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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 tions with significant supply chain experience and synthe-
initiatives through project implementation. However, select- sizing these results with the current related literature.
ing the right supply chain projects can be difficult due to
high levels of organizational risk and technical complexity. Keywords Supply chain management project . SCM
Although the literature is rich in quantitative and qualitative project selection . SCM project management best practices .
methods for project management, prior research into best Case studies
management practices specific to supply chain management
(SCM) project selection is limited. This paper examines the
methods used in evaluating and selecting SCM projects 1 Introduction
used by the management at three publically held multi-
national organizations. The primary objective of this Many organizations implement supply chain management
research is to identify a set of generalizable good practices (SCM) projects to enhance inter-organizational coordina-
in the selection and evaluation of SCM projects. Nine tion, increase efficiency, add value, and ultimately improve
useful business practices in SCM project selection have the bottom line. SCM project is a special class of enterprise
been identified based on cross-case comparisons and a level project that can potentially generate high returns, but
close examination of the literature. Eight practices had been also has high risks arising from unpredictability and
previously identified, but were scattered throughout the technical complexity. The technologies that enable SCM
literature on ERP, IT management, and R&D management. business solutions typically span vertical architectural
A new practice calls for the consideration of supply chain levels (business, application, and technology architectures),
partners’ return-on-investment (ROI) in the project selec- and integrate horizontal inter-organizational processes and
tion process. Highest preference should be given to win- enterprise applications. The inherent technological complex-
win projects for the organization and its partner(s). The ities and intricacies of convoluted business processes associ-
practices identified here sho`uld provide the foundation of ated with SCM projects can result in highly visible and
practical guidelines that can be used during the planning expensive failures. Charette (2005) documented SCM-related
stage of SCM projects. This paper reduces the knowledge project failures at Avis Europe, Ford, Hershey Foods,
gap in SCM project management by analyzing organiza- 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
R. G. Mathieu (*) : R. Pal projects has become a critical management issue.
Department of Computer Information Systems & Management Like any major capital investment, SCM initiatives must
Science, College of Business, Showker Hall, MSC 0202,
show significant benefits to warrant their continuation and
James Madison University,
Harrisonburg, VA 22807, USA expansion throughout the enterprise. While project evalu-
e-mail: [email protected] ation and selection methodologies have been abundantly
R. Pal available to business decision makers, information on
e-mail: [email protected] utilizing them in the context of SCM projects is limited in
The selection of supply chain management projects 165

the academic literature. Three notable exceptions are the and SCM, and refer to project management best practices.
works by (1) Sarkis and Talluri (2004) who use the We cover both academic and practitioner journals. The
analytical hierarchy process and goal programming to review directs us to a thorough understanding of the current
evaluate and select software for e-commerce software and practices and to develop a basis of comparison with the
communication systems for a supply chain, (2) Alvarado et information obtained from the case study. In the following
al. (2008) who describe a value mapping framework to sections we provide detailed discussions on existing literature.
identify stakeholder value in SCM IT projects, and (3) Brun
and Caridi (2008) who use a value and risk assessment 2.1 General approaches for project evaluation
methodology to evaluate SCM projects. There are a number
of practitioner articles that discuss the need for appropriate In order to economically justify implementation of a
evaluation and selection of SCM and enterprise-wide IT project, basic concepts like net present value, hurdle rate,
projects (Rodin 2001; Shaw 2006; Vaskelis 2001; Hartman internal rate of return, and cash flow are used widely (Foley
2002; Elkins 2003). 2002). Rogow (2004) interviewed a number of executives
The complexity of SCM projects makes it necessary to involved with IT project decisions. His findings suggest
evaluate them as inter-organizational systems with multiple that companies should look beyond return on investment
decision makers (Sarkis and Talluri 2004), apply lessons and total cost of ownership. Some organizations have
learned from prior implementations (de Burca et al. 2005), formalized process measurement and process improvement
and develop strategic framework for appraisal and audit of as part of project justification (Segars et al. 2001). Other
the associated systems (Sarkis and Sundarraj 2000). Hence, considerations such as multi-year financial commitment
we dig deeper into the issue and make attempts to have a analysis and budget provisioning should also be made before
better understanding of the complex decision-making process taking the final project selection decision. Lefley (2004) also
of selecting SCM projects using exploratory case study. Three argued that financial approach for appraising strategic
projects involving various aspects of supply chain manage- benefits of projects is inappropriate. The research looked
ment at three multi-national organizations are investigated. into procedure for developing strategic indices (SI) that can
By examining the experiences obtained from these projects be used to identify and evaluate projects’ strategic benefits.
and analyzing opinions of the personnel involved, we identify Stanleigh (2006) mentioned that projects should be aligned
nine useful practices in selection of such projects. While eight with organizations’ core strategies. Organizations should
of them had been acknowledged previously, they were have well structured process of prioritizing projects.
scattered throughout the prior literature on ERP (enterprise The academic literature is filled with sophisticated
resource planning), IT (information technology), and R&D techniques (such as analytic hierarchy approach, conditional
(research & development) project management. We put forth stochastic dominance, goal programming, etc. to name
these practices together and establish their relevance in the just a few) to evaluate projects. However, evidence
context of SCM project selection. In addition, we identify a suggests that these sophisticated evaluation techniques
new management practice of including return on investment have not found wide acceptance among practitioners.
(ROI) consideration beyond organizational boundaries or According to the Mainstay Partners’ study originated in
assessment of potential impact on supply chain partners in the 1999, only 21% of the companies have processes for
SCM project selection process, prioritizing and managing technology investments. Most
The rest of the paper is organized as follows. First, we choose their IT investments on an ad-hoc basis, favoring
provide a broad review of the extant literature on evaluation pet projects of powerful managers (Hartman 2002).
criteria and justification procedures of different types of Many use ROI metrics that are inconsistent from one
projects. Next, the research methodology is presented. project to another making it nearly impossible to correctly
Subsequently, three cases are presented and analyzed. This choose which projects should be funded and which ones
leads to identification of good practices in selection of SCM should not be selected (Lewis and Koller 2001).
projects. Finally, we conclude the paper with comparative
analysis with other good practices and discussions on the 2.2 R&D project evaluation
contribution of the study, managerial implications, and
future research. 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
2 Literature review stress on management buy-in and support (Cooper et al.
1998). R&D project evaluation models historically fall into
We review well-established evaluation approaches used in three categories: financial, risk, and scoring (Lawson et al.
selection of projects in different areas including R&D, IT, 2006). While financial methods have been found to be used
166 R.G. Mathieu, R. Pal

