Often simple things in life are best, such as applying logic into business decisions and operations. How? Well, most companies will admit economies have changed since a few years. And even before that, consumers started becoming much more demanding. So, it is about time for CIO’s, COO’s and SCM directors to check which software logic is most suitable to dealing with the new reality, including embracing new developments. Spoiler alert: Using ERP is a ‘given’, as APS is a ‘necessity’.
For over three decades most companies had a focus on implementing software that allowed them to manage data from financial and production processes. Those applications were merged into one and called ERP. It opened a whole new era in which shippers were able to plan processes and products they owned. One software provider in particular was benefitting from this merge, a company based in Walldorf.
Times have changed and keep on changing. Just-in-Time has been replaced by a more agile approach in supply chains. This new ‘normal’ means that companies are forced to adapt faster and better to customer demand. So, they need a smooth running supply chain that allows them to serve customers better, something that might even save time and money. The supply chain department of many companies has gained importance. That said, decisions made on which tech should support ‘supply chain’ have not changed. Modern times require software that help in forecasting, optimizing and executing what there is and how those elements need to be used. Can that be done with ERP?
So, can ERP be used for forecasting, optimizing and executing products and processes? Most influential departments of enterprises indeed think ERP is the right tool. This rational is mainly to be found among financial and IT-executives. The truth is that even if an ERP is equipped with some APS functionality, there are restrictions to what it can achieve.
For example, when you implement an APS Demand Planning module, your system will pull order and shipment history, along with customer and product master data, from your ERP. The APS module then generates a demand forecast and feeds it back into the ERP. Beyond demand planning, there are other valuable modules like S&OP Management, Master Production Schedule (MPS), and Rough Cut Capacity Planning, which all enhance your ERP's supply chain data, turning it into clear, actionable, and visual forecasts. These advanced calculations surpass the capabilities of standard ERP planning modules.
Despite this, many business leaders still opt for several ‘integrated’ ERP planning modules from a single major vendor, under the assumption that these systems will seamlessly work together. Unfortunately, this is often far from reality. What multi-site manufacturers ideally should use is an ERP that can be enriched with data from processes such as from S&OP and S&OE. A proper APS is able to do so.
As ERP in itself rarely has an ROI, an APS system can be used to create value within the supply chain. CFO’s and CIO’s need to adapt to the new reality and thus should consider the use of a proper APS software, not extra functionality from an ERP provider.
Investing in production capacity or smart software?
There is one more reason why an APS, in addition to an ERP, is more suitable for this era of demanding customers. Companies have the choice to invest in idle capacity, but most likely the CFO won’t allow that as it won’t benefit solvability. Dealing with unused capacity while there might be insufficient raw materials or skilled employees requires a more sophisticated planning tool. An MRP can be used for forecast calculations based on average demand, but not for 12 or 24 months ahead. An APS is able to do so, creating a better planning and adapting production planning to peak demand, as an example. It is a trade off that companies need to make. Investing in costly production capacity or investing in an APS that allows to work and plan more efficiently.
APS as prevention for disasters
Running an APS, next to the ERP, will serve companies in several ways. By helping manufacturers in getting an understanding of what the financial impact is of a planning. It also will allow the supply chain department to create value and let the enterprise thrive as customers will be happier and production cost will be reduced. Last but not least: the APS might prevent for disasters to happen when the only Excel-master within the company is no longer available.