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The selection of supply chain management projects: A case study approach Article  in  Operations Management Research · December 2011 DOI: 10.1007/s12063-011-0058-2

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Oper Manag Res (2011) 4:164–181 DOI 10.1007/s12063-011-0058-2

The selection of supply chain management projects: A case study approach Richard G. Mathieu & Raktim Pal

Received: 1 July 2011 / Revised: 13 September 2011 / Accepted: 15 September 2011 / Published online: 27 September 2011 # Springer Science+Business Media, LLC 2011

Abstract Organizations undertake strategic supply chain initiatives through project implementation. However, selecting the right supply chain projects can be difficult due to high levels of organizational risk and technical complexity. Although the literature is rich in quantitative and qualitative methods for project management, prior research into best management practices specific to supply chain management (SCM) project selection is limited. This paper examines the methods used in evaluating and selecting SCM projects used by the management at three publically held multinational organizations. The primary objective of this research is to identify a set of generalizable good practices in the selection and evaluation of SCM projects. Nine useful business practices in SCM project selection have been identified based on cross-case comparisons and a close examination of the literature. Eight practices had been previously identified, but were scattered throughout the literature on ERP, IT management, and R&D management. A new practice calls for the consideration of supply chain partners’ return-on-investment (ROI) in the project selection process. Highest preference should be given to winwin projects for the organization and its partner(s). The practices identified here sho`uld provide the foundation of practical guidelines that can be used during the planning stage of SCM projects. This paper reduces the knowledge gap in SCM project management by analyzing organizaR. G. Mathieu (*) : R. Pal Department of Computer Information Systems & Management Science, College of Business, Showker Hall, MSC 0202, James Madison University, Harrisonburg, VA 22807, USA e-mail: [email protected] R. Pal e-mail: [email protected]

tions with significant supply chain experience and synthesizing these results with the current related literature. Keywords Supply chain management project . SCM project selection . SCM project management best practices . Case studies

1 Introduction Many organizations implement supply chain management (SCM) projects to enhance inter-organizational coordination, increase efficiency, add value, and ultimately improve the bottom line. SCM project is a special class of enterprise level project that can potentially generate high returns, but also has high risks arising from unpredictability and technical complexity. The technologies that enable SCM business solutions typically span vertical architectural levels (business, application, and technology architectures), and integrate horizontal inter-organizational processes and enterprise applications. The inherent technological complexities and intricacies of convoluted business processes associated with SCM projects can result in highly visible and expensive failures. Charette (2005) documented SCM-related project failures at Avis Europe, Ford, Hershey Foods, Hewett-Packard, Hudson Bay, Kmart, Nike and Sainsbury PLC with losses ranging from $33.3 million to $527 million. Thus, over time successfully selecting the right SCM projects has become a critical management issue. Like any major capital investment, SCM initiatives must show significant benefits to warrant their continuation and expansion throughout the enterprise. While project evaluation and selection methodologies have been abundantly available to business decision makers, information on utilizing them in the context of SCM projects is limited in

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the academic literature. Three notable exceptions are the works by (1) Sarkis and Talluri (2004) who use the analytical hierarchy process and goal programming to evaluate and select software for e-commerce software and communication systems for a supply chain, (2) Alvarado et al. (2008) who describe a value mapping framework to identify stakeholder value in SCM IT projects, and (3) Brun and Caridi (2008) who use a value and risk assessment methodology to evaluate SCM projects. There are a number of practitioner articles that discuss the need for appropriate evaluation and selection of SCM and enterprise-wide IT projects (Rodin 2001; Shaw 2006; Vaskelis 2001; Hartman 2002; Elkins 2003). The complexity of SCM projects makes it necessary to evaluate them as inter-organizational systems with multiple decision makers (Sarkis and Talluri 2004), apply lessons learned from prior implementations (de Burca et al. 2005), and develop strategic framework for appraisal and audit of the associated systems (Sarkis and Sundarraj 2000). Hence, we dig deeper into the issue and make attempts to have a better understanding of the complex decision-making process of selecting SCM projects using exploratory case study. Three projects involving various aspects of supply chain management at three multi-national organizations are investigated. By examining the experiences obtained from these projects and analyzing opinions of the personnel involved, we identify nine useful practices in selection of such projects. While eight of them had been acknowledged previously, they were scattered throughout the prior literature on ERP (enterprise resource planning), IT (information technology), and R&D (research & development) project management. We put forth these practices together and establish their relevance in the context of SCM project selection. In addition, we identify a new management practice of including return on investment (ROI) consideration beyond organizational boundaries or assessment of potential impact on supply chain partners in the SCM project selection process, The rest of the paper is organized as follows. First, we provide a broad review of the extant literature on evaluation criteria and justification procedures of different types of projects. Next, the research methodology is presented. Subsequently, three cases are presented and analyzed. This leads to identification of good practices in selection of SCM projects. Finally, we conclude the paper with comparative analysis with other good practices and discussions on the contribution of the study, managerial implications, and future research.

2 Literature review We review well-established evaluation approaches used in selection of projects in different areas including R&D, IT,

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and SCM, and refer to project management best practices. We cover both academic and practitioner journals. The review directs us to a thorough understanding of the current practices and to develop a basis of comparison with the information obtained from the case study. In the following sections we provide detailed discussions on existing literature. 2.1 General approaches for project evaluation In order to economically justify implementation of a project, basic concepts like net present value, hurdle rate, internal rate of return, and cash flow are used widely (Foley 2002). Rogow (2004) interviewed a number of executives involved with IT project decisions. His findings suggest that companies should look beyond return on investment and total cost of ownership. Some organizations have formalized process measurement and process improvement as part of project justification (Segars et al. 2001). Other considerations such as multi-year financial commitment analysis and budget provisioning should also be made before taking the final project selection decision. Lefley (2004) also argued that financial approach for appraising strategic benefits of projects is inappropriate. The research looked into procedure for developing strategic indices (SI) that can be used to identify and evaluate projects’ strategic benefits. Stanleigh (2006) mentioned that projects should be aligned with organizations’ core strategies. Organizations should have well structured process of prioritizing projects. The academic literature is filled with sophisticated techniques (such as analytic hierarchy approach, conditional stochastic dominance, goal programming, etc. to name just a few) to evaluate projects. However, evidence suggests that these sophisticated evaluation techniques have not found wide acceptance among practitioners. According to the Mainstay Partners’ study originated in 1999, only 21% of the companies have processes for prioritizing and managing technology investments. Most choose their IT investments on an ad-hoc basis, favoring pet projects of powerful managers (Hartman 2002). Many use ROI metrics that are inconsistent from one project to another making it nearly impossible to correctly choose which projects should be funded and which ones should not be selected (Lewis and Koller 2001). 2.2 R&D project evaluation Many R&D portfolio managers use a hybrid approach that combines different traditional approaches; they rely far less on financial methods for portfolio management and put stress on management buy-in and support (Cooper et al. 1998). R&D project evaluation models historically fall into three categories: financial, risk, and scoring (Lawson et al. 2006). While financial methods have been found to be used

