In A Down Economy, Can Consultants Help?
During a down economy, logistics execs often turn to consultants to help boost supply chain efficiency. If you're thinking of tapping into professional help, read our advice on choosing the right consultant, avoiding pitfalls, and achieving off-the-chart results.
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Building a world-class supply chain is difficult in any economic climate. But transforming the supply chains of three organizations into one integrated world-class supply chain is an awesome challenge.
Just ask Fred Berkheimer, vice president of Unilever Home and Personal Care North America, which was formed when Chesebrough-Ponds, Lever Brothers, and Helene Curtis merged three years ago.
"We're going to reinvent ourselves," he says, with the goal of establishing a world-class supply chain—including slashing order cycle time from one week to 48 hours—in a few years.
To help achieve this goal, Unilever is supplementing its own logistics staff with a carefully selected group of supply chain and systems consultants to work on initiatives that include implementing a new order management system, redesigning the company's logistics network, and revamping Unilever's transportation processes.
Amoco Fabrics and Fibers Company (AFFC), an Atlanta-based wholly owned subsidiary of BP, also turned to a consulting firm to help evaluate how its supply chain could be more efficient and effective. A cross-functional team worked with Logistics Resources International (LRI), Atlanta, to audit customer response, inventory management, supply procurement, transportation and warehousing, and to review logistics technology.
"We recognized early in the process that we needed a consultant because we didn't know the right questions to ask," says Raylene Morris Carter. As Amoco's manager of customer service, she is currently supervising the second stage of the company's supply chain project, which involves implementing portions of the master plan developed during the first stage.
These two approaches have been very successful. But not all logistics and supply chain professionals' experience with consultants is so positive.
For example, one logistics executive recalls stepping in as project manager because the consultant assigned the task didn't have the necessary skills or experience to deliver a complex project on time. And plenty of managers will advise that a high-level partner sent in to sell the job may be replaced by much less experienced associates.
To help make sure you get the results you want, Inbound Logistics asked Berkheimer, Carter, and Bernard J. Hale—principal of Logistics Consultants Inc., San Juan Capistrano, Calif. and a former logistics executive in healthcare distribution and third-party logistics—to share the lessons they've learned working with supply chain and logistics consultants.
There is a plethora of logistics and supply chain consultants to choose from, but their capabilities, scope, and experience vary widely. Supply chain consultants include former logistics executives and academics whose operations range from one-man shops to very large firms with thousands of employees, and everything in between.
"Sole practitioners and large firms both have value," notes Hale, himself a sole practitioner. The best type of consultant to use depends on the particular project. "If you're trying to put in place a worldwide logistics network, you're probably better off going with a large company that has the necessary models, experience, and resources," he says. "Many small organizations don't have the time or technology resources required to do all the number crunching that goes into modeling.
"On the other hand, if you want somebody to travel around the world and in one week analyze and evaluate seven distribution complexes, your best bet may be a sole practitioner or a small firm," Hale says. "There aren't many massive firms that can be that flexible and react as quickly."
"There are definite advantages to the one-man show," notes Unilever's Berkheimer. "They can be much more efficient and cost-effective especially in specialized fields. But what if the consultant gets hit by a bus?"
In addition to lack of depth, when working with a sole practitioner, "you may not get the objectivity and diversity of thought and input that you can get from a larger company," he says.
Working with Tier 2 Consultants
Unilever has achieved good results in some situations working with Tier 2 consultancies, rather than the largest firms. "It's a much lower cost bracket, and we can get superior personnel and results as good as would be realized working with a Tier 1 firm."
Before starting your search for a supply chain consultant, "define the scope of each supply chain project carefully, and develop an understanding of how the project fits within the broader supply chain program," suggests AMR Research Inc.'s Kate Murphy. "With so many aspects to a supply chain, the tighter the requirements, the more accurate the consultant selection will be."
While some companies automatically turn to consultants with whom they've had success in the past, others go through a formal evaluation and selection process. For example, the supply chain project team at Amoco Fabrics and Fibers identified a list of selection criteria to use when evaluating consultant candidates, researched potential consultants, invited a number to make presentations, then asked them to submit proposals.
"We heard several proposals, and there was a huge difference in their approaches," Carter says. The consulting firms varied widely in two key aspects:
- The cost of the initial analysis. "There was a range of several hundred thousand dollars," says Carter.
- The number of AFFC personnel who would be required to work on the project.
AFFC ultimately decided to work with Logistics Resources International on the project. "LRI's entire approach was geared toward helping us learn how to do the work ourselves," Carter explains, "as opposed to coming in, identifying and correcting the problems, then leaving."
Be Specific About Goals
When evaluating potential consultants, "do your homework," advises Bernie Hale. "Be very specific about your goals and objectives, then find out what potential consulting firms have done for similar organizations, and what results they've gotten." Beware of consultants who tell you they can deliver the work you want done, then don't really have the capability of doing so.
When you interview consultants face to face, pay close attention to what they say, suggests Deloitte Consulting in its booklet Your Secret Weapon. Is it clear that they have learned about your customers and your competition, analyzed your web site, called your customer service line, spoken with experts in your industry, and visited places where you sell your products? If they have, you know they are prepared, and are actively interested in understanding your business and its problems.
