Friday, April 18, 2008

SAP Advanced Planner and Optimizer

SAP Advanced Planner and Optimizer
Datapro Summary
SAP's Advanced Planner & Optimizer (APO), the planning component of its supply chain management suite, supports global supply chain planning processes involving large numbers of variants. The six applications that make up APO use constraint-based planning and optimization functions to plan for demand, supply, and production functions for the extended supply chain and also to support plant scheduling and global available-to-promise functions. SAP's Business Framework architecture enables integration among all APO applications, and equally important, with the other SAP R/3 execution and financial products. A collaborative environment is supported among all supply chain participants to create a closed loop communications network among customers, suppliers, and employees. APO became a GA release in December 1998.

Overview
SAP's APO is one major component of its two-element collaborative end-to-end supply chain management solution. The other major component is its Logistics Execution System (LES). The LES component handles warehouse management and transportation management.
APO complements SAP's ERP transaction system with supply chain optimization and data analysis tools. This linking of the ERP and APO products is accomplished via SAP's Business Framework, the company's component-based strategic architecture providing integration services and synchronization of data between the APO and ERP components. Collaboration extends planning and execution functions beyond the enterprise boundaries to encourage information exchange and to improve the efficiency of the supply chain. The collaborative capabilities can include all demand side, supply side, and transportation participants in the supply chain. With its mySAP.com initiatives, SAP Web-enabled its software and is offering browser-based and roles-based workplace portals to facilitate information interchange. With mySAP.com, organizations can link their enterprise backbone data with other SAP technologies and applications to collaborate globally with all supply chain participants.

Analysis
In combination, APO and LES integrate information and decisions from the entire supply chain into a seamless and optimized information infrastructure. APO provides a thorough suite of advanced supply chain planning tools for real-time advanced planning and decision support. The APO applications include the following:
· Supply Chain Cockpit is a configurable graphical user interface to manage and control the supply chain.
· Collaborative Planning enables collaborative logistics' planning among supply chain participants across networks.
· Supply Network Planning & Deployment synchronizes demand with sourcing, production, and distribution activities and plans material flow through the entire supply chain. The Deployment solution enables planners to rebalance and optimize the distribution of products through the network.
· Production Planning and Detailed Scheduling manages the flow of materials and resources on a plant-by-plant basis. Production planners can create optimized, feasible production schedules.
· Demand Planning provides forecasting and demand planning tools enabling companies to capture changes in demand signals and patterns as early as possible and create accurate forecasts.
· Global Available-to-Promise utilizes a global, multilevel, rules-based strategy to match supply with customer demand. It also performs capable-to-promise logic checks in both real time and simulation mode to enable precise delivery commitments for customer orders.
The Business Framework enables each of the APO applications to operate through its standardized Business Application Programming Interfaces (BAPIs) and to function either as standalone products or as a single integrated element. The Framework also supports integration with the transaction data of the R/3 execution system and also employs a library of advanced optimization algorithms and a memory-resident data processor (the liveCache) to accomplish the advanced planning and optimization routines. The data in APO, structurally optimized data objects from the R/3 ERP execution systems, are synchronized with the transaction data through a series of real-time triggers, which are provided through integration services of the Business Framework. APO also integrates with SAP's Business Information Warehouse to provide access to important business data and enable data analysis. SAP's Internet-Business Framework complements the Business Framework by mapping the SAP interfaces (BAPIs) into an XML structure, and back again, to facilitate communications on the Internet.
Architecturally, APO is built around SAP's liveCache, a high-speed, memory-based technology for executing data-intensive functions, and for providing integration with all R/3 systems within an organization. liveCache technology operates within the SAP Business Framework and offers orders of magnitude performance improvements for certain functions, such as forecasting and supply chain planning and optimization. liveCache provides the high-speed platform necessary for a real-time response even when intense computations are involved. For example, liveCache makes it possible for a sales representative to perform comprehensive available-to-promise calculations during a phone conversation with a customer. liveCache also provides a focus beyond a single R/3 instance (that is one R/3 system), offering a view of the entire supply chain and tight integration with all R/3 instances within an organization. It also interfaces, through the Business Framework, with non-R/3 applications and supplier and distributor systems.
Under SAP's mySAP.com initiative, APO can take advantage of many of the services offered as part of mySAP.com, including Workplaces and Marketplaces. The Workplace provides an employee portal that functions as a personalized virtual desktop in which employees can define all the transactions needed to perform their job by accessing applications and information based on their role. Complementing the Workplaces are mySAP.com Business Applications, which provide collaborative business processes that span corporate boundaries and create different business scenarios, which can function within an enterprise or across organizations. The functions needed to execute tasks for each business scenario reside in mySAP.com and non-SAP software application and service components, all of which are available through the mySAP.com Workplace. The mySAP.com Marketplaces provide integration at the application level and accommodate hosted applications for a range of supply chain functions, such as collaborative forecasting, demand planning, procurement, transportation-request tendering, and so on.

