Managing Change in the Supply Chain
J. Paul Dittmann, Ph.D.
University of Tennessee
The life of a business professional today means being constantly connected with little downtime to recharge. Supply chain professionals often find themselves at the center of the storm, striving to balance very demanding operational imperatives with the need to satisfy customers and therefore help grow revenue. They must find ways to operate successfully today, yet also improve rapidly to be competitive in the future. And, improvement basically means “managing change”. Change management is the essence of the real work of a business professional.
Ironically, supply chain professionals often find themselves ill equipped to deal with change management, and in fact most have only a vague idea of what it is all about. Yet, studies show that projects fail more due to human and organizational reasons than technical challenges. A common comment heard from supply chain professionals when asked what it takes to successfully implement initiatives is that it simply requires excellent analysis and a good plan. Many do not naturally gravitate to the softer issues of communication planning and organizational buy-in. Yet failures in these areas are at the root of many initiative failures.
The Project Management Institute statistics on project success are not encouraging:
- Only 16% of projects come in on time, on-budget, on-benefit
- 53% complete, but greatly missed time or budget or benefit.
- 29% never complete
- 62% of companies has a runaway project that seriously damaged the firm
A CSC Index study is only slightly more encouraging, with successful projects representing 32.1% of the sample.
What creates this dismal track record? Many factors cause the failure of initiatives, from scope mis-management to lack of good project leadership to technical deficiency. But the experience from working with hundreds of companies at the University of Tennessee strongly indicates that the most significant short-coming is in the change management area.
A major study of change management in the supply chain area was completed at the University of Tennessee and published in the book: Handbook of Global Supply Chain Management by Mentzer, Myers, and Stank, 2007, Sage Publishing. This work was grounded in a complete review of the change management literature as well as data from hundreds of companies in the University of Tennessee databases.
To summarize the results of this study, there are four change management imperatives that must be addressed to ensure success in supply chain initiatives, described below.
Identify Key Stakeholders
One project manager from a major firm leading a major supply chain initiative thought he had designed the perfect change management plan. He introduced the topic with a well-crafted 30 minute presentation to everyone affected. He followed that with a one hour review with everyone directly involved to go deeper into the coming change. About a month after the project began, he issued a newsletter that clearly showed the progress being made and the benefits to be achieved. Finally, as the project neared completion, he managed to get a 600 word article in the company newsletter. This project manager did many things right, but missed in one key area. He did not first identify the individuals critical to the success of his initiative, and design a communication plan specifically for them.
We estimate that companies communicate over two million words to their employees regarding just new initiatives each quarter. The communication plan described above amounts to only one-half of one percent of that mass of information bombarding employees quarterly. Unless the communication process precisely targets the key players, it will not rise above the normal noise level in a large enterprise. There are people in every company for nearly every project that will make or break the project. These people may be anyone from senior executives to critical subject matter experts embedded in the organization. To manage change effectively, these key people must be identified, and exposed to a customized communication plan.
When change management is taught in the supply chain executive education programs at the University of Tennessee, each participant goes through a short exercise. They first identify the most important supply chain project facing them today, and then they place individual names on a grid like the one below:
|Highly Influential people
who oppose the initiative
|Highly influential people who are taking no apparent position on the initiative||Highly influential
People who are enthusiastic
|Moderately influential people and opposed to the initiative||Moderately influential people who are taking no apparent position on the initiative||Moderately influential people who are enthusiastic|
|People with little influence, but
Oppose the initiative
|People with little influence
who are taking no apparent position on the initiative
|People with little influence who are enthusiastic|
The communication plan cannot be designed effectively without first going through this exercise. Once it is done, it is then time to develop a detailed communication process with a targeted message.
Develop a Communication Plan with a Targeted Message
Developing a good communications plan means addressing in detail the seven items in the grid below.
The message needs to change depending on the audience. In the extreme stereotype, operations people love to hear about cost reduction projects, and sales managers get excited about plans to increase revenue. Although never this simplistic, the message must be tailored to the audience.
The feedback mechanism in the above model needs to be more than an afterthought. Feedback operates on two dimensions. On the one hand, feedback to the project team should drive reasonable changes within the project scope. But more importantly, feedback to the original audience is the catalyst that creates buy-in.
