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.

http://www.scmfocus.com/inventoryoptimizationmultiechelon/category/service-level-hierarchy/

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

http://www.scmfocus.com/inventoryoptimizationmultiechelon/2010/01/its-time-for-the-sap-xapps-program-to-die/

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:

http://www.scmfocus.com/servicepartsplanning/2010/11/13/deloitte-writes-ok-paper-on-service-parts-but-would-you-want-to-hire-them/

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)

http://www.scmfocus.com/demandplanning/2010/07/using-demandworks-smoothie-for-forecast-prototyping/

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.

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Conclusion

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.

References

My service parts planning consulting offering.

http://www.scmfocus.com/consulting/areas-of-specialty/service-parts-planning/

Discussing the underinvestment in parts.

http://www.servigistics.com/solutions/parts.html

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

http://logistics.cat.com/cda/components/fullArticle?m=115228&x=7&id=382143

 

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The Real Service Parts Question

TheRealServicePartsQuestion.jpg
The Real Service Parts Question

We learned the following things from a white paper by Ciber. Reducing the Excess: Using Vendor Managed Inventory to ImproveProductivity Without Sacrificing Customer Service.

“Reduce Capital Investment in Inventory Our parts distributor estimated it had more than $180 million worth of inactive inventory (inventory with zero demand at a customer location in more than 9 months) across its 3000 U.S. locations. In fact, the distributor discovered three things: Fewer than 40% of service part numbers experience 52 or more orders per year (i.e., one per week) Nearly 25% of service part numbers are ordered three times or less per year (i.e., less than once per quarter) Nearly 60% of service part numbers sell only once per year” http://www.ciber.com/downloads/whitepapers/CIBER_ManagedInventory.pdf?

We learned the following things from a whitepaper by Ciber. Reducing the Excess: Using Vendor Managed Inventory to Improve Productivity Without Sacrificing Customer Service.

“Our parts distributor estimated it had more than $18 million worth of inactive inventory (inventory with zero demand at a customer location in more than 9 months) across its 3000 US locations. In fact, the distributor discovered three things. Fewer than 40% of service part numbers experience 52 or more orders per year (i.e.,one per week)Nearly 25% of service part numbers are ordered,three times or less per year (i.e., less than once per quarter) Nearly 60% of service part numbers sell only once per year”

References

http://www.ciber.com/downloads/whitepapers/CIBER_ManagedInventory.pdf?CFID=15663357&CFTOKEN=25661373


The Service Parts Software Under Investment

FinishedGoodsvsServiceParts.jpg
Where is they money for service parts software? Companies will end up spending one way or another, either on solutions that can help the rather weak state of service parts management improve, or by continuing to incur high obsolescence and other costs.

The Current State of Investment

It is well known by those that work and follow the service parts industry that it is tremendously underinvestment in. Most companies, with the finished goods focus place their resources in the latest and newest thing. This is illogical, as service parts are a very good business and most often one of the most profitable parts of any product oriented business. A typical quote in the industry is the following: That’s bound to change as the success stories multiply. At corporate phone network operator Avaya Inc. (AV ), Servigistics software has helped slash the number of raging e-mails the company’s CEO would get when big clients such as General Electric Co. (GE ) had trouble with their Avaya phone systems. With 2,000 stocking locations worldwide processing 8,000 phone and network parts, Avaya’s service department managed a huge logistics spiderweb. Until three years ago, however, parts were tracked on a simple Excel spreadsheet — which meant that Avaya technicians had the right ones in stock just 39% of the time. “It was an absolute disaster,” says Jeffrey S. Gardner, Avaya’s director of global service operations.”(August 01, 2005 BusinessWeek Magazine – Yes, Ma’am, That Part Is In Stock)

However, we are not so sure. This is why we are proposing that service parts software vendors lower the cost of software by offering an integrated service platform which is described in the article below.

http://www.scmfocus.com/servicepartsplanning/2009/06/10/service-parts-are-a-perfect-market-for-4pl/

A Robust Strategy

The opportunities in service parts are clearly tremendous. However, if customers are less willing to spend in this area (irrationally or not) vendors should develop a solution that charges incrementally in order to meet the need. Our view is once companies try these solutions, they will be less reticent to invest in them.