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most widely amongst large organizations, companies that use hybrid approaches incorporating risk analysis and scoring scheme with financial analysis generally do a better job in selecting projects (Cooper et al. 2001). Despite potential advantages of structured hybrid approaches, they may be cost prohibitive. Also, sometimes management thinks that high quality decisions can be made primarily by the experienced executives even without a structured approach. Some of the complex methods for R&D project evaluation are mentioned here. Meade and Presley (2002) discussed how analytic network process (ANP), a more general form of analytic hierarchy process (AHP) and capable of assessing dynamic multi-directional relationship among the decision attributes, could be used for selecting R&D projects. Sun and Ma (2005) proposed multi-box packing model heuristic based on integer programming for simultaneously selecting and scheduling R&D projects. The total value of the selected projects was maximized and schedules were so made that annual costs were kept close to the estimated annual budgets as much as possible. Ringuest et al. (2000) used a methodology for adding or removing a project from an existing R&D portfolio using the criterion of conditional stochastic dominance which analyzed the effect of a given project on the risk and return of the existing portfolio. Using a multiple case study approach Verma and Sinha (2002) showed how interdependencies between R&D projects in technology firms influence project performance. Hence, a portfolio approach may be particularly useful for selecting R&D projects when resources are available to implement the methodology. 2.3 IT project evaluation The methodologies used for evaluation and selection of IT projects can be classified into four major categories: economic, strategic, analytical, and integrated approaches (Irani et al. 1997). Economic approaches generally use financial measurements such as return on investment (ROI), internal rate of return (IRR), net present value (NPV), and payback approaches. They largely ignore intangible factors. Strategic approaches are less structured, and deal with projects’ strategic alliances with corporate goals by considering both tangible and intangible factors. Analytical approaches such as scoring models (Nelson 1986), risk analysis (Remenyi and Heafield 1995), and analytic hierarchy process (Saaty 1990) are highly structured but subjective with the use of tangible and intangible factors. Integrated approaches such as balanced scorecard (Kaplan and Norton 1996) and multi-attribute utility theory (Sloggy 1984) combine subjectivity with formal structure, and incorporate both financial and non-financial dimensions of decision making. It is argued that traditional economic appraisal techniques are not appropriate for justifying

R.G. Mathieu, R. Pal

investment in IT projects because of intangible benefits, and direct and indirect costs associated with these projects. On the other hand, while analytical and integrated approaches are capable of considering intangible factors they are complicated to use (Irani et al. 1997). Milis and Mercken (2004) argued while traditional appraisal techniques such as payback period and net present value methods are not quite suitable for IT project evaluation, the newer appraisal methods are difficult to interpret and use. They suggested that reliance on a single technique may yield suboptimal results and proposed multi-layer evaluation process based on balanced scorecard. Kulak et al. (2005) proposed axiomatic design (AD) approach, which is suitable for multi-attribute evaluation of IT projects. 2.4 SCM project evaluation SCM projects are often closely linked to ERP that have emerged as the backbone of the modern information technology infrastructure. Many organizations have adopted ERP systems with the goal of integrating key business processes so that information can flow freely between various parts of the firm (Laframboise and Reyes 2005). The inter-organizational nature of supply chain makes the evaluation more complex (Clemons and Kleindorfer 1992; Levinson 1994). Overall acceptance by supply chain partners associated with such projects is critical for success. Sarkis and Talluri (2004) mentioned about lack of methodologies in the literature on justification of interorganizational systems. Brun and Caridi (2008) evaluated SCM projects by identifying key performance indicators and ultimately performing a performance gap analysis. Alvarado et al. (2008) developed a value-mapping framework which examined the contributions of multiple stakeholders in SCM projects taking into consideration of the fact that a dominant partner in a supply chain might try to move decisions in their favor. Since SCM projects influence relationships with upstream/downstream suppliers/customers, supply-chain-wide performance measures are needed to measure effectiveness (Chin et al. 2004). However, many companies ignore this and tend to stick to organization based measures only. 2.5 Best practices in project management The Project Management Institute has “provided project management insight, best practices and enterprise support for the project management profession” since 1969 (Project Management Institute 2006). Loo (2003) described best practices as the “optimum ways of performing work to achieve high performance” and mentioned that much of the literature on best practices are related to benchmarking against external organizations. Loo (2002) included inte-

The selection of supply chain management projects

grated project management systems, effective scope management, planning, scheduling and controlling of project, high-caliber project teams, stake-holder participation, effective communication within teams and externally, and customer satisfaction among critical success factors in project management. One approach to best practices in the supply chain community has been the Supply-Chain Operations Reference-model (SCOR). SCOR has been developed and endorsed by the Supply-Chain Council as the cross-industry standard diagnostic tool for supply chain management (Supply Chain Council 2011). SCM groups often use SCOR to establish performance metrics and compare supply chain performance with industry counterparts. It has been used successfully in a number of SCM projects despite the model’s limitations as reported in the literature (Power 2005). One major limitation is that SCOR does not explicitly assist in project evaluation process. 2.6 Summary A small number of research studies have noted distinctive aspects in evaluating SCM projects. Pinto and Mantel (1990) found that client satisfaction and perceived quality accounted for approximately 57% of the total variation in success of the projects they studied. Bryde (2003) also stressed on the importance of customer satisfaction in implementing projects successfully. In case of SCM projects the customers can be internal as well as external (such as upstream and/or downstream supply chain partners) to the organization. Hence, implication of a SCM project for such partners may need to be considered in the project evaluation process. However, reported existing methodologies rarely mention about it. Flaig (2005) argued that classical net present value (NPV) approach falls short of capturing some of the project’s major effects in process improvement including quality and yield rate. Also, probability of completion is not considered in classical NPV. According to Knill (2000) it is imperative to consider the impact on adjacent and downstream processes when evaluating a SCM project. It is clear that SCM projects often pose additional challenges and may require further considerations in the process of evaluation and selection. Although the literature discusses a wide range of project evaluation methodologies at length, understanding of evaluation processes for selecting SCM projects is rather limited. Detailed information on how organizations that successfully completed SCM projects had actually evaluated and selected the projects is not available. Also, it is not known if there are commonalities among the decision making processes used to evaluate and select successful SCM projects. In subsequent sections we present how answers to these questions are explored.

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3 Research methodology We conduct an exploratory case study with the primary objective of identifying a set of generalizable good practices in selection of SCM projects. A case study approach was adopted as it allowed us to investigate what exactly happened in the evaluation and selection of supply chain projects in an organization and enabled us to understand inter-relationships of various factors involved in the process. We purposefully sought to go beyond different analytical techniques to examine the processes and methodologies that organizations employ in the decision making process. Here, good project selection practices are defined as the recommendations based on prior outstanding results that can be adapted in the evaluation and selection of a project. Information obtained through case studies provided us with necessary depth to understand and analyze the process. A cohesive set of good practices were determined after a series of interviews with managers and executives involved in the project evaluation and selection process at three different Fortune 1000 companies. These practices are then summarized and compared to similar findings and theoretical formulations reported in the extant literature. Case-based research allows investigators to understand the nature and complexity of the processes taking place and serves as a basis for theory building. We adopted the general principles of theory building through case study research (Eisenhardt 1989; McCutcheon and Meredith 1993; Yin 2003). This is particularly useful when there is no specifically defined construct. There is a need for close look at within-case and cross-case analysis along with existing literature. Such approach has been used successfully to identify critical success factors in managing projects (Fricke and Shenhar 2000; Verma and Sinha 2002). A multiple-case study approach was chosen as a mechanism for determining the good practices in SCM project selection because multiple case studies are sometimes more compelling (Herriott and Firestone 1983) and are analogous to conducting multiple experiments to replicate the findings (Yin 2003). Since resource requirement for going beyond single case study was not an issue the opportunity to analyze findings from multiple experiments was attractive. Hence, we adopted an exploratory multiple-case research strategy as elaborated in Yin (2003). The salient steps included in the methodology are research design, preparation for data collection, collecting the evidence, and analyzing the evidence. 3.1 Research design An important starting point was a review of the literature on the evaluation and selection of SCM projects. The scope of

