Managing Change in Supply

Chain Management

Katy Keane April 29, 2005

What you want as supply chain leader

Enhance supply chain impact on business

performance
Establish yourself as effective leader of change
Impediments to these goals

Organizations are typically “segmented” into silos

with varied agendas
Change management tools are poorly
understood and/or hard to implement
Tools to reach your goals

• Recognize and leverage the

“Shadow Organization”
Organizational Silos
• Make customer satisfaction the
universal language

• Business Process Redesign (BPR)

Change Management • Change Leadership Principles
Tools • Management System with Metrics
as the centerpiece
The vision – externally integrated
supply chain

™
Supplier

Customer

Information Transportation
Data Interchange

Electronic Data

Online Visibility
Retailer Reports

Communication
Manufacturing
 The vision – internally integrated

Finance Production

Customer Service
Logistics

Information

ERP Systems

Intranet

Scorecards

Sales Reports

Communication
Forecasting
We are not aligned – not even internally

People

Process Technology
 Marketing

Manufacturing

Logistics

Sales
Silo-Busting – where do we begin?

Finance
Reasons “destructive” silos develop

 Lack of top management awareness and

involvement
 Absence of cross-functional knowledge,
processes, and tools
 Fear of sharing knowledge
 Misaligned metrics
 “I win – you lose”
Tools to reach your Goals

• Recognizeand leverage
Organizational Silos the “Shadow Organization”
• Make customer satisfaction the
universal language

• Business Process Redesign (BPR)

Change Management • Change Leadership Principles
Tools • Management System with Metrics
as the centerpiece
Anatomy of a “Shadow Organization”
Governed by
individuals in
authority
positions –
“What we say
we do”

Influenced and
guided by
underground
peer group
leaders –
“What we
really do”
Breakout Exercise
 List significant change initiatives that your
organization has begun over the last 4 years.
 Discuss how receptive your organization was to
that change, and why it was either successful or
unsuccessful.
 How did the subculture “shadow organization”
influence that success or failure?
Tools to reach your Goals

• Recognize and leverage the

“Shadow Organization”
Organizational Silos
• Make customer satisfaction
the universal language

• Business Process Redesign (BPR)

Change Management • Change Leadership Principles
Tools • Management System with Metrics
as the centerpiece
Customer is shortest path to
concerted action
Customer pays the bills
Customer is ignorant to internal politics
External customer focus enables “blameless”
dialogue and problem-solving

Your organization’s customer satisfaction metrics

provide the “starting point” for your
supply chain improvement agenda and lay the
foundation for your change initiative.
Tools to reach your Goals

• Recognize and leverage the

“Shadow Organization”
Organizational Silos
• Make customer satisfaction the
universal language

• Business Process Redesign

Change Management (BPR)
Tools • Change Leadership Principles
• Management System with Metrics
as the centerpiece
Why performance does not happen

Customer needs/expectations are unclear

Measures of success are not clear/captured

No repeatable, consistent, scalable processes

Organization not aligned, skilled &/or managed

to deliver
Business Process Redesign (BPR)
Addresses these issues to improve organization
performance
Clarify customer expectations
Define measures of success in the customers’
terms
Create processes that drive consistent execution
Organization structure, skills and measurements
are set up to support the processes and
organization’s mission/role
Business Process Redesign offers a way
to leverage customer (dis)satisfaction

“A poor business process will

always
win over a dedicated work
force”
Business Process Redesign takes teams
through:

Structure

Organizational
Jobs

Alignment
Business Processes

Departmental
Mission
Customer Requirements
Business Process Redesign
Customer
Requirements
Structure
•Clear understanding
Jobs of what your
customers expect
Business Processes and how they define
performance.
•Output -
Departmental Mission understanding of
customers and
Customer Requirements expectations
Business Process Redesign

