The Innovator's Solution


An Example of Outstanding Change Management

Posted by Jeff Bodenstab on Apr 26, 2016 6:30:00 PM

Managing change or "change management" at the individual level is essential to realize benefits across the organization. Companies pick supply chain planning software based on the benefits to the business. But they install the software successfully—and realize the gains—when they convince users of those benefits. It’s the critical “last mile” of any implementation and can be one the hardest miles to overcome.

Pharmacy_Supply_Chain.pngOne of the best examples I have seen of highly successful change management was presented by Tina Jalap from the Swedish pharmacy chain Kronans Apotek. At a recent supply chain conference she described an implementation of ToolsGroup software from the perspective of their end user, the people in the pharmacies that managed their inventory locally.

During the implementation Jalap worked closely with users and pharmacists at more than 300 drug stores (“Apotek” is Swedish for pharmacy). Later she became manager for replenishment.

Jalap stressed the importance of putting herself in users’ shoes. They go to work every day knowing exactly what to do. They've been doing it for years. Then, one day, someone tells them to stop what they’ve always been doing, because there is as system that can do it instead—and can do it better. The challenge, she says, was in convincing those users of “the importance of losing control in order to gain control.”

Users asked how they could trust the system to do their work. They were going to stop managing inventory at each individual site, and cede control to automated demand planning and replenishment software. The carrot was that the time saved from reduced administrative tasks would allow them to be more attentive to customers. But users wondered, how can I provide the best service for the customer when I'm not in charge of what I stock for that customer?

In order to gain the users trust Jalap knew she needed a series of answers to questions her users would have about moving from locally managed to centralized inventory management. Some examples:

Q: If a customer asks for a product that we don’t have, how will the system know that there is a demand?
A: In the system we can add ”missed sales” and this will be added to the actual sales transactions when the demand is calculated.

Q: Sweden is a long country and the seasons don’t start at the same time, how will the system know when allergy season starts in different parts of the country?
A: We have added a season code to classify the pharmacies according to where in the country they are located. We have also defined pharmacies that have their peaks during the summer or winter.

Q: Some prescribed products are essential that pharmacies keep in store even if sales volumes are low. How can we secure that they are available?
A: We are able to add a minimum service level to those products so that they will not go below that level when inventory is optimized considering both value and service level.

Jalap also knew the users needed to understand what could be achieved. She clearly communicated the project objectives: decrease inventory value by 15%, increase service level by 1.5%. Everyone in the organization, including the users, realized the company could not achieve these goals by doing business the same way as before.

Jalap conveyed to users what decisions they could and could not influence, sending a clear organizational message that the company was going to fully centralize inventory planning and replenishment. Her team did not want to engage in endless discussion and requests for exclusions based on the particularities of each pharmacy—they were confident the software could "learn" the intricacies of customer patterns, promotional campaigns, seasonal variations, and so forth.

A communication plan targeted stakeholders with information and demos based on what each needed to know. Throughout the project, the pharmacists were in close contact with IT support, sales coaches, and regional managers so they could channel their questions and feedback.

Interestingly, Kronans ran two pilots, each with a different type of user. The first included early adopters who were comfortable with new technology and could spread the word of the benefits of the new approach. The second included some of the more challenging situations or more reticent users, so those objections could be addressed and overcome. Then the full-scale implementation began, adding an average of 28 pharmacies per week.

The rollout was a success: inventory value was soon reduced by 12.5% and service level increased by 0.5% points as the software optimized each item and each store. Additional gains were in progress.

In addition to improved performance, Kronans now only needs 3 people working centrally to supply products to 312 pharmacies, a job they estimated before took 27 full time equivalents spread across all the pharmacies. This resulted in a remarkable 88% improvement in planning productivity.

And finally, local fears have also been allayed and users have expressed positive feedback with the new program. “The implementation was a great success,” Kronans declares.

Topics: General, Supply Chain Planning

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