In the last few posts, I’ve been talking about “brittle” applications, applications that just don’t work unless everything goes right. We all know lots of analogues for these apps in other areas: the Ferrari that coughs and chokes if it’s not tuned once a week or the souffle that falls if you just look at it funny. But it doesn’t occur to most people that many, if not most enterprise applications fall into the same category.

They don’t realize, that is, that ordinary, run of the mill, plain-vanilla enterprise apps are kind of like Ferraris: it takes a lot to get them to do what they’re supposed to do.

Here are some examples.

Consider, for instance, the homely CRM application. Many, if not most executive users go to the trouble of buying and putting one in because they want the system to give them an actionable view of the pipeline. Valuable stuff, if you can get it. When the pipeline is down, you can lay people off or try new marketing campaigns. When it’s up, you can redeploy resources.

Unfortunately, though, it takes a lot to get a CRM system to do this. If, for instance, the pipeline data is inaccurate, it won’t be actionable. Say a mere 10% of the salesforce is so good or so recalcitrant that their pipeline data just can’t be trusted. You just won’t be able to use your system for that purpose.

It’s kind of funny, really. Giving you actionable pipeline data is a huge selling point for these CRM systems. But when was the last time you personally encountered one that was 90% accurate.

Another example I ran into recently was workforce scheduling in retail. A lot of retailers buy these things. But it’s clear from looking at them that the scheduling can be very easily blown.

Finally, take the example I talked about before, MRP. When you run that calculation, you have to get all the data right, or the MRP calculation can’t help you be responsive to demand. If even 30% of the lead times are off, you won’t be able to trust much of the run. And when was the last time more than 70% of the lead times were right.

Notice that if you underutilize a brittle system, it can be somewhat serviceable. If you use the CRM system to follow the performance of the salespeople who use it and don’t try to use the totals, the inaccuracy doesn’t matter. If you just use MRP to generate purchase requisitions, the lead times don’t matter. But, as I said in the earlier post, if you do underutilize the system, the amount of the benefit available falls precipitously. And then the whole business case that justified this purchase and all this effort just crumples.

What makes me think that a lot of enterprise applications are brittle? Well, I have a lot of practical, personal experience. But setting that to one side, it’s always seemed to me that the notion of brittle application explains a lot of data that is otherwise very puzzling.

Take for instance all the stuff that Michael Krigsman tells us about project failures. He is constantly reminding us that the cause of failure is a three-legged stool, that it could be the vendor or the consultant or the company, and he is surely right. What ought to be puzzling about this, though, is why there is no redundancy, why the efforts of one group can’t be redoubled to make up for failings in another. If the apps themselves are brittle, however, it takes all three groups working at full capacity to make the project work.

Or, more generally, look at the huge number of project failures (what’s the number, 40%, are abandoned?). Given how embarrassing and awful it is to throw away the kind of money that enterprise app projects take, you’d think that most people would declare some level of victory and go home, unless the benefit they actually got was so far from what they were hoping for that the whole effort became pointless.

How can you tell whether the enterprise app you’re looking at is brittle? Well, look at the failure rate. If companies in your industry historically report a lot of trouble getting these things to work, or if the “reference” installations that you look at have a hard time explaining how they’re getting the benefits that the salesman is promising you, it’s probably a brittle app.

Two questions remain. When do you want to bite the bullet and put in a brittle app? And why would vendors create apps that are intrinsically brittle?

Next post.

Brittle Applications

August 31, 2009

In a previous post, I said that MRP was a “brittle” application, and a commenter questioned me. What is a “brittle” application? Is this a technical term? What makes MRP brittle? All good questions.

A brittle application is one that doesn’t work at all unless a lot of disparate conditions are met. MRP, for instance, doesn’t work unless all the data is right, people know how to use the program, the demand for the products is stable, purchasing is also committed to minimizing inventory levels, etc., etc.

The notion applies to a lot of other programs besides MRP, though I’ve rarely heard the term used. But notice that it brittleness isn’t so much a feature of the program as it is the purpose to which the program is put.

Let’s take a simple example: a word processing program. For normal purposes, a word processing program in this day and age is not brittle. A rank novice can use it to type and print. But even today, if you want to use, say Microsoft Word, to put out a 16-page brochure, complete with illustrations, well, good luck, is all I can say. You try to get an illustration and have it float and change the size and put in a table, and–well, just try it, it’s a nightmare. So, to put a 16-page brochure together, Microsoft Word is brittle, but to print out a letter, it’s not.

The point about the MRP program that QAD wrote, which follows the APICS standard religiously, is that it’s brittle relative to the purposes for which it was intended. Pam and Karl and Evan (the founders of QAD) really believed that QAD’s could do supply chain management for manufacturing facilities very effectively. My point was that the program is too brittle. To get things right, you have to get all the data right and keep it right, etc., etc. And if you don’t, what you have is an overwrought and overcomplicated Kanban system, without Kanban’s virtues.

