Manufacturing Supply Chain Woes
April 2022
Featured Panelists:
Mike Romeyn, Lindsay Smith, Tim Wise,
and Roz Lowe
Welcome to our Manufacturing Woes show. I’m Sarah Scudder, CMO at SourceDay and the show host. I am joined by Mike, Lindsay, Tim, and Roz. They have extensive manufacturing experience and I’ve asked them to share some of their favorite nightmare stories today. Our show’s sponsor is RapidRatings. I’ve been friends with their team for many years. Actually, I personally used their service at my last company. So, I’ve asked Eric to join us and say a couple words about his company and specifically what they’re doing that’s unique in the manufacturing space.
Hey, thanks Sarah and appreciate being here today and happy to be a sponsor. So, we’re innovating in the financial risk assessment space, using and leveraging AI and our predictive analytics to help manufacturers see into the future on their suppliers, so to speak, whether it’s a short-term view or a medium-term view, using financial statements as the input. And so we’ve got our models that run on top of those financials to really help supply chain folks really keep abreast of issues that might bubble up from companies that are deteriorating in their manufacturing supply chain.
And Eric, you are joining us from New York and you have some decent weather finally. Yeah, it’s almost 65 so I’ll take it. Love it.
Awesome, and I enjoyed moderating a panel at your conference and you guys are doing some really awesome things, so highly encourage you guys to check Eric and his company out.
Thank you. So, to kick off our conversation today, I’d like to have everybody joining us put in the comments where in the world you are joining us from. So, we’d like to see where you are today and then also put a word or phrase that describes your biggest manufacturing train wreck. And I know you probably have a lot to consider, but think about one thing that really stands out that you want to share with us in the comments.
So, I’m going to have Lindsay kick us off today. So, Lindsay, would like to have you start by introducing yourself and share a personal or random fact about yourself.
Thank you, Sarah. Good morning, Lindsay Smith. I’ve been in the medium-sized U.S. manufacturer supply chain management role for 20-30 years, mainly in the technology space. So, a lot of printed circuit board and small box build manufacturing. I’ve held roles as site general manager, especially for contract manufacturer. That’s a legitimate low-margin kind of hard job and all the way to global supply chain president, senior vice president for a couple of public companies. So, that’s far more a far more strategic kind of role.
Fun fact, oh dear. Let’s see, here you go. Held up at gunpoint in a taxi cab in a pirate taxi cab in Mumbai and found myself arguing with the guy with the gun over 70 Rupees which on reflection was five bucks. So, probably not one of my best judgments to take issue with the amount I was being robbed for, you know, rather than just pay up and get on the plane and go home.
And you’re doing a kitchen remodel. Dare we ask how it’s going? No.
So, Lindsay, my first question for you is I’d like to have you tell about a time when your supplier experienced a major, major catastrophe.
So, there are the good ones, right? Yeah, I think the great thing about buyers is the world’s best, and you know that we’ve got to be careful of that because that sometimes masks that the process isn’t as robust as it should be.
Major, major. Well, in 2012, the Evonik plant in Marl, Germany, blew up, so it blew up with an explosion and fire, of course, halted production, and employees were killed. The Evonik plant is one of the major sources of nylon 12 in the world. So that, of course, got everyone’s attention, especially in the automotive industry.
What the supply chain folks at least like me didn’t realize is that although it was the major nylon 12 supplier, there were others. It was the only global source for cyclododecane, CDT, which is a polymer that goes into nylon 12, and they’re the only place in the world that makes it. So they provide all the other nylon 12 sources.
So, we were fat, dumb, and happy thinking well, okay, so we lost a nylon 12 producer, we’ll just go and buy it from another one. And discovered the flaw in that little strategy.
In 2012, the supply chain was regarded as being quite as increasingly adapted. You know, that was coming off the heels of the nuclear plant disruption in Japan and the tsunami in Indonesia. So, we were regarded as being a resilient industry, but what was interesting, Sarah, was how different supply chains took it to different levels of seriousness.
And, U.S. manufacturers in the automotive industry sent out a note saying, “Hey, this could disrupt things for a few days.” A council was put together in Detroit to pull together the different perspectives of OEMs and manufacturers to review things. Analysts published comments. Generally, what we saw happening was a big event, and then different people trying to cut through the clutter and get clarity about what is the problem.
Because you, the challenge was you can’t define the problem statement. Is there none of it? Is there some of it? Is there alternatives? Is there stock on the shelf? And then…
What was interesting, Sarah, was the advent of force majeure, and that was interesting because that cut through everything, you know, of course, Evonik was first out the gate and said, ‘Okay, here’s your first major; we’re out of business; yeah, we’re shut down.’ In fact, we can’t even get into our factory until the authorities complete their investigation of the deaths.
What was surprising was the number two supplier in the world, Arkema, also declared force majeure because they said, ‘Well, you know, we can’t get the CDT, and by the way, our demand has gone through the roof because of the other plant going out.’ And then…
The actual manufacturers of the components made from nylon 12, typically two big manufacturers, they all declared force majeure. So, of course, a lot of us used the tubing as a component supplier, so then, of course, we had the decision, ‘Okay, do we turn around and tell our customers that we’re force majeure?’ So it has this trickle-on effect; it was in a fluid situation. Though there were more unknowns than there were knowns.
