Why do supply chain projects often fail? As Joe Peppard, a professor at University College Dublin's Michael Smurfit Graduate Business School, raises the question in an article in the Wall Street Journal, the subtitle of which is: "Too Often, Investments in Technology Fail to Achieve Promised Results."
In the article, Peppard gives four causes for failure:
Adding to Peppard’s list are some reasons for failure that must be explicitly spelled out for the supply chain. These include:
Taking the safe option. In the old days, it used to be "Nobody ever gets fired for choosing IBM hardware." Choosing a safe option is often justified by "It fits with our architecture.” And software salespeople, often heavily commissioned, are experts at convincing managers that "it can do the job." The software probably does the job, but it just gets in the way, like a Pinto racing at Le Mans.
Overlooking the small vendor. All innovation doesn't come from the big guys. Consider the warehouse management system (WMS) space. Many vendors make WMS systems, but none truly "manages" the warehouse — instead, they rely on the user to say what to do next. Tools exist from small vendors that automate and optimize all decisions within warehouse operations, actually acting as the “brain” for the WMS.
Forgetting that sunk cost is, well, sunk. So you invested in some "just-OK" system. Call it quits. Sears needed to adapt its systems to support changing operations, but it didn't. That should be lesson enough.
Slow failure. It's almost like the item above — not knowing when to say "enough.” This is often the case with software developed in-house. Businesses sink more and more money into these tools, only to have them fail even harder.
Lack of talent. The people implementing and running the system must know the business and be innovative. Smart is, by itself, not enough. So often, the expectation is that the users will keep it working and improve its operation over time. This doesn't always happen. Since few supply chain systems are "set it and forget it," there needs to be a Center of Excellence that is rewarded by the value created by the system.
Lack of commitment. Value creation is critical to commitment, which generally means senior managers must be reminded of the savings.
Missing statistical process control. Systems should be treated just like machines. Are they in acceptable ranges of performance?
Peppard recommends companies take the following actions – some of which align with a business's needs, but others that are unlikely to be implemented:
Here, then, are some lessons for the supply chain space:
Use "loss analysis." One leading consumer products company has a defined process for examining the supply chain. Step 1 is a loss analysis to determine where cost and service could be if everything were "perfect." From there, they work backward to determine what’s feasible. For example, if the space in the trailer is 4,000 cubic feet, why are they using less than 3,000 cubic feet? Working backward, why is the load palletized? Pallets take up space and add cost. What could be done to eliminate pallets? The next step is determining what systems are needed to get more cube in the truck. Can load optimization achieve more stacks? Quantify savings? Quantify costs?
Be bold. One of the enduring pain points in consumer products is variability. The consumer drives the grocer to order more or less products. The grocer, in turn, places orders in the customer-facing distribution center. That DC is resupplied from the factories by the deployment system. Enter the bullwhip effect and day-to-day volatility, which drives transportation departments wild. They ship two loads one day, and 20 the next. Costs skyrocket. Tools that help to “level” the transportation load and replenishment schedule can help smooth this variability, saving millions of dollars annually.
Measure. Check everything. In the above example, check deployment volatility — is it increasing or declining? If it’s increasing, get the Center of Excellence involved. Change the settings until the results go in the right direction.
Don't be bullied by IT. Reforming the IT structure is a hard sell — so stand your ground.
Listen to the vendor, but insist on hypercare. The vendor often knows the best way to manage interfacing and implementation. But insist on them performing hypercare with defined performance goals: no performance, no pay.
Supply chain software is an ever-changing landscape. Failure to move on can be fatal.
Tom Moore is founder and chief executive officer of ProvisionAI, AutoScheduler.AI, and Transportation Warehouse Optimization.
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