One project manger told us that she would gather suggestions from the key stakeholders for her project, work them into the project, and then meet again to show the stakeholder how their feedback was being used. This created strong cross-functional ownership, and she found it well worth the substantial time investment.
Plan for Good and Bad Resistance
Resistance to new concepts is normal, and that resistance takes two forms. In one case, we heard a project manager lament that her project to improve availability of product was failing because of severe resistance. When asked what form that resistance took, we heard things like key people not coming to project review meetings, pulling a critical person off her team to assign to another project, and simply ignoring the project. This was compounded by highly confrontational statements made at critical times to cause the initiative to lose credibility.
A project cannot succeed in the face of such negative resistance, and actions like these must stop if the project is to make progress. If face-to-face, fact-based reviews and appeals to the individual opposing the effort do not work, then the senior sponsor be leveraged. Senior sponsors earn their keep when they help project managers remove barriers like these.
On the other hand, some level of initial resistance is to be expected and indeed should be viewed as positive. Such actions as open-mined questioning, initially challenging the need and debating alternatives, and questioning the approach can all be important parts of a healthy buy-in process. But, this buy-in process takes time, time not accounted for in most project plans. We strongly recommend that this process be planned for in a formal way. Time for debate should be scheduled as tasks on the project plan or Gantt chart. Otherwise, they will be by-passed too quickly, causing this critical buy-in process to be short circuited. In a rush to stay on schedule with the technical tasks, the soft items often take a back seat. Yet ironically these are the most important factors in the eventual project success.
Develop a Plan to Sustain Change
In a major durable goods company, we saw an interesting scenario play out. The CEO decided that it was critical to improve forecast accuracy. This occurred after someone mistakenly sent him a report showing a 60% forecast error at the SKU location level. He decided that this situation had to be the source of many of the operational inefficiencies in his company, and he then delegated this problem to a young marketing V.P. who was rising rapidly in the firm. When the given the assignment, the V.P. realized that he needed help in a major way, in that he knew nothing about forecasting technology nor even the current basic approach being used in the firm. So, he did a little research and brought in the best consultant he could find.
The consultant conducted an audit and found many deficiencies in the process and the systems used. He designed a world class process, and brought in state of the art software. He also convinced the V.P. to initiate a forecast collaboration process with the company’s three largest customers.
The plan was outstanding, and worked beautifully. Forecast error fell by one fourth from a 60% error to a 45% error. Room for improvement of course still existed, but the CEO was ecstatic with the process. Of course the CEO was not so pleased that he didn’t demand additional improvement for the next year. The V.P. was on to other problems assuming this one was on the right track. But, by mid year, he checked in and found something very wrong. All of the accuracy improvement had been reversed! By the time the situation stabilized it was too late; and the results for the year came in at an embarrassing level actually worse than the year before.
What went wrong here? The plan for improvement was technically flawless, and indeed it had produced early promising results. A key piece was missing however. The plan to sustain the change was missing.
Our experience shows that sustaining change is often more difficult than implementing it in the first place. Yet, ironically project managers rarely develop a well designed plan to sustain change.
Much has been written on the subject of change management with some excellent models in place. There is John Kotter’s strategic eight step model for transforming organization, Todd Jick’s tactical ten step model for implementing change, and the General Electric seven step model for accelerating change. These have a lot of similarity. But, the analysis at the University of Tennessee based on working with hundreds of companies indicates that the above four areas are the most often deficient.
Very simply, to effectively manage change and successfully implement supply chain initiatives, the project team must identify the key individuals, and design a targeted communication plan specifically for them. The project plan must include sufficient time to deal with healthy debate; and, once the project is implemented, a plan to sustain the change must be executed.
- Handbook of Global Supply Chain Management, John Mentzer, Matt Myers, Ted Stank, Sage Publishing, 2007, Chapter 31.
- “Leading Change”, John Kotter, Harvard Business School Press, 1996.
- “Implementing Change”, Todd Zick, Harvard Business School Press, 1991.
- “Learning in Action”, David Garvin, Harvard Business School Working Knowledge, 2000.