Manufacturing Supply Chain Woes
Sam Scibilla, Jocelyn Aguero and Rob Carr
Welcome to our Manufacturing Supply Chain Woes show. I am Sarah Scudder, CMO at SourceDay, and our show host today. I am going to be joined by Greg, Kevin, and Billy. They have extensive manufacturing experience, and I’ve asked them to share some of their craziest nightmare stories with us today. Our show’s sponsor is RapidRatings. You should be able to see their logo at the top of the screen. I’ve been friends with their team for many years, actually used their platform at a previous company. They help educate buyers and manufacturers about the financial health or risk of their suppliers. And with all of the bankruptcies and craziness happening this year in the market, it’s very, very important to make sure and be aware of the financial health of your suppliers. So you can prepare, mitigate risk, and find alternative suppliers if needed.
To kick off our conversation today, drop us a note in the comments and tell us where in the world you are joining us from. Also, tell us a word or phrase to describe how your day is going. We always seem to have a pretty eclectic crew with people joining from all over the world. So drop a note in the comments and any questions that come up throughout when Greg, Billy, or Kevin are sharing their stories and chatting, put those in the comments as well. And I’ll make sure to ask and incorporate those into our discussion.
So, to kick us off today, I am going to have Greg do a super quick intro. And then, Greg, I’m gonna ask my first question to you today. All right, thanks, Sarah. Yeah, Greg Manhire. I’m currently working at AWS. I’ve been in supply chain in Silicon Valley companies for 20 plus years now and have worked in all aspects of supply chain, from contract manufacturing management, supply management, material management, OEM management, even reverse logistics. So I’ve covered the forward and backward aspects of supply chain in my 20 plus years. We’re glad to be here. And Greg is a fellow Texan, him and him and for lunch Chicago. So awesome to get to know Greg in person.
So, Greg, my first question or story I’m going to queue up for you is you had an experience where you were learning to manage people and a customer at the same time when you took over a management team, and you had some challenges and follow-ups. I would like to have you share that story with us to kick us off.
Yeah, when I was back at NetApp, I took over our OEM management team, and we were dealing with what’s known in the industry, and I’ll leave names out to protect the innocent or the guilty here, but a difficult customer. And I was new to managing people, like Sarah said, and new to managing customers. As in supply chain, we are the customer. So it was a little difficult to turn that around and have to learn that. And so I, this particular customer had a very hockey stick quarter ends and year ends, and our company was going through a difficult time of allocation with a new product. It was ramping very fast, and we were trying to determine how do we satisfy our needs. It was coming up on our year end, as well as our customer’s quarter end, which was offset by a month. But we were extending lead times across the board. So, you know, we were looking at this, and we were figuring, okay, how much do we give them? And at the end of the day, we said, well, what’s the forecast, right? And we need to determine what did they forecast that we need to give them and allocate their pro-rata share of our supply. We weren’t able to meet our demand. We weren’t able to meet their demand. As we got down to it, we ended up pulling some strings, we maneuvered things around, and had a few interesting opportunities of dealing with their senior directors and getting earfuls of this one particular guy. I don’t remember what his name was, but I do remember his Scottish accent very clearly as he was yelling at me over the phone about how it was their quarter end, how we better give them everything they need, whether it was 100 percent of their demand, 200 percent, or a thousand percent of their demand. We better figure out how to get them all the parts they needed. So it was a first time I’d ever been yelled at by a customer. So that was definitely interesting. At the end of the day, we maneuvered things around. We were able to work our backlog and pull things in and push product over to their mid-side of the manufacturing building and get everything out that we needed to. And luckily, at the end of the day, it turned into an attaboy from our CEO. So that was definitely, the tongue-lashing was well worth it at the end of the day because everybody knew how difficult a situation we were in.
