Progressive Distributor - Fear of change

Fear of change

Why some companies fail to upgrade technology

by Dan Kaplan

Many companies face a daily dilemma: should they replace their current aging computer system or live with it despite its deficiencies? Not being able to make a decision, they often rationalize by saying, “Do I really want to relive the bad experience I had in the past and upset the apple cart?” Another factor affecting their decision not to upgrade software is the computer personnel’s fear of learning new technology. Having used the old software for many years, they make all kinds of excuses about why new software is not needed. Being the experts, management relies on their advice. When facing the reality caused by business disruption, management often has to hire an outside consultant to evaluate the company’s needs and recommend a new computer system despite the fear and resistance of the computer department and the users.

Two issues result when companies face a fear of change:
• Fear of learning new technology limits the selection of a new computer system

• An inappropriate computer system leads to business disruption and financial losses

Fear of learning new technology
Resistance to change often results in business disruption and financial losses. Frequently, the computer department is the reason why change doesn’t occur. Having gotten used to their old reliable computer system and being afraid to learn new technology, computer personnel become the gatekeeper, preventing management from purchasing new technology. Any attempt at introducing new technology is met by a stone wall of resistance.

Recently, I spoke with the computer manager of a very large construction supply company who refused to look at any software that was not running on his current computer platform. Despite the president’s intervention, the manager refused to evaluate any software that did not run on the computer platform he was using. Not wanting to rock the boat, the president told me his business problems were the “cost of doing business” and let the manager have his way.

This company often suffered from either a shortage or excess of inventory in the warehouse, and frequently shipped the wrong equipment to client construction sites. This resulted in rush orders shipped to the construction sites while the incorrect shipment was returned to the warehouse. The cost of doing business the president referred to could have been avoided by selecting the proper software regardless of the computer platform on which it ran.

Inappropriate computer system
Not having an integrated computer system results in limited information, and decisions made based on gut feeling rather than accurate computer data. Basing inventory purchasing decisions on gut feeling often results in excess inventory or inventory shortages.

Speaking with the division president of a very large importer, I was told the following story: Because of incorrect purchasing decisions, his very large warehouse was exploding from unwanted inventory while there were shortages of saleable inventory. The company owner refused to buy new software, still upset about the $500,000 he spent on his current computer system which didn’t function accurately. The owner also remembered the business disruptions the company had undergone when the current software was implemented. So, between not wanting to cut his losses after investing $500,000 on the current computer system, and being afraid of the business disruption caused when it was implemented, the owner turned down the division president’s suggestion to buy a new, integrated supply chain software.

Trying to reason with the owner, the division president told him that millions of dollars of excess inventory were collecting dust on the warehouse shelves, a problem that could be eliminated with a new integrated computer system. The owner, not wanting to face reality, turned down the division president’s request. This resulted in the classic domino affect of incorrect shipments, inventory being returned, invoices not being paid until credits were issued, and the accounting department handling credits and adjustments instead of taking advantage of early vendor invoice discounts. Even worse, a lack of space for excess inventory made it necessary to build a larger warehouse to store the excess inventory.

The frustrated president, realizing the owner would not buy new computer software for fear of repeating his previous experience, gave up trying to convince him. He learned to live with the system’s limitations, accepting its errors as the cost of doing business, hoping that sooner or later the owner will see the light and overcome his fear of change.

Overcoming the fear of Change
Upper management in many companies realize that in today’s competitive market they must upgrade their aging computer systems in order to increase efficiency and lower operating costs. As a result of today’s competitive business reality, profits are lower. Therefore, sales volume must increase to maintain profit margins. Many times when I ask business owners how they define a good customer, their answer is, “A good customer is someone who buys very large quantities.” The reality is, the good customer who buys very large quantities at a low profit margin has a large amount of returns and pays invoices late. Merchandise purchased on the basis of gut feeling often become excess inventory. Everybody remembers the big order they once got, not realizing it might have been a one-time promotional order, or a product may have reached maturity and is on the decline.

One of the essential ways to improve the bottom line profit is to lower the operating cost. Having an integrated software results in wise purchasing, just-in-time inventory and accurate shipments. An integrated Web-based order system enables customers to order over the Web, maintain an accurate record of their orders, and check inventory levels. Customers with access to their information on the Web are a new reality businesses need to face.

Integrated warehouse software also results in reduced manual labor and increased inventory accuracy. The ability to scan received inventory in real-time mode enables the customer service department to instantly know what just arrived and, if needed, ship it off the loading dock without placing inventory on the shelf. Many businesses keep their inventory to a minimum by having an integrated warehouse system and can ship merchandise when it arrives without incurring the cost of storage. Warehouse personnel who pick the inventory for shipping using wireless radio frequency devices cannot pick or ship the wrong products. By scanning different locations for accuracy on a weekly basis, warehouse personnel can locate misplaced inventory and instantly correct computer records to reflect the newly found inventory available to be shipped.

In order to compete successfully in today’s demanding market, integrated supply chain software provides solutions from the Web, to back-office order processing, through the warehouse, and culminating in updating the financial modules. Integrated supply chain software results in better customer service, efficient purchasing, and accurate inventory in the warehouse. The end result: lower operating costs that improve bottom-line profit.

Since 1980, Dani Kaplan has worked with corporate executives to improve purchasing, increase warehouse and distribution efficiencies and implement the solutions that result in substantial savings and productivity improvements. Dani is president of SMC Data Systems Inc. (www.smcdata.com) and can be reached at (212) 714-3536.