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Is Your Supply Chain Transformation Good Enough?

Analyst Insight: Theoretically, supply chain transformations deliver a different set of capabilities and outcomes that customers recognize. The reality is that a transformation may simply be a radical or rapid change to the supply chain organization and operations in response to changes in the marketplace. It could be a dramatic reduction in cost or improvement in service to remain competitive. In other words, the outcomes are not necessarily different, just better than the prior state. – Michael Dominy, Research Director, Gartner

Is Your Supply Chain Transformation Good Enough?

Dramatically improving supply chain capabilities and performance requires significant changes to practices and processes. Supply chain transformation involves changing multiple functions, and impacts processes and individuals across the organization. The question many ask is, "How do we transform?" Regardless of what changes need to be made to achieve a particular level of performance, an enterprise should take the following steps:

1. Set and communicate the supply chain vision and strategy. The strategy includes time horizons and describes how the supply chain needs to function to support customer segments. The vision should be easily understood by all levels of the organization, and can be aspirational.

2. Assess current-state performance. Current processes should be defined and measured with inputs, outputs, steps and sequence, time, and cost, as well as who does what, and what systems/technologies are used and should be captured and analyzed.

3. Identify gaps. Compare current practices with best practices, and benchmark current metrics and performance with industry and cross-industry peers.

4. Develop a transformation business case. This is a high-level business case that captures strategic and tangible benefits.

5. Prioritize improvements. Use a decision-making model with criteria and weightings to force trade-offs across benefits, cost, risk and strategic alignment.

6. Develop a road map by function, cross-functional and inter-enterprise process. Define what functions will be tackled each year. The current-state maturity, competitive strategy, corporate objectives, availability of resources and speed will dictate the scope and number of initiatives tackled each year.

7. Align the plan with other functions and initiatives. Meet with key functional leaders, and discuss competing and complementary initiatives. Search for synergies with IT, finance, and sales and marketing.

8. Build a detailed-initiative business case. Transformations require a C-level review and approval, as will the business case for each initiative or phase of the transformation. The detailed-initiative business case is a refinement of the transformation business case that includes sensitivity analysis with conservative, moderate and aggressive estimates.

9. Select partners. For each initiative, identify the skills and specific resources required to determine whether outside assistance is needed. If external partners are required, use a cross-functional team (operations, finance, IT, supply chain and others, depending on the initiative) to evaluate and select the partner or partners.

10. Pilot, implement and roll out. Some enterprises opt to pilot a transformational change in a region or business unit before rolling out across the organization. The pilot-and-expand approach is particularly useful for large or complex multi-business-unit enterprises.

11. Measure and sustain. Enterprises must implement metrics that will reinforce the desired future state and sustain the new performance level. Without changes to metrics and incentives old habits and behavior can return, causing performance to slip back to previous levels.

                                                    The Outlook

Supply chain transformations are complicated, involve dozens or hundreds of individuals and cost tens or hundreds of millions of dollars. The result can be a dramatic improvement in performance, but care must be taken, and hard work will be required. One supply chain executive who led a $200m transformation put it best:  "You need to do an assessment or multiple ones. Transformation isn't cheap. It requires a dedicated team, and it will take time."

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