Kevin or Billy, either of you have a crazy nightmare customer story from your experiences that you want to share as well? I think, Greg, it’s pretty common, unfortunately. I mean, all of us who have worked in the service industry have had one of those clan experiences, and I think it’s a good learning on how to deal with different personality types and mitigate people risk. I mean, I’ll share, you know, being a procurement consultant, supply chain consultant, I had a client, so I’ll consider them a customer, who had a super interesting business model. It was the type of business where folks had to remain home with a device around their ankles, and if they were to leave the premises, there would be all sorts of alerts. Phenomenal company, incredible technology that has pretty much one use at this point. But, you know, this was back during COVID time. We all know about the chip shortages that the automakers had, and this business had a very similar issue where they had thousands upon thousands of these bracelets that were sitting on a shelf and virtually useless. So they had to literally, they had the 10 or 15 components that make up this particular device. They had them either fully assembled minus the chip, or they were in varying stages of assembly, waiting for this chip. And it was a nightmare. It was a real big challenge for the entire business to rely on the small little five-dollar chip that makes their technology work. There was really, oh, and then, and then during that whole process, networks around the entire country were going from 3G to 4G, and in some markets, they were going to 5G. And each one of these chips had to work on the latest and greatest cell towers. So that further compounded this real nightmare for them. And municipalities were demanding bracelets. The more people that got into trouble, the more bracelets they needed. So you can only imagine how creative they had to get to figure out how to get some of these bracelets to work during a pandemic, chip shortage type period. It’s crazy.
And Billy, I’d like to have you take a minute and do an intro. You have a very unique background because you’ve been ahead of procurement at multiple organizations, worked in sports, worked in media. Now you have your own company. So tell us a little bit about who you are.
Yeah, so really 37-year procurement professional that has now, knock on wood, left the corporate environment and is doing things for myself. The company is SourceNow.Pro. What the foundation of the company was really built on is there is an absolute clear need for procurement, supply chain, HR, facilities, IT, to work better with procurement because if there is a divide, if there is folks in procurement or otherwise that don’t really understand how to build internal relationships, their personal metrics will suffer, the team metrics will suffer, the company goals will suffer. So we have authored a training program that really talks about five different areas. But in the end, what we have seen is that procurement departments’ metrics, personal, team, and customer reaction have gone up by double digits. So it’s a really phenomenal thing, and I’ve taken that program around the world. When I worked for Bloomberg as a senior procurement leader, prior to that, I was employee number one and started corporate procurement for the New York Mets, and I spent there 10 years during some great ups and downs. But just a couple of those things we also handle. There are some companies that don’t want procurement or others to handle large-scale strategic sourcing events. They want them confidential, so we help folks with that. But management training is really what we do well, and everything you could that we offer is on SourceNow.Pro. We also find high-level procurement folks who can really help transform procurement departments, help start procurement departments, assess procurement departments. So that’s what I’m, it’s one of my ventures that working out now, and we have a couple of very large-scale try clients on that training side because it’s just, it’s so important. If procurement is fledgling a little bit in that relationship management, it’s a problem.
Thank you, Billy. Kevin, welcome to the show. Tell us a little bit about who you are.
Well, thank you for having us on the show. I’m Kevin Smith, I’m the CEO and founder of CASE Consulting, a supply chain management solution consulting practice. We essentially help small and medium-sized businesses to scale their operations in order to fast forward their growth trajectories. Regarding my background, I’m sure you can hear I have an accent, so born and raised in France where I grew up, and I started my career while, in parallel, running a soccer professional career. So in terms of stories, it’s very interesting because one of my first jobs that I had was in the automotive industry, so I wasn’t that savvy on all the aspects of the supply chain. And I was working on the development of a car, from research and development with the engineering bureau to build all the supplies and processes prior to transpose them into the massive assembly plant. So it was kind of a multi-market project as we needed to address suppliers in Asia, prototype makers in other parts of Europe, and with a mass assembly plant based in Spain while we were based at the research and development center in the area of Paris. So my direct clients were the engineering bureau with the specific request for test and compliance prior to getting the car or some part of the car compliant to go to the market and transpose the processes to the mass assembly plant. So we were in charge, me and my team, to collect all the needs from this engineering bureau, break down the car via the bill of materials, and basically address suppliers that would be able to supply the parts. But it was for an R&D project which is not the top priority, so some of the parts were already in full series, so we could address that with some other facility of the group. And some others needed require some work from different vendors that are really well known in the automotive world and some prototype makers, which entailed, at a certain time, delays in terms of deliveries as the deadlines were pretty tight. There are always hurdles on the logistics side, even though the part is done and it’s coming from Turkey, we can have issues with customs, we can have issues with the truck stuck on the road for any given reason. So I’ve been yelled at several times by this engineering bureau, with the pressure from the board of the brand, which is a number one brand in France, to get this car out on the master assembly plants to make sure they can meet their release plan, as it was the number one bestseller of the brand. So then it was basically the bread and butter, and they needed that new version to come out to keep boosting the sales. So that’s the funny situation that I had to deal with, and such as Greg, I wasn’t that experienced. I didn’t take it personally, but it was kind of challenging to find out the right balance because at the end, when our job is done, because there is not that much that we can do, instead of just calling suppliers, finding solutions with freight forwarders, sometimes making calls to customs if they can accommodate us, and we get lucky enough to have an agent that can push the needle forward. Yeah, that’s the story I wanted to share because I think it’s something that a lot of young folks getting out of schools or just embracing a supply chain career can face, and it’s important to remain calm and cool and always have a positive attitude in order to overcome those challenges.