most widely amongst large organizations, companies that investment in IT projects because of intangible benefits,
use hybrid approaches incorporating risk analysis and and direct and indirect costs associated with these projects.
scoring scheme with financial analysis generally do a better On the other hand, while analytical and integrated
job in selecting projects (Cooper et al. 2001). Despite approaches are capable of considering intangible factors
potential advantages of structured hybrid approaches, they they are complicated to use (Irani et al. 1997). Milis and
may be cost prohibitive. Also, sometimes management thinks Mercken (2004) argued while traditional appraisal techni-
that high quality decisions can be made primarily by the ques such as payback period and net present value methods
experienced executives even without a structured approach. are not quite suitable for IT project evaluation, the newer
Some of the complex methods for R&D project appraisal methods are difficult to interpret and use. They
evaluation are mentioned here. Meade and Presley (2002) suggested that reliance on a single technique may yield sub-
discussed how analytic network process (ANP), a more optimal results and proposed multi-layer evaluation process
general form of analytic hierarchy process (AHP) and based on balanced scorecard. Kulak et al. (2005) proposed
capable of assessing dynamic multi-directional relationship axiomatic design (AD) approach, which is suitable for
among the decision attributes, could be used for selecting multi-attribute evaluation of IT projects.
R&D projects. Sun and Ma (2005) proposed multi-box
packing model heuristic based on integer programming for 2.4 SCM project evaluation
simultaneously selecting and scheduling R&D projects. The
total value of the selected projects was maximized and SCM projects are often closely linked to ERP that have
schedules were so made that annual costs were kept close to emerged as the backbone of the modern information
the estimated annual budgets as much as possible. Ringuest technology infrastructure. Many organizations have adop-
et al. (2000) used a methodology for adding or removing a ted ERP systems with the goal of integrating key business
project from an existing R&D portfolio using the criterion processes so that information can flow freely between
of conditional stochastic dominance which analyzed the various parts of the firm (Laframboise and Reyes 2005).
effect of a given project on the risk and return of the The inter-organizational nature of supply chain makes the
existing portfolio. Using a multiple case study approach evaluation more complex (Clemons and Kleindorfer 1992;
Verma and Sinha (2002) showed how interdependencies Levinson 1994). Overall acceptance by supply chain
between R&D projects in technology firms influence partners associated with such projects is critical for success.
project performance. Hence, a portfolio approach may be Sarkis and Talluri (2004) mentioned about lack of method-
particularly useful for selecting R&D projects when ologies in the literature on justification of inter-
resources are available to implement the methodology. organizational systems. Brun and Caridi (2008) evaluated
SCM projects by identifying key performance indicators
2.3 IT project evaluation and ultimately performing a performance gap analysis.
Alvarado et al. (2008) developed a value-mapping frame-
The methodologies used for evaluation and selection of IT work which examined the contributions of multiple stake-
projects can be classified into four major categories: holders in SCM projects taking into consideration of the
economic, strategic, analytical, and integrated approaches fact that a dominant partner in a supply chain might try to
(Irani et al. 1997). Economic approaches generally use move decisions in their favor. Since SCM projects influence
financial measurements such as return on investment (ROI), relationships with upstream/downstream suppliers/custom-
internal rate of return (IRR), net present value (NPV), and ers, supply-chain-wide performance measures are needed to
payback approaches. They largely ignore intangible factors. measure effectiveness (Chin et al. 2004). However, many
Strategic approaches are less structured, and deal with companies ignore this and tend to stick to organization
projects’ strategic alliances with corporate goals by consid- based measures only.
ering both tangible and intangible factors. Analytical
approaches such as scoring models (Nelson 1986), risk 2.5 Best practices in project management
analysis (Remenyi and Heafield 1995), and analytic
hierarchy process (Saaty 1990) are highly structured but The Project Management Institute has “provided project
subjective with the use of tangible and intangible factors. management insight, best practices and enterprise support
Integrated approaches such as balanced scorecard (Kaplan for the project management profession” since 1969 (Project
and Norton 1996) and multi-attribute utility theory (Sloggy Management Institute 2006). Loo (2003) described best
1984) combine subjectivity with formal structure, and practices as the “optimum ways of performing work to
incorporate both financial and non-financial dimensions of achieve high performance” and mentioned that much of the
decision making. It is argued that traditional economic literature on best practices are related to benchmarking
appraisal techniques are not appropriate for justifying against external organizations. Loo (2002) included inte-
The selection of supply chain management projects 167

grated project management systems, effective scope 3 Research methodology

management, planning, scheduling and controlling of
project, high-caliber project teams, stake-holder partici- We conduct an exploratory case study with the primary
pation, effective communication within teams and objective of identifying a set of generalizable good
externally, and customer satisfaction among critical practices in selection of SCM projects. A case study
success factors in project management. approach was adopted as it allowed us to investigate what
One approach to best practices in the supply chain exactly happened in the evaluation and selection of supply
community has been the Supply-Chain Operations chain projects in an organization and enabled us to
Reference-model (SCOR). SCOR has been developed and understand inter-relationships of various factors involved
endorsed by the Supply-Chain Council as the cross-industry in the process. We purposefully sought to go beyond
standard diagnostic tool for supply chain management different analytical techniques to examine the processes and
(Supply Chain Council 2011). SCM groups often use methodologies that organizations employ in the decision
SCOR to establish performance metrics and compare making process. Here, good project selection practices are
supply chain performance with industry counterparts. It defined as the recommendations based on prior outstanding
has been used successfully in a number of SCM projects results that can be adapted in the evaluation and selection of
despite the model’s limitations as reported in the literature a project. Information obtained through case studies
(Power 2005). One major limitation is that SCOR does not provided us with necessary depth to understand and analyze
explicitly assist in project evaluation process. the process. A cohesive set of good practices were
determined after a series of interviews with managers and
2.6 Summary executives involved in the project evaluation and selection
process at three different Fortune 1000 companies. These
A small number of research studies have noted distinctive practices are then summarized and compared to similar
aspects in evaluating SCM projects. Pinto and Mantel findings and theoretical formulations reported in the extant
(1990) found that client satisfaction and perceived quality literature.
accounted for approximately 57% of the total variation in Case-based research allows investigators to understand
success of the projects they studied. Bryde (2003) also the nature and complexity of the processes taking place and
stressed on the importance of customer satisfaction in serves as a basis for theory building. We adopted the
implementing projects successfully. In case of SCM general principles of theory building through case study
projects the customers can be internal as well as external research (Eisenhardt 1989; McCutcheon and Meredith
(such as upstream and/or downstream supply chain part- 1993; Yin 2003). This is particularly useful when there is
ners) to the organization. Hence, implication of a SCM no specifically defined construct. There is a need for close
project for such partners may need to be considered in the look at within-case and cross-case analysis along with
project evaluation process. However, reported existing existing literature. Such approach has been used success-
methodologies rarely mention about it. Flaig (2005) argued fully to identify critical success factors in managing
that classical net present value (NPV) approach falls short projects (Fricke and Shenhar 2000; Verma and Sinha
of capturing some of the project’s major effects in process 2002). A multiple-case study approach was chosen as a
improvement including quality and yield rate. Also, mechanism for determining the good practices in SCM
probability of completion is not considered in classical project selection because multiple case studies are some-
NPV. According to Knill (2000) it is imperative to consider times more compelling (Herriott and Firestone 1983) and
the impact on adjacent and downstream processes when are analogous to conducting multiple experiments to
evaluating a SCM project. replicate the findings (Yin 2003). Since resource require-
It is clear that SCM projects often pose additional ment for going beyond single case study was not an issue
challenges and may require further considerations in the the opportunity to analyze findings from multiple experi-
process of evaluation and selection. Although the literature ments was attractive. Hence, we adopted an exploratory
discusses a wide range of project evaluation methodologies multiple-case research strategy as elaborated in Yin (2003).
at length, understanding of evaluation processes for select- The salient steps included in the methodology are research
ing SCM projects is rather limited. Detailed information on design, preparation for data collection, collecting the
how organizations that successfully completed SCM projects evidence, and analyzing the evidence.
had actually evaluated and selected the projects is not
available. Also, it is not known if there are commonalities 3.1 Research design
among the decision making processes used to evaluate and
select successful SCM projects. In subsequent sections we An important starting point was a review of the literature on
present how answers to these questions are explored. the evaluation and selection of SCM projects. The scope of
168 R.G. Mathieu, R. Pal

