Governance: The Key to Successfully Transforming Your Supply Chain
With the repeated geopolitical, climate, and economic upheavals we have experienced in recent years, Supply Chain must constantly adapt. Yet, despite good intentions and team investment, how many companies can claim to have fully succeeded in all their Supply Chain transformation projects?
Supply chain transformation projects powered by clear, effective Governance
When it comes to governance, at Diagma, as observers and co-actors alongside our clients in Supply Chain developments across multiple sectors, we have arrived at two convictions:
Few Supply Chain transformation projects truly and fully achieve the objectives initially set;
Success depends essentially on Supply Chain governance and on the governance adopted for the project.
How can we explain the mixed success of supply chain transformation projects?
In our view, five factors explain the mixed success of Supply Chain transformation projects:
First, the link between the performance targets set by Senior Management (EBITDA, working capital requirement, CSR ambitions) and Supply Chain's objective contributions is not always very explicit, and can create mismatched expectations toward Supply Chain teams.
Second, Supply Chain is a complex subject involving multiple decision-making and execution processes, carried out by a range of skill sets that are not always easy to bring together into a coherent, effective whole.
Likewise, as a function, Supply Chain is the most cross-functional and interacts with most others (Marketing, Sales, Finance, Purchasing, R&D, HR): the success of Supply Chain transformation also depends on the ability to streamline and coordinate these interactions during the transformation and beyond.
In addition, certain Supply Chain roles, from the Director down to the warehouse operator or truck driver, are frequently reassigned due to pressure and/or demanding working conditions: this resource instability is an obstacle to executing new best practices, even when the plan is flawless.
Finally, identifying the relevant changes to make — sometimes with the support of consultants to speed up the diagnostics — is often the easiest part. But ensuring that new practices are properly adopted and flawlessly executed at scale is much more of a challenge.
Three pitfalls to avoid for a successful supply chain transformation
The absence of explicit performance objectives (economic, environmental) set by Senior Management.
Top-down calls for change, hoping they will be enough to spontaneously drive Managers and teams to adapt what needs adapting, without defining a project structure.
Demanding success and results without providing the additional or temporary resources that are often essential to free up time for those capable of driving and embodying the change.
What supply chain governance accelerates and secures transformation success?
Based on our experience, five conditions must be met for these Supply Chain transformation projects to succeed:
A Supply Chain Director who sits on the Executive Committee and drives the transformation by highlighting the "good reasons to change" and the "risks of doing nothing";
Appointing a Supply Chain Performance Owner who links economic ambitions to end-to-end operational performance indicators (OTIF, costs, and inventory) and environmental indicators (GHG emissions, etc.);
Managers and business-unit team members who engage first with "why change, why now?" and then with "what to change for?", enabling proper adoption and rollout of new practices;
A mutual commitment framework that spells out the rights and responsibilities of Supply Chain entities and the other functions they interact with;
An evolving project governance model that progressively widens the circle of "change agents" and sustains momentum:
– Diagnosis: a few key experts open to analysis and to questioning the status quo
– Envisioning the future Supply Chain: a second circle of creative, bold builders;
– Putting it into action through pilots, then rolling out proper execution: implementation leaders driving the pilot projects.
Note: This article was adapted from content originally published by Diagma, Massimo Consulting's European joint-venture partner, at https://diagma.com/gouvernance-cle-de-reussite-pour-transformer-votre-supply-chain/
