Are you forcing the wrong supply chain optimization to fit your organization?
May 8, 2017 by Kevin Deveau FICO
May 8, 2017 – While plenty of versions of the classic fairytale Cinderella exist, it is arguably one of the most familiar stories in the world.
The magic of the timeless story, lies in the glass slipper abandoned on the castles steps. The slipper would not fit anyone else in the kingdom no matter how hard they tried, as it was made for one foot only — Cinderella’s.
Surely, everyone at one point or another has felt the pain and frustration of trying to force something to fit or work for them that simply is not meant to be.
So how is your supply chain optimization solution working for your organization?
For years, Canadian manufacturers have understood the potential of using supply chain optimization (SCO) solutions to solve complex operational challenges and improve their supply chains. In fact, a recent research project conducted by IndustryWeek Custom Research and FICO found that three out of four manufacturing companies have been using or plan to use supply chain optimization solutions within the next 12 months. While a select few have successfully been able to leverage the potential benefits of these increasingly sophisticated analytic tools, many have only scratched the surface.
Implementing a supply chain optimization strategy has been a key business priority for manufacturers in hopes of either maximizing capacity utilization, identifying and sustaining process improvements, finding people with the right skills, improving customer satisfaction or improving their bottom lines overall. However, many organizations are not able to see or measure the benefits from their SCO investments.
Many organizations have invested heavily in ERP (Enterprise Resource Planning) solutions. As appealing as it may be to leverage the secondary features of these solutions to support analytics and SCO, these are not the core offerings of ERP solutions. In addition, these components are complex and time-consuming to modify, so as an organization’s needs change and grow overtime, decision-makers may find themselves in a process of seemingly unending ERP deployment.
It all comes down to the analytics. For many of these organizations, the problem lies in not being able to identify what their key priorities are ahead of deploying a SCO program — and this is an issue. While additional analytic solutions can be added to complement existing ERP implementations, supply chain optimization can be most effective when a company is able to identify what questions they want answered from the outset, and begin gathering and analyzing the right data, right away.
These questions will be dependent on the organization. For example, better demand responsiveness and cost reduction are likely high priorities for Company A, whereas finding talented people is a higher priority for Company B. This is why it becomes important for organizations to self-assess. The SCO strategy that would work best for Company B will not provide the type of value Company A is looking for.
You have to choose the shoe that fits the foot, you can’t force the foot to fit a shoe.
Many organizations are still trying to force SCO strategies that simply are not meant to serve their needs. FICO/IndustryWeek’s report found that more than half (54 per cent) of responding manufacturers had been using SCO solutions for over a year, yet of those, well over half feel that their SCO optimization efforts are trailing or just keeping pace with their competitors.
Further, there is a clear disconnect between the recognition of importance of supply chain optimization in the industry (80 per cent), and the number of organizations who have actually have clear SCO strategies in place (44 per cent).
This comes back to the need to assess your organization’s priorities before implementing a SCO strategy in the hopes that it will improve your business overnight. To achieve competitive advantage, SCO strategies must be implemented with rigour.
Supply chain optimization project implementation
When it comes to implementing a SCO strategy successfully, better inputs equal better outputs. There are a number of reasons why SCO implementation can fail: for example, the lack of leadership and management support, poor rollout and execution or failure to make a connection to the wider business strategy can all cause SCO to become unsuccessful. However, no software solution or level of leadership support can make up for bad data.
From goal setting to execution, the successful implementation of your SCO strategy can be mapped out into four typical project phases.
• Phase one: SCO project design and management
Here your organization should work with your solution provider to identify your objectives and vision of the organization’s desired future state. This will allow you to best select and engage the team that will be involved throughout the project. At this point your solution provider should help you identify the appropriate software needed to reach achieve your desired results, and develop a model to support you.
• Phase two: Data collection
This phase is where the relevant and important data is identified, aggregated and integrated into the model. This also includes the “cleaning” or filtering of data to ensure that only data that, when analyzed, will provide insight into the business problems you are looking to solve is captured. Another important aspect to consider during this phase is data storage. With many different options now available, your organization will have to decide based on the amount of data you will need to store, and your budget, which storage option is best for you.
• Phase three: Reporting
Reporting is critical for the successful completion of an optimization project. In order to communicate throughout the lines of the organization, the findings should be summarized and visualized into dashboards and leadership reports. This will ensure that decision makers can effectively understand timelines, costs and benefits and evaluate the ROI.
• Phase four: Execution and integration
Following the implantation phases, it is then time to integrate the optimization into existing business processes. Managers can then use the ongoing analysis to make supply chain decisions that will best maximize the areas of the business that matter most to your organization. It is important to keep in mind that this will require effort and investments of time and budget to successfully set up; employees may need to be retrained in certain areas, and some equipment may need to be upgraded, for example.
The ability to make good decisions with limited information is a highly valued capability of effective leaders. A willingness to embrace SCO can make organizations less dependent on the talent of individual managers and improve decision-making capabilities across the organization. The foundation of any successful SCO initiative is identifying what data to collect and analyze, but when done properly, analytics and SCO can unlock solutions to business pains and help balance cross-functional conflicts. The ultimate benefit for any company using optimization tools is to make more decisions that minimize costs and improve services, which will translate into better profitability and future revenue growth.
Kevin Deveau is vice president and managing director, Canada, at FICO. He is responsible for growing FICO’s Canadian market share and strengthening client relationships. FICO is a leading analytics software company, helping businesses in 90+ countries make better decisions that drive higher levels of growth, profitability and customer satisfaction.