PDF File: 

ASC6_wp_pearson_samali.pdf

Accenture - London

Tough economic times and hypercompetitive markets have increased the demand for new, accelerated approaches to supply chain system development and delivery.

Companies are always looking for better ways to move to a higher level of performance, and recent economic conditions have accelerated that search. In the process, however, many organizations have rediscovered the performance potential of an integrated, extended supply chain – working with suppliers, customers, business partners, and third parties to create seamless end-to-end operations. Many companies have also found that business performance improves when certain activities are handled elsewhere. For example, offshore development of large information technology (IT) applications can reduce labor costs significantly, without compromising quality. Additionally, outsourcing entire business processes – from payroll to manufacturing to service management – has become a mainstream approach practiced by nearly half the Fortune 1000.

A marriage of these two concepts is drawing closer: Enlightened clients, solution-development specialists, and advanced communications are coming together to affect the external development of integrated supply chain solutions. Simply put, complex, highquality solutions are being designed and integrated using a blended, multidisciplinary, and expert workforce; one or several supply chain delivery centers staffed by specialized resources; and innovative, accelerated approaches to general system development and delivery. The results, in many cases, read like a “Who’s Who” of high performance: higher quality, lower cost, less risk, and shorter time to delivery. We will take a closer look at this potent and increasingly popular solution delivery approach, often referred to as a strategic delivery model.

About the Approach Think of supply chain delivery centers as industrializing (i.e., increasing the scale and specialization of) supply chain system integration work. As shown in Figure 1, this implies one or more delivery centers (onshore, near-shore, and offshore) with specialized teams working faster, better, and at a lower cost to deliver key parts of a solution. Roche, a global health care company, is utilizing this model for a pan-European supply chain transformation program that includes the design, build, and implementation of a new supply chain operating model using SAP’s Advanced Planner and Optimizer solution. Roche’s first release was completed from start to finish in only seven months and delivered a compelling proof of concept. The strategic delivery model approach comprises three basic tenets:

• Highly specialized development and delivery teams, working in an industrialized environment to provide reliable, predictive, and effective supply chain solutions;
• A global network of delivery centers, where work can be completed in an accelerated fashion by dedicated technologists and client representatives; and
• A suite of innovative, yet proven, solution development methods, tools, architectures, components, templates, re-usable code, and accelerators.

Due to global scalability and flexibility, these solution delivery approaches can be used for the largest and most technologically complex projects.However, they are also appropriate for smaller implementations – projects that previously could not afford high levels of dedicated expertise.

Delivery Centers Deliver

Supply chain integration efforts can have a significant – and nearly 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 deleterious shifts in priorities. In fact, a recent research initiative by Accenture, INSEAD, and Stanford University found that the main reason for supply chain project failures is an inability to make the technology work as promised. Such failures generally can be traced to:

• The immense complexity of bringing supply chain optimization science into an operational environment. Supply chain solutions use very intricate optimization algorithms and leading-edge, constraint-based planning techniques that are complex and not widely understood;
• Lack of deep implementation experience. Superior technology development and implementation skills are manifested best in the resources that do it most often. Such experience is particularly hard to find in a corporate environment, since the same large-scale implementation is almost never completed more than once. Moreover, some supply chain solutions are so new that company-resident experience – and even external expertise – is rare;
• Lengthy lead times. Long delivery time can increase risk, compromise quality, undermine resource continuity, engender cost overruns, and make it difficult to sustain sponsor support and enthusiasm; and
• Insufficient focus on the management of change and the delivery of real business value. Supply chain projects nearly always require the successful implementation of new or redesigned business processes and the inculcation of organizationwide change. Unfortunately, the effort needed to create high-performing, low-risk, integrated systems can sap a company’s ability to effect process and culture change. Simply put, there is insufficient time, energy, or money remaining to properly manage change.

Delivery-center-based supply chain integration projects are well positioned to address and ameliorate these concerns. For example, the delivery center value proposition involves well-tested methodologies; proven, re-usable assets and building blocks; and the most experienced people available anywhere. For these reasons, delivery centers are a natural hub for late-breaking technologies and best practice processes and operating models. In addition, delivery centers offer quick ramp-up and scalability because the development infrastructure is already in place. Business stakeholders also gain the freedom to focus on culture and process change because delivery center professionals take the lead with integration, management, and delivery.

