Supply Chain Re-Engineering Concepts and Implementation

by Allan Gibson

April 14, 1999

Successful supply chain reengineering requires an understanding of various disciplines, such as information technology and business process improvement, together with the ability to mobilize and motivate diverse corporate cultures. Reengineering is fraught with risk, but by keeping some principles in mind, success is more likely. And the rewards are potentially enormous.

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who has become familiar with the concepts of Supply Chain Management realizes
that (for most organizations) it means significant change to current business
processes, job definitions, organizational structure, business policies and
culture ­ in essence – creating a new business model. And even if the current
information technology (IT) applications support today’s business model, it
is highly unlikely that these IT applications will effectively support supply
chain business model. The resulting acquisition and implementation of new information
technology will become the most costly and time-consuming component of implementation.
In this article, we will address some critical success factors particular to
supply chain reengineering, such as information technology, scope (breadth and
focus), mobilizing within multiple cultures, and building and sustaining momentum.

There should be little debate
as to which comes first ­ the reengineering or the IT acquisition, especially
if the objective is to enable superior business operations and management. Reengineering
creates a new business model, for which the business requirements are documented
and mapped to various technology solutions. The solution with the best fit is
selected, and the overall implementation begins.

But in many cases, we find
that the organization has already acquired IT solution, and is now considering
how to reengineer the current business model for supply chain management.

There are no easy solutions
at this point. They range from ignoring the reengineering and just installing
IT application to resetting the “go-live” date. A courageous and insightful
management team may realize that the delay in “go-live” will be offset by the
earlier achievement of higher levels of benefits, but it is difficult to keep
that perspective as the barriers to business change emerge. The (relative) simplicity
of the pure technology implementation keeps beckoning, and the goal of implementing
a superior new business model is easily forgotten.

Click for larger image.

How Much to Change?

1: Do We Change It All at Once?
The scope
of supply chain management is huge; some definitions start with the integration
of customer fulfillment needs through the optimization of product production and
delivery, and incorporating supply management. Very few of those who have ventured
down this path have succeeded, although many have declared victory. The problems
are that it is just too big, the breadth of change and resistance frequently overcomes
any project team (see Figure 1).

The solution is to partition
and prioritize. Think big, but implement in small steps. Achieve early victories
to sustain momentum. Use early delivery of benefits to help fund additional
costs. Even this is still a challenge, because the company will have to live
with some business units working in business model while others are still in
the old. The incongruities are troublesome at times, but still offer less risk
than doing it all at once.

2: What to Reengineer?

As the company looks
for ways to partition and prioritize, the tendency is to approach it from an
organizational perspective. Because most companies operate, manage and reward
from an organizational perspective, it feels natural to develop a plan sequencing
the reengineering of various organizations (e.g. customer service, logistics,
purchasing). It is easy to identify the responsible managers, as well as point
the finger at the change targets.

Click for larger image.

Process requires organization

This approach is flawed because
business processes drive the operations of a company, and in most companies,
those business processes span multiple organizations before achieving their
end result (see Figure 2).

Most business processes
have many hand-offs, associated manual control systems, many non-value steps,
huge cycle times and high levels of cost. In a nutshell, it is the process that
is not managed. So when the reengineering efforts focus on organizational activities,
they fail to address the opportunities for improving the performance of the
overall business process. This may result in higher organizational performance,
but may be of little benefit to the customer and the company.

The solution is straightforward.
Construct a business model of the company’s key business processes. Describe
the processes in verbs and nouns (so that no one will confuse them with organizations).
For clarity, any process that is depicted must be described by the 5 to 9 sub-processes
that it comprises. Use a structured analysis concept of having multiple levels
of processes. If the top level is the enterprise/company, then the second level
is the 5 to 9 major business processes that the enterprise does, and for each
of those processes, describe the 5 to 9 processes that comprise it. Now we have
identified 25 to 81 key business processes, and they can be mapped to business
strategies to determine which business processes need superior or improved performance.
The outline of a plan, based on reengineering business processes, begins to
emerge and it has focused on identifying and prioritizing business processes
for reengineering (see Figure 3).

Click for larger image.

Supply Chain Business

3: Mobilizing Multiple Cultures

Typically, supply chain
management reengineering involves external customers and/or suppliers. If it
doesn’t, it is just an internal project masquerading as supply chain reengineering.

