How SAP’s TCO Compares for SAP APO Service Parts Planning

Background and Motivation for the Research

When I am often told about the reasons for decisions to go with software that I am familiar with, the logic often does not seem to make sense. In fact the entire process for repeatedly selecting expensive and lower functionality software from the major monopoly vendors turns out not to be based on the main comparison points of software. The main comparison points of enterprise software are the TCO and the application’s functionality. However, companies primarily look for solutions from vendors that they are already working with, and then allow the issue of integration to play a primary decision-making role. Therefore, they primarily ignore TCO (most tend to make decisions without knowing the estimated TCO), focusing more on initial software acquisition cost, and de-emphasize the functionality comparison between applications. A primary way this is done is by having executives, who don’t work with enterprise applications perform the functionality observation through a controlled demo environment and by marginalizing the users, removing them from the decision-making process. This allows applications that are weak or have unreliable functionality to compete with vendors that have excellent and reliable functionality.

The Basis for Estimation

I visit clients often post go-live on SAP APO and have developed a good sample of companies. I know the typical length of an APO implementation, as well the costs of maintaining APO. I also work with a number of best-of-breed vendors. Because I had access to information from several necessary sources, and was able to make times estimations based upon personal experience, I decided to perform a total cost analysis between SPP and a best-of-breed service parts planning vendor. This is just the service parts planning analysis. Here are links to the others.

The Scope of the Analysis

This analysis is limited to the major planning applications. I have developed estimates for costs of APO modules versus best-of-breed applications for the areas which I have first-hand knowledge, which is demand planning, supply planning, service parts planning and production planning and scheduling. I do not perform any similar analysis for other popular enterprise areas such as ERP or analytics.

Why the Best of  Breed Vendor is Not Named

I am not trying to recommend any one vendor in this analysis, so naming the vendor I used would be a distraction. The main point is that SAP’s TCO is in an entirely different cost category. Essentially any best-of-breed vendor I selected would generally compare similarly. Some will be a bit more expensive and some a bit less so, but no best of breed vendor will come anywhere close to SAP’s TCO.

Why SAP License Costs are Set to Zero

SAP license costs are difficult to determine. There is little doubt they have some of the highest average license costs in the enterprise market, but their price fluctuates greatly. In addition, the costs may be bundled with other software. In terms of publicly available rates, SAP has a government price sheet. However, the price sheet is based on an arcane point system that is clearly designed to not allow anyone to independently calculate a price, while meeting the US government requirement that they have a price sheet. I worked with this sheet for around an hour and a half, and then realized, it was not meant to be deciphered. SAP license costs are shrouded in mystery.

However, when I performed the analysis, even without SAP license costs, I found SAP TCO costs to be so high that even without any license costs or SAP support costs (which are based upon the license costs) the best of breed vendors were still easily beating SAP in TCO in all the application areas. Secondly, any article which does not rank SAP as #1 in whatever it is being compared with is open to immediate criticism. (In fact, the easiest way to have a soft life in IT is to skip any analysis and declare SAP the victor. In doing this, you generally are not required to provide any evidence, but simply say something like “SAP support best practices.”) So something that shows SAP’s TCO being higher than anything else will be considered biased. Therefore, to counteract this concern, I decided to tilt the playing field in SAP’s direction by making all of the license costs free. So this analysis assumes you never had to pay anything for SAP’s software or their support.

Doing this does one other thing, it emphasizes the point that the license cost should not be the main focus of the comparison and that other costs predominated in the TCO. Therefore, free software can end up being not the best decision.

Analysis Assumptions

There are a number of assumptions in this analysis. One of the most important is the duration of the implementation. This is one of the trickier things to set. Software companies tend to deemphasize this number, which is why I had to use my experience to adjust the results to what I have seen. SAP implementations take the longest of any enterprise vendor, and there are very good reasons for this, which I get into later in this post. However, for both SAP and the best-of-breed vendor, I have included a range, and the estimated TCO for each in terms of implementation is based upon an average. There is no perfect analysis of this type that can be created because of all the different variables. However, not being able to attain perfection should not get in the way of attempting estimation. One way or another, these types of analyses must be performed and I always think it’s better to take a shot at estimation rather than to throw one’s hands up and say its unknowable.

Total Cost of Ownership

According to this estimate, SAP has a higher total cost of ownership than the best of breed application I compared it against. Having worked in SAP as long as I have, I intuitively I knew it would be higher, but even I was surprised by how much higher it was. Here are some of the reasons.

SAP’s Implementations take Significantly Longer than Best of Breed Implementations

  1. SAP’s software is very difficult to understand and is highly encapsulated. SAP has so many settings which allow the system to behave in different ways that extensive time must be spend in both understanding the settings and understanding the interactions between the settings. The statement that SAP is filled with “best practices,” is actually incorrect, because a best practice approach prescribes that the system define specific ways of doing things, when in fact SAP follows the “comprehensive approach.” This includes a seemingly unlimited number of ways of configuring the system.
  2. Of all the applications I work with, none approach SAP in the number of areas of their applications that don’t work. This includes functionality that never worked, beta functionality that is still listed in the release notes as functional, and functionality that did work at one time but was broken by an upgrade or other cross application factor. In fact no one is even comes close. SAP’s marketing strategy is to cover functionality as broadly as possible so they can always say “we have it.” This same development approach spans across applications, as I observe the same thing in different product lines such as SAP BW. This is one reason SAP’s TCO is probably headed further up in the future. However, this results in product management writing checks that development cannot cash. Testing each area of functionality to ensure (part of what I do by the way) imposes more work and more time on the implementation.
  3. The large consulting companies have built their business model around SAP and extend the time of SAP implementations to maximizes their billing hours. SAP made a strategic decision quite some time ago to let the consulting companies control the speed of implementation in order to be recommended by the major consulting firms, regardless of the fit between the application and the client need.