the review included research papers and trade magazine prior to the actual interviews to increase the reliability of
articles that discussed economic justification of supply the case research.
chain projects as well as related projects such as ERP,
material handling, manufacturing, and information technol- 3.2.2 Participant selection
ogy. This helped us justify the need for identifying the good
practices in SCM project selection and institute the research Participating organizations were selected based on their
questions. Subsequently, we discussed the suitability of long-term involvement and expertise in the supply chain
exploratory multiple case study as appropriate research projects. This was important to establish the good practices.
method. The purpose of the case study is to explore how We had to limit the number of organizations to three
organizations evaluate and select supply chain projects because of logistical reasons. Each of the three organiza-
successfully to reap benefits. Certain steps and procedures tions selected was global publicly traded company that had
are followed in evaluation and selection of those successful at least one organizational group devoted to the manage-
projects. Based on prior outstanding results and general ment and execution of SCM projects. At the same time they
adaptability potential, some of these steps and procedures were selected from different industry segments as maxi-
are recognized as good practices. Here, we use thorough mally different cases might be helpful to ensure rich pool of
study of project experience including project evaluation, diversity (McCutcheon and Meredith 1993). While select-
execution, and outcome as embedded unit of analysis (Yin ing the organizations, we made sure that we would be given
2003). We also analyze if the identified practices have any access to the key personnel who completed successful SCM
element of uniqueness by comparing them with the project(s). Brief information of the participants is presented
practices in other areas. in Table 1.

3.2 Preparation for data collection 3.3 Collecting the evidence

One of the authors was a principal investigator in all three Data were collected through face-to-face interview sessions
cases. We approached with an open mind and maintained that lasted between sixty and ninety minutes. A scripted
an unbiased view without preconceived notions so that any interview approach was used. The questions were devel-
contradictory evidence would not be missed. oped based on a review of literature and background
discussions with knowledgeable project managers. At the
3.2.1 Protocol development end of the interviews each participant received a draft
manuscript of the interview, and was asked to review it for
Structured client interviews were the primary source of accuracy and add comments where appropriate. Minor
data in this study. Following the principles of case study modifications were made to the final draft of the manuscript
research, a protocol was developed that included not based on feedback from the participants. Following
only the interview questions but also the procedures to Eisenhardt’s (1989) recommendations, data were collected
be used by the interviewers and overview of the case from each of the cases as independent entity. Although we
study project (Yin 2003). Each interview session started were interested to see if there were any commonalities
with a statement about the purpose of the research and an among the cases we made deliberate attempt not to lead
assurance that the respondent would receive a transcript of discussions with any preconceived notions. We believe this
the interview with a chance to change and/or edit any reduced reflexivity (Yin 2003), i.e. leading interviewee to
statements in the transcript. Interview script began with tell what interviewer wants to hear. We also examined the
the interviewee’s description of the project. This descrip- project documents that were provided by the participating
tion was followed by questions in five areas of inquiry: organizations. It helped us cross-examine and triangulate
formal methods, cost assessment, benefits assessment, risk the data to a good extent. In order to ensure reliability of the
assessment, and ROI in the project evaluation process. It information gathered we kept detailed records of interviews
was followed by questions designed to solicit experiences and reviewed documents, and cited these evidences in the
related to the economic valuation of projects. These discussion leading to identification of good practices in
questions were developed in discussion with few execu- SCM project selection process.
tives from the participating organizations. After sending
the initial draft of the questionnaire, one of the authors met 3.4 Analyzing the evidence
with the executives individually to understand their
interpretations of the questions and also to include their Following Eisenhardt’s (1989) recommendations to improve
suggestions. The process continued iteratively and the validity of the results, the same interviewing team was sent
questionnaire was tested over a course of three months to all three participating organizations and one of the authors
The selection of supply chain management projects 169

Table 1 Summary of cases

Industry segment of participating Focus of the project investigated
organization

Case A Beverage maker Development of vendor managed

(BevGiant) inventory (VMI) system for an overseas
retailer selling beverages produced by
the supplier (BevGiant)
Case B Chemical based automotive Integration project between supplier of
(AutoChem) component producer chemical based high performance
automotive components (AutoChem)
and automotive manufacturer to reduce
number of permutations of products sold
and consolidate product specifications
Case C (PetsFud) Pet-food producer and marketer 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 replenish-
ment lead time

stayed out of the interview process to play devil’s beverage retailer by the supplier, BevGiant. BevGiant is a
advocate and critique the initial findings of the global leader in production, marketing and distribution of
interviewing team. The goal was to treat all the evidences consumer beverages. While BevGiant used a SAP-based
fairly with adequate considerations for alternative interpreta- ERP system to support the financial functions of the
tions and to produce analytic conclusions consistent with an organization, it still largely relied on a proprietary legacy
exploratory research project. Hence, we used the analytical supply chain management solution. In order to reduce lost
techniques suggested by Miles and Huberman (1994) sales due to out of date product, reduce the number of
whereby a matrix of categories was created and evidences ‘mark down’ sales due to bloated inventory levels, and
were placed within such categories. We used this cross-case grow the volume of product sold, BevGiant worked with an
synthesis by comparing the findings from three case studies overseas retailer to implement a vendor managed inventory
to establish the good practices. We also used pattern- (VMI) solution.
matching logic, as elaborated in Yin (2003), to compare the While the existing order fulfillment process was reliable,
anticipated project evaluation and selection considerations an improved fulfillment system was needed to meet the
with empirical evidence. The details are presented in the needs of an overseas retailer that had highly variable
subsequent sections. demand. The proposed solution involved modifications to
the existing information system (new data and process
requirements) and changes to the organizational structure
4 Case overview (third party merchandising with the incorporation of human
intelligence to facilitate demand forecasting and support
Here provide broad overview of each of the three cases pricing decisions).
used in our study. We present each case starting with Formal methods used to evaluate Case A included
general description of the supply chain project completed cost benefit analysis and payback period. Adjustments
successfully by the participating organization. Then we had to be made for foreign investments, interdependent
present the information on how and why these organiza- projects, and cost of project delays. Since it was a large
tions decided to go ahead with the projects. Per request of project with a payback period of greater than twelve
the participating organizations we refrain from mentioning months, formal ROI calculations were required and a
their actual names to maintain confidentiality, rather corporate hurdle rate had to be met. The cost drivers for
fictitious names are used. the project included a significant IT investment in a
SAP to legacy system ‘bolt on’ and a third party VMI
4.1 Case A - BevGiant solution to develop forecasts.
When evaluating the project potentials, historical data
Case A was a project that involved the development of a were used to estimate reduction in lost sales due to out of
vendor managed inventory (VMI) solution for an overseas date stock, reduction in price markdowns due to overage,
170 R.G. Mathieu, R. Pal

