What Is Transformation?
Let’s look at the different definitions of the word transformation. It is quite interesting to put perspective on a word that we all use as supply chain professionals every day!
- GENERIC: a thorough or dramatic change in form or appearance
- PHYSICS: the induced or spontaneous change of one element into another by a nuclear process.
- MATHEMATICS, LOGIC: a process by which one figure, expression, or function is converted into another that is equivalent in some important respect but is differently expressed or represented.
- LINGUISTICS: a process by which an element in the underlying deep structure of a sentence is converted to an element in the surface structure.
- BIOLOGY: the genetic alteration of a cell by introduction of extraneous DNA, especially by a plasmid. The heritable modification of a cell from its normal state to a malignant state.
I find it fascinating to take a step back to look at the definition of a word from our common language, even more when we use this word in both our professional and personal life. I also really like the idea of movement and agility within a transformation process.
Where To Start: Transforming Your Supply Chains
First, you need to know your current state, supply chains business models, operating models and governance models. You have to understand your current supply chains maturity level.
We say supply chains with a “s” because companies need to think end to end, inbound supply chain, midstream supply chain, outbound supply chain, and returns supply chain. Each supply chain segment has its own challenges and issues with potential solutions. Understanding one's current state of their supply chains management is the start of any transformation. We need a baseline to be able to build the new model. You have multiple options to do so, either internally or with some external support.
You should start with a deep supply chain diagnosis, leading a complete and thorough analysis of your supply chains to identify priority actions which, if taken, would improve your efficiency. One way you can do this is through management interviews and an analysis of challenges and performance of the supply chain (done through interviews and an online scorecard where questions are asked to key people in different departments and countries).
This will provide you with a systematic identification of your most critical supply-chain issues, your strategy, a comparison of internal objectives among different departments, a clear prioritization of the actions to be initiated, and an estimate of the potential improvements (cost, FTE, service, strategy).
The diagnosis should be done for all supply chain activities including planning, execution, monitoring, finance, reporting, performance management, procurement, engineering and optimization activities, but you can decide to focus on only specific areas in a phased approach. You can also select only the inbound supply chain or outbound supply chain according to your priorities. Regardless of which approach you take, it needs to cover processes, IT systems, and resources.
Companies need to know their core and non-core activities for supply chain management and logistics all with the right level of detail. If you know how to differentiate core from non-core, then you can build a clear road map for your activities and build an in-sourcing plan for core activities and an outsourcing plan for non-core activities.
Once you have a good view of your current state of supply chains and you've identified your core and non-core activities are, you can then develop your future state, your targeted supply chain business model, operating model and governance model. Designing your target model is the second key milestone necessary in a transformation. The design work allows you to compare outputs and costs of the future model against those of your current model.
All of this allows you to start the third step of your transformation approach. In this step you analyze the impacts and efforts of your new transformation initiatives towards the future state. How is your new plan working out? You can prioritize the initiatives according to their costs and impacts, starting with quick wins (Low Effort, High Impacts). The list of transformation initiatives with their priorities is called a transformation road map. A road map can be crucial to navigating towards a successful transformation.
To manage successful transformation, you need the full commitment from your entire organization and your executives. Top management needs to support the vision to transform towards the target state and be all in. The above approach for supply chain transformation allows the right business case to present value of the transformation to company executives.
Now you can start the roll out and execute the plan.
There are various options which will help jumpstart a transformation so you can always find the right option for your specific situation. It just takes time so stay patient and stay focused!
We started with a definition and we will end with one.
FOCUS: Follow One Course Until Successful!