by Sree Hameed and Marc Escande

Introduction

In software implementations, we constantly talk about need to “balance people, process, and technology”. Yet, to date, most SCM projects continue to focus much of their energy on technology implementations and simply pay lip service to end-user training and executive alignment.

We are now a decade into the technology-enabled supply chain journey, and the lessons learned thus far dictate that this attitude must and will change for several reasons including the following:

• SCM technology has evolved to a point where users’ ability to fully exploit its advances are considerably lagging.
• The vast majority of SCM technology implementations have been point solutions within functional silos. As companies attempt to pull these disparate projects together into streamlined, cross-functional processes, capturing the underlying value becomes more about people and process, and less about technology.
• The outsourced supply chain shifts new value creation opportunities outside the enterprise – where the ability to rely on a “technology mandate” to bring about alignment is less effective.
• SCM technology is quickly approaching “commoditization” as ERP and suite vendors gain functional parity with best-of-breed players.
• Planning and execution systems are converging to enable an adaptive, closed loop process, and new business process tools gives users the power to define exception management policies – which can only be as effective as the users’ systemic understanding of supply chain cause and effect.

These observations were substantiated in an internal study conducted by a leading SCM vendor as early as 2000. The goal of the study was to investigate why customers failed to attain the full value potential of their SCM projects.

As part of the remedy, an innovative SCM concepts education program was rolled out to a small group of customers. While the program was instrumental to overcoming change management challenges within customer organizations, the initiative floundered because there was no consensus within the vendor organization to continue the program.

The goal of this article is to discuss these observations and share certain insights that can be of value to both end-user organizations as well as technology vendors.

The bubble that had to burst…

Our infatuation with technology in the 90s was understandable (well, at least from a vendor perspective.) So many breakthroughs occurred over the past decade that it is no surprise that the SCM dialog was largely dominated by the technology and its potential to manage an increasingly complex supply chain. Fortunately, the infatuation has started to wane, and we have begun to “mature” as we realize the magnitude of the effort required to make the technology relationship work.

For those brave early adopters who plunged in with enthusiasm, the results (or lack thereof) have been sobering. In all fairness, while users did benefit from the adoption of SCM technologies and make valuable gains, however, in many cases it fell short of their expectations. While some may argue that the technology has yet to mature, it is also true that today, the technology-enabled supply chain is at a point where users’ ability to fully exploit these advanced technologies is considerably lagging.

The gap between potential value estimated vs. actual value realized

Because this SCM vendor used a novel value-based approach to selling software applications, success was judged on the achievement of a business result instead of the typical go-live event. Therefore, it was imperative to get to the bottom of why customers failed to attain the full value potential of their SCM projects.

The study yielded a valuable insight: For the most part, projects achieved their business results when it came to the implementation of a single solution within a functional silo (e.g., demand planning, transportation planning, factory planning, etc.) However, when projects involved the integration of multiple SCM modules, i.e., a cross-functional implementation, there was a significant gap between the potential value assessed before the implementation and the actual value realized afterwards. (While it could be argued that the potential value assessment was overly optimistic, this was not the case. The estimates were conservative and customers agreed that the objectives were attainable.)

Getting to the root cause…

The knee-jerk reaction to these “failed” cross-functional implementations was to blame the technology for being “poorly-integrated”. And there was some truth to that. But, more importantly, the study revealed that on average, only 30% of the problems were attributed to software-related issues. Within these cross-functional implementations, 70% of the problem was tied to people and process-related issues.

The conclusion from the value gap study was clear: (Beyond obvious software improvements), there was a need to educate users on conceptual and process knowledge, in addition to the traditional product training. One customer aptly captured the sentiment as follows: “We bought a Ferrari and don’t know how to get it out of the garage.” It was a case where software was considered “technically” implemented, but user adoption was a completely different story.

