Search

Improving Third-Party Reverse Logistics Using Kotter’s Eight-Stage Change Process

Abstract

The requirement for a repeatable, systematic, sustainable change or transformation method becomes clear as organizations embark on transformation or improvement initiatives. This endeavor is possible and typical at the tactical or process level but may be lacking when the change involves the entire enterprise. Enter Kotter’s change model. This eight-stage iterative process provides a high-level framework that separates discrete activities into two sections, then breaks down four stages within each section, to enable a step-by-step approach to managing organizational change. This is particularly applicable in production, supply chain, and processing industries including Third-Party Reverse Logistics (3PRL), where the marriage of this method and recognized best-practices such as Lean and Six Sigma is a natural, practical, and beneficial union. The case study presented offers a real-world example of this application including measures defined, actions taken, and the associated results.

Introduction

“Change can be hard. It is often difficult to conceive performing tasks in a different order, in a different place, at a different time, with different resources, or in a different manner altogether” (Bowie, 2011). This human challenge, whether termed change, improvement, or transformation, is constant and consistent in all organizations and systems at the macro- and micro-levels on this side of grace. While our Father in Heaven does change us, He is the only person who Himself does not change. “For I the LORD do not change” (English Standard Version Bible, 2001). The rest of us, therefore, need a method for the execution of effective and efficient change.

Reverse logistics is a critical component of supply chain networks. Unfortunately, the core tasks typically associated with this business model are classified as rework by the best business practices, fraught with waste and non-value-added activities (for example, unpackaging then later repackaging items). Companies tend to compensate for this by increasing inventory buffers and increasing staffing (includes temporary workers and overtime efforts). This presents unique challenges for reverse logistics firms attempting to achieve or increase margins (or to survive), and these challenges are amplified by reduced predictability. “Blind” buys, bulk purchases, and retail returns can impose several “unknowns” on the management team: unknown (but estimated) incoming volumes, unknown incoming product mix, and unknown labor requirements per product. This can make labor allocation and cost planning a nightmare. For example, it can be extremely difficult to plan labor costs when the cost per unit (CPU) for an eight-hour shift with 100 associates ranges from $0.20 to $0.80.

My firm, Roxtar Consulting, was approached by a distressed United States-based multi-million-dollar 3PRL firm that was struggling to satisfy a portfolio of customers, manage a diverse workforce, and control operations across multiple facilities and business lines. Specific core operations included multiple processing centers, multiple distribution centers, and a mobile set of flex retail locations. The primary leadership concern was clearly focused on two consecutive years of loss.

Attempting to solve issues like those referenced above at the tactical- or ground-level may produce some perceived improvement, but transformation across the entire enterprise is required to implement successful and sustainable change. “The most discussed change management theories are at the organisational level (Kotter 1996; Stacey 2001), as leaders of organisations attempt to steer the entire company in line with their corporate or business level strategies” (Sittrop & Crosthwaite, 2021).

While Lean Six Sigma and other process-related methods are best practices at the tactical-level, organizations may also employ a repeatable, systemic approach to encourage successful change management across the entire establishment. In this vein, “Kotter’s change model is one of the best-known frameworks for change management. It is regarded as a simple and straightforward framework” and “many practitioners continue to implement it” (Kang et al., 2022). This eight-step (or “stage”, “phase”, etc.) model provides a perpetual logical loop for continuous organizational assessment, planning, and improvement execution. Exploration of this model in two sections, the identification of industry and area in need of change and planning for change implementation, proportionally divides the eight-steps and enables a simple, point-by-point application discussion based on the corporate case study referenced above (3PRL company).


Section One: Identification of Industry and Area in Need of Change

“The first four steps in the transformation process help defrost a hardened status quo” (Kotter, 2012). The very first stage is focused on establishing a sense of urgency, or clearly describing the burning platform.


Stage One: Establishing a Sense of Urgency

This stage requires organizations to “examine the market and competitive realities” and to “identify and discuss crises, potential crises, or major opportunities” (Kotter, 2012).

As a first step, a comprehensive assessment was performed across the customer’s industry, facilities, and systems. Data and process analyses, coupled with observational data and executive, management, and hourly employee interviews, revealed that the customer’s historic system, process, administrative, management, and physical configurations generated multiple costly forms of waste (primarily transportation and over‐processing), consumed excessive amounts of capacity, required negative flow, severely limited external dock access, and enabled little‐to‐no management control of personnel, equipment, or inventory. The effects of the existing configuration included reduced shipping and receiving throughput and velocity, overtime costs, and unpredictable performance. A quantitative- and qualitative-data-driven Strengths, Weaknesses, Opportunities, and Threats (SWOT) assessment summarized and communicated this information, including macro- and micro-level details.