Are there other enterprise application systems that are brittle? Lots and lots of them, I think. Almost all the old, Siebel-style CRM systems were simply too brittle; they depended too much on the good-will of the salespeople, the accuracy of the sales model embedded in the system, the reliability of the sales cycle, etc., etc. You wouldn’t think that financial systems are brittle–after all, they have to work–but they often had components that were overly brittle: cash management systems, for instance, and fixed asset systems and budgeting systems.

What do most companies do when they have an overly brittle system? They use the system for lesser purposes. And they feel REALLY bad about it. So, the Microsoft Word user makes a brochure that is far less fancy, but more manageable, and the QAD MRP user uses the product for tracking inventory. And both of them keep on saying, “Well, one of these days, I’ll get around to really making this product sing.”

They shouldn’t. Brittle applications are brittle for a reason. A lot of the time, it’s because they’re really a special-purpose product, but yours is not that purpose. Some of the time, they’re brittle because they’re badly designed. Some of the time, the model they’re using (MRP is a good example) just doesn’t fit the situation you’re in. In any of the cases, the fact is that they really can sing for the right user, but that doesn’t mean it’s your fault if they don’t sing for you.

What do you do if you have a brittle app that isn’t singing? Give up on it. It won’t work for you. Get another app, one that works. Or change the process. Or just accept the fact that it will never work the way you thought it would.

In any case, good luck.

I used to work at QAD, a small manufacturing software vendor. I subscribe to a QAD chat group, and occasionally people ask questions like the one in the title.

It sounds as if the person asking is peddling something–who knows–but it’s an interesting question nonetheless. What kinds of knowledge are necessary (key) for an ERP implementation? If you run a manufacturing company, is APICS (that is, supply chain) knowledge particularly important?

Certainly, QAD used to think so. When I was an employee, you got a bonus for becoming APICS certified. (APICS is the American Production and Inventory Control Society; to get certified, you had to learn how MRP worked and how inventory should be managed.) And certainly, when the product was designed, the focus was on matching supply and demand. The product was built originally for Karl Lopker’s sandal manufacturing business, and the idea was always to have simple, usable product that managed inventory well.

So you would think that the answer, at least for QAD users, is, “Of course APICS knowledge is key. Duh.” But I don’t think so.

You see, while I was at QAD and then for some years afterward, I looked at a fair number of installations. And what I saw was disheartening, at least if you believed in good supply chain practices. The systems weren’t really using good supply chain practices, at least as APICS defined them.

Let me give you an example, which APICS-trained people will understand immediately. One of the ideas of these systems is to reduce the amount of inventory you have on hand at any one time. To do this inside the system, there are two parameters that you have to set, lead time (which is the amount of time it takes for an order to be fulfilled) and safety stock (the amount you want to have on hand at all times). The longer the lead time or the higher the amount of the safety stock, the greater your inventory expense.

So what would you say if discovered that in not one or even two installations, but many, the safety stock and lead time numbers for most of the inventory were set once, en masse, and then never set again? Well, I’ll tell you what to think. These figures, which are key to making the system work, are not being used.

Now this was not just true of QAD Software; it was equally true wherever I went, no matter what software was installed.

So doesn’t this say that supply chain knowledge is key, after all? If they had supply chain knowledge, wouldn’t they have paid more attention? At first, I thought so. But then after a while, I realized that more supply chain knowledge would have made very little difference.

You see, that’s not why they were using the software. All these companies, it turns out, didn’t really care about getting supply chain stuff right. They managed the supply chain fairly sloppily–tolerated a lot of inaccuracy and suboptimal behavior–and they got along (in their minds) just fine doing that. They didn’t want to put in the kind of care and rigor that is the sine qua non for doing with these systems what they were designed to do.

What were they using the software for? Well, mostly to manage the paperwork virtually. Please don’t cringe, Pam, if you happen to be reading this. This is not a hack on you. The plain fact is that the companies needed to keep track of their commitments (orders), their inventory, and their money, and that’s what they used the system for. They needed a piece of paper that told people what inventory to move that day and where to move it to. And the system gave it to them.

To do this, though, you didn’t need much APICS knowledge or, if you didn’t believe in APICS’s recipes for inventory management, other supply chain knowledge. All you really needed was to be able to count, which most of the users could do without being APICS-certified.

So is supply chain knowledge key for an ERP implementation? Not at all. You can have perfectly happy users who have got exactly the nice simple implementation they need without much supply chain knowledge at all.

This answer, of course, raises lots of questions. What is key? Why do these companies tolerate sloppy supply chain practices? Wouldn’t they be better off if they cleaned up their act. Herewith, brief answers.

What is key? At a rudimentary level, the financials. You have to get the basics right, here, or you’ll never close your books. In a system studied recently by a grad student at Harvard Business School, 65% of the inventory records were inaccurate. Can you imagine the upset if 65% of your account balances were incorrect?

Why do they tolerate sloppy supply chain practices? I think it’s largely because more finely tuned systems are much more brittle. They take a large amount of care and feeding and their ability to take hard, rude, unexpected shocks is limited.

