Supply Chain Performance in 2021
Sheyna: Hello, everyone. Welcome to the webinar today. My name is Sheyna Webster. I’m the content marketing manager here at SourceDay. Welcome to the third and final webinar in our Summer Series, this one on Supply Chain Performance in 2021. We have a really great group of speakers today that are excited to talk to you all about the effects of COVID-19 on the supply chain that we’ve seen this year.
Just a few housekeeping items before we start. Feel free to ask us questions or provide commentary throughout the webinar. We’ll be doing a live Q&A at the end of our discussion with Tom, Clint, Christine, and Josh. You can send the questions via the Q&A feature on Zoom or via chat, I’ll be monitoring it throughout. Either one is fine.
If you have any audio or video issues as we go through the webinar, feel free to send me a chat and I can try to help you out. What also helps sometimes is just leaving and rejoining the webinar, so you can try that as well if you have any issues. And also, please don’t forget that we are going to send out a recording of the webinar after this event. You should get that tomorrow. If you have to drop off early or you feel like you missed anything, don’t worry about it. You’ll get the recording in your inbox including the Q&A part of the webinar. With all that being said, I’m going to hand it over to our panelists and let them introduce themselves and get started. Thank you again for joining us – take it away, Christine.
Christine Hi, guys, thank you so much for joining us today. We are very excited to be talking to you again with another webinar in our Summer Series. Today we’re going to talk about Supply Chain Performance in 2021. My name is Christine McAvoy and I’m the Director of Customer Success at SourceDay. I’ll pass the mic to Clint McCree.
Clint: Thank you, Christine, appreciate that. Welcome, everyone, to our third Summer Series webinar. I’m really looking forward to this. This is probably a topic that’s near and dear to all of you, supply chain performance and overcoming all those supply chain disruptions we’re seeing out in the industry today. So as Christine said, my name is Clint McCree. I’m one of the co-founders of SourceDay. And looking forward to the topic today. Tom?
Tom: Thank you, Clint and Christine. I’m Tom Kieley, CEO and also co-founder of SourceDay. I’m excited to be here in my second Summer Series webinar and looking forward to all the great conversation and questions.
Joshua: And my name is Joshua Schultz. I’m an SME and consultant with SourceDay. I’ve lived a lot of this from the manufacturing and supply chain side. And now seeing how SourceDay is addressing it in their software package, I’m really excited to be here and talk through it from both sides, inside and outside.
Christine: Awesome. Thanks, guys. Well, as we’ve said, the topic today is Supply Chain Performance in 2021. I think everyone on the call today should know, what is at the heart of that ultimately, which is COVID. What we’ve learned in 2020, and how that’s now affecting 2021. So, guys, I’d love to hear from you about some of the pain points we’re seeing. I know everyone sees it on the news and it’s become much more of a topic of conversation. But what exactly has COVID done to supply chains in 2021?
Tom: I guess I’ll go ahead and kick off here. I appreciate that, Christine. I think it really exacerbated problems that were already present. Supply chain complexities have always existed, and one of the most recent compelling events obviously is the tragedy of COVID which has also been combined with the Amazon effect. Consumers and businesses are used to getting products same day or next day in most cases. I think demand has risen to all-time highs in some industries with that and from the tragedy.
Transportation logistics issues in the world – you’re starting to see shortages and missing and late parts really impacting on-time in full deliveries to customers. This is ultimately what everyone is talking about when you turn on the news, your inability to get your Peloton bicycle, or your chicken from your favorite chicken wing place, or whatever it might be: toilet paper. Those impacts are all happening as a result of supply chain gaps and misses that have existed for decades, they’re nothing new.
Joshua: I think what Tom saying is spot on. A lot of this stuff was already there, a lot of the infrastructure was there, the setup for this to happen. I think the public side that we see all the time right now in supply chain is unavailability. Stuff is just not available. That comes down to something that’s not new and that’s supply and demand dynamics.
What I think COVID did is it shifted those further and faster than they have been shifted before. What we saw was, “Hey, there’s always been a problem, we just didn’t experience shocks big enough to make it obvious to the end consumer or to the news.” It was just the poor ops guys that were feeling it.
I think one thing that COVID has done is awakened everybody from executives all the way down to say, “Hey, we are exposed to large shocks in supply and demand.” Like Tom said, it’s a complex machine. Complexity has a lot of unanticipated consequences, so now everybody’s trying to think, “Hey, if this continues, whether it’s for COVID, or weather, or a port shut down, whatever the reason is, we need a way to handle these shifts and these dynamic changes.”
Clint: I love that response, Josh. I was feeling the same thing about that. The thing is we’ve always said – and this is something we try to educate our customers on – is that supply chain disruptions have been there for a very long time, since the beginning of time, since we started doing manufacturing and wholesale distribution. It just hasn’t been on the radar or front of mind for a lot of organizations.
There hasn’t necessarily been an impact at the consumer level when you’re dealing with a lot of these supply chain disruptions because companies will spend a lot of money, they’ll do some unnatural things, to try to protect the consumer from these outages.
But when COVID happened, it just stretched everybody so thin and that’s why we couldn’t get our Peloton bikes, we couldn’t get ketchup at the burger stand. The list just goes on and on and on and on. And that’s just because of all the reasons everyone already knows about COVID. But when you talk about already stretched supply chains, now you’re dealing with labor shortages because maybe people are sick, maybe they can’t come into work, maybe their businesses have shut down temporarily. There’s a lot of things that are happening in 2020 that continue to stretch our supply chains very, very thin.
You know, we’re here in Texas, I don’t know where Josh is but he might be in Texas. But we followed COVID with what we call Snowmageddon. I’ve lived in Texas for my whole life and I can remember four snowstorms and two of them were in 2020. We were stretched even further in Texas. I mean, it was incredible how little products and things were available at the stores. That’s all supply chain problems that we were seeing.