I don’t want to go on too long, Sarah, but you know, three different ways supply chains responded.
You know, a small medical manufacturer that I worked for, we put in place a tiger team. The CFO chaired it; we escalated our established supply relationships; we over-communicated; we offered full transparency of our customer names, their production schedules, their net demand, and we could afford, since it was a secondary component, we could afford to pay a price premium. Supply chain only allocated the critical material, the nylon 12, to two established customers, so we avoided any kind of chaos.
At the other end of the continuum, one of the major U.S. automotive manufacturers, one of the big three, turned out later that they’d put five supply chain guys on a plane and gone off and bought the world supply of nylon 12, which was a big and bold strategy.
The other end, you know, a multi-billion dollar U.S. medical manufacturer contacted us by mail six months later and said, ‘Hey, we’d like to buy a few tons of nylon 12 resin if you have any on hand.’ So, you know, the two continuums of nimbleness and responsiveness, right?
One supply chain team on a plane and go and buy up the world supply, versus another belatedly six months later sending letters saying, ‘Hey, you got any spare?’
Well, that’s quite a story. I feel like that could be an entire show sometimes.
We’ve got people joining us from all over the world, so I want to give a shout-out to Dan joining us in South Carolina, Jeremy joining us from Florida, Joe from Sacramento, Andy joining us from San Francisco, Shy joining us from Washington D.C., Darlene from NorCal.
We’ve got John coming in from New Jersey, so lots and lots of folks here. So great to have you all.
Mike, would love to have you introduce yourself. I know you’re joining us from vacay, so thank you for making time for us. Tell us a little bit about your background, how you got into manufacturing, and then a fun or personal fact.
Perfect, thanks, Sarah, for allowing me to join the call today. Looking forward to collaborating with everyone today. Similar to Lindsay, I came from actually manufacturing for contract manufacturing: printed circuit boards, cable harnesses, box builds. As Lindsay said, you know, thin margins in those worlds, right? So we had to do everything we could to lean processes out, you know, operational excellence, lean processes on the floor, whether that’s in supply chain, wherever we were, squeezing margins out.
But my name, again, is Mike Romeyn. Been with SourceDay about four years now, but prior to that, spent 20 plus years in electronic manufacturing, so I’ve been in plants around the world. Actually, don’t come from a software background, ironically enough, but I love it here, working with supply chain folks again, just in a totally different capacity. Correct.
But a fun fact for myself: I’m actually a Dutch citizen. I have a very strong Texas accent, but I am a Dutch citizen, and that’s the fun fact for me. And you like to fish and catch very, very big fish.
Yes, I am. My wife and I actually, that’s a fun fact too. My wife actually taught me how to saltwater fish. So but we are avid anglers, and I’m actually down in the Florida Keys right now. I’m hoping to go fishing, but the wind’s been blowing 30 to 40 miles an hour every day, so I haven’t been able to get get on the water.
So, my question for you is, tell me about a time when a penny part shut down your production line.
Yeah, well, Lindsay’s gonna know this one as well, right? This is the world we came from, and actually, Lindsay brought up, you know, the tsunami that happened. We actually had, at the time, you know, two things happened there. We were missing a lot of parts for our printed circuit boards. We had an SMT line, multiple SMT lines, which means surface mount technology lines. We were, you know, obviously pulling jobs and getting them ready to be put onto the reels and onto the SMT line. And, you know, here we are, pulling the entire job and about to start this job and realize that we’re missing a reel of capacitors, right? So, this point-zero-zero-five cent part is holding us up from running a literally ten-thousand-dollar printed circuit board that was going into a box assembly that was going to an oil and gas company. And we were holding up a one-million-dollar truck because of a 0.005 capacitor. So, as you can imagine, we were scrambling. And then, you know, with the tsunami that hit, and this is, it happened a lot throughout my 20-plus-year career, that things like this were happening. You know, even a seal, for instance, would stop us from producing. So, we weren’t proactive like Lindsay was talking about. We were firefighting. Our procurement group was the best firefighters on the market. I mean, they would literally chase down material, chase down suppliers all day long. And, you know, they were always in a reactive mode, not a proactive mode. So, you know, unfortunately, those type of things happen, and we weren’t able to be proactive to let our customer know that we’re about to hold up their million-dollar truck. So, you know, that was a ripple effect for our business, right? Because they could potentially have taken business away from us. But we obviously recouped. And another example was, we had, on the way to our facility to drop off a lot of material, we had a UPS truck catch fire right in front of our plant, and we had a ton of material on that UPS truck for the, you know, for that week and that next one of printed circuit boards and box builds. That was huge because some of the lead times, as Lindsay will know, on electronic parts could be 15 weeks, 16 weeks, 18 weeks, you know, so those are some of the nightmare scenarios we had in manufacturing, Sarah.