To date, delivery-center-based implementations have been shown to reduce project costs by up to 40 percent. Simply put, easy access to more experience and better tools produces faster, better results. Cost reductions are also the product of blending on-site, onshore, near-shore, and offshore resources to deliver different components of a solution. Companies seldom have in-house access to all these elements.

Just as important, however, is the assurance of optimal quality. In this case, a delivery center approach is desirable because its very essence is dedicated, experienced, specialized resources. Those resources – human and technological – have exceptional functionality honed across multiple projects. Proven, re-usable assets and building blocks encourage quality because they have been battle tested.

Lastly, the delivery center approach is rapidly evolving, expanding, and providing new value-added offerings, such as:

• Application Management – Provision and maintenance of dedicated (in-house) application management structures is difficult and costly. Outsourcing application management to a services provider with the requisite infrastructure and expertise enables companies to focus more tightly and readily on the provision of business performance enhancements.
• Model and Data Management – Supply chain structures change over time, but there generally is little expertise available in-house to update the supply chain model or to intensively handle the data management issues that any supply chain model produces. Outsourcing these two elements to a services provider can significantly reduce costs and risks.

Critiquing the New Approach

Benefits are key; however, corporate leaders still need to be sensitive to the complexity and perceived strangeness that a delivery- center approach represents. Although projects of this sort do not demand a completely new development methodology, serious attention must still be paid to the practicalities of split-site project work. For example, developing a supply chain operating model is a business-driven, iterative activity (prototyping, conference room pilots, etc.) that requires significant interaction between business stakeholders and implementation teams. As such, there must be concise definitions of what activities can be completed on-site and which should be taken to onshore, near-shore, or offshore centers. Such decisions are reached by balancing key activities against criteria such as the level of business interaction needed, the required amount of customization/development, the perceived level of complexity and risk, and the targeted cost reduction benefit.

Figure 2 demonstrates the key drivers for this decision-making process, while Figure 3 provides a sample breakdown of tasks between on-site and off-site locations.

Management reticence, complexity, and overhead are other common concerns. Project managers generally do not like to lose the direct control they exercise over an on-site team. In addition, more expertise and formal structures are required for project management, status reporting, communication, issue management, and quality control. Figure 4 highlights a number of key communication complexities of the multisite solution delivery.

Even cultural and linguistic concerns are part of the delivery center equation. For example, using near-shore or offshore resources and teams requires a better understanding of the working cultures of the various countries, and the potential language challenges.

Making the Right Choice

An off-site delivery center approach to developing and integrating supply chain systems may prove ideal for some companies but inappropriate for others. Figure 5 presents some of the key questions that must be answered to gauge an organization’s suitability. If a delivery-center approach does appear to be the right choice, then the following guidelines can help make the undertaking a success that genuinely extends a company’s market and operating performance.

• Roles and responsibilities – Clearly define group and individual tasks, ensuring that the right activities are performed by the right people at the right location;
• Project 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;
• Risk identification – Ensure that all risks associated with off-site delivery (e.g., communication breakdowns) are included in a risk plan, with mitigation actions clearly articulated;
• Communication – Develop streamlined and formal communication mechanisms, and make goals and plans highly visible across all teams, at all locations, and at all times. Communicate clearly, openly, and frequently;
• Decision-making – Build empowered decision-making forums to which appropriate project members have an access path; and
• Validation – Define the criteria upon which the off-site work will be evaluated, and create responsive review and sign-off procedures.

Lastly, be sure that the required disciplinary and structural mechanisms do not become a mammoth bureaucracy. Streamlining is a necessity; the structure should not become the project.

A Viable Alternative

Using an external delivery-center approach to create complex, integrated supply chain solutions is no longer a bleeding-edge or drawing board concept. It is a viable, business- benefits-focused alternative with real-world, present-day value. As Dieter Wegmann from Roche notes: “We embarked upon an ambitious supply chain transformation project – just seven months from the start of detailed design to the first go-live. Accenture’s Barcelona delivery center played an instrumental role delivering the applications at speed, working seamlessly with the core project team in Switzerland.”

Roche is not the only company that has embraced the strategic delivery model. Several of the largest multinationals are using it to achieve the agility and adaptability of smaller, regional companies. Even some of these smaller companies are working with delivery centers to leverage the scale economies and broad market penetration that once were the sole purview of much larger organizations. Regardless of size, companies that successfully adopt this approach can derive significant performance benefits in difficult markets.