Focusing too heavily on ‘leading’ practices rather than
looking at their own organisation’s needs is one of the main reasons most
supply chain transformations fail, according to a report.
By Rima Evans
The Top Three Reasons
Supply Chain Transformations Fail by Wipro Consulting Services found that
two other top mistakes companies make include “relying on the big bang of
technology as the main driver” and “failing to address organisational issues”.
The paper said the supply chain can account for more than
half of a manufacturer’s total cost of doing business. And while businesses may
be aware of its shortfalls, most supply chain transformations failed.
While reasons for failure varied by firm and industry, most
tended to arise as a result of making one of the three mistakes.
Authors of the report Ramanan Sambukumar and Anil Vijayan
said many firms fell into the “leading practices trap”.
“While there are a lot of lessons to be learned and insights
to be gained from leading practices, our experience suggests that it is
actually more important for a company to pay careful attention to learning more
about its own supply chain situation in order to make the right choices,” they
said.
Also, supply chain technology was not being implemented or
applied correctly, with the “tendency to see technology as the solution rather
than enabler”.
Meanwhile, another mistake was to implement change without
addressing the organisation issues. “Effective change requires buy-in across
the organisation and leadership to instil it,” the report said.
“Without top management’s commitment to create the sense of
urgency necessary to overcome resistance to change and make positive change stick,
even the best supply chain initiative will fail.”
To avoid the traps, the authors suggest the following four
strategies:
1. Drive transformation from the top and synchronise it with your
business strategy
Supply chain affects supplier relationships, people
and processes, roles and incentives. As such, it must be an integral element of
your overall business strategy. Senior executives are best able to view the
organisational supply chain holistically, enabling a smooth and efficient transformation
of the system and avoiding the pitfalls of treating each aspect as a separate
entity.
2. Focus your supply chain on what matters most: the customer
Supply chain is demand-driven, which means the end customer is
everything. To maintain your competitive edge, the very design of the supply
chain (and the business, of course) should be focused like a laser on customer
needs. The supply chain's primary objective should be to deliver to the end
customer the right product at the right time at the optimal cost and desired
quality.
3. Invest in regular ‘tune-ups’
There's no such thing as a permanent fix. An effective supply chain must
undergo regular change in order to respond to the ever-changing operating
environment. Schedule systematic diagnostic tests and benchmark yourself
against competitors. Monitoring the internal and external environment for
change is one of the best ways of understanding the inefficiencies in your
supply chain, but it's not the end. The ultimate goal should be to understand
the root causes of your inefficiencies and subsequently fix them.
4. Align the business architecture and technology to support the supply
chain, but first get the business process right
Technology is unquestionably
critical for an effective supply chain, but technology has its limitations in
serving the bigger organisational success. It can't fix a flawed supply chain
design. Fix those design problems first within the business processes with
technology as the enabler. As supply chain processes are refined and new technology
is introduced, the organisational structure must be aligned to support these
initiatives. This requires a deep understanding of underlying processes,
critical success factors and the organisational dynamics that lead to the
success of the enterprise.
