How to Reduce Late Deliveries and Improve Manufacturing Efficiency
Sarah: Good afternoon, everyone. Thank you for joining us for our webinar today about the hidden link between on-time delivery and manufacturing efficiency. My name is Sarah Moore, and I’m excited to be your host today. I can’t wait to share this awesome story with Terri Decker, my guest. I want to kick off with a housekeeping item. We have some material prepared for you. But we really want to hear from you. We’re here to deliver value. I want to encourage everyone to take advantage of either the chat function within the Zoom window or the Q&A function. And if you’re not familiar with Zoom, if you hover over the window that you see on my screen, then you’ll see a chat function and a Q&A function in the red circles there. And then the other thing I wanted to share is that we are going to continue to ask your questions. Many of you filled out the survey after you registered, and so, there’ll be a few polls that pop up throughout our presentation. The responses there will be completely anonymous. I encourage everyone to participate because that will make it more valuable for everybody.
With that, I’m going to move to our agenda. We’ll kick off with introductions, then I have a little bit of information to share about the industry. The main event today is Terri Decker, who is going to share her case study on on-time delivery. I’ll do a brief overview on SourceDay. Most of our time today will be a live conversation. We’ll save some time at the end, about 10 minutes or so, for audience Q&A. You don’t need to wait till the end though to ask questions. If you go ahead and post those in the chat or the Q&A, we have someone behind the scenes who’s helping us organize those, and they’ll feed them to us as we go. All right, so with that, my name is Sarah Moore. I’m the CMO at SourceDay. I’ve spent the last 27 years now working with enterprises to help them embrace new technologies to move their businesses forward. At SourceDay, it’s all about supply chain performance, which is our topic for today. And with that, I’d like, Terri, if you wouldn’t mind introducing yourself.
Terri: Well, thank you, Sarah, and good afternoon. Even though I’ve got experience in a multitude of different industries, my current role is that of supply chain performance manager for JBT AeroTech in Orlando, Florida. And for those of you that are in the Midwest and experiencing the cold, don’t hate me for it, but Orlando is beautiful. I joined JBT in 2018, and since joining, my focus has been on finding issues within our supply chain that are preventing us from delivering to our customer on time 100% of the time. So, that’s what my focus has been on. And, of course, we’ll be talking a little bit about that today.
Sarah: Awesome. I’ve really enjoyed getting to know you in this process, so I’m thrilled that we get to do this together. The industry update information that I wanted to share is that many of you, about 20% of you completed the survey after you registered, where we asked, the last year has been rough on all of us, when do you expect your business to stabilize? We’re happy to hear that about 30% of you are either already stable or going to be very soon – the first half of 2021. And yet 70%, at least 70% of you who are still waiting to get back to the new normal, either later this year or sometime next year. And so, with that, our first poll question is we want to hear, how are you measuring whether you’re still working through challenges or is your business stabilizing? What are the key KPIs that matter most to you right now, this year, and going forward? And then while everyone’s responding, I’ll share that if you haven’t seen it, I know many of the companies who have tuned in today are Gartner customers. Gartner just came out with a new report called “The Future of Supply Chain: Crisis Shapes the Profession,” where they surveyed thousands of companies globally and learned that 77% – three-quarters of the companies – are planning to invest deeper in more collaborative supplier relationships to get more resilient supply chains, which is not a surprise to us. This is what we wake up at SourceDay every day to do. We are hoping that today we can share some insight for those of you that are in that camp and planning to make investments. Within that same report, 66% of the respondents said that they’re planning to achieve that through investments in supply chain visibility technologies. And so, it’s another great theme that will be woven through our conversation today. So, let’s see. Thank you all for responding. It looks like you are not alone, on-time info from suppliers, a third of you said is an important KPI.
On-time delivery to customers continues to rule the day though. You need those parts from your suppliers because you’ve got to meet your commitments to your customers. And then reducing inventory manufacturing efficiencies, those are also metrics that everyone on our webinar today is paying attention to. I’ll tell you one more interesting anecdote about OTIF, Hackett Group, if any of you are also Hackett Group customers, they just published their 2021 key issues report. And one of their big findings is that OTIF, on time, in full, is the most important KPI when it comes to supply chain productivity and performance. And yet, it’s the one that nobody measures very well. It’s the one that all of their surveyed…hundreds of companies responded and felt they were the least ready to measure. So, it’s a big topic for our conversation today. I’m glad to hear that the audience is going to get value out of our conversation. That’s what we’re here to talk about. So now I’m going to hand off to Terri to share a little more about JBT and the company that you work for.
