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Achieving Consensus to Drive Real Change in your Indirect Supply Chain: Case for Change

This is Part II of our three part series on Achieving Consensus to Drive Real Change in your Indirect Supply Chain. To learn more about Setting up Change, check out last months article!

Good enough is no longer good enough.

A recent McKinsey study found that only 25% of companies that try to undergo an organizational-wide change initiative actually complete it. No wonder the status quo seems so attractive. Change is always met with resistance. It feels like any change initiative might not work. Why should this time be any different? And of course you have denial: this won’t impact me. Take into consideration as well that the broader the impact of the change, the more the organization will try to diffuse the risk. A 2013 CEB member poll shows that 78% of companies are requiring more and more stakeholders to make a decision – an average of 5.4 decision makers[1]
 

Case for Change

There’s a false sense of security in the status quo. Change is disruptive, expensive and risky. And the chance of failure seems pretty high. There’s a perception that doing the same thing, or doing nothing, doesn’t cost anything. But failing to assess the risk of the status quo doesn’t mean the risks won’t materialize[2]. It just means you won’t be prepared when they do. And having no transparency into what your sub-optimal MRO processes is costing your enterprise doesn’t mean that the costs aren’t there – and they’re substantial both in terms of dollars and in terms of the value that’s literally being left on the table.
 
Clayton Christensen, a Harvard Business School professor and author of The Innovator’s Dilemma and other books on disruption, says the right question is not whether an industry is safe from disruption. Better, he argues, is to look at whether or not the conditions facilitating disruption are present in an industry.
 
Let’s take a look at the conditions surrounding MRO and why the status quo has such a strong grip on this mission-critical, core-enabling business process:

  • While a high volume of transactions – requisitions, purchase order processing, confirmations, validations and payments – are spent on MRO, it’s a relatively low spend when compared to direct materials. So it seems not as important as managing the direct supply chain.
  • MRO is highly political because it touches so many stakeholder groups – from procurement to maintenance to reliability to finance.
  • Traditional supplier relationships keep manufacturers hostage to their supply programs.
  • Companies have become dependent on their legacy systems. Those systems may have worked well in the past, but as industry has changed, bolting on to those systems eventually breaks the system.
  • Risk! From a personal perspective, it’s always riskier to change when the reward doesn’t seem as great.

 
But the status quo can be risky too. Before organizations can even explore alternate courses of action, they have to come to the realization that change is here – the status quo no longer works and if you feel like it works well enough, market conditions will soon render status quo irrelevant anyway. Executive teams typically explore the risk of different courses of action – scenario planning for “acts of God” and how to prevent an information breech. But neglecting to make a similar assessment of the risk of staying the course is a huge mistake.

Deliberate disruption for sustainable growth and success.

The negative impact of disruption isn’t inevitable. Christensen says that “disruption works because the incumbents don’t respond.” It’s those companies that respond, creating their own disruptions, which will thrive in the face of this change. To make it today, every company, no matter how big or small, no matter how long they’ve been in business, has to be nimble and quick. They only have 3.1 years before it all changes! Successful companies must be willing to jump markets and change industries with a start-up style boldness, just to keep pace with the frantically shifting demands of their consumers.
 

“The advantages of the past have been commoditized and the rules of the game have fundamentally changed. We can no longer rely on the past as a game plan for winning. Deliberate disruption is the only path.”
-- Josh Linkner, The Road to Reinvention

 
Disruption is not just finding ways to cut costs. Unlocking value trumps cost-cutting every day. Forward thinkers across the industry seek catalysts for acceleration beyond traditional labor arbitrage and transaction processing into a more collaborative, entrepreneurial and value-driven business world. They seek services that deliver simplified, intelligent and nimble operations[3].

Contact us today to learn more about driving change in your organization!
 

This is Part II in our three part series on Achieving Consensus to Drive Real Change in your Indirect Supply Chain. Check out Part III, Driving Change to learn the next steps.



[1] Source: Executive Guidance – Winning Consensus-Based Sales. CEB, 2015.
[2] Source: Davey, Liane. The Status Quo is Risky, Too. Harvard Business Review. May 02, 2014. https://hbr.org/2014/05/the-status-quo-is-risky-too
[3] Source: Accenture Operations. Beware of the Smoke: Your Platform is Burning. The Evolution to the As-a-Service Economy Poses Major Opportunities and Threats to Enterprises. HfS Research, Ltd. 2015. 

Success Story

SDI is an MRO integrator and partner that really helps drive categorization and a best practice approach.

SDI at Work

In the third post in this series on MRO As-a-Service by Spend Matters, Pierre Mitchell and Michael Lamoureux talk about how managing MRO as a process delivers benefits from efficiency to effectiveness and beyond to an evolutionary phase. The next generation of value, MRO-as-a-Service, helps organizations build intelligent, agile, scalable and integrated supply chains (direct and indirect).

The project team has worked its way through Define, Measure, Analyze, and Improve. It’s time to begin the Control phase. The key stakeholders gather to evaluate the solution as implemented and create a plan to sustain the improvements. The goal is to standardize the improved processes, establish an audit schedule and schedule periodic follow-up to identify additional opportunities for improvement.