So, Greg, you mentioned you worked at a company called NetS. What would you say was your biggest challenge or train wreck or problem that you had in relation to commodity management? A large portion of our listeners for this show are indirect materials procurement, which I feel like can sometimes be hair on fire, firefighting mode all the time.
Yeah, when I think back, it’s been quite a few years, so some of the stories are a little bit hazy, trying to recollect all the details. But, you know, going back into my days of commodity management, I reflect, I spent a lot of time working with hard disk drives, and anybody in the hard disk drive commodity remembers the floods of Thailand back in the early 2000s, where full factories were eight feet, ten feet underwater, and they were sending in diving crews to try to recover the equipment.
There was one particular component that I think everybody thought, “Well, we are all multi-sourced. We’re buying from the Seagates, we’re buying from the Hitachis, we’re buying from the Fujitsus, the WDS of the world, you know, back in the day. They’ve all merged now, it seems like.” But what a lot of people didn’t realize is that all of the motors that were going into those disk drives, 95 percent of them were coming from one company. And every one of the customers thought we were dual-sourced, but at the end of the day, when that motor factory was underwater and couldn’t get the parts out, none of us were dual-source. We were all single-source based on that one particular component.
And I remember as we were going through our commodity strategies for the following year after we got through this situation, the commodity strategy now had a whole new outlook on it because it wasn’t just, “What are you going to do to multi-source your commodity?” Well, what are you doing, and what does it look like multiple levels down the chain and into the second tier, into the third tier? And are the suppliers that we’re buying from, are they multi-sourced? So it was really taking your risk assessment down into the second tier, the third tier, fourth tier of the supply chain, where a lot of people hadn’t really looked before. And so I think that was a big “aha” moment, at least for us at NetApp. And we were buying millions of disk drives a quarter. And so I think it hit a lot of other people the same way.
So, Greg, as a car guy, right, a motor gets wet, it’s toast. So I’m just curious, and for the folks watching, when you’re getting divers to go get motors, I mean, what are you guys actually looking for?
Well, the issue wasn’t the specific motors. The issue was that the factories themselves, the factories couldn’t produce. And so the whole supply chain of the hard disk drive motors, they’re teeny-tiny, the whole supply chain dried up, if you will, pardon the pun there, but completely dried up. And everybody realized that we weren’t multi-sourced like we thought. And then when you had 80-90% of the motors coming from one supplier, trying to ramp up the other supplier that was only, you know, 5-10-15%, it just took way too long. And then, Kevin, a question for you. You know, the scenario that you painted, you’re almost going back to Sarah’s point about me being in sports and baseball. It’s like, you know, you’re the guy holding the bat. It’s the top of the ninth. You’ve got two men on base. You need to at least hit a single. But when you don’t hit the single, you know, the team’s like, they’re all coming down on you. So how do you deal with the pressure of that? It all comes down to Kevin Smith, and engineering is on top of you. I mean, how do you respond? That’s an interesting management technique, or there’s, you gotta be pretty aware of the situation. How do you manage those relationships?
I always do the same thing, and maybe it comes down to my athlete background, where I’m able to communicate first, listening, listening. What is their needs and what is at stake for them? That’s the most important thing, to understand why maybe they can get emotional, and we can get into that tense moment, which sometimes are productive and help to grow. But my main focus in this situation is to be able to clearly assess the situation and the state of mind of my audience and my interlocutor. And secondly, being able to kind of address each point following the triptych: quality, cost, and lead time. Making sure that even though I don’t have the product, I don’t have the port, that’s what I’m going to do. This is the step I’m going to undertake. That’s when I’m expecting feedback. That’s how potentially we can receive the product, and I will keep you posted on the next steps in the next X amount of time. So I’m always trying to communicate that clearly to let the other hand understand that my hand, things are kind of done. I can just try to push an action more to get more efficiency from the reaction chain. But at the end, there are some things that are out of my control as we speak. That’s the way I’m addressing those types of situations.