SAP Resources Are Some of the Most Expensive in IT

  1. There is nothing controversial about this statement, it is well known in IT circles.

SAP Has the Highest Manpower Support Requirement

  1. Getting back to the topic of application complexity and fragility, SAP simply takes more resources to maintain. Something I recently had to work with was one method which was part of functionality that did work, but stopped working as of the release SCM 7.0. First the problem that cropped up due to this needed to be diagnosed and explained (we did not find out about the broken functionality but perceived it through system problems. Once discovered, this functionality had to be change to a method that did work, and the business had to invest time creating a new policy to work with the changed functionality. This was course expensive and time-consuming.

SPP in Particular

Of the four different planning areas that I have created TCO comparisons for, SPP is a special case as it is an immature product with significant needs for on site development. For this reason I have given it the longest implementation timeline of any SAP planning product. It also estimate its support load to be higher than the other SAP planning products because of maturity issues combined with the extra effort to support the custom development that must accompany any SPP project.

Secondly, SPP projects are very risky due to SPP’s lack of maturity. Therefore, the long timeline included here does not include the likelihood of walking away from the implementation at any time during the project.

Integration is Overrated as a Cost

The cost differences between SAP and a best of breed application are enormous, and the frequently used argument, that the company wants an integrated solution, cannot reasonably be used to justify a decision to select SAP. I have not broken out the integration separately, as it is built into the consulting costs, but an adapter of even a few hundred thousand dollars would not tip the TCO in SAP favor. Also, the maintenance of the SAP CIF (the middleware that connects R/3 to APO) is vastly underrated. My experience and with developing custom adapters for connecting best of breed planning applications to SAP, I have become firmly convinced that the cost of maintaining the CIF is more than the cost of developing and maintaining a custom adapter. The CIF, which connects up APO to SAP ERP is unacceptably problematic. For more on the CIF, see this post.

Implication for ROI

According to most publicly available studies, around 1/2 of projects have a positive return on investment. However, this greatly depends upon the TCO of the solution and the functionality within the application that can be leveraged. SAP planning modules are so expensive compared to alternative solutions, and deliver a lower functionality level than best-of-breed solution, that as a natural consequence they have a lower ROI, and a lower percentage of positive ROI projects. However, the incorrect perception in industry is just the opposite, that SAP is the safe vendor to choose.

Outsourced Support to Reduce Costs?

Companies now often outsource a portion of their support to India, so one might imagine that the support costs listed here could be reduced. This is another frequently held assumption, but does not prove out in reality. A good rule of thumb is that while India based resource are about 1/4rth as expensive it takes more than twice as many individuals to get close to the same amount of support work done. Secondly, there must always be at least one in country resource. Thirdly, this is a mess to manage. There are not only language and time barriers, but it appears some of the companies providing these resources are actually double book the same resource on multiple clients. I have been dealing with this issue for several years now and I end up having to read notes from the support team which are not spelled properly because of language barriers. Outsource operations lack good professional management, and the client resources end up having to take over support organization tasks.

Generally, I am not sure outsourced support works for any area very well, but it particularly unsuited to complex systems such as planning applications. Generally, when support is outsourced, the quality of support drops precipitously, and anyone in IT knows this.


If you confront SAP and large consulting firms to require a good TCO analysis, be prepared for a dispute on the true cost of their software and time required to go live. However, its critical to make your decisions based on actual observations at multiple account, as I have in this article, and not based on hypothetically sales estimates from their sales team on how fast a solution can be brought live. I have done the best job possible here to bring the real world data to my estimates, and I even stacked the deck for SAP by removing all license costs, but SAP still came up with a much higher TCO.

By the way, this was also true in the other application areas I analyzed. The real world data shows across the board that SAP is significantly more expensive in total costs of ownership than best-of-breed solutions.




Understanding SAP’s Service Parts Maintenance Solution

Service Parts Maintenance is an SAP Multi Module Solution


I had heard the term Service Parts Maintenance (SPM) in relation to SPP, however, I never paid it very much attention. However, upon re-reading the SPP training documentation I found a very detailed explanation as to what it is. According to the SAP documentation SPM is a combination of SPP, BW, SRM, SNP and EWM. Also the documentation is that this is the template that was selected and used by Cat and Ford. In the documentation which is clearly direct from SAP product management they are very strongly encouraging the use of this SPM design and set of components for other clients. At one point in the documentation, the article notes that some modules can be removed, but then the implementing company “will lose functionality.” This seems like a strange thing to point out, as it is axiomatic that when one does not implement a software component that functionality is reduced.

High Risk Strategy?

Generally SPP has not found a big following in industry. I believe that the design and approach of SAP with regards to SPM is one very big reason. There are a bunch of problems with promoting the implementation of so many modules. First and most obvious is it reduces the likelihood of success of the project. Second, there is no way that these modules would work together as simply as proposed, that is proposed as an integrated solution. A much more logical approach would have been (and can be, because there is no reason this strategy can’t be changed) to focus on targeted SPP implementations and getting a sold base of SPP installs before rolling out the “master plan” for a multi component integrated service parts solution. If I had any involvement with SAP product management in SPP I would push for this approach to be reversed. I get a certain amount of deja-vu with this specific topic. I personally dealt with product solutions that were promoted before they were ready when I worked for i2. Looking back on that time now, I seriously question the sanity of many of the people I used to work with. We had development teams that would continually fail to meet their development deadlines, but continue to grow the future promised functionality. Due to the stock bubble of the time it was considered de rigueur to “think big.” Well it all came crashing down, and everyone of those sales people and developers who told me I needed to “get with the vision” of the company owes me a nice apology (no one ever calls unfortunately, they must be too busy building more sand castles in the sky and reducing value from the economy to call me.)

