Setting up for success: creating alignment with supply chains
Over the past 12 months, client organisations have sought to create greater alignment with their supply chains to gain security of supply and provide additional support throughout supply chain tiers. Building upon our Realising the extraordinary findings, we explore a six-step process for ensuring suppliers and client organisations are seamlessly aligned.
Over the past two decades, client organisations have sought to achieve outcomes more consistently by adopting better integrated operating models to combat internal delays and costs. With the disruption of COVID-19, certainty and integrated models have become even more important.
Market research undertaken over the past year has highlighted that to withstand ongoing changes, business leaders have prioritised supply chain relationships to not only secure supply, but to create security and alignment across major projects. An example is the creation of Project Bank Accounts (PBAs) on High Speed 2 (HS2) in the UK to provide greater payment protection for the supply chain and Sydney Metro accelerating work in the pandemic to support suppliers and take advantage of reduced traffic.
To create an integrated approach on major projects, there must be alignment in operating, commercial and governance approaches – and this must be client organisation-led.
Despite progress in acknowledging responsibilities, greater understanding is still needed according to our market poll, which highlighted only six percent of respondents believed that clarity of the client organisation’s role was vital in enabling the supply chain’s success. In regions such as the UK (three percent) and Australia (four percent), this figure was even lower highlighting that there is a lack of clarity of the client organisation’s role in how they must integrate and align supply chains into integrated organisation models.
Understanding blockers to supply chain alignment
While great strides have been taken in aligning operating models with supply chains, there continues to be a challenge with different levels of maturity and interface structures. Factors which typically block alignment include:
- Lack of end-to-end visibility which includes poor line of sight regarding linkages between the target operating model and market engagement strategies, but can also include inconsistent or non-digitally enabled data analysis and poor visibility of outcomes.
- Limited understanding of the client organisation and supply chain’s role, responsibilities and dependencies.
- Misalignment of outcomes and priorities within the delivery cycle.
- Market engagement which is at odds with the client organisation’s vision or doesn’t meet the desired joint outcomes between the client organisation and supply chain.
- Differing cultures and behaviours in client and supply chain organisations which can lead to divergent approaches, mistrust and adversarial outcomes.
To enable a step change in end-to-end relationships, client organisations must align operating, commercial and governance approaches with supply chains. But before this, they must start with clear, understandable outcomes which essentially are the ‘north star’ guiding priorities, tasks and operations.
This outcome-driven approach provides clarity as to the roles of the client organisation, as well as the supply chain and removes potential ambiguity or inconsistent messaging through multi-tiers of the supply chain. This is promoted through increased connectivity and closer integrations within the supply chain or ecosystem.
Once outcomes are at the centre of the programme and operating model, it is up to the client organisation to maintain an aligned model and:
1. Understand and identify linkages and support structures
Identifying the difference between the target operating model, overall commercial lifecycle, client and market engagement strategies and outcomes, enables definition of where obligations sit. There must be an honest recognition of the linkages within the wider programme lifecycle as by taking the holistic end to end view, clarity is provided regarding roles and expectations of the client organisation, as well as the supply chain.
Once the structure and linkages are established, assurance processes need to continually test that alignment is ongoing. Too often an event identifies misalignment, and the focus is on responding, rather than also considering the governance and assurance measures which themselves require revisiting and updating.
2. Enable a programme delivery ecosystem
Through designing an end-to-end programme delivery model, client organisations create an ecosystem which instils integration from the beginning.
An example of a collaborative ecosystem approach is the Project 13 (P13) methodology. Project 13 offers a business model which is enterprise focused and enables the client organisation and supply chain to be focused on whole-life outcomes. It identifies where the linkages are within the commercial lifecycle, as all parties have open and early dialogue in the pursuit of joint outcomes and reduction in overall delivery risk. UK nuclear power company, Sellafield, has adopted this approach for its long-term delivery strategy.
3. Establish clear roles and capability
The roles, responsibilities and overarching supporting governance structure need to be clearly understood by all to drive performance. This must start with client organisations inwardly looking at what the long-term vision is, establishing what core roles and activities they wish to retain, the responsibilities they wish to take on, as well as what the market can provide. Against this framework, clients need to ‘hold the mirror’ to themselves in critically assessing if they have the right capabilities or capacity in place to evolve.
By focusing on creating a more capable organisation, some client organisations are seeking to increase efficiencies through increasing involvement in front end design and construction.
To do this, they are strengthening their in-house capability and capacity; where the cost of investment is easily recovered through reduced contingency levels and lowered unit build costs.
4. Align cultures and behaviours
To effect alignment, client organisations should first examine their own culture and behaviours to enable alignment. This must include creating awareness of the current collaboration culture/capabilities and exploring what changes need to take place to enable an integrated operating model. It is imperative to remove potential barriers, such as adversarial thinking, which divide client and supply chain organisations to enable an inclusive mindset.
To bring the vision to life, a practical tool is a set of shared values and behaviours which are built to enable all those engaged to understand what is expected of them and how they should live them in an outcomes-based environment.
5. Communicate it, live it, measure it
By clearly communicating programme outcomes, a single shared vision is created for the supply chain to align to and deliver. To ensure the shared vision is achievable requires client organisations to integrate processes and embrace the digitalisation of approaches.
The client organisation must also create key performance metrics (KPIs) which are aligned not only to the vision outcomes, but also joint delivery of them.
Goals must be linked to supply chain alignment of performance – such as appropriate governance routes and must be supported by active monitoring and needs analysis to ensure successful delivery of the vision. By regular checks and measurement, all parties can have confidence that structures are working effectively as a whole system, and that the governance structure provides a robust escalation process.
6. Create a single risk-based lifecycle process
Adopting a single risk-based system enables organisations to drive strategic decision-making and bring together risk from all lenses; organisation strategy, culture, governance, policies, risk data, measurement and evaluation, scenario planning and stress testing. Exploring risks with supply chains isn’t new and in recent years, client organisations have sought to truly understand their operating model and map how it links to the overall commercial lifecycle in a deeper and more accessible way.
A key enabler of this full lifecycle understanding of risk is digitalisation.
By creating a standard approach that draws together data, technology and digital working, client organisations can create familiar and repeatable delivery environments for the supply chain.
Starting the journey now
These six steps will enable an aligned client organisational model which can fully integrate supply chain partners.
In essence, it will mean that supply chain partners are treated as an extension of the client organisation and that integration is at the heart of everything the client or supply chain does. With more client organisations driving towards integrated but agile operating models, a stronger relationship with supply chains will be created which is underpinned by the right capability and culture, a shared data environment and jointly developed governance, assurance and measurement methodologies.