Yeah, interesting question. The soft skills and the people skills are so important in supply chain, and I think finally, they’re coming to light. You can teach people a function or an industry, but you can’t necessarily teach some of those soft skills. Billy, what about you? Piggybacking on Greg’s story, what is your kind of standout train wreck story around a single-source item or supplier, and what did you do about it?
Yeah, you know, I’ll tell you, my time at Bloomberg was interesting because they, you know, people say financial services, but what they really did was to build these terminals that provided a lot of great information to tens of thousands of clients, financial information, traders, money managers. They actually built these terminals. The keyboard was built separately, then they leased the terminal. We had to deal with reverse logistics to get the terminal back once the lease is up. But I got to tell you, one specific instance was the keyboards that were built by a manufacturer in the US had a significant issue where, I don’t remember exactly, but it wouldn’t talk to the terminal. Some of the keys were not actually performing the functions on the screen they were supposed to. There were some intellectual property issues.
So, in a very short order, in partnering with procurement, procurement had to go and find a new keyboard manufacturer, I mean, like fast. So, in that space, there were like three of them, one was in, I think two were in the US, and one was in Mexico. Just imagine, you have an active customer base, tens of thousands of keyboards go bad, you need to stockpile some keyboards. They stockpiled some bad keyboards, then you have to find a supplier, have them build it, get the membranes down, the electronics down, the forming down, test it. So, all of this was happening while customers were having these new subscribers. The good news is, with the reverse logistics, they were receiving back keyboards that worked. You just refurbish them and send them back out with the new terminals. But they had to backfill the keyboard stock. It all worked out in the end, but during that three-four month process of finding a new keyboard manufacturer was incredible.
But I’ll tell you, the way that us in procurement partnered with supply chain is absolutely paramount. Anyone listening here today, make sure you have a phenomenal relationship with procurement or whoever helps you with the sourcing and negotiating contracts, legal, IT. Make sure that solid bond is there. And then, I would also say, anticipate everything. Don’t ever say, “Oh, that’s not going to happen to us.” Greg, a phenomenal story about, you know, yes, there’s a rainy season, but to have eight, nine, ten feet of water, you’ve got to anticipate every possible scenario. Have a standard operating procedure for any one of those scenarios. Make them up if they sound ridiculous. It could still happen. Super important.
So, we did not even cue this up this way, but Billy’s story about reverse logistics actually ties directly into a story from Greg. So, Greg, when we were at lunch, I actually remember you talking about transitioning from a manufacturing supply chain role to something in reverse logistics, and there were a lot of challenges that can come with reverse logistics. Maybe you could just explain what it is and some of the challenges that you had faced, because Billy mentioned it as well.
Yeah, I mean, reverse logistics, I did this all the time. Yeah, what is that? I mean, it’s essentially returned, right? When you buy something, the easiest way to explain it is you buy something on Amazon and you want to send it back. That return goes through a reverse logistics process. I joined the reverse logistics team at Lab126, which is a part of Amazon that does all of their R&D products, the Echo, the tablets, the Kindles that everybody’s familiar with. Not only was it just, you know, I was transitioning into a new company where I had to learn all these new products because they don’t actually call it an Echo, right? Everything has its code name, so we had to learn all the 35-40 code names and all different processes and so forth. But then, on top of it, what I took out of the whole process is that reverse logistics is 10 times harder than actually forward logistics. Manufacturing a product that has a bill of materials that says, “I need one of these and two of these and ten of those,” is much easier than reverse logistics, where it comes back and you say, “I might need one of those, I might need two of those, I might not need any of those if that part’s not damaged.”
Looking at a tablet, for example, you had different severities of damage on the product, and you have to look at the overall value of the product, the cost of the product, the cost of the components on the product, and then determine, “Okay, if I got a tablet back and the screen is completely shattered, well, how much is it going to cost to replace that screen? Or how much is it going to cost to replace the back panel if it’s scratched up? Or if we have a speaker that’s missing, do we have to take the panel off and replace the speaker?” The engineering that goes into all of the decisions determining, “Do we repair it or not?” is one completely different aspect than your normal manufacturing process. But then, the planning of all those parts, because now you have to take into account what I learned about was attrition rates, right? Every time a product comes back with a damaged screen, you have to replace it 100% of the time. But you may only have to replace 50% of another component when every time that screen comes back damaged.