Should SAP Have Control of Your Entire Solution Design For Service Parts

I would say they shouldn’t. There is nothing particularly “service partsy” about BW. While service parts planning requires specialized software, reporting certainly does not. Possible the best fit for the company may be Teradata or some other smaller innovative vendors in the BI space. Who knows? This is a decision for the data warehousing team, and in case SAP is unaware, the service organization at most companies does not exactly draw a lot of water with the data warehousing team. How about the other recommended tools? Just because a company wants to use SPP, should it use SAP SRM? There is no reason to think so. This same logic applies to each all the modules. Each needs to be evaluated on the basis of the fit with requirements, not with its fit with SPP. I have been working with planning solutions for some time, different planning applications to SAP and non SAP systems. I generally do not consider integrating different systems a big deal and non-fancy flat file interfaces held together by Unix batch jobs and Awk scripts (for data manipulation) work perfectly fine. I never needed fancy integration tools to get the job done.


While I like SPP and service parts planning in general, I would never say that my expertise in service parts planning enables me to propose what other software components that are completely unrelated to planning should be. I don’t think there is anyway around each company performing a detailed evaluation of every module it purchases to ensure it will add the maximum business value. I have always thought that software selection is the most important part of the project. I would recommend not short circuiting that process in order to buy into a vision.

SAP SPP Continues to Have Implementation Problems

The pathway is not clearing for SPP as the successes have been few and far between. However, there is a solution.

Bringing Up SPP in the Market

SPP has been a long haul for SAP. First of all, this product was an attempt to bring service parts planning into the mainstream. Rightly so, SAP identified service parts planning as a key underinvested in area in the enterprise. SAP thought it could grow this business and combined part of the code bases of SAP Demand Planning, SAP Supply Network Planning and then added service specific capability that had been sitting in other best of breed applications for a number of years. These include:

  1. Inventory Rebalancing
  2. Leading Indicator Forecasting
  3. Repair Buy Functionality
  4. Partial Service Level Planning (planning low on the service level hierarchy)

More details on the service level hierarchy at the post category link below.

SAP even surprised me by coming up with in my opinion the best interface for planning in all of SAP SCM, the DRP Matrix. This helped address a historical weakness in the SCM modules, (at least for one module). However, the initial problems began when SAP approached clients and explained the SPP solution to them. Instead of focusing on just SPP, instead clients were shown a demo that included a smorgasbord of SCM functionality which brought many different modules into the solution (such as GATP) and even the SAP Portal. This was a mistake because even the biggest service organizations have a lot less money to spend on software, so getting them just to purchase SPP would have been a success. Furthermore, service organizations are far further down the capability totem pole than the finished goods side of the business, so their ability to even implement the solution that SAP presented to them would have been unlikely. I have spoken to SAP product management about this, and they have re-stated that this is their strategy and that they think it is gaining purchase with clients.

The Partnership with MCA

A second part of their strategy was to partner with best of breed service parts planning company MCA Solutions and created a “xApp” which combined the forecasting functionality of MCA SPO with the supply planning portion of SPP. I have written previously that I am very much opposed these types of arrangements for a number of reasons.

There are several thorny issues with these partnerships.

  • It’s unclear that vendors should be selecting vendors of clients. The large vendor many not select the smaller vendor that is best for clients vs. best for the larger vendors
  • These partnerships allow SAP to say they have functionality that they did not originate and are claiming extraordinary IP rights vis-a-vis the smaller software company
  • SAP’s partnership agreements require that the smaller vendor declare their IP and that IP that is undeclared can be taken by SAP. This was rather shocking and I think shameful that such an agreement would even be drafted.
  • Unequal partnerships like this are inherently inconsistent with the type of economy that a lot of Americans say they believe in. The Federal Trade Commission has a role, which they don’t seem to take very seriously anymore to prevent over concentrations of power in any industry, and that includes software.

I describe this more fully in this post

However, as luck would have it, the xApp program is currently dying or dead (the xApp program includes something like 140 different applications vendors that SAP has “partnered with”) and by in large they have not caught on. MCA and SAP’s contract for the xApp program was not renewed.

Project Problems

Despite their missteps, SAP was able to get several companies to buy and implement SPP. However, two of the biggest implementation sites of SPP, which are Caterpillar Logistics and the US Navy, are after a number of years and significant expense not anywhere. Navy is not live with SPP, and unlikely to ever go live. This is something the folks over at Navy don’t like to talk about much, as a whole lot of US taxpayer dollars went to Deloitte and IBM for very little output. The blame does not squarely lie with SAP even though SPP does not work properly. I plan to write a future article entitled “I follow Deloitte,” which describes how every post Deloitte SAP SCM project I seem to work on is barely functional. However, Deloitte continues to get accounts somehow due to the fact that too many corporate decision makers are not performing their research. You can read more about the problems in hiring Deloitte to manage services parts projects here:

How About Ford?

Another major implementation for SPP is Ford, but they have seen little value from their SPP implementation. The best predictions I receive from those that have worked on the project is that Ford will eventually walk away from SPP. However, they cannot publicly do this because they have invested at least 9 years and very large amounts of money into the implementation. Therefore, SPP now has no large reference accounts for SPP. A hybrid of SPP has been implemented at Bombardier, however this is the old SIO architecture where MCA Solutions performs most the heavy lifting. Therefore, it can also not be considered a live SPP implementation. None of this surprises me, as after working with SPP, it is not possible to take the application live without custom development work or combining with a functional service parts planning applications. This solution turns SPP into a shell, which can make some executives happy, as it means they are using SAP, but the work is done by a different application.

Reference Accounts?

This is a problem because they were to be used as the major reference accounts to selling into other accounts. The problems at Caterpillar are particularly galling as SPP was actually developed at Caterpillar. Caterpillar Logistics is plastered all over a large amount of SAP marketing literature and is the gold reference account for the solution. Here there is not much to reference, unless as a potential client you are willing to wait that long to bring a system live. And secondly, the degree to which Cat is live is a matter for dispute. Cat will do what it can to continue the impression that they have at least some functionality live, because to walk away would mean a PR problem for them. What would be interesting is to see if SPP can be implemented without a large consulting firm as neither IBM nor Deloitte have had success with SPP. SAP should consider backing a smaller firm or doing it themselves as they need a success in the SPP space. At this point the biggest reference-able account for SPP is Ford.

