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By Dave Nelson, Patricia E. Moody, and Jonathan R. Stegner Is your supply chain running on all eight cylinders? If the answer is no, maybe the problem lies in your procurement practices. There are ten common supply management mistakes companies make that hinder growth and diminish profitability. Here's some good advice on how avoid them.

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here are ten clear pitfalls tbat limit a supply chain's contribution to profits and growth. These problem areas also mark the difference hetween mature organizations tbat are working on all the right issues and bringing along the best resources and tbose operations that are stuck in a tactical day-to-day grind. Before jumping into fixing each of these ten problem areas, however, we recommend that managers perform a quick sur\ey of their operation's capabilities and become familiar with key work areas: understand where procurement people are really spending their time and vvbere tbere ma\ be gaps. Gene Richter, the former chief procurement officer of IBM, used a 13-question checklist (see sidebar on page 42^ to evaluate purchasing performance and to understand wbat areas are important to the group. This checklist helps to highlight questionable

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and problem areas and serves as a great starting point for further gap analysis and spend foeus. The checklist raises more questions when suppfy management is reviewed, and it should highlight strengths as well as obvious weaknesses. Use it as a starting point to examine exactly what your company does In tbe supply chain: where the emphasis is and where tbe big dollars are. If your primary area ol responsibility is engineering or manufacturing, this checklist will he a perfect jumping-off place for reviewing supply chain operations. These questions are also useful for customer/supplier or engineering/procurement teams to use if they want to streamline their processes and if they want to identify and focus on a few important tasks.

solid contributions, if the expectations for purchasings role in the business are low. chances are the results will be the same. High expectations produce high results in sports as well as husiness: the best athletes in sports sucb as tennis and golf live with their own internal high expectations as well as tbe daily responsibility to stay tops in the rankings, and they know the effect a bad crowd has on the game. When Jimmy Connors and John McEnroe played home matches at tbe U.S. Open in New York, for example, tbey both raised tbeir level of game to unexpected heights because the home crowd expected tbem to play hetter than everand no one was disappointed- But when the U.S. Davis Cup team played hometown favorites like Coran Ivanesevic in Zagreb, Croatia, they suffered painful losses as the crowd cheered tbeir missed hits and booed winners. It made the hill that mticb Building on Your Strengths steeper and higher to climb. In tennis and goU. mental attiNo purchasing group covers all areas equally well. Harleytude counts for more than 90 percent of tbe game; and in Davidson. for instance, works very hard on strategic planning new and innovative areas like suppiv management, attitude and supplier relationships. .Although Honda's ptirchasing was and respect count just as much. not strong on computer systems integration, purchasing peoLow expectations can be especially damaging out in tbe ple worked well with manual data that was accurate and available. We are sure tbat ever\ group that perlorms a good supjily base. Many suppliers work hard to deliver pertect management review will find one or two ol the most common quality and on-time performance, hut because of their size or mistakes made in every supply chain organization. There is clout, they often do not get the respect and appreciation they not one company that can demonstrate excellent perfor- deserve. It is ironic tbat as outsottrcing places higher and mance in all areas, and very few companies rank above aver- higher proportions of product value in the hands of smallage all around. However, if your group has a few and medium-size suppliers, many first-tier operations still strengths...that are important in your industry, we urge you undervalue second- and third-tier contribtitions. to build on tbese strengths and see what happens. Tbe ten Second-tier suppliers are often the source of innovation common mistakes (discussed below) are problem areas that and growth. For first-tier producers in the United States, 80 we sec hlocking the progress of far too many good organiza- percent of the anntial new products are developed and protions. We think tbat some, if not all ten, of tbem can be duced by second-tier companies. Although these suppliers addressed immediately in ways tbat will actually change cur- may not represent the largest portion of a corporate spend. rent performance. Before the cure, however, comes diagnosis their unique conlribtitions make the supply cbain more globand treatment. ally competitive, and tbat value is beyond measure. Internally, procurement groups can also suffer from low-