So, it really throws a whole another variable into your planning process when working with contract manufacturers doing last-time buys because, especially in the consumer electronics world, you launch a product, you go up, and you build three, four months, and you build up all this inventory because you’re going to come out with another one for the next Christmas season, and you haven’t even gotten, you know, you’ve maybe gotten 100 to 100 returns back, and now all I have to do is the last-time buy that’s going to last us for five years. So, the planning process, it’s a real crapshoot. So, understanding all of your assumptions that go into those buys, understanding all of your attrition rates, understanding are you on track, your actual consumption, over-consuming, under-consuming, because the one thing that we all know in supply chain is that your forecast will be wrong. That’s just how wrong will it be, and in reverse logistics, it is definitely going to be wrong. So, it’s trying to minimize that and really understand, you know, what’s the gap.
So, so far, if you allow me, Greg, I don’t do exactly what you do on the reverse side, but I got to imagine another nightmare is as these things are coming back, you know, you have to predict what you need to stock in order to make these repairs to get them back out. So, have you, can you tell us a nightmare about, oops, we forgot to order this widget, and like, what ramifications does it have systemically? I’m curious. And Kevin, same thing for you after Greg.
Yeah, absolutely. Yeah, I think obviously the forecasting process for reverse logistics, and I mentioned this once as we were doing a like a reverse logistics 101 to the entire company, was when you have a manufacturing bond, you have one BOM, right? We had like eight BOMs because we had different bill of materials based on the type of return you were getting, if it had to be repaired, if it didn’t have to be repaired. There’s multiple different BOMs that we had to deal with. So, absolutely, I think things happen. You didn’t plan enough or we over-consumed the last-time buy on that panel way faster than we thought. So, what happened? You basically, in the world of Amazon, it’s all about customer obsession. So, you say, “What’s the next closest available product that meets that customer’s product?” And you end up upgrading them. You give them the next best product that you can to fulfill their return. So, my product was $100. In theory, I might get a product worth $200 that’s worth $250 if you can’t. Yeah, usually not that extreme. There’s usually, you know, for example, you go buy a new tablet for Prime Day, just a little plug for Prime Day there for everybody. But you can go in, you buy an eight-inch tablet, and say it breaks within 45 days or it breaks in nine months if it has a one-year warranty. If they don’t have that product to send back to you or can’t repair it, they will go off and they’ll provide you the next version, the newest version, or there’s always another product targeted to replace the one that gets sent back if they can’t replace it, at least in electronics. Yes, in customer electronics, yeah, for sure.
I think I can share my experience here. I had to go through a program of reverse logistics 101 for an online company back in Europe. It was a young startup buying liquidation stock, old stock, slow movers, and just basically building pop-up sales out of those, whether it’s Nike, whether it’s going to be a Samsung tablet, it doesn’t matter if a fridge. And basically, this company grew up tremendously fast, and they never anticipated the river’s flow. So they quickly appeared to have six facilities to handle their returns, two facilities to manage the sorting, the qualifications of the product, whether they’re proper to go back in stock, whether they need to be refurbished, and with a lot of rework and repackaging, or basically going to description or to the side channels for reaper, especially specifically for electronic consumer goods. So the challenge there was to be able to forecast, as Greg mentioned, how much, how many returns are we going to get out of those pop-up cells? And it helped a lot to be able then to kind of access in terms of resources what are going to be needed at a given point of time, just following a distribution, a normal chart, whether we’ll need to have X amount of labor, X amount of a component in stock to reproduce, repackage, refurbish the product, putting it back in stock, and recreate sales out of those for electronic consumer goods purposes. The company didn’t want to take the heat anymore, and they just decided to sell all defective items that we couldn’t repackage on site to a company specifically dedicated to that business as there were specialists of that. So it was the solution that we found there at the time in order to kind of streamline a maximum or reverse logistics process and try to save as much as we could over the loss because it’s a loss anyway and being able to regenerate sales with a good, qualify properly to be refurbished and resold to the end consumers.
Kevin, do you think looking back, was that the right decision to make?
Absolutely. When you’re not a professional of electronics and you’re selling government electronics, some food and beverage, as it’s liquidation stocks, you don’t want to get the burden having some specialists higher on site just to do so. The economical ratio is not there to do such. So definitely, it was the best decision to make.