Where Do We Go From Here?: The Blended Approach

SAP’s Product Management Approach with SPP

Some decisions that have been made by SPP product management are very poor. I think the major consulting companies are out of their depth in implementing SPP, and it needs to be radically improved in order to make more if its functionality effective. A significant amount of functionality that is in the release notes simply is broken or does not work properly.

I have performed SPP consulting and would like to see the module, and service parts planning in general to become more popular and widely implemented than it is. However, its important to consider that SPP only introduced some of the functionality that brings it partially up to par with other best of breed solutions in the current version (7.0) (prior to 7.0, SPP was not really competitive) and it can take several versions for SAP’s newest functionality to work correctly. For this reason, including my personal experiences configuring SPP, it would be difficult for me to recommend relying upon SPP exclusively. I think the experiences at Caterpillar Logistics,Ford and the US Navy lend credence to the idea that going 100% with SPP is a tad on the risky side.

To fill in the areas of SPP that are lacking I would recommend a best of breed solution. Some things like leading indicator forecasting really need to be improved. Furthermore, if you want to perform service parts planning with service level agreements (SLAs) there is no way around a best of breed solution. There are a number of very competitive solutions to choose from, and it all comes down to matching the way they operate vs. the company needs.

Simulation Capability Enhanced with Best of Breed

I will never be a fan of performing simulation in SCM entirely. The parameters in SAP SCM are too time consuming to change and the system lacks transparency. However, several of the best of breed service parts planning solutions are very good at simulation. While it may be conforming to use a single tool, it’s generally a bad idea to try to get software to do something it’s not good at. For simulation I would recommend going with a hosted solution and a best of breed service parts planning vendor. (for those looking for an excellent prototype environment for finished goods, I recently have had a lot of success with Smoothie by Demand Works)

As few companies want to make the investment to staff a full-time simulation department (planners are often too busy, and lack the training to perform simulation), it makes a lot of sense to have the application with the vendor. As they are experts in the application, they can make small tweaks to the system and provide long-term support to the planning organization. All of this can be built in at a reasonable rate to the hosted contract.



It only makes sense to use the history of an application to adjust future implementations. In doing so, it is most advisable to pair SPP with a best of breed vendor that best meets the client requirements. The additional benefit of this approach is that you get access to consultants who have brought numerous service parts projects live. And those consultants primarily reside in the best of breed vendors. We were recently contacted by a major consulting company to support them in a client which is looking at SPP (we don’t work for consulting companies), and the consulting company was simply focused on getting the client to implement SPP, so knowing the company, it is not difficult to imagine the stories that were told, and what was covered up to get the client to sign on the dotted line. Companies interested in the full story on SPP’s functionality and how it compares to what else is available can contact us by selecting the button below.


My service parts planning consulting offering.

Discussing the underinvestment in parts.

On the precise date the SPP initiative was kicked off at Catepillar Logistics.


Using As a Service Database

Information Management

We maintain a separate blog dedicated to information management. On this blog we have written about a service that is set to change file management as currently practiced.

There are many implications to file management for, however the one we want to discuss here is the capability with respect to service parts information. allows you to easily keep documents, and then to link these documents to web pages and to send these links through email. Service parts have many files such as specifications or user manuals. The question is how to best manage these documents. Our previous idea was to simply integrate the documents into the actual web page. See an example at our Service Parts Portal website.

However, now we are not so sure that this is the best approach. A better approach may be to host the files at and then simply profile links to the page that lead to has an excellent interface for managing large numbers of files, in fact we think it currently the best on the web. Systems like SAP and others are trying to maintain the content in a central repository, the fact is ERP systems are not very good at this.

How Dell Shows Parts Connections Online

Dell’s Website and Intel Linkage

Something we found interesting while writing an article on assembly to order in SAP SCM and Dell.

This relates to how websites from different companies can be used to interoperate with each other to add functionality for the consumer and maintainability for the involved sites. We were on the Dell website, when we noticed they have a link to the right that states:

“Compare processors to find what’s the best for you.”

Here is the site, notice the orange circle to the right under livechat.

Dell Intel 1

Where the Link Goes

What we found interesting about this was that the link takes you to Intel’s site, where an explanation is laid out for the consumer between the different microprocessors Intel offers in Dell models.


Who Benefits?

What is even more interesting about this is how Dell benefits. First, they provide valuable information to their consumers. Second, they no longer have to maintain information on their own site about a product that they do not make. We could see links like this for all the components. What this does is demonstrate and make transparent the contribution of suppliers to the end manufactured product.

Extending the Concept to Service Management

This concept can be extended to service parts management. For instance, if a hard drive needs to be repaired, or a microprocessor needs to be switched out, it is the supplier, not the assembly firm (in this case Dell) that has the intellectual property and knowledge of the components. Too often the main brand that performs final assembly has attempted to both present the concept that they “manufactured” the entire item, and that they were the specialists in servicing sub-components that they did not manufacturer. The web provides the ability to show the interconnections with suppliers that made the sub-components and to integrate product and service information in a way that has not been done before. Manuals in the future would be both on-line and integrated. Thus the overall guide to say…the Dell Inspiron 14 could be partially on Dell’s website, but then integrated with Intel’s and Western Digital’s and Corsair’s (etc..) websites. This is all accomplished through linking. Furthermore, each supplier only need write the manual and guide for its components once, and this can be linked to by Apple, Dell, and any other manufacturer that uses that component in their products. This both reduces the costs of maintaining this information, and improves its quality.

Items Becoming Less Serviceable

A Story of Un-Serviceability and the iMac

There is not much I own that I like better than our 24 inch iMac, but my sudden understanding of its basic un-serviceability has been a real disappointment. iMacs are not the only things getting less serviceable.

What You Learn When Your iMac Goes Down

We recently had the hard drive in our iMac go out.

