Change is hard, and this can put businesses off doing things differently – but we shouldn’t let fear of failure stop us making the improvements that will take us into the future
Companies talk a lot about change but making it happen is notoriously tough. A third of respondents to the most recent Indirect Procurement Report, produced by RS and the Chartered Institute of Procurement and Supply (CIPS), described managing change with stakeholders as either quite or very difficult.
It’s no surprise that so many working in procurement feel this way. The complexity of MRO operations makes breaking from the norm especially challenging, to say nothing of the large numbers of stakeholders they take in.
There are likely to be many suppliers and items involved, and influencing this broad base can be difficult. You will have to overcome the “status quo bias” that exists in many organisations – the inertia that can lead to feelings of, “This is how we’ve always done things, so why change now?”
“Never underestimate the importance of communicating why you are making changes to the way you work with suppliers”
Supply chain transformation lead, water industry
To challenge this kind of thinking, it’s important to clearly articulate why you need to do things differently. Don’t be afraid to seek help in telling this “Why change?” story internally. It’s vital to win hearts and minds.
As a supply chain transformation lead in the water industry says: “Never underestimate the importance of communicating why you are making changes to the way you work with suppliers – all your colleagues need to know and understand why.”
The right tools for the job
Change management tools are not as well understood as they should be in most businesses. But there are models out there, such as Kotter or Kubler Ross, which will help drive change if properly used.
It can be tough for procurement leaders to initiate change that, to be successful, needs to reach into every corner of the organisation – especially when, according to our report, there is an average of seven stakeholders involved in change and transformation processes.
Obviously, if you are going to make change sustainable, it’s crucial to get buy-in. It’s one thing to enforce compliance with procurement policies, but quite another to persuade stakeholders that they should want to do it.
Organisations need to pay attention to this cultural change element of MRO strategy and understand that it can take time for behavioural change such as automatically checking an online catalogue to become embedded.
Expose the true costs
The best place to start in making the case for change is with the numbers. The key is to focus stakeholders’ minds on all of the direct and indirect costs – the total cost of ownership (TCO). By analysing historic MRO costs, you will be able to show the true price of ad hoc purchases.
As well as the more obvious extra costs of one-off purchases like shipping, the true cost to the organisation of setting up multiple vendors and raising purchase orders needs to be highlighted to show just how expensive it is to go outside the approved supplier list.
Historic MRO purchase data can also be used to identify trends such as the most commonly required items and ensure that your approved supplier has those parts available when and where needed.
Change can also help procurement professionals elevate their role within an organisation to one that focuses not just on cost, but which adds value to the business too.
It’s important to understand why stakeholders do things in the way they do. If you can get inside their mindset, you can make the case that adopting a TCO approach will help them achieve their objectives, particularly when the whole business is being pressed to do “more for less.”
The wrong answer
One of the biggest challenges is individuals in businesses who are forced to focus on the wrong things; when cost pressures hit, they often look to suppliers to reduce the unit price of items.
This is not the route to sustainable savings. Not only will you not get the best prices for one-off purchases but the hidden costs, such as inventory over-stocking, need to be exposed to stakeholders.
If organisations consolidate spend with fewer suppliers, they increase spend leverage and should naturally see overall basket costs reduce. Breaking down the barriers of a conventional supplier-customer relationship and taking a more collaborative approach is a big and important step that will drive out cost.
Combining a more evolved approach to managing costs with opportunities to add more value to the business (via vendor-managed stock initiatives, etc) makes the case for change more compelling. The challenge then is to communicate the need more effectively.
Dr John Kotter, a bestselling author on business and leadership, talks about the importance of creating a sense of urgency to drive change. MRO professionals can use the continuing need to reduce costs to instil in stakeholders the urgency of adopting best practice and adhering to procurement policies.
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