1. Low Expectations
Coauthor Nelson calls this mistake "operating at kindergarten level in a grad school environment," hut the practice of allow- Dave Nelson is vice presidcnl of global supply chuin management ing purchasing to be an undcrachiever is an expensive at Delphi Corp. Palricia E. Moody is cm author and lonsiilltinl. Jonalliun /{. approach to global supply management because it underpowr i.s geners a vital contributor to corporate profits and growtb. eral director of global supply Innovative Sourcing Unf^jrtunately, examples of lov\' expectations (and low results) tinindm'mcnt ti( Delphi. This Solutions That Deliver in procurement are common. When board of director's reprearticle is excerpted irom Extfaofdinary Results sentation, for instance, does not include supply chain maniheir book Tlte Ittcrettihle agement at high levels, performance suffers. Decisions tent! Payback: Soiutiotts llnil to overlook procurement's contributions to profit, and budDvliver ILxiraorilhuiry gets for staffing and resources in supply management are limHfsutts. Cop\'righ( 2005. ited. Or when procurement planners' and managers' compenPublished by .\M\C()M sation is lower than that of managers in other areas, the Iktoks, a dhision o/ message is clear: Procurement is an administrative process Amertt'an Alanagemenf that makes the wheels turn and keeps the paperwork flowing, .Vssotiatidfi. ,\euVr>rli, iN'.Y. but it somehow isnt as professional or important as finance DAVE NELSON L'sed with pemiissiim. .Ail or marketing. rights reserved. For more PATRICIA E. MOODY in/omiation visit www.atnaLow expectations make the challenge even more difficult JONATHAN R.STEGNER combooks.org. because no matter how good an organization is. no matter bow eager its employees are to do their best and to make

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competition paid $1.50 and then cleaned and reused the gloves, the iacts hit homedecentralized spend decisions not only encouraged maverick buying but also increased the cost! By switching to a more-sensible buying strategy that included a single supplier, iewcr varieties of gloves, and better prices, planners realized immediate savings of 35 percent, or 2. Decentralized Purchasing $490,000. almost hall a million dollars in gloves alone! Even Decontrali/ed procurement organizational structures were Deere suppliers knew that lack of control hred inefficiencies! originallv designed to guarantee eontinuotis delivery of plant- ii that type of variance existed for one simple production speciHc pr{)ducts directly into iactories in order to kvv\i the item, how mtich craziness would Deere find with bigger lines running at all costs, I lowcver, they are now our biggest items like tires and engine components? barrier to imfiroved spend management, wbich is a tremenThe isstie ol cost effectiveness is key in anv decentralized tlous problem in stipply management today. A decentralized operation, but tbere are other problems as well. For suppliers purchasing structure is one in which [nirchasing offices and tbat may be shipping materials to customers at more than decision making are not coordinated, su|)plier strategies are one plant, at dilferent prices or specifications, the custoTiier not linked, volume is not leveraged, relationships exist at low is not showing what Honda calls "same face," which is a tiniorganizational levels, and there are local incentive schemes. form approach to buying and communicating that minimizes Althiuigh purchasing oiTices arc maintained at the piants or conlusion and saves time. Quality specifications may difier at divisions, there may be a central procurement iunction as from one ]>lant to another, even from one engineer to another. And when the purchasing system allows product or design proliferation, or when there is not an integratIF the expectations for purchasing's role in the husiness ed central database to tell the storv\ no one is the wiser. In a growth comare low, chances are the results will he the same. pany launching many new products each year, this is a problem; but in a wcil that pcriorms a few limited procurement functions. mature industi") that earns predictable revenues on a known Commodity and cost analysis, quality and material specifica- set of products, it is inexcusably expensive. tions, negotiations, buying, strategic planning, and expediting may be conducted at any and all levels and at manv different Curious Incentives to Stay Decentralized locations in a decentralized organizationand that is the ihe centralization/decentralization decision, however, is problem, Tbis approach to managing material ilows is a lega- more than a simple choice based on good analysis of the cy oi the vertical integration model. Although some elements spend, cost benciits, and production demands. There is oi that model have shifted as outsourcing and other supply strong emotion surrounding the question of whether to chain flows have moved out, the basic decentralized founda- decentralize^and how much or how fastand where there tion imjirint remains in place in so many corporations that we is emotion, there is usually power or money. These two issues knov\ it still needs to be addressed at verv' high levels. must be addressed when companies consider hov\' to best Decentralized operations have a tendency also to put one structure tbe supply management area: cost allocation for a plant in competition with another for the same suppliers central procurement department and the division or plant work. J-^ manager's incentive to retain purchasing power. First, it costs money to maintain a central purchasing Maverick Buying operation, especially when it is staffed b>- planners who are What happens to the spend, for instance, in a billion-dollar paid more at central planning than if they were working at corporation, wben everv' plant maintains its own team of buy- the plant level. Central procurement operations require good ers tbat orders maintenance and repair operations (MHO) data frorn an integrated purchasing system, and this system materials independently? Because MRO parts and supplies will probably cost more than smaller plant-level operations, are ungiamorous. they are usually overlooked when compa- Tbe funding to operate a central system comes from allocanies Iirst attempt cost reductions. However. MRO is one of tions [jlaced on the plants or the division, in essence, the the easiest opportunity areas starting out. As John Deere dis- plants pay ior planning, negotiating, and buying by a central covered when a planner studied the company's MRO spend, group that leverages tbe combined size of all the smaller the result was $1.4 million for 424 difi'crent varieties of plants and divisions, while making buys that ideally should gloves, all intended t{) be used on the production floor ior work to the advantage of al! parties involved. Therefore, there basically the same purpose, before being Jiscardcd, When may be a trade-off between the central group's ability to the glove supplier mentioned to one Deere analyst that i^eere leverage the buy and tbe plant's contribution to the cost of was paying $7,50 lor a single-use pair of gloves while the the central group,.,.