Drive Reliability

See this link for a very interesting article on drive reliability

This article reinforces what we have experienced first hand — the MTBF numbers produced by drive manufacturers are false. Carnegie Mellon’s lack of differentiation among vendors in this study indicates their research was likely polluted by vendor pressure and or contributions.

What we learned is that iMacs are not designed to be serviced by users. The design of the iMac looks great, but has a very strange assembly that makes it even more difficult to work on than a laptop. The iMac has not screws or other fasteners on the case (except on the bottom for memory replacement). A hard drive is a major sub-component in a computer and tends to be one of the more problematic. It is something that not only should be designed to be easily replaced but should be designed to be swappable. As with media like CDs, there is no reason a door could not be added to any computer, and different hard drives could be added and removed to give the user maximum flexibility in booting to different drives. With a spare drive, this would mean that no computer could be brought down due to drive failure.


“Swappable” drives have been used in servers for some time, and are now available for home disk centers (which allow for RAID configurations) such as the Acer model above.

However, while no personal computer actually makes it as easy as we think it should be, Apple has designed a case with no entry through the back, so the user or service technician must actually pull off the glass cover with a suction cup and remove the display (delicately) to expose display. Next the display must be removed to reveal the hard drive. Several specialized tools are required for the task. Waiting for tools to arrive from eBay, as well as the Apple Store’s $420 quote for the work, is why our iMac is sitting unused at the time of the writing of this article.

Long Term Trend

This is part of a long-term trend in consumer items to hide the fasteners in order to increase the “coolness factor.” This trend extends to a number of different categories. If one looks back to the cars of the 1930s, one can see that they were more modular, and the rivets, pins, screws and other fasteners were more apparent. What this meant was that cars were more serviceable.

The Bentley Speed Six was a very serviceable car. The engine was easy to get to, the fenders were easily replaceable, and the exposed fasteners allowed the replacement of many parts by shade tree mechanics.

By the 1950s, almost all cars had moved to integrate the trunk and fenders into the body, and fasteners were no longer observable from the outside. This resulted in a smoother look, but also in a more complicated design and more expensive automobile to work on.

The 1950s Cadillac Series 62 was representative of cars from this era, in that it had an integrated body and hidden fasteners. Bodywork on this type of car is more time-consuming and expensive and must be done by professionals. However, since then, cars have become far more complex and as a result less serviceable still.

Serviceability Trend

The long-term is to decrease the serviceability in items. While this may be good for company profits, it is actually bad for consumer and bad for the environment. The more difficult and expensive it is for items to be repaired, the more quickly they are simply replaced by new items. The problem is that companies do not seem to have an incentive to build long-lasting and easily serviced items. The finance area of the company seems to think it reduces sales of new items (which it does), and new product design and marketing seem to think it reduces the “coolness” factor of products. Marketing and finance have come to dominate US corporations, so it is no surprise that their values have become the values of American business. This is not going unnoticed. According to industrial designer Victor J. Papanek, the following holds.

That while American products once set industrial standards for quality, consumers of other nations now avoid them due to shoddy American workmanship, quick obsolescense and poor value.

Historical View

There is this common impression which is reinforced by advertising that this year’s model is better than last year’s, and that in general we are on a continual upward slope. This is not actually the case. There are many business practices and products that were “better” – better for the consumer and better for the environment — in the past. In addition to serviceability, many products were simply designed to last longer half a century ago. As an example, there is a lively market for classic toasters from the 1950s on eBay. These 50+ year old toaster still work, because they were built to last. The concept of a 50+ year old item is unheard of today.

This 1950s SubBeam is still working, and adjusted for inflation, is probably selling for more on eBay than it did back when it was purchased in a store in the 1950s. Why can’t more items be built to last and be built to be serviceable?

Noticing Changes

I suppose the question to ask is what has changed? How did American business go from offering many durable and serviceable products to offering products designed to be thrown away? Secondly, how did both American and international consumers become habituated to this new consumption pattern? Thirdly, does anyone think that this trend can actually be reversed by “the market?” Actually, it would appear that on broader goals such as environmentalism (which the life-span of products are a contributing factor towards) that the market will drive product development in the opposite direction, towards planned obsolecense. People generally need to have a better understanding of the relationship between product service-ability and sustainability. It is difficult to see companies making a focus of product service-ability without more pressure from consumers. However, consumers have become so habituated to disposable products, that most don’t know where to begin to ask for this level of build quality.


One question I have is if purchasing specialized drives, such as surveillance drives — which are designed for high usage video applications are more reliable than normal consumer drives. Seagate makes a very price attractive model.

This is an interesting article on planned obsolecense in hard drives. We quote from it below.

For a long time, I was a big supporter of IBM drives and recommended them at every turn, but now not so. They too have had enormous numbers of drives returned to them recently, and I am sure that is what spawned the Hitachi buyout. I have noticed over the last couple of years that manufacturers have stopped putting little mini in-line fuses on the electronics of the drives. I often asked myself why they were doing this, as the fuses could not cost 1/2 cent each. I have since found out! This is a little known fact that is not limited to hard drives alone unfortunately, but also incorporated into cars, electronics of all sorts, and everyday things that we the consumer use. This little known fact is called “built-in obsolescence”! This is a very little discussed problem in today’s society, but we all face it at some point or another.

The is an excellent excerpt on this exact point in the book Waster Makers, published back in 1960. We have copied it below. This relates to deliberate changes that made items less serviceable.


