Programme Managing the Supply Chain Portfolio

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PM WORLD TODAY – FEATURED PAPER – JUNE 2010

Programme Managing the Supply Chain Portfolio

Professor Dr Pieter Steyn

Cranefield College of Project and Programme Management South Africa

Abstract:

Effective and efficient management of the Supply Chain Portfolio is widely regarded as the key to optimal organisational performance. How to achieve this has remained a complex challenge to executives. This article proposes programme managing the project driven and non-project driven components of the Supply Chain Portfolio as a sustainable solution to the problem.

Introduction

Stock and Lambert (2001) describe Supply Chain management as a highly interactive, complex systems approach that requires simultaneous consideration of many trade-offs. Supply Chain management integrates key business processes from suppliers to end users and provides products, services and information that add value for customers and other stakeholders. According to Steyn (2003, 2009) the Supply Chain Portfolio consists of seven key cross-functional business processes:

1. Customer relationship management (CRM). 2. Customer service management (CSM). 3. Order fulfilment.

The abovementioned cross-functional business processes focus on serving external customers. Moreover, in addition to managing service delivery aspects the Customer Service Management business process also attends to product returns from dissatisfied customers.

4. Product development and commercialisation. 5. Procurement.

6. Demand management and capacity planning. 7. Operations (manufacturing) flow management.

These four cross-functional business processes focus on serving internal customers; hence they play a major role in supporting the three cross-functional business processes that serve external customers.

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Stock and Lambert (2001) identify the structural dimensions of the Supply Chain Portfolio as the participating members, the cross-functional processes of the Supply Chain, and the different types of process links across the Supply Chain. They identify executive support, leadership excellence, commitment to change, and empowerment as key requirements for successful Supply Chain management, and regard information as a key enabler of Supply Chain Portfolio integration. However, they do not propose an integrative model to achieve the abovementioned. They assert that, due to the dynamic nature of modern organisations, leadership and management should regularly monitor and evaluate the performance of the Supply Chain. They regard it as imperative that performance goals are met, and failing so, that Supply Chain alternatives are evaluated and change implemented.

According to Steyn (2009) the latter is virtually impossible in bureaucratic organisations and the challenge is for organisations to transform to learning organisation paradigms and structures. Professor DA Garvin (1993) from Harvard Business School provides the following definition of a learning organisation: “A learning organisation is an organisation

skilled at creating, acquiring and transferring knowledge and at modifying its behaviour to reflect new knowledge and insights”. He asserts that to stay competitive in the new

economy, organisations must strive to move away from bureaucratic practices towards becoming learning organisations that are far more agile and flexible. This requires that organisations restructure themselves accordingly.

Steyn (2001, 2009) proposes that organisations shape their cross-functional portfolios into various programme structures, some processes serving internal customers and others external customers. In addition to the project related programme structures of the Strategic Transformation Portfolio, Continuous Improvement Portfolio, Capital Expenditure Portfolio, and Virtual Network of Partners Portfolio (Semolic, 2009), they should also shape the Supply Chain Portfolio’s cross-functional processes into a programme structure, or structures depending on the business model adopted.

As shown in Figure 1 the Supply Chain Portfolio is an integral part of the cross-functional programme structures of learning organisations. The programme configurations are not mutually exclusive. They support each other in an integrated way and the strategic picture is linked to the operational activities (Partington, 2000) (Thiry and Murray-Webster, 2000). The major organisational benefits of strategic importance delivered by the individual programme configurations vary from effectiveness, efficiency, and both effectiveness and efficiency. Moreover, benefits of strategic importance of the process deliverables are measured by utilising appropriate key performance indicators (KPIs) that are linked to critical success factors (CSFs) in a balanced scorecard. This is generally followed by a system of appraisal and review performed by the executive leadership to determine whether organisational benefits of strategic importance accrue to a satisfactory degree. According to Steyn (2009) the portfolios, including the Supply Chain Portfolio, are arranged into different programme structures each with its own portfolio manager and support staff as illustrated in figure 2.