Terri: Okay. Thanks, Sarah. So JBT is a publicly-traded company headquartered out of Chicago, Illinois, and it has two primary arms or divisions. One is food tech, and they support all of the industrial food producers. But where I’m located is in the AeroTech division. And that division is all about servicing the airlines, be it with our ground support equipment or gate equipment. We also provide airport services to that equipment. So, many of you have probably seen our products, walked through jetways if that rings a bell. Those are all products of JBT AeroTech.
Sarah: And in Texas, last week, your deicing machines came in handy because of our weather event. We were very grateful for deicing machines in Texas!
Terri: Absolutely. You know, I live in Florida now, and in the winter, I pray for ice because that’s of course when our product is going to get used. So, yeah, it was an absolute nightmare over these past 10 days for so many people. But I’m glad our products could be there to help out with the challenges. So, we’re talking about what have been the challenges at JBT. Like, so many companies in 2018 (we’re going to go all the way back to 2018), we saw a surge in product demand. And company after company and in all industries, we saw that same type of spike. As a result, our supply chain could not respond in a way that we needed it to in order for us to meet our customers’ delivery requirements. And as you can see, in 2018, we were only getting parts in here on time, about 68% of the time, and 30% that’s, you know, 33%, one in every 3 parts did not arrive in time for when we needed to produce that piece of equipment. So, in 2018, we were facing some really stiff challenges when it came to our supply chain and we knew that if we didn’t change something, it was not going to be acceptable. Like any customer, if you can’t give them what they need when they need it, they’ll find someone who can. So, we absolutely doubled down and said, “This isn’t going to work. We’ve got to change something.” So we set about, and if you’ll go to the next slide, we set about…
Sarah: Before we do that, I want to jump in here and ask, tell our audience a little bit about your back office, what ERP are you running? Tell them a little more about your supplier base.
Terri: Sure. Sure. We’re running off of SyteLine. We currently have just about 500 suppliers, but of that 500 suppliers, only about 25 make up 80% of our spend and 80% of our PO lines. So, it is the old 80/20 rule for us, and that applies in so many places. But we really knew that if we could drive performance with that top 20% of our suppliers, that we would make a huge leap toward meeting our customers’ expectations.
Sarah: Getting that red dot on this chart to move up closer to 100%. Right?
Terri: Exactly. Exactly. In 2019, we were totally focused on driving supply chain improvement. We did this in a number of ways, primarily using what a lot of people will be familiar with as supplier engagement. We had a whole playbook in which we engaged with our suppliers and opened up the dialogue to better understand what was it that was getting in their way of being on time. And we wanted the open dialogue because we understood that this was not only a supplier issue, but it could very well be a JBT issue. And we wanted them to have this, call it ‘fearless communication,’ so they could tell us what we were doing that was hindering them. When all was said and done, we found the number one issue to be communication. Our suppliers weren’t communicating well with us. We weren’t communicating well with our suppliers. And so…
Sarah: And how were they communicating at that…back in 2019? You know, you had all these parts that were showing up late, you had parts that were expected, unfortunately, with the jet bridge, you need everything in order to ship it?
Terri: Yeah, you do. And that’s a really good question because what we were doing, like so many other companies, we were managing our purchasing activities using spreadsheets, and emails, and phone calls. So, we would create these elaborate spreadsheets, telling the supplier what we wanted and when we wanted it, and we’d fire it off in an email with dates that we wanted them to meet, and maybe we’d send out every Monday. Well, by Wednesday, we’d send them another one and say, “Well, forget what I sent you on Monday. Here’s what I want now.” And oh, by the way, some of these I’m pushing out, some of these I’m pulling in. Well, that’s purchasing, right? POs, they have changed. But what was happening is our suppliers were getting lost in all those spreadsheets. They couldn’t keep track of which one was the most recent. What did we really want? What did we really need? When did we need it? And so, there were thousands, and I mean, thousands of emails a week that were going out, back and forth between our supply base and our buyers. And it was absolutely mind-boggling. Not only did we not have things here on time, as you can well imagine, we had things here that we didn’t need. Those weren’t the things we needed. And our inventory grew, it just kept growing and growing. But it never diminished because we didn’t have what we needed at the right time.
Sarah: There’s a saying at SourceDay that, “We know we need every part to ship and order on time. We know parts are going to be late, 100% certain that some are going to be late, we just have no idea what it’s going to be.” And organizations will buy ahead. They’ll try to buy safety stock, buffer stock, and that definitely helps mitigate this challenge, but it’s not a complete answer because you just don’t know which one’s not going to show up.
