Best Practices: Implement Massive SCM Projects

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Managers currently regard large, multi-site, multi-year Supply Chain Management
(SCM) implementations as too risky. Indeed, such projects require
extremely skilled project management. BP Chemicals implemented Aspentech’s
MIMI supply chain management solution across 17 businesses. It
was a huge, highly successful project, largely because of excellent project
management.

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Best Practices: Implement Massive SCM Projects

  1. 1. THOUGHT LEADERS FOR MANUFACTURING & SUPPLY CHAIN ARC INSIGHTS By Simon Bragg BP’s SCM Project Management Lessons • Stagger sub-projects • For each sub-project, first develop a rough-cut model • Define central and local project management roles and responsibilities • Clarify policy regarding standardization vs localization • Budget 5 to 10 percent/year of project costs for support, maintenance, and continuous improvement INSIGHT# 2003-12E & MP MARCH 19, 2003 Best Practices: Implement Massive SCM Projects Keywords OpX, SCM, Project Management, Chemical Summary Managers currently regard large, multi-site, multi-year Supply Chain Man- agement (SCM) implementations as too risky. Indeed, such projects require extremely skilled project management. BP Chemicals implemented Aspen- tech’s MIMI supply chain management solution across 17 businesses. It was a huge, highly successful project, largely because of excellent project management. BP Chemicals BP Chemicals manufactures petrochemicals, intermediates, and plastics, which includes acetic acid, acrylonitrile, aromatics, purified terephthalic acid (PTA), olefins, polyethylene, and polypro- pylene. With 35 manufacturing sites worldwide, BP Chemicals produces around 27 million tons of product a year. The supply chain planning task is huge, around 100 unique products, several thousand SKUs due to grade and pack types, thousands of customers, and hundreds of delivery points. Project drivers were fairly typical of most large chemical companies. By BP standards prior to implementation, forecast accuracy, data and information visibility, customer responsiveness (e.g. right product in right place), were unsatisfactory. Some businesses had problems completing their monthly planning cycle within four weeks, and purchasing would procure against out of date forecasts. In addition, BP wanted to run proac- tively, with a better understanding of customers’ requirements and wanted to react faster to order changes.
  2. 2. ARC Insights, Page 2 ©2003 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com The Supply Chain Implementation For each business, the new process was: 1. Propose Supply Plan: incorporate maintenance plans, production ca- pacity, co-producer capacity, and raw material availability. 2. Propose Demand Plan: incorporate segmentation and demand rules. 3. Resolve Supply Issues: obtain feedback from production. 4. Resolve Demand Issues: use feedback from sales managers. 5. Apply Supply Plan: use detailed production schedule and stock replen- ishment movements including VMI. 6. Apply Demand Plan: communicate constrained demand plan, perform ATP checks as appropriate, confirm customer order, schedule and exe- cute delivery. Across all 17 business lines, around 250 users touch collaborative demand planning, including product, account, and sales managers. Approximately 30 users handle supply chain planning, and about 50 users tackle produc- tion planning and scheduling. BP split the implementation into two phases. Preliminary project definition work and vendor selection began in September 1999. The first 9 business lines, those that were most enthusiastic, began implementation in July 2000, with completion in 12-18 months. Phase 2 kicked off in October 2001, and is almost finished. BP split each phase into some 40 smaller sub-projects, for instance focusing on demand forecasting for a business, or production planning for a manufacturing plant. In total, the project required over 60 man years of effort and employed 40 outside consultants at its peak. Project Payback The quantified benefits are confidential, although BP would agree that most projects achieved payback in a year. Based on our understanding of Aspen- tech’s technology and the chemical industry, we suspect payback was achieved within months. Recommendations: The Lessons of BP Phase 1 adopted many well-known good practices. The team sold each sub-project to every business unit leader before beginning implementation. The business unit leaders had to agree to the time commitments required of
  3. 3. ARC Insights, Page 3 ©2003 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com their people, the scope of work, and the project timeline, cost, and value delivery. After Phase 1, BP conducted an internal review of what worked and what didn’t. This revealed 70 lessons; the main ones are: Stagger Sub-projects Kick-off one or two business lines and projects every month. Although this extends the elapsed time, BP gained cost effective management of external resources and better sharing of project lessons. In Phase 1, all business lines kicked off together, proceeded in parallel, and ended more or less together. This over-burdened central project management by requiring support for all projects at about the same time and meant that project lessons could not be shared across sub-projects. For Each Sub-project, First Develop a Rough-cut Model On each sub-project, have consultants develop a new rough-cut business process and mathematical model to deliver some value in 1-3 months. Then let users try it. Since sub-projects were staggered, BP central project management could switch these consultants onto other projects. A few months later, have the consultants return to the rough-cut model to incor- porate users’ ideas and rework a final, definitive process and mathematical model. In Phase 1, for each sub-project, project consultants typically defined the new processes and changes, then developed the mathematical model, and handed it over to users. Unfortunately, at the outset, the users didn’t know enough to, for instance, fully define some heuristics. The result was that some models were too simple, others too complex. It also took 6-10 months to put a model in front of the user. Phase 1 work enabled BP to develop standard processes and model tem- plates based on Aspen’s MIMI Configured Applications (CAPs). In Phase 2, these CAPs cut implementation work by up to 50 percent. Balance Central and Local Management Define clear roles and responsibilities for central and local project manage- ment. For each business line, BP identified a local lead, responsible for delivering an appropriate solution to their business line. The local lead, for example, organized meetings with the implementation team, ensured end- users were appropriately involved and trained, and solved the data issues.
  4. 4. ARC Insights, Page 4 ©2003 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com Ideally, the local lead is a skilled networker, a good communicator with plenty of initiative, and understands the entire business. At a minimum, the lead should know the business areas where the most opportunity is ex- pected. Some knowledge of supply chain concepts is nice, but an aptitude for the technology outweighs an initial understanding. BP’s central project management team managed the vendor relationship, external resources, and schedules. By allocating available resources across the sub-projects, it manages the trade-off between total costs and time- scales. BP used more local consultants in Phase 2 because it found that hav- ing Phase 1 consultants in time zones 6-8 hours away created difficulties. Clarify Policy Regarding Standardization vs. Localization Strike a balance between “thou shalt do this” and “this is the way, if you wish to adopt it.” BP expected demand and production planning to be common platforms because BP has many internal supply chains. Common platforms enable visibility and supply chain optimization across multiple business units. It’s the business unit’s decision whether or not to adopt the other solutions, using their own ”fit-for-purpose” criteria. Budget 5 to 10% of Project Costs for Continual Improvement Continue tweaking your supply chain model, adding constraints and func- tionality to reflect business and market changes. Going live does not equal project completion. In the first year after going live, budget around 10 per- cent of the total project cost for support, software maintenance, and enhancements. Thereafter, budget about 5 percent of total project cost each year. However, the costs of changing the planning model to handle a major business change such as a plant closure or an acquisition should be borne by that activity. Please help us improve our deliverables to you – take our survey linked to this transmittal e-mail or at www.arcweb.com/myarc in the Client Area. For further information, contact your account manager or the author at sbragg@arcweb.com. Recommended circulation: All EAS and MAS-P clients. ARC Insights are pub- lished and copyrighted by ARC Advisory Group. The information is proprietary to ARC and no part of it may be reproduced without prior permission from ARC.

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