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the review included research papers and trade magazine articles that discussed economic justification of supply chain projects as well as related projects such as ERP, material handling, manufacturing, and information technology. This helped us justify the need for identifying the good practices in SCM project selection and institute the research questions. Subsequently, we discussed the suitability of exploratory multiple case study as appropriate research method. The purpose of the case study is to explore how organizations evaluate and select supply chain projects successfully to reap benefits. Certain steps and procedures are followed in evaluation and selection of those successful projects. Based on prior outstanding results and general adaptability potential, some of these steps and procedures are recognized as good practices. Here, we use thorough study of project experience including project evaluation, execution, and outcome as embedded unit of analysis (Yin 2003). We also analyze if the identified practices have any element of uniqueness by comparing them with the practices in other areas.

prior to the actual interviews to increase the reliability of the case research.

3.2 Preparation for data collection

3.3 Collecting the evidence

One of the authors was a principal investigator in all three cases. We approached with an open mind and maintained an unbiased view without preconceived notions so that any contradictory evidence would not be missed.

Data were collected through face-to-face interview sessions that lasted between sixty and ninety minutes. A scripted interview approach was used. The questions were developed based on a review of literature and background discussions with knowledgeable project managers. At the end of the interviews each participant received a draft manuscript of the interview, and was asked to review it for accuracy and add comments where appropriate. Minor modifications were made to the final draft of the manuscript based on feedback from the participants. Following Eisenhardt’s (1989) recommendations, data were collected from each of the cases as independent entity. Although we were interested to see if there were any commonalities among the cases we made deliberate attempt not to lead discussions with any preconceived notions. We believe this reduced reflexivity (Yin 2003), i.e. leading interviewee to tell what interviewer wants to hear. We also examined the project documents that were provided by the participating organizations. It helped us cross-examine and triangulate the data to a good extent. In order to ensure reliability of the information gathered we kept detailed records of interviews and reviewed documents, and cited these evidences in the discussion leading to identification of good practices in SCM project selection process.

3.2.1 Protocol development Structured client interviews were the primary source of data in this study. Following the principles of case study research, a protocol was developed that included not only the interview questions but also the procedures to be used by the interviewers and overview of the case study project (Yin 2003). Each interview session started with a statement about the purpose of the research and an assurance that the respondent would receive a transcript of the interview with a chance to change and/or edit any statements in the transcript. Interview script began with the interviewee’s description of the project. This description was followed by questions in five areas of inquiry: formal methods, cost assessment, benefits assessment, risk assessment, and ROI in the project evaluation process. It was followed by questions designed to solicit experiences related to the economic valuation of projects. These questions were developed in discussion with few executives from the participating organizations. After sending the initial draft of the questionnaire, one of the authors met with the executives individually to understand their interpretations of the questions and also to include their suggestions. The process continued iteratively and the questionnaire was tested over a course of three months

3.2.2 Participant selection Participating organizations were selected based on their long-term involvement and expertise in the supply chain projects. This was important to establish the good practices. We had to limit the number of organizations to three because of logistical reasons. Each of the three organizations selected was global publicly traded company that had at least one organizational group devoted to the management and execution of SCM projects. At the same time they were selected from different industry segments as maximally different cases might be helpful to ensure rich pool of diversity (McCutcheon and Meredith 1993). While selecting the organizations, we made sure that we would be given access to the key personnel who completed successful SCM project(s). Brief information of the participants is presented in Table 1.

3.4 Analyzing the evidence Following Eisenhardt’s (1989) recommendations to improve validity of the results, the same interviewing team was sent to all three participating organizations and one of the authors

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Table 1 Summary of cases Industry segment of participating organization

Focus of the project investigated

Case A (BevGiant)

Beverage maker

Case B (AutoChem)

Chemical based automotive component producer

Case C (PetsFud)

Pet-food producer and marketer

Development of vendor managed inventory (VMI) system for an overseas retailer selling beverages produced by the supplier (BevGiant) Integration project between supplier of chemical based high performance automotive components (AutoChem) and automotive manufacturer to reduce number of permutations of products sold and consolidate product specifications Part of efficient consumer response (ECR) in retail grocery industry—the objective was to make outbound logistics of the pet-food producer and marketer (PetsFud) more efficient to meet customer demand and reduce replenishment lead time

stayed out of the interview process to play devil’s advocate and critique the initial findings of the interviewing team. The goal was to treat all the evidences fairly with adequate considerations for alternative interpretations and to produce analytic conclusions consistent with an exploratory research project. Hence, we used the analytical techniques suggested by Miles and Huberman (1994) whereby a matrix of categories was created and evidences were placed within such categories. We used this cross-case synthesis by comparing the findings from three case studies to establish the good practices. We also used patternmatching logic, as elaborated in Yin (2003), to compare the anticipated project evaluation and selection considerations with empirical evidence. The details are presented in the subsequent sections.

4 Case overview Here provide broad overview of each of the three cases used in our study. We present each case starting with general description of the supply chain project completed successfully by the participating organization. Then we present the information on how and why these organizations decided to go ahead with the projects. Per request of the participating organizations we refrain from mentioning their actual names to maintain confidentiality, rather fictitious names are used. 4.1 Case A - BevGiant Case A was a project that involved the development of a vendor managed inventory (VMI) solution for an overseas

beverage retailer by the supplier, BevGiant. BevGiant is a global leader in production, marketing and distribution of consumer beverages. While BevGiant used a SAP-based ERP system to support the financial functions of the organization, it still largely relied on a proprietary legacy supply chain management solution. In order to reduce lost sales due to out of date product, reduce the number of ‘mark down’ sales due to bloated inventory levels, and grow the volume of product sold, BevGiant worked with an overseas retailer to implement a vendor managed inventory (VMI) solution. While the existing order fulfillment process was reliable, an improved fulfillment system was needed to meet the needs of an overseas retailer that had highly variable demand. The proposed solution involved modifications to the existing information system (new data and process requirements) and changes to the organizational structure (third party merchandising with the incorporation of human intelligence to facilitate demand forecasting and support pricing decisions). Formal methods used to evaluate Case A included cost benefit analysis and payback period. Adjustments had to be made for foreign investments, interdependent projects, and cost of project delays. Since it was a large project with a payback period of greater than twelve months, formal ROI calculations were required and a corporate hurdle rate had to be met. The cost drivers for the project included a significant IT investment in a SAP to legacy system ‘bolt on’ and a third party VMI solution to develop forecasts. When evaluating the project potentials, historical data were used to estimate reduction in lost sales due to out of date stock, reduction in price markdowns due to overage,

