Avoid The Transformation Traps

You’ve been reading SI and after the considerable amount of discussion around Next Generation Supply Management that has taken place since January, you know your organization needs a transformation to get to the next level. Operational excellence isn’t enough — it’s all about strategic business enablement. Moving from tactical cost cutting to sustainable value generation. A long term vision that elevates Supply Management to the center of the business.

However, transformations are easier said then done. Getting it right is a journey, as compared to getting it wrong, which often only requires a single misstep. That’s why SI was pleased with this recent white paper form Wipro that summarized the top three reasons supply chain transformations fail. While not a how-to guide, it did point out the most common gotchas that an organization needs to keep an eye out for.

The Leading Practices Trap
While the organization will need to implement, and execute on, leading practices on a daily basis if it wants to be a world class Supply Management organization, it will not be able to go from 0 to 60 without passing through every speed in between, and it will not be able to adopt a competitor’s practices as is. Some processes will have to be adapted gradually. For example, trying to move from landed-cost to value-generation models might be too big of a step for an organization used to making buying decisions from landed cost. The organization might have to move to simple TCO models supported by an optimization solution with expressive bidding and get the stakeholders comfortable with this level of analysis first. Only when an organization understands that lowest landed cost does not equal lowest ownership cost will they be ready to accept that lowest (ownership) cost is not necessarily the best value. In addition, just because JIT inventory management works for the organization’s biggest competitor, this doesn’t mean it’s the right solution for the organization. If the organization uses a more time-intensive manufacturing process than the competition, or is subject to more unpredictability in sales, then the organization might need to maintain buffer stock to insure demand is met and profitable revenue levels are preserved.

The Technology Big Bang
While the organization will need to implement advanced supply chain technologies that automate processes, improve planning accuracy, streamline execution, expand visibility, and transform information into knowledge, an attempt to implement such systems simultaneously across the board is just asking for disaster. Just ask FoxMeyer. Oh wait, you can’t. A failed big-bang roll-out of a new ERP bankrupted the company. All that’s left is a case study. The implementation of new systems must be staged, well-planned, and rolled out in a controlled manner.

Ignoring the Organizational Big Picture
Change requires both buy-in across the organization and the leadership to instill that change. Leadership is required to break through the barriers of poor communication, lack of focus, distrust, and silo mentality. Don’t overlook the big picture.

The white paper also has some good tips on how to avoid the traps. Including:

  • Start from the Top
  • Focus on the Customer
  • Continuous Improvement
  • Fix the Process First

For details, see the top three reasons supply chain transformations fail. It’s worth the read.