January 7, 2012 | Author: PM Hut | Filed under: Procurement Management
Hey! You Got Supply Chain in My Project Management!
By John Westerveld
Recently I was reminded of an old TV commercial for Reese’s Peanut Butter Cups. Now, some of the readers of this blog may not be old enough to remember this commercial, so I’ll give you the “Cliffs Notes” version. One person is walking down the street enjoying their peanut butter (what…doesn’t everyone eat peanut butter from a jar while walking down the street?). Another person is walking the other way eating a chocolate bar. The inevitable happens; and they collide causing the chocolate bar to get into the peanut butter. One of them declares “Hey, you got your chocolate in my peanut butter!” the other replies “You got your peanut butter on my chocolate!” Then to everyone’s surprise, they find that the combination works!
So, what does this have to do with supply chain you ask? Many companies have major installation projects required to recognize revenue for their products; solar farms, cell phone towers, major equipment installation, etc. They don’t receive full payment until the project is complete and running. Typically, these companies will have a system that manages their supply chain and another system for project management. What is surprising is that these systems will often run independently of one another. If information flows between these systems, it is a manual update performed by the project manager or master scheduler depending of which way the information is flowing.
But isn’t there a relationship between the supply chain and the project that drives the requirements? If a project moves out by six months, doesn’t that impact the supply chain? If a major component on the critical path for the project is going to be late, doesn’t that impact the project? Project managers and supply chain managers are like those people in the commercial; walking along, doing their thing, eating their chocolate and peanut not realizing that there is a better way.
Let’s imagine the following scenario; you are a project manager managing the installation of a large piece of medical equipment at a hospital. The contract has been signed, and the project plan has been approved. But all is not rosy. The schedule is aggressive and there are significant penalties if the project comes in late.
So, a few weeks have gone by, and things are progressing well; the supply chain has gone to work building the equipment and work has started at the hospital to prepare the site. Then, one of the suppliers several levels down in the supply chain has pushed out their delivery date on a key component that goes into a critical piece of equipment needed for the project. This lateness is propagated up through the supply chain and is now reflected in the delivery date of this assembly. Traditionally, the project manager might never be made aware of this critical shortage, because traditionally, the project manager doesn’t have visibility into the supply chain.
In this new world, however, supply chain and project management are both part of the same system and are linked together. So, when the project manager comes in, he immediately gets an alert that the project is going to miss its date including the impact on revenues and additional penalty costs. A few clicks later, the project manager sees that the lateness is due to a late assembly coming from the supply chain. With this information, he project manager can collaborate with the supply chain to resolve the issue.
Integrating supply chain with project management is like sticking chocolate in peanut butter. Once you put it together, you realize that they are better together than on their own. Do you manage projects as a regular part of your business? How do you tie the project plan back to the realities of the supply chain? Comment back and let us know!
John Westerveld is a demo architect for Kinaxis. Previously, John was a product manager responsible for supply management, supply chain risk management, application interface and framework, integration management and server. He joined Kinaxis over 7 years ago bringing with him 16 years of manufacturing experience, including 10 years in the information technology field. John is a qualified APICS instructor and is certified APICS CPIM. You can read more from John on the Kinaxis blog.
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