Stage Two: Creating the Guiding Coalition

This stage involves “putting together a group with enough power to lead the change” and, at the same time, “getting the group to work together like a team” (Kotter, 2012). A Change Control Board was designed and initiated to review and approve (or disapprove) all changes, and the team’s performance status was continuously assessed using Tuckman’s group development model. “The group development model is an abstract conceptual representation in the group development theory and encompasses five distinct phases: forming, storming, norming, performing and adjourning” (Guttenberg, 2020). This team included members of the executive team, middle-management, and floor-level leaders, and this construct enabled a cross-strata perspective for opportunity and risk consideration.


Stage Three: Developing a Vision and Strategy

Stage three includes “creating a vision to help direct the change effort” and “developing strategies for achieving that vision” (Kotter, 2012). For-profit organizational visions may include financial targets, and this customer decided to focus on improving customer service while reducing cost by at least $10 million per year. However, “a proper strategy is needed to work through a firm's vision and mission and incorporate it with sustainable actions throughout every level of the company” (Tuori et al., 2021).

To deliver these results, a sequenced portfolio of interrelated projects was designed focused on Information Technology (IT) and physical system enhancements to optimize the flow of materials and the associated information. This plan served as a short-term strategic plan. The foci of the plan are important facets to consider, because “the effectiveness of a reverse logistics strategy is contingent upon the successful execution of activities related to materials and product reuse” (Chen et al., 2019).


Stage Four: Communicating the Change Vision

This stage suggests “using every vehicle possible to constantly communicate the new vision and strategies” and “having the guiding coalition role model the behavior expected of employees” (Kotter, 2012). The new vision and strategies were actively communicated during recurring management meetings, regular morning and afternoon processing huddle meetings (all hourly employees and floor-level management), video productions, and the design and deployment of Visual Management Systems. Members of the executive and middle management teams were required to participate in process audits and root cause analysis sessions to communicate the new vision as well as to model the expected behaviors (process ownership, management support, focus on the financial goal, etc.).

Together, the efforts employed throughout the first four stages of Kotter’s change model provided a deliberate approach to formulate and communicate the required changes for this organization. This set the platform for a successful transformation launch.


Section Two: Plan for Implementing the Change

Continuing with Kotter’s model, “phases five to seven then introduce many new practices” and “the last stage grounds the changes in the corporate culture and helps make them stick” (Kotter, 2012). While planning may present challenges for organizations in need of change, execution may be fraught with turmoil. These four stages provide the stepping stones to navigate this quest.


Stage Five: Empowering Broad-Based Action

At this stage, the organization needs to “get rid of obstacles”, “change systems or structures that undermine the change vision”, and “encourage risk taking and nontraditional ideas, activities, and actions” (Kotter, 2012). This stage clears the way for stage six wherein measurable results are achieved. To remove obstacles as quickly as possible, Roxtar Consulting intervened and assumed interim management responsibilities for the affected facility. This effort also involved nontraditional facility and equipment layout modifications, placing core processes and activities adjacent to (as close as possible to) primary shipping and receiving docks, and redesigning entire processing lines.


Stage Six: Generating Short-Term Wins

Stage six requires “planning for visible improvements in performance”, “creating those wins”, and “visibly recognizing and rewarding people who made the wins possible” (Kotter, 2012). This is vital to igniting the change “engine”, providing evidence of a practical method for improvement and evidence that the method works.

The Lean Manufacturing-oriented kaizen and kaikaku team-based project approaches were utilized to accomplish these goals. “Whereas kaizen is advised to be used for day-to-day problems for which some data is available, kaikaku is recommended for whenever a more fuzzy system-level change is needed to break through persistent organisational barriers” (Franken et al., 2021). These approaches are both suitable for short-term improvement projects, require results communication and method proliferation, and include celebrations for team accomplishments.


Stage Seven: Consolidating Gains and Producing More Change (The ROI Funds More Projects)

The next stage involves “using increased credibility to change all systems, structures, and policies that don’t fit together and don’t fit the transformation vision”, “hiring, promoting, and developing people who can implement the change vision”, and “reinvigorating the process with new projects, themes, and change agents” (Kotter, 2012). Leveraging victories is an effective method to sustain and further improve performance and the positive change momentum.