Competitors
Because of SAP's leadership position in the ERP marketplace and the introduction of its supply chain management suite of products, it competes with a wide range of players. In the ERP space, all of the major vendors have good or very good supply chain products. Perhaps SAP's most serious competition in this segment comes from Oracle's Release 11i of e-Business Suite and its supply chain management products. However, in addition to Oracle, SAP will encounter threats from other serious contenders such as PeopleSoft and J.D. Edwards. Baan had good supply chain management software, but because of its recent financial difficulties, executive turnover, and so on, it does not appear to be a serious risk to SAP's business.
In addition to the ERP vendors, SAP also encounters competition from the traditional supply chain vendors, such as i2, Manugistics, and Logility. The former two vendors have expanded their traditional supply chain software and leverage their experience in optimization capabilities to satisfy requirements of a broader market segment supporting communications among trading communities. i2 is in a good position to help solve supply chain problems that evolve from the emerging e-commerce market. Logility, although much smaller than SAP, has a very good product line that satisfies both advanced planning and execution functions. Although each of these traditional supply chain vendors poses threats for SAP, Gartner forecasts that ERP vendors will account for about 60 percent of the supply chain software market by 2004.

Oracle
With Release 11i of its e-Business Suite, Oracle represents a serious threat to SAP in the supply chain management market. The addition of applications, such as Customer Order Management, a Product Configurator, and Advanced Pricing, in combination with the integration capabilities to its ERP execution software gives Oracle a well-rounded and comprehensive SCM solution that handles both advanced planning and execution phases of supply chain management. It rounded out these functional offerings with Internet access that lets supply chain members, including employees, customers, and trading partners, collaborate to optimize plans and ensure timely delivery of supplies and products. Oracle's decision-support tools also help manage operational performance with a series of pre-built applications, including key performance indicators allowing managers to track performance against multiple targets and optimize supply chain resources.

PeopleSoft
PeopleSoft's Supply Chain Management solution focuses primarily on advanced planning with support for:
· Manufacturing planning (to support production and capacity planning, production and cost management, engineering, and quality)
· Supply chain planning (to support demand and enterprise planning and order promising)
· Materials management (to support purchasing, payables, inventory expenses, and asset management)
· Sales and logistics (to support remote-order entry, order management, product configuration, billing, and receivables)
To accommodate the execution phase of SCM, PeopleSoft partnered with Optum and McHugh Software, which provide warehouse and transportation management software. Like Oracle, PeopleSoft's SCM applications are integrated with its customer relationship management, financials, human resources, and enterprise performance management solutions to provide a consistent enterprise view of the data.

i2 Technologies
i2 Technologies was an early and successful player in the supply chain planning market and continues to be successful with its Rhythm supply chain optimization product. Within the past year, the vendor leveraged its strength and experience in that market and provides intelligent e-business solutions for a much broader market segment. It applies its optimization techniques to other areas of business process planning to offer solutions for a much broader array of business functions, including procurement, electronic commerce, fulfillment, and product development, among others. In early 2000, i2 introduced TradeMatrix, a B2B portal for multiple marketplaces that employs i2's advanced optimization and execution capabilities to improve buying and selling decisions in the supply chain and also to solve supply chain problems that evolve as a result of entering an e-business environment.

Manugistics
Manugistics made many important changes to its product line and management team during the past year. It redesigned the entire product line to accommodate additional service applications that extend the company's optimization software and to take advantage of the growth of the Internet. For example, its collaboration product enables communication among all supply chain participants within and outside the enterprise, running Manugistics and non-Manugistics software. New monitoring, measurement, and analysis tools are available to ensure supply chain efficiencies. The company also introduced important features that enhance the trading and enterprise networks. The product line, NetWORKS, supports many changes at a basic architectural level, which when considered in combination, have a pervasive and positive impact across the entire product line. The product orientation changes the traditional supply chain into a trading community that fosters intelligent communications among all members of the supply chain, inside and outside of organizational boundaries. In the first quarter of 2000, Manugistics also introduced its ExchangeWORKS, a platform that enables trade among buyers and sellers in a many-to-many trading environment.