So, Kevin, you mentioned something that I think Greg and Billy both have experience with as well, going and working for a startup or a very small organization that doesn’t have a procurement or supply chain function established and built out. So, Greg, maybe we’ll start with you and have you share a train wreck or nightmare story going to a startup, within your case, a much larger organization, so it was well-funded but nothing was in place.
Yeah, I’m actually living and breathing it now, going over to Amazon Web Services. We’ve taken on a new project, and we’re trying to do some new things, and I’ll leave it at that. But as we’re doing this, we are in full startup mode with these new projects, and there are no supply chain systems. There’s no processes. There were a few suppliers chosen when I joined, so that was helpful at least. That part was already in the works, so it was now, okay, let’s meet the suppliers. Let’s understand the suppliers. What are we buying? What’s the supply chain look like? And just let’s get it started. As we’ve kind of gotten through that, you know, the blocking and tackling, as I call it, now we’re starting to realize, oh, we don’t have this. We don’t have that. We don’t have a solid change management process where we can document changes within our bill of materials and communicate it out to our contract manufacturers. We don’t have good visibility to do inventory across multiple contract manufacturers. And the further down you get into these issues, you realize, wow, we’ve got a lot of work to do. And that’s really kind of where we’re at right now in this process, in our journey. We are producing a product and getting it out to meet our customer needs, but it’s really like just bootstrapping it right now. And the nice thing is having the experience, you kind of see, oh, this is where it needs to go. I know what direction we need to take it. But unlike in a startup where you just get, well, let’s get three people in a room, who are the people we need to talk to? Okay, let’s go do this, let’s do that. Boom, now when you’re in a startup mentality in a large company, now it’s, I’ve got to go get 300 people in the room, and we have to get lots of stakeholders and lots of buy-off and lots of signatures. So it’s just a lot more difficult, I would say, to get things done, which definitely becomes frustrating. But with the one thing I like about our smaller group is everybody’s on board to get it done, and whatever we need to do to make it work and make it better, everybody’s on board. So we definitely have the right mentality within the team to do the heavy lifting that’s required.
Yeah, and I’ve had to, Sarah, as you said, with respect to startups or even more mature organizations, the nightmares come when there’s one overarching thing that’s missing, and that’s being not aligned. So if you take the approach when you first get into this environment, startup or something more mature, get up on that balcony, as I like to say, take a look, take a 180 or 360 view, really understand what the immediate goals are for the first three months, six months, call it 12 months. Make sure that your internal stakeholder base is absolutely aligned to the strategy. This way, it makes for more productive meetings, it makes for more accurate action items as the steps as you move along this path. But if there is misalignment at any level, if there’s disagreement at any level, if there’s one group that doesn’t really understand why you’re there or the purpose or they say, “I can do it better myself,” there’s going to be nightmares. So it’s absolutely critical, as I said before, just about this alignment at all levels, have frank conversations, get in a room if there’s someone who doesn’t support the mission and say, “Look, what’s the issue? Let’s overcome those issues,” and you will prevent nightmares going forward. And of course, you know, SourceNow.pro can help.
I just heard what you said, and it’s very interesting. You mentioned alignments, you mentioned understanding, you mentioned the different stakeholders of the value chain. What I noticed over my 13-plus years of experience in supply chain is we have to do a lot of education. So, getting people to understand what is in the line on the whole, hands step by step to get them where the company needs to be. It’s not always an easy part. So, getting the alignment and everybody on board with the plan, from what I’ve seen so far, that’s not always the easiest part. You’re right, even with a CEO, it might not work because there are goals that kind of go against each other. That’s why every time I get into a company, especially a small company, I try to understand what are the short, mid, and long-term goals. You spoke about those short-term goals. For me, short-term goals can be only quick fixes. When we’re looking at the big picture, we need to build a solid frame and foundation from the get-go. As soon as we identify the gap that we have to patch in our value chain, when it’s not done, we’re just building a Band-Aid over Band-Aid. And in the end, it might work for a while, but it’s gonna collapse inevitably at the moment, and rebuilding from scratch is going to be even worse and more complex to do because all the history is coming into play.
