OR/MS Today - October 1999

October 1999

Developments in ERP, E-Business Rock OR's World

By ManMohan S. Sodhi

As the song goes, there is something happening here, and what it is isn't exactly clear. There is a lot of big news with OR-based systems in relation to e-business, but what does it mean for OR academics, practitioners and students? Let me share some recent news from some of the dominant suppliers of enterprise resource planning (ERP) and ponder the implications for the OR profession.

Baan's Global Supply Chain Offering for e-Business. Baan recently announced a new suite of Baan supply chain products with international e-business capabilities. Last year, the company released a suite of ERP software packaged with planning software, and subsequently acquired CAPS Logistics to expand that offering. With this recent announcement, Baan made the suite e-enabled to allow companies to "construct and maintain dynamic, intelligent supply chain systems" across the Internet with the following announced capabilities:

Global model to help companies reduce international taxes and cross-border tariffs,
Internet-based collaboration with supply chain partners,
Integration with Baan ERP to integrate planning with execution, and also integration with R/3, the ERP software from industry leader SAP.

The suite covers strategic planning to help companies locate plants and distribution facilities, operational planning for both demand and supply, and execution by integrating with other applications like ERP and customer relation management.

Oracle's Internet-based Advanced Planning and Scheduling. Oracle recently announced plans to deliver an Internet-based advanced planning and scheduling (APS) solution to optimize e-business processes for planning and scheduling across the extended supply chain. The solution, slated to be available by the end of this year, is expected to allow quick implementation, enabling businesses to begin realizing return on their APS investment immediately. The Oracle APS solution comprises demand planning, advanced supply chain planning, global available to promise (ATP) server, and manufacturing scheduling.

Oracle has an ambitious value proposition for customers as they become e-businesses:

One-day ROI for existing customers (Oracle Release 10.7 and 11) with an implementation time for Oracle APS as little as one day!
Support for all manufacturing processes compatible with project, flow, process and discrete manufacturing, or any combination of these,
Increased collaboration using the Web for promising orders based on supplier resources and capacity as well as sharing demand forecast and production schedule information.

PeopleSoft and Enterprise Resource Optimization. It is hard to ignore a company that was the first ERP vendor to recognize the value of OR-based planning systems as seen by their acquisition of Red Pepper. Last year PeopleSoft announced complete integration of planning into its ERP system. And, hold your breath, the company even changed the software type from ERP to ERO or enterprise resource optimization! Now they are reportedly heavily into the Web and using the Web for ERO.

SAP Advanced Planning and Optimization, and Transportation Planning. Last year industry leader SAP announced the development of an optimization-based supply chain planning suite called Advanced Planning and Optimization (APO) and surprised everyone by actually delivering it on schedule. SAP has now announced transportation planning and vehicle scheduling functionality to expand APO with the pilot shipment due in February 2000. Features include shipment planning and freight consolidation, mode and carrier selection, negotiation of contracts, volumes, quotas, schedules and features of the supply network, static or dynamic organization of routes, multi-pick and multi-drop capabilities, round-trip capabilities, and fleet sizing and management. To complement transportation planning, SAP also provides an execution system called logistics execution system, or LES, for efficient execution of transportation plans.

SAP APO enables manufacturers and logistics providers to leverage the Internet and collaborate on forecasting, replenishment and transportation requirements using the collaborative environment, mySAP.com.

What This Means for Us

First, the word "optimization" is no longer a bad word that cannot be spoken in business, and that means it will be eventually be used in respectable business schools again as students demand it.

Second, optimization is everywhere at least in part because the ERP systems provide data. To really benefit from ERP, you really need OR-based planning systems. And, e-business can only accelerate this need for ubiquitous OR.

Third, we can say "We said so" and congratulate each other but we should wait until our OR e-chickens are hatched. All this stuff is "packaged" software, which means every Tom, Dick and Jane without an optimization background thinks he or she can model supply chains and create plans. To some extent they can, but sooner or later difficult modeling issues will arise. This is where you come in, but how do you convince the industry of the value stemming from your OR knowledge? By emphasizing business process and software knowledge over and above your understanding of models, modeling and meta-heuristics. Otherwise, industry will sing to you: "What have you done for me lately?"

Dr. ManMohan S. Sodhi is president of the Logistics Section of INFORMS and manager in supply chain planning with Andersen Consulting in Chicago. He is the founder of the OR news group, sci.op-research, and welcomes your comments at MohanSodhi@AOL.com.

Table of Contents

OR/MS Today Home Page

Lionheart Publishing, Inc.
506 Roswell Street, Suite 220, Marietta, GA 30060, USA
Phone: 770-431-0867 | Fax: 770-432-6969
E-mail: lpi@lionhrtpub.com
URL: http://www.lionhrtpub.com