What Comes First: The Egg Or The Chicken?

chicken

Money. Fine, I am joking. Customer first. Then – money. And then – either egg or chicken. Or both. But ultimately it is all about money. In medicine, though, it can be a question of life or death. Sounds very cheap. Sounds like an attempt to scare. However, that is just a simple reality. Thankfully, only the brightest of us get to be doctors with knifes. Coming back to the life of “simple” people… how do you ask the wrong question and what might be the consequences?

5 Why’s many How’s

Sakichi Takoda was a very curious man. He wanted to find out all root causes of processes he was dealing with in Toyota. And yes, he is the man behind “5 Why” methodology to explore cause-and-effect relationships. There were other smart people, who developed the model (or, let’s say, adjusted) and made it only “3 why’s”. Some other models added the next steps: once you know what is wrong, you should be trying to figure out “How” to fix it.

Examples of questions

Let’s start with explanation, what I mean by “question”. It does not need to have a question mark at the end of the sentence. There can be a lot of situations in business daily life:

  1. I have production process wastage. How do I dispose of it in the most profitable way?
  2. Personal development plans, goals, objectives. A goal to “leverage benefits from different areas”, “use data proactively”, “strengthen resilience and realize potential”.
  3. Procurement KPIs: we need to achieve 100% process compliance. Or, another example, £1 million of price reduction savings. How are we going to do it?

Expert judgement – it’s what managers get paid for. You do not need to see a question mark at the end of a sentence to trigger the smart questioning process in the brain. Recognizing the situations and questions is a skill!

 

Why are the questions “poor”?

 

I know, first of all – “are they poor?” and only then – “why?”. Let me answer the second one first:

  • Because some questions do not encourage you to think.
  • Some questions are very strongly leading and restricting.
  • Some questions, on the other hand, can motivate someone to become extremely inventive. There are serious books which call some forms of extreme inventiveness criminal activity.

Let’s analyse the examples given above. A mind-set like in the first example can lead to the whole team wasting time, resources and effort looking for an answer. The team might come up with something. BUT! You know what is the secret? Maybe the focus should have been elsewhere? Maybe, first of all, we should have analysed the reasons of having the waste and addressed them?

Second example describes very restrictive thinking. Especially, when the goals are given from the “top” (management of the company). People get goals, that they do not believe, that do not motivate them (you know, objectives, which are not SMART), and ask a question: “so what do I do now?” And, as you can imagine, there are many alternatives:

  • Not even attempting to achieve what they are asked;
  • Cover up in excuses “I tried”;
  • Leave the company…

And the last example given above… A very smart CPO draws up best-in-class procurement processes. Implements them. And, to his (her) surprise, starts getting reports, which show big non-compliance. Let’s call the person Ryan. Ryan spends few sleepless nights and comes up with policy enforcement tools: reporting, grievance and all the rest of it. The KPI improves. Furthermore, Ryan implemented interesting price reduction targets. Now his team members are whispering. They know, that bringing the function in-house (making vs. buying) would cost less overall. But if they do that, they will not achieve their targets – price savings. Therefore, they keep on buying the same things over and over again. BUT! Every story has a “but”, right? At the same time, the CEO notices sharply increased spend in other areas, lost clients and, overall, reduced business results… What happened? Ryan asked “How?” before asking “Why?”…

What came first – the egg or the chicken?

Not sure if that question is “the right” one, but it makes you think. And that is the main purpose here: right questions make you think. I think biggest issues are not with the questions themselves. All questions are good. It is much worse when you do not have questions. Most important thing is – sequence (or timing, if you like). To first of all understand the causes and only then address them. Whether it’s procurement or anything else.

The main goal of the business is to satisfy customers and stakeholders. For customers – it is the right products, the right services. For stakeholders (shareholders) – it is about profit, and sustainability. As a part of that comes cost control, cost reduction, best items (services) to be bought. Well, simple (???) procurement’s job.

So, to sum up, what can you do better?

  • Recognize (identify) questions.
  • Take time to think about the real needs and root causes.
  • Speak up.
  • Ask questions about the questions themselves (challenge them).
  • Use expert judgement and critical thinking.
  • Resist to prioritize small and urgent tasks over long-term, strategic work.
  • Know the rules, but improvise.
  • Make decisions and fix the wrong ones.
  • Try. Again and again.

And yes, it is valid to procurement (because, as the t-shirt sellers say: Procurement manager – because a miracle worker is not a profession). Cheers to us!

