Manufacturing Supply Chain Woes
Michael Ryan, Bo Bradshaw, and
Welcome to the Manufacturing Supply Chain Woes Show. I’m Sarah Scudder, CMO at SourceDay and the show host.
Today, I am joined by Bo, Sarah, and Mike. They have extensive manufacturing experience, and I’ve asked them to share some of their nightmare supply chain stories. Today, our show’s sponsor is RapidRatings.
I’ve been friends with their team, actually, for many years, used their software product myself at a previous company. They allow manufacturers the ability to check and track the financial viability and financial status of their suppliers. So, if you have lots of suppliers and you’re really looking at risk, you may want to check out their solution. I found great value when I used it.
So, to kick off our conversation today, drop a note in the comments for us. Tell us where in the world you are joining us from. It’s always fun to see. We get typically a pretty global audience. So, drop us a note and then also put a word or phrase to describe your biggest manufacturing train wreck. So, some crazy supply chain thing that’s happened to you. Put a note or phrase, and then our panel will be open to questions throughout the show. So, if someone’s saying something and you have a question or something you want to add, go ahead and drop that in the comments throughout.
So, Bo, I want to start the conversation with you today. So, I’d like to have you do a super quick intro, and then my question for you is around telling me about a time when you inherited an absolutely disastrous supplier mess.
Thank you, Sarah. Happy to be here. So, hello, everyone. I’m Bo Bradshaw. I’m the procurement director at Edgio Incorporated. So, I am really responsible for building and guiding the procurement department at Edgio for all things supplier and supply chain related. And I have an extensive manufacturing procurement background. I was at Dow Chemical for eight years prior to joining Edgio. And so, Sarah, in answer to your question, I’ll tell you about a time where I had moved into a sourcing manager role at the time. So, this was several years ago, and my predecessor had ordered a pre-fabricated building. And when I inherited the space, that order – and it was a very large order, it was a seven-figure order, and it was for multiple buildings – and it was critical to the project at the plant. And when I inherited that order, the supplier had continued to miss deadlines. And so, I really became concerned, started to dig in, and found out that it looked like the supplier was having some financial difficulties. And so, digging into that a little bit more, I became more and more concerned because this was a privately-owned entity, and that they were going to go bankrupt and we were going to be left holding the bag, which would have just killed the project timeline on the deliverables.
So, what I did when I became concerned is I engaged directly with the CEO of that company – again, a small privately-owned – and really took over in regard to their sub-supplier issues, as far as we went actually buy the components for the building ourselves and then go ahead and get those routed over to the manufacturer of the buildings. That way, we actually own the components as they were getting on site because what I didn’t want to have happen is our supplier be spending our money and then they declare bankruptcy, and we can’t get our buildings out from behind the fence. So, I did that as well as I also renegotiated the PO deliverables. We had milestones set on the PO, and so I renegotiated those deliverables to better manage our cash flow and then manage the risk. And so, with a combination of those, as well as myself and the project procurement manager – because this was a capital order – I would follow up weekly with the CEO, and the project procurement manager would follow up daily with the actual project manager on the supplier side to make sure that we were in sync. So, to kind of bring it all to a conclusion, we did get all of our buildings, which was a relief. And fast forward about nine months later, the sales rep from that supplier called on me, and we actually had a meeting in the office. And come to find out, he had actually changed companies, and unfortunately, they were having very severe issues. Their people weren’t even getting paid. He had worked many months without getting paid. So, the lesson there is it’s really important to keep an eye on your suppliers and have a contingency plan if you do see that they are getting into financial difficulty. There are ways to manage through it so that you’re not left holding the bag. And if you are left holding the bag, you’ve at least mitigated your risk as much as possible.
So, we had a comment come in from the audience. I’m going to flash it up again. Trygve said, “I had to buy a new fridge, and the one I wanted wasn’t available for four months. To me, features, benefits, costs aren’t all I consider as a buyer now. It’s availability, too.” So, I wanted to see if Sarah or Mike or Bo have any insight or feedback on his comment.
So, I actually had a recent experience I think pretty similar to yours, Sarah, as far as furniture delays were concerned. So, we recently moved, and we also needed new furniture. And so, one of the key issues for me was, is it in the warehouse, or am I going to be waiting for months and months? So, similar to the comment made about the fridge, absolutely, supply chain issues are still persisting. And so, when you’re buying anything for your company or in your personal life, if it’s anything manufactured, I suggest you go ahead and verify with the business you’re buying from. If it’s something that should be a completed unit, do they have it in stock? And if not, where are they getting it from? They can promise you a lead time, but those suppliers that are on the retail side, especially, have very limited control in regard to what they can do as far as shipping timelines are concerned with manufacturers. So, I completely agree with the comment that, yeah, it’s definitely a consideration. And I don’t think that we really have an idea when those issues are going to end.