Christine: No, absolutely. I think as a consumer who’s changed her Starbucks order four times now to accommodate for things that are changing, the layperson starts to understand much more what’s happening in supply chain. I know for a lot of our customers, SourceDay didn’t necessarily make COVID go away, but they were able to act and respond to delays, and take action on experiences that every business was feeling. I’d love to hear from you guys specifically about what our customers were able to do and how they were able to respond to those pain points that you just lined out that are affecting everyone.
Tom: I’ll go and kick things off again. I feel like I say this every day and it’s really because I truly believe it. I speak a lot with customers and their organizations, their leadership, and their buyers, who I call the unsung heroes of every manufacturing, direct-to-consumer, retail, distribution, organization. Without your buyer organization, you don’t have a heartbeat or a pulse on your ability to actually meet your customer demands.
Organizations have pumped a lot of resources and time, and effort, and money, and capital into front of the house, e-commerce, sales automation, marketing, making sure they can sell more of their product and widgets or distribution. But they’ve left a crater between the purchase order and the shipment, where it actually gets on to a mode of transport. And that crater is effectively a black hole of manual processes: no visibility, no communication, no collaboration outside of manual processes.
Organizations are now finally realizing that they need to digitize and transform their supply chains and enable their buyers to be the unsung heroes and be more strategic and thoughtful in their days and actually accomplish what they were hired to do, which is make their supply chains more impactful and more empowered to meet their goals in the organization and ultimately hit their customers’ objectives and goals.
And if you don’t do that, organizations that haven’t stepped into industry 4.0 and automated and digitized their supply chains, that crater, that gap between purchase order and ERP and fulfillment and transportation is where things go to die and where you will start to lose customers because you’re not able to actually meet their commitments.
Joshua: I’m really opinionated on this and specifically what SourceDay can do. Again, I was working in supply chain during the start of COVID. Going into COVID, the state of supply chain labor was already really, really tight. And it had been happening for probably two decades. And just to paint a mental picture of what this looks like, you’ve got consolidated purchasing, consolidated procurement, trying to cut costs. The reality is most of procurement is act, react, trigger, react. So it can be done through Excel.
You start to lower the amount of decisions that are made, and you run them through Excel. As you have people moving through procurement, they’re building these Excel sheets, putting in inputs and assumptions – some which are good, some which probably should have been changed. But as they move on, somebody else inherits that sheet and they say, “Oh, this is how we do planning, this is how we do orders.” Nobody questions it.
You’ve got this 15 to 20-year-old lean, brittle ordering system and COVID hits and then boom: why did you order this? Why didn’t you order more? I don’t know. I’ve been using the same sheet for 10 years. Some guy that’s not even in procurement anymore built it. And so we don’t know what’s happening. We don’t have the internal processes to take care of it. We don’t even know where the assumptions are coming from and we don’t have time to figure it out.
You just saw blanket buffers across the board at three months to all lead times, order twice as much as we normally do. Just get orders out the door because we might run out for a long time. That is really wasteful. And I understand why they do it. Clint said people will pay and I’ve seen it pay millions and millions of dollars to protect the consumer from knowing that we ever had a problem acquiring this part, or this assembly. But during COVID, it just was too much and couldn’t be done.
If you could start to understand those parts on a line-by-line level, what the assumptions were, who the suppliers were, what their performance history is, you know, basically all of the data that’s in your ERP but not really accessible, you wouldn’t have had to have made a blanket statement spending in excess millions of dollars on your inventory for that buffer. You could have just focused on the items that matter, the items that needed adjustment.
And that is exactly what SourceDay does: a line by line accounting. You’re only working on the problems. You’re not ordering 30% more of everything just because you don’t have time to figure out where you need that 30%.
Clint: It’s a great, great point. I’d love to add something to that as well. And, you know, what we saw and I think we’re even slowly continuing to see in the market an adjustment. But as COVID started to really run and organizations were slowing down, we first saw this massive flow of information in SourceDay where companies were having to push out their orders.
These were purchase orders they already had with suppliers; they were trying to bring them in. Now there’s this move-out message coming from their ERP system that says, “Hey, we don’t need that inventory anymore. Our customers are pushing those out.” And then, toward the end of last year, we saw the exact opposite. We saw customers starting to ramp back up and now we need to start moving all that stuff back in.
And Christine, when you asked that question about, how our customers solve for that, that’s going back to Josh’s point of managing by exception. If you know exactly what you need to focus on, which items you need to push out, which items you need to move in, and not have to treat every single purchase order the same, it gives you the ability to be very strategic about your business and focus on what’s going to matter.
And the other thing I’ll just kind of add to that is we also saw that a lot of our organizations had a reduction in workforce. And so, you know, if organization that had three or four buyers middle of 2020, they started to reduce that staff. And now you’ve got maybe pretty critical information for a lot of those customers let’s say if they’re not SourceDay, for example, where they have less buying staff, maybe even the suppliers are starting to reduce staff. And you’ve got critical information buried in emails that no one is even looking at anymore because those people are no longer there.
That’s one of the things that’s really big, what Tom said about visibility and communication, having a platform where all this information is funneling through. No matter whether you have 1 or 10 or 80 buyers, everyone can have access to this information to keep the product moving. Whether we’re moving it in or moving it out, there’s somebody there that can be attentive to it and take care of it. And I think that really helped our customers specifically work and navigate through the struggles of COVID.
Tom: I’m going to interrupt Christine because I know she’s probably about to speak, so I apologize. And in addition to Josh and Clint’s incredible input, you know, what we like to talk about is buyers need to be given command and control over their supply chain. Thinking that they can do that in manual processes across hundreds or thousands and tens of thousands of PO lines across hundreds or thousands of suppliers is absolutely asinine. It’s completely improbable to think that any human or number of humans can actually keep up with that amount of change.
