Why Do Interventions to Improve Supply Chain Planning Fail so Often?
21st June 2018 | Richard Lloyd
Increasingly, supply chain planning organizations have a good idea of what they want to achieve.
This often consists of long lists of KPIs, functionalities and new processes. These are then documented at length in endless pages of powerpoints.
Yet, rarely are these missions successfully implemented. What we frequently see is that 3 years after developing the comprehensive vision, the implementation plan has stalled. Research shows that the main stumbling blocks are on the human side, within culture and leadership.
Some reflections on the challenges faced by interventions to improve planning:
- To implement new processes change is required to the way that organizations work together and how individuals operate. Making those changes is hard and many projects fail. The bi-model business model is here to stay, but it is a challenge; carrying out changes while the supply chain continues to operate is like "doing heart surgery while running a marathon".
- In the supply chain, change involves multiple departments and organizations. Sales, manufacturing, logistics, purchasing, and finance teams within an organization all play a part. Externally, suppliers, customers, service providers and IT providers also have a role. There is a tendency to optimise in silos because this avoids political issues.
- Value and culture - there has been much work done around changing organizations focussing on values and culture, both inside individual departments and as top-down/corporate-wide initiatives. The culture and value changes required to change supply chain are different and cut across boundaries.
- Some of the core supply chain concepts are abstract and based on complex ideas, such as the Forrester effect and the Theory of Constraints. Some are based on mathematical models: for inventory, statistical forecasting, allocation algorithms, network optimisation, global optimisation, and bi-directional propagation. This makes them hard to articulate and to understand.
- Many of the core challenges in the supply chain are caused by human behaviour, driven often by emotion: Forecast bias, gaming, and short-termism. Yet the supply chain is often seen as an engineering or technical function, and improvement programs tend to focus on the tangible. Most managers in supply chains come from a technical background. They are less comfortable with “soft” change theories, psychodynamic models and psychology.
- It is hard to make improvements sustainable. Some organizations manage to achieve improvements. Yet due to people changing jobs, mergers, organizational changes, commercial terms and general entropy, the supply chain efficiencies that are reached in an improvement program, may well decay. This makes the process of fixing the supply chain a never-ending task.
It was with these thoughts in my mind that I set out on my research journey in about 2009. Successful Integrated Planning in the Supply Chain documents the ideas that I came across along the way. My objective is simply to make supply chain planning projects more successful.
The terms ‘organizational change management’, and ‘change management’ often get tacked on to the end of interventions when an adoption of a new system and process is not going very well. This may be fine if you are implementing a new invoicing system, but will simply not work for something as delicate and complex as integrated planning.
Top down, “regressive” change management programs have as bad a history of failure as supply chain transformations. Recent thinking focuses on “platform” driven change. This is where individuals are encouraged to drive bottom-up change.
For Integrated Planning to Work, You Need to Tackle People's Behaviour
Behavioural economics challenge the theory that people are only driven by self-interest. Research shows that context and the way choices are presented are important. People’s behaviour is a manifestation of the assumptions that they make. It is affected by their belief in certain theories as well as their philosophy of life. This drives their decisions. This is often referred to as their “mindset”.
Addressing the mindset of people working in a company is one of the hardest tasks for organizational change management. To ignore mindset when designing new processes and systems can be a fatal mistake.
Let’s take two extreme examples of mindset. There is the story of the janitor who worked at NASA in the sixties and considered himself to have been part of the team that sent man to the moon.
Then there is the alienated worker that Marx wrote about in the 1840’s. This worker had lost the ability to determine life and destiny, deprived of the right to conceive of themselves as the “director of their own actions”. Alienated from the product, from the means of production, from other workers and from their “species-essence”.
This comparison is not about wages or working conditions, but about how individuals perceive their roles; how involved they believe themselves to be, and how much power they feel they have over their environments.
For integrated planning to work, people need to feel part of the bigger picture. If they are alienated, they will naturally focus on their immediate environment; their local optimum. They will come into conflict with other elements in the chain.
However, if they think like the janitor in NASA they are more likely to “do the right thing” and seek a global optimum. As one head of supply chain planning said: "We have to change the way that everybody things in this organization".
So, What to Do About It?
These problems are not going away any time soon. Despite years of management thinking and leadership training, we will still see a tendency for managers to default to the top-down mode when under pressure.
The challenge, therefore, is not to just fix problems within your organization as they occur, but rather to establish systems and platforms for change. This will mean that in the future, knee-jerk reactions and top-down initiatives will be less likely, as a culture of platform-driven change becomes the new norm.
In the future, social skills such as persuasion, emotional intelligence, and teaching others will be in higher demand across industries than technical skills like programming, equipment operation, and control. Technical skills will need to be supplemented with strong social and collaboration skills.
My book discusses a number of models for thinking about organizations and some tools and techniques that can be useful, and have worked for others trying to make changes to organizations. Digesting these models takes a lot of time, and even once you understand more deeply the rationale behind them, it is still challenging to bring them into daily usage.
Some key thinkers that helped form Successful Integrated Planning in the Supply Chain: Chris Argyris on action theory, Peter Senge on systems thinking, Herbert Simon on bounded rationality, Gareth Morgan on metaphors, and Richard Pascale on positive deviance.
You can make use of the framework of Successful Integrated Planning in the Supply Chain in a few ways:
- The discovery framework, of situation, complication and implication, can help structure your thoughts, whether engaging at a new organization or looking afresh at an organization that you know well.
- The lists of questions should provide you with plenty of material to structure interviews and discussions.
- The approach for building a platform is not a blueprint, but is designed to be an inspiration for what could be.
It takes courage to propose much of the thinking here when the environment that surrounds you is urging you to find a quick fix to a wicked problem. The hope is that that there is enough material here for you to argue for a different approach.