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cost of product spoilage, and increase in volume due to enhanced sales. The risk of the updated system not generating reliable and accurate data for demand forecasting was assessed. In addition, project leaders had to review the risk associated with potential modifications in business environment resulting in changes in demand and corporate responsiveness. The overall leader of the project was a senior level executive in the supply chain group. He played an important role in interfacing with the overseas vendor, sales & marketing, IT, and third party merchandisers. Periodic reviews called ‘test points’ were used. Costs, benefits, and other performance metrics were reviewed. A gradual implementation process was used whereby the prior manual mode steadily gave way to an automated mode. Throughout the project much attention was given to the end-users of the new VMI solution. 4.2 Case B - AutoChem Case B was an ERP integration project initiated to link a supplier of high performance automotive components (AutoChem) better with an automotive manufacturer. AutoChem, a global manufacturer and marketer of a variety of chemical-based materials used a broad range of consumer and industrial applications, implemented the project. The primary goal of the project was to improve data integration between supplier and manufacturer in order to reduce the number of permutations of the product sold and consolidate product sizes. At AutoChem a management approval process (MAP) board met once a month to accept or reject project proposals. The board was constituted of members from different business units. MAP document called for scope and process description. Process and technology enablers were identified, along with the identification of the transaction functionality required. Variable costs were identified in terms of the number of man-weeks required to complete the tasks. Before and after benefits for both customer and manufacturer were listed. Metrics used were market share, manufacturing efficiency, and inventory savings. Risk assessment was used to assess technical, financial and execution risk. A major risk was associated with XML/BizTalk technology as the organization did not have any prior experience. The volatility of expected benefits was a big issue in ROI analysis. The benefits accrued were not factored into the project evaluation originally performed for the initial SAP purchase. Yet the project (Case B) would not be possible without an ERP platform. Not only the project leader had to convince persons in their own organization about the benefits of the project, he had to persuade the external customer.

R.G. Mathieu, R. Pal

4.3 Case C - PetsFud Case C at PetsFud was a supply chain module upgrade project within the context of an efficient consumer response (ECR) initiative in the retail grocery industry. PetsFud is a global producer and marketer of high-quality pet products with over a dozen manufacturing facilities located throughout the world. Within the past several years, PetsFud had implemented a company-wide rollout of SAP’s Advanced Planner and Optimizer (APO). For them, the APO module was a key component of the supply chain management solution that provided a complete toolset for planning and optimizing supply chain processes at the strategic, tactical, and operational levels. PetsFud sought to reduce lead times at several distribution centers and retail centers through upgrades of a SCM component in the integrated information system. A key goal was to establish how the SCM module upgrade would result in a positive return for both the supplier and the retailers. Ultimately it was required to demonstrate how both the supplier and the retailer benefitted from the project. Savings were shown as annual cost savings. Two separate but linked worksheets were constructed to house driver data and rates data. These variables were typically adjusted during a sensitivity analysis. Operational costs were tracked throughout the project but there was not an emphasis on making sure that the costs were in line with the planned budget. Managers at PetsFud noted that cost estimates were more difficult to obtain if there were changes in the ranks of senior management and if the project required hiring skilled staff particularly in the IT area. All major SCM processes were documented. Case C was a major cross-functional activity within PetsFud. Metrics used to assess the project included fill rates, order cycle times, and transit times. Benchmarking was used in the portion of the project where a logistics piece was being taken away from a distributor in order to determine ‘fair compensation’. Contingency plans were developed for worst-case scenarios. The project had an expected payback period of between eighteen and twenty-four months. It had a sponsor and a lead project manager. The project went before a Project Review Board for approval. Organizational redesigns prior to the project eliminated possible cross-functional conflicts. Positive relationships with the SCM group and the IT group at PetsFud were critical for the ultimate success of the project.

5 Cross-case comparisons After close look at the individual cases, they were compared to determine if patterns of successful evaluation

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and selection of SCM projects exist. In all three cases the evaluation and selection of supply chain projects were considerably influenced by the organization’s overall business strategy. The VMI project at BevGiant was part of company initiative to increase revenue in the overseas beverage market by reducing lost sales, markdown frequency, and inventory obsolescence. The integration project at AutoChem for consolidating product varieties and standardizing order fulfillment procedures was initiated by the company-wide efforts to automate business processes. The logistics profitability project at PetsFud, which had the aim of making the distribution channels more cost-effective and responsive to customer needs, was motivated by the company’s business strategy to cope with efficient consumer response (ECR) initiatives. AutoChem mentioned that they would not select a SCM project that was not well aligned with strategic corporate objectives even if the project may have good return on investment. PetsFud also expressed similar viewpoints. We summarize these findings in Table 2. The managerial considerations that influenced SCM project evaluation are summarized in Table 3. In all three cases, cost-benefit analysis was used to measure the attractiveness of the project. In addition, payback period was considered in BevGiant and PetsFud. In all three organizations, a high-level formal review board was given responsibility of approving projects after conducting detailed evaluations of all major project proposals made by various business units. Since, a SCM project is typically a major project it usually goes through a rigorous and independent review process. At AutoChem and PetsFud, it was required to submit scope document analyzing anticipated impact on existing business processes and necessary process changes before the project went through the approval process. At BevGiant the document was recommended but not required. In order to streamline the business processes, organizational redesigns may be required and it took place at BevGiant and PetsFud. Also, the review board emphasized separating the

Table 2 Role of strategic corporate objectives in SCM project selection decisions

SCM project selection is motivated by overall business strategy SCM project is not selected when it is not aligned well with strategic corporate objectives even if it has good ROI

BevGiant

AutoChem

PetsFud

Significantly

Significantly

Significantly

No conclusive evidence

Yes

Yes

roles of IT lead and functional lead to avoid potential conflict of interest in all three cases. Table 4 presents cost assessment considerations. Cost assessment required segmentation into fixed and variable costs, and a determination of the impacts of factors such as duration, scope, and resources. Detailed bottom-up estimation was used in all three cases. While in Cases A and B there were not any major challenges in estimating cost, in Case C there were few difficulties in cost estimation with transition of experienced workers. Table 5 presents benefit assessment considerations. While some of the metrics used for assessing benefits of SCM projects were specific to the project goals, both operational and financial measures were used in all cases. Benchmarking was used only at PetsFud. Many times SCM projects require optimizing and redesigning existing business processes and/or developing new processes to tap the full benefit potentials. In all three cases such business process reengineering (BPR) was considered and historical data were extensively used to back up benefit and cost estimation. Project risk was assessed in all three cases (refer to Table 6). The common focus of risk assessment was to analyze the risks of not achieving the desired goals of the project and assess the possibility of the project not being completed on time. At AutoChem risk assessment was mandatory for all projects reviewed by the project review board. The largest area of risk as perceived by the organization varied with the nature of the SCM project. Few other risk factors, as presented in Table 6, were also considered. The role of ROI in SCM project selection decisions is presented in Table 7. In all three organizations ROI calculation was necessary in the approval process of large projects. While total cost of ownership was a major consideration at BevGiant, exceeding corporate hurdle rate was an important selection criterion in AutoChem and payback period of 18 to 24 months was expected at PetsFud. As expected, larger projects saw higher involvements of senior level executives in the approval process. Also, the work that went into calculation of ROI was later used in assessment of the ongoing SCM projects at BevGiant and PetsFud and the finished SCM project in AutoChem. Table 8 presents how the concerns of other business units within the organization as well as outside business partners play a role in selection of SCM projects. In all three cases efforts were made to eliminate/reduce conflict of IT group with other functional areas and build consensus among various groups impacted by the project. Since downstream and/or upstream supply chain partners may get affected by a SCM project, both BevGiant and PetsFud considered partners’ potential gains and losses arising out of the proposed SCM projects. PetsFud mentioned that they