What we know about supply chain through our data and through our customers’ data over the last five+ years is that over 50% of purchase orders are going to change. We had customers through COVID that were able to maintain over 95% on-time in full delivery rates to their customers because they were prepared. They had command and control over their supply chains, they were able to predict and prepare rather than react which is really what we saw as consumers in the world throughout the pandemic as we were trying to find things on the shelf that just were no longer there.
Christine: Now, honestly, what was really entertaining about what each of you was saying was, as someone whose knowledge of manufacturing comes almost entirely from our customers, and what I’ve learned with working with them, the scenarios, the stories you guys are talking about, I’m sure some of them right now are having moments of wondering, “Are they talking about me?” Things like lead time… we have a report in SourceDay that actually looks at the timeline that something is open within a platform.
When our users compare it to the lead time in their ERP, they wonder, “Well, why is this 30 days when it actually really is closer to 40?” And the answer is always because so and so said it was that way and when I came, that’s how we did it.
And then thinking of when we started to show our PO exception modules to customers and the response was things that were very emotional. This is beautiful, this is so great. We never get through all of this. And it’s something that’s just so funny to think about having such a strong reaction to a tool that they’ve never had before.
A lot of our customers, during the height of the pandemic and still today, found that they shifted what they were working on to meet their needs. They had the ability to help those in need. They had the ability to switch manufacturing things that they were doing to assist frontline workers.
Tom, Clint, I’d love to hear from you guys, the impact you feel knowing we helped them do that, we helped them better serve the public. Some of the awesome feedback we’ve gotten from customers about the ones that were able to continue hitting their own time goals, meeting what their expectations were because they were partnered with SourceDay.
Clint: I’ll tackle that. First of all, you mentioned lead times. You know, we can probably have another Summer Series on lead times because that is near and dear to my heart. Tom and I have been talking to many of our customers who were in one business before COVID, and now they’re in the business of helping with COVID.
I talked to a medical manufacturer yesterday in the Cincinnati area and they literally just told me, “We were in the medical device industry specifically testing for COVID,” which we all know is more important. And they were urged to streamline their timeline. They had to take something that usually takes them about 52 weeks to design, procure materials for, build, and ship, down to about 12 weeks.
There’s a lot of moving pieces there. There’s engineering involved. Of course, there’s procurement involved. There are people who have to understand raw materials and inventory, there’s an ERP. But certainly, you’re not able to be quick on your feet without having a supply chain that can react to that. This customer specifically said, “If we were individually emailing every one of our suppliers and following up with them with spreadsheets and requests for information, we would have never made it.”
The fact that we could work through a platform like SourceDay, we could bulk-communicate, leveraging the platform to do a lot of self-automation in terms of communicating on their behalf, completely streamlined them and allowed them again to go back and just worry about the things that were going to be exceptions. Versus having to worry about every single nut and screw and washer that can potentially bite them, right? So that was big. It’s really nice to hear. We’ve heard that story many times, but that one was fresh on my mind from yesterday.
Tom: That’s such an impactful story. It’s truly humbling for us to have been in a position as a software company to help our customers make pivots and change and do their part in small or big ways to help the world get through the pandemic. We had a number of customers, one comes to mind that was making components for ventilators, and that was a pivot for them. Collaboration comes in many forms: right, wrong, and indifferent.
The new world and the new age of technology and typical user experience requirements… it’s not the phone, in person, it’s not fax, it’s not Excel or email sheets. It’s from the palm of your hand, people want to be able to very quickly and proactively and with as few steps as possible collaborate with their trading partners. The times of picking up their phone and having deep relationships and conversations to make something happen with a supplier chain partner are gone. Speed and accuracy are critical.
Through COVID, our customers were able to react and pivot and onboard new suppliers, get them into the platform, and then get them acknowledging, and providing updates, and exceptions, and management, shipment information of all the components that they needed that before COVID, they had never even bought from these suppliers. But they are able to do that very rapidly and get products to market faster, which ultimately did save lives. So that is a big piece. And that’s not a credit to SourceDay, that’s a credit to the global economy and our ability to actually do that because of technology.
Christine: Anyone that follows any of our social media channels, you’ll see a lot of times that we hashtag things with #changelives. And I think that’s a big piece. What you guys just explained is that we really take very seriously that we help people help people. I love hearing that.
On the supplier side, I will acknowledge too, we were very, very busy and we still stay busy because like you’ve mentioned, we’re changing context. As much as we have our customers that might be changing team members, our suppliers are as well. So being able to get them in fast is a big point for our group and we want to make sure that that’s always a priority.
Clint: You know, another thing too on that too, Christine, you made me think of this. When these companies had to pivot their businesses to deal with COVID, they also had to have brand new suppliers they’ve never worked with before. Having a platform to be able to communicate, get those POs clearly communicated, get them acknowledged, and have something that’s tracking that for them was very, very helpful for them because it’s the first time they’ve done business with these suppliers. So that’s another piece of it.
Christine: Absolutely. So, knowing where we are in 2021, and that the effects of COVID are still going to linger not even through this year, but probably what we learned the changes in business, what do you guys see as continuing to be the next steps for supply chain? What do we think will stay? And where do we think we’ll continue to improve?
Clint: That’s a Josh question. I’m pretty sure.
Joshua: I think a lot of the understanding around internal processes is going to change. We’ve said it over and over and over, COVID did not do anything new or fill an existing infrastructure that was already brittle.
Looking forward, I think there’s a lot of things at the company, like say the top customer that are going to flow down, that are going to all of a sudden, they’re not currently there. There’s infrastructure, there’s processes, there’s systems that were never needed before because you just trusted that your supplier was going to manage your JIT, and they trusted that their supplier was going to manage just-in-time.
