Problem in the system?
By Thomas Wandler, Senior Partner Kloepfel Consulting
Purchasing regularly faces the challenge of reducing costs but fails due to internal resistance. With the traditional suppliers, a change is often very difficult and entrenched processes often stand in the way. I am not talking here about partners with whom you jointly develop products and secure your own performance. Rather, I’m talking about products and services that are largely interchangeable and easily comparable.
Comparison makes you rich
Many of the incumbent suppliers are very well networked within the company and argue with a maximum service level that is calculated nowhere or only very vaguely. The various specialist departments that purchase the goods and services from the suppliers make similar comments. “It’s going so well, why should we change?”. This overlooks the fact that purchasing can get more out of the same budget. Of course, purchasing does not determine what the suppliers should deliver, but rather probes the price-performance ratios on the market according to the specifications of their colleagues.
Purchasing can learn from sales
Before sounding out new suppliers, buyers should talk to their colleagues in sales about how they look after their customers. What arguments does sales use to avoid losing the customer? What strategy does sales use to keep the customer lucrative and continuously increase margins? Purchasing can derive a lot from this to make the various supplier offers more transparent.
Initial spark for a supplier change
If we look at all B and C suppliers in an ABC analysis, for example, we quickly find a significant number of suppliers who have continuously increased their prices over the last few years. This alarm signal can be used to start a change initiative. The goal should be a massive cost reduction, and it should also be aimed at questioning all suppliers.
Here we are already faced with the challenge that many of your colleagues resist changing their suppliers. The arguments are manifold and range from:
- No sufficient resources for such an effort
- The “other” departments do not want to
- We shouldn’t do this to ourselves for a few euros
To the absolute killer argument: “No other supplier understands our company as well as the current one.”
Motivate to change suppliers with pilot projects
If you start to change a few suppliers that are visible in the company, an interesting situation will arise. Employees become more aware and often start to question suppliers themselves. So, you start to identify which areas or which visible supplier would be suitable for such a “pilot project”. Suggestions might include:
- Maintenance cleaning (beware: they can raise a lot of dust here)
- Facility management service providers (plumber, painter, etc.)
- Travel agency
- Office supplies
- Security – porter services
- Rental clothing
Taking the first steps
As you can see, there are many areas that are worth a closer look. You should proceed in a structured way if you want the project to be successful. First create a list of employees you assume have contacts with suppliers. You can also do a small supplier satisfaction survey. You’ll find that as soon as you start talking to colleagues about it, your supplier will also catch wind of it and probably get back to you in a very timely manner. Often with an unobtrusive issue to clarify to find out why you are questioning their performance or products. The quicker this happens, the more likely you are to come across potential savings here.
Overcoming internal challenges
However, it is only now that the real work begins, and this usually takes place within your own company. Please don’t forget to talk to the works council as well. Because in very many of these issues, it is the first point of contact for your colleagues, who express their displeasure there. It is also important to coordinate the project in advance with the management because it will certainly cause unrest in the company. You might not think it possible but swapping your service provider in the area of maintenance cleaning, for example, can lead to massive resistance throughout the company.
Rethinking internal areas of power
We quickly reach the most difficult component of a vendor change. The emotional and perceived intrusion into other people’s “areas of power.” For example, almost everyone feels responsible for their cleaning staff. You will see employees who previously complained that their office was not always clean suddenly go to the barricades to prevent a change – exceptions prove the rule.
When we talk about facility management or maintenance issues, it gets even more difficult. Then we face the challenge that, for example, the maintenance manager thinks he is the sole decision-maker as to which service providers he wants to use.
When you reach this point, the most important fundamental discussions arise for a long time. Namely: who is allowed to make which decisions! This is where it pays to direct the discussion to the process level and show where the “seams” are in the company. Clarify with all those involved that you are not interfering with their decision-making authority. Rather, take your responsibility for purchasing and compare the existing supplier with its competitors according to the specifications of your colleagues.
The user should decide what he needs and when he needs it – the purchasing department compares the suppliers on the market and decides who comes into question!
In this way, you avoid competence wrangling and retain your decision-making ability as a purchaser.
Create trust among colleagues
To avoid or stop such “trench warfare”, you need transparent communication and a structured way of working. By this I mean that you need to present all criteria leading to a decision with transparent parameters. This can lead from a clear price comparison, references of another supplier to key figures and other points. Often a personal introduction of the new supplier also helps to clear up many concerns.
The specialist departments specify which requirements a supplier should fulfill. True to the motto “comparison makes you rich”, you compare suppliers on the market based on these specifications. Transparency in supplier comparisons forms the basis for the trust required to convince colleagues to change suppliers. Change a few suppliers first to raise awareness of the purchasing department and its performance as well as its contribution to the company’s success!
Your purchasing department is running hot and you need external support? Then schedule a consultation with us today!
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