In my last post I wrote about why the majority of savings opportunities - up to 66% according to an Aberdeen study - are squandered: lack of an implementation plan and lack of a supplier management strategy. The underlying root cause of both of these issues is the failure to recognize the importance of change management when engaging in a cost reduction initiative.

As the sourcing lead, one hat you wear, like it or not, is that of change manager - ensuring that if cost reduction is identified, the opportunity will not be squandered. The first step in becoming change manager is understanding the types of challenges you will encounter. In my next two posts I will outline some of the major challenges encountered during a strategic sourcing engagement. In my final post on the topic I will provide some context on how to get ahead of these challenges and ensure savings are realized.

Challenge #1: The Facts Do Not Always Speak for Themselves
Completing a solid analysis of savings identified during the strategic sourcing process does not necessarily translate into rational business decision-making. Rather than focusing on the results, many end users look for gaps in the analysis or comparisons that are not apples-to-apples. In some cases, end users are simply doing their homework, and once they have determined that the analysis is solid, they will proceed with your recommendations. Others will attempt to question anything in the hope of stalling the initiative or derailing it. For example, an end user might say, “I talked to that supplier before; I didn’t think it could handle our business.”

The facts (or savings) do not always speak for themselves, and just because hard dollars are on the table does not mean that the folks responsible for day to day activities within the category will support the outcome, or take any responsibility for it.

Challenge #2: Misinformation
As is often said in politics, perception becomes reality. Even if you provide a clear response to end-user questions and concerns, it often seems like their original premises stick. People within the organization will remember the challenges and continue to restate objections that have already been effectively addressed. Misinformation can spread like wildfire throughout an organization. If you keep your implementation timeline on track, this lack of facts can be irrelevant. People always talk and rumors always abound. However, if you find your timeline is slipping or your plan is falling off track, you need to find new ways of communicating your message to counter misinformation. It is at this stage that executive sponsorship becomes helpful. If you have a high-level sponsor who can help get your message out through the organization and cutoff rumors, now is a good time to use them.

Challenge #3: Missing the Big Picture
Along the same lines as misinformation, an end user who does not have all of the information may be as detrimental to your success as one who is simply misinformed. For example, it is very common, as implementation proceeds, to hear end users start to complain that they used to receive better pricing from a supplier that they found for a very specific item, often something as minute as a roll of toilet paper. They will prove that they were paying $.59 a roll versus the $.65 that the new supplier shows in the catalog. They then use that information to show every other user how they did a better job negotiating than the procurement team, and they may continue to purchase off-contract. The piece they are missing is that there might be a yearly rebate from the new supplier that offsets the higher unit price, or that you need to lump that spend into a larger bucket (and take a small loss) in order to adhere to a volume commitment to your new supplier that drives savings that far offsets that single loss item.

Unfortunately it is difficult, and sometimes impossible, to share the entire big picture or explain a contract to each and every end user. It is also something that usually does not show itself in the first month of an implementation; it may happen months down the road. Careful auditing can help eliminate this issue.

Challenge #4: “We tried this Before and it Didn’t Work”
End users, particularly those with years of experience or seniority within your organization, also use past experience as a justification for why change cannot happen. If at any point in the past another supplier was under contract and that supplier failed, you will likely encounter the “We tried this before and it did not work” argument. End users often use this argument to justify why the currently-utilized supplier is the only supplier in the marketplace that can properly serve your business. One way to counter this argument is by converting their subjective concerns into objective analyses. Try to discover precisely why the former supplier failed, and how the new supplier has taken care to avoid the same issues or, in the case that the new supplier is the supplier that failed, make the supplier document what has changed in their methods of doing business to address the issues.

These four challenges are all responses you will receive from those resistant to change. There are things you can do to prevent them, but more than likely you will encounter them at least once during a project. Other challenges, however, arise due to a lack of upfront investment and thought on the part of the sourcing lead. In my next post, I will discuss those challenges.
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Joe Payne

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