Make Sure They Listen to You Before Giving Their Answers
It's equally important to pay attention to how well the consultants listen to what you say, Deloitte says. "Consultants will want to impress you with all their great answers to all your great problems. But they should listen to your explanations of your problems before giving you their answers."
Dig deep to get a true picture of a consultant's character and capabilities. Ask these questions:
- What don't you do well? "Consultants who tell you they do it all are really telling you they don't mind putting your organization's success at risk," Deloitte says.
- Name a client you wouldn't give as a reference, and why. "Admitting mistakes and demonstrating the ability to learn from them is a healthy sign of honesty, integrity, and intelligence," says Deloitte.
- How do you plan to leave? "Good consultants are always working themselves out of a job," Deloitte says. "More than anything, it's an attitude. Look for it."
- If we don't hire you, which of your competitors should we hire and why? Consultants will either give you a direct answer or evade the question. Either way, says Deloitte, you'll have learned important information about the consultant's character "that you need to know before you sign on the dotted line."
Avoid Scope Creep
Supply chain management projects by their very nature tend to be complex and far-reaching, so they can keep consultants gainfully employed for long periods of time.
"If there's a number-one issue in any consulting project, it's scope creep," reports Fred Berkheimer. "It's human nature."
Set Expectations from the Get-Go
Logisticians are trained to think in terms of process and continuous improvement, which makes it difficult to keep the scope of a project from expanding beyond its original goals. In addition, he says, "it's rare that you'll find third parties helping to curtail scope creep."
It's crucial to clearly set expectations from the get-go. "Clarity and narrowing the scope down from the beginning are absolutely necessary," Berkheimer says. "Even with that, I can almost guarantee that, unless you make a concerted effort not to let it, the scope of the project will creep. It's inherently difficult to say 'I'm going to leave this for another day.'"
Suppose you want to bring in a consultant to help with your organization's move into collaborative commerce, for example. "Each collaborative effort requires a tremendous amount of time to study, establish the trust that's necessary to collaborate with trading partners, and integrate the necessary systems," notes Hale.
Rather than writing them a blank check, companies that turn to consultants for help moving into collaborative commerce should be targeted in their efforts. "Be very clear on your goals and objectives, and start small," Hale advises. "Tell the consultant that your goal is to be collaborative and world class, but that you want to work with a handful of specific suppliers and customers.
"Tell the consultant that you want to stay within your budget, and don't want this to creep into a five million dollar project that will soak up 20 percent of your manpower." Then, Hale says, keep the project under very good control.
Secrets of Success
For greatest success when working with logistics consultants, follow these guidelines:
Start with a common base of knowledge. The supply chain project team at Amoco Fabrics and Fibers, for example, attended a week-long supply chain management overview class at the Georgia Institute of Technology's Logistics Institute. While Ed Frazelle, president of LRI, taught this particular class, virtually any good SCM class would have been valuable, Carter says.
"The class helped put everyone on the project team on a level playing field in terms of terminology," she says. In addition, attending the seminar strengthened team members' knowledge outside their area of expertise. This enabled them to contribute more effectively when other areas were being analyzed.
Insist on solid, experienced, and well-qualified consultants. "Get a high degree of commitment from the consulting firm on the level of consultants to be used in the project," advises Berkheimer. "Otherwise a partner can come in and sell the deal, then you get two guys fresh out of school" to work on the project.
"Specify the level of expertise you feel you need based on your objectives, Hale suggests. "If you don't, you may get five new MBAs who barely know what a forklift is."
Once you know who you will work with, make sure there's good chemistry between the consultants and your team, Berkheimer advises. Look for individuals who fill in any gaps that your team may have.
Don't look for a clone of yourself. "I look for consultants who think differently than I do," Berkheimer says. "We tend to like people because they're like us—but why do I need somebody else to act as a mirror? I try to find consultants who will bring up crazy angles" and by doing so contribute to a much stronger result.
Make sure they have "skin" in the game. "It can be good to link the consultant's financial reward with the outcome, especially with implementation," notes Berkheimer. "But most consultants would prefer that it's all upside and no downside. If consultants are not willing to share in the downside, that's a red flag for me."
Even without incentive-based pay, you can ensure that consultants have a vested interest in the successful outcome. For example, "generally, we take the approach that a consultant's involvement in a future implementation rides on how well they did on the up-front piece," Berkheimer says.
Establish an open atmosphere. To successfully work with consultants, advises Berkheimer, "establish a strong relationship and set an environment and tone where not only are you free to challenge, but where you are expected to challenge each other. There has to be a real open environment of sharing and feeling that you're in this together."
Keep the executives informed. AFFC's executive gatekeeper for the supply chain improvement project is the president of the company, which ensures that the executive team is kept fully informed on their progress. The project team had great success early on bringing in two consultants from Logistics Resources International to present an educational session to its leadership team.
Laying the Groundwork
The consultants presented an educational overview, helped senior leaders understand where the company was compared to other companies, talked about potential supply chain systems options, and addressed cultural and change management processes that would be required to improve the supply chain. This session helped lay the groundwork for the proposed supply chain master plan that was presented to—and approved by—the executive team one month later.
By following these guidelines, and doing your homework, you can find the right consultant to steer your supply chain projects smoothly through to completion, no matter what the economy.