Remember in the late 1990s, when advanced planning and scheduling (APS) was hyped as a tool that would be a key enabler for most manufacturing companies in becoming more agile, responsive, and efficient in dealing with variations in demand and with unplanned disturbances on the shop floor (and in the entire supply chain, if you will)?
An APS solution integrated with an enterprise resource planning (ERP) system was supposed to enable a manufacturer to optimize its production schedule based on efficiency goals, profit objectives, customer service levels, and other key performance indicators (KPIs) and business drivers.
For companies that require APS capabilities, the impact could be significant in terms of increased efficiency, improved customer service levels, and increased visibility across departments. TEC’s 1999 article Advanced Planning and Scheduling: A Critical Part of Customer Fulfillment seems relevant today, even after all these years.
A number of APS providers have cropped up since then, some of which were once high-flying companies with salad days of high initial public offering (IPO) valuations and thriving stocks. Many of them have meanwhile ceased to exist as independent entities, such as i2 Technologies, Manugistics, Numetrix, SynQuest, RSS Scheduling, Fygir, etc. Others, such as Adexa, Asprova, Taylor Scheduling, AspenTech, Logility, Demand Solutions, WAM Systems, etc., have been doing fine. Even the aforementioned former companies and their value propositions seem to have lately been reborn within their new parent companies, such as JDA Software, Oracle, SAP, and Infor.
Why have many of these APS best-of-breed companies failed in their first market attempt? Well, for various reasons, starting with their mismanagement and the SAP APO newcomer product “eating their lunch” in many instances.
Another major reason was their focus on long-term demand planning and predicting what might happen in the horizon. Not only were these planning methods and algorithms complex and arcane for regular users to deploy, but these systems were also then largely unable to schedule in near real time, especially in light of unplanned events such as asset failures, manufacturing nonconformance runs (scrap, rework, etc.), engineering change orders (ECOs), and rush jobs (for very important customers).
In other words, companies had little use for these APS systems’ sophisticated “what if” capabilities in terms of varied demand and forecast simulations over months and years, since they could not address the short-term firefighting realities of the shop floor execution.
Lately, though, these products have seen a renewed interest due to their integration with scheduling and manufacturing execution system (MES) products, and also due to the recent general public’s realization of the value that demand planning has in the realm of strategic integrated business planning (IBP) and sales and operations planning (S&OP). For more information, see TEC’s 2009 blog post series APICS 2009 From the Expo Floor: Is S&OP Coming of Age?
One vendor that has distinguished itself throughout all this time has been UK-based Preactor International Group, whose growth has now been positive for about 40 quarters (even during the tough 2008 and 2009 years, thus bucking the prevailing manufacturing IT market trend that saw a sharp sales slump).
The Preactor Group is made up of Preactor International (PI) and a number of wholly owned subsidiaries, including Preactor Europe with its office in Lyon (France) (formed in 2008), Preactor Software India in Bangalore (2005), and Preactor North America in Dallas, Texas (US) (formed in 2010).
Preactor is a world leader in production planning and scheduling software used by a wide range of businesses. It is an independent company based in the UK, formed following a management buyout from its parent BTR (now merged with Siebe and renamed Invensys since 1999) in 1993. Its founders, Mike Novels, Chairman and Chief Executive Officer (CEO) [or “Managing Director” in UK business lingo]); Graham Hackwell, Technical Director; and Zena Wren, Finance Director, are still at the helm of the group whose employees are located in the US, Asia, and Europe.
The company has been consistently profitable, does not rely on external funding or support for its growth, and today, has the largest installed base of any of its competitors around the world. Frequently integrated with ERP, MES and supply chain management (SCM) solutions, Preactor’s technology is used by more than 3,000 small, medium, and large multinational companies located in 67 countries.
Being Lean Itself
Despite its large install base worldwide, Preactor is managed in a lean manner, currently having 51 employees in total, about half of them in the UK. The company’s business model is predominantly indirect through a channel of partners who are able to sell, implement, and support Preactor solutions for their clients. Preactor has established reseller and consulting partnerships with more than 400 companies located around the world to provide local expertise to support the implementation of the solution for each company.
