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The 3 Ways People React to Change and Why Procurement Leaders Need to Take Note!

The 3 Ways People React to Change and Why Procurement Leaders Need to Take Note!

I remember vividly the time when a leading Utility firm in the UK asked me to review a major delivery contract that they just negotiated with a series of contractors. Their expectation was that this new contract format would deliver significant cost savings. In fact, costs were going through the roof and the Major Contracts Director was in danger of being exited from the company!

After an initial investigation, it became clear that although the contract was ‘sound’ the approach taken to embedding the new ways of working left a lot to be desired. I remember having a meeting with the Contract Managers and asking them, “What do you think about the new contract?”

What do I think? I think it’s terrible, completely not required. There was nothing wrong with the way that we have been managing maintenance for the last 15 years. The Contractors, however, love it – it’s so much more weighted in their favour! 

Even as adults, most of us don’t choose change. We get comfortable with our routines, our lives, our friends, our cocktail of choice, even our routes to work, and any detour can be a source of frustration, fear and stress—we prefer the security of what we know. But change is unavoidable, and how we react to it determines the outcome, good or bad.

[bctt tweet=”Change is unavoidable, and how we react to it determines the outcome, good or bad.”]

There are usually three ways that people react to change:

• Be non-active.

These are the type of people who keep their head down, carry on doing what they’ve always done, assuming that this ‘latest initiative’ will eventually go away and be replaced with the next big thing! Unfortunately, they are often right. Basically, they resist the change and choose to remain in denial. If I don’t address the issue, it’s not really there. It won’t happen to me, so I’m just going to continue to go about my business. Or they cop an attitude and say, It’s not fair. Why me? Either way, they don’t move forward and stay stuck.

• Be reactive.

I’ve seen examples of department heads, upon hearing that the Chief Executive is pushing for a 20% reduction in budgets frantically start calling all their core suppliers and demand that they reduce their prices and pressures them to make a fast decision. These types of department heads don’t have all the necessary facts but make a decision anyway to eliminate their immediate stress and worry. It’s a knee-jerk reaction. The challenge with this approach is that they can cause massive pressure within the supply chain that can ultimately (and often does) come back and bite them in due course.

• Be proactive and positive.

Earlier this year, I was working with a company that was growing rapidly. As such, their needs were changing on a monthly basis and historically they had adopted a ‘we’re bigger now, so give us a bigger discount’ approach to supplier engagement!  They had achieved savings but the basic ‘lets squeeze the lemon’ approach had its limitations.

To ensure that the supply chain was fit for purpose, we invited all of the core suppliers in for a discussion, explained to them the future direction of the business, asked them for ideas and recommendations, and did research on the Internet around innovative approaches.  They prepared a budget and shared this with the core supply base. They outlined and shared a joint vision of what success would look like. They put their focus on what they could do, focused on the positive outcomes and took action.

Obviously, the ideal way to deal with change is to be is proactive because you feel more in control. And the more we feel we have control over the situation, the less stress and frustration we feel. It doesn’t matter what the subject is —when we take charge of change, the journey feels more comfortable and ends up more rewarding.

Easy to say, but how do you choose to be proactive when it’s so easy to freak out or hide under the covers?

• Acknowledge that change is part of life. Nothing would exist without change. It’s inevitable.

• Accept your emotions. Tell the truth on yourself to allow all your feelings. Cry the crocodile tears and release the energy as it comes up. Be patient, as it takes time to sort through all your emotions and adjust to change. Too often we skip over this step, shove our emotions down and that ends up slowing us down.

• Reframe the situation to see the positive. After I explained to the Contract Managers the rationale for the change in Contract and how we can embrace it to create a true Win Win across the full maintenance regime, they started to understand more about the possibilities ahead. They could work in partnership with the contractors, they could be more proactive in the financial management and ultimately have a more fulfilling career.

• Action is required because decisions, not conditions, determine your path. By deciding to move forward and trust the process, we put our focus on what is available.

Change Management is a key ingredient in my C.O.S.T. Optimisation Formula. Download my book for free here. One of the modules that I cover is the Change Accelerator, an illustration of which is given below;

 

 

Your ability to effectively manage the change across your organisation will determine the level of the benefits that you realise from your procurement activities. I’ve seen examples where forecast savings were completely wiped out by not managing the change effectively. Equally, with the case of the Utility company mentioned above, by actively managing the change process and embedding new ways of working, we delivered over £30m of savings over the next 12 months.

Key Steps to Enhanced Supply Chain Collaboration

Key Steps to Enhanced Supply Chain Collaboration

I read with interest the Blog Post on 21st Century Procurement entitled – Collaboration and the Making of the Social Supply Chain, elements of which I have included within this post.

Agnes Rubaj, the author highlights that;

“collaboration in a supply chain organisation is essential to pretty much every role, from the customer service rep, to the demand planner, to the supply chain executive. And those are just the roles within the company. Supply chain organizations operate within global networks of external trading partners that require regular back and forth communication.

[bctt tweet=”Collaboration in a supply chain organisation is essential to pretty much every role…”]

Social media aids collaboration within a business environment because it can help build trust and closely connect people from different roles, backgrounds, and locations across the globe. Many companies, in the supply chain space or not, are turning to enterprise social networking tools to influence collaboration and open communication throughout their departments. However, research shows that these tools are not getting as much traction as predicted and employees go back to relying on outdated collaboration methods, such as email, review meetings, and phone calls.”