Beyond all these factors of quality debasement and by repairmen there were several objective factors about modern appliances that helped make them expensive to maintain and that helped increase the business volume of servicing agencies or replacement-parts manufacturers, and, in some cases, the manufacturers hoping to sell new replacement units. There were more things to go wrong. Those added luxury accessories that so delight copy writers were adding to the problems of products to break down. The rush to add extras on washing-machines in the form of cycle control, additive injectors, increased the number of things that can develop ailments. The Wall Street Journal wrote: “Parts and accessory dealers naturally are pleased with the added extras put on new cars.” They should be. I have two neighbors who bought station wagons in 1958. One bought a model with power steering, power brakes, automatic shifting, and power windows. The other—a curmudgeon type who doesn’t think that shifting gears and raising windows by hand are too much of a strain—bought a car without any of the extras. His years of ownership of the car have been relatively trouble-free. (And by spurring the extras he saved several hundred dollars at the outset.) The other neighbor who bought the car with all the extras moans that he got a “lemon.” His car, he states, has been laid up at the garage seven times, usually because of malfunctioning of the optional equipment. Replacement parts were costing more. The gizmoed motorcar was a good case in point. A creased fender that in earlier years could be straightened for a few dollars was now, with integral paneling” and high-styled sculpturing, likely to cost I $100 to correct. The wrap-around windshield was likely to last three to five times as much to replace as the unbent/ windshields that motorcars had before the fifties. Ailing parts were increasingly inaccessible. In their pre occupation with gadgetry and production short cuts, and perhaps obsolescence creation—manufacturers often gave little thought to the problem of repairing their products (or alternatively made them hard to repair.) Sales Management dominated and demanded that“products are not designed for service.”It was of steam iron that could be repaired only by breaking it apart and taking out the screws. Some toasters were riveted together such that a repairman had to spend nearly an hour just getting to the right part. This is to replace a fifteen-cent or a ten-cent spring. Product analysts at Consumers Union told me that air-conditioning units in automobiles were often cluttering up the engine compartment so badly that it took an hour or two to remove a rear spark plug. Built-in appliances—which were being hailed as the wave of the future had to be disengaged from the wall before repair work could begin. Many of these built-ins were simply standard.

Facilitating Repairs

Manufacturers often failed to provide in provide information that would facilitate repairs. Recently The Boston Globe protested that appliance manufacturers were getting so “cozy” with service manuals that customers seeking them got the impression they were “censored as if they contained obscene material.” The Electric Appliance Service News likewise expressed indignation on behalf of servicemen, or at least independent servicemen. It said, “Our mail is loaded with gripes daily from servicemen throughout the country lamenting their inability to obtain service manuals from certain manufacturers.” Often this coziness has sprung from the desire of the manufacturer to keep the repair business to itself and out f the hands of independents. The News charged that “some manufacturers do not make service manuals available to all independent repairmen and therefore it is almost impossible to make repairs easily and properly—and at a time-saving expense.

This exerpt is from the book The Break Through Illusion and is related ho how R&D was changed to be less integrated and more specialized, and how service-ability as well as manufacturability were reduced.

R&D was also separated from other corporate activities such as product development and manufacturing. In 1925 Bell Labs was organizationally separated from Western Electric “to permit more effective specialization in research and development. “R&D now became the first step in a specialized assembly-line process of innovation. According to the historian George Wise: “At subsequent workstations long that assembly line, operations labeled applied research, invention, development, engineering, and marketing transform that scientific idea into an innovation.”

As this process moved along, projects and products would simply passed over the transom from R&D to product development, from product development to pilot production, and from pilot production to manufacturing Once a project was handed on, the receiving group vas confronted with a fait accompli, their freedom of operation constrained by earlier decisions. For example, engineers working on the body of a car might design it in such a way as to make proper placement of the engine and steering difficult. The engineers assigned to steering and motor development would then change the design based on their needs. By the end of this process would be expensive and difficult to manufacture. Typically, this yielded results that were expensive and frequently of low quality, for example, the Ford Pinto and the Chevrolet Vega, cars that were designed as lemons.“


The consequences of all this were both profound and disastrous. The connections between R&D and production were irrevocably severed. New ideas and inventions were stranded in a “twilight zone” between R&D and production. American industry went from a system in which innovation and production were closely linked to one in which it became increasingly difficult to produce the research labs’ developments economically. Some companies, like DuPont, responded to the growing gulf between the R&D and manufacturing by creating internal “venture” divisions designed to turn promising R&D into new products or in cases into new businesses. But few of these new venture visions proved successful. For example, none of DuPont’s major new internal ventures or spin-off companies amounted to much. The reason for this was basic: new venture divisions simply added another intermediate level to an already overblown and unwieldy R&D bureaucracy. Here again; large corporations showed that they were oblivious to the need for more fundamental kinds of restructuring.


It’s interesting how little changes. The article below describes how Apple decided to use glass on the back of the iPhone 4 in a decision prioritizes style over durability. I don’t know how many people care about the back of their phones, but I would venture to guess not much. Glass has no other property that you would want to put in the palm in that it is not a good insulator (so the heat will come through the back of the phone), and it is a low friction surface, meaning the phone will be more prone to slip out of one’s hand.

Another case of Apple choosing style over durability.

On a second very popular Apple product, much was written about how much better the iPad 2 was than the iPad 1. People were amazed by how thin it was and how it now had tapered edges which felt great in the hand. However, little was written about how this would affect serviceability. It turns out quite negatively. ZDNet disassembled the iPad and essentially recommended that users never try to open the iPad 2. They gave the product a serviceability score of 4 out of 10. In addition to reduced serviceability, the durability of the iPad 2 was reduced over the iPad 1, with a much greater likelihood of the glass cracking than in the iPad 1. If publications continue to lightly cover aspects of durability and serviceability, companies like Apple will have the incentive to continue to not emphasize these aspects in their design.

What is The Target Stocking Level?

What is a Target Stocking Level?

The first time we heard of Target Stocking Level was on an MCA project. This is the actual output of the Strategy module of MCA SPO. We have listed a short definition from MCA’s SPO Glossary.

“TSL is the quantity available to meet demand within the lead time and thus becomes the basis for computing the customer service levels. The TSL for each Location part is determined on the impact of what the TSL will have on the service level.” – MCA Glossary

TSL in Common Usage

A search through the web shows that this term is not very common. However, it is not hard to find it listed in books through Google Book Search.