cost of product spoilage, and increase in volume due to 4.3 Case C - PetsFud
enhanced sales. The risk of the updated system not
generating reliable and accurate data for demand forecast- Case C at PetsFud was a supply chain module upgrade
ing was assessed. In addition, project leaders had to review project within the context of an efficient consumer response
the risk associated with potential modifications in business (ECR) initiative in the retail grocery industry. PetsFud is a
environment resulting in changes in demand and corporate global producer and marketer of high-quality pet products
responsiveness. with over a dozen manufacturing facilities located through-
The overall leader of the project was a senior level out the world. Within the past several years, PetsFud had
executive in the supply chain group. He played an implemented a company-wide rollout of SAP’s Advanced
important role in interfacing with the overseas vendor, Planner and Optimizer (APO). For them, the APO module
sales & marketing, IT, and third party merchandisers. was a key component of the supply chain management
Periodic reviews called ‘test points’ were used. Costs, solution that provided a complete toolset for planning and
benefits, and other performance metrics were reviewed. A optimizing supply chain processes at the strategic, tactical,
gradual implementation process was used whereby the prior and operational levels.
manual mode steadily gave way to an automated mode. PetsFud sought to reduce lead times at several distribu-
Throughout the project much attention was given to the tion centers and retail centers through upgrades of a SCM
end-users of the new VMI solution. component in the integrated information system. A key
goal was to establish how the SCM module upgrade would
4.2 Case B - AutoChem result in a positive return for both the supplier and the
retailers. Ultimately it was required to demonstrate how
Case B was an ERP integration project initiated to link a both the supplier and the retailer benefitted from the
supplier of high performance automotive components project. Savings were shown as annual cost savings. Two
(AutoChem) better with an automotive manufacturer. separate but linked worksheets were constructed to house
AutoChem, a global manufacturer and marketer of a variety driver data and rates data. These variables were typically
of chemical-based materials used a broad range of adjusted during a sensitivity analysis.
consumer and industrial applications, implemented the Operational costs were tracked throughout the project
project. The primary goal of the project was to improve but there was not an emphasis on making sure that the costs
data integration between supplier and manufacturer in order were in line with the planned budget. Managers at PetsFud
to reduce the number of permutations of the product sold noted that cost estimates were more difficult to obtain if
and consolidate product sizes. there were changes in the ranks of senior management and
At AutoChem a management approval process (MAP) if the project required hiring skilled staff particularly in the
board met once a month to accept or reject project IT area. All major SCM processes were documented. Case
proposals. The board was constituted of members from C was a major cross-functional activity within PetsFud.
different business units. MAP document called for scope Metrics used to assess the project included fill rates, order
and process description. Process and technology enablers cycle times, and transit times. Benchmarking was used in
were identified, along with the identification of the the portion of the project where a logistics piece was being
transaction functionality required. Variable costs were taken away from a distributor in order to determine ‘fair
identified in terms of the number of man-weeks required compensation’. Contingency plans were developed for
to complete the tasks. Before and after benefits for both worst-case scenarios.
customer and manufacturer were listed. Metrics used were The project had an expected payback period of between
market share, manufacturing efficiency, and inventory eighteen and twenty-four months. It had a sponsor and a
savings. Risk assessment was used to assess technical, lead project manager. The project went before a Project
financial and execution risk. A major risk was associated Review Board for approval. Organizational redesigns prior
with XML/BizTalk technology as the organization did not to the project eliminated possible cross-functional conflicts.
have any prior experience. Positive relationships with the SCM group and the IT group
The volatility of expected benefits was a big issue in at PetsFud were critical for the ultimate success of the
ROI analysis. The benefits accrued were not factored into project.
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 5 Cross-case comparisons
leader had to convince persons in their own organization
about the benefits of the project, he had to persuade the After close look at the individual cases, they were
external customer. compared to determine if patterns of successful evaluation
The selection of supply chain management projects 171

and selection of SCM projects exist. In all three cases the roles of IT lead and functional lead to avoid potential conflict
evaluation and selection of supply chain projects were of interest in all three cases.
considerably influenced by the organization’s overall business Table 4 presents cost assessment considerations. Cost
strategy. The VMI project at BevGiant was part of company assessment required segmentation into fixed and variable
initiative to increase revenue in the overseas beverage market costs, and a determination of the impacts of factors such as
by reducing lost sales, markdown frequency, and inventory duration, scope, and resources. Detailed bottom-up estima-
obsolescence. The integration project at AutoChem for tion was used in all three cases. While in Cases A and B
consolidating product varieties and standardizing order there were not any major challenges in estimating cost, in
fulfillment procedures was initiated by the company-wide Case C there were few difficulties in cost estimation with
efforts to automate business processes. The logistics profit- transition of experienced workers. Table 5 presents benefit
ability project at PetsFud, which had the aim of making the assessment considerations. While some of the metrics used
distribution channels more cost-effective and responsive to for assessing benefits of SCM projects were specific to the
customer needs, was motivated by the company’s business project goals, both operational and financial measures were
strategy to cope with efficient consumer response (ECR) used in all cases. Benchmarking was used only at PetsFud.
initiatives. AutoChem mentioned that they would not select a Many times SCM projects require optimizing and redesign-
SCM project that was not well aligned with strategic corporate ing existing business processes and/or developing new
objectives even if the project may have good return on processes to tap the full benefit potentials. In all three cases
investment. PetsFud also expressed similar viewpoints. We such business process reengineering (BPR) was considered
summarize these findings in Table 2. and historical data were extensively used to back up benefit
The managerial considerations that influenced SCM and cost estimation.
project evaluation are summarized in Table 3. In all three Project risk was assessed in all three cases (refer to
cases, cost-benefit analysis was used to measure the Table 6). The common focus of risk assessment was to
attractiveness of the project. In addition, payback period analyze the risks of not achieving the desired goals of the
was considered in BevGiant and PetsFud. In all three project and assess the possibility of the project not being
organizations, a high-level formal review board was given completed on time. At AutoChem risk assessment was
responsibility of approving projects after conducting detailed mandatory for all projects reviewed by the project review
evaluations of all major project proposals made by various board. The largest area of risk as perceived by the
business units. Since, a SCM project is typically a major organization varied with the nature of the SCM project.
project it usually goes through a rigorous and independent Few other risk factors, as presented in Table 6, were also
review process. At AutoChem and PetsFud, it was required to considered.
submit scope document analyzing anticipated impact on The role of ROI in SCM project selection decisions is
existing business processes and necessary process changes presented in Table 7. In all three organizations ROI
before the project went through the approval process. At calculation was necessary in the approval process of large
BevGiant the document was recommended but not required. projects. While total cost of ownership was a major
In order to streamline the business processes, organizational consideration at BevGiant, exceeding corporate hurdle rate
redesigns may be required and it took place at BevGiant and was an important selection criterion in AutoChem and
PetsFud. Also, the review board emphasized separating the payback period of 18 to 24 months was expected at
PetsFud. As expected, larger projects saw higher involve-
ments of senior level executives in the approval process.
Table 2 Role of strategic corporate objectives in SCM project Also, the work that went into calculation of ROI was later
selection decisions
used in assessment of the ongoing SCM projects at
BevGiant AutoChem PetsFud BevGiant and PetsFud and the finished SCM project in
AutoChem.
SCM project Significantly Significantly Significantly Table 8 presents how the concerns of other business
selection is
motivated by
units within the organization as well as outside business
overall business partners play a role in selection of SCM projects. In all
strategy three cases efforts were made to eliminate/reduce conflict of
SCM project is not No Yes Yes IT group with other functional areas and build consensus
selected when it is conclusive
not aligned well evidence
among various groups impacted by the project. Since
with strategic downstream and/or upstream supply chain partners may
corporate get affected by a SCM project, both BevGiant and PetsFud
objectives even if it considered partners’ potential gains and losses arising out
has good ROI
of the proposed SCM projects. PetsFud mentioned that they
172 R.G. Mathieu, R. Pal