All right, Mike. Thanks for being with us. Roz, we’d love to have you introduce yourself. Maybe tell us a little bit about how you got into this crazy manufacturing world and share a personal or random fact about yourself.
Hi, thanks for having me. Well, I got into this industry because of my dad. He owned a machine shop, and, you know, I just kind of grew up in the business. So, I’m your typical shop brat, I guess you could say. You know, there are a lot of us out there. We just kind of were born into it, right? And no matter how hard I tried to push myself away from it and do something else, you know, it just, here I came. I came back to it, you know, every time. A fun fact about myself, I’ve always been involved in the industry in some way or another, in a niche market. So, I always tend to find myself in some kind of niche aspect of the industry, which is always pretty exciting because we get to work on really interesting programs when you’re involved in niche markets. And currently, I’m with La Gage Company, and we’re in a very niche market because we machine beryllium, which is a very highly toxic material grade used primarily in missile defense. They’re using beryllium a lot in space today because of the material properties and how well they do in different temperatures and light and weight. So, beryllium is definitely a growing side of the market in manufacturing. So, that’s the fun fact about me.
Awesome. So, my first question for you is, I’d like to have you share a disaster that you’ve had to deal with, trying to keep up with the AS9100 changes every year.
Well, yeah. And maybe for those that don’t know what that is, just quickly describing what is the AS9100.
Well, it’s a compliance that I wasn’t part of this industry when it first came about. I was first involved in the industry as a younger person, and it didn’t come about till I want to say the ’80s, but you gentlemen can correct me if I’m wrong, or you guys can chime in on the chat. But when it came in, for a lot of manufacturers, there was a push. Like, we thought, ‘Wow, this is just a pain. Why do we need this? It’s an expense. It’s an additional expense. It’s gonna cost us.’ And it’s basically to make sure you’re running compliant, making compliant parts, and doing it in a compliant manner. It’s kind of like the rulebook. It’d be like driving without rules, right? So, it’s kind of like the rules that you know, we use to drive so that we can drive safely. So, at one point in time, somebody thought of, ‘Hey, let’s do this AS9100 thing,’ which replaced ISO, which was another set of rules and regulations that were imposed. And anyways, everybody kind of needs to be certified to do certain components and make sure that they’re following best practices.
An example, and it was a real push. I hated it. I thought it was the worst thing in the world. I, you know, I just saw it as a big expense being imposed upon our little engine that could shop. And, you know, we’ve been making parts all this time, and, you know, gosh, they got a rocket to the moon, and they didn’t have this then. Why do we need it now? So, an example is, which kind of showed me why we need it and why we need to stay up with the different rules as they change each year because they do. I was working with a material supplier, and he had… oil. He was working in the oil industry. The material could not be past 26 Rockwell, you know, for him to be compliant and make parts the way they needed to be made. And with AS9100, it was… Rev B was came out, and that’s when material needed to be validated, and you’d have to send it out for tests and confirm the results, right? Then, Rev C came along and eliminated Rev B.
Then, Rev D came along, and this brings me to the story where you… you know, even if your material supplier gives you certs and says, ‘This is what it is, here’s the birth certificate to that material… you cannot just rely upon that. And if it’s critical, then you actually have… you’re required to go get testing done. So this man knew his rules and regulations and wasn’t just flowing things through. And he was doing his due diligence and checking things as it should. And it turned out the material supplier had actually given him the wrong material, even though the certs matched and everything was golden, you know. It was actually took a machinist who raised his hand and said, ‘I’ve been running this stuff for 20 years. Something’s wrong with this material.’ And the owner of the company said, ‘Oh no, you know, it’s a reputable supplier. You know, default, this is… there’s nothing. Get back to work.’ And the machinist again raised his hand and said, ‘Something’s not right.’ So they went ahead and pulled the material out, put it on the Rockwell, you know, we did a Rockwell test on a hardness test on it. And sure enough, this material was running out at like, you know, 42 Rockwell and completely not compliant. Wouldn’t work. So, it was a lot of money. Very… the guy lost a whole week’s worth of, you know, work, machining these parts and getting them close to, you know, the end, right, you know, when it was ready to deliver to his customer. And we had to, you know, put on the brakes and go back to the material supplier and get it fixed. But, you know, just because the certs say it, it taught me why AS9100 rules are important because here was a perfect example as to, you know, the supply, the guy, the vendor, need, you know, was checking, double-checking what the certs from the material supplier were stating. And so, it’s a pretty… that was… that could have been a nightmare. It ended up not being a nightmare, but thank God we got it straightened out for him. Thank you, Roz.
Tim, would like to have you introduce yourself and share a fun or personal fact.
