The Risk Management and Engineering (RBT) department of KIVI (Royal Institute of Engineers) studies high-profile events, analyses them and tries to find ways to better manage technical risks. A week ago, I wrote a column about a case by Dick Bartelse, which he presented at the last symposium. I described how one can successfully turn risks into challenges. Risks are not always monsters to be managed by reducing probabilities and effects of uncertainties, no uncertainties can be overcome by turning them into certainties. Risk as a challenge, was my story. That triggered a lot of reactions.
Reactions to a column by John van der Puil
At the recent KIVI-RBT symposium, Dick Bartels, former director of Procurement at AKZONOBEL, presented a case of deliberately seeking out technical risks. Managing risks is then seen as taking on challenges. A customer comes to Brosserdeel, manufacturer of coatings, with a question. The customer asks for a coating for the back of the new phone to be introduced that protects but also feels like rubber. The Koreans at Huwan Huwan call it "Rubber Feel". The idea is novel; it's all about feeling and that can't be specified in a technical sense.
I described the customer demand, listed some clauses from the contract, mentioned that a very critical supplier for the binder had to be found. I continued by listing a few environmental risks that one cannot control and mentioned a few risks that one faces as challenges. I closed with a conclusion that in certain circumstances, one can consider risks as challenges.
This generated quite a few responses.
Prof Dr Arjan van Weele, professor emeritus of Procurement at TUe wrote:
John, good morning! Thanks for the column. Have read through this one. Interesting but less than the previous contributions. That is because this column ends very open ended. Coming to the end, as a reader you wonder: yes, nice message and now what? What should our supplier do or fail to do next to make the product a success?
My answer cannot be other than humble in tone. In previous columns, I have often drawn a conclusion urging the reader to address a problem or point of interest in their professional life. Or I have criticised the organisation of risk management and pointed the finger at systemic flaws, making risk management misbehave rather than serve society. While in this column, criticised by Arjan van Weele, I only mentioned facts and circumstances that Dick Bartelse, the seminar's introducer had told me in an engaging way. I was more of a go-to narrator than a columnist. A column should end with a conclusion that is useful to the reader.
Let me make an attempt anyway.
In such challenging situations as the Rubber Feel, one must sharply distinguish between risks one cannot control oneself and those one can. What one cannot control partly depends on one's own place in the business chain. Logisticians call this the chain or, using an English term, the supply chain. Huwan Huwan is the producer, which has to capture the end market. Brosserdeel is one of the suppliers Huwan Huwan needs to make the phone's introduction a success. Extreme demands are placed on Brosserdeel's strategic supplier, the binder supplier. These are three links in the chain.
Some risks that Brosserdeel cannot influence Huwan Huwan can influence. Market launch, publicity, catering to the youthful audience in various parts of the world. The performance of Huwan Huwan's other suppliers also remains out of sight and out of Brosserdeel's control. That is business for Huwan Huwan.
Environmental conditions like trade wars, armed conflicts, uprisings in Hong Kong, in Iran or anywhere else in the world, economic downturns, Brexit cannot be influenced by any link in the chain. You have to live with those uncertainties and take the risk of the harmful effects. It is entrepreneurial risk that has to be lived and endured. Similarly, disruption in essential markets of lithium, copper, chips, cameras, dyes is a phenomenon that happens to you, not something you can prevent.
But what can Brosserdeel do something about? How do you tackle such a challenge? By making it a project with a project team led by a knowledgeable project manager. Knowledge of making coatings, but above all an enthusiasm, a lot of tact to deal with one's own people, but not least with other cultures. A second key figure will be the buyer. Call him account manager for all acquisitions for this particular coating. The project team will further include a top figure from R&D, a lab technician, an employee from logistics. Do not include a lawyer. Do have a lawyer check both contracts upstream and downstream for legal errors, but don't give the legal department the power to stop the business because of the risks. Because risks are now challenges.
It is important to meet with Huwan Huwan in a constituent meeting. [1] There, client and supplier should openly put their lists of identified risks on the table. Indicate the Basic Risks, but especially the White Spots. This is where agreements should be made on how to tackle the as yet unconquered technical aspects of the project. Agree on brainstorming sessions, but also gossip sessions in order to identify Blind Spots in time. Prerequisites for such a consultation are complete openness, trust in each other's competences and commitment, positive attitude, willingness to work overtime where the project demands it.
The outcome of such a consultation is that parties know from each other where their strengths, but especially their weaknesses, lie. For instance, at the start, the recipe for the coating is not yet known. There is also no specification of components yet. Huwan Huwan will specify which materials it will test for the casing. Plastic? What grade? Steel? Aluminium? Which hinges will be tried. The client does not know yet, but by the end of the constituent meeting, a description of the process of the collaboration should be ready in draft form. The parties sign for it or solemnly promise.
What requirements should you place on the supplier of a bottleneck product?
The choice of binder supplier is a bottleneck product for the whole chain. If that fails then Huwan Huwan is an illusion poorer. The project team will devote a lot of attention to this. It is very likely that that sub-supplier will house in Asia. After all, there needs to be development. New technology. Under breathtaking time pressure. In four months, the pilot batch has to hit the market. That means weekend work with occasional sleeping on the couch at the laboratory. Europeans don't do that anymore. They have to go to the stadium on Sundays. But eastern Asia is overflowing with young, fanatical, highly intelligent, diligent academics, who can achieve enormous feats in inventiveness and work ethic.
So what demands do you make of such a supplier? Basically, the same high demands you impose on your own organisation. They are competencies and human qualities. The supplier must be enthusiastic for the final product, that famous phone that will come. Inventiveness, creativity, talent to do research are the least requirements. Excellent equipment, 24/7 staffing of R&D and laboratory, continuous accessibility, secrecy of Brosserdeel's recipe, on the other hand promise by Brosserdeel to respect any production secrets of the supplier.
communication with customer and with the supplier network will continue around the clock. Timelines and lead times will change during the project. Rejection of trial coatings will happen quite often. And if it succeeds and the phone hits the public then Upscaling and outsourcing will create the necessary tensions, supplier selection, bottleneck products. Minute chain logistics will be required, constantly reliable communication channels, both physical and human. The project team will need to be expanded. It cannot be disbanded until the regular organisation has mastered production and logistics. Positively motivated staff outside the project team are also healthy.
Challenges are exciting, fascinating and satisfying. Managing extremely high risks feels like winning the European Cup.
John van der Puil
Board member RBT
Member Programme Committee
Arjan Van Weele
Thu, Nov 21, 5:41 PM (16 hours ago)
to me
John, this already much better and sufficient as far as I am concerned.
Postscript by the author:
Many more responses to this column have been received at RBT. About that in a future column.
JP
[1]. in the Constituent Assembly, parties agree on how the process of their cooperation will proceed. Prerequisites for success are openness, transparency and trust. Results of a successful project are a smooth process, willingness to jointly address obstacles that emerge during the process. talked about dealing with Blind Spots that emerge during the process. Creating clarity on risk allocation. Much of this is already in the contract, but it is good to make this clear with the technicians on the project team. For the term Constituent Meeting, we also see kick-off meeting, risk treatment meeting. In the construction industry in the Netherlands, the term construction team is in use, involving transparency and an attitude of tackling problems together .