What Comes First: The Egg Or The Chicken?

New Year’s (fine, Chinese New Year’s) resolutions

resolutions

Guilt is a bit like emotional hangover. New Year’s euphoria is fading and you are left with the scraps of yesterday’s overstated intentions.

I came to the office today and realized, that it is almost the last day of January. And the online radio DJ’s just won’t stop reminding that, too. Feels like they are doing it on purpose. And that does not help with not feeling guilty.

Why is it bad? Because one of my promises to myself was to write more. One month is gone and I did not write anything. Outrageous! But hey… I am ready and willing to rehabilitate and get back to the rhythm of keeping my promises.

There are loads of “Tips how to…” out there on the vastness of the internet. One of them suggests to announce publicly about your intentions. Then the pressure of peers, expectations from others will motivate to stick to the promises just a little bit more.

So here it goes… This year main subjects I would like to write about and share with you all are:

  • To consolidate or not to consolidate the supplier base? What is the right answer to this question?
  • How do you switch from supplier-centric to category-centric category management? Sounds quite simple, but it is not always like that.
  • Spend analysis DIY: where do you start and what are you looking for (at)? A list of tips of how not to get lost when you are looking into a spreadsheet with data in 30 000 lines and 50 columns.
  • Once again about rebates, prebates, strike ratios and recovery audit. How much does your money cost you?
  • Procurement project progress monitoring and control: borrowing some indicators from project management. How to apply earned value management to procurement – schedule variance, budget variance, and earned value.
  • Recognizing sales’ BS and not buying things you do not need or do not exist: story about contactless car wash.
  • Strategy evaluation and selection tools.
  • Budgeting and business plan creation for procurement function. Some guidelines and templates to ease up CPO’s and category managers’ life.
  • Cost Of Doing Nothing Different – revisiting the subject of total cost of ownership and it’s hidden factors – processes, procedures. Can you put a price tag on them?
  • A lesson which I learned at school in Year 8: price of money.
  • Critical Success Factors for Procurement. Are they (and how) different from KPI? Which ones are more important?
  • Good quality raw data: you have everything, if you have that!
  • Can lean six sigma be a helpful tool for procurement?
  • Slide deck from a procurement leader’s conference, where I will be talking about strategic procurement management.

The list is not finite, surely. Many of them will come with sample tools and templates. If any of the subjects seems urgent or important – drop me a line – I will prioritize them.

So here it goes… No turning back now, right? February, bring it on!

 

 

 

New Year’s (fine, Chinese New Year’s) resolutions

Procurement Wears Strategy

pws

If you think Procurement is a forgotten orphan in an evil witch tale

Read this article, if you think Procurement (or any other function, for that matter) in your company is not being taken seriously enough and you want to change it. If it is not considered important enough and you would like it to become a strategic function. If you think, that company does not give your department the opportunity to prove it’s worth. If everything you are expected to do is just have one more price negotiation, chase another late delivery, not issued invoice or resolve errors in delivery. Read this, if you feel like other departments have a big dissatisfaction with procurement. If, no matter what is it that you suggest, it causes more resistance than buy-in from people.

Poser Effect

It actually has got a name: the effect is called Poser effect. And you probably have heard about it in few situations. When talking about the clothes, it basically says that you should wear clothes to fit the role you are after, not your current role. It is a fact, that the clothes you wear, change the way other people perceive you. The effect also was observed in experiments, where it showed, that your outfit also changes YOUR perception about yourself. Scientific name to it is enclothed cognition . So what, you are asking?

You will be perceived the way you behave

And that is the answer to anyone saying “I would do more and bring more benefits to the company – but nobody lets me. Nobody thinks of us seriously.” You will be perceived the way you act. A little part of the overall impression will be your clothes, too (especially for the first impression), but I strongly believe that actions speak louder. It is up to you to show initiative and start acting strategic, prove you’re worth the place at the top table – or – “wearing strategy”.

How do you try on strategic outfit? Choose clothes

It’s slightly easier with clothes, right? But how do you check how (and if) procurement is aligned with company’s strategy? My suggestion is to refresh some classic business management concepts and apply to procurement function in your company.

Most important part – company’s vision and strategy. Firstly (and do not be surprised by the question) – do you know the vision and the strategy of the company? Because not all companies communicate it clearly. Some of them don’t even have one. Anyway, do not panic if you do not know it by heart. There might be a lot of variations on a very detailed level, but on a high scale, there are only three main possible strategies:

  • Cost leadership – price strategy;
  • Customer intimacy – service strategy;
  • Technology/innovation – product strategy.

