How are you going to burn the ship? Greg Sachs asked the National Fastener Distributors Association.

In a NFDA Executive Summit conference session on creating a world class supply chain for fasteners, the chief procurement officer for Resideo Technologies called for “procurement transformation” by distributors.   

Resideo is best known for the Honeywell home thermostats. Resideo has 13,000 employees and in 2018 reported sales totaling US$4.8 billion.

“Let go where we came from,” Sachs advised. He cited the “Burn the Ship” example from 1549 with Herman Cortes setting fire to the ship so the crew couldn’t go back to where they had become comfortable.  

Sachs displayed the change curve with stages of information, denial, support, anger, exploring, direction, acceptance and encouragement.

“Our role as leaders is to accelerate our employees / teams along the curve – not reject the process and steps – they have to happen,” Sachs said. Be aware of employees and / or teams that get stuck cycling between ‘exploring’ and ‘anger,’ Sachs warned.

Your company must change from traditional selling to strategic alliances, Sachs said.

By developing strategic alliances between suppliers and customers, you can “adapt to market conditions together.” Sachs worked such an alliance between Honeywell and Field Fastener.

Developing “strategic alliances” requires becoming trusted advisors and innovation in product and process, Sachs said.

  • World class supply requires zero tolerance for missing planned customer orders and quality. The supplier must anticipate issues and react quickly, Sachs said.
  • Sachs emphasized communicating solutions rather than problems. Work with the customer to manage risk and evil based on customer expectations.
  • The supplier must create value beyond the price, Sachs said. World class companies generate 4.2% to 5% net productivity.

Methods include logistics, VMI, inventory, payment terms and value engineering.

  • The total cost of ownership model should drive all decisions and the results must show in the P&L and balance sheet, Sachs said.
  • “Don’t co-innovate for the leverage,” but rather because you are strategic partners.
  • Assurance of supply “are table stakes to be in the game.”
  • Focus on the value beyond your immediate offering.
  • “Be willing to share the pains and gains.”
  • Your relationships must go beyond sales, Sachs said. You need the “ability to influence at the top of the house.”
  • Be aware that sharing information can scare your customer’s procurement people, Sachs pointed out.
  • There are multiple companies that can qualify as a supplier. You have to show “capability beyond price.” Issues can include you showing your supply and that you financially sound before you can say, “Let’s dance.”
  • Beyond the immediate customer, “keep a relationship with end customer,” Sachs advised. “Every engineering change and every volume change can mean something.”

There are still a lot of opportunities in optimizations,” Sachs declared.

Working with customers means accepting, “You gotta make money, we gotta make money.”