Terri: Absolutely. And another thing, interestingly, that we found as we were trying to dig into and peel that onion, we have two little metrics. One is on-time delivery. Did the supplier get it to us on the date that we asked for it? But even more important, internally to us is, was the part here when I started that unit in production? We call that the start date. So, like, most companies, we order parts to arrive four, three days early, right? So that we know we’ve got it. We’ve got time to receive it and so forth. And that’s one thing. But if the part comes in one day late or two days late, that’s important. However, it has not stopped our production line. But if that part is not there on the start date, now, we’ve had a direct impact on our production line. And as I said earlier, in 2018, one in 3 parts was not here when we needed it.
Sarah: This part of the chart right here, this purple dot.
Terri: Yes. And so, as we dug in and peeled that onion, what we found out was that if a PO was not acknowledged, it was going to not be here when we started the unit. A hundred percent of the time, 100%. It surprised us, right?
Sarah: It did. Yet in hindsight, it seems a little bit like common sense, right?
Terri: It seems so intuitive. But if you don’t have the right tools and you’re not looking in the right place, you’re not going to see it. Well, we started using some continuous improvement tools. And then we said, “Okay, communication is a big issue. How do we solve this communication issue?” We had already invested in and deployed SourceDay, however, we weren’t using it. JBT is no different than those of you that are listening in. We launched a tool and it wasn’t comfortable, it wasn’t familiar. They didn’t see the advantage to using it. So, we didn’t use it. Well, by golly, we started, kind of, understanding SourceDay better, understanding what it could do for us, and found that it could bridge so many of our communication gaps, that to not use it and to not, if you will, exploit its capabilities, was just a complete point of saying, “No, wait, we’re not going to leave that money on the table.”
Sarah: And it’s really common, especially when the software that you purchase requires behavioral change.
Sarah: They know their butt is on the line. They’ve got to get these parts in. They have a process and a system that has worked for them in their minds for, in some cases, decades. Asking them to try something new, whether that’s your buyer team or your suppliers is kind of scary because it can feel risky. And so, the change management piece is often a pretty big challenge for customers.
Terri: I agree with you 100%. It can be challenging for our customers, but it was also challenging internally because both parties had to change. But when you can find that “What’s in it for me?” nugget and share that, then the eyes open wide, and people are willing to change. Once they see the advantages, and with that, I mean, there wasn’t the thousands of emails in a given week and that, you know, communications were flowing, they knew what was going to come, they knew what wasn’t yet acknowledged, once they had those analytics and that intelligence, they were like, “Wow, I feel like I know what’s going on now.” They jumped on board and we can see that since 2019, we’ve even had even more success in 2020. And who in the world thought in the midst of a pandemic that a company would see improvement in any metrics, let alone supply chain metrics and on-time delivery metrics? The world was in chaos. Things weren’t shipping. They were getting stopped at the port. But by golly, you know, we had really, really tied up that communication problem and filled that void. And so, when we had to, unfortunately, push out orders because our orders ceased to exist, we had that immediate communication to our suppliers and immediate communication back. There wasn’t a bunch of spreadsheets, just getting revision after revision and confusing the heck out of everyone. It was all there, very easy to read, very easy to digest. And it was immediate. It was live information.
Sarah: And far more actionable than the spreadsheets, the phone calls, the emails.
Terri: Oh, sure.
Sarah: That old adage is always true, right? You can’t manage what you don’t see.
Terri: That’s right. That is right.
Sarah: So, you move from react mode to now predict and prepare.
Terri: Yes. And so, you can see that in 2020, we ended the year just shy of 90% on-time delivery from our suppliers and to our customers. And as important, you can see that we’ve reduced our parts missing at start from 33%, down to around 8%. So, one of the things that really is exciting, I guess, maybe that’s a nerdy word but, you know, we’re able to see at a source date, what our suppliers’ performance is. Here’s a great example. This is a dashboard, right? And right now, we are seeing upwards of 86% of our POs are acknowledged within 3 days, 2.7 days. Who would have ever thought two years ago we’d get there, let alone be able to measure that? I’m not saying we didn’t have other tools and that we didn’t have other processes that we were working on. But when I try and define the game-changer, it was solving the communication gap. And this was one of the major tools that allowed us to get to where we are and will help us get to where we eventually will be, which is 100% on time.
Sarah: You think you’ll get there using SourceDay?