Table 3 Managerial considerations in SCM project selection decisions

BevGiant AutoChem PetsFud

Formal methods used to evaluate project Cost-benefit analysis, Cost-benefit analysis Cost-benefit analysis,
Payback period Payback period
Formal review board is responsible for evaluation, Yes, for projects with Yes, for large projects, but Yes, for large projects, but
selection, and monitoring of projects capital expenditure of no specific guidelines no specific guidelines
$1 million or higher about project budget about project budget
Detailed scope document including analysis of Recommended but Not Required Required
anticipated impact on existing business processes and required
necessary changes needs to be submitted before the
project goes through evaluation process
Consideration of necessary organizational redesigns in Yes No consideration required Yes
the evaluation process
Consideration of necessary project governance by the Separation of IT and Separation of IT and Separation of IT and
project review board functional leads functional leads functional leads

would give higher priority to the projects with win-win Observation # 2. The SCM project should be evaluated
situations for the organization and its partner(s). comprehensively by an independent review panel.

It has been reported in the literature that the project

6 Useful practices in SCM project selection selection decision can be politically motivated and
managers tend to support pet projects without consider-
Based on the cross-case comparisons and close look at the ing the big picture (Hartman 2002). Decision makers
literature, we have identified the following useful practices may not be on the same page about the true potential of a
in evaluating and selecting the SCM projects. They are project (Gallagher 2003) and organizations may use
summarized in Table 9. inconsistent metrics from project to project (Lewis and
Observation # 1. The SCM project should be aligned Koller 2001). In order to avoid inappropriate decisions,
with organizational strategy and must garner manage- many major projects are assessed by formal review boards
ment support. with representation from all relevant quarters of an
organization. This is particularly important for SCM
Typically SCM projects are high visibility projects in an projects where inherent conflicts may exist between
organization with multiple stakeholders. Organizations invest functional areas within an organization and between
substantial resources with the intention of getting appropriate different organizations in the supply chain (Sarkis and
returns. Hence, it is natural that evaluation of a SCM project is Talluri 2004). In all three cases, review panels were
greatly influenced by its alignment with the organization’s responsible for evaluating all major candidate projects.
strategic objectives. In all three cases project selection Managers at BevGiant implemented ‘test points’ where a
decisions were considerably influenced by the organization’s review panel reexamined cost and benefit assumptions
overall business strategy. Gallagher (2003) and Stanleigh throughout the SCM project life-cycle. BevGiant manag-
(2006) also expressed similar views. Sarkis and Sundarraj ers were careful to monitor project metrics during the
(2000) emphasized the strategic nature of evaluating infor- implementation process. Both AutoChem and PetsFud
mation technologies in the supply chain. Favilla and Fearne have had SCM projects killed by project review boards for
(2005) mentioned about the importance of effective commu- public relations and/or legal reasons. Segars et al. (2001)
nication of KPIs among all major stakeholders of SCM and Stanleigh (2006) emphasize the importance of well
projects. Metrics should be developed that are critical to structured processes for prioritizing projects. Structured
senior executives. This can help raise the visibility and the approaches adopted by review panels help reaching cross-
value of the project. It is worthwhile to note here that functional consensus and making unbiased decisions. But
decision makers in AutoChem and PetsFud mentioned they the review process can consume large amounts of
would not select a SCM project with potentially good ROI if resources and some organizations may find the benefit to
the project was not aligned well with organization’s strategic be overshadowed by the cost and time involved (Lawson
core objectives. A manager at AutoChem stated that the et al. 2006). Nonetheless, considering the intensive
greatest risk factor for a SCM project is “implementation investment requirements and huge significance of SCM
without strong support from the CEO”. projects, rigorous review by an independent board is
The selection of supply chain management projects 173

Table 4 Cost assessment in SCM project evaluation

BevGiant AutoChem PetsFud

Costs are segmented into variable/direct Yes Yes Yes

cost and fixed/indirect cost
Methods for cost estimation (analogous Bottom-up estimation Bottom-up estimation Bottom-up estimation
estimation, bottom-up estimation,
parametric estimation, etc.)
Methods for connecting project evaluation No formal methods used No formal method to tie Operational costs are tracked,
process with cost budgeting and control cost control with project but there is no emphasis to
during the project approval process ensure that costs are in line
with budget
Challenges with cost estimation No major challenges faced No major challenges faced Difficulty faced due transition
of experienced workers

warranted. Additional benefits include experience of the effective scope management as a critical success factor.
review panel from past projects which may serve as a Flaig (2005) and Knill (2000) noted that a project’s effects
knowledge base in the decision making process (Stanleigh, on adjacent business processes should be considered in its
2006). evaluation although this aspect is widely ignored in
practice. Because supply chain projects typically contain
Observation # 3. The scope of the SCM project and
multiple interdependent business processes, cross-impact
associated business processes should be documented
documentation is imperative. Similar viewpoints were
well before evaluation. Impact on existing business
expressed by Favilla and Fearne (2005).
processes within the supply chain should be considered.
Observation # 4. Detailed benefit and cost calculations
Formal documentation of each business process is
are needed for SCM project evaluation. Qualified and
important in all SCM projects. In addition, a scope
experienced supply chain experts should be used to
document is helpful for understanding precisely what is
generate estimates.
expected during the course of a project. All three
organizations considered documenting business processes Benefit and cost estimates should be as comprehensive
and clearly defining the project scope prior to evaluation to as possible to understand the true potential of a project. The
be very important. While this was not required but complex nature of SCM projects makes this task even more
recommended at BevGiant, it was required at AutoChem difficult. One critical aspect of developing a business
and Petsfud. At PetsFud over thirty major processes were justification for SCM project is a thorough evaluation of
documented using a “from-to-by-copy” matrix for each the trade-off between total cost of ownership and the
process step. At AutoChem the management approval enterprise-wide long-range benefits. Organizations have a
process required a scope and process description where tendency to focus narrowly on upfront expenditures and
technology enablers were identified and transaction func- benefits limited to departmental time and cost savings.
tionality was clearly specified. Loo (2002) included 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 Inventory savings, Increase in fill rate,
in markdowns, Increase in sales, Manufacturing efficiency Reduction in order cycle
Increase in market share gain, Increase in market time, Reduction in transit
share rime, Cost savings
Benchmarking used Not used in this project Not used in this project Used to determine fair
compensation for a
logistics
piece takeover
Consideration of business process Yes Yes, and this is required by Yes
re-engineering (BPR) in benefit the project review board
assessment

