Defining the scope of a supply chain project is crucial for optimizing implementation efforts, balancing cost reduction and quality, and measuring progress. Connecting supply chain initiatives with corporate objectives and using KPIs and ROI can help streamline implementation. Involving implementation specialists is also important.
The most important aspect of optimizing supply chain implementation is defining the scope of the project. This will help determine a timeline for implementation. For example, a simple process change might only require a one-day release; however, a complete supply chain strategy review can take a year or more to fully implement.
Defining the scope will help to optimize the balance between cost reduction and quality in the shortest possible time. It can also help to measure implementation progress over time. To optimize the speed of implementation and ensure the best resources for the implementation team, buy-in from management is required. The best way to do this is to connect the implementation of supply chain initiatives with corporate objectives. This will ensure executive management sponsorship of the implementation, which can help accelerate implementation efforts.
Senior executives are often concerned with product lifecycles, new product development, market differentiation and cost containment. Key performance indicators (KPIs) are a way for supply chain managers to connect supply chain implementation goals to larger corporate initiatives. Examples of KPIs are lines per hour, cost per employee, or book value of inventory. KPIs help identify implementation gaps. Gaps in implementation are defined as process steps that are not beneficial to the overall corporate objective.
Another commonly used measure that helps streamline supply chain implementation efforts is return on investment (ROI). ROI helps project managers monitor costs throughout the supply chain implementation cycle. ROI also helps you find break-even points that can be used as milestones along the timeline.
The most common way to calculate ROI is to divide the net profit made from an investment by the cost of the investment. For example, if you invest $10 USD ($) and earn $2 from the investment, the ROI will be calculated by dividing 2 by 10. The answer is 20%. If the costs associated with supply chain implementation outweigh the expected benefits, the implementation effort should be abandoned.
A common mistake that supply chain implementation teams make is not including the implementation specialist in making decisions on supply chain solutions or creating new KPIs. Implementation is an important consideration for medium and large scope projects. Therefore, implementation team members can add considerable value to maximizing supply chain implementation efforts.
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