Terri: Absolutely. No doubt. Now, 100% on time to our customers, I don’t know that I can solve 100% of our supply chain on-time delivery because as you said, there’s always that little bit that, you know, might not get here, but we’re using and deploying a number of inventory strategies to offset those things that we can’t have confidence in. But yes, I think it’s very doable. I think we can get there.
Sarah: That’s great, and hopefully encouraging to everyone who tuned in that said on-time delivery to customers is the top KPI, on-time delivery of parts is really crucial, along with the other things from the poll. So, with that, let’s move to our next poll question. How is everyone who’s tuned in today managing acknowledgments with your suppliers? Do you know what your percentage of them go unacknowledged and are potentially root cause for why certain parts are late because the supplier never received the order or didn’t acknowledge that they received the order, so they didn’t commit back to you to send you what you need? It is so fascinating to me and exciting to the team here at SourceDay when we identify a root cause problem like this that is totally solvable. That can be the catalyst that motivates people to just try the new approach. There’s a really basic thing that’s breaking down in our communication, which is we send you the order, we don’t get the acknowledgment back. That’s how it was for your team, Terri, a couple of years ago. It’s not that way anymore?
Terri: No. A couple of years ago, we had such a high unacknowledged rate that it was more than one person’s full-time job trying to follow up on, well, are you going to acknowledge? Well, can you meet the date? And now, it’s at 86% acknowledged. It’s so much easier for us to manage that and to really hone in on those that aren’t acknowledging, but even more, it’s not the single PO. Using the analytics, we’re able to understand which supplier is dragging their feet, that’s taken 7, and 14, and 28 days. And we can really work with them and give them the training through SourceDay that will help them understand the benefits of acknowledgment. And so yeah, it has changed night and day, night and day.
Sarah: We love hearing that. Thank you for sharing that. So, of our audience today, 60% or less than 10 think their suppliers go unacknowledged. And then there’s 20% that say they don’t know. So very common. I know we have a bunch of SourceDay customers on the line today and then many, many, many of you that aren’t yet using SourceDay for that. So, thank you for sharing that piece as well. With that, I want to spend just a couple of minutes for those who are not familiar with SourceDay on our organization and the tools that Terri’s team have used to address these problems and get these amazing results. Our mission is to improve our customers’ supplier performance. We work with thousands of companies globally: manufacturers, retailers, distributors, consumer packaged goods companies, and all of their suppliers worldwide. Today, Terri’s experience is integrated to SyteLine ERP, but there are over 20 others that we have also integrated with. I know many of you responded and shared that you’re on Visual, you’re on Epicor, you’re on Oracle or SAP. It runs the gamut. And that’s one of the things that makes our approach unique, we can work with all of those. We have over $80 billion in spend that’s been processed through SourceDay, millions of changes managed, and billions of parts that are received on time, which is fundamentally saving our customers millions of dollars. When we do all of that work, we’ve replaced the spreadsheets, the emails, the phone calls with our software. We learn by looking across the data set that we gather that something that might surprise many of you. And that is change is constant. We know that. That’s not a surprise. But the amount of change that organizations have to manage on a daily basis is 40%. Every order you make to a supplier is on average going to have a change to price, a date, or a quantity. And that creates chaos for your buying team.
It creates chaos for your planning and your scheduling team. It creates chaos for your suppliers because all of that changes managing emails and spreadsheets like Terri shared. And unfortunately, it results in things falling through the cracks in your ERP system, your SyteLine, or your Epicor being out of date, and mistakes happen. And this is the root cause of the common enemy that we all have, which is late parts. It’s not good for anyone’s business. We’re all setting out to try to improve that on-time delivery so we can be more reliable to our customer set. I would like to hear now what the audience…how they manage changes with suppliers. So, this will be our final poll, as we walk through that, it’s fascinating for us to see that oftentimes suppliers are just as happy with replacing all of that manual communication with a single source of truth, that oftentimes, the changes, the back and forth, the he said, she said, creates a break in trust, a break in positivity in the relationship, and it demotivates everyone. Managing changes in a more modern way is one of the things that is a benefit for both sides. So, not surprising, 86% of you are still communicating changes between your buyers and your suppliers over email and phone. And about 10% of you today are SourceDay customers. So welcome. Thank you for joining us. So, how do we fix that? Well, fundamentally, everyone’s in the same boat. The ERP investments that every organization has made do a great job automating processes within your organization. Whether that be MRP processes, planning, scheduling, finance, etc., you name it, ERPs have really transformed how businesses operate and deliver lots of value to the organization, except suppliers can’t use it. Organizations outside the business can’t use it directly.