ered expectations or unclear objectives. We will talk later about what metrics work best to measure sup|)lv chain perInrniatice, f here is great power in numbers; and continued high-level purchasing performance and good press throughout the suiipiy base are the fuel for raising low expectations.

High expectations produce high results.

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A second issue tbat is raised as a quiet objection is often veiled in the "but we're different" argument. When plants are staffed to expedite or pull in materials and to coordinate shipping scbedules with suppliersnot to negotiate spend agreements and buytbe plant manager or division bead will have fewer higb-paid professionals reporting to bim or ber. Would you ratber be in cbarge of production supported by a few planners for $80,000 a year or an entire operation staffed at tbe plant level with buyers, planners, negotiators, expeditors. and purchasing engineers at SI50,000 a year plus management perks? It's easy to see wby plant and division managers will fight a central procurement approach if it means tbeir jobs are narrowed to simply produetion and expediting! Tbe trade-offs between a central and a decentralized structure become clear, bowever, when companies look at tbe incredible payback opportunities tbat appear wben purcbasing is centralized or centrally managed and controlled. It is interesting to note tbat Honda is centralized in Nortb America but decentralized globally. It's reasonable to leave expediting and daily material flov^' in the hands of the plants and tbe divisions who are responsible for just-in-time perlormanee. But like al! other key functions of the businessfinance, marketing, and buman resourcesprocurement needs to be centralized to le\erage tbe buy. Wben just-in-time and excellent supplier quality and delivery performance guarantee predictable material flows, it makes even more sense to move procurement planning, negotiating, and buying operations out of the processing plants....

