A New Approach to Supply Chain Planning Software: Try Before You Buy!

Supply chain planning software is very expensive. For large global companies, the implementation and software fees can run well over a million dollars. Software-as-a-service (SaaS) has improved the total cost of ownership. These are often public cloud solutions, which means the solutions can’t be customized. Customization often is a major factor in implementations that are over budget and go way past the original deadline. Further, customization results in difficult upgrades. This leads many companies not to upgrade their solution and eventually the software gets stale and stops being used.

In some cases, platforms can be designed such that there are design studios that allow new algorithms and functionality to be created, integrated with the software, and the software provider than certifies that the upgrade path is still protected. Kinaxis and JDA offer these types of environments.

The other advantage of SaaS is that it is a leasing model. Your upfront payments are not nearly as big.  The cost of implementations can be more expensive than the license payment and many more times the cost of the annual SaaS fees. But if it is a failed implementation, and the software is abandoned, the cost of failure is much lower in a SaaS environment.

When SaaS is based on per user pricing, it is also possible for customers to take a solution and have a small number of users play with it in a sandbox environment before moving to a full implementation and a larger user base.

Try Before you buy

But while the SaaS era is better for customers, nothing beats a try before you buy program. Indeed, when it comes to enterprise software this is so rare it counts as radical business innovation.

Mayne Pharma Gets a Try Before You Buy Deal

Mayne Pharma is a specialty pharmaceutical company listed on the Australian stock exchange. Mayne is focused on applying its drug delivery expertise to commercialize branded and generic pharmaceuticals. Mayne Pharma provides contract development and manufacturing services to more than 100 clients worldwide. I spoke to Carl Turner, the Vice President of Supply Chain at Mayne, about their experience with Vanguard Software.

“What sold us on Vanguard,” Mr. Turner said, “is that they agreed to take Mayne’s historical data on Bills of Materials, stock keeping units, and what previous sales were” and then forecast what they thought sales would be for six to eight months.  These were monthly forecasts from Vanguard’s perspective. But for Mayne, it was not a forecast at, it was for sales that had already occurred. In short, Vanguard had a “blinded view.” Mr. Turner explained that “None of other competitors offered to do the blind test.”

Vanguard’s forecasting engine provided results that were “clearly better” than what Mayne had been able to achieve. The mean absolute percentage error (MAPE), is a common statistical measure of prediction accuracy for demand forecasting. “We saw improvements in MAPE,” Mr. Turner said. Vanguard had told Mayne what the average MAPE error was for their industry. They were able to significantly improve their forecast and get to the industry average. This was very important for Mayne because there are six month led times associated with buying critical raw materials used in the products they produce. Further, drugs have an expiration date. Drug companies don’t want to buy a product that is on the verge of expiring.

Mr. Turner does not have a precise calculation of the savings, but obsolescence, drugs that need to be thrown away because they have expired, was reduced substantially. “Those savings are in the millions,” Mr. Turner exclaimed.

The software as a service sales model is a much less risky proposition for software customers than the old software license model. The industry has become more customer centric. Further, it must be admitted, that this try before you buy program is much more suited to demand planning than supply planning. Nevertheless, kudos to Vanguard for taking customer centricity to a radical new level!

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