The 5 Keys to Supply Chain Transformation Success

By Michael Dominy | December 06, 2022 | 0 Comments

Supply ChainPower of the Profession

Whether transforming from siloed supply chain to an integrated cross-functional supply chain or to an externally-focused ecosystem orchestrator, CSCOs face alignment, resourcing and implementation challenges. Our supply chain transformation research revealed five critical insights.

  1. Strategic Alignment is More Effective than Top-Down Executive Mandates
  2. Strategic Benefits are Prioritized More Than Tactical Ones
  3. Internal Full-Time Equivalents Resources Comprise at Least 1/3 of the Total
  4. Resistance to Change is Nuanced
  5. Supply Chain Strategy Transformation Offices or Supply Chain COEs Lead the Way

Use Strategic Alignment Instead of Executive Mandates

Supply chain transformations take, on average, 2.9 years, and are formal programs with budgets, involve changes to multiple supply chain functions and require numerous, full-time interrelated teams. Transformations require board or C-suite approval and commitment from the executive team, but that is different from an executive mandate.

CSCOs and their supply chain strategy and transformation leaders need money, people and time to adequately plan and execute a successful supply chain transformation. Successful CSCOs sell and sustain transformations up, across and down the organization by building a transformation business case that is linked to key strategic forces. Strategic forces are broad developments taking place outside, or within, an enterprise that will influence the strategies and priorities for the organization which ultimately translate into initiatives that are implemented as part of a transformation.

Our research identified the top internal and external strategic forces behind supply chain transformations, which were business model dynamics, cross-functional collaboration and technology.

Target Strategic Benefits Over Tactical Ones

Senior supply chain executives must be able to explain to other C-level executives and the board of directors why their supply chain must transform. Justifying supply chain transformation requires an executive alignment business case.

Unlike tactical business cases for projects within a fiscal budget that require specific tangible benefits such as cost and inventory, executive alignment business cases drive executive engagement and agreement regarding the strategic benefits the transformation will deliver. Our study showed the top strategic and tactical benefits from supply chain transformations: improved resiliency, enhanced stakeholder engagement and cross-functional integration (see Top Benefits to Support Your Supply Chain Transformation (subscription required) and The Supply Chain Transformation Opportunity).

Have Internal Full-Time Equivalents Represent at Least 1/3 of the Total Resources

Transformations are difficult to execute and few, if any, companies can achieve them without external help. Most supply chain transformations use external resources in the form of expertise or personnel to help implement the complex initiatives that involve multiple functions, people and technologies.

Companies don’t plan and execute transformations entirely on their own. The data from our study shows that a more typical approach is to use a mix of internal and external resources, with dedicated internal full-time equivalents representing, on average, 36% of the total resources.

Focus on Decision Stakeholder Resistance, Not Resistance to Technology by Individuals

Supply chain leaders often cite “change management” or “resistance to change” as the biggest challenge to completed initiatives. Examining the data more closely shows that the issues are more nuanced. The top challenge is “resistance to change from decision stakeholders,” with 38% ranking this among the top three challenges, while “mistrust in new systems and/or ways of working” (18%) is fifth on the list. These data would indicate that the issue is more about who can make what decisions versus employees being unwilling to use technologies or adopt new processes.

Also surprising is that “limited availability of suitable technology” is second in the list of top concerns, with 28% ranking it among the top three concerns or challenges. This finding contradicts conventional wisdom and beliefs that, “The technology is not the problem; people’s resistance to using it is.” Preventing stalled or failed transformations requires identifying and overcoming the top inhibitors to successfully completing transformations.

Use Supply Chain Strategy Transformation Offices or Supply Chain COEs to Lead the Way

Many functions and roles are involved in a supply chain transformation. Having the right one leading is a key to success. The figure below shows which roles are involved in supply chain transformations and which ones lead them. The top three roles are supply strategy/transformation office, IT/digital and supply chain COE.

The IT or digital organization is involved but, most of the time, does not have primary responsibility for the transformation. A supply chain strategy and transformation organization or supply chain COE does. PMOs are involved in the transformations, but are not primarily responsible for leading them. PMOs typically have professionally trained and often certified people whose purpose is to plan and manage the implementation of initiatives across the enterprise. Some functions, including supply chain, have their own PMO organizations within their COE for transformation, which might be why the percentage of PMOs with primary responsibility for leading the transformation was lower than might be anticipated.

Now is the time to unshackle your supply chain

Supply chains must truly transform. Multiple unfamiliar, persistent and widespread disruptive shocks are forcing organizations to scrutinize all aspects of their supply chains. Past investments and resourcing decisions have resulted in differing — often too little — amounts of resilience and agility. Although the sudden and intense spotlight shone on supply chains is uncomfortable, it also presents a unique opportunity — the opportunity to secure funding and resources to implement critical investments in the supply chain organization and operations. CSCOs and their teams can successfully transform if they use five critical success factors

  1. Aligning with strategic internal and external forces that include, but are not limited to, technology
  2. Targeting the right benefits. Multi-year strategic supply chain transformations go beyond cost reduction and productivity improvement. Resiliency, stakeholder engagement and cross functional integration were the top benefits organizations cited.
  3. Staffing the transformation correctly with full time employees representing at least 1/3 of the total.
  4. Focusing change management on stakeholder decision making processes not just employee resistance to using new technology.
  5. Using or establishing a supply chain transformation office or CoE to lead the overall transformation.

 

Michael Dominy
VP Analyst
Gartner Supply Chain
Michael.Dominy@gartner.com

 

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