Achieving increased credibility is practical and simple when using the gains from individual, project-based improvement efforts. This is also essential for system-wide change implementation. Storyboards were used to communicate the project journey, dashboards were posted and discussed throughout the facilities, and morning and afternoon meetings were utilized to communicate this information to the entire workforce. Examples of the improvements achieved and communicated include but are not limited to the following.

The organization achieved the benefits in excess of $15 million per year. This includes reduced labor costs by over 50% for seven major processes, reduced external trailers and associated dwell costs by 90%, improved Facility A capacity by 32% and Facility B capacity by 55%, improved packing throughput by 239% and reduced staffing by 44%, and expanded processing diversity by 275% per production cell while reducing cell footprints by over 15% (contributing to increased capacity and throughput).


Stage Eight: Anchoring New Approaches in the Culture

The final stage in a single iteration through Kotter’s change model includes “creating better performance through customer- and productivity-oriented behavior, more or better leadership, and more effective management”, “articulating the connections between new behaviors and organizational success”, and “developing means to ensure leadership development and succession” (Kotter, 2012). While the first four stages emphasize the establishment of a strategic platform to launch the improvement strategy and associated initiatives, the second four stages stress the need for the sustainment and potential furtherance of the benefits achieved.

To solidify the improvement efforts and results, several managers were replaced, and the remaining management job descriptions were modified to include process-centric requirements and strategic goal responsibilities. Operational and technical training sessions (including Data Analysis, Lean Six Sigma, Constraints Management, Project Management, etc.) were provided to infuse the expertise and practical knowledge needed to manage the transformed organization.


Conclusion and Lessons Learned

Change is hard, not impossible. Identifying the best method to engage in and execute change is a critical exercise for any individual or any organization. Kotter’s change model offers a high-level, systematic, repeatable, and sustainable cyclical solution. The eight stages can be divided into two sections, allowing discrete planning (at the stage level) and careful execution with an emphasis on short- and long-term results. In the case of the 3PRL customer, this framework, in combination with best-in-class operational improvement methods, provided a practical program and project management approach along with sequenced and controllable benefits.





References

Bowie, J. (2011). Lean Acres. ASQ Quality Press.

Chen, D., Ignatius, J., Sun, D., Zhan, S., Zhou, C., Marra, M., & Demirbag, M. (2019). Reverse logistics pricing strategy for a green supply chain: A view of customers' environmental awareness. International Journal of Production Economics, 217, 197-210. https://doi-org.ezproxy.liberty.edu/10.1016/j.ijpe.2018.08.031

English Standard Version Bible. (2001). ESV Online. https://esv.literalword.com/

Franken, J. C. M., van Dun, D.,H., & Wilderom, C. P. M. (2021). Kaizen event process quality: towards a phase-based understanding of high-quality group problem-solving. International Journal of Operations & Production Management, 41(6). https://doi.org/10.1108/IJOPM-09-2020-0666

Guttenberg, J. L. (2020). Group development model and Lean Six Sigma project team outcomes. International Journal of Lean Six Sigma, 11(4), 635-661. https://doi.org/http://dx.doi.org.ezproxy.liberty.edu/10.1108/IJLSS-09-2018-0101

Kang, S. P., Chen, Y., Svihla, V., Gallup, A., Ferris, K., & Datye, A. K. (2022). Guiding change in higher education: an emergent, iterative application of Kotter’s change model. Studies in Higher Education, 47(2), 270-289. https://doi.org/10.1080/03075079.2020.1741540

Kotter, J. P. (2012). Leading Change. Harvard Business Review Press.

Sittrop, D., & Crosthwaite, C. (2021). Minimising Risk—The Application of Kotter’s Change Management Model on Customer Relationship Management Systems: A Case Study. Journal of Risk and Financial Management, 14(10), 496. http://dx.doi.org/10.3390/jrfm14100496

Tuori, M. A., Rois, R. S. R., Martowidjojo, Y. A. N., & Pasang, H. (2021). Formulating a Sustainability Balanced Scorecard (SBSC) For a Leading Integrated Palm Oil Based Consumer Products Public Company in Indonesia. Journal of Management Information and Decision Sciences, 24(3), 1-15. https://www.proquest.com/docview/2517259813

0 views

Recent Posts

See All

Abstract This research finds that ineffective or absent data collection processes can be destructive to an organization in three ways. First, the use of nonrepresentative or anecdotal sampling is a so

An agent-based simulation model supports “complex decision systems where a system or network is modeled as a set of autonomous decision-making units called agents that individually evaluate their situ

Basic and Applied Social Psychology (BASP) has banned the use of p-values and confidence intervals in articles they publish. The publication “will require strong descriptive statistics, including effe