material for tbe next one. If purchasing bas the ability to cnnsolidate and review bill of material tlata. including supplier preferenees, specifications, and pricing, tbey will of coiuse inevitably catcb redundant parts. Tbey also ma\ see parts tbat bave been "over-spec-ed" (especially if procurement engineers get involved), components tbat may be requested at bigber or tigbter tecbnical specifications iban truly required for acceptance price and feature perlornuince. The second organization fallout problem comes when purchasing reports to production or operations. Companies tbat still live with tbis model neglect spend management and strategle procurement planning in favor of expedites and other tactical short-term activities, A test of tbat trend is to review premium freight charges; if tbey are frequent and bigb, production is using purchasing as a big expedilor rather tban as a partner in profit creation, Wben nonpurcbasing professionals make purcbasing decisionsfor example, wbetbcr to outsource a critical partsupply cbain spend or tecbnologv objcclives arc often overlooked, Tbe grovvtb of the outsourced electronics industry illustrates this point. Initially, companies like IBM sought to outsource difficult or expensive \v'ork to board shops that bad gatbered tbe rigbt equipment and expertise to make production managers' lives n little easier. Outsourcing made sense because it simplified the lives of manufacturing executives. The decision to outsource was usually made bv' manufaeturing managers wbo worried less about tbe cost of materials and more about tbe availability of supply. Tbe make/buy decision was simple because electronics suppliers always priced their products lower tban wbat original ccjuipment manufacturers (OEMs) could do tbcmscKcs, and they guar3. Production Reporting into anteed delivery\ But gradually, tbe financiais started to ttirn Operations or Marketing the otber way as contract suppliers learned more about comwben significant percentages of corporate spend are outponent prices than tbeir customers. C'ustomcrs lost visibility sourcedin the automotive industry the outsourced percentto parts prices. As contract manufacturers took more control age can easily reacb 85 percent of tbe total, in the computer of component specifications or deliveries, many of them industr)' it is even bigberit makes good financial sense for all material production and flow functions (in-bouse and out- found ways to make more money on component prices tban sourced) to report into one responsibility center managed by processing, and tbeir OEM customers lost the ability to manprocurement. Tbat is where costs and supplier performance age component suppliers well or profitably. A simple decision to outsource production bcadacbcs grew into a blind spot, a can be compared and consolidated, . For most companies, tbe idea of manufacturing reporting casb drain that procurement managers find difficult to to supply management is a radical concept, the very opposite reverse. of traditional practice. In tbe old prodtiction model, purchasing reports to eitber operations or product marketing: pro- 4. Lack of Good Analytical Tools curement under this model has limited reacb and limited Even when traditional enterprise resource planning (ERP) responsibility as a cost center tbat serves production or prod- and other procurement software solutions do not oiler the uct divisions. This traditional operating structure automati- kind of simple analytics required to identify and realize bigh cally creates waste in several ways. payback solutions, it is essential for spend management to First, wben procurement reports into marketing and serves find otber solutions tbat allow good analysis. There arc many product-marketing divisions, there is a tendency to grow tbe creative solutions, clever ways to get around the lack ol good parts lists and create overlap and redundancya problem data: some solutions are sbort-tenrt, one-time data-gathering tbat builds complexity. Wben introduction and management and analv'sis projects, while otbers can be tacked on to tbe of a product portfolio takes precedence over carelu! revievv' of larger procurement or aecounting software. Wbat is essential the parts lists, it's easy to accumulate obsolete components for profitable spend management is the ability to gather, conthat were speeified for one product but left out of tbe bill of solidate, manipulate, and analyze procurement information
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"But We're Special, We're Different"