Good morning, everyone. My name is Tim Wise. I’m in lovely Colorado, where spring is trying to force its way in, but I think I saw a lot of snow on trucks today coming out of Wyoming. So, it’s not quite here yet. I have spent 25 years within the high-tech space, primarily everything from laserjet printers to supply chain toner cartridges, inkjet cartridges for Hewlett-Packard, all the way to storage goods for Seagate, running international supply chains, redesigning and configuring networks, lots of outsourcing, so Mike and Lindsay, lots of outsourcing in your field, a lot of good experiences, and a lot of not so good experiences. So, let me see… fun fact, I too, Mike, I’m a fisherman, except I trade. I like to trade, chase trout, primarily here in Colorado, Wyoming, and Montana. So, fun fact about me, Sarah, I grew up playing basketball, played basketball in college, once got to play a pickup game with Magic Johnson, and I played against Dennis Rodman in college. So, he was a… he was one of my college rivals, and yes, he was weird then and still weird. So, anyway, yeah, that’s a little bit about me. I’m always surprised at how big Magic Johnson’s hands and feet are. I saw one of his shoes sometime, and it was almost unbelievable. You know, I’m six foot five, and I feel small against most of those guys, right? So, it’s… it’s pretty incredible. Yeah, big… big dudes, big guys for sure.
So, Tim, first question for you: With the congestion at the ports, coupled with Asia supply uncertainty, companies are starting to evaluate if they should move some or all of their operations back closer to the customer. What has your experience been moving factories? What were the challenges and what needs to be considered, and what should you never do in that process?
Yeah… you know, I’ve moved a lot of factories, like from insourcing to outsourcing, and I had one a few years ago, specifically where we were moving to a contract manufacturer, and we were moving out of Malaysia into China, and we were actually turning over an existing facility to a contract manufacturer where they were basically buying the assets and assuming ownership of the equipment and the facility. I think most of the time, people, you know, as we look at moving factories, we think, ‘Well, you know, we’re going to buffer up the supply chain, right? And we’re gonna, we’re gonna put some extra material in place, we’re gonna get the suppliers, we’re gonna pull in stuff, we’re gonna build the head, or maybe we’re gonna do that, and we’re gonna duplicate some of the equipment such that we don’t entirely bring down the facility while we’re ramping up a new facility.’ In this case, we had decided that we were going to basically take a lot of the existing equipment and move it to the new facility. As a result, there was a lot of debate about how much buffer, like, what do you need to buffer, right? You know, do we need a month, do we need six weeks, do we need a couple weeks, what do we need, right? And of course, our customers were very nervous about this move, right, because the risk of not being able to come back up in a timely manner, you know, could eat into availability, etc. I think the… one of the biggest lessons that I’ve learned as I’ve done this is that, honestly, most of the time, you come out the back end of these things with a major hangover of inventory. Okay, because everyone’s… everyone’s kind of gets emotional about it, and they don’t get rational about it. Most manufacturing companies are going to move, they know what they’re doing, they’ve done it. The factory typically comes up in the manner in the time frame that they think it does.
In this specific case, not only did we buy too much inventory to buffer, and then we had a soft spot with some of our customers, we ended up double worldwide the inventory that we needed for the business, and it freaked out the CFO. It freaked out, you know, because they had to report this huge inventory bulge. That really, you know, they had to take a write-off to reserve for some of the inventory, and really, it all could have been mitigated with just a little more, a little more common sense around look, we do have confidence, we know we’re doing to bring up these factories…
That was for the move to China from Malaysia; the other facility was in South America. When they took it over, somebody in their right mind thought it was smart to leave the 50 million dollars in of inventory in the building that they were not going to buy. Okay, we were going to keep that and then they were going to buy it from us as they needed it to build our product on our behalf. So, I don’t know who made that bright decision, but they started the new company started using that material. Being with SourceDay, what they do, they started using material and they didn’t even issue any POs, so we had no record of what they were using in the facility. To the point where on the fourth of July, my team was down there on the fourth of July, you know, counting, doing a full water wall physical, and we lost about five million dollars worth of inventory during that move. So, on one end, I couldn’t find the inventory that I needed; on the other end, I had, you know, tons and tons of inventory, too much, and a facility that was really idle for the first month because they didn’t need to build anything. So, you know, lots of stress for nothing, in my opinion, because people got emotional about product availability, and they just didn’t have confidence in their operations or what they were taking to that contract manufacturer. It took another 9, 12, 15 months really to correct that inventory situation. Put a big hurt on something that was supposed to save them money in the long term, right? So, that was my experience with moving, and it was… it was… it was really stressful for a lot of people. Lots of stress, lots of money, lots of money, lots of money.
Lindsay, on-time delivery is a key KPI, often the number one KPI in the manufacturing sector.
The inbound supplier on-time delivery is one of the key KPIs that supply chain organizations are largely measured by. Tell me about a time when a supplier surprised you with the root cause of their missed or late delivery.