A company can be relatively good in all of them, but one of them must be the most important. Here are the main differences of main strategic directions.

strategies

Looking like this, you will agree, that procurement will have to be different in different companies. There is no “one fit for all”. If you are trying to implement extensive processes in a company that needs speed – do expect a lot of resistance and no buy-in.

How do you try on strategic outfit? Wearing it

Once you have established, what the company is trying to achieve, you have to measure it on your department or function. Again, there will always be a lot of aspects, but business classics focus on three main areas:

  • People;
  • Processes;
  • Technology

Here are the main keywords to look for while checking the application of different strategies in different layers of organization using different strategies:

keywords
Wrapping up

Knowing the strategy is the key. Checking, how procurement’s work, goals and strategy is aligned to overall company’s strategy is a first step. If you find any gaps – act on them. Most of the time it means simply getting out of the table and start talking to everyone: business users, suppliers, management. You do not need to change organisational chart to be able to talk to people, do you? Listening to people, identifying improvement opportunities. Looking for answers internally and externally – who, if not procurement, has access to suppliers’ sites and to other, non-competing companies? Start noticing solutions and benefits for the business other than price reductions and bringing them to the table.

Start acting strategic

Once you embrace company’s goals and strategy – and start wearing it – everyone in the company will start considering you strategic.

 

Procurement Wears Strategy

Short daily negotiation skills’ refreshers

My son: Mom, let’s talk about hair.

Me: I am listening…

My son: It is too long! Look!

Me: We discussed this yesterday. And the day before that. And the day before that. 

My son: Yes. But that was yesterday. Then the hair was shorter! 

Me: One day is not enough to reach the required lenght for cutting.

My son: But it is enough for you to change your mind! Can we cut it? Please?

Five minutes every day CAN make you better. Better negotiator, better professional, better mom (or dad). This one is for our best teachers – our kids!

Short daily negotiation skills’ refreshers

Tips for ladies: how to use procurement techniques with beauticians

beauty

This one goes out to all the ladies. I know, I know – we are all beautiful naturally. And (almost) never need any beauty supplies or treatments. But if you accidentally (!!!) find yourself in one of such places – here is what I learned recently.

First and most important – they are all businesses. Smaller or bigger – everyone is in business for business. Therefore, the goals, that they have; problems, that they face and methods, that they use in every day work are the same as you have at work.

New customer attraction

Go there only if you really need or want a specific procedure. Beauty shops, which have more ambitious growth targets, will be more aggressive to get new customers. They will be more flexible with pricing of the first procedure – or even offer it for free. It is good if you, as a service buyer, already have a firm opinion if you need the procedure. Also, if this is a series of procedures – if you are going to use all of them. Then getting one of them free of charge, negotiating prices of the other ones – everything will be beneficial for you.

If you are only curious to try, you might find yourself in a trap, spending money when you had no intention in doing so.

There are some beauty specialists, who do not need any new clients. Or, to be more precise, do not need them at a specific moment in time. Everything changes. If you really want to get there – be persistent and / or patient.

Building dependency

Just like in “normal office business”, service providers like to create dependency. The same rule applies with beauty stores and services. You might be sold:

  • Very exceptional service (“only available in this shop in this country”);
  • Completely innovative product (and there are oceans of those – every store will have at least few of them. The “newer”, the better).
  • Follow up procedures: once you to have the procedure you came for done, you are told, that “follow up refreshers” are needed. Otherwise, “it won’t work”.

A quote from one beautician I know: “they have to need us. They cannot just stop coming”.

Cost and pricing strategies

Oh, yes, they are flexible! A lot. And these are the things you should know to be ready for the price conversation:

  • Rent of premises. Services in London will be more expensive than in Grimsby – sounds logic, right?
  • Investments into equipment. Service providers, working with old or no equipment at all, will have lower prices.
  • Investments into trainings. Self-educated “YouTube specialists” will have different pricing structure. I am not saying the latter is bad – on the contrary: I know some specialists, who are amazing at what they do without any fancy certificates. Instead – they have passion for what they do.
  • Ingredients, technology and materials used. The same beautician told me a story of a hardcore negotiating customer of hers: the customer convinced her not to use the local anaesthetic cream (because “she is very brave”) and reduce the price of the service…
  • Efficient time usage, bundling. Recipe changeovers for production lines are expensive due to cleaning, downtime. The same here: setting up for a new customer, cleaning up after – it is not efficient time usage, nobody pays for it. I mean – it is not a separate line on the bill. But someone must pay for it. If you can – consider doing several procedures in one go and do not forget to ask for price improvements. If you came to a tanning shop to buy your monthly pass – ask, if they are planning any promotions. Buy when the promotion is on (some places will apply it immediately for you not to run away with your wallet).
  • Perception. That works for both sides. Marketing is a very strong tool here. You might be ready to pay higher price because of references or the image that the beauty shop has. On the other side – beauticians are good sellers, too. They will evaluate how you look and will set the pricing based on that (do not overdress the first time you go there). They will observe your body language: if you show signs, that the full set of several procedures is too much for your budget – they will react and adjust to your budget. If you manage to sell the perception of bigger future business (“after this, I will want to do this and the other and then a little bit more”), they will adjust prices.

Easy for me to say. I learned all this already being on the procedure chair. Knowing things is not the same as being able to apply and applying them in real life situations. Care to try the tips next time you are in the beauty shop? Please share experiences!

Tips for ladies: how to use procurement techniques with beauticians

OH-SH1T-NUMBER. Making humour work at work

oshitnumber

Ha-ha! Very funny! I bet everyone else (not procurement, of course) thinks, that procurement is all about numbers, cost and budget reductions, limitations, taking away fun and bullying suppliers. Surprise! It is not only that! First of all – its people who work as buyers of all sorts. And most of them do have sense of humour which helps at work a lot.

So how does it work and why should you smile and laugh more at work?

Humour has a lot of benefits:

  • Is joyful to yourself and others.
  • Keeps things light and breezy.
  • Increases employees’ morale and motivation, atmosphere at work.
  • Makes embarrassing moments funny (like this one here – when I completely messed when Portuguese won European football championship).
  • Helps with sales: builds relationships and keeps things in perspective.
  • Blocks stress: increases endorphin and blood flow in general, relieves tension.
  • Helps bonding – interpersonal, among team members. Sharing life stories, experiences which were funny, letting others learn from your misunderstandings – all of this brings people closer together.

There can be a lot of different types and forms of humour: verbal humour, physical humour, comedy in print. It is always important to choose best way to express yourself: as in any communication, there are some rules around it.

Do’s:

  •  Observe colleagues expressions and reactions – the joke in your head sounds funny, but people are different.
  • Keep it clean, short, subtle – jokes are different, people are different. So unless you know the people you are talking to very well – better safe than sorry.
  • Respect customers, employer, co-workers. Not much to comment – there is a place and time for everything. We come to work firstly to work.Customers, employers are people paying your salary. And unless you are a professional comedian – you are not being paid for joking all day.
  • Count to 10 and participate in moderation. Especially on the moments when you feel like “biting” someone with sarcastic joke – stop and think. And count to 10, if needed, until the urge passes.
  • Choose your wording, timing, audience carefully.
  • Practice.
  • Make mental notes. Just like I did during a meeting with engineers. We were discussing some spare parts suppliers’ changeover and they were concerned about their response timing possibilities. One of the business requirements was that the new supplier has a “hotline”. Only the engineers used different name. They said “o-sh*t-line” (fine, fine – I did not invent this word). There and then, it was an amazing moment of laughter and a silence breaker, which helped people to express their main concern aloud.
  • Select practical jokes VERY carefully. From being improper and distracting they can lead to health and safety disasters – and nobody is going to think it is funny.

And another part – don’t’s:

  • Sarcasm. No excuse for abuse.
  • Put up with insults.
  • Don’t be the only one laughing. Or – the only one not laughing.

Another powerful tool is a smile. Smile to people and they will smile back. I practice this a lot. During negotiations, simply in office or on the tube. During negotiations I can ask most serious questions. A question like “so can you tell me then where does your company earn profit, if you claim that your margin almost does not exist?” from a grumpy buyer could be perceived as a form of aggression. While if you do it with a smile – it will be a game of words, not an expression of aggression, but the question will still be there.

Sometimes people get confused – they are no longer used to people smiling at them for no reason. Try this exercise: during your morning commute (especially in crowded places), instead of trying to drill a hole in your phone with your eyes, lift them up, make an eye contact with a stranger and smile. I do that. Yes, i get different reactions. However, most of them smile back.