And that just-in-time slowed down and now there’s this idea that, hey, maybe excess inventory is not waste, maybe it’s something that we should be investing in. I think that redefinition, taking it from something that is waste to something that is investment in longevity, sustainability, adaptability, and flexibility, is going to be huge. It’s going to happen in the front office, back office, warehouse, and inventory, it’s going to be across the board.
I think companies need to look at two things. One, out of everything we’re doing now to stay afloat, what are we doing because we didn’t have systems and processes before that you can probably let go? But what are the systems and processes that if we had in place would have really mitigated these risks? And I think that’s what we’re going to see stick around. And I think we’re going to see some new supply chain methodologies and best practices float around over the next 10 years.
Tom: Josh, is obviously the subject matter expert and really can’t add anything more than that. What I do say though is that the pandemic put a spotlight on problems, and weaknesses, and pain points, and fragility in supply chain processes that have existed and gone noticed but unmanaged for decades because they were getting by just fine. This exposed known problems and perpetuated them throughout the entire supply chain, created that problem all the way down to the end customers with a spotlight on the existing issues.
I think when it comes to supplier performance, to your question on what do we think will continue to perpetuate and exist now post what we know about the pandemic and disruption that can happen in supply chain is you need to start to have a digital process. And you need to start to be able to leverage data and historical data and start to build predictability in your supply chain. And build that through actionable data that has happened over time based on transactions and actions between your organization and your suppliers globally.
Use that to start to build intelligence around how supplier performance is going to impact your business over periods of time of fluctuation in demand cycles. You can start to have a better just-in-time result for your customers without buying excess inventory or having too little inventory and expediting and paying air freight fees. All of the data points that we now capture as a platform are giving our customers, again, that command and control to drive higher performance and accountability to their suppliers where it should be.
Clint: I love those two answers. And one of the things I think I’ve probably said in the last two Summer Series webinars is, like it or not, supply chain disruption, supply chain challenges are very much being discussed at the executive level in boardrooms probably for every company that’s dealing with direct spend, and building products, and stocking products and things like that. That’s probably not going to go away. It’s made it into the boardroom, it was such a major disruption in 2020. That I see that’s probably going to be a permanent staple in those discussions going forward.
The other thing I think is important to point out and, back when I used to be in manufacturing, we would buy from suppliers and give them purchase orders, and then essentially beat them up to try to get the pricing down and get the delivery down. Those days are gone. Suppliers now really need to be seen more as strategic.
And I know the ones that are winning with SourceDay are the ones that have taken that leap and said, “Okay, we really want our suppliers… Well, we see them now as being strategic. They are a stakeholder for us and we want to bring them into the fold of our business.” That’s the other piece I don’t think is going to go away. Suppliers and customers are going to tighten up those partnerships.
What Tom said too is when looking at dashboards and supplier performance, that’s not going to go away either. Supplier performance and metrics have been a part of ISO 9000 for those of you who are doing that, that’s been there for a very long time. But I think we’ll probably see more companies, whether you’re ISO or not, roll out these particular metrics that they’re going to want to score against to see how these suppliers are doing.
And I also believe the last thought there is we’ll see more of our customers require their suppliers to have backup plans. So business continuance to figure out, “Hey, if we have another major disruption, how are you going to keep supplying us? Or do we need to go find a backup supplier that is going to be able to keep supplying us?” And so, I think those points there are not going to go away as we come out of the pandemic.
Christine: I think that’s why a lot of our suppliers are adopting faster than before, they’re going into the platform, they’re taking action. For them, it’s feeling like they’re able to keep up.
In an industry like what we’ve talked about so many times that doesn’t have as many advancements as other moving pieces of the company, a tool that helps them be cutting edge, makes sure that their information is on time, does all of the things that they need to do to be a good partner and maintain that business is well received. I think that is super helpful to think about. As we prepare to attend to any questions, any last thoughts that you guys want to impart on the group about COVID’s impact?
Joshua: Really quick, I will share that this was more of like a macro context. But I think before COVID, everybody was trying to successfully predict things. Predicting lead times, predicting all kinds of things. I think that we’re moving into more of a preparation mindset when it comes to procurement. When you’re preparing, you’re almost stress-testing against a wide range of ideas rather than just predicting a lead time and assuming it’s correct.
You’re going to need some kind of software that can extract, use, and speak back to your ERP to help you better understand your parts, the data on those parts, the suppliers, so that you can quickly react and be adaptive in, kind of, I think the environment that we’re going to be in going forward.
Tom: And I’ll add to that. I completely agree with what Josh said there. I think what we see from organizations is, in some cases they may be looking at the problem trying to solve the ERP or the planning engine because the reality is the data is more often wrong than right. And it’s not an ERP problem, it’s not an MRP problem, and it’s not that you’ve deployed the wrong solution or maybe you deployed it and customized it the wrong way.
The reality is it’s doing what it needs to do but it only has half of the story, right? Your ERP is living in a silo behind the four walls of your organization and depending on data from hundreds or thousands of suppliers that it is not sharing data with.
The organizations that we speak with, we’re challenging them to say, “Prioritize your projects not around fixing an ERP that isn’t really broken, it’s not the root cause of the problem, you’re putting the blame on the wrong solution. The root cause is you don’t have a process around capturing data quality from your suppliers that is driving accuracy into your planning and scheduling. Your MRP is not using the most real and accurate data every day when it’s planning.” Your buyers aren’t paid to stand there and manually key supplier updates. Those are tasks that you can have automated. That’s what SourceDay is built for.
Give your suppliers and buyers the ability to be more strategic and thoughtful in their relationship. Driving more automation enables that. Look at the problem differently now that this has been a big spotlight. Don’t try to fix existing software technologies, do what Josh said. Add extended solutions outside of your ERP system that will continually transform and digitize your organization to drive transparency, collaboration, visibility, and more intelligence around how you do your planning and scheduling.
