Is Procurement Ready to Say Good-Bye to the Spreadsheet?

(Featured Image from Microsoft website.)

Yesterday, June 27th, I ran across an interesting tweet. Jon Hansen (@piblogger1) tweeted the following:

I wholeheartedly agree with Jon. In this age of blockchain and and small app startups disrupting almost every industry you would think that procurement, and supply chain in general, would be ready to part ways with spreadsheets.

But are we?

An article from Robert Half reports that 63% of U.S. companies still rely on excel spreadsheets. And a Small Business Trends reports shows that 84% of Small Businesses rely on excel!

This comes as no surprise for a number of reasons:

  1. Spreadsheets are cheap or free. A small business needing to keep costs down can get Microsoft Office for the low price of $10 or so a month, or just utilize Google Spreadsheets for free. OpenOffice is another free offering that has a program just like excel. The list of free alternatives goes on.
  2. Spreadsheets is easy. I don’t care who you are, spreadsheets is easy to learn. And once learned, spreadsheets can be utilized to do a plethora of things. Organize data, create charts and tables, analyze said data and charts/tables. Even an iota of training can lead an employee to create a generally acceptable presentation of data. Want to learn more about how to do things in spreadsheets? There are a number of excellent free online resources, or you can pay for a book, or even pay for an advanced class at your local community college. Big solutions providers? Not so much.
  3. Current ERP/WMS haven’t done a good job creating a viable replacement for spreadsheets. Despite SAP, Oracle, Coupa and others making great strides, the numbers I cited above speak for themselves. Enterprise Resource Planning (ERP)/Work Management Systems (WMS)/etc. do not provide enough of a solution to effectively unseat the spreadsheet.

I have personal experience in this area.

The company I used to work for had used an industry specific WMS for decades. Spreadsheets were the norm for day-to-day operations. As I left, the company I worked for was beginning the long road to a major upgrade of the WMS. But when asked about spreadsheets and additional functionalities, the WMS supplier replied that the company would still need to utilize spreadsheets.

Two small businesses I’ve worked with in the Greater Omaha Metropolitan area use spreadsheets for 80-100% of their operations. One of the businesses effectively has a WMS at their disposal, but that only covers a small fraction of what they need to track, and the WMS doesn’t connect with the business owner’s bank account. Enter spreadsheets. The other small business is just starting up, and there is zero dollars in the budget for even NetSuite by Oracle. Spreadsheets fill that void.

Conclusion

I think, as do many others within supply chain and procurement, that it’s time to say good-bye to spreadsheets. It’s 2019, after all.

But, then again, we were supposed to have flying cars and cities on Mars by this point…

Maybe someone will come along and create that perfect ERP that finally replaces the spreadsheet.

Supply Chain Flywheel

In February Jim Collins came out with the small book “Turning the Flywheel: A Monograph to Accompany Good to Great“.

In it, Collins discusses the Flywheel concept, and how organizations like Amazon and a failing school on a military base leveraged the Flywheel concept, and made it their own to become GREAT.

I first heard about it on the Tim Ferriss Show. During the interview, Jim Collins discussed the monograph, how it applied to businesses, departments, and even our personal lives.

I shared that portion of the podcast (starting at 1:40:00 or so) with a colleague, and together we built the flywheel for our Supply Chain Division at the company I worked for.

The Supply Chain Flywheel

Here is the Flywheel we came up with.

  • Increased Stakeholder Engagement
  • Quality Scope of Work
  • Better Market Position
  • Better Market Relations
  • Reduced Total Cost of Ownership
  • Increased Stakeholder Buy-In

As described by Jim Collins, each step in the Flywheel cannot but help cause the next step.

Increased stakeholder engagement cannot help but lead to a better quality scope of work. A better quality scope of work cannot help but lead to a better market position. A better market position cannot help but create better market relations. Better market relations cannot help but reduce the total cost of ownership of the materials/services being sourced. Reduced total cost of ownership cannot help but lead to increased stakeholder buy-in. Increased stakeholder buy-in cannot help but lead to increased stakeholder engagement…

And so on, and so on, and so on.