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Table 3 Managerial considerations in SCM project selection decisions

Formal methods used to evaluate project Formal review board is responsible for evaluation, selection, and monitoring of projects Detailed scope document including analysis of anticipated impact on existing business processes and necessary changes needs to be submitted before the project goes through evaluation process Consideration of necessary organizational redesigns in the evaluation process Consideration of necessary project governance by the project review board

BevGiant

AutoChem

PetsFud

Cost-benefit analysis, Payback period Yes, for projects with capital expenditure of $1 million or higher Recommended but Not required

Cost-benefit analysis Yes, for large projects, but no specific guidelines about project budget Required

Cost-benefit analysis, Payback period Yes, for large projects, but no specific guidelines about project budget Required

Yes

No consideration required

Yes

Separation of IT and functional leads

Separation of IT and functional leads

Separation of IT and functional leads

would give higher priority to the projects with win-win situations for the organization and its partner(s).

6 Useful practices in SCM project selection Based on the cross-case comparisons and close look at the literature, we have identified the following useful practices in evaluating and selecting the SCM projects. They are summarized in Table 9. Observation # 1. The SCM project should be aligned with organizational strategy and must garner management support. Typically SCM projects are high visibility projects in an organization with multiple stakeholders. Organizations invest substantial resources with the intention of getting appropriate returns. Hence, it is natural that evaluation of a SCM project is greatly influenced by its alignment with the organization’s strategic objectives. In all three cases project selection decisions were considerably influenced by the organization’s overall business strategy. Gallagher (2003) and Stanleigh (2006) also expressed similar views. Sarkis and Sundarraj (2000) emphasized the strategic nature of evaluating information technologies in the supply chain. Favilla and Fearne (2005) mentioned about the importance of effective communication of KPIs among all major stakeholders of SCM projects. Metrics should be developed that are critical to senior executives. This can help raise the visibility and the value of the project. It is worthwhile to note here that decision makers in AutoChem and PetsFud mentioned they would not select a SCM project with potentially good ROI if the project was not aligned well with organization’s strategic core objectives. A manager at AutoChem stated that the greatest risk factor for a SCM project is “implementation without strong support from the CEO”.

Observation # 2. The SCM project should be evaluated comprehensively by an independent review panel. It has been reported in the literature that the project selection decision can be politically motivated and managers tend to support pet projects without considering the big picture (Hartman 2002). Decision makers may not be on the same page about the true potential of a project (Gallagher 2003) and organizations may use inconsistent metrics from project to project (Lewis and Koller 2001). In order to avoid inappropriate decisions, many major projects are assessed by formal review boards with representation from all relevant quarters of an organization. This is particularly important for SCM projects where inherent conflicts may exist between functional areas within an organization and between different organizations in the supply chain (Sarkis and Talluri 2004). In all three cases, review panels were responsible for evaluating all major candidate projects. Managers at BevGiant implemented ‘test points’ where a review panel reexamined cost and benefit assumptions throughout the SCM project life-cycle. BevGiant managers were careful to monitor project metrics during the implementation process. Both AutoChem and PetsFud have had SCM projects killed by project review boards for public relations and/or legal reasons. Segars et al. (2001) and Stanleigh (2006) emphasize the importance of well structured processes for prioritizing projects. Structured approaches adopted by review panels help reaching crossfunctional consensus and making unbiased decisions. But the review process can consume large amounts of resources and some organizations may find the benefit to be overshadowed by the cost and time involved (Lawson et al. 2006). Nonetheless, considering the intensive investment requirements and huge significance of SCM projects, rigorous review by an independent board is

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Table 4 Cost assessment in SCM project evaluation BevGiant

AutoChem

PetsFud

Costs are segmented into variable/direct cost and fixed/indirect cost Methods for cost estimation (analogous estimation, bottom-up estimation, parametric estimation, etc.) Methods for connecting project evaluation process with cost budgeting and control during the project

Yes

Yes

Yes

Bottom-up estimation

Bottom-up estimation

Bottom-up estimation

No formal methods used

No formal method to tie cost control with project approval process

Challenges with cost estimation

No major challenges faced

No major challenges faced

Operational costs are tracked, but there is no emphasis to ensure that costs are in line with budget Difficulty faced due transition of experienced workers

warranted. Additional benefits include experience of the review panel from past projects which may serve as a knowledge base in the decision making process (Stanleigh, 2006). Observation # 3. The scope of the SCM project and associated business processes should be documented well before evaluation. Impact on existing business processes within the supply chain should be considered. Formal documentation of each business process is important in all SCM projects. In addition, a scope document is helpful for understanding precisely what is expected during the course of a project. All three organizations considered documenting business processes and clearly defining the project scope prior to evaluation to be very important. While this was not required but recommended at BevGiant, it was required at AutoChem and Petsfud. At PetsFud over thirty major processes were documented using a “from-to-by-copy” matrix for each process step. At AutoChem the management approval process required a scope and process description where technology enablers were identified and transaction functionality was clearly specified. Loo (2002) included

effective scope management as a critical success factor. Flaig (2005) and Knill (2000) noted that a project’s effects on adjacent business processes should be considered in its evaluation although this aspect is widely ignored in practice. Because supply chain projects typically contain multiple interdependent business processes, cross-impact documentation is imperative. Similar viewpoints were expressed by Favilla and Fearne (2005). Observation # 4. Detailed benefit and cost calculations are needed for SCM project evaluation. Qualified and experienced supply chain experts should be used to generate estimates. Benefit and cost estimates should be as comprehensive as possible to understand the true potential of a project. The complex nature of SCM projects makes this task even more difficult. One critical aspect of developing a business justification for SCM project is a thorough evaluation of the trade-off between total cost of ownership and the enterprise-wide long-range benefits. Organizations have a tendency to focus narrowly on upfront expenditures and benefits limited to departmental time and cost savings. Hence, qualified and experienced people should be used to

Table 5 Benefit assessment in SCM project evaluation BevGiant

AutoChem

PetsFud

Metrics used

Reduction in lost sales, Reduction in markdowns, Increase in sales, Increase in market share

Benchmarking used

Not used in this project

Inventory savings, Manufacturing efficiency gain, Increase in market share Not used in this project

Consideration of business process re-engineering (BPR) in benefit assessment

Yes

Increase in fill rate, Reduction in order cycle time, Reduction in transit rime, Cost savings Used to determine fair compensation for a logistics piece takeover Yes

Yes, and this is required by the project review board

In a broad sense, optimization of existing processes, reconstruction of core processes, and invention of new processes are considered as BPR.

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Table 6 Risk assessment in SCM project selection decisions BevGiant

AutoChem

PetsFud

Is project risk assessed?