Yeah, so Kevin, I’ll tell you, you know, one of the biggest things that I find as we travel, quite frankly, the world, different cultures, different ways of interacting with people, a lot of it comes down to perceptions. It’s what does that not just that department, how do they perceive you as an individual, but your role? If you understand the perceptions and you have the tools to manage the perceptions and the personalities, then alignment, nine times out of ten, there’s a realignment. If you don’t know really what an individual’s goals are, what they’re told they need to accomplish, and you have yours, what you think you need to accomplish, and they’re not aligned, you’re just gonna always run in parallel, and you’re never going to be together. So, understanding even things like emotional intelligence, really understanding how to overcome perceptions, how to interact with those leaders at all levels, will really drive results. And it’ll take that 12-month timeline and truly bring it down to those three, four months that we all love. I mean, especially in some of the competitive markets that some of the companies are in right now, if you’re not aligned, you’re going to be a laggard, not a leader. It’s just, that’s just the way it is.
So, I’d like to throw supplier collaboration into the mix here. So, we’ve been talking about dealing with internal stakeholders and a startup or smaller organization. I think the most important stakeholder is your supplier. Sorry, I’m just so passionate about this, but in the same way, I talk about working with internal stakeholders, suppliers absolutely need to have a seat at the table. If you’re having strategy sessions about a product, about reverse logistics, about shipping, about whatever it is, you gotta have the supplier because they have a vested interest in your success. You can’t work in a vacuum and then say, “Hey, supplier, we want you to do this.” They’re gonna be like, “Wait, wait, we could have, if we were at the table, we could have done it in such a different way that makes your life easier.” And then I’m a firm believer in having periodic business review meetings with suppliers. So, if you take a look at the bell curve, on the left side is your most strategic, maybe it’s 10 or 20% of your supply base. Then you get down into your long tail suppliers. We always hope to get the long tail, push them over to somewhere in the middle. But that 10-20% of the highest strategic suppliers, some of them you should be meeting with daily or twice a week or at least weekly, just to really align with procurement. If, in the case of IT, with IT, if it’s in HR, you get the leaders from each of those groups in there. You get the suppliers. I have found some of the biggest success stories when a supplier has a seat at the table and they are working on a new solution, technology, process. When I was sitting at the table and leading procurement teams, I wanted to know about what they’re doing before any one of their other customers do, because I want to have the rights to early adopt that process, that technology, that theory, whatever that is. And if we can jointly deliver it to the marketplace together, you are super powerful and you are absolutely in the driver’s seat.
Kevin or Greg, train wreck. Let’s start with a train wreck supplier story and then maybe turn that into what you learned about the importance of collaborating more with your suppliers.
Kevin, take that one first. Okay, well thank you. So, I was working in China, a different culture, and it was a young company as well establishing its supply chain. They found this supplier, so I got on board a few weeks after, a few months after the company started, and I headed to China, spending about a month there, meeting that main supplier, the main and only supplier that they had at the time. While we had a lot of compliance on the U.S. side for the product, as we were manufacturing e-cigarettes dedicated for the cannabis industry, vapes, we were trying to find the best solutions in order to get a manufacturer with GMP certification, ISO certification, a supplier able to understand the heavy metal regulations, and so on and so forth. The supplier that we were working with didn’t get what, in turn, on the U.S. side, and why we were supposed to get those agreements and keep working with them. So, that’s where the alignment, as Billy mentioned, comes into play. We found this common ground and they understood where we were coming from, why we needed those reliable sources of supply for ceramic coil in order to avoid as much heavy metal in it as possible, why we needed the GMP certifications as a product that needed to be compliant with FDA, even though it’s not federally legal worldwide. And so, we were able to work collaboratively there as they have their full network of suppliers in China to find solutions, to find the best provider of ceramic powder to avoid lead and deliver a best-in-class product for the consumer market and the brands that we were servicing here in the U.S. side. Over time, we were able to work with them to get them to a GMP certification through a certified certification body called Intertek, I’m sure you know about it, and work as well toward a NASAL certification, which reinforced the credibility of the organization in the U.S. and also gave us kind of an insurance policy, I would say, about the quality of the goods that we were delivering to our customers here in the U.S. and in Canada.
Yeah, the certification piece is really interesting, Kevin. That’s hardcore supplier collaboration when you’re not only exchanging ideas and data, but you’re actually helping move the supplier forward with a certification which will potentially open up a whole new revenue stream for them.