A huge challenge exists
­ the integration of the customers and suppliers into the reengineering
project. Issues include:

  • Working with different
    engrained cultures based on past relationships
  • Establishing trust in
    how benefits will be realized
  • Coordinating resources
    across multiple companies
  • Determining project
    leaders and resources
  • Sharing funding
  • Fearing loss of competitive

The goal is to get the right
people together to address these issues early and develop a strong project charter
so that the project team can be effective. Failure may doom from the beginning,
and this failure won’t be discovered until considerable time and money have
been wasted.

There are no easy answers
here, but there is an approach that works. We can take the business model (from
above), and identify the external and internal customers and suppliers for the
business processes being reengineered. Within those segments, we can identify
those who are most important to us ­ both today and in the future. Using
the desired project outcomes, we can usually get a coordinated meeting of the
external representatives (probably one company at a time). Here is where many
lose the opportunity ­ usually by having a fairly fixed desired outcome
and even to the point of having identified some potential changes. The difficulty
is that all the ownership is on one side, and there is frequently neither partnership
nor agreement. Further progress is seriously impaired.

But if the agenda is approached
without preconceptions, and with a clear goal

Then we have a pretty good
first cut at a team-based project charter. The details can be worked out, and
the partnership created to get off to the right start. The key point is to develop
a charter that all key stakeholders have ownership of, and provide clarification
as to what is being addressed, for what objectives, in what way, with what resources,
and to what schedule. Consider the charter to be a contract between management
and the project team, and remember ­ a weak, vague contract inevitably
results in a weak or failed project.

Click for larger image.

Sustaining Momentum

4: Building Momentum

A critical success
factor will become creating and sustaining momentum for the project. It will
be months before it is complete, and many of the participants still have their
normal job to do. The easiest and fastest place to start is the “as-is” assessment.
The techniques are easy to use; the data relatively fast to acquire; and within
two months we should have a pretty good picture of how the process works today
and what its performance measures are. It’s likely that most of the process
measures did not exist and the data for them probably had to be created.

What should emerge through
the walk-throughs of what was documented is the identification of fast track
opportunities ­ small changes that can be quickly implemented with little
or no cost. These opportunities may or may not have significant tangible benefits,
they represent the beginning of real change. They demonstrate that change will
happen and begins to differentiate this project from others that produced no
results. Project momentum builds. Additionally, the ease in which the fast tracks
are implemented provides significant insight as to the barriers that can be
expected during the implementation of major change (see Figure 4).

Goal of Team-Based
Project Charter

  • develop objectives
  • clarify scope
  • outline deliverables
  • outline approach
  • identify roles
    and key participants
  • estimate level
    of effort and timeframe

5: Sustaining Momentum

We have reached the
point where we generate the major redesign ideas. There are many techniques
here ­ they generally revolve around structured workshops with team members
and employees from the process areas. A key tactic is to increase the number
of people involved, by having many participate in workshops of short duration
(8-24 hours). By having more people involved, we ultimately have more people
committed to its implementation. At this stage treat all ideas as good ideas
(most are), with the emphasis on getting hundreds of ideas out on the table.
Some of the workshops can create different external scenarios such as globalization,
economic downturn and new competition so that the team can be building change
idea scenarios for economic conditions different from today. Special techniques
need to be used to get the participants to think outside of the current process
and job.

When the workshops are over,
the team returns to assessing each idea, adopting the good ones, and then creating
a conceptual view of how process works, and subsequently defining jobs, organization,
management systems, business polices and technology requirements.

A key is to continue the momentum
from the previous stages. And while building on that momentum, review the key
concepts we have discussed in this article. Is this an IT project or a business
change project? Have we partitioned our scope to reduce risk yet achieve worthwhile
benefits? Are we focused on implementing model or just moving work around organizationally?
Have we got a good implementation charter? Have we got the commitment of key
stakeholders? Are we still working together as a team, involving others and
building their commitment? Are we managing change or hoping that the beauty
of business model will overcome all resistance to its implementation?

The reengineering journey
is long and hard and fraught with risk. The principles presented here will reduce
the risk and improve the odds of success. The rewards are enormous.

the Author

Mr. Gibson has
over twenty-six years experience in management consulting, with particular emphasis
on business reengineering, strategic planning for information technology and
deployment of knowledge-based workflow applications. He has directed or participated
in hundreds of consulting assignments spanning a wide range of business and
information technology issues for both public and private sector clients. Mr.
Gibson has been the Senior Principal with the Business Re-Engineering Group
over the last eight years, based in Atlanta, GA. The Business Re-Engineering
Group focuses on knowledge transfer of business re-engineering principles through
education, training, and project facilitation programs.

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