By Vikas Argod, Senior Supply Chain Operations Consultant & Karun Alaganan, Supply Chain Operations Manager at Chainalytics
If a few potholes need to be filled on a single street, it’s likely closed for a few hours at night to prevent disruptions during your commute. But if two lanes need to be added to a 25-mile stretch of highway passing through a metro area, construction must be carefully planned months in advance and phased in such a way that allows traffic to continue to flow, minimizing the potential for any major commuting headaches. Top-notch civil engineers, consultants, and skilled project managers (PMs) are always brought into the mix to help plan and execute these major construction projects.
A Supply Chain Transformation is like a 8-Lane Highway Undergoing Construction
In essence, supply chain transformation projects are very similar to large-scale highway infrastructure projects. During a supply chain transformation, customers still expect on-time deliveries, suppliers still continue to deliver, competitors announce promotions and shareholders still dial into earning calls. It’s expected to be supply chain life as usual.
Like most infrastructure projects, supply chain transformation programs tend to be riddled with delays, cost overruns, and multiple incidents of fire fighting can often occur.
During a recent engagement with a construction services company, a business leader complained that there were far too many crisis situations diverting critical resources towards fixing the current business situation rather than working on the supply chain transformation initiative at-hand.
Due to these fire fighting events, resources were spread very thin and even worse, underutilized in other areas! Even with an overtime workforce and overnight shipments, customer delivery windows were missed and sales directors started to lose confidence in the supply chain.
Eventually, project backsliding resulted in poor quarterly earnings numbers and the transformation initiative was brought to a temporary halt.
During any successful transformation initiative, the supply chain will undergo an irreversible structural change . The end state is always a greener pasture (i.e. ‘more lanes in an interstate’) but no one wants to live through the dust and detours during the transition phase.
This “hit-a-brick-wall” outcome is more common than one would think. We’ve all heard of these supply chain disruptions that can often occur as a result of project delays. The reasons for failure may seem industry- or company-specific at the first glance (i.e. “our industry is unique, standard methods don’t work here”). Most companies approach their set-backs with a myopic vision, trying to “cure” the symptoms (i.e. “ship everything overnight” or “produce X item at twice the quantity” or “hire more temps” or “hire a new project manager” etc.), while the need of the hour should actually be a detailed root cause analysis and corrective measures. In fact, when conducted, the same underlying root causes are common in over 80 percent of project delays.
Avoid Detours With Strong Project Management
There are no shortcuts to supply chain transformation success. All who seek to transform their supply chains begin with creating objectives and goals for the transformation.
Only with those who develop good implementation capabilities (or acquire those capabilities by hiring highly competent consultants) achieve their objectives. In fact, McKinsey research has shown that a well-executed clear-and-detailed implementation plan returns 143% at the end of the supply chain transformation initiative vs. a not-so-clear implementation plan which only returns a much-less-significant 35% .
A robust program management office (PMO) that develops an always current and realistic plan while taking an analytical approach for planning transition-time resource scheduling can make the journey both more enjoyable and even more successful.
Three ‘Must Haves’ for Supply Chain Transformation Success
Throughout our multiple supply chain transformation initiatives we’ve conducted with clients, Chainalytics has developed an in-depth transformation checklist. With a few strategic tweaks, it works well across most industry segments.
These three items from the full list are absolutely necessary for ANY supply chain transformation program to reach or exceed their expected business goals:
1. Engage a skilled and robust PMO to ensure strategic & continuous alignment
Recently, we came across a situation during an engagement with a billion dollar manufacturing company, where the PMO was created just as the implementation began. It took 10 weeks for this team to fully understand the project scope, institute changes and report actual status to project sponsors. This is far from an ideal situation.
A PM or PMO should be involved right from the very inception of the project – even better, from the very inception of the business case. The same PM must be part of implementation and transition teams, to ensure strategic alignment start to finish.
Overall the PMO should be the primary owner of the program and must be responsible for aligning all stakeholders to the plan.
A PMO’s presence will help the implementation avoid the always-dreaded ‘flavor of the month’ fatigue that often besets change management programs. Of course, all other standard project management tasks apply here as well; status reporting, documentation, meeting cadence, RACI diagrams etc.
2. Take an analytical approach to calculate & model resource needs during the transformation & transition periods.
Here “resource” means people, systems, and inventory. Resource needs are key inputs to the business case. The PMO should create an implementation plan, model the resource needs using inputs from the project plan, run a few scenarios and then request the necessary resources.
Identify all possible internal risks (IT deployment delays, inventory shortages, increased overnight shipments), external risks (regulatory risks, litigations), and all possible opportunities (early deployment, higher demand). Assess the impact of these internal and external risks, assign probabilities, segregate them into different workstreams and classify them as controllable or uncontrollable.
Duplication of resources for business continuity (backfilling of positions) is a reality and must not be underestimated. Rather than planning for additional resources as the crisis hits, make it part of the model from the start. After all, resources are often twice as expensive in a crunch, so it’s just a better idea to plan for them in advance.
3. Always develop & maintain a current, realistic plan that uses the program as a structured guideline.
Everyone creates a program plan, but in many cases, it is considered sacrosanct or immutable,has unrealistic targets, or all of the above.
Transformation program goals are NOT structured around implementing a new system or process, but around reaching a company goal.
It’s critical to create an integrated plan that takes into consideration work streams, dependencies, training needs, risk mitigation strategies, to determine the critical path. With specific and tangible tactical milestones, reporting program success becomes more accountable.
“We’re going to do this project in record time” is a classic planning fallacy and never works (except in self-help book scenarios).
First consider the program’s overall length from a critical timeline perspective, then modify and base it on prior experiences inside the company or in the marketplace. The plan must be iterative in nature and reflect the most recent status of the initiative. This is not to say that milestones are moved a day before due dates, but any new situations must be quickly assessed and realistic changes made to the plan. Chainalytics typically advocates for phased go-lives compared to a “Big Bang” delivery for this very reason.
Project planning is like forecasting: If it’s not adjusted for new business situations (i.e. marketplace challenges, key personnel changes etc.), it quickly becomes useless!
Hit The Ground Running
If you want your transition to move smoothly–with few detours and disruption as possible– your supply transformation team needs to be as ‘strategic’ as it is ‘tactical’ . Too much of talk of strategy and too little attention to actual implementation details means your project will quickly disintegrate.
These three tenets are just starting points that are then followed by expanding into sub-activities. By maintaining flexible resources and planning alongside a structured program design, your transformation program will be more likely to succeed.
If you need help transforming your supply chain, contact Chainalytics using the form below.
Karun Alaganan is a Manager in the Supply Chain & Operations practice at Chainalytics. Karun focuses on the delivery supply chain transformations, warehouse capacity modeling and design, business process improvements, re-engineering and implementing lean methodologies.
Vikas Argod is Senior Consultant in Supply Chain & Operations practice at Chainalytics. Vikas specializes in warehouse operations, transformation program management and service delivery processes in project-based business environments.