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Horror story #1: One of the big consumer-products companies that Joan Padduck used to work for hired a consultant to help it reduce order lead time. The consultant spent a lot of time gathering data and ideas, including from Padduck, who had earlier launched an internal effort to improve the company's supply chain. In its recommendations to senior management, the consultant cited that initiative-but took credit for what Padduck had already started. The firm ended up getting fired by the client, which later hired a different consultant to do the whole project all over again.
"The [original] consulting firm didn't understand the workings of the company well enough at the outset," says Padduck, who today serves as technical adviser to Global Trade Systems Inc. in Scituate, Mass. "The project kind of imploded."
Now on the consultant's side of the fence, Padduck urges both parties to do their homework before entering into any engagement. That begins with a careful review of the candidates, followed by a process plan that lays out the details of the engagement. "Both sides must come to agreement on exactly what's expected," she says.
There's always the possibility of "scope creep," as the consultant uncovers problems that weren't evident at the outset. That can happen even when the mission is relatively limited in its goals, and the parties need to be prepared.
Much of the work done by Global Trade Systems, for example, involves getting companies certified under the voluntary security program known as the Customs-Trade Partnership Against Terrorism (C-TPAT). But that process can uncover deeper concerns. One company that engaged GTS for this purpose turned out to be ignorant of many key provisions of import procedures, resulting in some possible disclosure issues. So GTS referred the client to several Customs attorneys, and has put the C-TPAT project on the back burner for now.
Compatibility is a two-way street; consultants must vet the client as well. Padduck recalls turning down one engagement when the company in question admitted that it was seeking C-TPAT certification solely for the sake of appearance. All it wanted was "a manual on the shelf," she says. Such a situation can end up reflecting poorly on the consultant, even if its advice wasn't heeded, says GTS president Philip Spayd.
Same As It Ever Was
Horror story #2: Jack T. Ampuja, executive director of the Center for Supply Chain Excellence at Niagara University, used to work for a large frozen-foods company. Each year for four years running, the company would hire the same consultant to examine the same problem. Each year its recommendations would be stuck in a drawer and forgotten. "I like the work and money," Ampuja says, taking the consultant's point of view. "But I'd much rather have you do something."
For each of his engagements, Ampuja asks two things of the client: a sincere focus on cost reduction, and a commitment to managing internal change. He tries from the beginning to weed out those companies that suffer from organizational paralysis.
Some engagements are done on a flat-fee basis, with the burden of implementation left to the client. As Ampuja puts it, "We can give you the road map, but you have to drive the car."
The other approach rewards the consultant when its recommendations yield actual results, such as money saved from process streamlining, or inventories reduced. This notion of "gain-sharing" is a risky one for the consultant, which faces obstacles such as corporate politics, management change and reorganization.
Ampuja prefers the latter arrangement, assuming the client is game and likely to embrace his group's conclusions. In such cases, he insists on senior-level backing within the company, and an agreed-upon time line for the appearance of results. To guard against unanticipated changes, the client agrees to pay a certain amount for the consultant's work if the project is scuttled by a major event, such as the replacement of the CEO or sale of the company.
Ampuja torpedoes the notion that large companies, because of their bureaucratic nature and inbred conservatism, are less likely to enact major change within the organization. On the contrary, he says, it's the smaller companies that pose a greater problem in this regard. Often the same entrepreneurial spirit that drove initial success will resist outside advice. Or a less-experienced executive will inundate the consultant with repeated questions about basic concepts.
"The worst is the guy who can't get out of his own way," says Ampuja. "He says it's going to take six weeks, then it stretches to six months." One client spent more than five years on an engagement, only to say that it wasn't ready to make a commitment to the plan laid out by the consultant. A year later, the company was in bankruptcy.
Simon Says: Stop
Horror story #3: The consulting arm of IBM was working to implement a supply chain event management system for a large retailer. The effort was intended to integrate processes between the company's powerful merchandising group and the logistics and sales and marketing departments, all of which had been operating as silos. The complex project involved the use of dashboards and key performance indicators, to create a high-level view of the supply chain for all managers.
Then, nine months into the job, a new executive vice president of the client's merchandising group came on board, recalls Karen Butner, supply chain management lead with IBM's Institute for Business Value. The manager advanced the opinion that the entire effort amounted to nothing more than "another e-mail system." IBM, along with other executives within the client company, had to scramble to convince the doubter that it was much more than that. After months of delay, he relented, with the program resulting in zero stockouts during a major ad campaign.