Clint: I know we’re about to jump into the Q&A here, so I’m just going to go back to something Tom said earlier really quick. We see organizations all the time invest heavily in the sales side of the organization, maybe their plant, the equipment they’re using. But as Tom pointed out, we see some reluctance or slow to adopt technology on the supply chain side of their business.
And so, you know, I get asked a lot of times, what should we be doing as supply chain? One of the first things I think is an interesting question to ask yourself is, do you believe that a supply chain problem has ever impacted your business? And do you believe supply chain problems could impact your business? Could it impact your customer? And the answer is always yes.
But what’s really interesting about the next question is I ask, do you measure that? And most of the time, customers don’t measure that. They don’t measure an impact from the supply chain disruption all the way to how that impacted their customer maybe from a revenue perspective, or customer satisfaction perspective.
Now that supply chain is top of mind for everyone, I’d say first and foremost, we’d love to have you as a customer using our platform which is giving a lot of value to our customers. But start to begin to look at that supply chain problem and what the downstream impact has been to your business. I’m pretty sure once you start to measure that, you’ll be much more willing to invest in solving some of your supply chain problems.
Christine: Yes, what resonates with me is a lot of times, our customers come and they don’t know. They know what’s good, they know what’s painful. And it’s the in-between that sort of ‘death by a thousand date changes,’ right, and not measuring that piece of it.
do see we’ve got some questions in the chat. Feel free, questions, comments, thoughts, anything that you want to add to what we said today, we’ll go ahead and answer a few of those and get started here.
Sheyna: Hi, everyone. All right. So we are going to jump into the Q&A here as our panelists join us. Hello, everybody. Thank you so much for this awesome webinar. We have a few questions in the chat. To kick it off, I’m going to start with one from Daniel that says, how do you quickly play catch-up when lead times with zero warning increase are two to four times what you’re used to? They had items overnight that went from four to six weeks to, you know, 14 to 20. Josh, if you want to take that one.
Joshua: Sure. Playing catch-up is hard, because you’re acting after the fact. It’s hard to change what’s already happened. There’s two ways to think about this, proactive and reactive.
Proactively what you can do now that you know this might happen, and I know this doesn’t answer your question, but you can start to look at all the points of failure along a supply chain. And I don’t just mean the suppliers, but I mean ordering, stocking, shipping. What are all the places that something might go from 1 day to 20, or just also different metrics you can measure? And try to come up with plans that you can use, right? An example here would be dual sourcing. Where can I find other suppliers where I might not use them regularly, they might be more expensive, but I start to create these backup plans?
But reactively, which is really what I think Daniel wants to know, is when you understand what’s happening in real-time, in other words, you have visibility into the PO lines, you have visibility into how things are moving, what you’ll notice is most of this stuff is not actually overnight. There are indicators and there are signs that things are going to happen. It’s not an actual delay or cancellation of a shipment but it is things like suppliers continually moving out dates. And that’s the kind of thing that SourceDay really helps you see and visualize is, hey, where are there things happening that are showing increased risk before the risk actually happens?
Clint: I want to jump in on that as well. Back when I was in manufacturing, one of the things that we talked a lot about was having good hygiene around lead time maintenance. When you’re out quoting products, materials to build your products, oftentimes, when you go out and do an RFQ, we communicate with the supplier, we figure out price delivery dates, lead times. We enter that into our ERP systems and then we forget about those things, you know, maybe for years.
I encourage anyone who’s running an ERP system and that’s leveraging MRP, you certainly want to make sure that you’re keeping up with your lead time hygiene. And now that’s more critical than ever. You should certainly be communicating with your suppliers about getting early signs, “Hey, do you see your lead times increasing?” This is a critical thing going on with COVID, etc., etc. So, you know, if you’re doing something like this once a year, or a couple of times a year, you probably should increase that frequency more now than ever in terms of keeping up with your lead times with your suppliers.
Christine: Yes, and your CSM can help you with that. Hey, Dan. So anytime you want to look more into this we’re happy to help, so don’t hesitate to reach out.
Sheyna: Awesome thanks, guys. And actually, I asked a follow-up question which is, how can you manage increased logistics time, material shortages, and labor, and capacity shortages all at the same time when it’s a moving target?
Joshua: This is like the big question, right I think this is what everybody’s facing. The reality is, I don’t think you can, right? That’s why we’re seeing what we’re seeing with everything pinching at once. The only thing that I’ve really seen help or alleviate this is buffers, buffers in capacity, buffers in ordering.
The only way to really correctly implement a buffer is back to what we were talking about before, visibility into what you have, how it’s moving, who you’re ordering from. And I’m talking about visibility on a PO line basis, not just on a supplier aggregated basis which is what a lot of people track. It’s a lot of data, it’s a lot of work, most people don’t have the labor to do it correctly. And I think you need some good digital tools like SourceDay to really get that done.
Clint: And then, of course, the question says labor capacity shortage, I’m assuming that’s at the supplier level, not necessarily at Daniel’s level, but it could be both. And I agree. The more visibility you can have using solutions, technology, running reports, looking at…you know, what we would do is we would run reports from our ERP to see, “Okay, these are our lead times, and this is what our suppliers have been delivering against those parts. Does that match up within their lead time window?”
All those kind of exercises that you need to start doing a lot more of to get that visibility that you need. Because we’re not going to change, nothing is going to change, all the changes that are happening in the industry in terms of these shortages, supply chain disruptions. What you can really only do at this point is just get that early visibility, add the buffer stock, as Josh mentioned, but get that early visibility so that you can be ahead of the game as much as possible.
Sheyna: That’s great. Thank you. We also have a question from Mandy which is, how are your vendors working through COVID and new business models and supply chains while maintaining compliance with new regulations and other countries?
