Supply chain consultancy reaches a turning point

From lengthy reports to tangible results

Consultants used to spend months conducting research, only to present clients with a lengthy report that subsequently ended up in a drawer. But it now seems that those days are behind us as a growing number of consultancy firms are helping clients to implement their recommendations through training, coaching, tools, dashboards, secondment, interim management or even by taking over entire planning processes. And a lengthy report is no longer effective nowadays – by the time the report has been written, the conclusions are already outdated.

By Marcel te Lindert

The fundamental business model of consultancy firms has hardly changed over the past 100 years. They send smart outsiders into a company for a certain period of time to provide advice and solutions for highly complex problems. Their solutions are traditionally presented in a report that the company’s management team can reread at their leisure. The consultants bill the company for the number of hours worked.

In an article written in 2013, Clayton Christensen, Dina Wang and Derek van Bever, three academics from Harvard Business School, identify two factors that have contributed to sustaining this model for so long: opacity and agility. By opacity, which means ‘lacking transparency’, the researchers refer to the fact that consultancy firms are ‘black boxes’ as far as many companies are concerned. Clients find it very difficult to judge a firm’s performance in advance, because they are usually hiring the firm for the specialised knowledge and capabilities that they themselves lack. Even afterwards, it remains difficult to truly assess the performance because of the large number of external factors that influence the outcome of the consulting project.

These range from shortcomings in the implementation of the recommendations to changes in the market situation. Therefore many companies hire consulting firms based on their brand, reputation, on ‘social proof’ such as their references and the eloquence of the consultants themselves. Also, they often assume that a high hourly rate represents a mark of quality. ‘Agility’ means the speed and flexibility with which consultancy firms continually identify new issues and use them to create new opportunities to provide advice.

Access to knowledge

This traditional business model – which is executed to perfection by the likes of McKinsey, A.T. Kearney and Boston Consulting Group – is now changing. The researchers from Harvard Business School state several reasons for this, including the increased access to knowledge and information. Nowadays, companies are less dependent on consultancy firms since they can obtain information in other ways too.

Another reason is that more and more former consultants are joining ‘regular’ companies. They understand how the ‘black boxes’ work so they are a lot more critical when enlisting help from their former peers.

Dynamic tool

A quick survey among a handful of consultancy firms specialised in supply chain management revealed yet another reason why lengthy reports are no longer the answer: the increased dynamism in the private sector. Gone are the days when a company could take its time formulating a supply chain strategy and could spend three, four or even five years rolling it out from the top down, claims Frans van Helden, managing consultant at Ortec Consulting – the consultancy arm of Ortec which is focused on developing algorithms and implementing them in bespoke planning solutions, often targeted at improving supply chain performance and optimising the use of the available capacities.

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This article was first published in Supply Chain Movement 20 | Q1 – 2016

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