They are disconnected from the ERP. And so, all of that back and forth and the change that we talked about happens manually. SourceDay replaces that with cloud-based software, so that instead of the email chaos, the thousands of emails that Terri talked about, everyone has a single source of truth that they log into, that keeps your ERP automatically up to date in real-time and keeps your suppliers informed as to your expectations, your new orders, your changes. Everything flows more seamlessly. Everyone has the visibility they need so they can see if there are issues that might be arising, unacknowledged POs, late parts, and both sides can get to work solving the most important and impactful issues before they affect the on-time delivery of your orders to your customers. So, quick screenshots, just to give you some…the visual learners in the audience, what does this stuff look like? Well, Terri’s buyers now log into SourceDay and see a dashboard like what I have on screen here. Rather than logging into their inbox to look at and comb through dozens of email messages, SourceDay has organized all of their PO lines into a bunch of different buckets and categories, organizes updates from suppliers, the hot parts that the planning and scheduling teams, production teams have set are crucial that they arrive on time, the pending PO lines, the ones that the suppliers have not yet acknowledged. So those are quantities of PO lines. And then we also organize by dollar or by spend because that’s another way that a buyer needs to prioritize their time. And then lastly, we’ll roll up all of the different changes and show organizations which parts are needing to be moved in, and how many dollars, how much money is associated with that? In this case, about $5 million, what’s being moved out. We saw a lot of this last year because as consumer demand or customer demand for certain parts soften, you don’t want to be buying inventory to fulfill orders that have evaporated or gone away, which is also why cancellations happen.
And so, this command center for the buyer allows them to make much more valuable use of their time, and prevent things from falling through the cracks, so that you can be more like Terri, and move your on-time delivery of finished goods from 69% to 89%, 90%, eventually 100%. The other thing is that suppliers have a similar view. I’m not here to show you the product today or for much of a sales pitch. But the last piece I’ll say is that for the finance team, this problem creates chaos for them too when it comes to paying invoices. So, once you get your PO house in order, there’s great opportunity to improve the velocity and accuracy of your invoice processing and payment with your suppliers, which can be another big motivator to get your suppliers on board. SourceDay has the only AP automation solution for SyteLine today. And so those of you tuned in that might be struggling with this challenge in your finance team, please reach out to us. We can help. Okay. Let’s ditch the slides. Terri, what do you say?
Terri: I think that’s a great idea. And before we continue, Sarah, could I just take two seconds and recognize the fact that one of our very critical suppliers at Kimball in Torreon, Mexico, has joined this webinar. And I wanted to just give an acknowledgement and a shout out to them and the team that we certainly appreciate them as a supplier and appreciate them joining the webinar. Thanks, Sarah.
Sarah: You’re welcome. So, I wanted to actually talk a little bit more about the supplier process because we’re going to cover a few themes today. The one we’ll start with first is change management with suppliers. How on earth do you get them to use and work with you in a new way? Almost all prospects that we talk to say, “I’ve tried this before. We’ve done portals. They don’t work. Suppliers don’t use them so our buyers don’t use them.” And we end up right where we started. How did you guys address that problem or did you run into that at all?
Terri: Sure, of course. First and foremost, it’s been my experience in my whole career, that what gets measured gets improved. And for so many reasons, JBT had fallen off the wagon with regards to a scorecard. We weren’t measuring our suppliers’ performance and we reinvigorated that, reintroduced the new generation scorecard, that part of it was their delivery performance. Once we got beyond the initial finger-pointing, then the supplier started seeing what their performance will look like. And we use green, yellow, red. And if they were yellow or red, they wanted to get better. They just naturally wanted to get better. It was a perfect lead into me for me to say, “Here’s how we can get there. This is what’s standing in our way.” And it was a natural progression for those that were… And I’m speaking of those that may be, one, we needed to get them on SourceDay. They weren’t previously, so we had to get them on SourceDay, or for those that were on SourceDay but reluctant, they saw the connection. And once they started engaging, our buyers saw the advantage. And naturally, then the scorecard improved. So, yes, you will always run into a little bit of that pushback. But typically speaking, what gets measured gets improved. And we presented that scorecard every month. We did a Zoom meeting, met with them, went over it, looked at the details, and they were on board. We provided them a tool for success. And they came along.
Sarah: That’s a really important thing that you just said. You have made JBT easier to do business with for your suppliers. They don’t have to pay. You provide the service to them for free.