Clint: I’ll jump on this part of the question. The other part we might have to take offline just because I want to understand more specifically what they’re asking, but certainly what we have seen with our customers, with new customers that we’re talking to about what we do is the workforce has gone remote. The suppliers, the users, the sales teams, customer success people are all now remote working from their homes. The biggest thing that they’ve had to adapt to is being able to keep up with their customers, keep them going but working from their home.
That’s one of the biggest things we’ve seen. Of course, there was a nice little fit for SourceDay because we do that quite well. But for those that don’t have a solution like that, it has become a major challenge to keep up with. Now, compliance is an interesting question. Tom, I know you’ve dealt with a lot of stuff around compliance.
You know, we see a lot of different things from compliance whether it be, you know, specific things by country or it could be what industry you’re in. So maybe you’re in aerospace and defense or something like that and you’ve got some compliance. And we do help in certain areas there maybe there’s some documentation that goes along with, purchasing, and the suppliers, and documentation that has to go with it that can be tagged in SourceDay, for example, or it could be something else.
But we do offer a solution for that in SourceDay but certainly, we do see that has been increased demand, you know. And Tom, I know you’ve dealt a little bit of the compliance stuff more than I have, so I don’t know if you want to touch on that.
Tom: And Josh may have more of this as a, you know, more recent practitioner with some overseas suppliers in that realm, specific SCIP. That is not one that comes to mind that we’ve dealt with and knowledge I’m familiar with. We could probably take that offline and talk to some of our solutions consultants and get more granular on that.
I can speak historically that many of our customers that do have to have documentation from suppliers for regulatory purposes to make sure that they’re, you know, not at-risk suppliers to do business with for all the various reasons that exist, have used our Source docs module to require proof of acknowledgment of documents that show those certifications, or those associated requirements and regulations, depending on the country of origin.
So, those are possible within SourceDay. We have customers that do this with Source docs. We can have expiration dates on those documents, we can require audit trails of acknowledgments by both parties. So that is how we’ve managed it to date. We’d need to get more use case and specific with your ideal scenario to understand further, but that’s a high level.
Sheyna: Thanks, Tom and Clint. A few more questions here. Which KPIs should organizations watch most closely this year and through next year as a measurement of supply chain performance, in y’alls opinion?
Tom: Well, all of them. Joking aside, right? What I like to talk most about is COVID put a spotlight…and we speak about this often, right? COVID put a spotlight on pain points, and gaps, and process, and automation, and digitization that have existed for decades. I always talk about buyers being the unsung heroes because they’ve been the last ones to get technology and innovation to give them the visibility, the collaboration, and the tools to be successful.
What we speak to a lot of our customers about at Fortune 100 and 500 customers all the way to small retail is making sure that you can have high on-time and full delivery rates. And that’s not just getting suppliers to deliver in full, but it’s high quality, meaning they’re delivering the right mix of parts to the right locations, at the right price points that you’ve already agreed to.
And not having visibility into that in real-time as it’s changing at over 52% catches you off guard. And having that happen during a time of disruption such as COVID, or others can exponentially compound into risks that will cause you to lose customers. Managing OTF rates at a 90% or higher being the perfect rule. Hackett has done some good studies around that.
Being able to manage your suppliers’ accountability and responsiveness – most people don’t really put much attention or credit to how responsive your suppliers are to your specific demand changes or needs. Platforms today like SourceDay can actually give you that real-time responsiveness rate very easily, and then start to show you trending where a supplier is going to start very obviously, giving you poor performance because they’re not being responsive to your purchase orders as they’re changing rapidly or even just in general acknowledgments.
Seeing OTF rates, price point variance changes over periods of time – it’s hard to predict where that’s going. And then really giving scorecards around supplier responsiveness is just critical as a starting point.
Christine: One of the things that we’re seeing with customers when we’re going through reports and data is not all supplier impact is created equal. When Tom is referencing OTIF, a lot of times what our groups are saying is, “Well, let’s look at that even further and think about the 80/20 rule. Let’s think about which suppliers we need to focus on first because their impact is hurting us more than others.”
And so coming up with a strategic plan for taking action is what we’re seeing a lot of our customers do and taking data and really diving into it and then being able to be proactive.
Clint: As Tom pointed out, we have some basic metrics that we score on for supplier performance inside our platform. But here’s the thing, one of our favorite stats we’d love to talk about around here because we actually see millions of PO lines every year is, we do know that 52% of the POs that you create are going to change. Between you, the buyer, and the supplier, they’re going to change.
And going back to what Tom’s comment is, when those changes happen, if the suppliers are not responsive to you, there’s almost a virtual guarantee that there’s going to be some sort of hiccup in your supply chain. And so that’s a major one, that’s not something a lot of organizations measure, is how responsive you are. But because 52% of your purchase orders are changing, you really have to have that clarification with your suppliers that they’re able to meet those changes. So that is a big one for sure.
Sheyna: Thanks, guys.
Tom: I could talk about that one for four days, but I won’t. I’ll let that lie.
Clint: Yeah, that’s a whole another webinar, right? That’s a whole another webinar.
Christine: Jumping into business review, guys, I’ll let you take it.
Sheyna: Awesome. Clint, I think this is one for you. But how do supply chain teams convince their executive leadership to invest in supply chain technology, resources, and people?
Clint: Oh, that’s great. It’s one of my favorite questions because historically for all of you out there who are probably in supply chain like I was in the manufacturing business, our organization is more than willing to spend money on selling more, building widgets faster, investing in those areas of business. Very little investment has ever been made in supply chain for so many companies.
And this is where we see an organization has a $100,000 ERP system and sends emails to suppliers with million-dollar POs and has no visibility into whether the supplier has accepted the PO or shipped against a PO, it’s just kind of a black hole. However, everyone out there will agree, and we’ve talked about it earlier, and now even in some other webinars is everyone agrees that if we have a supply chain disruption it’s probably going to somehow impact our production and likely impact our customer.