Hence, Preactor’s ecosystem has over 1,000 accredited professionals that offer key resources working closely with users to ensure each company’s requirements are met. Accredited local APS and SCM specialists deliver individual country- and region-specific solutions, as well as multisite and multicountry solutions for global corporate users. The product has been translated into 35 languages.
All Preactor’s products (about six upward- and downward-compatible product editions) are focused solely on the planning and scheduling software space. Users are across all major manufacturing sectors and in some logistics/services providers. The product has provided benefits in discrete, process, hybrid, and repetitive manufacturing environments.
A Family of Solutions: Different Strokes for Different Folks
From the outset, Preactor’s founders have looked at providing a range of solutions for long- and medium-term planning and short-term detailed scheduling, all based on the same core code (there have been no acquisitions). By instilling the ability to switch functionality on and off, they have created a product range that is functionally rich, easily customizable to meet specific requirements without changing the core code, and affordable.
Although based on complex algorithms, the tiered product functionality approach and interactive decision support tool have enabled many companies to become leaner and more agile. In the early stages of Preactor’s development it was the small to medium size business (SMB) that was the main focus of the product, but as the company has added functionality through the years, larger multinationals have purchased Preactor. A small sample list of large customer includes major manufacturers such as Eurocopter, Cosworth Racing, Lonza Biopharmaceuticals, PPG, US Paint, Highland Spring, Steinhoff Bedding, Acelor-Mittal, EXAL, International Greetings, Imperial Tobacco, and Whatman.
Playing Well with Others
What has also played well in Preactor’s favor is easy integration with other applications such as ERP and MES, while the vendor’s indirect approach and channel have been less intimidating to usually better-known ERP and MES providers. Most MES (let alone ERP) systems do not have good scheduling functionality, especially in terms of their sequencing capability. To that end, Preactor is one of the few APS products that can accept real-time data and drive rescheduling.
The holy grail here is closed-loop scheduling, whereby the scheduling engine has to have a data model, triggers, and event-driven (conditional) rescheduling. Most scheduling systems don't have these capabilities, but Preactor does. The vendor has been transparent in terms of available documented case studies. From more than 150 customer testimonies, here are the average benefits:
- 50 percent reduction in inventories and work in process (WIP)
- 90 percent improvement in on-time delivery performance
- 25 percent improvement in production efficiency
Thus, in France, Preactor has recently expanded its customer base to over 220 companies, making that country Preactor’s third-largest installed base after the UK and US. Brazil has also been a very successful market, with almost 200 accounts, and it is a similar story in Italy, which has lately witnessed a 40 percent increase in installations, as a result of Preactor’s partnership with local ERP and MES providers and consulting companies.
Several sectors are showing strong growth despite the world economic slowdown, such as food and beverage, pharmaceuticals, plastics and rubber, packaging, complex machinery, as well as the automotive and aerospace industries. Preactor’s most successful sector, metals, has recently passed its 350th implementation.
Q&A with Preactor Founder Mike Novels
What follows is our candid question and answer (Q&A) session with Preactor’s founder and CEO Mike Novels, who is recognized as one of the leading experts in planning and scheduling technology in the manufacturing sector.
TEC: What are your main product lines (editions), and what has been selling best of late?
MN: We recently released Preactor 11 (in May 2010) as an umbrella brand. Preactor 400 APS is by far the best selling of all of our products. This product is close to the top of the range in terms of price and functionality
We are about to release a new Product called Preactor Express. This is a free Preactor system aimed at very small companies who cannot afford to invest in manufacturing software. Of course, part of this investment by us is aimed at those who grow and see the benefits of Preactor so they will upgrade to one of other Preactor products (for a fee). Like all “Express” products (e.g., SQL Server Express, Visual Studio Express), this product has cut down functionality compared to other Preactor products, but is infinitely more useful than an Excel spreadsheet offering rule-based sequencing, “what if” capability, capable-to-promise real-time enquiries, and much more. As with other Preactor products there is no limit to the size of the database. It uses Microsoft SQL 2005 or 2008 Express for data storage. Preactor Express is compatible with 32-bit and 64-bit versions of Windows XP with SP3, Windows Vista SP1, Windows 7, Windows Server 2003, or Windows Server 2008 Windows 7 operating systems. It is designed to be run locally on the user’s PC.