Strengths
Full-Featured Supply Chain Planning
Considering APO's relatively late arrival in the supply chain market (late 1998), compared to SCM vendors like i2 and Manugistics, SAP developed applications that rival the planning and scheduling features of those early entrants. Its support for the demand chain planning side includes applications for demand planning, collaborative planning, and inventory planning. The only functions missing are a strategic planning tool and a network design element, both of which are planned for introduction in September 2000.

Good Integration
Unlike some of its traditional supply chain competitors, SAP has a large installed ERP user base it can tap for APO applications sales. To encourage that sale, SAP focused on integration not only within its supply chain applications (both planning and execution), but also with its back-office ERP applications and with customer supply chain partners. SAP Business Framework, liveCache technology, and plug-ins have facilitated this integration. liveCache, a component of the Business Framework, provides integration with all R/3 instances to provide a view of the entire supply chain. Plug-in 2000 is a special integration tool that provides automatic integration with R/3 without programming. It is a tool that can build integration models and automatically update data in APO in real-time as events occur in the R/3 ERP transaction data.

Good Support Software
To complement an already strong SCM offering, SAP also provides a thorough suite of support software to enable good decision-support capabilities. The inclusion of its mySAP.com Internet portal opened up its entire application suite to support collaboration among all supply chain partners on the Internet. A Business-to-Business Procurement capability, part of mySAP.com, supports a purchasing function on the Internet, giving buyers the opportunity to effectively deal with suppliers and to negotiate the best prices among supply chain suppliers. Its Business Information Warehouse is a pre-configured data warehouse that can be used to access internal and external data from a variety of sources, and then analyze results. The Business Warehouse also provides key performance indicators for company performance and process benchmarking.

LiveCache
Leveraging large main memory hardware architectures that can support tens of gigabytes of RAM as well as 64-bit processors, liveCache eliminates bottlenecks associated with transferring data between disk and memory, thus removing a critical limiting factor on system performance. SAP began using a memory-based architecture with the introduction of R/3 in 1992 and extended it considerably in 1995 with R/3 Release 3.0. This architecture reduces disk I/O bottlenecks through the use of shared, buffered data caches, to deliver rich application functionality with outstanding scalability. Now, liveCache extends this architecture by bringing application execution even closer to the data--both the processing of an application and the data it needs are contained in the same operating system process in RAM. Further enhancing performance, liveCache includes built-in business application logic and functionality. liveCache aggregates transactional data from multiple sources in main memory--including non-R/3-based systems--and then represents it in optimized structures for the task at hand. In this way, liveCache provides performance advantages for operations involving complex analysis of massive data stores required for supply chain planning or forecasting.

Limitations
Product Line Gap
Although APO provides a robust set of functions for advanced planning and scheduling functions in the supply chain, a few features are currently missing. SAP does not support transportation planning or network design. However, both applications are due for release in September 2000. Transportation planning will facilitate logistics planning by balancing carriers, costs, transportation times, delivery policies, and so on. The network design software will function as a strategic component in laying out the supply chain, including performing functions such as adding or consolidating strategic elements like distribution centers, warehouses, depots, and more.

Full Plate
During the past 18 months, SAP has been engaged in an important strategic evolution. It entered two highly competitive markets, customer relationship management, and supply chain management, each with well-entrenched but smaller competitors with very good product offerings. During the same period, it introduced its mySAP.com, a re-branding of its product line, and a series of technologies that extends its R/3 ERP software to the Internet. At the same time, it suffered the departure of several highly placed executives, particularly in SAP America, and declining margins (like other ERP vendors in the dwindling ERP market).

Datapro Insight
SAP has made some significant progress since the second quarter of 1999, solidifying further its leadership position in the ERP market and opening up market opportunities in newer markets, such as supply chain management, customer relationship management, and e-commerce. Its supply chain solution is one of the stronger ones in the market, not only because of the inclusion of its feature-rich planning and execution functions, but also because of the integration with the back-end financial and ERP applications via its Business Framework architecture. SAP APO is the vendor's advanced planning, optimization, and scheduling software for integrating and synchronizing global supply chain processes. Together, the SAP APO components offer a solution enabling close interaction and synchronized planning across all supply chain participants--from the supplier's supplier to sales, purchasing, and production planners to customers and consumers. The APO component of its supply chain solution is a positive addition to its broad and deep suite of enterprise applications.

7 comments:

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