Purchasing Performance Checklist

1 . How is procurement organized currently? A. Logistics? B. Production planning and control? C. Incoming material and component quality? D. Inventory management? 2. What performance metrics are available currently? Are they used directly in performance reviews? 3. Who really selects the sources? A. Procurement? (Central? Regional? Plant?) B. Engineering? C. Top management? D. It depends on the commodity (cite some examples)? 4. Who negotiates the price and other contract terms? 5. How are make/huy decisions made for: A. Components? B. Finished products? 6. What are the major outside sourced part categories, hased on dollars spent? 7. What part categories are most critical from a quality, technology, and/or delivery standpoint? 8. Who are the ten most important suppliers? For each, identify: A. The primary country oi manufacturing origin. B. The country of headquarters. C. How often they are visited by procurement people. 9. Can your MRP system requirements be: A. Cross-communicated within the company? B. Consolidated into one demand on the supplier? C. Consolidated nationally? Globally? 10. What are company policies regarding: A. Ethics? B. Buyer behavior? C. Supplier behavior? 1 1 . Are there regular, formal processes for communicating with suppliers and getting their input? A. Periodic surveys? B. Advisory councils? C. Ombudsman? 12. What are the averages for the procurement people for: A. Years of education? B. Predominate discipline? C. Years with the company? D. Years in procurement? 13. What delegation of financial authority do the various levels of procurement have? Does any other function have procurement delegation authority?
Source: R. Gene Richter, former chief procurement officer, IBM Corp., copyright 2001. tJsed by permission.

from many sources. The frequency of analysis at inininuini should bt' once per quarter. Many large organizations with multiple databuses find it difficult to consolidate key bill of material data. Deere's 'one intern and n spreadsheet" story offers one solution to the prohlem of missing analytics: Deere wanted to understand bow much steel, vvbat types, and Jt what prices the eompany was buying all over the world. Management sensed that tbere were opportunities to leverage the buy and achieve multimillion dollar savings in steel, as well as in other commodities. Hov\ever. it was impossihic to gather accurate information from all of Deere's steel plants around the world. Different Deere huyers operated under different decentralized policies, so it was hard to obtain the correct information from each one. The solution was to hire a central purchasing intern who, over a period of two to three months, was able to retrieve accounts payable data that filled in the gaps. The best source for actual payment history was, of course, accounts payable for tracking purcbase orders back to negotiated contract prices, wbicb is another checkpoint v\here potential savings usually lie hidden. Purchasers can review individual contracts or release paperwork, or, as a last resort, they may ask the supplier! For a single high-value commodity like steel, data digging to find cost variance or errors is a worthwhile exercise; trying to capture savings on all commodities, all the time, however, requires consistent and fully, centrally integrated data.

5. Supplier Proliferation
Let s think ahout the image of a lean supply base. In [he old manufacturing days, a factory of 5,000 to 10,000 workers was a good thingbigger was better. Today, optimum factory size is a few hundred personnel. And its the same with suppliers. In the past, more was better, while today, leanin the factory and in the supply chainis better. Customers cannot effectively manage more than itOO to 400 key suppliers. Supplier proliferation dilutes an organization s focus and eliminates tbe type of in-depth technology and commodity intelligence development that is required to meet bigh levels of quality and price performance. A surplus of suppliers also limits the number of high-level partnerships that good relationship btiilders can develop, and it makes supplier development too expensive to undertake on a large scale. However, we are not recommending single soureing all commoditiesan
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approach that carries great risk, particularly for North American operations with global networks. But we do find, in fact, tbat purcbasing groups that have deliberately reviewed and narrowed down their supply base to a manageable number will be able to gather and apply best practices and spend management initiatives much more successfully because tbey are starting from a good position. Decentralized procurement unfortunately builds supplier proliferation, and when organizations want to bring all buying and negotiation activities into one central point, tbey will need a method to review and reduce, or rationalize, the supply base at tbe same time. Sometimes, the supplier historical data vvill show slightly better performance hut hecause of than the others. The value of good performance data is that perlormance/cost trade-of(s will be clearer and easier to see. In terms of payback, focusing development resources on a fevi- selected and clearly high-potential suppliers makes more financial sense than scattering attention over several hundred suppliers of unknown potential.

continue to obscure bigher level objectives. In a tactical operation, it is difficult to achieve payback without beating up suppliers, which is an aj^proach that cannot be successlully sustained. Suppliers will run lor the nearest exit plan! A tactical focus tends to eat up resources at the plant level, and it sometimes has an impact on central procurement as well, A reasonable approach to the strategic vs, tactical locus is to escalate emergency or chronic plant procttrement issuessuch as bad quality or poor deliveriesto central

