Do the Supply Chain improvement projects justify the investment?
While I’m not aware of a precise estimate, I’m sure that several billion dollars are invested each year in hardware, software, and services by companies across industries – manufacturing, distribution, retail, utility services, and others – to improve their supply chain performance.
However, I’m not sure if anyone – including the companies making the investment – is completely sure of the return on investment they have achieved.
In most cases, I believe, that the corporate policies mandate creating a “business case” to support the request for funding the projects. The Capital Approval Requests (CAR) are typically quite rigorous and require estimating the expected Net Present Value (NPV) and Return on Investment (ROI) associated with the supply chain improvement projects.
However, once the funding for the project is approved, I believe the attention shifts from estimating the potential of improving supply chain performance and thereby creating value to simply executing the project. And in most cases, there’s no estimation of actual improvements and actual value creation after the project is completed.
To me, that seems, sub-optimal for the company and its shareholders. Wouldn’t you want to know if your project is delivering the results that you wanted?
I’d like to hear your experiences with large supply chain transformation programs and whether they delivered results to justify the investment.
While we’ve all heard the proverb – ‘measure twice and cut once’, I suggest that we put it in practice with a twist - measure thrice (at the beginning of a supply chain improvement project, during the project, and then again after ‘go-live’) and cut once.