Terri: That’s right.
Sarah: You don’t charge them either. And another thing I want to mention and highlight here is that SourceDay is right there alongside your team with our managed services organization heavily invested in making sure your suppliers are trained, they’re supported when they lose their password or they bring on a new CSR. We manage all of that for your IT team, for your operations team. You don’t have to worry about any of that. That’s SourceDay’s job.
Terri: Yeah, you hit on a really good point. In the last 12 months, JBT and SourceDay, they have been, you know, joined at the hip. We’ve expressed our needs and we’re getting tons of support out of SourceDay. And as you said, if we’ve got a supplier that we strategically need to be on SourceDay, all we have to do is send a little HelpDesk ticket that says, “Add supplier X, Y, Z,” and you guys take it. You contact them, you give them the training, you make sure that it all happens. And, like magic, they’re now on SourceDay and we’re communicating. So, it is really a great service.
Sarah: And you had a supplier you told me about the other day that started out back in 2018 at a 20% on-time delivery, which had to be brutal for everyone. I mean, that poor CSR had a terrible life trying to keep you guys happy. Tell us more about that story.
Terri: This was one of our top suppliers; we spent a lot of money with them. And in fact, I’ll be honest, they were our number one supplier. And we spent a lot of money, but we kept changing. “Now, we don’t want this, now we want this. Can you bring it in a week early? Can you keep it another three weeks?” And it was all based on spreadsheets. And we would give them the spreadsheet on Monday, honest to goodness, we changed it on Tuesday, and we changed it on Thursday. How in the world were they ever going to know? And so, as we improved our engagement process, and heard from them, and we implemented new approaches, this same supplier in the year 2020, in the midst of a pandemic was 100% on time every month. Wow. That’s what we’re going for, right? That’s the touchdown right there.
Sarah: A touchdown. That turns them into trusted partners now. You’re moving from the bickering, the finger-pointing, the frustration, the stress, anxiety, chaos, fire drills, to now you guys can work together and everyone wins. Everyone scores.
Terri: Absolutely. They’re invested in us. We’re invested in them. And they look out for our well-being, and we look out for theirs. It is truly a partnership. And that’s just one example. I’ve got, you know, similar ones that I could go on and on about. But it’s not that we did anything spectacular. This is just good supply chain management. And as anyone knows, that if you’ve got a breakdown in communication, there is no relationship that’s going to flourish and be successful. And once we figured out, kind of, what the silver bullet was, we were off to the races.
Sarah: I love that. So, talk to us a little bit about some of the hidden costs. So, on-time delivery, that’s an easy thing for people to wrap their heads around. But I showed a 40% change rate to lines across our customer base on average. I believe JBT’s pace of change is even higher, as you’ve alluded to, right?
Terri: It is. It is. Last time I had the courage to measure, about 80% of our lines get changed. Now, I’m going to give us a little credit and say that is in the midst of a pandemic. But even before that, it was quite high. And so, what happens? Well, if you can’t get that change in front of the supplier fast enough, you’re going to end up bringing that in. You were well within their lead time. They’re sending it to you. Now, the way that we partner with our suppliers, I can’t even tell you probably because it’s top secret, but I can’t even tell you how much money we were able to push out and/or cancel because of the speed at which we were able to communicate the change. And, so yes, there’s tons of hidden costs, right? Their inventory soars, our inventory soars…
Sarah: Expedite fees.
Terri: You expedite fees, and all of that, not to mention the, like, man-hours, managing all those emails and manipulating all those spreadsheets. So, you know, there’s a ton of hidden costs in the poor efficiency in which we were dealing with in 2018.
Sarah: So, I want to acknowledge the audience. Thank you for all of your questions. I see them rolling in. We are going to move to those in just a minute. The last topic I wanted to cover with you, Terri, before we do that is the inventory cost that, you know, if you can imagine a de-icing machine, a jet bridge, it’s a lot of big parts. And so, one of the most common ways to mitigate this challenge of late parts is to buy extra and have as many on hand as you can to try to prevent that scenario you described, where you don’t have every part you need on the start date. So, what has the inventory impact been to moving away from the old way and using SourceDay instead, having better communication with your suppliers?
Terri: Well, it has had a dramatic impact. I was speaking to when a change has to occur, if you’re within that window of the supplier’s lead time, if you aren’t collaborative, they’re going to send it to you. And you’re going to take it and you’re going to pay for it, right? I can think of one example off the top of my head, where, at the end of 2018, we had well over a million dollars in inventory of this one supplier’s product. At the end of 2019…I’m sorry, 2020, it was about 200,000.
