There is nothing like orchestrating a little crisis to push specification change through

Jan Va?ek

I know that this is a very sensitive topic, and the World would be a better place without it. However, "little artificial crisis" is an effective way of advancing change and Procurement managers should be able to use it in practice. The main principles are summarized in the table below. The rest of the article provides the rationale, three real-life examples and a few words of caution for younger Procurement managers.

Why little artificial crisis

Put simply, any specification change implies assymetric pain/benefits. "Spec up" means more comfort for the Internal customer but also price increase for the Procurement department. "Spec down" means savings for Procurement but significantly more work and problems for the Internal customer. Of course, there are numerous instances (in books and practitioner conferences) where spec. upgrade actually means savings and spec. downgrade results in less risk and trouble. But like Unicorns or Strategic procurement role, nobody ever encountered them in real life.

As nobody has motivation, time or budget to change specification on running projects unless it is absolutely necessary and as the validation process is lengthy, cumbersome and uncertain in outome, artificial crises may be the only lever that Procurement has to push the specification change through.

Let me illustrate the "little crisis" concept on a few real-life examples:

(1) Logistic or Capacity crisis

   Both the supplier and customer are large industrial companies. They are condemned to work together and furthermore, the collaboration is quite profitable for both sides. They have many great product optimization ideas but the final customer (a car manufacturer) is slow to approve and implement them and requires a large portion of the savings.

   Today, buyer and supplier are discussing on how to push through the new product generation quickly and keep the money. Finally, they decided to provoke a capacity and delivery crisis (without actually stopping the customer) and drag-in the final customer with a significant tooling renewal contribution request. The plan had to be well coordinated internally because everybody had to speak the same language.

As expected, the final customer refused to pay (as a matter of principle) but was dragged into the search for alternatives. Obviously, the new generation popped up as the most elegant solution to avoid the additional investment cost. Homologation process was sped up to terminate the tight logistics and the final customer was very happy that they would not have to pay anything and even negotiated a small savings ...

(2) Conflict escalation

Some specification changes are simply unacceptable on the working level (because specialists see the real effort required and risk), but are quite workable on the senior management level (because they see the final benefit, and will not have to live with the day to day consequences of their decisions).

   Procurement  sometimes intentionally escalates the conflict to senior managers where it can argue the "bigger picture and long-term strategic benefits." Yes, the change entails some risk, and yes, engineering has to put a lot of effort into that, but ...

I remember having used this tactics during the specification unification campaign across all manufacturing sites. It made sense commercially, streamlined procurement process, and reduced delivery risk, but required some testing. Unfortunately, one plant stubbornly refused the change arguing that they did not have the budget. The CPO waited for the big board meeting and handed the cheque to cover the testing to the plant manager in front of everybody. The situation was extremely embarrassing because specification unification was THE initiative. The cheque was refused and testing completed in the record time. CPO sent a powerful signal which was well received by all plant directors.

Of course procurement has to select the battles very carefully, because conflict escalation witnesses diminishing returns. However, sometimes it is the only lever to speed things up.

(3) Tit-for-Tat internal bargaining and office politics

We had a unique opportunity to radically simplify the filter specification and introduce a long needed competitor into the monopoly category. Considering the annual volume of 100.000 filters and the potential savings of 15 eur/pc, it was a major savings initiative.

However, engineering was reserved. Even though the new design met all requirements, you can never be COMPLETELY sure. AND they did not want to develop a NEW supplier.

We knew that if we patiently negotiated, we would miss the change window. We therefore decided to attack from a different direction and proposed "engineering non-preferred but technically approved" suppliers on three other categories. It took only a few days before engineering returned to bargaining table. We held our ground until they were running out of time and were ready to compromise. The final settlement "three for one" was acceptable for everyone. The deal was swiftly implemented and the teams moved to the next batteground.

And finally, a few words of warning for younger Procurement managers:

• Use this tool parsimoniously and only after careful preparation.
• Make sure that no irreversible steps are taken and no bridges burned during the artificial crisis.
• Combine it with other political games such as bargaining, common interests, alliance seeking, or sponsorship.
• "Little crisis" is a double edged sword. Nobody will help you if you get found out and things turn wrong, unless they fall with you.
•  Others will use the same tactics against you to advance their agenda. Think carefully about the consequences before you call their bluff.
• Whenever somebody uses the terms "bigger picture" or "strategic," they want you to do something extremely hazardous, outright illegal or at least fattening.

(C) Jan Va?ek, 2020