Many suppliers work hard to deliver perfect quality and on-time performance,
their size or clout, thev often do not
purchasing where a supplier's overall performance can he reviewed at the contract level. However, when an organization is mired in daily problems and planning horizons that barely stretch through ieadtime, it is nearly impossible to impose strategic work on top of the daily grind. We think far too many companies still expend dedicated resources on short-term fire fighting, and that imbalance signals either bad supplier selection, poor communications, or very unpredictable plant production schedules. All these issues are solvable, but they must be addressed at the proper level.

for one supplier whose price is higher get the respect and appreciation they deserve.

6. Short-Term, Low-Level Tactical Focus

If supply management visibility is high oniy when a hot order appears, production is in jeopardy, or the floor screams for premium expedites, then the department's tactical focus will

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7. Bad Press
We need to learn a lesson from marketing and then use it everyday. Strategic sourcing needs to speak the language of managementfinanciais such as profit and loss (P&L), expenses, and contributions are ihe buz/words that top management wants to hear about, the ones tbat purchasing professionals need to emphasize in all their communications. When procurement executives do nol make (he clear and direct conruction betv\t'en their contribution to profitability and re\enue growth, they relegate themselves to cost areas that always cr\ for cuts. It's a tough, reactive position to be in. lo re\erse this bad reputation, procurement professionals must turn their image around to reflect a positive one of profit and value creation. Reliance on savings and cost cutting to the exclusion of growth and Improvement, as botb CiM and Chrysler learned in the 1990s, creates bad press and loses good suppliers, which is a difficult trcntl to reverse. Remember tbat your work is known to both inside press (your peers, top management, and your people) as well as to outside press {Purchasing magazine. Supply Mnuigemeiit. Fortune magazine. and Vie New Ynrk Times). Remember that bad press is difficult to re\erse. bul no press is a great opportunity to mine. The T\lenol jn)isoning case in which President James Burke communicated a strong message that told the vvorld that McNeil (a Johnson & Johnson company) itself had also been hurt and that the company planned to refill tbe jiipeline with tamper-proof products sa\ed tbe companj' and established a benchmark For bow to deliver had news well. Burkes good press position put Jobnson & Johnson in a better recovery position as well,

information system (MIS) would provide the design and price information tbat both departments needed. Nearly 20 years later, bis dream remains unrealized, and one solution has been to physically co-locate supply management with newproduct engineers. Botb Honda and Delphi have found tbat establisbing stronger links between purcbasing and engineering or R&D earlier in the cycle are critical to optimizing this upfront area of the supply chain. Another key systems issue that helps to achieve functional integration is having a bill-of-materials database accessible to both areas offering the kind of information tbat engineers as well as planners and buyers require. Previously, engineering did Tiot sec contract information, such as pricing, that purchasing worked with. In a robust system environment, however, all design and pricing information, as well as supplier performance history, is readily available to all authorized users. Although new-product development engineers may be based in Detroit, Tokyo. Berlin, or where\er, planners and buyers can be located in Hungary or Indonesia. China, or Mexicoand tbe information still bangs together well,
I

