How to Make a Business Case for Supply Chain Investments

February 1, 2018

Written by Dr. Madhav Durba. This guest post first appeared on Kinaxis’ industry blog, The 21st Century Supply Chain.

Over the years I’ve had the opportunity to engage in or witness the process organizations go through to prepare business cases in support of supply chain investments, from the successfully crafted and executed, to those that fail to gain traction.

Based on that experience, I wanted to share my eight most important pieces of advice for those being asked to prepare a business case for their supply chain investments.

1. Ensure clarity on the strategic objectives of your organization.

Any sizeable supply chain investment draws the attention of the senior leadership. Rightfully, your leadership will look to understand how the initiative supports the overall strategic objectives of the business. Being well versed with these objectives and able to demonstrate how the proposed initiative will support them is paramount to getting buy-in from your executives.

2. Show how the initiative supports strategic objectives.

Are your executives measured on servicing strategic customers better than your competition and reducing regulatory risks? If so, your business case will need to show how you can align with these objectives. For example, understanding your customers’ buying behaviors and segmenting and serving them based on these behaviors will help differentiate strategic customers. By enabling end-to-end visibility across your entire network, you can put a flashlight on looming regulatory risks. Make strong links between the strategic objectives and the enablers as directly and explicitly as possible.

3. Use analysis and anecdotes to craft a compelling story.

If your business case comes down to driving a reduction in inventory or an improvement in employee productivity, providing sufficient operational data analysis along with anecdotal evidence of how the initiative can make a difference will help provide a compelling backdrop. Even a simple segmentation analysis on your customer or SKU portfolio, or bringing together your demand, supply and inventory in one place can be eye opening. For example, if 50 percent of your on-hand inventory is tied to supporting products that represent only six percent of your gross sales, you may have a prime opportunity. Apart from data driven insights, sharing anecdotes about the risks of not doing anything can be a strong motivator. For example, if better visibility could have avoided a regulatory fine of US $4 million, bring it up!

4. Factor in competing projects.

From time to time I come across a business case that’s built with no consideration of competing projects. If you sum up all the business cases claiming inventory reduction, organizations with such business justification should be running on negative inventory! The key is for you to understand what other initiatives are in flight in your company and reflect an appropriate entitlement for the benefits you’re claiming. For example, if you’re making a business case for a supply chain planning project and there is an inflight Warehouse Management Systems (WMS) project, you should engage with the team driving that project to identify synergies and appropriately reflect the entitlements without double counting them.

5. Understand your stakeholders and ensure their buy-in.

A young logistics executive who was pitching for a transformation project once lamented to me about how his business case presentation to his leadership team failed. It turns out this young executive worked very hard and analyzed a lot of data to put together what he thought was a compelling, objective business case. As part of his business case, he proposed a 12 percent reduction in inventory while enabling a 1.5 percent revenue growth driven by better management of the inventory mix and ensuring product availability. It turns out the executive in charge of sales who was responsible for delivering revenue growth was in the room with his peers and saw the business case for the first time. The project manager was asked to go back to the drawing board as the commercial executive challenged his assumptions. The young executive in this case could have avoided the agony by testing and validating his assumptions with the commercial lead ahead of time.

6. Identify your sponsor and let them bat for you.

The aforementioned situation could have been avoided if the young executive had engaged the help of another executive with significant interest in the success of the initiative; someone who had enough gravitas and a knack for navigating the organization. Remember, you’re selling your business case to stakeholders who often have conflicting objectives. Building consensus for change can be a delicate process. A sponsor can be of great help!

7. It is your business case. Own it!

While your company may have engaged external consultants to help you build a business case, you are the owner of the business case. At the end of the day, it is not your consultant who’s signing up for the business case – it’s you and your executives who will commit, and then be measured on it. So, you must understand, own, and stress-test every assumption driving the business case. Use multiple triangulation points so you gain confidence in the business case. Needless to say, you must factor in all internal and external costs to drive ROI, a breakeven point, and Net Present Value (NPV) to make it comprehensive.

8. Measure the value to ensure success and sustain momentum.

This last step is often easily forgotten, as I’ve seen some projects get the necessary buy-in and funding only to falter in execution. Your business case with all its stated objectives and enablers should serve as a guidepost for successful project execution that can be sustained over time. However, when an organization struggles with change management, it can be of great help to refer back to the business case to remind stakeholders of the overall project objectives. When you measure, socialize and celebrate the value a project has delivered to date with both your team and broader audiences within your organization, it will prove to be very meaningful and fulfilling for your entire team.

I hope you find this helpful in the development of your next business case.

What advice would you have based on your own experiences on the topic? I’d love to hear your thoughts!


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