Sarah: Wow, just for one supplier.
Terri: That’s just one. That’s just one. Now, of course, they provide us some pretty valuable components, but this was recurring, over and over. I’d like to acknowledge that another tool we use is inventory management. We deployed kanban. We deployed a poll system. We deployed stacking agreements. Where we could not come up with an agreeable inventory management, then we took on safety stock as an alternative for risk mitigation. But our suppliers were phenomenal. They truly were wonderful to work with. We continue to have those conversations. And they come to us and say, “Hey, I think this would be a great part for inclusion in the stocking agreement. Let’s take a look.” So, it’s just… It’s those… You know, you talk about hidden costs, well, there’s hidden value in building that relationship as well.
Sarah: And you’re down to one piece flow, you shared, with many of your critical parts.
Terri: Yeah, with many of them. Yeah, absolutely.
Sarah: That $800,000 savings in 1 year for one supplier quickly adds up, like you said, to super secret, but we can imagine at least 7 zeros on that number.
Sarah: I’m going to roll to audience questions now. We’ve answered a couple of them, so, please let us know if you have a follow-up. What’s the supplier experience? Do they pay? They don’t pay. It’s free. One of the questions is for you, they’d like to understand your definition for PO due date. And this is a really common question because it’s different everywhere. Yeah, I mean, those words mean one thing. When is the PO due? but it’s meant so differently everywhere. So how do you guys…?
Terri: Well, you know, that’s a great question because that was one of the first miscommunications that we had to solve because we meant one thing when we said PO due date and our suppliers meant something else. So, for us, PO due date is the date in which we expect it to be delivered to Orlando minus three days, plus nothing, if you’re a U.S., supplier. If you are in another country, it’s different. But for a U.S. supplier, PO due date is the date it arrives. And our suppliers interpreted it as the day they shipped it. They thought we meant ship it on this date. So, a huge, huge gap right there. Well, we cleared that up and made a big difference.
Sarah: For everyone.
Terri: That’s a good question.
Sarah: And I know we have organizations tuned in that operate and define that differently, know that SourceDay works with everything from CPG organizations, distributors, drop-ship scenarios. We come in and one of the things we seek to understand really early in our engagement with you is these important, crucial KPIs. We offer you some best practices that we have learned working with clients like you. But then we’re ready to show up and fine-tune the software to meet your needs, so that you’re measuring suppliers in the way that matters to your business. Heading back to some questions. Lead times, this is another really common topic. The question from Mark is how does your team address lead times and need for parts within lead time that are part of your KPIs?
Terri: Read the question one more time, because it sounded like two questions, but go ahead.
Sarah: The first part of the question is, how do you guys address lead times? How do you manage that with your suppliers?
Terri: Okay. So, first off, we expect lead times to be quoted in working days. But what we do, and this initiative is probably about a year in the making, we are going through our suppliers, looking for lead times that exceed 90 days. And taking that to the supplier, trying to work on strategies. When we quote new business, we’re looking for 90 days or less as a lead time. There’s a reason for that. In our industry, the way that our customers order, we do not have visibility. We build to order. We don’t have a warehouse full of deicers, waiting for someone to, you know, decide they want to buy one. They’re very expensive and they take a long time to build. So, we’re building more or less to order. We don’t get very many days of advanced knowledge of what the customer wants. So, we have to be nimble. Now, in the case where we cannot mitigate a date over a lead time, over 90 days, then we start looking at those inventory strategies and trying to collaborate with the suppliers, you know, using a number of different ways. You know, either we use safety stock here or we give them a letter of intent, and they stock there. Just, you know, it depends. It’s all very situational as to how we’ll approach that.
Sarah: And the second part of Mark’s question was, I hope I’m getting this right, Mark, is about the situations where you have the lead time, you have it planned, but things happening, you just need it faster, you need it within the lead time. So, the lead time in your example is 90 days, but you need that part in 45. It sounds like what I heard was you’ve…either have some materials on site that allow you to mitigate that risk, like your story on the buffer, you have some with the vendor, you tell them we need you to have it on hand.
