Project success can be difficult to define. It seems that it should be fairly straightforward but that has not been my experience. Every time my team starts a new project, we ask the client how they define success for the project. Many times we are still getting the answer “project goes live on time/on budget.” We then try and rephrase the question to ask, “what business benefit do you expect to get out of the project?”The answer still varies quite a bit from “soft” goals such as improved productivity to “hard” goals such as “$5M in inventory savings.” The quest for the true business benefit can be elusive and difficult to define.
In my opinion, it all starts with a business case.Most companies need to produce a business case in order to get a project approved, but this can be difficult as many companies still are feeling the pain from past failed SCM projects.But I postulate that the reason they have a list of failed SCM projects is that they lacked a solid business case that outlined the expected realized value of the SCM project (e.g. reduced inventory, better procurement, improved product availability, etc.). As a software vendor, one of the steps my company goes through when working with a prospect is to go through an expected Value Assessment as input into the prospect’s business case.The Value Assessment would define the specific measurements that would improve a company’s corporate performance.
Some of the best business benefits/business cases I have seen are:
1) Reduce expedite costs — I worked with a customer who had insanely high expedited freight costs because they paid very high penalties if product was not delivered on time. Not only did the SCM technology project help lower the freight costs and improve profitability, but it also helped improve customer satisfaction and contract renewals.
2) Improve employee throughput — Many companies still manage their supply chain on spreadsheets.One company I worked with is a very fast growing electronics company who did everything on spreadsheets.The result was employees had to work nights and weekends just to keep up and therefore the company had high employee dissatisfaction and high attrition rates. Their SCM project allowed the workers not only be more efficient and make better decisions about getting product out on time which helped their bottom line, but it also improved employee morale and decreased attrition and those associated costs.
3) Decrease inventory — One of the most common business benefits from an SCM project is a decrease in inventory and their associated costs.Most large companies are global with a complex supply chain map; they’ve typically done acquisitions and therefore have many disparate systems.They could also have a completely outsourced supply chain and therefore have no visibility into the key data required to manage inventory costs.The first step is global inventory visibility, this helps manage what inventory exists currently, what needs to exist and where it needs to exist.
There of course are many other examples of true business benefits. Some of the other business benefits that impact corporate results that should be considered in any business case are:
- Reduction in excess and obsolete inventory
- Fill rate improvements
- Fewer stock-outs
- Improved inventory accuracy
- Decreased cycle time
- Increased customer service levels
All of these can impact financial and operational measures such as:
- Asset utilization
- Cash-to-cash cycle time
- Cost of goods sold
- Revenue per fixed assets
So, companies should consider these types of business benefits when building the business case for an SCM technology project. The definition of success should be measurable and impact corporate results.
One more thought to ponder…wouldn’t it be ideal if a company’s supply chain system was integrated with their corporate financial system and the system had the ability model “what-if” scenarios in the supply chain and see their immediate impact on the corporate results?Wouldn’t that allow the company to make better SCM decisions which ultimately improve the corporate results?