And wouldn’t they do much better using the systems? In many cases, no. You see, at most of the companies I’ve run into, the MRP/APICS model that QAD (and every other software vendor) provided is not actually all that accurate. To make a really significant difference, you need more sophisticated tools that are better suited to the specifics of your supply chain.

Comments welcome.

It’s a plain fact that there are certain kinds of math problems that even bright people don’t solve very well and computers solve better than we do. Some of these look surprisingly simple. If you’re a retailer, when should you mark down product and by how much? Or if you’ve got to make six deliveries, should you use one truck and make six stops, two trucks with three each, etc.

Entrepeneurs in the world of enterprise software have recognized this fact for a long, long time and have seen an opportunity there. They develop so-called optimization software, which solves an essentially mathematical problem and then provide it in various forms to the market. A few have provided only the engine itself, most of them ending up in I-Log, and many more that provide optimization solutions that address specific problems, like supply chain optimization, markdown optimization, or the subject of this post, sourcing optimization.

Now if there’s one thing that’s completely clear about optimization software, it is that the track record has been disappointing. I’m not just talking about the overpromising and underdelivering that afflicted the big-name supply chain optimization vendors. (No names, but you know who you are.) I’m talking about really wonderful products, like Joe Shamir’s ToolsGroup, which have struggled to put their tools in the hands of people who need it.

Sourcing is no exception to the general rule. In sourcing, optimization came to the fore when companies like FreeMarkets or Digital Freight wanted to set up sourcing “events,” where possibly hundreds of bidders could bid on thousands of line items, offering discounts for bundles of selected lines. What if A bids X for lines 1, 2, and 3, and B bids Y for lines 2, 3, and 4, etc.? This is one of those math problems that linear programming solutions solve better than human beings do.

A number of vendors still in the market place (you know who you are) proceeded to develop solutions for setting up and managing these events, which of course did a lot more than just figuring out which bids to accept. And to some extent, they worked; they did change the way many companies do business, and sourcing events are now fairly normal, with several large companies being big proponents.

But in my (admittedly somewhat limited) view, the optimization piece has been relatively unimportant. Certainly some companies have developed some good optimization algorithms, and they are used, but in the events I’ve seen or heard about, it’s not clear to me that the solutions they offered were actually all that optimal, and the reaction of buyers that I know to the solutions they offered have been tepid, shall we say.

I’m not surprised, as I say, because I’ve seen similar reactions from users of other optimization software.

Now I have a degree in math, and I’ve taken a course in linear programming. I know that the solutions they give you are better than what people can come up with by themselves. So are the people who don’t like these solutions just grousing? That’s certainly what most vendors think.

Well, the other day, I got a glimmer of the answer from some terrific research done by Vishal Gaur of Cornell University. (See my earlier post, “An Automated Replenishment System.”) He found in his case study that a solution produced by optimization software had a highly suboptimal operational effect because it was optimizing around the wrong things. The math was done perfectly, but the problem had been set up incorrectly.

This is always a problem in principle when you set optimization software chugging away. The software draws a box around the problem and finds the point inside the box with the best available solution. If you draw a different box (usually a larger one), the solution will be different, and will take longer to find.

In Professor Gaur’s case, the software developer had drawn the wrong box around the problem. Now what’s interesting here is that the software developer never knew that he’d done anything wrong. He delivered the software, and the IT people who were using it expressed satisfaction. And you might think, “Well, so what, even if it drew slightly the wrong box, it got roughly the right answer.” But in fact, when you change the box, you change the answer completely. So in this case, the users had to replace (manually) all the solutions the software offered (manually) with better and completely different solutions.

If you have optimization software, in other words, you have to draw the right box, or the answers that it gives you are not better than what you can provide, they are worse, often much, much worse.

Now look at how this applies to sourcing optimization. Let’s say that you set up the problem in one way. (You only allow bids from certain vendors, for instance, and you require that they offer discounts of a certain percentage.) If you draw the box differently, you will come up with quite different answers.

I was discussing this problem with Garry Mansell, president of TradeExtensions, a small sourcing optimization vendor. He argues that the only way of solving this problem is to provide a lot of services, along with the software. The experts that he provides (it just so happens, of course, that he’s in the business of providing this pairing) can keep the sourcing on track and make sure the right box is drawn.

Now I react to most honeyed words from vendors the way I react to offers of honey for my tea. (Hint: “No, thank you.”) But this struck me as roughly right. The problems that I’ve seen with implementations of myriad kinds of optimization software wouldn’t be solved, then, by fixing the software. It would be solved by helping people to make sure that they’re drawing the right box around the problem.

So who knows. Maybe Mansell is right. (Or maybe he’s just selling software. Or both.) But it seems to me to be a useful thing to keep in mind. If you’re looking at sourcing optimization software (or, more generally, any optimization software), don’t buy it and don’t use it, unless you have some serious experts, who can help you make sure that you drew the right box.