TEC: Why has Preactor done well even though many more contemporary APS vendors have fallen by the wayside?
MN: That is an interesting question and I am not sure I have all the answers. I guess in starting at the “bottom” of the scheduling market in terms of price and company size, we very quickly developed a function set that met most manufacturing company’s requirements, but realized that many of them wanted more flexibility still. This focused our attention on making the product very flexible in terms of database structures and scheduling rules without changing Preactor’s core code. Additional functionality could easily be added either by us or by the partner network with the appropriate skills. We are introducing a Preactor App store to our Web site that will provide a mechanism for Preactor partners to showcase their add-ons to the user base. We recognize that we can’t do everything so the ingenuity of our partners provides extensions that some companies want.
Another point is the definition of APS. Some call it an advanced planning system. Planning to us is very different to scheduling. Planning should be about how “much” to make, what to make, when to make it, how much to make and maybe where to make it. To us APS is advanced planning and scheduling. Scheduling is about how best to make it, executing against the plan. So this would involve sequencing, synchronization, and managing change taking into account constraints and conflicts.
We also didn’t try to compete with the ERP companies. Many APS companies had a significant overlap with what ERP companies do in terms of functionality and this was a disincentive to the ERP companies as well as the end user who had already invested heavily with their ERP provider. We seek to enable ERP not replace it. From the very beginning our business model has been predominantly an indirect one. 90 percent of our install base has a working relationship with a Preactor partner accredited by us.
This means that although The Preactor Group is a relatively small organization, our ecosystem of partners is 10 times larger. This gives us feet on the street and an extensive implementation resource pool that is not overwhelmed by demand, which can reduce the ability to grow without taking on resources which cannot be supported in a downturn. Yes, we give away margin on our software to our partners which reduces our top line net revenue, but it also means that we are more financially stable and do not need capital to grow.
TEC: When did you decide to go for Microsoft .NET Framework as a go-forward platform? Which original products/technologies have these tools replaced?
MN: Apart from the first two years of Preactor’s existence (the first versions of Preactor worked on IBM’s OS2 multi-tasking operating system) all Preactor software uses Microsoft’s technology. It’s what the market wanted bearing in mind that the solution is PC-based. We have stuck with that.
When new technology came along from Microsoft we sought to use it wherever we could and we continue to do so. Our product is written in C#, and our application programming interface (API) is .NET-based. We use the Microsoft SQL Server database (it works also with SQL Express) and there are various other Microsoft technologies that are in-built into Preactor.
TEC: APS and lean manufacturing: are they friends or foes, or is there no relation?
MN: That depends on who you speak to. Some consultants (we call them the “Luddites of Lean”) say you don’t need software to control production. Others know that this conclusion was based on the old economic order quantity (EOQ) approach to releasing orders in batches that was the basis of material requirements planning (MRP), and see APS as an ally of lean. My colleague, Graham Hackwell, has given many presentations on the subject. We also have end-user case studies that show how they have used Preactor as an essential part of their Lean initiative.
TEC: Please describe your install base (number of customers) and any generic profile (i.e., size, geographic region, industry, average number of users, etc.). In other words, what would be the sweet spot customer?
MN: We have more than 3,000 accounts, some of them multiplant roll-outs. They are spread across 67 countries. I would say our sweet spot is around 200 people on one site but I don’t have any detailed statistics on that. Industry-wise, our installed base is split like this:
|Metals and metal-fabricated products
|Machinery and equipment
|Plastics and rubber
|Electronics and electrical machinery
|Paper, packaging, printing, and publishing
|Automotive and aerospace
|Chemicals and pharmaceuticals
|Food and beverages
|Glass, ceramics, and miscellaneous materials
|Furniture and wood
|Textiles and apparel
|Transport, logistics, and services
Geography-wise, 66 percent of our accounts are in Europe, 14 percent in North America, 9 percent in South America, 8 percent in Asia/Pacific, and the remainder in other parts of the world. As for the average number of users, APS is not like ERP where you have a number of “seats.” Typically you have to license one master scheduling system, sometimes more, and a number of others who view or feedback data to it. There are times when you want multiple users to control the same model but this can be operationally chaotic if you are not careful. Most users prefer to have multiple planners sharing a single license but with different data models. Others use multiple licenses with a real-time messaging system to update each of them where one schedule change will affect the other.