We found a formula for it in the book Best Practices in Inventory Management by Tony Wild which we have listed below.


We had never run into the concept of TSLs in SAP until we did a search for it in SAP Help. We found it in the following area:

  • SAP ERP – The concept exists as a “range” within purchasing
  • SAP SCM Forecasting and Replenishment

TSL in Dead Modules or Functionality

Interestingly, of the four areas we found it, two of the areas – S&OP and SAP Forecasting and Replenishment are “dead” areas within SAP, in that they are only extremely rarely implemented in companies (see our next post for more details). The range concept of TSL in purchasing is infrequently implemented and instead the vast majority of clients we would guess use the requirements plus lot size to drive replenishment.


The one area where TSL is both used and used in a module that is actually alive is in Supply Network Collaboration or SNC. Interestingly, it is not called a TSL but instead is called minimum and maximum stock levels. We quote from the book Supplier Collaboration with SAP SNC..

“The projected stock and actual stock on hand are compared with the minimum and maximum stock levels agreed upon by customer and supplier for a location product. If the threshold values are not reached, or are exceeded, alerts are generated.”Mohamed Hamedy and Antia Leitz

SNC is not a planning engine like SAP SNP or MCA SPO. Instead it is a collaborative software add-on to SAP SCM that communicates, in this case, inventory information between SAP SNC (in most cases) and suppliers or customers. Most likely SNP (Supply Network Planning) is producing the TSL range, while SNC is gathering actual inventory levels, and then comparing the two to send our requests for bringing in more inventory on specific dates.


Target stocking level is not yet a common term in industry, but does have a number books which both cover it and work with the concept. The concept is a powerful one in that is manifests all of the complex inputs of stock determination into a single number, or a number range. This number(s) can be then compared to actual stock values, in order to develop stock transfers, unserviceable item repairs (for service parts) or can be communicated to suppliers or customers using a collaboration tool like SAP SNC.

Why Auto Parts Distribution is So Inefficient

Big Problems in Automotive Service Parts Networks

In our previous post we discussed the problems with how automotive service parts websites are dominated by dealers. We also discussed how this is inefficient and why these web sites should be centralized and either managed by the manufacturer, or simply outsourced to a company that has this as a focus.

However, after further research it turns out automotive service networks have even bigger problems than this. This quote is from the HBR article called Winning in the Aftermarket:

Some years ago, when we studied the after sales network of one of America’s biggest automobile manufacturers, we found little coordination between the company’s spare parts warehouses and its dealers. Roughly 50% of consumers with problems faced unnecessary delays in getting vehicles repaired because dealers didn’t have the right parts to fix them. Although original equipment manufacturers carry, on average 10% of annual sales as spares, most don’t get the best out of those assets. People and facilities are often idle, inventory turns of just one to two times annually are common and a whopping 23% of parts become obsolete every year. – HBR

Improper Parts Planning

When consultants for service parts planning software company MCA Solutions goes into an account and uses its SPO software to perform inventory re-balancing, they often find that parts are kept too low in the supply network. This is often because fill rates are only being locally managed and local managers are attempting to move parts to where they will eventually be consumed. The problem with this is that transferring parts from a forward location to another forward location is less efficient than moving parts from the parts depot to the forward location. Secondly, there is no reason to move a part to a forward location unless there is a high probability of consumption, or unless transportation lead times are particularly long. This analysis of where parts in the field should be located goes by a number of names including multi-echelon inventory optimization, redistribution and inventory re-balancing.

See the diagram below.

See these posts for more on part redistribution.

Generally, the independent dealer model continues to work against rational inventory pooling. AMR Research (now part of Gartner) does have a good point when they bring up this point in their paper Service Parts Planning and Optimization.

During the course of this research, we found SPP applications tended to be very tacticalin nature, solving specific inventory, fill rate, or service-level goals. Oftentimes service is still being viewed as a cost center, and SPP applications are not necessarily viewed as the keys to a greater world of service nirvana.
One explanation is that the buyers of SPP software tend to be planning managers ordirector-level planners who have no jurisdiction over service and repair or other areas of the SLM model. Other reasons include outsourcing, where OEMs have outsourced the service process but retain the planning aspects, or the fact that the company was never in charge of service in the first place—think of an auto OEM and the dealers that actually provide the service.

During the course of this research, we found SPP applications tended to be very tactical in nature, solving specifc inventory, fill rate, or service-level goals. Oftentimes service is still being viewed as a cost center, and SPP applications are not necessarily viewed as the keys to a greater world of service nirvana.One explanation is that the buyers of SPP software tend to be planning managers or director-level planners who have no jurisdiction over service and repair or other areas of the SLM model. Other reasons include outsourcing, where OEMs have outsourced the service process but retain the planning aspects, or the fact that the company was never in charge of service in the first place—think of an auto OEM and the dealers that actually provide the service. – AMR Research

Better Service Parts Planning Begins with Cooperative Planning

Rather than having every dealer attempt to manage its inventory, a much more rational and effective setup is for the dealers to pool their parts at a local depot and for the depot to manage the parts for them. Daily local “milk runs” would ensure part flow to the dealers, and would reduce the poor inventory turn of parts at the dealer location. A series of these depots can then be large enough to be electronically connected and to have their inventory represented in a web order fulfillment system that can better match supply and demand than can a series of disconnected dealers all trying to manage a smaller amount of inventory locally. Honda (for instance) could manage this themselves, or instead could outsource the management to a company like, that really knows how to produce transactional web sites and knows how to match supply and demand. This solution would be vastly superior to the current one where small dealers attempt to manage their own service parts websites (and where it took us 2 hours searching various dealer sites to find that we would have to call in to order a part)

What is happening in the dealerships is a disinterest in making changes or becoming more flexible in order to adopt new technologies. Companies can make a lot of money in the short-term by simply living off of monopoly power. GM was the poster child for inept management, inward thinking, abusive supplier relations and unresponsiveness to customers. A good catchphrase for management consultants could be “Don’t be Like GM.” While Honda quality is much better than GM’s ever was, Honda’s dealer network with respect to their service parts management is not all that much different. In fact most manufacturers seem to employ the same inefficient system. This demonstrates the restrictive influence of the dealership system that no matter how good the car company, the dealer system remains anachronistic.