Terri: It could be but… And maybe Mark is going, maybe, more toward if the supplier can’t meet that reduced lead time, do we hold them accountable for being on-time? And maybe that’s where he’s going. No, we don’t. If the lead time is 90 days, and for whatever reason, we only give them 45 days, but they deliver in 50, we don’t count that late, right? That’s inside their lead time. We know when we’ve gotten inside their lead time. And the other thing that we’ve done over and over again is in the event that we accidentally hold them accountable and they raise their hand, they let us know, we look into it, and we back off. But maybe if Mark was asking, truly what do you do? Well, we do everything we can. We use every expediting tool known to man to try and mitigate that. And maybe we can mitigate it to 60 days, right? So, what we’ll do is, you know, there’s manufacturing methods that we can use to, sort of, bypass certain things and hold the unit until that part gets here. But for sure, we’ll do whatever we can and have to be at airship or whatever to get that part here in order to meet the customer’s expectations.
Sarah: So quick answer to the question, can you receive the presentation? We will be sending a recording out. There’s some material in here that I wouldn’t want to share in slide form. So, the way that you’ll receive the presentation is a recording of our session today. So, know that that’s coming. It normally arrives either this afternoon, but since it’s a little later in the day, it might be tomorrow. Another series of questions came in around the topic of does SourceDay data have to be pulled from the ERP? And I want to make sure I was clear about that. And maybe we could share some of your experience in getting SyteLine integrated with SourceDay. The short answer is yes. And we have a lot of experience at making that easy for your IT team. We have dozens of ERP systems that we integrate with JBT’s on SyteLine, many, many, many SyteLine customers. So, let’s start there, Terri. So, what was that experience like?
Terri: Well, and I was not here when we launched SourceDay. So, I cannot speak to that, specifically. However, I’ll speak to something more recent. And that is we wanted to utilize one of the capabilities within SourceDay that we had not previously been using. And it was to allow our suppliers to print a PO directly out of SourceDay. And we haven’t done that before. So, we’ve been working with the customer service team at SourceDay. And we recognize that some features of the PO we wanted to print out that weren’t printing out. And in order to get there, long story short, our…JBT’s IT team met and worked with the SourceDay IT team, IT team, and solved that. And, you know, every time that we have needed, you know, call it a tweak or, you know, a reconfig, we’ve always had really good success with that.
Sarah: That’s great. And these other questions, most of them, crew, are going to be a little bit longer. And we’re coming up here on the hour. So, I’m looking for one more quick… This one should be pretty quick, I hope. Do you ever have a scenario where suppliers do not respond to the SourceDay portal with PO delays where they have a delay on there and they just don’t update SourceDay? Have you had that happen?
Terri: Sure. And that definitely will happen. But again, it’s all about that communication. And when they fail to deliver on time, and we dig into why, and we get to the root cause that they failed to let us know so that we could take appropriate reaction steps, then, you know, we work with them. We find out why, we communicate, we retrain, whatever it takes. But, you know, those cases are becoming fewer and fewer now.
Sarah: because SourceDay gives you, for every line of every PO an audit trail, it shows exactly when SyteLine sent it through SourceDay to the supplier. It shows exactly when that supplier acknowledged it, if there were any changes when your buyer approved or rejected those changes. And so, then if the receipt date doesn’t match what the supplier agreed to or if, for some reason, SyteLine or JBT didn’t update, that they needed it to change, it’s all…there’s no more he said, she said, there’s no more emails, threads to comb through and compare. It’s all stored in one place. And everyone can see it in real-time. So, with that, we are at time, and I want to thank you, Terri. It’s always a delight to speak with you. It really fills the bucket of everyone at SourceDay. And I know we had some other JBT folks on the line today. So, I want to extend my gratitude to all of you as well and your supplier who joined us. These are the stories of success that make us really proud of the work we do together. And we are thrilled to have you as a customer.
Terri: And I appreciate that, Sarah. And one last thought is everyone saw we’re not perfect. We still have some areas of where we want to continue to improve. So, you know, we’ll keep working it, and our supply base will keep working it. But, you know, it’s a continuous improvement process. And that is something JBT lives by is relentless continuous improvement. So, I don’t want to leave anyone with the impression that we’re done. We are far from done. But thank you, Sarah. I appreciate joining you this afternoon. And we have seen great value in the tool of SourceDay.
Sarah: Awesome. Well, let’s keep it that way. And with that, I’ll let everyone go. Again, you’ll receive a thank you email with the recording that you’re welcome to share with anyone in your organization, partners, etc. This is one in a series of webinars that we’ll continue to have throughout the year. So, keep an eye out for more invitations in the future. Thanks a lot, Terri. Take care down in Florida.
Terri: Thank you, Sarah. And thank you to everyone. Really appreciate your time today.