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Develop a Vision of Where You Want to Go
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Your supply chain design should incorporate the next-generation characteristics of transparency, flexibility, and simultaneity. Your supply chain Depending on your starting point, this may design should require major change or only minor updates to what you are already doing. Your road- incorporate the map to change doesn t have to be a massive next-generation undertaking. As you design your future supply chain, characteristics of ensure that it satisfies the four tests of supply transparency, chain architecture discussed in 2: strategic fit, end-to-end focus, simplicity, and flexibility, and integrity. Once your process design is com- simultaneity. plete, you can define the organizational structure required to ensure that it can be executed effectively and efficiently. You also can identify the information systems that will be needed to support the process and make the necessary data available.
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Strategic Supply Chain Management
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Test the strength of your solution by answering the following questions:
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Is the future process clearly defined How does the new process affect the existing process architecture, organization, physical infrastructure, and IT Do business and IT managers agree on the nature and scope of required changes Does the initiative meet all evaluation criteria return on investment, strategic alignment, business risk, and supply chain architecture rules Are the proposed changes ambitious but achievable How will you measure success
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Step 3: Adapt the Supply Chain
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The final step in managing the roadmap to change is all about implementation and ensuring that the solution is implemented in a way that achieves your value objectives. How you adapt your supply chain will depend on the types of initiatives you include in your roadmap, but the core disciplines provide an excellent framework for guiding your efforts. The most successful roadmap implementations use a phased approach, which minimizes risk and maximizes the likelihood of success. The phases generally include detailed design, prototyping or proof-ofconcept, a controlled pilot, refinement based on the results from the pilot, and rollout. A number of work streams are needed to support these phases, including program management, change management, and value management. While it is not our intent to provide a primer on effective programmanagement methodologies in this book, we note that successful implementation requires understanding and mastering these challenges. We will touch on each briefly, focusing on specific challenges associated with increasing focus on collaboration and information availability.
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Value Management
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The next-generation supply chain emphasizes the value of information and the ability to make real-time decisions far more than in the past. This means that many of the changes you put in place will focus less on tangible physical assets making it more difficult to measure and manage the value of your efforts. As an example, the value of reducing inventory days
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CHAPTER 6 A Roadmap to Change
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of supply from 150 to 100 days is relatively easy to measure. However, the value of increasing on-time delivery to commit from 70 to 90 percent is much more difficult. Since you ll need to monitor performance improvements at critical milestones, make sure that you have agreement up front on the specific metrics definitions and on the value created by hitting certain targets. Perhaps for every percentage point in improved delivery performance you can expect a 5 percent increase in the customer revenue stream for the life of the product. Or for every day you reduce your average order-fulfillment cycle time you will realize a one-time release of cash equal to one day s revenue, which can then be invested at your current cost of capital. Since the value of performance improvements will be different for every organization, there is no set formula to follow so make sure that you have agreement up front. Use the operational metrics you chose while designing the solution to measure progress toward your overall business objectives, and systematically audit value achievement after significant milestones are reached to assess whether the solution needs fine-tuning.
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