Reducing costs is a common survival strategy for organisations to employ. But, as the economic situation deteriorates, what started as a doing away with coffee, printing paper or non-essential spares becomes organisational restructuring, which may translate into job cuts. Purchasing departments have not been spared the distress of this kind of cost management, yet are still required to maintain (strategically) the service levels needed to keep customers satisfied.
Having seen many forms of cost reduction over the years (as an advisor in SAP supply chain optimisation), Steven Freemantle notes that staff reductions are seen as an accepted, albeit hugely disruptive, strategy to weather the storms of uncertain economic times, and like many strategies, there is often a disconnect between strategic intent and the day-to-day tactical activities.
“Staff are often thrust into new or different supply chain roles where they quickly become overloaded, however, if you run SAP this kind of painful organisational change can be soothed in many ways – there are SAP tools to effectively do 2, 3 or 4 people’s jobs,” says Freemantle, from SweetThorn Thought Leadership, in this month’s SmartProcurement.
Five questions need to be asked once a staff rationalisation strategy has been finalised. Armed with the answers, procurement and supply chain managers will have a starting point to ensure that they are able to meet other strategy imperatives with a diminished team. Leadership must use information from SAP to answer the following questions:
1. Do my people have the capability to fulfil their functions?
2. Do my people have the capacity to fulfil their functions?
3. Do my people care enough to fulfil their functions?
4. Is there someone upstream or downstream of my people who does not care, or does not have the capability or capacity to do what is expected?
5. If I am not happy with the answers to these questions, how do I fix the problem?
If you have been live on SAP for more than six months, you can easily answer these questions with fact, not just opinion. You will need these facts to make sure the remedies you implement bring about the desired outcome. “Too many companies I engage with have too many opinions and too little fact,” says Freemantle.
There are many standard reports that will give you the information you need, but the departure point is supply chain exception monitoring – your existing SAP tools that will tell you whether the required tactical execution is or is not happening. Supply chain exception monitoring is part of SAP’s standard supply chain management reporting suite that you have owned since you went live, and will tell you whether buyers are successfully keeping demand and supply in balance. It gives managers insights into the quality of supply.
You will also need to check the quality of demand signals under normal circumstances: procurement is often the victim of poor planning and forecasting from sales, production and maintenance. Rest assured that your internal customers were not spared the pain of staff streamlining and may also be unable to keep up with the workload to meet the objectives of their departments’ strategies. They too have stock-standard exception monitors in their functional areas that will give insights into the five questions mentioned above.
Once these questions have been answered you can begin further education, training and change management interventions to better manage the unsettling changes brought about by organisational restructuring and staff rationalisation. Not the cookie-cutter kind of change intervention you are used to, but the kind that satisfies the uniqueness of your people’s circumstances, and will equip them to meet all of your organisation’s strategic intentions.
By implication, the time for traditional training and change management is over (aside from the fact that there just isn’t budget for it). You will need to answer the five questions above so that you can understand some of the people-related causes behind the perceived poor performance of the supply chain. Either buyers, planners or inventory controllers are unable to use SAP to do their jobs; are swamped; or are demoralised. Or, there is a person somewhere else in the value chain who is in a similar circumstance.
And so your interventions must use data to address morale, better understand constraints and plan appropriate and cost-effective remedies in order to alleviate pressure of job cuts. If you use data, you will be able to measure the success of the interventions specifically designed to work through the aftermath of retrenchments.
While there is a glimmer of light, Analysts state that there will be little respite from cost sensitivity for some time. Now, more than ever before, is the time to start using what you already own, but it will require a dramatic change in your SAP culture, and dramatically different ways of engaging your procurement, planning and warehousing staff.
For more on getting the most from your SAP installation contact Steven Freemantel on firstname.lastname@example.org