Yeah, okay, great question, Sarah. When the supplier surprises us, they… I think it’s a blessing in the supply chain world to listen, all right? God gave us two ears and one mouth, and there’s a reason for that, yeah. And suppliers will tell you things if you create space for them, especially where supply chain management doesn’t know something’s happening or doesn’t get told about. So, we… you know, in our genius era, we started to move towards the digital migration path, you know, moving towards the kind of fully integrated goal that SourceDay offers, and the first thing we had to do was scrub data and normalize data. We set up a little SQL that said, ‘Hey, tell us about late POs. Tell us about late PELs.’ And couple it to the email alert feature that’s standard, and I think most ERP systems, certainly the Sage MAS 500s and Apricor, you allow you to use an email alert. So, we loaded up the supplier email contact information for every supplier, and we started sending out emails every Monday morning to suppliers saying, ‘Hey, on-time delivery, important part of our values and our, as Rox said, our ISO 9000 compliance. So, here’s the POs we show in our system that are late.’ And what was remarkable, Sarah, was that on-time delivery immediately improved. Went from about 85 to 97, and the reason for that is, you know, people were… the data was there, it was transparent, people were being held accountable, which was great. One of the surprises was that suppliers came back and said, ‘Okay, you’re sending me this report and you’re blaming me.’ I said, ‘No, no, we’re not blaming, we’re just saying this is what the system shows.’ And they said, ‘Well, all right, I received your PO and I sent an email and told the buyer we couldn’t honor that delivery.’ And two weeks later, I sent another email and didn’t reply, and… etc. What was interesting, Sarah, was as we got our act together with 97 on-time delivery just by monitoring late delivery, you start to get more and more clarity about what the root cause was. And you know, just a small purchasing team, maybe five or six buyers, and one of the buyers was recognized for being the top performer. She was just… in fact, we called… they called her the machine because she placed so many PO lines. Hand-in-hand with that, she had the most issues with suppliers coming back and saying, ‘Hey, yeah, I emailed you and said can’t do that price, can’t do that delivery, or asked for clarification on the order because there was an English second language issue, and didn’t get a response.’ So, the… the supplier surprise was the learnings was that all buyers are not equal. All… there was nuances as much as we were under that ISO or AS9000 umbrella of procedures, and we had a flowchart that the quality department drew up that said, ‘This is how we do our job.’ But each buyer had nuances of different ways of doing their job day-to-day. So, the… the fix was, you know, certainly… you know, uncovering the hidden issue was great employee coaching, team or retraining around, especially around purchase order confirmation, treating that as a separate process step, and then having direct conversations offline with supplier management and saying, ‘Hey, great that you have this partnership with our buyers. You have a second relationship and obligation to supply chain management, and you have to come to us and be open and tell us when things aren’t going the way you want them to.’
I hear a lot of communication in there, Lindsay.
Well, it’s always going to be one, yeah. Good, good, good pick up there because communication is always going to be one of the weak points in a process.
So, Mike, you spent the first part of your career, most of your career working for manufacturers.
That’s right.
Tell me about one of the biggest disruptions you had to your supply chain and what the impact was to your company.
Yeah, great question. I mean, we’ve seen a lot of disruptions over the… how many, x amount of years. Again, I’ve been in the manufacturing sector almost… you know, like with Lindsay and Tim, 20 plus years. You know, we’ve seen a lot. We’ve seen the tsunamis, we’ve seen… you know, obviously the 2009 global downturn that we had, those… you know, scenarios like that, and obviously we have COVID that’s… you know, still lingering around. But in my days of manufacturing, I always… always really think about two big ones. That was 2009 when we had the global downturn, it was a banking downturn, obviously. It was a huge one for globally for everyone that actually had a ripple effect, because we had all our eggs in one basket, and that one basket was oil and gas.
So, what happened was, when you’re building electronics for oil and gas, when you start having disruptions like this and downturns in the economy, you know, I consider that a disruption, right? To our manufacturer, and that is a disruption when you have a global downturn, right? So, we obviously were sitting on millions and millions of dollars of inventory that the customer asked us to go buy. Thank God that we had a contract in place, but you can only imagine if we didn’t have a specific contract in place. A PO is a contract, but, you know, things like that can really hurt a small… Again, Lindsay knows, it’s a smaller contract manufacturing company like us, we’re 35-40 employees, and we have all this inventory tied up. We couldn’t build product; the orders were getting pushed out almost a year. So, we obviously had to pivot, right? We had to react to that. The other one was, again, the tsunami. I think about that because we had to… again, we were an ISO 9001 company, I think we’re 2008 at the time. And what happened was, during that time of the tsunami, and then we had electronic parts coming out of different regions, they were starting to see a lot of counterfeit parts. We were getting a lot of counterfeit electronic parts. Again, this is a disruption to me because when you have things that happen that disrupt the electronic industry, you’re all of a sudden gonna have start seeing things like counterfeit parts. Now we had to build a whole incoming inspection team and put a lot of our parts under our microscope to make sure that the markings on the resistors, capacitors, and every other electronics were there, they weren’t counterfeit, right? So, that added a different layer and a cost to our entire manufacturing process that we weren’t ready, and we weren’t passing that along to our customers, they weren’t going to accept it, right? So, those are two that really stand out to me. I joke about the UPS truck, I don’t know if you want to call that a supply chain disruption, but to us, when you have a truck coming in and the catch is on fire, and all of a sudden you’re like, going, ‘Uh-oh, we have a lot of material on that truck.’ But, you know, there’s… there’s other aspects of it. We’ve seen it throughout. I mean, there’s things that happen, you know, just recently in Canada, for instance. I mean, that, again… I’m not manufacturing anymore, but I talk to clients all day long, and these… this is what I’m hearing. Even things like blocking the border and, you know, Canada, right? That’s impacting manufacturing. So, I can go on and on, I can think about it over 20 years. I mean, there’s been a lot, but those really stand out to me as two big ones that really impacted our business, and it actually impacted me personally, you know, as an employee of the company. In the 2009, because I was, you know, a leader in the company, and I actually took a huge, huge pay cut to keep all of our employees working. So, those are the type of things that happen in the world of manufacturing that people don’t always think about, right? And… but it is dynamic, for sure, and it’s really dynamic right now, but that’s one of my examples, Sarah. Thanks, Mike.