Departmental
Structure
Mission
Jobs •A clear and
concise statement
Business Processes of purpose
•Creates
boundaries
Departmental Mission•Output - Mission
Statement
Customer Requirements
Business Process Redesign
Business
Structure Processes

•Process maps and

Jobs measures linked to
defined customer
Business requirements
Processes •Output - multi-level
process maps,
Departmental Mission metrics and SOP’s

Customer Requirements
 Processes

Inputs
Inputs
Raw
Raw Materials
Materials
Knowledge
Knowledge Process Activities Outputs
Outputs
Skill
Skill Data,
Data,
Information
Information What
What results
results from
from
Actions taken on the the
the actions
actions taken
taken
inputs on
on the
the inputs
mple: inputs
ts Process Activities Outp
Dough Cut dough Cookies
Place cut dough places in pan
Turn on oven
Put pan with cut dough pieces in oven
Take dough pieces out of the oven
Business Process Redesign
Jobs
Structure •Clusters of activities
(within processes)
Jobs defining what
associates must do
and defining how
Business Processes associate’s
performance will be
Departmental Mission measured.
•Output - job
descriptions
Customer Requirements
Business Process Redesign

Structure
Structure
•Recommended
Jobs organization
structure
•Output -
Business Processes organization chart

Departmental Mission

Customer Requirements
 Ways to group jobs

Functional structures

Process structures

6-4
Creating an Integrated Demand
Chain Organization at Borden
Foods
Situation
ERP Implementation pushed through in 12
months in order to meet Y2K deadlines
Leading-edge demand planning technology
selected to achieve significant inventory benefits
as part of business case
Post go-live, case fill rates dropped dramatically
throughout much of system, creating major
customer risk
Months of functionally-based problem-solving
was not getting permanently better results
Solution

Pull together the disparate pieces

of the organization supporting the
demand chain to create a tighter
organization more singularly
focused on meeting the grocery
store customer’s need for greater
fulfillment reliability, using BPR to
get at the end-to-end process.
 Demand Chain Flow
Consensus Make Production
Enterprise Make or Manufacturing
Forecast Planning Buy? Planning

Buy

Co-Mfg.
Planning &
Execution

Accounts DC Receipt & Deploy to

Receivable & Order Order Management Distribution
Deduction Fulfillment Management Of Inventory Center (DC)
Reconciliation

Customer Focused Team Process

Customer
Invoicing Orders
Example: Consensus Forecast

 Mission statement:
 To determine an agreed-upon by item by DC
finished good forecast, by item and DC, for all
business units
 Inputs & suppliers:
 Historical shipment data – Information Systems
 Historical consumption data – External Firm
 Sales plans & promotional activities - Sales
 Marketing Initiatives & Plans - Marketing
Consensus Forecast
 Outputs & customers
 Consensus meeting minutes – SBU, finance,
marketing, sales, inventory planners
 Forecast error report - SBU, exec team, inventory &
production planners
 Metrics
 Forecast error (by SBU, product, and DC)
 Sales field forecast error (by region, product group)
 Consensus meeting participation
 Sales force modifications to statistical forecast
 Accuracy of shipment data
At BFC, preparing the Demand Chain
team was critical
 Associates needed to understand:
 The new business processes
 The SOPs that support the business processes that
they will work within and systems that will support their
work

The Standard
Systems Success
Business
Processes
+ Operating
Procedures
+ Training =
BFC RESULTS

Metric Prior Yr Current Yr % Chg

Case Fill 96.73% 98.04% +1.3%
On-Time Shipment 78.35% 90.39% +15.7%
Forecast Error 39.03% 30.56% -21.7%
Deductions to GTS 1.65% .95% -42.4%