In a broad sense, optimization of existing processes, reconstruction of core processes, and invention of new processes are considered as BPR.
174 R.G. Mathieu, R. Pal

Table 6 Risk assessment in SCM project selection decisions

BevGiant AutoChem PetsFud

Is project risk assessed? Yes. Chance of achieving desired Yes and required by the project Yes. Chance of achieving desired
outcomes on time was analyzed. review board. Chance of outcomes on time was analyzed.
achieving desired outcomes on
time was analyzed.
Largest area of risk If the new system does not New technology—XML/BizTalk, Contingency plan for worst case
(as perceived by the generate reliable and accurate organization had no previous scenarios
organization) data to aid in demand forecast experience with it
Other risk factor(s) Loss of data, Change in business Coping with automated processes Risk of not doing the project, i.e.
considered important by environment lost opportunity
the organization

generate the estimates. They must understand the problem Observation # 5. Comprehensive assessment of SCM
that the project is trying to solve. project risk must be made during project evaluation
The usefulness of multi-layer evaluation process (Milis with specific attention given to inter-organization
and Mercken 2004) and hybrid approach (Cooper et al. supply chain communication.
1998) in project evaluation decision has been argued in the Project managers are aware of the need to manage the
existing literature. It is suggested that project evaluation risks of a project. It is important that risk management be
should look beyond economic measures such as such as directly integrated into the project evaluation process. Risks
return on investment (ROI), internal rate of return (IRR), should be quantified and prioritized. Flaig (2005) discussed
net present value (NPV), and payback period (Irani et al. importance of including probabilities of accruing benefits
1997; Rogow 2004). While some of these measures were and incurring costs based on project risk in a modified NPV
used in all three cases we studied, a number of other analysis. A number of other studies also mention about the
metrics (see Table 5) were used along with consideration significance of considering risk in project evaluation
for intangible benefits. Both AutoChem and PetsFud used (Ringuest et al. 2000; Badri et al. 2001; Kulak et al.
volatility as a consideration in benefit estimation. Contrary 2005; Lawson et al. 2006). For BevGiant and AutoChem
to Koksal’s (2004) concern of not including long-term technical, financial, and execution risks were assessed. At
effect on sales, increase in market share was estimated by PetsFud a worst case scenario approach was used to
BevGiant and AutoChem. Detailed cost calculations were develop a contingency plan, and a senior decision maker
made in all three cases including bottom-up estimation. Past mentioned that the risk of not undertaking the project (i.e.
data were sufficiently used for validation. In all three cases, opportunity loss) was weighed in project selection decision.
roles of experienced project benefit estimators with SCM At AutoChem a manager mentioned that a significant risk
experience were considered important for project success. factor in SCM projects was the consideration of “senior

Table 7 Assessment of ROI in SCM project selection decisions

BevGiant AutoChem PetsFud

Is ROI calculation required by the Yes, for projects with capital Yes, for projects with major capital Yes, for projects with major
organization if a project has to be expenditure over $1 million expenditure capital expenditure
selected?
Any specific evaluation criteria for Total cost of ownership is Corporate hurdle rate must be 18 to 24 month payback period
projects requiring ROI looked at closely cleared is expected
calculations?
What is the level of involvement of Larger projects get more Larger projects get more Larger projects get more
high level executives in project involvement involvement involvement
evaluation?
How is the work that went into ROI There are periodic reviews Benefits are measured at least one Progress is assessed through
calculations used in later called ‘test points’. Costs and year after completion of a project periodic project reviews
assessment of SCM projects? benefits are reviewed.
Is there any procedure to cancel a There is no formal procedure, There is no formal procedure, but There is no formal procedure,
project if things do not go but unsuccessful projects will unsuccessful projects will be but unsuccessful projects will
successfully? be cancelled cancelled be cancelled
The selection of supply chain management projects 175

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

BevGiant AutoChem PetsFud

If the concerns of other business units Various metrics are watched. Cross functional buy-in is built Organizational redesigns have
that do not own the project but play a Need for IT resources are eliminated many of the
role and/or get affected by the project examined. Gradual potential conflicts. Buy-in
and their assessment of project are implementation is preferred to from IT group is crucial.
considered in the project selection keep a balance.
decision?
Is the ROI of the business partner(s) Yes, benefits and costs to both No formal consideration of Yes. Also, projects with win-
affected by the project considered in organization as well as partners’ ROI win situations get highest
the project selection decision? partners are considered priority.

executives voluntarily surrendering power, head count or on projects, even though they are not the ones who will be
budget”. SCM projects typically involve the use of using the system and helping it realize its full potential”.
inter-organizational communication systems and stand- Better results can effectively be achieved by separating the
ards (Sarkis and Talluri 2004). In each case, decision duties of the project manager from the IT lead. BevGiant,
makers explicitly considered the risk of implementing the AutoChem, and PetsFud required that someone outside of
inter-organizational communication standards associated the IT group take the lead role in managing large SCM
with the project. projects. At PetsFud a senior manager stated that “organi-
Observation # 6. Consideration of necessary cross- zational redesigns have eliminated many cross-functional
functional project governance structure should be conflicts” and as a result “relationships with the IT group
made as a part of the SCM project evaluation process. have been very good”. A manager at BevGiant described
the complexity of cross-functional relationships in a project
Nearly all supply chain projects involve information where the procurement group, the sales group, the IT group,
technology and the involvement of the IT department. and the external “merchandiser” group had to work closely
Solomon (2002) summarizes the inherent issue by stating together during the project evaluation and selection phase.
“the problem is that many IT leaders insist on taking leads 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 BevGiant, AutoChem, and PetsFud Gallagher 2003; Stanleigh 2006
strategy and must garner management support.
2. The SCM project should be evaluated comprehensively BevGiant, AutoChem, and PetsFud Segars et al. 2001; Stanleigh 2006
by an independent review panel.
3. The scope of the SCM project and associated business AutoChem and PetsFud Segars et al. 2001; Loo 2003
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 BevGiant, AutoChem, and PetsFud Cited by a number of studies
SCM project evaluation. Qualified and experienced
supply chain experts should be used to generate estimates.
5. Comprehensive assessment of project risk must be made BevGiant, AutoChem, and PetsFud Ringuest et al. 2000; Badri et al.
during SCM project evaluation with specific attention 2001; Kulak et al. 2005; Lawson
given to inter-organization supply chain communication. et al. 2006
6. Consideration of necessary cross-functional project BevGiant, AutoChem, and PetsFud Solomon 2002
governance structure should be made as a part of the SCM
project evaluation process.
7. If organizational redesign is necessary, it should be BevGiant and PetsFud Smith 2000; Chin et al. 2004
considered in the SCM project selection decision.
8. Initial work for ROI calculation may be used for BevGiant, AutoChem, and PetsFud Loo 2003
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 BevGiant and PetsFud Walker et al. 2002; Chin et al.
projection selection decision. 2004
176 R.G. Mathieu, R. Pal

