Ten Reasons Why So Many Supply Chain Projects Fail
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Approximately 70% of supply chain projects fail, and if software is involved the failure rate climbs to 85%. The document lists 10 reasons for these high failure rates: 1) decision making in supply chains is increasing in complexity faster than supporting resources; 2) coordination between different business units is still lacking; 3) metrics used often work against each other; 4) benchmarks are unreliable. The complexity and lack of proper resources, tools, and education leads to many supply chain projects failing to achieve their objectives.
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This document discusses inventory optimization in market-driven supply chains. It defines what it means for a supply chain to be market-driven and explains that market-driven supply chains require a holistic approach to inventory management that focuses on both inventory levels and the form and function of inventory across multiple tiers. The role of inventory has increased in importance for market-driven supply chains due to factors like increasing demand latency, organizational tensions around inventory reduction, the long tail of demand, and the bullwhip effect of global operations. A multi-tier inventory optimization approach is needed to manage inventory in these complex, market-driven supply network contexts.
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Ten Reasons Why So Many Supply Chain Projects Fail
- 1. Ten Reasons Why So Many Supply Chain Projects Fail RightChain™ | Copyright – Lou Arace 2011 Page 1
- 2. Based on our research, approximately 70% of supply chain projects fail. If the project involves software, the failure rate climbs to 85%! The reasons and excuses are many: The complexity and scope of decision making required in supply chain logistics is increasing much faster than decision support resources - models, metrics, education, methodology, management, and software tools - are developing. Though improved, the coordination and communication between marketing, sales, manufacturing, demand / supply planning, procurement, and distribution is still lacking and sometimes dysfunctional. Metrics used in supply chain management often work against one another and many times exacerbate the very problems they are designed to solve. Benchmark targets used in supply chain management are often unreliable, one-sided, and demotivating. The few key resources who are candidates for supply chain logistics projects are stretched so thin on dizzying arrays of projects that they have no capacity to handle the true requirements of a supply chain strategy initiative. Page 2 RightChain™ | Copyright – Lou Arace 2011
- 3. Based on our research, approximately 70% of supply chain projects fail. If the project involves software, the failure rate climbs to 85%! The reasons and excuses are many:…continued Consultants retained as supply chain guides are often young and inexperienced; follow regimented problem solving approaches without taking the time to learn the business. Many times these retained “guides” are more interested and financially motivated to sell or integrate large, expensive software projects. The decision support tools used to help supply chain professionals often do not properly reflect financial objectives and service constraints. Less than 10% of supply chain professionals have any formal education or training in supply chain logistics, and that education is often outdated and/or impractical. Third-party logistics firms who are looked to for supply chain strategic advice are really only qualified to provide advice pertaining to their supply chain niche, and even that may be biased towards their products and services. In the name of “cost avoidance”, procurement is still looking for the cheapest first price not the lowest TOTAL cost. Hidden inventory carrying costs, lost sales costs, transportation costs and poor quality costs are not included in procurement cost evaluations. Page 3 RightChain™ | Copyright – Lou Arace 2011