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BS-PM LEARNING ORGANISATION VALUE CHAIN SCHEMATIC

CORPORATE STRATEGY PORTFOLIO: STRATEGIC TRANSFORMATION PROJECTS PORTFOLIO: CONTINUOUS IMPROVEMENT PROJECTS PORTFOLIO: CAPITAL EXPENDITURE PROJECTS S U P P L IE R S C U S T O M E R S MAJOR BENEFITS: ORGANISATIONAL EFFECTIVENESS MANUF

FIN SALES & M PURCH

©P G Steyn 2010 MAJOR BENEFITS: ORGANISATIONAL EFFICIENCY MAJOR BENEFITS: ORGANISATIONAL EFFECTIVENESS & EFFICIENCY FINANCIAL BALANCED SCORECARD (BS) CUSTOMER INTERNAL LEARNING & GROWTH Performance Measurement on KPIs FEEDBACK M A J O R B E N E F IT S : C u s to m e r S e rv ic e E ff e c ti v e n e s s a n d E ff ic ie n c y

HUMAN TALENT, INFORMATION ARCHITECTURE, INFORMATION VISIBILITY PROJECT MANAGEMENT PROCESSES SERVING EXT CUSTOMERS ORDER FULFILMENT (EXT CUSTOMERS)

CUSTOMER RELATIONSHIP MANAGEMENT (EXT CUSTOMERS) CUSTOMER SERVICE MANAGEMENT (EXT CUSTOMERS)

PRODUCT DEV & COMMERCIALISATION PROJECTS (INT CUSTOMERS) PROCUREMENT (INT CUSTOMERS)

DEMAND MANAGEMENT & CAPACITY PLANNING (INT CUSTOMERS) MANUFACTURING FLOW MANAGEMENT (INT CUSTOMERS)

LOG HR S U P P L Y C H A IN P O R T F O L IO : N O N -P R O J D R IV E N C O M P N T PORTFOLIO: VIRTUAL NETWORK OF PARTNERS PROJECTS MAJOR BENEFITS: ORGANISATIONAL EFFECTIVENESS (INNOVATION) S U P P L Y C H A IN P O R T F O L IO : P R O J D R IV E N C O M P N T

Figure 1: Balance scorecard - programme management (BS-PM) learning organisation value chain schematic proposed by Steyn (2001, 2003, and 2009).

P R OG R AMME S T R UC T UR E S CPO COO CEO CFO Portfolio Manager:

Supply Chain Project Driven Component

Portfolio Manager: Supply Chain Non-Proj Driven Component Portfolio Manager: Innovative Continuous Improvement Projects Portfolio Manager: Virtual Network of Partners Projects Portfolio Manager: Capital Expenditure Projects Portfolio Manager: Strategic Trans-formation Projects MAJOR BENEFITS MAJOR BENEFITS

EFFECTIVENESS & EFFICIENCY

Permanent supply chain programme structures that enhance customer service effectiveness and efficiency (serve predominantly external customers) MAJOR BENEFITS MAJOR BENEFITS MAJOR BENEFITS

EFFECTIVENESS & EFFICIENCY

EFFECTIVENESS (INNOVATION) EFFICIENCY EFFECTIVENESS MAJOR BENEFITS Permanent programme structures that enhance value chain effectiveness / efficiency (serve internal customers) Non-permanent programme structure that enhances value chain effectiveness and efficiency (serves internal customers) EFFECTIVENESS & EFFICIENCY

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Non-Project Driven-, Project Driven-, and Hybrid Structures. Programme structures for non-project driven organisations

The organisational value chain schematic in Figure 1 illustrates the Supply Chain Portfolio programme structures for project driven and non-project driven components of the organisation. The non-project driven component includes the three business processes, i.e., Customer Relationship Management (CRM), Customer Service Management (CSM), and Order Fulfilment that serve external customers. The remaining four business processes constituting the non-project driven component are Product Development and Commercialisation, Procurement, Demand Management and Capacity Planning, and Operations (manufacturing) Flow Management that serve internal customers and support the three cross-functional business processes that serve external customers.