Most daring experiment that me and my team did with humour was presenting a very serious subject on a quarterly assembly of all centres of excellence. Imagine a hundred people sitting in the auditorium and waiting for a subject “Resisting supplier price increases” to be presented. And what do they get? Check this out…

price-increase-1

price-increase-2

The message was delivered very successfully. The feedback about that subject was best ever. The content was still serious and good. But at the same time it was not just an ordinary boring presentation:

  • our team had the best time ever while preparing the subject.
  • people in the audience related to the subject very well.
  • it was energizing, different, memorable – successful communication.

Procurement can be and is fun! Happy Friday everyone! Keep on smiling!

OH-SH1T-NUMBER. Making humour work at work

Single source and sole source suppliers. Is there really nothing to be done?

I am jealous to those who never had to deal with true sole suppliers. I think IT buyers will understand me best. It is just not that much fun.

The difference:

  • if you could be buying from quite a few suppliers on the market, but choose to stick with one supplier (leaner supply chain, eliminated duplicating logistics and management, administration costs) – you have a single source situation.
  • If you cannot buy from any other supplier – you have a sole supplier situation.

What are the real-life examples?

There are many office cleaning services providers out there in the market. However, for a list of very good reasons, you choose to outsource it to one service provider. That would be single sourcing. Now… imagine five different suppliers working on your ERP system creation and implementation at the same time, doing the same job for the same part of scope. Not fun. Or imagine that your supplier came up with exactly the product you need for your manufacturing process and… patented it… and keeps on asking price increases on every logical and illogical opportunity. Even less fun.

How does it happen? 

For single sourcing the option is deliberate choice. There are many advantages to it:

  • You keep the competition, because the supplier can be easily replaced. Negotiation leverage is at its maximum level like this.
  • At the same time, you spend less time for supplier management and supply chain administration.
  • You have consistent quality of items or services delivered. Or, if not, deal with it in one go.
  • You eliminate all non value adding activities (short example mentioned here).
  • The supplier will be more willing to work with you on various cost reduction/ services improvement initiatives.
  • The threat of losing business in the future will be a big motivator to not overcharge you.

For a sole supplier situation to form, there can be various reasons. Some of them are more to do with perception and resistance to change while others are truly sole supplier situations. I separate them into three categories. Please see explanations and lists below.

    1. Category I: true sole sourcing situations, where the company might be depending on one supplier without any escape routes.
      • Market monopoly (central heating in some locations, governmental services and similar).
      • Various patents: design, chemical formulae.
      • Lack of supply.
    2. Category II: high exit barrier single source situations – there are situations when due to various barriers (most often – financial: costs of switch) competitive situations turn into sole supply situations.
      • Equipment investment (when supplier provides plastic granules storage and supply systems; cleaning chemicals’ supplier provides funds for equipment).
      • Digital solutions – and the switching costs, related to them. Similar with the above. You might have had big negotiation leverage during initial buying process, but once initial contract period is over you catch yourself in a huge hangover. You find yourself depending on a source which, technically, is not sole, but switching costs are so painful, that it gradually turns into one way street of constantly increasing maintenance bills.
      • Manufacturing supply chain integrations. Some happen naturally (historically): imagine few factories being owned by one company, where one of them is internal supplier of work-in-progress items for another one. And some time along the way the first one is sold to other owners and becomes external supplier. While their manufacturing lines are tide-in with each other (line technical parameters, product and work-in-progress technical specifications). Similar integration can happen based on business’ decision to become partners with a specific supplier.
      • Industry regulations (or agreements). For instance – to be able to insure cash in a safe, insurance company might require specific quality certificate from a very specific certification organization. In this case, you cannot negotiate much and are being put into situation where you are given only one option.
    3. Category III: pseudo sole sourcing situations. A lot of times, business situation evaluation is more about perception and will, rather than pure statement. Identifying these would bring biggest benefits.
      • Business users’ preferences. Surprisingly enough, there are quite a few categories of spend, industries and companies, where business users are permitted to have preferences.  Next time you will be complaining about big number of resistant stakeholders (while you think about 10… fine – 50 people), remember your colleagues who work with personal health and safety products and serve factories with thousands of people that they must please. And yes, over the time, people tend to give preferences to brand name products. Implementing any change might be challenging.
      • Historical heritage. “We have always been doing it this way” – or buying from this supplier. And only this supplier.
      • Business’ requirements list. Those lists, that make one or the other supplier unique. Technical specifications, prepared by engineers. Delivery requirements, set by business users. Packaging requirements, defined by operations or logistics or marketing.

Can you do anything about it? How?

