Imagine you make bicycles for a living
You have a supplier who provides you with all the bike chains you use. Every week, without fail you get a shipment of chains into your factory and every month you pay for them.
How do you pay for your chains?
Method 1. The three-way match:
Employ somebody to match up:
- all the purchase orders
- all the invoices you received
- all the goods received notices
That way you can be absolutely sure you only pay for the materials that were ordered, invoiced and received.
Method 2 The two-way match:
Get the man in goods in to authorise payment by checking that the:
- goods received note tallies against an
- outstanding invoice
That way you can check you only pay for the chains you ordered and received
Method 3 The no way match:
At the end of every moth count the number of bicycles you made and pay for that many chains.
That way you simply pay for the chains you used.
If it were me…
If I was me managing the company I’d go for method 3. I’d far rather have people putting bicycles together than running around chasing paper.
Now you might think that is a simple bit of process mapping and creative thinking, but unfortunately you can only go for method 3 if you trust your suppliers and your suppliers trust you.
Isn’t it fascinating the way we substitute paperwork for trust?
Perhaps your suppliers like paper chases too.
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Image by kirsty
Love this post and reminds me of a project I completed last year. I work in car rental, and we outsource the wash and clean to a number of suppliers. In the old world the suppliers used to invoice us for the number of cars they washed…. which was then followed by days of rushing around checking the invoice, comparing the figures against various reports, arguing that the numbers were not correct and finally a negotiation on what we should pay. This would happen monthly in every rental station in the UK.
We agreed with the supplier that this process was in neither of our best interests and agreed to implement a self-billing process where we count the number of car rentals we do, and pay for that number + 5% to account for the various reasons why this number does not work. Now everyone can concentrate on the important things!
Keep up the good work James, I always enjoy receiving your posts. Have a good Christmas!
Phil
Thanks for your note Phil, a lovely story.
Thanks for reading and I hope you had a super Christmas as well
Hello James,
Yes it is fascinating: how much work we create for one another simply because we live in an age-culture where ‘my word is my bond’ is considered naive at best, and stupid at worst. In an age that does not value and call forth nobility, it is prudent that everyone is open to thieving. And thus putting in safeguards.
For trust to take root there have to effective mechanisms for detecting, shaming, and punishing those who do not play by the rule of the game. Those who seek to cheat and thus enrich themselves at the expense of the trusting others. Once, upon a time, when we lived in close knit communities and reputation was everything, shaming was enough. What will it take to cultivate trust today? Now that is a good question, I have no answer and will ponder it.
All the best
maz
I wonder how much effect social media has
Great point, James. Why do we do this to ourselves?!
Hmm… paper chasing vs. trust. Trust takes us to a whole new level…
Annette :-)
Well… it keeps me in work
Hi James,
Back in the 90s/early 00s there was a move to ‘upgrade’ supplier relationships to those of ‘partners’, which was meant to start (as I recall) build a relationship based on trust. It’s depressing to see how little progress we have made. I wonder if that is a function of the corporate environment and that there is still a lack of a commitment to build trusted relationships.
Adrian