Yes. Chance of achieving desired outcomes on time was analyzed.

Yes. Chance of achieving desired outcomes on time was analyzed.

Largest area of risk (as perceived by the organization) Other risk factor(s) considered important by the organization

If the new system does not generate reliable and accurate data to aid in demand forecast Loss of data, Change in business environment

Yes and required by the project review board. Chance of achieving desired outcomes on time was analyzed. New technology—XML/BizTalk, organization had no previous experience with it Coping with automated processes

generate the estimates. They must understand the problem that the project is trying to solve. The usefulness of multi-layer evaluation process (Milis and Mercken 2004) and hybrid approach (Cooper et al. 1998) in project evaluation decision has been argued in the existing literature. It is suggested that project evaluation should look beyond economic measures such as such as return on investment (ROI), internal rate of return (IRR), net present value (NPV), and payback period (Irani et al. 1997; Rogow 2004). While some of these measures were used in all three cases we studied, a number of other metrics (see Table 5) were used along with consideration for intangible benefits. Both AutoChem and PetsFud used volatility as a consideration in benefit estimation. Contrary to Koksal’s (2004) concern of not including long-term effect on sales, increase in market share was estimated by BevGiant and AutoChem. Detailed cost calculations were made in all three cases including bottom-up estimation. Past data were sufficiently used for validation. In all three cases, roles of experienced project benefit estimators with SCM experience were considered important for project success.

Contingency plan for worst case scenarios Risk of not doing the project, i.e. lost opportunity

Observation # 5. Comprehensive assessment of SCM project risk must be made during project evaluation with specific attention given to inter-organization supply chain communication. Project managers are aware of the need to manage the risks of a project. It is important that risk management be directly integrated into the project evaluation process. Risks should be quantified and prioritized. Flaig (2005) discussed importance of including probabilities of accruing benefits and incurring costs based on project risk in a modified NPV analysis. A number of other studies also mention about the significance of considering risk in project evaluation (Ringuest et al. 2000; Badri et al. 2001; Kulak et al. 2005; Lawson et al. 2006). For BevGiant and AutoChem technical, financial, and execution risks were assessed. At PetsFud a worst case scenario approach was used to develop a contingency plan, and a senior decision maker mentioned that the risk of not undertaking the project (i.e. opportunity loss) was weighed in project selection decision. At AutoChem a manager mentioned that a significant risk factor in SCM projects was the consideration of “senior

Table 7 Assessment of ROI in SCM project selection decisions

Is ROI calculation required by the organization if a project has to be selected? Any specific evaluation criteria for projects requiring ROI calculations? What is the level of involvement of high level executives in project evaluation? How is the work that went into ROI calculations used in later assessment of SCM projects? Is there any procedure to cancel a project if things do not go successfully?

BevGiant

AutoChem

PetsFud

Yes, for projects with capital expenditure over $1 million

Yes, for projects with major capital expenditure

Yes, for projects with major capital expenditure

Total cost of ownership is looked at closely

Corporate hurdle rate must be cleared

18 to 24 month payback period is expected

Larger projects get more involvement

Larger projects get more involvement

Larger projects get more involvement

There are periodic reviews called ‘test points’. Costs and benefits are reviewed. There is no formal procedure, but unsuccessful projects will be cancelled

Benefits are measured at least one year after completion of a project

Progress is assessed through periodic project reviews

There is no formal procedure, but unsuccessful projects will be cancelled

There is no formal procedure, but unsuccessful projects will be cancelled

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Table 8 Considerations beyond project owning unit and organization in SCM project selection decisions

If the concerns of other business units that do not own the project but play a role and/or get affected by the project and their assessment of project are considered in the project selection decision? Is the ROI of the business partner(s) affected by the project considered in the project selection decision?

BevGiant

AutoChem

PetsFud

Various metrics are watched. Need for IT resources are examined. Gradual implementation is preferred to keep a balance.

Cross functional buy-in is built

Organizational redesigns have eliminated many of the potential conflicts. Buy-in from IT group is crucial.

Yes, benefits and costs to both organization as well as partners are considered

No formal consideration of partners’ ROI

Yes. Also, projects with winwin situations get highest priority.

executives voluntarily surrendering power, head count or budget”. SCM projects typically involve the use of inter-organizational communication systems and standards (Sarkis and Talluri 2004). In each case, decision makers explicitly considered the risk of implementing the inter-organizational communication standards associated with the project. Observation # 6. Consideration of necessary crossfunctional project governance structure should be made as a part of the SCM project evaluation process. Nearly all supply chain projects involve information technology and the involvement of the IT department. Solomon (2002) summarizes the inherent issue by stating “the problem is that many IT leaders insist on taking leads

on projects, even though they are not the ones who will be using the system and helping it realize its full potential”. Better results can effectively be achieved by separating the duties of the project manager from the IT lead. BevGiant, AutoChem, and PetsFud required that someone outside of the IT group take the lead role in managing large SCM projects. At PetsFud a senior manager stated that “organizational redesigns have eliminated many cross-functional conflicts” and as a result “relationships with the IT group have been very good”. A manager at BevGiant described the complexity of cross-functional relationships in a project where the procurement group, the sales group, the IT group, and the external “merchandiser” group had to work closely together during the project evaluation and selection phase. AutoChem insisted that SCM projects should have a

Table 9 Summary of good practices in SCM project selection Identified practices

Case study support

Literature support

1. The SCM project should be aligned with organizational strategy and must garner management support. 2. The SCM project should be evaluated comprehensively by an independent review panel. 3. The scope of the SCM project and associated business processes should be documented well before evaluation. Impact on existing business processes within the supply chain should be considered. 4. Detailed benefit and cost calculations are needed for SCM project evaluation. Qualified and experienced supply chain experts should be used to generate estimates. 5. Comprehensive assessment of project risk must be made during SCM project evaluation with specific attention given to inter-organization supply chain communication. 6. Consideration of necessary cross-functional project governance structure should be made as a part of the SCM project evaluation process. 7. If organizational redesign is necessary, it should be considered in the SCM project selection decision. 8. Initial work for ROI calculation may be used for reviewing on-going project and cancelling a project if the progress is not satisfactory. 9. ROI of supply chain partner(s) should be considered in projection selection decision.

BevGiant, AutoChem, and PetsFud

Gallagher 2003; Stanleigh 2006

BevGiant, AutoChem, and PetsFud

Segars et al. 2001; Stanleigh 2006

AutoChem and PetsFud

Segars et al. 2001; Loo 2003

BevGiant, AutoChem, and PetsFud

Cited by a number of studies

BevGiant, AutoChem, and PetsFud

BevGiant, AutoChem, and PetsFud

Ringuest et al. 2000; Badri et al. 2001; Kulak et al. 2005; Lawson et al. 2006 Solomon 2002

BevGiant and PetsFud

Smith 2000; Chin et al. 2004

BevGiant, AutoChem, and PetsFud

Loo 2003

BevGiant and PetsFud

Walker et al. 2002; Chin et al. 2004

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Table 10 Rationale of good practices in SCM project selection and comparisons with good practices in other related areas Good practices in SCM project evaluation

Relevance to project evaluation rationale

Link with good practices in other related areas

1. The SCM project should be aligned with organizational strategy and must garner management support.

Should be considered for all major projects including SCM projects

ERP (Nah et al. 2003; Huang et al. 2004), IT (Irani et al. 1997; Jiang and Klein 1999), R&D (Cooper et al. 1998; Verma and Sinha 2002), PM (Pinto and Slevin 1988; Kaplan and Norton 1996; Stanleigh 2006)

2. The SCM project should be evaluated comprehensively by an independent review panel.

Can be appropriate for all projects competing for limited resources. This is of greater importance for major projects. Applicable for any project involving multiple business units exchanging information

IT (Segars et al. 2001), PM (Stanleigh 2006) ERP (Nah et al. 2003; Huang et al. 2004), IT (Segars et al. 2001), PM (Loo 2002; Stanleigh 2006)

Relevant for all projects, has greater significance for major projects

Applicable to good practices in all other related areas

Applicable for any major project requiring significant investment of organizational resources. Importance may vary with organization’s risk aversion.

