Procter & Gamble turns to SAP's APO for supply chain boost

Computerworld - Procter & Gamble Co. has begun what could potentially be a global rollout of SAP AG's supply chain management software, continuing an evolution of its supply chain technology infrastructure as it seeks tighter links with its suppliers using online marketplaces and other Web-based collaborative technologies.
P&G has already begun using SAP's Advanced Planner and Optimizer (APO) application at one of its manufacturing plants in Europe and at a North American facility. APO works by getting updates from retailers on customer demand, which create "demand triggers" that forecast the right amount of product mix needed by P&G. The software will also take into account the delivery schedule of raw materials and production cycles.
During the next three years, according to Stephen David, the company's CIO and chief business-to-business officer, P&G expects APO and connected dynamic replenishment applications to help cut in half the amount of out-of-stock problems the company encounters. The savings arise from ensuring the company has the right mix of goods available at distribution centers and on retail store shelves.
The Cincinnati-based maker of consumer products is a longtime user of SAP's flagship R/3 enterprise resource planning (ERP) software. Joshua Greenbaum, an analyst at Enterprise Applications Consulting in Daly City, Calif., said the supply chain rollout is an endorsement of APO as a relatively mature technology by a major SAP customer.
It may also help "get SAP to fix the scalability, quality and functionality problems that have slowed deployment [of APO] by other consumer goods companies," said David Dobrin, an analyst at Cambridge, Mass.-based consultancy B2B Analysts.
APO "is more of a reality" now than it was when the software was introduced three years ago, David said. But he said the technology still has some shortcomings. "I think it's fair to say this is a new product for SAP, so they're working with us and other manufacturers to try to get it fully commercial and [have] the key functionality," he said.
Christian Knoll, vice president for global supply chain initiatives at SAP, said SAP now has 278 APO customers, demonstrating the software's viability and maturity. He added that Version 3.1, the current release of the application, includes built-in processes tailored to specific vertical industries, including the consumer packaged goods sector.
David said P&G plans to include management of APO, as well as its R/3 ERP system, in an IT and business process outsourcing deal expected to be signed by year's end.