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 Should be considered for all major ERP (Nah et al. 2003; Huang et al. 2004),
organizational strategy and must garner projects including SCM projects IT (Irani et al. 1997; Jiang and Klein
management support. 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 Can be appropriate for all projects IT (Segars et al. 2001), PM (Stanleigh
comprehensively by an independent review panel. competing for limited resources. This is 2006)
of greater importance for major projects.
3. The scope of the SCM project and associated Applicable for any project involving ERP (Nah et al. 2003; Huang et al. 2004),
business processes should be documented well multiple business units exchanging IT (Segars et al. 2001), PM (Loo 2002;
before evaluation. Impact on existing business information Stanleigh 2006)
processes within the supply chain should be
considered.
4. Detailed benefit and cost calculations are needed Relevant for all projects, has greater Applicable to good practices in all other
for SCM project evaluation. Qualified and significance for major projects related areas
experienced supply chain experts should be used to
generate estimates.
5. Comprehensive assessment of project risk must be Applicable for any major project requiring IT (Remenyi and Heafield 1995; Badri et
made during SCM project evaluation with specific significant investment of organizational al. 2001), ERP (Schulz 2000; Nah et al.
attention given to inter-organization supply chain resources. Importance may vary with 2003), R&D (Ringuest et al. 2000;
communication. organization’s risk aversion. Lawson et al. 2006), PM (Stanleigh
2006)
6. Consideration of necessary cross-functional proj- Many times separating IT lead and IT (Solomon 2002), PM (Minarro-Viseras
ect governance structure should be made as a part functional lead ensure smooth project et al. 2005)
of the SCM project evaluation process. delivery. The consideration is important
for large projects with IT involvement.
Also, skill and quality of personnel
managing the project is critical.
7. If organizational redesign is necessary, it should Can be applicable for any large project ERP (Nah et al. 2003)
be considered in the SCM project selection with complicated business processes and
decision. potential conflict between business units
8. Initial work for ROI calculation may be used for Appropriate for any major project that PM (Loo 2003)
reviewing on-going project and cancelling a proj- requires close monitoring
ect if the progress is not satisfactory.
9. ROI of supply chain partner(s) should be Primarily specific to SCM projects as Usually not applicable to good practices
considered in projection selection decision. these projects usually involve partners in other related areas
outside organizations. However, similar
consideration may be applicable for the
projects in other areas where
collaboration among organizations is
required.

• 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, “Breaking organizational barriers and enabling collabora-
and PetsFud project review boards oversaw the project tion across the supply chain requires a cultural change in
governance structure and separated the duties of the project how your organization measures and rewards individuals
manager and the IT lead. and organizational units. The traditional model is based on
cost and revenue models: the new model is based on
Observation # 7. If organizational redesign is neces-
metrics that align to cross-organizational business processes”
sary, it should be considered in the SCM project
(Smith 2000). Also, Chin et al. (2004) reported the
selection decision.
importance of business process changes in supply chain to
Historically, conflicts between organizational units have cope with problems of information distortion and other
resulted in problems in execution of large projects. impeding factors. At BevGiant and PetsFud organizational
The selection of supply chain management projects 177

redesigns had eliminated conflicts between functional units sponsoring organization and negative for the customer
and improved overall business processes associated with the considered providing incentive for efficiency achieved to
implementation. The proposed redesigns were evaluated motivate the customer, while projects with a positive impact
during the project approval process. AutoChem was able to for the customer and a losing financial impact for the
avoid organizational redesign by developing a planning sponsor suggested using pricing strategy for the service
process that linked strategy, goals, objectives, and measure- provided to recover cost.
ments. It was used to ensure consistency in evaluation
among the functional areas of sales, marketing, manufactur-
ing, and IT. 7 Conclusions
Observation # 8. Initial work for ROI calculation may
We compare the useful practices in selecting SCM projects,
be used for reviewing on-going project and cancelling
which we identified earlier, with the well known practices
a project if the progress is not satisfactory.
in other related areas. Subsequently, we discuss the
ROI calculation should be considered as part of contributions and managerial implications of the findings
ongoing project management process. Loo (2003) men- followed by limitations and future research implications.
tioned about importance of project monitoring and project
review for timely identification of issues and taking 7.1 Comparison with practices in other areas
correctional measures to ensure success. It was found the
work that went into calculation of ROI during project We discuss the rationale of the good practices in SCM
evaluation and selection was eventually used for subse- project selection and examine if they can be linked with the
quent evaluations of projects in all three cases. The ‘test recommendations made in other related areas. The dis-
points’ developed at BevGiant implemented examined cussion is summarized in Table 10.
cost and benefit assumptions throughout the SCM project We find that selection of SCM project is greatly
life-cycle. AutoChem made extensive use of “best in influenced by its alignment with organizational strategy.
class” benchmarking in the SCM evaluation process. All ERP (Nah et al. 2003; Huang et al. 2004), IT (Irani et al.
three organizations mentioned about possibility of cancel- 1997; Jiang and Klein 1999), general project management
ing projects for unsatisfactory outcomes. (Pinto and Slevin 1988; Kaplan and Norton 1996; Stanleigh
2006) best practice literature also echo similar viewpoints.
Observation # 9. ROI of supply chain partner(s)
Vereecke et al. (2003) mentioned about importance of
should be considered in projection selection decision.
program management that involves coordinated manage-
The supply chain partners’ viewpoints including the ment of projects with a common strategic objective. It is
ones on economic return of the project are important for its natural that organization’s overall strategies will govern the
success. Chin et al. (2004) reported that SCM projects SCM project evaluation process. Jiang and Klein (1999)
influence relationships with upstream/downstream suppli- found project evaluation criteria to vary with strategic
ers/customers and hence supply chain wide measures orientation of organizations’ information system in time
should be used to measure the project’s effectiveness. dimension. While organizations with current strategic
Walker et al. (2002) mentioned about importance of project system place more emphasis on internal factors, organiza-
partnering and alliance. Among the three organizations we tions with future strategic system stress on both internal and
worked with, BevGiant and PetsFud considered the external factors. Huang et al. (2004) identified management
economic impact of the SCM project on the partnering support as a critical success factor in ERP implementation.
organizations. At PetsFud, particular attention was given to Cooper et al. (1998) stressed the importance of manage-
the economic impact of a new SCM project on downstream ment buy-in and support in R&D project selection. It is
customers. A senior PetsFud SCM manager noted that “in expected that any major project should meet the strategic
prior years several supply chain initiatives unintentionally corporate objectives in order to get approved by the
caused economic hardship on our downstream customers” management.
and as a result PetsFud was now “careful to consider the Evaluation of SCM projects by a formal review panel is
customer viewpoint when evaluating new supply chain justified for its potential to provide objective review. IT and
projects.” PetsFud developed a financial impact model that general project management literature favors this practice
considered procurement, transportation, and warehousing for all major projects competing for limited resources
from perspectives of both PetsFud and its downstream (Segars et al. 2001; Stanleigh 2006).
customers.Highest preference was given to projects with Scope management is a critical part of any project. In
win-win situations for the organization and its partner(s). addition, effect of process change is overwhelming for any
Projects where the financial impact was positive for the projects that involve significant information exchange
178 R.G. Mathieu, R. Pal

