Four Rules For Successfully Changing Suppliers | Article

outsourcing nightmareThe most feared happening in outsourcing is when the buyer initially selects what turns out to be the wrong supplier. Things degenerate to the point where the buyer has to change suppliers. Oh my gosh.

Is changing suppliers really the ultimate outsourcing nightmare? Not for Larry Miller, the Americas Regional IT Infrastructure Manager for STMicroelectronics. “The reality did not match the fear and trepidation beforehand,” says Miller, who is responsible for IT Supplier, Asset, and Project Management in countries from Brazil to Canada for the world’s sixth largest semiconductor manufacturer and the second largest in Europe. His new supplier is Unisys.

STMicroelectronics, which has manufacturing facilities in the US, Europe, Singapore, India and China, outsources its PC desktop and laptop support. “We didn’t want the overhead,” says Miller. He says PCs today are more powerful than mainframes were 20 years ago. “Hand-held tools today are so complex they require almost the same level of mainframe maintenance discipline (patches, firmware, operating systems updates, application and device drivers, configuration management, etc.) of the old days. You also have data integrity security issues to guard against, like viruses and phishing attacks. We needed an outsourcer who specializes in these maintenance and management disciplines to keep our tools running so we can keep our eye on the manufacturing ball,” he explains.

Miller assumed the role of IT Infrastructure manager after STMicroelectronics decided to change suppliers. His job was to implement the change.

Miller’s seasoned experience helped him lay the foundation for a successful switch. He started his career carrying a tool bag for IBM and moved through the ranks to supplier service executive; for the last 10 years he’s worked on the customer side.

Here is his blueprint for supplier switching success. Miller, who has a degree in industrial social psychology, says there are four parts to every successful change: forming, storming, norming, and performing. He points out there is no shortcut to success. “You can’t skip any of these steps,” he warns. They are the basics for evolving and learning; they create the process of “healthy change management.” These steps ultimately insure all parties involved are successful, profitable, and able to move forward. They help people focus on solutions, not problems.

These four steps create what he calls “a consistent, congruent path to the desired change.”

Forming

Miller says both parties have to accept there will be problems; change doesn’t come easily. The best way to proceed is to “assume good will” at all times. Miller says both sides have to believe the outsourcing relationship is a win-win for everyone. That belief must color all decisions even when the going gets tough.

He suggests building a cost model for the services needed. Each player must design its own cost models. Then the two sides compare the two models and look for mutually agreed-upon solutions. Miller says buyers get more business value from their suppliers if they consider the supplier their strategic solution partner.

Storming

At this stage both sides “open their kimonos” to assess what’s wrong with the current situation. Miller says this creates a very difficult and often uncomfortable situation based on the uncertainty of each other’s perceived agendas. It is here that the trust building begins. No one should personalize the problems, but humans lose tempers and shed tears. “You have to learn the art of retaining clinical professionalism,” Miller advises.

Once again, assume good will. The executive says that is critical in helping both parties stay on the path they have agreed to, despite the reality of being human and getting hurt feelings and bruised egos.

Norming

This is where the maturing and nurturing of disciplines and processes come into play. The goal is to normalize day-to-day procedures. Once the parties create baselines, it’s time to do some actual transactions or interactions. Miller suggests doing between five and 10 actions and then have a performance improvement metrics check review to see if the processes and performance agreed to are on track.

“Typically, you bounce between forming and norming until norming becomes the norm,” Miller observes.

Performing

During this stage both parties look at the processes and start improving them.

Each step has its own key performance indicators and metrics. Miller created a “math” formula to monitor the progress during each step:

Ps-Pc=Wva.

In English the formula says: The problems you solve minus the problems you cause equate the worth in value added. Both parties have to be +1 before they can go on to the next step.

Miller says his four-part process applies to life’s personal changes as well. Want to lose weight anyone?

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