Dashboards can also be an effective way to chart the progress of the engagement, Butner says. The existence of hard numbers helps in retaining the support of key individuals. It can even engender some healthy competition between department managers. "They want to see the bars go up like any other campaign," she says.
When an engagement fails, the seeds might have been planted at the very beginning, Butner says. Many times companies don't clarify what they are seeking to achieve. Lacking clear direction, they cannot properly assess the effort as it progresses through various stages. An overall mission statement, combined with specific targets, is essential.
A consulting engagement should be treated like any product launch, with deliverables, milestones and responsible parties sharply defined, Butner says. Periodic reviews ensure that everything is running smoothly. A well-crafted plan will also account for scope creep, allowing for adjustments if necessary.
Finally, Butner urges consultants to conduct post-engagement reviews to measure client satisfaction, assess how well the project met expectations, and identify lessons learned along the way. IBM will even come back months later to confirm that the new procedures are on track, she says. Making that assessment isn't always easy, though, given the difficulty of determining precisely which factors led to improvements in the company's supply chain. At such times, a consultant that agreed to a gain-sharing arrangement might find itself arguing with the client over how much it is owed.
An Unwelcome Exit
Horror story #4: A wholesale distributor of hydraulic valves and parts needed to revamp its warehouse management programs. The company chose a small consultant that it had used for another part of the business. Six months into the engagement, after extensive mapping of the client's processes, the lead consultant on the project left the firm, which had no suitable replacement on hand. The company was left trying to complete the task by itself, then had to hire another consultant.
"Make sure you're engaging with a consultancy that has the experience, capability and the bandwidth to support you throughout the engagement," says Bob Shecterle, vice president and group director of research with the Aberdeen Group. Even if the firm agrees not to walk away, it must have the resources to finish the job in a satisfactory manner.
The best consultant can be stymied by poor change management. Nari Viswanathan, research director with Aberdeen, recalls a large manufacturer that was a year into mapping all of its business processes, prior to installing new supply chain software. But all it ended up doing was automating existing processes, because some key individuals within the company were not brought into the loop during initial discussions and ended up blocking real change.
It's essential, says Viswanathan, to identify an internal sponsor who can oversee the implementation, guided by the proper metrics for judging progress. Whether the target is perfect orders, better customer service or some other major improvement, the company must clearly lay out the relevant metrics, then identify the individual who is responsible for each one. If all of the metrics are not aligned toward a common goal, "then you are not looking at a successful project," he says.
Choosing the right metrics in the first place is no simple task. A good consultant will look at the best practices of other companies to come up with a meaningful goal for improvement, says Shecterle. Without such prep work, Viswanathan adds, the client is unlikely to complete an engagement within the designated scope, budget and time.
To keep the project on track, the consultant and key members of the client's organization should form small working teams that hold status meetings on a weekly basis, Shecterle says. They compare actual results against project milestones and recommend needed changes. No less than once a month, a larger team meets with sponsors and other key individuals to chart progress and anticipate the next set of milestones.
Shecterle recommends that the parties build a pilot implementation into the project. The technique makes possible the measurement of results on a limited scale, prior to company-wide application of new technology or process change. "The pilot allows you to set expectations about the total size of the benefit," he says.
Take the Money and Run
Horror story #5: Clifford F. Lynch, principal of C.F. Lynch & Associates, tells the tale of a large consulting company that was hired to reduce the client's transportation costs. It made a number of recommendations that were aimed at saving the client between $10m and $12m a year. In a typical gain-sharing arrangement, the consultant would be paid a percentage of the savings.
There was only one glitch: the client paid its bill before the savings were realized. Then, when a financial expert looked into the situation, he found that the company's freight costs had actually risen. Why that happened was unclear-it could have been the result of changes in product mix or customer requests for specific types of transportation-but the matter ended up in arbitration.
"Looking back at the consulting project," says Lynch, "they should have set up a process to measure their recommendations.... Both sides were guilty."
As the head of a small consultancy, Lynch picks and chooses his engagements with care. Rather than sending out a rash of requests for proposal to companies gleaned from a directory, he prefers to win business through networking. Following an initial phone conversation, the prospective client should invite the consultant to spend a day or so on site, discussing the problem. At the end of that time, Lynch says, "you're going to be able to tell whether there's a good fit." Then the consultant can respond with a formal proposal.
Even the most promising engagements can founder on the rocks of corporate politics. In-house staff might resent the presence of an outside consultant, complaining that they don't have the time to meet and answer endless questions, or feeling that their own expertise has been called into question. The situation gets even dicier when layoffs are a possibility. At such times, the consultant represents a real threat to workers. "You have to make sure when the word comes down that people understand they are part of the process," says Lynch.