IT (Remenyi and Heafield 1995; Badri et al. 2001), ERP (Schulz 2000; Nah et al. 2003), R&D (Ringuest et al. 2000; Lawson et al. 2006), PM (Stanleigh 2006) IT (Solomon 2002), PM (Minarro-Viseras et al. 2005)

3. The scope of the SCM project and associated business processes should be documented well before evaluation. Impact on existing business processes within the supply chain should be considered. 4. Detailed benefit and cost calculations are needed for SCM project evaluation. Qualified and experienced supply chain experts should be used to generate estimates. 5. Comprehensive assessment of project risk must be made during SCM project evaluation with specific attention given to inter-organization supply chain communication. 6. Consideration of necessary cross-functional project governance structure should be made as a part of the SCM project evaluation process.

7. If organizational redesign is necessary, it should be considered in the SCM project selection decision. 8. Initial work for ROI calculation may be used for reviewing on-going project and cancelling a project if the progress is not satisfactory. 9. ROI of supply chain partner(s) should be considered in projection selection decision.

Many times separating IT lead and functional lead ensure smooth project delivery. The consideration is important for large projects with IT involvement. Also, skill and quality of personnel managing the project is critical. Can be applicable for any large project with complicated business processes and potential conflict between business units Appropriate for any major project that requires close monitoring Primarily specific to SCM projects as these projects usually involve partners outside organizations. However, similar consideration may be applicable for the projects in other areas where collaboration among organizations is required.

ERP (Nah et al. 2003)

PM (Loo 2003)

Usually not applicable to good practices in other related areas

• PM stands for project management literature. • Here we cited only a few references from other related areas for comparison purposes. Please note that the list is not comprehensive.

sponsor not within the IT group. At BevGiant, AutoChem, and PetsFud project review boards oversaw the project governance structure and separated the duties of the project manager and the IT lead. Observation # 7. If organizational redesign is necessary, it should be considered in the SCM project selection decision. Historically, conflicts between organizational units have resulted in problems in execution of large projects.

“Breaking organizational barriers and enabling collaboration across the supply chain requires a cultural change in how your organization measures and rewards individuals and organizational units. The traditional model is based on cost and revenue models: the new model is based on metrics that align to cross-organizational business processes” (Smith 2000). Also, Chin et al. (2004) reported the importance of business process changes in supply chain to cope with problems of information distortion and other impeding factors. At BevGiant and PetsFud organizational

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redesigns had eliminated conflicts between functional units and improved overall business processes associated with the implementation. The proposed redesigns were evaluated during the project approval process. AutoChem was able to avoid organizational redesign by developing a planning process that linked strategy, goals, objectives, and measurements. It was used to ensure consistency in evaluation among the functional areas of sales, marketing, manufacturing, and IT. Observation # 8. Initial work for ROI calculation may be used for reviewing on-going project and cancelling a project if the progress is not satisfactory. ROI calculation should be considered as part of ongoing project management process. Loo (2003) mentioned about importance of project monitoring and project review for timely identification of issues and taking correctional measures to ensure success. It was found the work that went into calculation of ROI during project evaluation and selection was eventually used for subsequent evaluations of projects in all three cases. The ‘test points’ developed at BevGiant implemented examined cost and benefit assumptions throughout the SCM project life-cycle. AutoChem made extensive use of “best in class” benchmarking in the SCM evaluation process. All three organizations mentioned about possibility of canceling projects for unsatisfactory outcomes. Observation # 9. ROI of supply chain partner(s) should be considered in projection selection decision. The supply chain partners’ viewpoints including the ones on economic return of the project are important for its success. Chin et al. (2004) reported that SCM projects influence relationships with upstream/downstream suppliers/customers and hence supply chain wide measures should be used to measure the project’s effectiveness. Walker et al. (2002) mentioned about importance of project partnering and alliance. Among the three organizations we worked with, BevGiant and PetsFud considered the economic impact of the SCM project on the partnering organizations. At PetsFud, particular attention was given to the economic impact of a new SCM project on downstream customers. A senior PetsFud SCM manager noted that “in prior years several supply chain initiatives unintentionally caused economic hardship on our downstream customers” and as a result PetsFud was now “careful to consider the customer viewpoint when evaluating new supply chain projects.” PetsFud developed a financial impact model that considered procurement, transportation, and warehousing from perspectives of both PetsFud and its downstream customers.Highest preference was given to projects with win-win situations for the organization and its partner(s). Projects where the financial impact was positive for the

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sponsoring organization and negative for the customer considered providing incentive for efficiency achieved to motivate the customer, while projects with a positive impact for the customer and a losing financial impact for the sponsor suggested using pricing strategy for the service provided to recover cost.

7 Conclusions We compare the useful practices in selecting SCM projects, which we identified earlier, with the well known practices in other related areas. Subsequently, we discuss the contributions and managerial implications of the findings followed by limitations and future research implications. 7.1 Comparison with practices in other areas We discuss the rationale of the good practices in SCM project selection and examine if they can be linked with the recommendations made in other related areas. The discussion is summarized in Table 10. We find that selection of SCM project is greatly influenced by its alignment with organizational strategy. ERP (Nah et al. 2003; Huang et al. 2004), IT (Irani et al. 1997; Jiang and Klein 1999), general project management (Pinto and Slevin 1988; Kaplan and Norton 1996; Stanleigh 2006) best practice literature also echo similar viewpoints. Vereecke et al. (2003) mentioned about importance of program management that involves coordinated management of projects with a common strategic objective. It is natural that organization’s overall strategies will govern the SCM project evaluation process. Jiang and Klein (1999) found project evaluation criteria to vary with strategic orientation of organizations’ information system in time dimension. While organizations with current strategic system place more emphasis on internal factors, organizations with future strategic system stress on both internal and external factors. Huang et al. (2004) identified management support as a critical success factor in ERP implementation. Cooper et al. (1998) stressed the importance of management buy-in and support in R&D project selection. It is expected that any major project should meet the strategic corporate objectives in order to get approved by the management. Evaluation of SCM projects by a formal review panel is justified for its potential to provide objective review. IT and general project management literature favors this practice for all major projects competing for limited resources (Segars et al. 2001; Stanleigh 2006). Scope management is a critical part of any project. In addition, effect of process change is overwhelming for any projects that involve significant information exchange