Depending on its business model organisations can be structured as project driven, non-project driven, or hybrid. The latter means that the organisation has both a project driven as well as a non-project driven component in its Supply Chain. Non-project driven organisations generate income (revenue) by selling products and services to external customers. In non-project driven organisations the cross functional project management process serving external customers does not exist. Non-project driven organisations are not in the business of doing projects.

121

NON-PROJECT DRIVEN LEARNING ORGANISATION VALUE CHAIN SCHEMATIC

CORPORATE STRATEGY PORTFOLIO: STRATEGIC TRANSFORMATION PROJECTS PORTFOLIO: CONTINUOUS IMPROVEMENT PROJECTS PORTFOLIO: CAPITAL EXPENDITURE PROJECTS S U P P L IE R S C U S T O M E R S MAJOR BENEFITS: ORGANISATIONAL EFFECTIVENESS MANUF

FIN SALES & M PURCH

©P G Steyn 2009 MAJOR BENEFITS: ORGANISATIONAL EFFICIENCY MAJOR BENEFITS: ORGANISATIONAL EFFECTIVENESS & EFFICIENCY FINANCIAL BALANCED SCORECARD (BS) CUSTOMER INTERNAL LEARNING & GROWTH Performance Measurement on KPIs FEEDBACK M A J O R B E N E F IT S : C u s to m e r S e rv ic e E ff e c ti v e n e s s a n d E ff ic ie n c y

HUMAN TALENT, INFORMATION ARCHITECTURE, FORMATION VISIBILITY ORDER FULFILMENT (EXT CUSTOMERS)

PRODUCT DEV & COMMERCIALISATION SERVING INT CUSTOMERS PROCUREMENT (INT CUSTOMERS)

LOG HR S U P P L Y C H A IN P O R T F O L IO : N O N -P R O J E C T D R IV E N C O M P O N E N T PORTFOLIO: VIRTUAL NETWORK OF PARTNERS PROJECTS MAJOR BENEFITS: ORGANISATIONAL EFFECTIVENESS (INNOVATION)

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All seven cross functional business processes are present in the non-project driven component. Of the seven only Product Development and Commercialisation is a project-based business process. The programme management value chain architecture for the non-project driven component of the Supply Chain Portfolio is shown in Figures 3 and 4. 122₁₂₂ PROG M EXTERNAL CUSTOMERS PORTFOLIO MANAGER : “SUPPLY CHAIN” ORDER-FULF PROCESS MANAGER Functional Managers Functional Employees

“SUPPLY CHAIN” PROCESS TEAMS

Project-Portfolio Manager PROG M INTERNAL CUSTOMERS CRM PROCESS MANAGER CSM PROCESS MANAGER

STRUCTURE FOR THE FOURCROSS-FUNCTIONAL PROCESSES SERVING INTERNAL CUSTOMERS:PRODUCT DEVELOPMENT, PROCUREMENT, MANUFACTURING FLOW MANAGEMENT AND DEMAND MANAGEMENT

ARE SIMILAR TO THE ABOVE ARRANGEMENT

Figure 4: The non-project driven component’s programme management structure.

Programme Structures for Project Driven Organisation

Project driven organisations are unique. To win orders they tender on RFPs (requests for proposals) received from the external customers. When successful in their bids they generate income (revenue) by doing the projects for those external customers. For effective and efficient customer service they create and utilise cross-functional project management processes that constitute the project driven component of the Supply Chain Portfolio. Order fulfilment and product development become part of the cross-functional project management process activities and are performed by the project team members during the project lifecycles.

The cross-functional project management processes that constitute the project driven component of the Supply Chain Portfolio are still supported by the five remaining cross- functional business processes of the non-project driven component of the Supply Chain Portfolio. These are CRM and CSM, Procurement, Operation (manufacturing) Flow

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Management, and Demand Management and Capacity Planning. This unique programme management value chain architecture for the project driven component of the Supply Chain Portfolio is shown in Figures 5, 6 and 7.

