Managing Partner at USM Supply Chain Advice. Helping companies achieve higher profits through cost reduction and digitization of the supply chain.
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Are you considering a supply chain transformation? Many companies are, because the supply chain affects their top and bottom lines. In fact, the effects are not only on revenues and costs, but also on cash flows.
Because they are critical to the profitable growth of the business, supply chain transformations can become a means of increasing revenue before interest, taxes, depreciation and amortization; improved cash flows; and higher customer satisfaction.
The “why” or benefits are visible. However, it is not clear what a “supply chain transformation” entails. This can lead to the actual return on investment being lower than what a company expected at the start of the project. To avoid unpleasant surprises, avoid these seven mistakes in your supply chain transformations.
1. Ignore Your Company’s Transformation History
Taking a fresh approach does not mean being blind to the past. If your organization has made previous supply chain transformations, it’s essential to critically analyze what worked, what didn’t, and the reasons behind it. Past experience provides great insights and learning opportunities.
2. Adopt what success means
The supply chain extends across multiple functions in an organization. This implies multiple stakeholders with different perspectives, priorities and interests. As such, stakeholders or team members may have different views on what the success of a supply chain transformation means. To get alignment, the team must sit down and define key metrics, calculating such metrics, data sources, and expected levels for each metric. That removes subjectivity.
3. Do not define a baseline
Transformation is a journey. I have seen companies tempted to implement artificial intelligence, blockchain and other applications. The benefits offered by these emerging technologies are tempting.
However, you may not need them right now, given the stage you are at in your journey. For example, if your team primarily uses Excel for supply chain planning, applying machine learning can be a daunting task. It doesn’t mean these technologies don’t work; it just means that they are not suitable for the specific situation of your company at this particular time. In this example, where most of the planning has been done through spreadsheets, a macro solution could work wonders.
4. Lack of or inaccurate data
Data is fundamental to the success of a supply chain transformation. If you have bad data, the results are bad too. This is trash in, trash out.
For example, an organization may have unnecessary inventory because their bill of materials (known as “BOM”) has not been updated, or they may miss an important launch because the bill of materials was incomplete, the supplier’s lead time was inaccurate, or the on-hand inventory is incorrect. You get the point. Bad data can negatively impact your supply chain transformation. It has a negative effect on the results and can also affect the confidence of team members in the project.
5. Miscommunication with stakeholders
“If you can’t communicate, it’s like winking at a girl in the dark – nothing happens. You can have all the brainpower in the world, but you have to be able to communicate it,” Warren Buffet said about the importance of communication.
This is no exception in supply chain transformations. Communication with stakeholders is often the make-or-break element. I have listed the key points below that may be helpful to improve communication with your stakeholders:
• Hold meetings to discuss expected results and distribute an agenda to be followed in advance.
• Document meeting minutes and define next steps.
• Ask for input or feedback through various channels, such as meetings (in person or online), phone calls and emails. Also show the team members how their input is considered.
• Communicate potential risks and propose mitigating measures.
• Explain and demonstrate how the transformation will benefit each specific stakeholder.
6. Only focus on short-term execution
This error occurs when the organization is so focused on the ‘now’, on setting everything up, that it somehow ignores the future or doesn’t plan well.
For example, after a major purge of open purchase orders that should have been closed, no future audit process is in place to ensure that the organization maintains this improvement. The same can happen with bills of materials, suppliers, customers, items and other data that need updating.
7. Ineffective Workout
It is often said that there are three basic types of learners: visual, auditory and kinesthetic. Each type has a main way to learn. Visual learners are the ones who learn best from seeing educational materials. Visual learners on your team can benefit from photos and graphics. Auditory learners prioritize sounds, such as expert conversations or podcasts. Kinesthetic learners learn more by doing.
When developing training materials such as PDFs and videos, companies need to consider these types of learners. Indeed, training materials should be adapted with relevant examples of the roles and responsibilities of employees. Ineffective training can lead to lower user adoption and negatively impact the momentum of a supply chain transformation.
A supply chain transformation has the potential to exponentially increase your organization’s profits. Of course there are risks. Be aware of these fatal mistakes to avoid. As a result, you can get a significant return on your investment.
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