Definitely – yes. Depending on what you are dealing with and which stage in the process you are in:

  • Firstly, if you can avoid buying – you should.
  • Be involved in a process as early as possible – to prevent from any pitfalls.
  • Make it yourself – if it is an option. You can also find a provider who has similar services or products and convince them to adjust their offering to your requirements. Integrate vertically by buying your supplier and making them your internal provider.
  • If you are on a tender (or category strategy review) to buy a product / service:
  • Check full life cycle, related to the product and / or service. Analyse what kind of additional costs will be related to object you are purchasing.
  • Study alternative sources (make or buy decision, again: even if you choose to buy, when the time comes to create negotiation leverage, you will have your homework half-ready).
  • Choose the right way of buying. If it makes sense – maybe you can buy machines and servicing / maintenance separately? Or the other way around – bundle, if that makes sense.
  • Prepare a good contract in advance and communicate it upfront – with built-in price review mechanisms and no-penalty exit.
  • Invest time in developing full SLA – and following in through to the end of the relationship.
  • Share the information (technical, legal, commercial) early in the process with all suppliers; cross-validate with specialists, 3rd party service providers.
  • Analyse proposals with the purpose to identify “unique” solutions.
  • Analyse the supplier’s business needs and decision drivers:
    • time of the year (when does their financial year finish? Is there a reason to believe that tendering on a specific time frame might give you better or worse conditions – like buying grain just after new harvest data is clear and not based on assumptions; like negotiating software giants closer to their financial year end, when they are likely to be more aggressive with pricing).
    • geographical aspect: if you are negotiating with huge multi-country covering supplier, perform market test of their pricing policy in different countries. You might be surprised, that your branch, located somewhere further away from central function would get a better group deal purely because of the location.
    • sales strategy: are they more aggressive with the pricing of new solutions / new technology? Are they interested in growth? Market entry? Stopping their competitor entry? Can you invite someone new, who is not yet in the market? Does the size of the contract matter?
    • do not forget to negotiate small value adding add-ons and other benefits to the contract.
    • “sell” positive references, feedback and referrals.
    • reduce their risks and become a better customer (implementing electronic ordering and invoicing tools, consolidating POs).
    • threatening with an alternative supplier – or bringing one in.
    • juggling the timing of signing contract.
  • Consider change to business strategy – move the location of your HQ, give up of markets or products.
  • Invest in in-house R&D, work with laboratories and universities.
  • Re-evaluate short term switching costs and compare them against long term business losses if you decide (once again) not to change anything.
  • Educate business users. Re-think and challenge old ways of working. Eliminate all pseudo-sole suppliers.

Should you do it at all?

That is the question, too. The saying goes “nothing personal, just business”. Procurement should also be business oriented and invest its resources where they matter. Should you start any project? Depends. If this is something that you must do routinely (review category or contract) anyway – you might just consider how much time and effort to invest. And similarly, if the prize, that you are after, is big enough – it means it is worth spending time with it.

Based on the situation your business is in, you should perform opportunity analysis and evaluate your expectations. It is not only about the size of the spend. With sole suppliers, there is another level of complexity to be evaluated – the nature of the business situation. Yes, you can do this for sole supplier situations, too. Per the categories mentioned in the article above, approximate ratio of effort / success can be shown as per graph below. Required effort is a relative number – it can vary in units of measurement (days / weeks / months / people involved)

roe

 

That is one part of the equation – it performs a sense check from Procurement’s perspective: you have size of the spend, adjusted by situation complexity. Another big part to the projects like this is implementation. In many cases, it can (and will) end up in a change project. If you want Procurement’s credibility not to suffer, you must make sure, that savings promised and savings landed (or benefits) are as close as possible. So, if you decided, that procurement is interested to pursue an improvement project, perform another quick sense check: change equation will help you (Beckhard-Harris’ model).

d-x-v-x-f

What this says is if the dissatisfaction with sole supplier situation is big enough (bigger than the resistance), if the benefits anticipated also play a role in the game; if you have a plan how to act (discussed above) – you increase the chances of success and delivering benefits to the business. At the same time, it suggests what you can do if any side of the equation is not favourable: increase internal dissatisfaction among key stakeholders (clearly communicate risks and losses of the situation to finance people), reduce resistance to the project (get the buy-in from engineering, technology, sales and other departments).

Thank you for reading! Would be happy to hear from you and learn from your experiences on this matter.

 

Single source and sole source suppliers. Is there really nothing to be done?