10. No Supplier Development

Perfect perlormancczero rejects and perfect on-time delivery for every partis achievable at all levels of the supply cbain. but it is unusual. Each spring. Honda of America fetes its excellent suppliers witb recognition awards tbat prove error-free performance is possible. Hut, for every Nippondenso, a multiple award winner, and Jobnson Controls with its excellent track record, there are dozens of 8. Product Variety and Complexity suppliers who need teehnolog\ and management assistance Chr\sler discovered in tbe 1980s tbat a Focus on product to reach higher levels. Usually supplier-development engivariety carried down to the level of piece parts, nuts and neers are a resource that customers can more easily provide bolts, and screws could bankrupt the company. than small- and medium-size suppliers, at least to gel started. Unfortunately, many procurement groups inherit a long line I be range of assists needed by suppliers to aebieve bigb levoF unnecessar\' parts selected generations earlier by indi\ idual els ot quality and performance is long, from quality circles buyers and engineers. Although these buyers had little idea of and supplier seminars, where new ideas are explored, to the exact financial impact of their selections, today most SWAT-team rapid-response assistance in emergencies. planners are aware that eomplexity costs. Supply cbain organizations tbat do not include people who John Deere's glove story illustrates the pitfalls of unlimited can work with suppliers at tbe plant le\el are missing big savparts proliferation, Theresa Metty. chief procurement officer ings and performance opportunities, Tbe proven payback for at Motorola, believes tbat parts proliferation and cotTiple.xity is supplier-development personnel is tbree to four times their one of sourcings biggest challenges. She has launched a "War eost, and this investment is one that is quickly paid back but on Complexity" tbat emphasizes elimination oF excess parts to most frequently overlooked. tbe tune of several million dollars. Simplifying, or rationalizing, the parts list is a long-term solution that has immediate The Fear Factor payback. If producers want to find immediate cost relief and AH of these ten items require significant change: new polichange the Wiiy buyers and engineers work together, reduction cies, new measurements, and new strategies for ever\' comoi variety and eomplexity is a great place to start. modity. It seems that even tackling one or two obstacles hrings up new problems to solve. Tbere are many reasons 9. Purehasing Separate From wby companies naturally encounter resistance to change, New-Product Development such as fear of job loss, fear of having to learn new proeesses, When Gent- Ricbter headed up Hewlett-Packard's purcbas- or Fear of having to move to another area. Fear is a powerful ing group, bis dream was to ba\e "a buyer at ever\' engineer's inhibitor tbat can sometimes serve a useful purpose, but elbow," and his bope was tbat an integrated management when good companies are attempting to make reasonable
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changes using proven methods, fear just gets in the way. Amazingly, when we describe the "before" and "after" views of improved supply management operations, especially in spend management dollars, everyone is energized. When we relate case examples of real companies, like Honda, Delphi, and their suppliers, which bave instilled a culture of continuous improvement and cbange, people beeome believers. Yet, despite the promise of better work and bigger opportunities to come, fear remains. Some statistics from a book by David Ropeik, director of risk communication at the Harvard Center for Risk Analysis, highlight the apparent craziness of acting in fear of change. The list of things we fear is long and growing-spiders, snakes, smallpox, anthrax, airplane crashes, terrorism, credit card debt. However, tbe odds of dying before the average age of 80 from unnatural causes are not as high as we fear. The risk of dying in a plane crash is one in 9 million: being killed by lightning is one in 3 million; dying in a flood, one in almost 7 million. Our fear of events over which we have no control, such as airplane crashes, is stronger tban our fear of problems we ean prevent. One of the most common and preventable killers, heart disease, has earned a probability of one in three hundred, yet Americans are notorious for bad diet and sedentarv lifestvles that

inevitably cause health problems.' Fear is a strange motivator. The immediate threat can be more important thtm tbe imagined and less probable ones. The lesson for companies and teams contemplating change is to understand and expect that fear will accompany change. The best approach is to recognize and acknowledge the resistance and move quickly into realistic and profitable challenges at hand. Once the first prohlem has been resolved, team members can move more quiekly to the next one.

Sense of Adventure

jp

If you want to pick up big savings fast and more later on. if you are not satisfied with traditional procurement s predlctahle yearly price increases of 3 to 7 percent and you are willing to take on tbe work of major organizational change, then you are ready to begin The Incredible Payback. If your heroes are purchasing giants like Honda. Delphi, and Toyotamarket makers that return profits through procurementthen you are ready to begin. You know the old ways won't get you lhere, so are you ready to make some money? CJGO
Footnotes ^ David Ropeik, Risk: A Practical Guide for Deciding What's Really Safe and What's Really Dangerous in the World Around You (Boston: Houghton Miffiin, 2002).

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