Doom Loop

The Doom Loop, of course, is the exact opposite, and each step in the Doom Loop feeds the next.

  • Decreased Engagement
  • Poor Scope of Work
  • Poor Market Position
  • Poor Market Relations
  • Increased TCO
  • Reduced Stakeholder Buy-In

Conclusion

Supply Chain/procurement should strive to reach the flywheel described here and, of course, improve upon it. Maybe there’s an additional step your team or department needs to add. Try and develop it.

And if you do need a hand to start your flywheel, the MEYBEST Procurement Solutions: Strategic Sourcing Training is a great place to start.

Communicating Change

You’ve completed the sourcing event. The agreement is awarded. The supplier begins full implementation next Monday.

And then the storm hits.

The employees on the line are up in arms. No one told them things were changing, and unbeknownst to you entire processes and policies needs to be changed. Their supervisors aren’t happy either.

With resistance from below, you go to senior management for assistance. But they only had a high level view of your sourcing event and the change it would bring, and have difficulty providing assistance.

What happened?

When Change Begins

News about change, whether good or bad, is not like wine. It does not get better with age. From the very beginning of your sourcing event you must craft your communication letting those affected within the organization know what’s going on.

Early Stages

The idea phase is over, and the sourcing event is in full swing. Suppliers are being talked to, stakeholders are being consulted as to what they want. Here, too, communication of what is going on must go up, down, and across the organization to those affected. A simple update may suffice. “We met with X and Y Suppliers on these dates.” Maybe that’s enough to keep people informed that change is moving along – and coming their way.

During Change Design

The agreement has been awarded. Now you, your sourcing team, and the supplier are sitting down to hash out the key deliverables and milestones. Who is in that meeting? Are all those affected there? Who from the executive level has provided their guidance, or is in the meeting to match the supplier’s executive team? Has that executive been updated on what’s in the agreement, and the desired end state so they can support your vision?

Implementation

Before and during the implementation of the new supplier, communication is even more key. Daily or weekly updates with the supplier, the employees on the ground and their supervisors ensures progress is moving forward, and any problems are addressed immediately. The executive level will be wondering as to the progress of implementation, and if the savings and added value promised through the agreement will be realized.

Post-Implementation

This is your time toot your own horn. This is where you show the progress made, the savings and added value realized. Both quantitative and qualitative measures of success should be used in your communication through the organization.

But it’s not a time to sit on your laurels. This is where you engage the executive level, managers, supervisors, and even people on the line to reinforce the change. How many times has change come around, only to disappear and things go back to the way they were? Not only do you need to reiterate the story of the gains made for the organization, but you must gain buy-in from all levels to ensure compliance. When individuals decide not to comply, you must also gain the buy-in of their management to deal with them accordingly.

Craft Your Message

Throughout this process you must craft your message. You wouldn’t provide granular details of the change to senior management, nor would you want to give a strategic, 50,000ft view of the change to the line employees. Ensure your message gives the “Why?” and “What’s in it for me?” at the correct level of detail.

Conclusion

There have been dozens of books written on change management and communication. A lot of it’s the same information. Why do they continue to sell? Because people in organizations continue to fail at it. Keep to the principals above and you and your organization will be better prepared for the change your sourcing event brings.

Managing Change in Procurement

These days it seems every organization is going through some sort of change. Companies are cutting levels of management, cutting headcount, adding headcount, reorganizing departments, changing processes, adding paperwork, reducing paperwork, and so on. Such changes can be small or large, but all come with some friction from all affected.

As things change, people within the company will begin to push back. It’s human nature. Change is hard for most human beings. Many times there are personnel, long in the tooth with the company, that have seen such “change initiatives” before, and are just waiting for this latest iteration to blow over before everything goes back to normal.