PROJECT DRIVEN LEARNING ORGANISATION VALUE CHAIN SCHEMATIC

CORPORATE STRATEGY PORTFOLIO: STRATEGIC TRANSFORMATION PROJECTS PORTFOLIO: CONTINUOUS IMPROVEMENT PROJECTS PORTFOLIO: CAPITAL EXPENDITURE PROJECTS MAJOR BENEFITS: ORGANISATIONAL EFFECTIVENESS MANUF FIN SALES & M PURCH

©P G Steyn 2010 MAJOR BENEFITS: ORGANISATIONAL EFFICIENCY MAJOR BENEFITS: ORGANISATIONAL EFFECTIVENESS & EFFICIENCY FINANCIAL BALANCED SCORECARD (BS) CUSTOMER INTERNAL LEARNING & GROWTH Performance Measurement on KPIs FEEDBACK

HUMAN TALENT, INFORMATION ARCHITECTURE, INFORMATION VISIBILITY PROJECT MANAGEMENT PROCESSES SERVING EXT CUSTOMERS

PROCUREMENT (INT CUSTOMERS)

LOG HR S U P P L Y C H A IN P O R T F O L IO : N O N -P R O J D R IV E N C O M P N T PORTFOLIO: VIRTUAL NETWORK OF PARTNERS PROJECTS MAJOR BENEFITS: ORGANISATIONAL EFFECTIVENESS (INNOVATION) S U P P L Y C H A IN P O R T F O L IO : P R O J D R IV E N C O M P N T

Figure 5: Project driven component of the Supply Chain Portfolio and the five supporting processes as discussed in the text.

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115 115 115 EXECUTIVE PORTFOLIO MANAGER: EXTERNAL CUSTOMER PROJECTS PROJ-TYPE A PROG M PROJ-TYPE B PROG M PROJ-TYPE C PROG M Prof PG Steyn (2009) EX TE R N A L C U ST O M ER S MARKETING FUNCTIONAL MANAGER A N OTHER FUNCTIONAL MANAGER INF0-TECH FUNCTIONAL MANAGER

Figure 6: The project driven component’s programme management structure illustrating the cross-functional project management processes of the Supply Chain Portfolio serving external

customers. 116₁₁₆ PROG M EXTERNAL CUSTOMERS PORTFOLIO MANAGER :

“SUPPLY CHAIN” Functional

Managers

Functional Employees

“SUPPLY CHAIN” PROCESS TEAMS

Project-Portfolio Manager PROG M INTERNAL CUSTOMERS CRM PROCESS MANAGER CSM PROCESS MANAGER

STRUCTURE FOR THE THREECROSS-FUNCTIONAL PROCESSES SERVING INTERNAL CUSTOMERS:PROCUREMENT, MANUFACTURING FLOW

MANAGEMENT, AND DEMAND MANAGEMENT

ARE SIMILAR TO THE ABOVE ARRANGEMENT

Figure 7: The project driven component’s five supporting cross-functional business processes of the non-project driven component of the Supply Chain Portfolio.

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Programme Structures for Hybrid Organisations

Hybrid organisations are plentiful and have both project driven and non-project driven components in its Supply Chain Portfolio as described above. Steyn (2009) asserts that to enhance value chain effectiveness and efficiency project driven, non-project driven, and hybrid organisations need to adopt Continuous Improvement-, Capital Expenditure-, and Virtual Network of Partners Portfolios as programme structures. Moreover, when the need arises they must establish a Strategic Transformation Portfolio programme structure to analyse, develop and implement emergent strategy.

