Improving project supply chain performance

I have been in the strategic procurement and supply chain business as a practitioner for more than 35 years, for the large part in the energy industry. During the last 10 years I have endeavored to introduce novel ways of improving profitability for clients in industries as diverse as pharmaceutical, retail, public sector and manufacturing, in addition to the energy industry.

What has changed over those 35 years? The most noticeable change, of course, has been the introduction of IT and the market being bombarded with faster and more comprehensive systems to improve the efficiency of supply chains, from procurement to customer relationship.

Management teams have to wrestle with the decision to invest in a system, and, in my experience, many are finding it very difficult to decide which systems will meet their business needs. The volume of technical information and associated acronyms present management teams with considerable confusion. They want to know the following specifics about systems being considered:

• Realistic potential for improving profitability

• Time required for implementation

• Total cost

• Length of time projected for return on investment (ROI).

They are aware of both the publicized promises and subsequent overruns in time and budget. Combined with the complexity of the case for investment, they often conclude, “We can probably manage with what we already have.” Delegation of the decision-making to procurement or IT has also proven to be an ineffective remedy.

Can’t product capability, cost, time, and ROI be expressed in simpler terms to facilitate management team decisions?

Considerable improvement potential

In the 80s, I was involved in managing procurement for North Sea capital projects. Since, I have been conscious of and observed it being a neglected area with considerable potential for improving business profitability. I am uncertain that much has changed.

Clearly, tackling the supply chain at the earliest stage is likely to bring the best results. Procurement for capital projects is the stage of the supply chain process at which commitments are made that impact not only on costs and time within the life of the project, but also through operations and ultimately to obsolescence.

As a practitioner and advisor in the environment of procurement and supply chain management, clients expect me to follow my published beliefs of:

• Simplicity

• Real business benefits in the short term

• Cost and time transparency

• Sustaining client improvement without continuous consultants’ support

• Pleasing the client.

I believe the solution to the procurement of capital projects can also be simple. So, why does the energy industry often hold the view that solutions to its problems have to be complex, sophisticated, costly, and time-consuming to implement? The simple solution should be so much more appealing.

I wonder if the market assumes that complexity and high prices are necessary characteristics of a good product. Conversely, are simplicity and attractive prices indications of inferior products?

Finally, having spent so much of my working life in an environment of multi-million dollars spent, I really question the adage “big is beautiful.” I have come across small companies employing highly skilled and seasoned professionals capable of making a very considerable impact on business improvement.