Change in procurement is no exception. As a company’s procurement organization and the way it does business changes, those within the procurement organization and people within the rest of the company can become frustrated with shifts in everything from new faces to new ways of doing things. It’s up to that Procurement or Supply Chain manager or director, and their team, to navigate these turbulent waters.

Organization

Many times the first thing to change is the procurement organization (usually interchangeable with the change in processes, talked about below). New faces from different business units or outside the organization show up with new titles and responsibilities. The scope of the work they are responsible for changes, and suddenly people within the company have no idea who to call to handle their material or service needs.

Communication is key when this occurs, and over communication is best. It’s important for the procurement organization to openly publish contact information, job titles and a basic description of their duties.

Procurement personnel should have regular meetings with their stakeholders, two or three times a week if need be at the beginning. Of course, face to face meetings are preferable if possible. Technology has made it possible for quasi-face-to-face meetings when being there physically isn’t possible or economical, though.

The Procurement director or manager must ensure that their procurement organization’s strategy and goals are clearly communicated to the organization, and that senior management is on board with their strategy, goals, and the changes occurring.

Processes

Change in processes goes hand-in-hand with change in organization. No longer can a requester create a request and approve it themselves. Now they are required to go up through their management chain. Instead of a crew leader or project manager overseeing a RFP and handling negotiations, the Procurement Organization will take care of all of that.

Again, communication here is key. The Procurement Organization must clearly lay out who has responsibility for which part of the procurement process, and explain why.

For example: “It’s important for the procurement specialist to handle the request for proposal and be the single point of contact for supplier questions so that all suppliers receive the same information. It’s important for the procurement specialist to be the single point of contact for the bids themselves so that they can be compiled and reviewed fairly and ethically, and we can make sure the company is getting the best total cost for what we’re sourcing. More money saved and value added to the organization ensures we’re competitive and people can keep their jobs.”

Explaining the reasons behind theses process changes is just one step.

The next step is showing the value of these changes. The Procurement Organization must balance quick wins with longer terms wins to show their internal customers the value of these process changes. If there’s one thing I’ve seen that brings a skeptical internal customer on board to a new procurement process, it’s dollars saved that directly impact their budget, both immediately and for years to come.

Suppliers

In every company there is a supplier that everyone loves. The sales rep stops in each month to say hi, asking about family members and the golf game coming up that weekend.

With change in procurement organization and processes comes change in suppliers.

Everyone’s favorite supplier is not the best total cost for the organization. After a multi-million dollar RFP, the business was awarded to some supplier that no one has ever heard of. How could the procurement organization do this? The favorite supplier took such good care of the company! This can be especially hard if changing suppliers means changing out a fleet of vehicles, or changing even more processes.

Did the favored supplier actually take care of the company, though?

Once more, communication is the key piece in changing suppliers. The procurement organization must mine historical data and forecasted spend from the company’s systems to clearly communicate and demonstrate the savings and value adds they are receiving by using the new supplier. Showing the savings now, and how much the organization will save in the future quiets many critics.

For those critics that remain, it will be communication of the new supplier’s processes, as well as communication with the supplier of the customer’s requirements. Again, this may be cause for frequent meetings between the procurement organization, the new supplier, and the internal customer to ensure implementation is going smoothly and any issues are hashed out immediately. If the procurement organization can accomplish this, they will most likely win over the last hold outs.

Conclusion

Communication is the corner stone of any change initiative, and changes in a company’s procurement organization, processes, and the suppliers are no exception. Senior management buy-in, and short- and long-term wins are also key, and the procurement director/manager must strive to achieve them all.

Not everyone in the organization will be won over. There are always hold outs. But if the procurement organization does their job and communicates with senior management and other departments in their company, they can work through these issues.

In closing, the final piece of achieving lasting change is to have a plan to continually reinforce that change. Having a five and ten year plan to reinforce and continually improve the changes in procurement ensure those changes remain, and that any gains made aren’t lost two or three years after the changes have been implemented.