And so for those companies that are trying to convince the executive leadership that we need to invest in that, you’ve got to be able to link supply chain disruption to a customer disruption. And that’s the most clear way that you can get that done. Everyone is willing to invest in more customers, taking care of the customers, doing that side of the business right and that’s the best way to link that.
Hopefully you have an ERP solution that you can link purchase orders to customer orders, or purchase orders to work orders and those kinds of things. And when you see a supply chain disruption with a supplier, or material, or something like that, you can begin to build a story around how that particular supply chain problem disrupted other parts of your business.
Tom: I’ll just add a little bit to that. Clint hit the spot on right. But we had customers before SourceDay that were chartering private jets and other modes of transportation at obscene costs. And since using SourceDay, they have not had to do that.
To Clint’s point, you need to tie it to customer misses that have a specific dollar amount. Where we’ve worked with some of our top executives that mandated a project to go solve supply chain misses. Their purpose and reason behind it was they were tired of having to discuss and excuse quarterly or monthly misses and shipments to customers because you weren’t able to get parts out the door. You weren’t able to get finished goods out the door to your customers and recognize that revenue due to a single supplier miss.
And not having visibility to that and living in Excel, and email, or manual process, or just relying on human manpower, and human power to drive that collaboration is going to create misses every time.
Sheyna: Thanks, Tom. Thanks, Clint. One more question here. I think Christine might be able to take this one. How do we get suppliers that our customers have exclusive relationships with on board with using SourceDay especially if there might be a pushback?
Christine: No, absolutely. I won’t bore you guys with all the details of the campaign. But it’s a pretty built-out process that we run through that, you know, short of you know, courier pigeon. We’re going to reach out and try to contact your supplier and get them onboarded. The biggest piece really for us is providing the context for them. To keep in mind that the conversation to the supplier needs to be more about what they’re going to get from the partnership, how they’re going to use it, why their customer has selected them. So really making it clear that this is something that’s impactful for them as well.
And our team of supplier success managers is always happy to pick up a phone answer a question. A lot of times we find the pushback is just over people don’t know. They think they know what to expect with portals, they think they know what we’re going to ask of them. And when they get in, it’s usually like, “Oh, this is a lot easier than what I’ve done before. Yeah, it’s not a problem.” There’s not much we haven’t heard and we always welcome interesting new feedback.
Sheyna: Thank you, Christine. We have a couple more questions that have come in. One of them is, how do you or have you overcome supply issues related to DX-rated orders?
Clint: Yeah, that’s an interesting question. I’m not sure everyone in this webinar will know that. But the DX/DO I am assuming it means the Department of Defense-related type purchase orders where the response and acknowledgment of POs has to happen pretty quickly within a 7 to 10-day window. If you’re not using a platform like SourceDay it can be very complicated. If you’re relying on emails and spreadsheets and sending these out to your suppliers, that can be very problematic.
SourceDay actually has built into it and, I’m sure there’s other tools that do as well. But certainly, SourceDay has built into it the ability to track and monitor and stay on top of DX and DO orders in terms of responsiveness. It’s not even specific to DX or DO, it’s more or less just made a functionality that when new a PO is created for a supplier and it shows up in a SourceDay platform for the supplier to take action on, we actually automate that action for them.
We ensure the suppliers are seeing the POs, we’re making sure they’re interacting with those POs, and so we’re staying on top of it for you. And you can actually set how often you want SourceDay to stay on top of the supplier for you. I don’t know if that’s actually the specific question. I know Tom, I think you might want to jump on that too.
Tom: No. Again, you nailed it, right. I think it is our core out-of-the-box functionality, and purpose, and birthright, if you will, to drive what ultimately becomes a DX/DO requirement. Giving suppliers accountability and visibility and audit history to responsiveness and shipment. And to your point, your question really around making sure you’re managing supply, where you have to drop everything you’re doing because you received a DX order, you now have to get your suppliers to do the same thing.
Having SourceDay in place gives you the ability to react in an instant to, you know, change those purchase orders, shift your demand, cancel existing orders to suppliers, issue the purchase orders in the DX track that have to get acknowledged and shipped first as a priority out the door.
That all is made a functionality at SourceDay because we’re bi-directionally integrated within real-time right back into your ERP and near real-time syncs from your MRP giving that data to those suppliers. Not both just for the DX order, but also canceling the other orders that have to be stopped to prioritize the ones that you must get out through regulation and process. So those are native functionalities out-of-the-box that are just coincidentally a piece and part of how we do business for all of our customers.
Clint: You said that way better than I did.
Tom: I don’t know about that. I’ll accept it though.
Sheyna: Thanks, guys. We have another question here which is, have you experienced vendors changing payment terms between orders, for example, changing from net 30 to payment in full prior to manufacturing? And what would need a vendor to take this drastic of a step?
Clint: Well, it’s an interesting question. I’ve not experienced that myself sort of mid-PO. I mean, once the PO has established terms and it’s been acknowledged, usually you ride that out through the life of the PO. I have seen ‘payment in full’ on a lot of deals, a lot of purchase orders, especially when you’re dealing with overseas suppliers where before they will even ship you the product, they want payment, and essentially you’re taking ownership at their dock. So they finished the goods, they’ve manufactured them, they want to receive full payment and now you’re responsible for logistics and you own it.
And that gets into some other complications within the ERPs because now you literally have to take on ownership of the inventory. It’s in your ERP somewhere but it’s not even available for you to access, it’s in a virtual state essentially. It creates a lot of problems; we have seen that.
I think a lot of the suppliers do that because before they want to allow them to ship, they want to receive their payment in full and have you take ownership of it. But I have not seen that mid-PO. That’s a new one for me.
