Glide RiteThe Problem

There are a couple of problems with the current situation, as Raj is discovering. The first is that the engineer, Angela, is ordering without the consent of the supply chain division. This alone is cause for concern because this is not the process, and she is not following the supply chain department's processes. So in that sense, regardless of what else is happening, there appears to be at least an error made. This might also reflect a certain mistrust of the department in terms of what they think the supply team does (order).

Further, this process of having the suppliers bid against each other on price is worrisome. Price might not be the only criteria against which bids are evaluated, for example. The reality is that if it was just about price, you wouldn't really need a supply chain department. The supply chain management function weighs a number of factors when ordering goods, including all the different specs for the goods, but also the relationships with the different suppliers. Maintaining good relationships with critical suppliers is part of the supply chain management role, and the approach that Angela is using might serve to compromise some of the relationships that have been built up over the years. Specifically, if these suppliers are accustomed to closed bids, having their bids used against each to lower the price might ruffle their feathers, and not just by a little bit. Angela is not taking the suppliers' interests to heart hear, which is something the supply chain team has to do.

There is a final issue in terms of culture, where the organization in general does seem to lack respect for what Raj does. The reality is that Raj is new, and has had trouble convincing people in the company to do what he needs them to do. Relationships with suppliers are being soured and inventory is stacked to the roof. Raj needs to either earn or demand the respect of his co-workers quickly so he can instil best practices approach to supply chain management, remediate the damaged relationships with key suppliers, and restore an organizational culture that respect the role of the supply chain department.

One of the issues that the company is also facing is that the development of new products has been significantly higher than target over the past year. With a target of 30 new products, they produced 32 in 2009 but then 57 in 2010. This explosion in new products has caused financial metrics to suffer, and for both customer and supplier satisfaction to deteriorate. There is a loss of focus in releasing so many new products. Furthermore, there are now goods in inventory that have significant overlap in terms of functionality, something that creates a situation where inventory turnover has declined sharply and is well below the KPI target. The reality is that the inventory turnover. So some of the biggest problems that the company is currently facing are related, and are issues that Raj can solve.

Alternatives

Raj has a number of options. The first one is to use his expertise and formal power as the supply chain specialist to implement solutions on his own. This would mean bringing back control over inventory management. Under such a situation, Raj would likely need to write up new SOPs, scale back the authority of different managers and plants to do their own ordering, and to concentrate supply chain management power centrally. To the extent that taking a decentralized approach to supply chain had its benefits, the last year has shown that having people involved who simply are not professional supply chain managers has had a detrimental result to the quality of supply chain management, and now the warehouses are full of inventory, to the...

The company's financials are failing to hit their targets, and part of that is because so much capital is now tied up in inventory.
The major advantages of this option are that Raj has the expertise to solve the problem. He is specifically trained to run a good supply chain system, and in fact that it what he was hired to do. Raj has the expertise to solve these problems. The downside to this is that there is a political dimension here. He doesn't really need to worry about ruffling Angela's feathers in the sense that she's not there for long, but he does need to concern himself with the rest of the company. If he tries to do this on his own, as a new person, he might be perceived negatively, especially by people who have been with the company a long time and might have had a different relationship with Raj's predecessor, or by the more creative types who might feel like their ability to be creative and innovate has been stifled.

The second approach is to bring about greater levels of control, but to do so in a way that builds a coalition of department heads, and the "real boss", Alecia. This approach would manifest itself in Raj discussing the issues with the relevant stakeholders to find solutions to the company's operational problems that are mutually beneficial. The conversations might be tougher, but they would be more honest in nature than if Raj just tries to implement solutions on his own. He will need to build the right coalitions among the leadership team in order to execute his plan, but there are certain reasons why this will work better.

There are several advantages to this plan. First, he needs to talk to Alecia. She will understand the big picture, because that's her job. She will be appalled with the financial performance of the company in the last year and will want solutions. She will actually notice that inventory is a big part of the problem and be looking to the inventory guy, Raj, and notice that the problems correlate with his arrival in the company and the time of the prior vacancy. The reality is that the other departments spend the time before Raj was hired and just after when he was getting settled to spread their proverbial wings a bit and test their boundaries. Raj needs to pull them back from that. First, by getting Alecia on board, Raj will be operating from a position of strength. He won't just be the new guy in the supply chain department, he'll have the full weight of the "real boss" behind him.

Second, this plan has an advantage in that the controls will be much stronger. Alecia should be providing targets for the department heads, and she can provide targets that orient them towards helping solve the inventory management issue. The department heads will then be instructed to build those metrics into their reports' quarterly goals as well. For example, if everybody in the company has an inventory reduction target against which they will be measured, that will immediately focus them on inventory. The reality is that the probably have not given much thought to inventory when they were building out their 57 new products. Why would they? They never had any reason to. The fact that excelling at one metric came at the expense of others is not lost on senior management, but on people working the day-to-day, the might not have realized the consequences of taking that sort of unbalanced approach. With new KPIs that reflect inventory management as a corporate priority, they probably will; the culture can be changed.

The third advantage here is that Raj does need to establish SOPs. The company probably was so set…