNP maintains resource/constraint information. The abbreviated explanation is that the master data maintenance in APO is so time-consuming that few APO projects have updated constraint master data. We cover some of this complexity in the book Setting Up the Supply Network in SAP APO. We have covered other applications that do an exceptional job at master data maintenance in their applications. One of these is profiled in the book Superplant: Creating a Nimble Manufacturing Enterprise with Adaptive Planning Software.

One thing that is impossible for APO or PP/DS (unlikely in reality, not as per the advertised functionality), which is the module for production planning, is to create optimized production plans. This is because PP/DS’s optimizer cannot be taken live, or should I say, “kept live.” This is covered in the article The Failed PP/DS Optimizer. While SAP has virtually no customers using the PP/DS optimizer, they continue to tout the ability to optimize their sales literature. SAP consulting companies continue to tell their customers that they can maximize their production plans when if they investigated, they could learn that this does not happen on real projects.

In some cases, available to promise dates can be provided to sales orders. Still, GATP, the APO module that does this, is so complex to set up that in most cases, the rules are simplified down to the point where they are not much more complicated than what is in the Sales and Distribution module of ERP. However, the expense of setting up GATP is exceptionally high.

APO ROI

Here is SAP’s statement about APO’s ROI.

“Ensure a successful implementation and maximize your ROI with information resources that support the different phases of SAP Advanced Planning and Optimization – from planning and installation to operation.”

SAP has no studies that demonstrate any ROI with APO implementations. SAP has found that they can claim they like about TCO or ROI because the vast majority of customers never ask for any evidence to support these claims. When SAP does fund a TCO study, as they did with Gartner (for HANA), is it engineering to show whatever SAP wanted to show, as is covered in the article How Accurate is Forrester’s HANA TCO Study? SAP and their consulting surrogates want it both ways. They want to sell costly software and to staff highly lucrative projects for a long time, but then they want to declare that they have the lowest TCO? How is that possible? As long as no one checks, it makes sense to continue to make a claim.

APO implementations have a hard time obtaining positive ROI for the following reasons:

All of the APO modules are overly complex and difficult to configure as well as difficult to use.
APO is an expensive set of applications.
APO is based upon a lot of concepts that harken back to the mid-1990s. Many of these concepts have been proven ineffective, but the software has not changed.
Large consulting companies usually implement APO. These consulting companies are so expensive, and they lengthen out the implementation by such a degree that the costs of implementation are very high. APO has the longest predicted implementation timelines of any supply chain application in any category in which APO competes.
APO, because SAP was developed and each module is so complicated and dated, means that APO modules have the highest TCO of any set of modules in the planning space.

How are these things a recipe for lower TCO and higher ROI?

We have put a lot of work into estimating not only APO TCO (we don’t estimate ROI) but the TCO of many applications, and there is no way these claims by SAP can be valid.

See the Brightwork TCO calculators in this article.

Consider a Faster (APO) Deployment Option?

Here is what SAP says about APO deployment.

“Get up and running even faster. SAP Advanced Planning and Optimization rapid-deployment solutions bring together software and services to speed go-live for a rich set of supply chain planning functionality.”

These are the so-called “RDSs.” There is little value in any of the RDSs for any of the SAP products for which RDSs exist. In our view, the RDSs are simply sales and marketing constructs that create the false expectation that the RDS can allow the software to be implemented faster than it will be.

As none of the Rapid Deployment Solutions (RDS) solutions contain much value, and none demonstrated any ability to implement SAP more quickly (their intended purpose), they seem to have petered out and have stopped being sold. Brightwork covers the RDSs in this article.

Even though they are essentially dead, SAP sales and marketing still enjoy referring to them as if they are a “thing.” However, the people who have to implement usually don’t appreciate them.

Go to top

Conclusion

This page was an inaccurate take on APO that does not reflect the reality of what typically occurs on APO projects. If taken at face value, this information would lead to significant expenditures of money to implement functionalities within APO modules that have already failed at many SAP customers. The specifics mentioned by SAP simply don’t occur in real life. SAP’s presentation of APO has zero correlation with reality and does not match APO’s implementation history.

This article receives a Brightwork Accuracy Score of 2 out of 10, mostly for how much information it leaves out.