It seems often that the large American car companies have little interest in their service operations. Instead they prefer to spend their money on advertising. They have lost the battle for the aftermarket, and this reflects in their new sales, although they are unable to make the connection.

To quote again from the HBR article Winning in the Aftermarket:

In the automobile industry, for example, there’s a distinct correlation between the quality of after sales service and customer intent to repurchase. Brands like Lexus and Saturn inspire repeat purchases by providing superior service, and, consequently, they have overtaken well established rivals like Ford and Chrysler. – HBR


The current dealer centric automotive service distribution system is an anachronism and is probably one of the reasons that dealerships have such high costs. Instead of attempting to reduce these costs, dealers are simply passing on their inefficiency to the consumer. However, dealers should be wary. While they have used political finagling to prevent web-based car purchases, this will eventually come to pass. The only thing that the dealers are really necessary for is for providing local service. They should do what they can to make their service operations, which includes service parts planning and management as efficient as it can be. A big part of the answer to this is to begin cooperatively or centrally planning and pooling inventory.

Parts Hub

The parts hub concept has also been proposed by John Snow, at Enigma, which is a software company focused on parts procurement decision support. The post on this topic can be found here.


Service Parts Planning and Optimization, ARM Research 2007


After this post was published, we found that auto dealers have a considerably poorer track record on customer service for repairs than independent shops. This promoted us to write this article that questions the validity of dealerships generally and proposes a dealer-less model.

John Snow has some interesting things to say about this concept at the link below.

Why Auto Parts Websites Are a Problem

Caught in a Time Warp

It is always amazing to come upon a technology that is so amazingly underutilized. This would be the case for service parts online databases.

The Story

We needed a door handle assembly part for a 1997 Honda Accord. First we started with eBay, which really had a pretty small inventory. We could only find the door handle assembly for a four door, not for a two door. This was a dealer only item. The trouble began when we started looking through dealer websites for the item. The experience began to get us thinking that the dealer value-add is seriously in question. Dealers are not necessary to buy cars (they could be bought online, but tested at a manufacturer sponsored center in a mall that had just a few models). The care could then be either transshipped from a different location, or simply build to order. However, instead of this we have this medieval auto dealer system that holds massive amounts of inventory so buyers will make impulse purchases “that day.”

Service Databases

When looking through the websites of dealers, it was absolutely maddening to try to navigate them. Most the sites are caught in a time warp and exhibit the worst of web navigation and design. Some of them ask for contact information so they can treat the desire to purchase parts as a “lead.”

San Francisco Honda, like 99% of the dealerships, seem to seriously misunderstand what the web can do, and how it can help automate transactions. Now we will be calling to the dealer, just like we would have back in 1940.

Why Has Online Parts Supply Demand Matching Been Decentralized to Dealers?

Why does Honda allow dealers, who lack the interest or size to develop competent transactional websites to sell auto-parts on-line? Why are Honda, and other major manufacturers, not managing this with a single website and a national network. It appears as if the dealer network (a way for manufacturers to sell franchises and not have to worry about retail, is interfering with the new realities and efficiencies of the web. Automobiles may have to be serviced locally, but there is no reason, with our fast shipping network, for parts to be managed at dealer locations. And especially when a customer wants to order a part, there is absolutely no reason they should have to a dealer to do so.

Its does not have to be this way. The fulfillment could be performed by dealers, but Honda could manage the front-end, much like

Learning from

The lesson from Amazon is that the web based supply demand matching no longer needs to be performed by the same organization that performs fulfillment. See this article on and how they serve as a supply demand matcher.

IT and Monitoring Competence and Fourth Party Logistics Providers

The concept of multi-partner coordination enabled by monitoring tools is a concept in logistics called fourth party logistics and is covered in this post.

It’s a sad fact that there is simply not a lot of thinking going on in the management of service parts.

Where Are the Books on Parts Planning?

Book Availability

We have written a number of times about how under-emphasized both service management and service parts planning in particular is and continues to be in companies. However, what surprised us to an equal degree was a recent search for books on this topic. We stopped by and performed a search for “service parts planning” and received this result.

What it Means

For those that do not search very frequently, we can tell you how unusual this result is. By the third result, we are already getting into books that are so old or out of print, that there is no image posted. Also notice that this third listing has nothing at all to do with service parts, but came into the results in any case because there are so few books on this topic. One of the books is completely dedicated to service parts planning in SAP. However, what if you are a company that does not use SAP? This book will probably not cover what you need then. The second book is related to algorithms for service parts supply chain. This would probably answer a few questions for the technically inclined, but it can not be considered a book for business people trying to understand service parts planning and does not cover the topic generally. If we change the search to “spare parts planning” we get similar results, so the terminology used does not change the results much.

You can do the search yourself and see the full results. However, of the next few pages of results, we only found the following book to be applicable.

And this is not a book specialized on service parts planning per say, but simply service parts. This book covers service parts generally, but does allocate chapters to things like forecasting and inventory management for service parts.

Best Books and Articles

This is a listing of the top books and articles in the field. The list can certainly grow.


  1. Analysis and Algorithms for Service Parts Supply Chains – John A. Muckstadt –

  2. Service Parts Planning with mySAP SCM: Processes, Structures, and Functions – Jörg T. Dickersbach –


  1. Winning in the Aftermarket – HBR June 1006 – Cohen, Agrawal, Agrawal


How are the next generation of service parts planners and consultants to be trained if there is not literature commonly available on the topic? Our conclusion is that considering the size of the service market there could be more material. Secondly, in order to advance the field, its important that more material be published.