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Secret Formulas of Supply Chain Planning: What’s Your Foundation Built on?

It’s really no wonder that many companies dread the prospect of taking on a large scale change effort. The business press is jam-packed with examples of companies who have trudged this path into obscurity or oblivion. Perhaps it’s because spectacular failure is more interesting than spectacular success – or maybe it’s because spectacular failure is more common.

So why is it that some change efforts produce phenomenal results, while many sputter? What do the successful companies know that others don’t?

Driving change in supply chain planning is like building a house. When you’re done, it will provide all of the comforts of life – but not before you’ve built the foundation. The
foundation is critical to homebuilding, because decisions made in this step dictate the rest of the project – how big the house will be, whether it can support one story or two, the building materials that can be used, etc.

A business process design is the critical first step in changing how you work – it’s the
equivalent of the foundation for driving real change.

What’s a business process? Basically, it’s a series of activities that takes inputs and produces an output. Think about baking a chocolate cake. The inputs are things like eggs, milk, sugar, chocolate and flour. The output is a chocolate cake. The recipe is the step-by-step process you need to follow to transform the inputs into the output. If the recipe (or process) is followed, you’ll produce a chocolate cake.

Rushing to the implementation stage in a change effort without a business process design is as ill-advised as trying to bake a cake without a recipe. A little extra time spent up front designing the process can save you a ton of grief during the implementation.

Why?

First, it forces you to think about how you want things to work. Actually describing how you want to execute something on paper isn’t always easy. It has to be detailed. And if you can’t explain it in simple terms and make it work on paper, your probability of successfully implementing it is close to zero.

Second, it provides your marching orders for the rest of the change effort. Business processes are what add and subtract value in organizations, and a well-designed business process lays the foundation for all aspects of a simple, painless implementation.

Unfortunately, here’s how change efforts play out in an alarming number of companies:

Management compares current performance with benchmarks. “Uh-oh, we’re not doing
very well!”, they say. “Time to change! Let’s get some new technology to help us improve!”

Not long after, a team is commissioned to research the latest technology offerings for their industry. Then the courting process begins: PowerPoint shows and scripted software demos in full colour on the big screen… Steak dinners, fine wines and cigars are consumed…

Maybe even some “futuristic visioning” with senior management. Eventually, the technology provider who’s made the best “pitch” wins the deal.

Wonderful. You have a shiny new software package and have yet to give much thought as to what you’re really trying to do with it. Now the pressure’s on to make the software deliver the promised results. So what’s next?

Well, one of three things might happen:

1. Dip-switch mania – You haven’t really thought about what you want to do in any
great degree of detail, so you wind up just trying to use as much software
functionality as possible in the hopes that results will magically materialize.

2. Same-old, same-old – All of the effort, energy and focus in the change effort so far
has been on technology. So it stands to reason that you can use the new software to
do the same things you’ve always done and achieve great results.

3. The Hail Mary – Before it’s too late, everyone collectively comes to their senses and realizes that it’s the process that’s important, not the technology. It’s decided to
completely shelve the software for a few months while efforts are redoubled on
process design. By divine providence, the software that you had previously selected
happens to be the best possible choice to support the new process design and the
implementation goes off without a hitch.

We’ll leave it to you to assign probabilities to each of these possible events – we can say,
however, that scenario 3) is a rarity.

How about this alternative approach…

Let’s start again from the point where management realizes they need to change. They again commission a team. They even suggest that new technology is needed. This time, however, the team takes a different path. Rather than looking for technology, then instead look in the mirror.

They ask questions. Of their customers. Of their suppliers. Of their own internal operations. They question how their current business works and ask themselves if there’s a better way of doing what they do. They learn by studying other companies. Sometimes in other industries.

They kick around ideas. Document how things might work. Do small, focused tests. Fail.
Learn from their blunders and revise their thinking. Eventually, they design and document a business process (or a recipe if you will) that they think will deliver results.

After that, they educate – everyone. The rank-and-file folks who will actually run the newly transformed business… senior management… operations… suppliers… customers…anybody you can think of who will be affected by the transformation.

Once the new process has been put through its paces and the change is supported and
understood, THEN the search begins for technology (if required) to support the effort. And this time, the request is simple.

No PowerPoint, no visioning. Show us that your technology can support our well thought
out and documented process. Whoever comes closest to this criteria wins. It should make implementing things easier, don’t you think?
Not only that, but software selection is only one of many activities that are driven by the
process design. Education, workflows, job design and implementation strategy all follow
from the end state you have decided to achieve.

A number of years ago, the Oliver Wight Group surveyed manufacturing companies about the results of their MRP (Manufacturing Resource Planning) implementations. Their findings were revealing. The companies that invested the most in process design, education and training had results that were more than twice that of companies that did not.

It would seem that of the three “pillars of change” (People, Process and Technology),
successful implementations give technology the least attention, not the most.

The idea here is simplicity itself. If you’re driving change, put your efforts up-front in
designing a better process. A simpler process that will serve as the foundation of your
change efforts.

You’ll find it’s time well spent.

Editor’s Note: This is the second post in the new “Secret Formulas of Supply Chain” planning brought to you by Demand Clarity Mike Doherty, partner at Demand Clarity and  co-author of Flowcasting the Retail Supply Chain, will be teaming up with CSCMP and André Martin (the father of DRP),  to deliver the required knowledge and understanding you need to successfully implement these groundbreaking guidelines. This seminar is designed specifically for retailers and their consumer-packaged goods (CPGs) manufacturer trading partners and is oriented to directors, senior directors, and vice presidents. More information here.

 

 

 

Demand Clarity

Jeff Harrop and Mike Doherty are the founding partners of Demand Clarity Inc, which helps clients design and implement supply chain planning processes.They have worked with some of North America's largest retailers, distributors and CPG manufacturers. Together with Andre Martin they co-authored Flowcasting the Retail Supply Chain, a book that outlines a new approach for managing the retail supply chain (www.flowcastingbook.com).

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