TEC: Please describe your competitive landscape, and why you win/lose to these competitors.
MN: The reasons we win could be classified as follows:
- Flexibility/customizability of our products: a product family that provides solutions matched to the user's requirements without changing the core code. We match the model to the company needs; others have a fixed model and fixed scheduling rules and companies are required to fit in with the limitations of the APS solution.
- Functionality with affordability.
- Track record: case studies and references available, and case studies have been written by and with users providing additional evidence of the continuing relevance of APS solutions to companies with proven return on investment (ROI).
- International presence: very important for multinationals.
- Partner network: offering world-class APS software, locally delivered for local companies in local time zones and local languages.
Our number-one competitor is an Excel spreadsheet and the “do nothing” attitude. There are a number of other competitors mainly local to the country. There is no other competitor with the same geographical spread that we offer.
The main reasons we lose (if we are “in” the running at all) are the following:
- The company requires an ERP system and the chosen supplier says it can provide the APS functionality.
- There is an HQ requirement to use product X (say, SAP APO).
- The company thinks that integration will be difficult and expensive to implement.
- The company decides to continue to use their spreadsheets.
TEC: Any view toward going multitenant software as a service (SaaS)/on-demand (via subscription) or not?
MN: Yes, we are looking at that but right now we have seen very little demand for that outside some countries such as Brazil and Asia. We do offer a rental option for Preactor but it’s not true SaaS in that Preactor is not hosted. We are seeing real resistance by users to having company critical applications running on someone else’s hardware which they have no control over. If this changes then we are ready to offer solutions for this environment.
TEC: Although the trends have been positive lately, what issues/challenges are still keeping you awake at night (e.g., ERP guys eating your lunch)?
MN: Some ERP companies are indeed developing their own modules but so far, from what we have seen and what users tell us, they are way behind what we have. Even the very powerful SAP has had three or four attempts to have a functional detailed scheduling option, but according to the users we have who use Preactor with SAP, it doesn’t match the functionality we have. Recently though, customers have asked us for a standard link certified by SAP so we have invested in that. It uses the SAP NetWeaver technology but we also have a .NET link option too for those who do not have the necessary components to use SAP NetWeaver technology.
It seems to me that it’s unlikely that ERP vendors will all develop a good scheduling application at the same time, with the same level of flexibility that Preactor enjoys. If one does, then perhaps the others will be drawn to us to compete successfully. Speed to market and domain knowledge will drive this and there are few others with the same experience we have in finite scheduling.
TEC: Do you have any long-standing and proven independent software vendor (ISV) partnerships?
MN: Many. For example, the Sage Group has partnered with us for many years. First with their UK product lines and now with the X3 product. They and SYSPRO embed (OEM) our scheduler within their ERP product offerings. Mazak (one of the most famous machine tool makers in the world and based in Japan) do a similar thing and include a scheduling module based on our technology in their Cyber Production Center tool. We are a “QAD Solution Partner.” We have a product called Preactor for QAD, which includes Preactor 400 APS and a two-way integration to QAD ERP products such as MFG/PRO eB, as well as the latest releases such as SE and EE.
Since 2009, we’ve been certified to provide our abovementioned finite capacity scheduling module, Preactor 400 APS, for the Wonderware MES system (formerly Factelligence). We also partner with APRISO in the MES space.
Last but not least, in the Microsoft Dynamics ERP world, we have standard links to Dynamics GP, NAV, and AX, but our main relationships are with their distributors. One of our partners has a Preactor granule for Dynamics NAV (Logico in Switzerland). Another partner offers a customizable link to AX. There are many other partnerships, and we are always looking to expand the number of companies we work with where it makes sense for both parties to collaborate.