Greg, what about you? I’m trying to think, what’s the best one here? I kind of want to go with something that leverages what Billy was talking about on alignment. You know, supplier alignment. We’re working on a project now where we’ve had engineering has developed this great product. They’ve developed it, they’ve gone to the contract manufacturers now and said, “All right, well, here it is. We’re going to build it.” And the very first meeting I walked into with one of our partners, they said, “When are we going to talk about designing for manufacturability?” It was just like, wow, you know? You had a bunch of really smart engineers who had put together this really cool product and rolled it out, and we are building it. It’s a good product, but it takes a lot of man-hours to put together. It’s difficult to put together. And our partners have said, “Well, if we could change a few things, we can actually probably cut the labor hours by X percent, saving you X amount of dollars on labor and so forth.” And that’s where that alignment really comes in. Here’s our design, what do you think? How do we work together to make it so it’s manufacturable and we can do it as efficiently as possible and deliver the end goal of what you really need, of what you’re looking for? But we can also work together to deliver it at the lowest cost. And I think that alignment with your suppliers, whether it’s on product design or whether it’s on system rollouts or just understanding the supply chain, right? I also find that the communication is so huge with your suppliers, making sure they understand what you’re trying to achieve. Going into a solution, we were rolling out a system at one time with one of our contract manufacturers, and I don’t think anybody had ever really explained to them what was the overarching goal, what were we really trying to achieve. And when you just start breaking it down into very high-level building blocks as to this is what we’re trying to get to and this is how you play a part in this and this is why you’re important in this piece, in this project, the light bulbs go on. And all of a sudden, they’re a lot more willing to participate, to be part of the project and deliver it to be successful.
So Kevin, you have a lot of global experience, which is one of the reasons why I asked you to come on the show because I think everything is so interconnected. What would you say are the major differences between the EU and the U.S. market, and maybe a train wreck or two that you’ve lived through managing those differences?
Speed, absolutely speed. Speed is essential here in the U.S. Everything is up and quick. Products appear, disappear, succeed, and definitely speed is the most important component. As a supply chain professional coming from Europe, I didn’t get that at the beginning. I was focused on delivering quality work, making sure every single aspect of my supply chain is tied up, and I can be 100% sure about what information I’m conveying. I realized, I wouldn’t say quickly, I got a slap on the wrist a couple of times, that it’s not about that. As long as you get 70-80% right, just keep going. I’m gonna figure out the 20% then. While in Europe, we kind of bore the workflow through bureaucracy. Greg mentioned signatures, 300 signatures prior to moving on to something. That’s more the European style, I would say. It’s just two different cultures, but definitely speed is of essence here in the U.S., and that’s what I learned so far and what distinguishes the two markets.
Greg or Billy, any global market experience that you’ve had that stands out?
Yeah, I’ll throw just a different take on my international experience. If you’re a leader in supply chain, you really need to understand that there are different labor laws everywhere, especially throughout Europe and Asia. It’s super important to understand what those are as you’re operating your supply chain groups, but hopefully, you have a team that can guide you. The other thing is, as I go back to alignment or working with different people, there are different cultures around the world where people communicate very, very differently. For example, when I toured Asia to do some training, it was very if you sit in a room of 20 people and you had people at different levels, you had men in the room, you had women in the room, some feel that it’s appropriate not to speak just because of the culture. So, it’s really important to understand as you’re operating your supply chain or procurement operations to really, don’t assume that everybody else in the world works like they do here in the States. They just don’t. And if you understand those different cultures, take the time to understand the people and how they work, things will work just that much better, faster, and smoother, and you’ll get some really, really good ideas out of people who normally wouldn’t share. That’s really my take on it. I agree with you, Billy.
Yeah, I would agree with both of you. Speed, now 100%. Kevin, you have Europe going out on a three to four-week vacation and everything stops, and it’s like, that’s okay. And over here, that’s not okay. I mean, that’s one of the big differences I see, and it should be, though. It should be okay. Yes, completely agree. And you know, on the communication front, the one thing I find is a lot of times in the U.S., we will ask questions, and then people will respond with not just the yes or the no, but the yes and. And I think when you’re dealing with a lot of other cultures, you will get just the yes. And so, you really need to be very detailed in your questions if you want to know five things. If you want the yes and answer, you better be specific in what you’re asking so you can get those details, or it’s going to be three days of emails going back and forth over different time zones trying to just figure out some pretty simple answers.
Well, I want to thank Greg, Billy, and Kevin for coming on our show today. Our next show will take place on Tuesday, August 8th at noon Central. I encourage you to reach out and connect with all three of them on LinkedIn, and enjoy your afternoons.