between different business units. Hence, business process projects may be viewed as adoption of innovation by the
reengineering plays a crucial role in ERP projects (Nah et implementing organizations. Hence, it is justified that
al. 2003; Huang et al. 2004). Like ERP projects, SCM complexity of SCM projects should also be reduced or
projects involve both intra and inter organizational infor- eliminated whenever necessary, and organizational redesign
mation exchange and process flows. Hence, effect of can be a vehicle to reach the goal.
process changes should be considered in SCM project The importance of periodic monitoring and reviews to
evaluation decision. Similar viewpoints are expressed in IT ensure success is discussed in Loo (2003). Since the initial
project management (Segars et al. 2001) and general project ROI calculation of SCM projects during the approval
management best practices (Loo 2002; Stanleigh 2006). process are usually quite involved, it makes sense to reuse
Detailed benefit and cost estimation is important for any the work in subsequent evaluations.
kind of project as it is a primary basis for project The supply chain literature emphasizes the importance of
justification. However, additional layers of complexity are upstream/downstream supply partners in ensuring stream-
added based on significance of a project. Thus, it is quite lined business operations. Hence, it is justified that their
expected that benefit and cost estimation for major projects perspectives, including gains and losses (if any), should be
like ERP and SCM projects are complicated. considered before a SCM project is selected. While this
Risk assessment in project evaluation is a common consideration is specific to SCM projects, similar consid-
practice. A number of articles related to evaluation of eration may be applicable for the projects in other areas
projects in various areas such as IT (Remenyi and where collaboration among organizations is required.
Heafield 1995; Badri et al. 2001; Kulak et al. 2005), ERP
(Schulz 2000; Nah et al. 2003), R&D (Ringuest et al. 7.2 Contribution and managerial implications
2000; Lawson et al. 2006), and project management
(Stanleigh 2006; Maytorena et al. 2007) mention about The good practices identified in this paper provide sound
necessity of risk analysis. SCM projects are no exceptions evaluation and selection guidelines during the planning
and importance of the issue may be influenced by project stage of a supply chain project. Our findings confirm the
size. Lack of future planning (Schulz 2000) and late importance of talented managers who understand the
completion (Nah et al. 2003) have been reported as major importance of thorough project planning. Management’s
obstacles in ERP projects and are attributed to large size of understanding of the useful practices presented in this paper
ERP projects. Although typical SCM projects are smaller can have a significant impact on an organization’s ability to
than ERP projects, the size of SCM projects is still select and implement SCM projects with a high payoff.
significant. Hence, smooth execution and on-time com- One of the main contributions of our study is the
pletion of SCM project is an important issue and enhancement of the knowledge base in supply chain project
associated risk must be closely analyzed. Also, varying selection decisions. The literature suggests that selection of
risk attitude of different firms taking part in a SCM project appropriate SCM project and its implementation may pose
adds an interesting twist to the analysis. additional challenges. Although the literature discusses
Separation of duties of the project manager and the IT various project evaluation methodologies and project
lead is important in major IT projects (Solomon 2002). management best practice, information on SCM project
Since SCM projects usually involve significant IT imple- selection process is rather limited. Detailed information on
mentation, the issue should be considered. Minarro-Viseras how organizations should evaluate and select the SCM
et al. (2005) found appropriate staffing and project projects successfully is not widely available. To the best of
manager’s personal quality and skill to lead the project to our knowledge, we take the first comprehensive step
be key success factors in strategic manufacturing initiatives towards exploring this issue.
(SMI). Supply chain projects have many similarities with Nine useful practices for SCM project selection were
SMI and these considerations are also important while identified in this study. While eight of them had been
evaluating and selecting a SCM project. previously identified, those practices were scattered
Requirements for streamlining complicated business throughout the prior literature on ERP, IT, and R&D project
processes and/or eliminating potential conflicts between management. Unlike prior studies, by focusing our research
business units may drive organizational redesign. The ERP on SCM projects we were able to identify the practices that
best practice article by Nah et al. (2003) recommends are critical to the success of SCM projects. In addition, we
overcoming the issue of unnecessary complexity by identified a new management practice of including return
undertaking organizational change as necessary. The article on investment (ROI) consideration beyond organizational
cited Rogers’ (1995) diffusion of innovation theory that boundaries or assessment of potential impact on supply
suggests that the rate of adoption of an innovation is chain partners in the SCM project selection process. For
negatively related to its complexity. Many of the SCM each practice, we establish its relevance to project selection
The selection of supply chain management projects 179

rationale and the link with good practices in related areas. project partnering and alliance within scope of an assump-
Also, the project selection practices identified here are tion that “all parties can achieve a win-win situation
backed up by evidences gathered from successful real-life provided they work together to help each other gain not
SCM projects. Thus, practitioners can instill themselves only a realistic reward for their input but to gain a
with certain degree of confidence in following these competitive edge in the market as a result of their
practices for selecting SCM projects. Although the extant experience on this milestone approach”. However, not
literature documents many of the useful practices identified always such win-win situation may persist. It will be
here in the context of non-SCM projects, there is a need for interesting to study how the project selection decisions are
investigating if those practices are useful in selecting SCM made when conflicts between an organization and its
projects appropriately. This study provides the much partner(s) may arise out of a proposed SCM project. Also,
needed confirmation to the least. it will be worthwhile to compare the decision making
process when a dominant organization is driving the project
7.3 Limitations and future research implications with the situation when a relatively weak organization is
taking the SCM initiative.
All three organizations, which we studied, implemented Also, large SCM projects may pose unique challenge.
SCM projects successfully. The case of unsuccessful Sometimes these projects are divided into smaller sub-
projects was out of scope of this study. Nonetheless, projects in multiple phases called business releases (Moller
lessons may be learnt from the unsuccessful projects. It 2000). This practice reduces risk, promotes learning from
may be worthwhile to investigate if any organizations that previous experience, keeps the momentum going, and
fail to implement a SCM project successfully follow the reduces time to receive returns. Many world-class firms
practices identified in this study and what implications it recommend this practice for very large projects. However,
may have on potential outcomes. in any of the three cases we studied, business releases were
Our study focused on the US based organizations only. not used. Although we do not expect any change in the
While we expect the findings to be applicable for firms good practices identified here, further exploration on SCM
outside the US, there may be additional considerations in project with multiple business releases may provide
selection of SCM projects which are unique to their additional insights.
situations. We had to keep the number of firms studied to
three for logistical reasons and hence did not have control Acknowledgements The authors would like to thank Dr. Ik-Whan
G. Kwon and Dr. John W. Hamilton of the Center for Supply Chain
factors such as firm size, maturity, etc. While some of the
Management Studies at Saint Louis University for their support of this
researchers may prefer to include higher number of firms, research project.
some others have conducted case research with similar or
less number of firms. We chose the firms from different
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