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 which is in 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 to Transform your Supply Chains?
First you need to know your current state, your 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 its current state of supply chains management is the start of any transformation. We need to know the baseline, the “as is” situation 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 deep analysis of your supply chains to identify priority actions to be conducted to improve your efficiency. You need to do a deep understanding of your situation 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).
It will provide you a systematic identification of the most critical supply-chain issues vs 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 (planning, execution, monitoring, finance, reporting, performance management, procurement, engineering and optimization activities) but you can decide to focus only on some areas in a phased approach. You can also select only the inbound supply chain or outbound supply chain according to your priorities. 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 and they need to know with the right level of details. If you know how to define core from non-core then you can build a clear road map for your activities, 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 know what the core and non-core activities are you 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 to transform. The design work allows you to compare the outputs and costs of the future model vs the current model.
This allows you to start the third step of your transformation approach by analyzing details of the impacts and efforts of transformation initiatives towards the future state. 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.
To manage successful transformation, you need the full commitment from your entire organization and your executives. Top management needs to have the vision to transform towards the target state and be all in on the vision. 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 to transform, you can always find the right option for your specific situation. It takes time so stay patient and stay focused!
We started by a definition and we will end by the definition of FOCUS: Follow One Course Until Successful!