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between different business units. Hence, business process reengineering plays a crucial role in ERP projects (Nah et al. 2003; Huang et al. 2004). Like ERP projects, SCM projects involve both intra and inter organizational information exchange and process flows. Hence, effect of process changes should be considered in SCM project evaluation decision. Similar viewpoints are expressed in IT project management (Segars et al. 2001) and general project management best practices (Loo 2002; Stanleigh 2006). Detailed benefit and cost estimation is important for any kind of project as it is a primary basis for project justification. However, additional layers of complexity are added based on significance of a project. Thus, it is quite expected that benefit and cost estimation for major projects like ERP and SCM projects are complicated. Risk assessment in project evaluation is a common practice. A number of articles related to evaluation of projects in various areas such as IT (Remenyi and Heafield 1995; Badri et al. 2001; Kulak et al. 2005), ERP (Schulz 2000; Nah et al. 2003), R&D (Ringuest et al. 2000; Lawson et al. 2006), and project management (Stanleigh 2006; Maytorena et al. 2007) mention about necessity of risk analysis. SCM projects are no exceptions and importance of the issue may be influenced by project size. Lack of future planning (Schulz 2000) and late completion (Nah et al. 2003) have been reported as major obstacles in ERP projects and are attributed to large size of ERP projects. Although typical SCM projects are smaller than ERP projects, the size of SCM projects is still significant. Hence, smooth execution and on-time completion of SCM project is an important issue and associated risk must be closely analyzed. Also, varying risk attitude of different firms taking part in a SCM project adds an interesting twist to the analysis. Separation of duties of the project manager and the IT lead is important in major IT projects (Solomon 2002). Since SCM projects usually involve significant IT implementation, the issue should be considered. Minarro-Viseras et al. (2005) found appropriate staffing and project manager’s personal quality and skill to lead the project to be key success factors in strategic manufacturing initiatives (SMI). Supply chain projects have many similarities with SMI and these considerations are also important while evaluating and selecting a SCM project. Requirements for streamlining complicated business processes and/or eliminating potential conflicts between business units may drive organizational redesign. The ERP best practice article by Nah et al. (2003) recommends overcoming the issue of unnecessary complexity by undertaking organizational change as necessary. The article cited Rogers’ (1995) diffusion of innovation theory that suggests that the rate of adoption of an innovation is negatively related to its complexity. Many of the SCM

R.G. Mathieu, R. Pal

projects may be viewed as adoption of innovation by the implementing organizations. Hence, it is justified that complexity of SCM projects should also be reduced or eliminated whenever necessary, and organizational redesign can be a vehicle to reach the goal. The importance of periodic monitoring and reviews to ensure success is discussed in Loo (2003). Since the initial ROI calculation of SCM projects during the approval process are usually quite involved, it makes sense to reuse the work in subsequent evaluations. The supply chain literature emphasizes the importance of upstream/downstream supply partners in ensuring streamlined business operations. Hence, it is justified that their perspectives, including gains and losses (if any), should be considered before a SCM project is selected. While this consideration is specific to SCM projects, similar consideration may be applicable for the projects in other areas where collaboration among organizations is required. 7.2 Contribution and managerial implications The good practices identified in this paper provide sound evaluation and selection guidelines during the planning stage of a supply chain project. Our findings confirm the importance of talented managers who understand the importance of thorough project planning. Management’s understanding of the useful practices presented in this paper can have a significant impact on an organization’s ability to select and implement SCM projects with a high payoff. One of the main contributions of our study is the enhancement of the knowledge base in supply chain project selection decisions. The literature suggests that selection of appropriate SCM project and its implementation may pose additional challenges. Although the literature discusses various project evaluation methodologies and project management best practice, information on SCM project selection process is rather limited. Detailed information on how organizations should evaluate and select the SCM projects successfully is not widely available. To the best of our knowledge, we take the first comprehensive step towards exploring this issue. Nine useful practices for SCM project selection were identified in this study. While eight of them had been previously identified, those practices were scattered throughout the prior literature on ERP, IT, and R&D project management. Unlike prior studies, by focusing our research on SCM projects we were able to identify the practices that are critical to the success of SCM projects. In addition, we identified a new management practice of including return on investment (ROI) consideration beyond organizational boundaries or assessment of potential impact on supply chain partners in the SCM project selection process. For each practice, we establish its relevance to project selection

The selection of supply chain management projects

rationale and the link with good practices in related areas. Also, the project selection practices identified here are backed up by evidences gathered from successful real-life SCM projects. Thus, practitioners can instill themselves with certain degree of confidence in following these practices for selecting SCM projects. Although the extant literature documents many of the useful practices identified here in the context of non-SCM projects, there is a need for investigating if those practices are useful in selecting SCM projects appropriately. This study provides the much needed confirmation to the least. 7.3 Limitations and future research implications All three organizations, which we studied, implemented SCM projects successfully. The case of unsuccessful projects was out of scope of this study. Nonetheless, lessons may be learnt from the unsuccessful projects. It may be worthwhile to investigate if any organizations that fail to implement a SCM project successfully follow the practices identified in this study and what implications it may have on potential outcomes. Our study focused on the US based organizations only. While we expect the findings to be applicable for firms outside the US, there may be additional considerations in selection of SCM projects which are unique to their situations. We had to keep the number of firms studied to three for logistical reasons and hence did not have control factors such as firm size, maturity, etc. While some of the researchers may prefer to include higher number of firms, some others have conducted case research with similar or less number of firms. We chose the firms from different industry segments to make them diverse as much as possible, but arguments can be made to enhance it further with additional cases. We hope that this research will lead to more empirical research on the economic justification of supply chain projects beyond the exploratory stage and towards theorybased models of SCM project evaluation and selection. Here, we discuss some of the research ideas that may be taken up going forward. We have mentioned earlier that risk exposure may not be the same for all stakeholders in a SCM project. A number of organizations may be willing to take part in a SCM project and they may have varying degrees of risk aversion. While the cases we studied did not have any similar situations, it remains to be studied in future how organizations share risks and if any contract mechanism can be devised to ensure fair share of risks among participating organizations. We discussed the significance of considering the perspectives of supply chain partners in SCM project selection. Walker et al. (2002) discussed the importance of

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project partnering and alliance within scope of an assumption that “all parties can achieve a win-win situation provided they work together to help each other gain not only a realistic reward for their input but to gain a competitive edge in the market as a result of their experience on this milestone approach”. However, not always such win-win situation may persist. It will be interesting to study how the project selection decisions are made when conflicts between an organization and its partner(s) may arise out of a proposed SCM project. Also, it will be worthwhile to compare the decision making process when a dominant organization is driving the project with the situation when a relatively weak organization is taking the SCM initiative. Also, large SCM projects may pose unique challenge. Sometimes these projects are divided into smaller subprojects in multiple phases called business releases (Moller 2000). This practice reduces risk, promotes learning from previous experience, keeps the momentum going, and reduces time to receive returns. Many world-class firms recommend this practice for very large projects. However, in any of the three cases we studied, business releases were not used. Although we do not expect any change in the good practices identified here, further exploration on SCM project with multiple business releases may provide additional insights. Acknowledgements The authors would like to thank Dr. Ik-Whan G. Kwon and Dr. John W. Hamilton of the Center for Supply Chain Management Studies at Saint Louis University for their support of this research project.

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