Regardless of how smoothly an engagement goes, most recommendations never get implemented, Lynch says. He used to work for a company that underwent annual business-process reviews by mega-consultant McKinsey & Co. Few of the ideas that arose from those exercises were ever put into place.
"There's only so much a consultant can do," says Lynch, particularly if the client's internal sponsor moves on to another job and the successor wants no part of the project. Lynch was part of a recent engagement in which the client stood to save millions of dollars. Then the sponsor took off. "They left us hanging out to dry in the presentation [to the management committee]," he says. "Nothing ever happened."
A Litany of Failure
The stories of failed engagements are endless. Steve Banker, service director of supply chain management with ARC Advisory Group, has heard every variation: The loss of key project personnel at a crucial juncture. The failure to conduct proper training of employees in the client's organization. The pushback from workers who feared the loss of their jobs-justifiably, in some cases. The promises made by vendors that weren't kept. The list goes on, and the reasons are many. "Companies will be the first to admit that the blame is not all on the vendors," says Banker. "They made a lot of mistakes, and can tell you what they were."
Supply chain consulting engagements come in many forms, some of them harder to measure than others. At one end is the straightforward software implementation that requires no business process redesign. That's merely a case of ensuring that the technology is installed on time and with full functionality. For such projects, a company might use a small, lower-cost consultant based outside the U.S., with experience in that particular area of technology.
Before such engagements take place, however, the company might seek broader change under the guidance of a larger, U.S.-based consultant. That entity lays out a strategic path for supply chain redesign. It helps the client to select the right technology tools, which are then installed with the help of the smaller, offshore vendor. Often the two consulting firms will have no direct contact, with the client handing the job from one to the other.
That's fine on paper, as long as each party fulfills its role and the project doesn't suffer from scope creep. But the existence of two separate consultants can make it tough to measure results, and assign responsibility for what goes right or wrong. In such cases, says Banker, "a good part of the onus of getting the return on investment has to be with the customer." Companies lacking strong IT or project-management skills might be better off going with a single consultant for strategy and execution, even if the cost is higher.
On the Same Page
It's not the size of the consultant that determines the success of an engagement, says Rick Blasgen, a veteran supply chain executive who serves today as president and chief executive officer of the Council of Supply Chain Management Professionals. The key lies in finding the best match for a particular company.
"What is it you're trying to accomplish?" asks Blasgen. "How much are you going to do yourself? What kind of experience does the consultant have within what you're trying to do? You need to get beyond the flowery slides and marketing pitch that's so broad it represents all things to all people."
Once those questions are answered, the company needs to establish project milestones that will demonstrate whether the consultant met the client's goals within the agreed-to budget and time line. Strict criteria for success, such as inventory measurements and balance-sheet numbers, must be established up front.
Equally important is the generation of accurate data to guide the consultant in its work. Misunderstandings arise when client and vendor can't agree on basic information and terminology. A phrase such as "the grocery class of trade" can mean many different things, notes Blasgen, depending on whether it refers to dry, frozen or refrigerated goods. Or a discussion of shipping volumes might leave out the fact that half of all products are shipped in the fourth quarter.
"You've got to ask the appropriate questions, then check it with the people who gave you the data," says Blasgen.
How the consultant gets paid depends on the length and nature of the engagement. Blasgen likes the gain-sharing approach, in which the consultant gets a bonus for meeting certain goals, as long as they are easily quantifiable. But the client shouldn't be in a hurry to take out its checkbook.
First, it must determine whether the hard numbers set forth at the outset were actually met. It might even hold off on a payment or two until the consultant comes back to review its work. All too often, says Blasgen, companies fail to conduct this kind of post-engagement analysis. "We're on to the next flavor-of-the-month project."
Consultants can mitigate the risk of losing an in-house sponsor by getting buy-in from that person's boss, and as many others as possible. Large engagements often involve an auditing group that can further dilute the power of an individual to kill the project.
The departure of the CEO can still prove fatal to the effort. But companies do the most damage to their consulting engagements when they fail to set clear goals, measure along the way and analyze the results. "There's a viable place for consultants," says Blasgen. "You're just got to use them right."
Council of Supply Chain Management Professionals, www.cscmp.org
Global Trade Systems, www.globaltradesystems.com
IBM Institute for Business Value, www-935.ibm.com/services/us/gbs/bus/ html/bcs_whatwethink.html
C.F. Lynch & Associates, www.cflynch.com
Niagara University, www.niagara.edu
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