Roz, you mentioned that you’re in a very niche market of machining. What’s the biggest nightmare that you’ve had to deal with in your career as it relates to supply chain?
You know what Lindsay said earlier? I’m gonna go with that customer service. It’s a nightmare when you don’t have a team that is advocating for the customer, and you know, in every business that I’ve been in, in this industry, again, I’ve been in a niche market, which tends to make you think, ‘Well, you’re in a cornered market, you can kind of do whatever you want, right?’ And there are companies who I’ve… I… there are places I’ve worked, and you know, there were niche markets, and they did take liberties with, you know, doing whatever they want, increasing their prices. In fact, one specifically, a company they were the only only company you could go to for a very specific service that they did. And all the primes listed this one organization, that’s the only place you could go, and three generations deep into the business, the company was, you know, accustomed to charging really high prices. And then they got very… you know, they got used to having life, you know, so sweet, right? No competition, there’s competition out there, but customers, vendors were not allowed to go to those different, you know, organizations that offered the same service for a much lower price, etc. Anyways, so this company got very used to being spoiled, I guess you could say. And they lost sight of their customer-advocating, you know, personality. They lost their humble, and which is what it takes to start a business. You know, when you start a business, you first get into the industry, any industry for that matter, you’ve got to have humble, or you’re not going to go very far, you’re not going to get started. So, anyways, this company, they lost their humble, and the customers all pounded their fist on the desks, and they complained and complained, and they went to the primes and said, ‘Look at how we’re being treated.’ And you know, it takes a lot to get a company like, say, for example, Boeing, to change a blueprint or frozen planning, right? That’s like a miracle. Long story short, the miracle happened, and the primes went ahead and opened up the floodgates and let the customers know, ‘You know what? You can start going to other places. I’m not gonna… We’re not gonna lock you into this one supplier.’ So, long story short, that’s kind of where… when I met the company, because they were actually bringing me on board, as… I had done… I ended up getting the nickname the ‘Go Get Them Back’ girl, because I then had to go get these customers who were… were the very customers that had pounded their fists and, you know, got something changed. I had to then go get those customers back and promise them that we were going to be good and humble and treat them right and care about our quality and care about the OTD and give them realistic pricing. Anyway, so we did that. We did manage to fix it, but about to… to speak to your question, teaching a ro… teaching a team unaware of, you know, the need to be humble, the need to be have gratitude, you know, especially in a niche market, you need to maintain a very customer-advocating team. You’ve got to teach that across the board to be successful, yeah.
Tim, what are the risks with suppliers making manufacturing changes or product changes without notifying customers?
Yeah, it’s a… it’s a… well, it’s almost like they don’t know what they don’t know. We had a situation where a power supply supplier thought they were making an innocent little resistor cap change on a board and assembly. You know, it took about three months to propagate, right? Because by the time they made the change and we flushed inventory out to our customers, and it went through from Asia, you know, finally landed in an installation, and these power supplies were supporting big storage network storage units, right? Like 2U48, so it had like 48 disk drives in it, 2U height. And we started having some failures, right? Some power supply failures, and they were intermittent enough that it was very hard to get to the root cause of what was happening.
But the bottom line was, eventually, we ended up with an epidemic failure in the field with these power supplies that we trace back to basically a resistor change, okay?
And, you know, when you’re dealing with that, and it was still intermittent enough that we didn’t really know all the scenarios or the install scenarios of that of those storage and those disk drives, such that we could easily say, ‘Well, you’re not at risk, you’re at risk, you’re at risk.’
And so, one, we had to deploy good power supplies out to the field right as soon as possible because they were easily replaceable and swappable, thank God.
But it was incredibly, incredibly disruptive for customers, for our customers, trying to get back to the original design. You know, took some time as well to get resourced and get the boards remade, and you know, it was an 18-month to 24-month purge and replace cycle.
In the meantime, we had our fingers crossed that, you know, some of the intermittent problems weren’t coming up. But I remember having a full-time person that’s all they did was have to go track these power supplies and figure out who was at risk, what was an install base, how do we pull those out, right? All you know supplier didn’t have good documentation about live tracking and where they, you know, how they were tracking their units in their factory as well. So, you know, having that tight interlock with your suppliers on change management, right, eco management, especially is something as sensitive as a power supply or any other type of electronic components, is really critical when especially, especially when they’re making changes that aren’t that don’t appear to be like a big deal, right? So that that was really ugly there for about two years actually.