The latter is required, firstly, when the organisation has to undergo radical transformation and change. Under these conditions the programme office is staffed from outside to overcome the constraining paradigm deficiencies in the organisation. It is common knowledge that a contaminated organisational culture cannot cleanse itself. Secondly, the programme structure for the Strategic Transformation Portfolio can also be established when innovative transformation and change of a minor degree is required. Under these conditions the programme office is staffed from internal resources. In both cases the programme office is a temporary structure (Steyn, 2009).

Conclusion

For optimal organisational performance it is imperative that the programme structures of the different portfolios operate in synergy, irrespective of the business model adopted by an organisation. Coordinating and integrating the activities of the Supply Chain Portfolio with that of other cross-functional portfolios is a key factor for success. Sound structuring, leading and managing of the programme architecture in a learning paradigm are the important linkages alluded to, but not defined, by Stock and Lambert (2001). Structuring and programme managing the Supply Chain Portfolio in accordance with the principles proposed in this article is the sustainable solution.

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Bibliography

 Garvin, D A, “Building a Learning Organization”, Harvard Business Review, July-Aug, 1993.

 Murray-Webster R and Thiry M, Gower Handbook of Project Management, 3rd Edition, Chapter 3, "Managing Programmes of Projects", Gower publishing, England, 2000, Ed. Rodney Turner.

 Partington, David, Gower Handbook of Project Management, 3rd Edition, Chapter 2, "Implementing strategy through programmes of projects", Gower Publishing, England, 2000, Ed. Rodney Turner.

 Semolic, Brane, “Virtual Networks of Partners”, Proceedings of the IPMA Research Expert Seminar, Cape Town, South Africa, March, 2010.

 Steyn, Pieter G, “Managing Organisations through Projects and Programmes: The Modern General Management Approach”, Management Today, Vol 17, No 3, April, 2001.

 Steyn, Pieter G, “The Balanced Scorecard Programme Management System”,

Proceedings of the 17th IPMA Global Congress on Project Management, Berlin, Germany, 2003.

 Steyn, Pieter G, “The Emergent Role of Chief Programme Officer (CPO)”, Featured Paper, PM World Today, Volume XI, Issue XI, November, 2009.

 Stock, J R and Lambert, D M, “Strategic Logistics Management”, 4th Edition, Chapter 2, McGraw-Hill International Edition, 2001.

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About the Author:

Prof Pieter Steyn

Author

Dr Pieter Steyn is Founder and Principal of Cranefield

College of Project and Programme Management, a South African Council on Higher Education / Dept of Education accredited and registered Private Higher Education Institution offering an Advanced Diploma, Postgraduate Diploma and Master’s Degree in project and programme-based leadership and management. Professor Steyn holds an engineering degree (BSc Eng), MBA and Doctorate in business management and is a registered Professional Engineer. Dr Steyn founded consulting engineering firm Steyn & Van Rensburg (SVR) in 1970. He was appointed professor in the Department of Management, University of South Africa (1976), was Founder Chairperson (1977) of the Production Management Institute of South Africa, and helped pioneer Project Management as a university subject at the post-graduate level in 1979 at the University of South Africa. He was professor of Project and Operations Management at the TUKS Graduate School of Management, University of Pretoria from 1990 until retiring in 1998. Pieter was Chairperson of the Commission of Enquiry into the Swaziland Civil Service in 1993; Project Leader of the Strategic Management Team for the Gauteng Government’s Welfare Department and Corporate Core, 1994 to 1996. He founded the Cranefield College of Project and Programme Management in 1998. Pieter is a co-author of the “International Handbook of Production and Operations Management,” (Cassell, London, 1989, ed. Ray Wild) and author of many articles and papers on leadership and management. He is Founder Fellow of the Production Management Institute of South Africa, and a member of the Association of Business Leadership, Industrial Engineering Institute, Engineering Association of South Africa and Project Management South Africa (PMSA). Moreover, he is past President of the Association of Project Management, South Africa (APMSA) and South Africa’s former representative on the Council of Delegates of the International Project Management Association (IPMA), 2000-2005. He is currently a member of IPMA’s Research Management Board. Pieter can be contacted at [email protected].