Inventory Accuracy 96.34% 99.96% +3.76%

Total Headcount 50 37 (46% -26%

new roles)
Implementing Change Within
Big Lots - Transportation
Situation
TMS implementation created the need for
significant re-training and re-evaluation of all
processes
Post go-live, service and ability to route inbound
shipments became a problem and reporting
accuracy created doubt and uncertainty
Vendors, carriers and buyers were losing
confidence in Traffic’s ability to manage
effectively
Solution
Created a cross-functional SWAT team that was solely
dedicated to identifying and solving the technical and
process issues
Re-evaluated processes to improve communication
across the organization
Constant re-training on the new system and all process
improvements with the teams
Implemented cross-functional metrics and scorecards
to track issues and progress
Communicated frequently to the organization on the
status of progress
 For Delivery

KEY MEASURE
LATE DOMESTIC COLLECT NO
Big Lots Results
Proactive management of inbound shipments,
meeting buyer and vendor requirements
Improved shipment visibility and communication
Improved on-time deliveries and lower
transportation costs
Improved performance of the traffic team
Critical success factors of BPR
Senior management support – must be visible
 Alignment at senior leadership team level

Clear and consensed understanding of customer

requirements and expectations
 Everyone must “sing off of the same songsheet”

Be aware of, and engage, the “Shadow

Organization”
Involve everyone and communicate often
Build strong internal relationships
Breakout Discussion
Where are your potential change management
“allies” in your business?
How might you leverage these allies to help
advance your supply chain improvement agenda?
Tools to reach your Goals

• Recognize and leverage the

“Shadow Organization”
Organizational Silos
• Make customer satisfaction the
universal language

• Business Process Redesign (BPR)

Change Management
• Change Leadership
Tools
Principles
• Management System with Metrics
as the centerpiece
“The Range of Change”

• Impacts single department or functional

Narrow process/structure
• Doesn’t touch customer

• Touches several functions

Intermediate • Closer to customer, or touches customer
in less significant manner

• Touches most/all functions &/or business

processes
Transformational
• Significant impact to customer
relationship capabilities
Understanding the scope of change is
an important starting point

What does
Impact of Change

the “Change
Curve” look
like for your
initiative?

Scope/Breadth of Org Impact

Use “Change Curve” as a simple
diagnostic tool in planning BPR

Participants How many people, from what

parts of the organization
Scope Timing, Investment in outside
resources
Measures What does the “finish line” look
like?
Change Communication approach &
management intensity, Training requirements
approach
Keys to change management success

Prepare the organization for what’s new/different

Understand and leverage your informal leaders
Create alignment at top of organization around
what “success” looks like
Understand the nature of “learning curves”
Keep the dialogue grounded in the customer-
relevant metrics and language
Tools to reach your Goals

• Recognize and leverage the

“Shadow Organization”
Organizational Silos
• Make customer satisfaction the
universal language

• Business Process Redesign (BPR)

Change Management • Change Leadership Principles
Tools
• Management System with
Metrics as the centerpiece
So why doesn’t success happen all the
time?
BPR is not a new technology
Borden, Big Lots and others are not unique
stories
If leadership is accountable to the customer
requirements and measures, and BPR is well
executed success might occur
The “difference maker” is
leadership commitment to a
disciplined “management
system” which ties it all together
and enables BPR benefits to
evolve with the business
“Management System” components

Continual Problem-Solving
Associate Accountability
Education & For Process
Process Tweaking Owners
Scorecard that
Reflects Customer
Requirements
& Process
“Health” Communication
Team-Based
of Performance to
Reward &
Customers, Staff &
Recognition Process Partners
 Do’s of new leadership
 Deliberately set formal business goals and engineer
informal culture values and group behavior norms that
counter old behavior
 Do not be intimidated by informal resistance or
adversarial behavior
 Recognize but avoid old subculture behavior
 Establish an environment that fosters involvement and
high accountability, creating a balance between task and
process
 Do not rely on formal authority, but use creative peer
pressure to get peers to manage change
Resources

Gabel, J.E., Pilnick, S. (2002), The Shadow

Organization in Logistics: The Real World of
Culture Change and Supply Chain Efficiency,
Council of Logistics Management, Oak Brook, IL