By James H. Hughes
Enterprise resource planning-based advanced supply chain planning tools have become increasingly powerful, and today they allow companies to set inventory targets more effectively, accurately model future networks, and make well-informed distribution decisions based on sales forecasts, customer segmentation, sales orders and actual production. And the list goes on.
Such capabilities are especially important today, because improvements in planning are the key to a variety of supply chain activities and to excellence in overall supply chain management, which can be an important driver of business performance. Indeed, in 2003 a team of researchers from Accenture, Stanford and INSEAD found that the average market capitalization of companies that employ supply chain best practices increased by up to 26 percent more than the industry average over a three-year period.
The potential value of today's ERP-based planning tools is clear, but in practice many companies find that they fall short. For example, in spite of significant industry investments in planning systems, the majority of chemical companies are not satisfied with their supply chain management technology, regardless of which technology they implemented, according to an Accenture industry study. When asked to rate their impressions of their current use of demand planning, 57 percent of respondents graded their internal results as less than favorable, and only 7 percent rated it as excellent.
The problem typically does not lie with the technology, however — it lies with the way that companies approach the technology. Too often, supply chain planning implementations are regarded as technical projects, when in fact they are business transformation initiatives and should be managed as such.
Transformation Rules of the Road
Business transformation does not just happen, of course. It requires a conscious effort and a methodical approach. Over the years, Accenture has been involved in numerous ERP implementations, supply chain planning initiatives and business transformation efforts across industries, and we have conducted ongoing research into the nature of high-performance businesses. Based on that experience and insight, Accenture has identified several practices that are key to a successful, business-oriented implementation of advanced planning tools.
These practices encompass the full lifecycle of an implementation. For example, companies need to work upfront to ensure business readiness — that is, to assess whether they have the right people with the right capabilities in place, and to consider training and recruitment to fill in any gaps. They also need to look beyond the launch of the system, and establish post-go live governance processes to ensure that the new tools are adopted by the organization and that employees don't gradually revert to the old approaches. And they need to set up ongoing "value realization" processes for managing against key performance indicators to keep the focus on achieving the desired business benefits.
For supply chain executives who want to take advantage of today's advanced planning tools, three practices stand out — in part because of their importance, and in part because companies often fail to address them. These practices are:
- Begin with a value-led business vision and a business case.
Today's supply chain planning tools offer a wide range of functionality. That depth and sophistication is important, but it can also be a double-edged sword. Facing a wide array of possible new capabilities, companies can get sidetracked and wind up going through the effort of implementing solutions that, in reality, will provide them with little business value. The effort needs to be targeted and focused right from the beginning.