Supply Chain Excellence [Electronic resources] : A Handbook for Dramatic Improvement Using the SCOR Model نسخه متنی

Fowlers' Project Portfolio and Projected Return on Investment

On Day One, the Fowlers design team met to review the project portfolio and projected return-on-investment (Figure 19-1). The numbers provided some surprises. The first was in Project Number Four: Disparate Systems. Nearly everyone had fit into one of two camps at the start of the project. The "rose-colored glasses" group saw the new Tier One ERP system as having achieved all that it was engineered to achieve; it was in and that was the goal, right? Those in the "system is the problem" group viewed the ERP system's implementation over the last couple of years as the main reason the company wasn't as successful as it had once been. But now, looking at the project portfolio, both groups agreed that in order to improve performance, more investment was needed to use the system to its fullest. The ROI value of Project Number Four was low—particularly in relation to the high level of first-year investment. This helped bring the camps together on prioritizing supply chain improvement elsewhere before putting more money into the system. It was clear that Project Number Four would start well after the rest of the projects on the chart.

Figure 19-1: Fowlers' project portfolio and projected return on investment.

Another surprise was in Project One: Poor Planning. Nobody had realized the tremendous cost of poor planning; it was the second biggest opportunity for profit improvement. The entire company had practiced execution and fire fighting until it was an art form. In fact, service awards were given to Fowlers employees who effectively responded to the most fires in a quarter. All of that could now change. The processes to be implemented that would improve the company's planning efforts were leading practices, but not rocket science. Of more concern was the human discipline needed to make, follow, and appropriately adjust plans. There were a thousand-and-one behaviors to change—from the executive team all the way to the manufacturing scheduler. Only a third of the cost for this project actually went to improving forecast analysis functionality; the rest was process and change management.

The third surprise was in Project Number Eight: No Formal Return Management. The financial impact of poor product return is the first low-hanging fruit of the twenty-first century. Accruals, obsolescence, return policy, reverse logistics, customer service, technical support, inventory disposition, product recall, and consigned excess inventory have all evolved to a point where a well-designed RETURN element can deliver significant financial impact on every income statement and balance sheet.

The fourth surprise was in Project Number Five: Poor Data Integrity. This project had the best ROI profile and the fewest required changes of all projects in the portfolio. The work is not glamorous, but improvements are exponential. If just one data field of the item master is off by just one digit, it cascades throughout the enterprise until, over time, inventory, cost, and service go out of control.

For each project in the portfolio, risk was assessed and strategies were put in place. Risk assessment included both gross dollar impact and probability of occurrence. Strategies were as simple as to avoid the risk or to accept it. When applicable, means to mitigate the risk were included.