So for those that are joining us, feel free to drop a note in the comments, tell us where you’re joining us from if you have any thoughts or questions for the panelists. Make sure to drop those in the comments section as well.
So, Lindsay, while the show is focused on train wrecks and nightmares, it’s not all doom and gloom. Tell me about a time when a supplier did something unexpected but it actually turned out okay.
Okay, so just getting yeah, all right. So a couple of comments in the comment field about well, these are circumstances not problems, and yet so what can we learn from all these great stories, right? So I think one of the themes, and Tim’s thing about the value of having a supplier change notification process in place. One that comes to mind was we had a supplier who was a great, great supplier, a Chinese supplier in beautiful Guangdong, in Southern China. And they provided low-cost fast-turn small form factor injection molded parts, and they could do tooling very quickly, very inexpensively. We learned to spec the tooling so that, you know, that in terms of what the duty cycle was going to be or how many parts we were going to run, and we planned on either supply chain manager or supplier engineer being on-site every at least every quarter. So part of our managed expense about a Chinese outsource was, you know, rule of thumb, you know, man outsourced from China for a million bucks and plan plan a hundred thousand a year for having engineers and business managers go out every quarter.
So I went, I took my turn, and I went out and met with a supplier outside of Shenzhen. And we had a really direct relationship with the CEO, so he gave me the tour and outside it’s interesting, a couple of thousand employees, big campus. And we got through all the discussion points and we had a couple of dozen parts we were sourcing, and I had a note from engineering that they were planning also to source silicone soft silicone molded parts, and soft silicon, you know, has a red flag against it. You know, there’s been… it gets everywhere, literally. So to the extent that some injection molders have erroneously introduced silicon to their facility and had to pretty much demolish the facility because once it gets in the facility, you can’t get rid of it. So I asked the CEO, so you’re going to make these parts, and he said, ‘Oh, yeah.’ I said, ‘Here?’ He said, ‘Yes.’ So I got two yeses. So I was still a little confused because I hadn’t seen the silicon molding equipment, so I said, ‘Well, in this building?’ And he said, ‘Oh, no, down the street.’ Okay. And is that part of your company? He said, ‘Well, it’s a friend, it’s a partner.’ So, okay, so you don’t own the facility? No, no, no. All right. But you think they’ll be able to make good parts? So, yeah, yeah. I said, ‘All right, put it back in the process.’ All right, we have to have our supplier management team come out and approve the facility. And he nodded and said, ‘Yeah, there’s no way they’ll approve it.’ What he said, ‘Well, what?’ I said, ‘Don’t they have, did they have a quality system, they have a quality manager, they had… They have a quality manual?’ They said, ‘No, no, no, nothing like that.
So, you know, the unlike Tim’s adventure, we were ahead of the curve, at least you know, we the red flags went off before we started receiving the parts. So I asked, ask them, Jerry, why would you do this? Why would you agree to supply a part you’re already having an established relationship? We’re paying you lots of money for lots of parts. Why would you go off and and sign up to do something completely different from a guy down the street who doesn’t have a quality system?’ And he said, ‘Well, I wanted to be helpful. They asked me if I could do it, so I said yes.’ So I think the be very careful. I think you know us buyers can be intimidating or suppliers can can get the wrong message that they want us to say yes all the time. And being able to catch it up front and saying, ‘Okay, this is this is silly, let’s put a stop on it, let’s roll this back through supply chain, tell engineering now they’re not going to get qualified, no way, no how, and let’s go off and do a commodity search for for silicone injection molders.
Interesting story you’ve had a lot of global experience, a lot of pain. Going back to you, lots of money and lots of stress. Mike, what was it like during your weekly production meetings when you knew you were going to miss a customer commitment?