She goes on to suggest that there are some requirements that a supply chain planning system of record must possess in order to facilitate proper integration of social networking functions, including:

  1. An end-to-end integrated system that includes everyone you collaborate with, including customers and external suppliers = Everyone working in one place
  2. Cross-functional visibility into up-to-date data = Everyone working from the same data
  3. Ability to create copies of said data (what-if scenarios) to model various supply chain business problems = Analysis is purpose-driven based on specific events/goals
  4. Ability to share the what-if scenarios with anyone in the system = Collaboration happens in context and with a specific objective
  5. A way to connect people in the system to the processes and materials for which they are responsible, so that identifying who to work with can be done quickly and mid-task = The right people are brought together

Although I accept the need for tools to facilitate effective collaboration, there are often other significant questions that organisations need answers to before they can really consider implementing a collaborative supply chain arrangement. These include;

  • What is supply chain collaboration?
  • Where does your firm stand in terms of supply chain collaboration with key trading partners?
  • What level of collaboration do you wish to achieve?
  • How would the increased collaboration influence the performance of your supply chain?
  • What, by the way, can be regarded as successful collaboration?
  • How can your firm get there?

Supply Chain Collaboration is one of the core pillars of my C.O.S.T. Optimisation Formula and I cover these questions in more detail within my book (download a free copy here).

So how do you Define collaboration?

All supply chain and procurement relationships can be considered as falling within a continuum, with traditional, arms-length relationships at one end, and collaboration at the other end, with cooperation and coordination in the middle.

At the most basic level, supply chain collaboration can be defined as the continuous process of sharing, partnering, connecting, and aligning to improve supply chain performance, for win-win benefits.

It represents the highest level of commitment between/among supply chain participants, short of joint venture or vertical integration. Getting down to basics, collaboration can be defined as “the co-ordinated application of a group’s knowledge to deliver a goal.”

In other words, a coordinated effort to pool knowledge of supply chain partners towards a common goal.

Many levels of collaboration are possible in a supply chain relationship in order to achieve a common goal.

Dan Gilmore of Supply Chain Digest offers a framework for supply chain collaboration that covers four levels:

Fig7

  1. The first level is achieved with consistent communications. – It is necessary for trading partners to talk in meaningful ways about opportunities for joint improvement. Although this is the first level, I often find that clients do not actively engage with their trading partners.
  2. At level two, there can be transaction integration with the automation of basic business processes and transactions, using various means such as EDI, the Internet or proprietary connections. This, in itself is a form of collaboration as it involves investment. Making use of your supplier partners online ordering portal for instance and linking this into your finance systems is an obvious example here.
  3. Information sharing moves collaborators to level three in terms of collaboration. At this stage, trading partners share information using the same platforms as in level II to help them make better decisions. Examples of information shared include those on production, components, forecasts, inventory levels, Point-of-sale data and more.
  4. The highest level of collaboration achievable requires business process integration between trading partners. This is the level at which trading partners engage in true joint planning, implement process redesign across trading partner interactions and really begin to share risks and rewards from collaborative efforts.

Depending on their inclination and the levels of commitment from supply chain collaborators, organisations can decide on the levels of corporate “intimacy” they want to achieve through collaboration.

What’s your experience of Collaboration?  What’s worked well? What should others be wary of? Please share your thoughts.

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Are you leaving ‘Money on the Table’ with your Procurement activities?

Are you leaving ‘Money on the Table’ with your Procurement activities?

When looking for efficiencies and cost savings, the first place most companies tend to look is to their suppliers, working on the assumption that if we can negotiate better prices, then our costs will fall.

Although this is certainly one lever that should be assessed, I believe in the old saying – “get your own house in order first

By reviewing the internal processes first, you are able to identify even more opportunities to generate not only cost savings but also efficiency gains from your negotiations with your supply chain partners.

For instance, one client that I’ve worked with had negotiated a fantastic deal with one of their main suppliers – the deal was scheduled to deliver a 16.7% annual saving across circa 30% of their overall spend. The products covered were mainly low value, high volume materials required to deliver their services to their clients. Their average stock holding of these products amounted to circa £25m.

By helping the client to introduce more structure around their stock management processes, implementing automated stock ordering and adopting a simple stock monitoring process, we were able to reduce stock by 20% within 3 months. This delivered an immediate £5m cash benefit to the Company, significantly enhanced the operational efficiency around stock management and strengthened the relationship with the chosen supply chain partner.

The Value Chain Tri-zoneTM has been developed to help you review all areas of your business to ensure that you can optimise all internal practices and processes. Opportunities such as this exist across the entire Value Chain Tri-zone of any organisation. The diagram below illustrates what I mean by the Value Chain;

Fig5

 

 

When undertaking an organisation wide review, I tend to break down the organisation and the opportunities that exist, into three core areas;

  1. Asset Management opportunities – these focus on the financial aspects of an organisation and are geared towards efficiencies in capital employed
  1. Enterprise wide opportunities – these are typically cross functional and are strategic in nature
  1. Function specific opportunities – these are more tactical and transactional in nature focusing primarily on individual functions.

You can discover more about the Value Chain Tri-Zone, in my book – The C.O.S.T. Optimisation Formula – download your free copy today by clicking here.