The knowledge gap was prevalent in the consulting partners as well. Their ability to impart a solid foundation of SCM knowledge as part of the change management effort was both inadequate and inconsistent. (Several new concepts had been introduced in a short period of time and few consultants were fully versed in the SCM concepts that were being introduced.)

Knowledge-related barriers to supply chain excellence

Fortunately, the vendor had the ability to draw a significant amount of supply chain domain expertise internally as a result of its numerous acquisitions, and had plenty of experience in “evangelizing” the SCM market. Within six months of the study, a comprehensive course on supply chain concepts was developed and rolled out to a small group of motivated customers.

The objective of the education program was to help close the knowledge gap by addressing two core root causes or barriers:

Outdated knowledge: Over the past decade, several new concepts have been collectively brought into a body of work which is now called SCM. For example, constraint-based management (introduced by Dr. Eli Goldratt) is now considered a fundamental concept to understanding supply chain behavior. There are other similar important principles – Little’s Law, the bullwhip effect, variability principles, etc. – that represent a core body of SCM knowledge. (The fact that this knowledge continues to grow underscores the supply chain’s untapped value potential.)

These concepts form the basis for the current generation of software tools as well as future development. However, other than a small minority of motivated supply chain practitioners, the vast majority of participants involved in the operation of a typical supply chain lack a systemic understanding of how supply chains work, and ultimately, are unable to fully exploit these tools. And with every new innovation, this knowledge gap continues to grow over time, as shown below.

An interesting point to note: Compared to a decade ago, today there are easily over a hundred programs in SCM (degreed and non-degreed), offered by universities and professional organizations (and that’s just in the US). While this a promising development to address the first barrier, it does not address the second barrier.

Lack of organizational alignment: The second challenge is achieving organizational alignment. Simply stated, many parts of the supply chain have been operating as functional silos for a long time, and implementing a streamlined cross-functional process where everyone is marching to the same beat presents a significant people and process challenge. As the study discovered, resistance to change and cross-functional tensions were evident during implementations.

So how is organizational alignment achieved? It’s done by ensuring that anyone who influences or is impacted by the supply chain project understands how the business processes will work together. Not only does this help minimize resistance to change and get greater buy-in across all users, but with management involvement, it presents an opportunity to ensure that the metrics chosen by management reinforce the desired changes.

This “user” population can be large: For example, a Global 100 telecomm customer had over 500 users directly interacting with the software system, but the implementation team recognized that there were over 2000 participants both inside and outside their enterprise who needed to be aligned on an integrated, enterprise-wide supply chain process.

The results and reasons for success

“Through the [SCM] course, we provided our key stakeholders with a rich foundation of knowledge, and we now feel more confident about achieving best-in-class supply-chain processes that are stable and enduring. The deployment of the [SCM] course was expeditious and our worldwide users enjoyed the flexible learning experience so they could learn at their own pace.” -- VP Strategic Planning, Semiconductor Manufacturer

“The course not only provided hands-on training but gave me ideas for improving processes with my suppliers – and through these ideas I was able to reduce a lot of unnecessary expenses I negotiated with suppliers and make my management feel proud …” -- User, Telecommunications Manufacturer

As evidenced by the above comments, the success of the concepts education program exceeded expectations. Between 2000 and 2002, the training was delivered to over 5000 end-users (customers and partners).

Based on discussions with customers, a list of “best practices” were compiled which included the following:

• Senior management commitment is absolutely critical. Their support is necessary to ensure employees are given the resources and time to learn. Some companies went so far as to offer bonuses and incentives for students with the highest scores.
• Avoid use of the term “training”. It is often equated with product training and fails to get executive interest. Instead, when repositioned as a change management effort, executives recognized the true value of the content and were much more supportive.
• A self-paced curriculum helps students to learn the material at their own pace. But deadlines should be set to ensure the overall group is making progress together.
• Test. But stay focused on learning, not test-taking. Have users take the test as often as they need to reach a level of competency that you deem fit. The knowledge is of value only if the user internalizes or absorbs it.
• Hold regularly-scheduled team meetings to clarify questions and gather feedback. Designate a subject matter expert (preferably an external party who can effectively play an independent, non-political role) to moderate these sessions.
• Be prepared to take action. You’ll get a lot of feedback from your team – have a plan to incorporate process improvement suggestions into ongoing and future projects. Otherwise, such programs are a waste of time and it’s better to “let sleeping dogs lie”.
• Design multiple learning paths to accommodate different training needs. When asked for feedback on content, executives appreciated the value of the broader principles and concepts, users appreciated learning about how other functional silos worked. Figure out what is best for your supply chain based on the existing knowledge gaps.
• Consider the use of an E-Learning platform to reach a globally-distributed, diverse population with different training needs. It can help, especially for administering on-line exams. (Despite the allure of online learning, a lot of people preferred to print out materials and read offline.)
• The goal of the content is to align the organization – not create experts. The content was designed in such a way that everyone gained a holistic perspective on the SCM process and how each of the functions worked together. There is no single “sanctioned” framework to convey the entirety of SCM knowledge, but what matters is that the framework used should be consistent across the business “ecosystem”. The following illustrates what was used for the [SCM] course:

The vendor dilemma

Despite the success of the initiative, there was no universal agreement within the vendor organization as to who was responsible for imparting this knowledge. And the decision of whether to scale the program beyond its experimental phase led to some soul-searching within the software vendor organization. In many ways, it was a classic “core competence” discussion.

Those familiar with the vendor’s genesis knew that early customers chose the vendor for its deep domain expertise in SCM as much as the technology, and they argued for “getting back to basics”. As one of the original founders had put it, “If we are in the business of selling cars to people who used to drive ox-carts, shouldn’t we also teach them driving skills?”

Others argued that as a maturing “product” company, the objective was to embed the domain expertise into the technology. It was the consulting partners’ responsibility for people and process issues, and supposedly their core competence. They also questioned the “back to basics” strategy – sure, it made sense during the early adopter stage, but is it applicable in a mainstream market? If any education was to be done, it was seen as a “marketing cost” to sell more products.

Outside observers weren’t sure either. It was a well-known fact that the vendor’s user conferences weren’t your average technology user group setting, but more like evangelical gatherings that stimulated lots of thoughtful discussion on topics like “business transformation”. But, for the most part, the legal contract between the vendor and the customer encompassed a software implementation.

Ultimately, no decision was reached on the education program since the vendor was consumed by a much larger set of problems beset by an aggressive growth strategy amid a faltering economy. But at the core of this has remained a question that the vendor never fully addressed: “What does the customer think they are buying from you?”

What you think you are selling and what the customer thinks they are buying may not be the same…

The answer to this (in my opinion) comes down to understanding a very simple fact: What does the customer think they are buying from you – a product or a result?

In that sense, the topic of education is much larger than developing and delivering a “course”. Every vendor wants to achieve the status of a “trusted advisor” to the client. However, for it to have meaning beyond a marketing platitude, it requires a strategic commitment to education that goes beyond the product.

It won’t be easy. For all the talk of “value”, our short history in enterprise applications shows that it is hard for vendors to break out of a product-centric perspective due to the nature of their business – but it is nevertheless critical to long-term success, if vendors continue to go down the path of “promising and delivering value”.

The incentive (or pressure) is growing. As the spotlight shifts away from Technology towards a balanced perspective that gives equal consideration to People, Process, and Technology, customers are going to gravitate towards those who can bring about this balanced view. As ERP and suite vendors approach functional parity, best-of-breed vendors could view this as an opportunity to establish differentiation via non-technology means. But that will mean having to think unlike a technology vendor, and the jury is still out on whether that can be done.

Marc Escande is the Supply Chain Director of the welding division of Air Liquide Canada, whose global supply chain includes manufacturing operations and over 90 distribution centers.

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©2005 ChainLink Research, Inc.