Well, I’ll keep it professional, first and foremost, but again, you know, it’s interesting you bring that up because you know what is it like in your production meetings, right? Because we, I lived and breed that for so long, but I was obviously the face of the customer at the manufacturing plant, and obviously, I would dive into these pre-production meetings. And it was kind of funny because it was almost like the same time every time we had a production meeting. You had your general manager in the plant, you had your production manager in the meeting, then you had your buyers come running in there with their laptops and their spreadsheets, and we all sat around and we started talking about, well, what are we going to miss this week, right? It was really, we never liked that meeting because we felt like we were always talking about the bad stuff that’s going to happen, you know, instead of what are we going to produce and are we going to meet our customer expectations? A lot of it was again, we talked about earlier, you know, the buyers in a firefighting mode, we’re reacting because we’re running into, you know, suppliers not delivering on time, and that’s not maybe because of a disruption but they obviously had capacity issues, for instance. I mean, I remember another scenario we had, it was a single-source supplier, which we don’t like a lot, but, you know, what I’m saying, you know, we have single-source suppliers. So what happened was, is, you know, somebody else came in and put an order, it was a government agency that came in, it was a defense contractor, somebody came in and took all the inventory, right? So these types of things happen in these production meetings, and it’s kind of neat, interesting you asked this, sir, because, like I said, we would sit there and really have some heated conversations about how are we going to get ahead of this. And as we all know, there’s things called safety stock, there’s things you know that we’re doing now to add more buffer to our stock, but, you know, things happen and you’re sitting on a bunch of inventory, it’s not the best thing, but bottom line is, I would sit in these meetings, the buyers would, you know, obviously run through their spreadsheets, they would have their open order reports, if you want to call them, with their suppliers, and they would just show us, okay, and they sorted it by late, and we would just go line by line, what are we doing, what are we doing, what are we going to do to get the part, what are we going to do, are we going to start expediting, throwing dollars at it, are we going to fly that material over here? I mean, that’s the kind of strategic, we’re like, oh my gosh, again, reactive mode, but we’re throwing money at the problem, right, just to get the material in-house, so we can meet customer expectations. Not only that, the general manager can tell the CEO that we met revenue targets, right? And so there were just a lot of moving parts, and every week we had a production meeting, it was a lot of just reactive, and I wouldn’t say finger-pointing as much because a lot of it just went back to, you know, Lindsay brought this up, a great example was, is we had the number one buyer on our team, they were, they were like a machine, right, they were like cutting the most purchase order lines, but what they weren’t doing really well was keeping the ERP up to date, they weren’t being responsive to the supplier in a timely manner, right? So what happens is they would just all of a sudden start crumbling, and then they would be in such a snowball effect, right, they could not get ahead of the game. So that’s when, you know, what did we do? I hate to tell you this, but we ended up throwing bodies at the problem, we had to hire another person to expedite, for instance, another body to purchase because we couldn’t keep up with the demand, that doesn’t make any SFO OR CEO happy, but how else do you keep up if you don’t have technology, you literally have to throw people at the problem, so that’s what we did, that production meeting was every week, and it was no one wanted to be in it, but, you know, it was so important to be in that meeting because I had to take that information and go back to the customers and let them know that the order might be late a week or two weeks or whatever it is. So pretty interesting calls is all I can tell you is but yeah, that’s a great example of a production meeting that at the company I was with, so I’m sure there’s similar stories with everyone else that’s been in manufacturing.
Tim, question for you, and then we’ll close out with Roz. So my question for you is, what happens when your manufacturing facility cannot manufacture what the engineers designed for production, which happens I think more than we realized?
You know, it, it really does, right, especially if you’re working in an outsourced contract manufacturing environment, specifically if you’ve done that a while, you usually have pretty good linkage with the engineers there and the process engineers on your product. They’ve got some experience, but when you introduce something new, we had introduced a basically a storage device that held 104 disk drives, okay, small form factor disk drives, it was a big complicated, you know, had a lot of mid planes in the middle of the you know, of the box, just think of a big aluminum box with a bunch of disk drives in it, and it had to be obviously hooked up electronically, and it was a big deal because it was a form factor that the industry had really wanted, right, with all the cloud environment and the storage, so there was really pent up demand for that, you know, long story short, it turns out these guys could really couldn’t build it, okay, consistently with any type of quality. We ended up having to rotate our engineering team out there for about, I bet it was a good nine or twelve months, where we always had to have somebody that from the design lab at the manufacturing site in China, such that they could actually manufacture it. But the other part of it was a lot of had someone had to be redesigned, right, because they couldn’t even get tools inside the box to do the hookups to the drives, as an example, so just lots of cost, lots of quality missed the go-to-market window, right, didn’t pump out the units that we thought we were going to be able to pump out, missed a lot of revenue, and we had some quality issues in the field later on some of the early units, right. So bottom line, you know, not tight enough collaboration with your manufacturer, and that can be internal or external, but it was it was a failed launch, missed revenue, lots of costs, very disruptive for a lot of people’s lives too, just to be on a plane to China every every two to you know, about every eight to twelve weeks, rotating three or four people, you know, back through China to ensure that we can make this stuff. Very frustrating.
Roz, two minutes, you gotta spit fire for our very last question. Tell me about a nightmare you had quoting complex assemblies.
Well sure, we were working on a big, a large component, the parts were like $53,000 each, so it was a lot invested, there were a lot of parts, it was the build took about a year to make this component that had a set was an assembly, and it was very close tolerance, really challenging part. And we got to the end of it, everybody was getting ready to raise the checkered flag and that helicoil, you know, the one supplier on the blueprint that that supplier no longer makes that helicoil, so two years ago when we quoted it, a year deep, when we got the PO, and we could have ordered them, could have ordered that helicoil, a little stupid little coil, we had to go through the process and getting the print the drawing change, getting it approved, getting the drawing changed, and you know, so that on-time delivery, that complex component the customer couldn’t wait to receive because it was an R&D project, which you know, led to a lot of other things, yeah, we were five months late because we had to wait for that little little helicoil but it was American manufacturing that showed up and made made it happen, and I’ve heard a lot of stories today about you know the source. I think today American manufacturing, uh machining in the USA is really coming back strong for some of these uh electronic components and helicoils and things like that so it’s really good to see that coming back anyways that’s nice. Well, we are at time, I want to thank Roz, Lindsay, Mike, and Tim for joining and sharing some of your train wrecks that you’ve experienced in manufacturing, next show is May 10th at 12 central so hope you’ll join us again.
