Ensuring supply chain project success

As supply chain implementation projects can have a significant and almost immediate impact on most companies’ bottom lines. However, the path to that bottom line is often clogged by excessive costs, lengthy delays, resistance to change and shifting priorities. The impact can either be excellent or disastrous.

Cost of failure: Last year, the giant British food retailer J. Sainsbury, had to write off its US$526 million investment in an automated supply-chain management system that was being implemented by one of the leading Big 5 consulting houses.

Among other challenges, Sainsbury was concerned that merchandise was stuck in the company’s depots and warehouses and was not getting through to many of its stores. It was forced to hire about 3,000 additional clerks to stock its shelves manually. The major failure point was that the required disciplinary and structural project mechanisms had become a mammoth bureaucracy.

It can happen anywhere: This is only one of the latest in a long, dismal history of retail supply chain software projects gone awry. Failures occur far more often than they should and often more than are admitted. What’s more, the failures are universally unprejudiced: they happen in every country; to large companies and small; in commercial, nonprofit, and governmental organisations; and without regard to status or reputation. The business and societal costs of these failures are now well into the billions of dollars a year.

Difficulty in achieving success: The problem only gets worse as supply chain complexity grows. According to a recent article by the Institute of Electrical and Electronics Engineers (IEEE), organisations and governments will spend an estimated $1 trillion on supply chain hardware, software, and services worldwide.

Of the projects that are initiated, from 5% to 15% will be abandoned before or shortly after delivery as hopelessly inadequate. Many others will be delivered late and over budget or require massive reworking. Few large-scale projects truly succeed according to their original scope of work.

Three major project risks: According to a web poll released by CompTIA, poor communication is the reason most projects fail. Insufficient resource planning was found to be the second most-cited cause, while unrealistic deadlines were third.

Project interference: According to the poll, other factors that contribute to project failure are interference by internal management, poor definition of project requirements; lack of stakeholder buy-in/support; undefined project success/closure criteria; unrealistic budgets; insufficient or no risk planning; and lack of control/change process.

Project management offices: PMOs have proliferated across the SCM landscape, driven by the need to reduce major project cost overruns, delays, and cancellations. A dedicated PMO provides the oversight and coordination to deliver projects on time and on budget by managing and reporting on your total schedule, risk, cost, quality, scope, and resources across all projects. But many PMOs fail to deliver against expectations, often because they are not properly empowered, equipped with the right tools or through poor role definition with local management.

Communication: Communication is a key component of a project at every stage, and once managers understand the objectives of the project, the expected results and the budget restrictions, they need to clearly communicate that information to everyone involved.

Resources: Insufficient resource planning is very closely tied to communication. When initially setting up expectations of a project, it is critical to understand what type of resources will be needed: when they will be needed and the necessary skills.

Deadlines: Unrealistic deadlines arise when there is a breakdown or inadequate internal communication, for example in not obtaining the right resources for the right period of time, there is a risk in building a schedule that just can’t be met.

Organising for success: Accenture use of the Solution Delivery centre approach, however this may not be right for all companies. The solution delivery concept systemises many of the functions and best practices of a PMO role. Companies can use these guidelines to help them successfully adopt a delivery centre approach that can help extend their market and operating performance, (source http://www.accenture.com), these include:

FRoles and responsibilities: Clearly define group and individual tasks, ensuring that the right activities are performed by the right people at the right location.

FProject management: Design and implement unambiguous, simple and widely communicated status-reporting structures, issue-escalation paths, and change-control processes and procedures that encompass all locations.

FRisk identification: Ensure that all the risks associated with off-site solution delivery, such as communication breakdowns, are included in a risk plan, with mitigation actions clearly articulated.

FCommunication: Develop streamlined and formal communication mechanisms, and make goals and plans highly visible across all teams.

FDecision-making: Build empowered decision-making forums to which appropriate project members have an access path.

FValidation: Define the criteria upon which the off-site work will be evaluated, and create responsive review and sign-off procedures.

Using an industry experienced PMO or certified management consultant who has been through a similar process to create complex, integrated supply chain solutions has many advantages. Being able to quickly direct organisations to adopt a proven implementation approach and knowing how to deal with multiple competing project variables and risks is a viable, business benefits-focused alternative with real-world, present-day value.

2 Responses

  1. This is very informative post. I love this and I will check your blog again.

  2. I am thankful for the new things I learned reading your post. Thanks.

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