Tom: You know, I’ll jump in there as well. There’s a lot of new resource, and data, and reports around the correlation between payments to suppliers and what that does to a supplier relationship for procurement, and buyers, and supply chain. And there is a direct correlation if you’re repeatedly mispaying, underpaying, overpaying, or late with payments to suppliers that could cause, you know, an instant reaction that you’re not expecting on a purchase order. That all of a sudden you’re needing something to be expedited and the supplier just says, “No, we need you to pay in full in advance.
In my experience, what I’ve seen from customers and heard from customers and reports is that that’s being driven because of payment issues. And not so coincidentally, SourceDay also happens to have an AP automation solution that solves just that core problem and making sure that you’re able to reconcile auto through a match and voucher to your ERP so that you can then pay your suppliers more accurately and on time to eliminate that risk, right.
Because it is a risk as a buyer, procurement person, supply chain leader, whatever your role may be. If you’re not in the payment side, you’re disconnected from that process and you may not even have visibility to how poor it may be. And it’s not intentional, it’s just through that being a very painful manual process.
And with the rate of change of purchase orders at over 50%, more often than not the invoice that’s coming in doesn’t match the PO because that change of purchase order demand to what is actually shipped to what is actually being invoiced. Having full visibility, you know, collaboration to those documents and to those communication points, is critical to ensuring suppliers are paid appropriately, which keeps that buyer-supplier relationship positive.
Christine: We’re seeing with some of our suppliers where they’re playing multiple roles too. So the ability to go in and pull the PO PDF and turn it into an invoice is all being managed by the same user, even in some of our larger groups, which was really surprising to us. But then having that capability is also a bonus for the supplier.
And then on customer side, we see a lot of them leaning into being able to take advantage of discounts faster by utilizing SourceDay and not becoming a real piece for them that makes the accounting group very happy. And then also again, for everyone, that’s looking for the wins getting paid faster. Everybody’s excited about that.
Tom: That’s a great question.
Sheyna: Yeah, awesome. All right. I think we have time for just one more question here, so I’m going to shoot this one to you guys. With regards to purchasing, what do you think are the most valuable reports that you’re seeing companies use?
Tom: I’ll be a little redundant since no one wanted to speak up. But I’ll fill the first piece of that and let others pile on. But, you know, again, OTIF, right is probably one of the most talked-about, you know, getting to the perfect order, right, which is again, about quality, on-time, in full to the right place, right location, right site, whatever it may be. Whether you’re dropshipping or not, you need to have visibility to that reporting.
One of our largest customers had over 30 distribution centers around the world and before SourceDay, they had zero visibility to what was coming inbound from suppliers until it showed up. The buyers had the data in some cases. Through our process and our standard out-of-the-box functionality and event ship notification that are created, we’re able to give those distribution centers visibility to all of the inbound shipments by the line and quantity of what’s actually coming inbound. And in many cases, the carrier information to actually track and trace that shipment in SourceDay.
So that kind of visibility is critical in reporting to be able to say what is coming inbound so that we can plan on what we can actually build? What can we stock the lines with? What can we go commit to customers is going to be coming when? So just general reporting around hitting a perfect order.
And then secondarily, you know, price point variants. Having a trending and charted down to the part number from all of your suppliers, that can give you the highs and lows the outliers of where you have room for improvement and where suppliers are impacting your business.
Joshua: I’ll add to that. I know one of the reports is also one of the oldest ones and that’s the Open Order Report that many people use just to get track of, “Oh, I forgot what I have on order,” or, “I forgot what I owe.” And if you’re a buyer, you may either produce those and send those or receive those and it’s usually maybe weekly or monthly depending on customer importance.
And what happens is you tend not to update the ERP or to make changes until you get that. So maybe weekly you’re making changes. Where you have all of that updated in real-time, SourceDay gives you the dashboard and the line-by-line accounting, so now you’re making those decisions daily.
So a lot of the power of SourceDay isn’t so much doing something different but it’s also speeding up those iteration cycles where you’re reacting daily to problems and you’re fixing them in three days, instead of weekly and fixing them in three weeks. And so you have a lot of those problems cycles get reduced or even get eliminated through the platform.
I think the Open Orders Report is extremely important. I think it’s being used more and more. I think it’s being requested more and sent more. And it’s going to actually create more work and more data. So it’s nice to have a digital way to receive, interact, and send that.
Clint: And I’ll just piggyback on some of this as well. When we go back to that number of 52% of your purchase order lines are going to change, if you’re cutting thousands of purchase order lines per year, that’s pretty hard to manage all that, that’s a tall task to manage all that.
So when you talk about what’s the right or ideal report, what reports we’ll be looking at, one of the things that you’ve got to be able to do (because you’re not going to be able to manage every PO the same way) is you’ve got to be able to surround yourself by being able to manage by exception. You have to figure out which of those purchase order lines, which of those suppliers, which of those materials are going to be the ones that are going to bite you.
And it’s very difficult to do that now in email. As soon as you shoot an email, or as soon as you create a spreadsheet and you send it over to your supplier, it’s virtually already outdated. So having a solution in place that gives you real-time visibility for you and your suppliers on all your purchase orders and gives you that manage by exception because you’re going to have to be managing this change all the time because the change is not going to stop, is having a system that can help you manage that change and bubble up those exceptions that need your attention.
One day it might be an on-time delivery problem, then the other day it might be something else, but you need to be able to see that so you can take action. I really feel like, you know, that’s my opinion on that question.
Sheyna: Awesome. Well, thank you guys so much. That’s all the time we have for today. But I appreciate everyone’s time. Thank you for an awesome webinar, the final in our Summer Series. And thank you to everybody who joined us. Don’t forget you’ll get a recording of this in your inbox tomorrow. Thank you guys so much.