Alright, Sarah. Happy to have you today. You’ve kind of done a career pivot recently. So, I would love to have you do a quick intro, talk a little bit about your background, and what you’re doing now. And then, we’ll dive into my first question for you.
Yeah, so I’ve spent the last 15 years working at different levels of supply chain for some of the largest Fortune 500 companies – Kellogg, Stryker, Pella, DHL. And I’ve taken my experience from all these large corporations, and a lot of them have these endless budgets, but yet there were still these huge gaps in their supply chain management and procurement activities. A lot was just manual processes that we had to do on the side. But kind of built this relentlessness for dealing with stockouts, shortages, backorders, but really passionate about sharing my experiences to help other businesses build their resiliency when it comes to supply chain. So, recently now, co-founded Tron Solutions Group, which is a women-diversity owned business consulting group. We focus on supply chain and hopefully going to help small to medium businesses in the industrial, construction, and manufacturing spaces help build more resiliency when it comes to their supply chain. So, really happy to be here and hopefully, there’s no pressure to be the other Sarah, who is also a woman of supporter of women in manufacturing, and hope I represent as well. But yeah, so thanks for having me.
Awesome, and congrats on your new endeavor. Being an entrepreneur is not easy, just ask Mike. It’s a, it’s you, you control your own schedule and your own destiny, but you work a lot.
Yep, yep. So, Sarah, given your background in supply chain and working for several large manufacturing organizations, my question for you is around so much focus was on the constraints of raw material for supply and manufacturing. What other procurement struggles did you have for other critical items?
There were a lot of other things that have caused challenges and struggles, not just raw materials. Yeah, so one example is the fact that a lot of companies, they really focus in on their raw material supply. However, another element that we really experienced at my last company was shortages of critical replacement parts for equipment. And that is something that I don’t think people really realized until it was almost too late. So, we had a CNC, that was our aluminum router CNC that kept overheating and causing the machine to shut down. So, we knew we needed a long-term fix. So, when we reached out to the manufacturer to order a new chiller, they said, “Oh, it’ll be eight weeks.” Well, sure enough, we ended up having it go down in that eight weeks. So, what we did is that we had to get real creative, and we actually created an air conditioner box. We actually built a wooden box and someone’s leftover air conditioner in a garage and tried to self-cool down the unit, and it worked for about nine weeks. But the chiller that we had ordered still hadn’t arrived.
So, week 10 comes and it dies and will not turn back on, and then week 11 comes in week 12, and we still don’t have our very critical piece of equipment up and running. So, we had to get pretty creative, and one of our engineers decided to watch this YouTube video and saw some woodworking shop in Arkansas that bought a chiller and was able to use it. It was kind of a, you know, not maybe the preferred chiller, but we were trying to find a chiller. Again, couldn’t find it from anywhere, so we ended up going on to Facebook Marketplace, and we found a chiller that someone was selling. They were using it to cool down their Bitcoin Farm in the garage, and they were selling it in order to upgrade it to a bigger chiller unit. So, we literally all of us in the office scrounged up whatever petty cash that we could, got the $300 together, met this person in a gas station parking lot, got the chiller, got it back to the building, and then we were able to get the unit up and running. The real chiller that we were waiting for from the manufacturer still didn’t show up for another eight weeks.
So, if we had waited, we would have still been down. So, that was a lesson learned. As then we started to realize that we need to source and have more of our spare parts, of our critical components for these pieces of equipment, ready to go, you know, on standby. And that’s just something that a lot of people don’t think about when you have a supply chain crisis. You focus on your raw materials, but that was something that, yes, it was great we had some raw materials, but you can’t really do anything with it until you can run your equipment. Looping in your maintenance group into when you’re starting to have these supply chain constraints can help prevent you from having these woes that we ended up experiencing of equipment going down and significant delays. But, you know, luckily the Bitcoin Chiller got us up and running for a little bit to hold us over. So, micro bow, any thoughts or comments on Sarah’s experience identifying critical spares? I mean, there’s a reason why they’re called critical spares, and Sarah, I have to, you know, high-five you for the ingenuity because you were in a position where the machine had to keep running. You had customers who needed your parts needed the product, and I applaud the creativity because, hey, you know, if you can’t get the parts you need, you’re going to figure out how to make it work one way or another, and that’s a fantastic example of understanding what those critical components are, where they are at risk, and keeping a spare. So, very cool, thank you. Sarah, my question, story, and exam flow. So, there’s a lot of small and mid-sized manufacturers that can’t necessarily go out and stockpile large amounts of critical parts. So, how did you manage from a cash flow perspective? Any advice for people that are working for smaller companies? Yeah, so one of the things that I would suggest for any small to medium businesses is you can work with your manufacturers or, for those critical parts, and discuss with them what do they have ready to go, what do they have as kind of an off-the-shelf stock ready to go. One of the downfalls for us was the fact that this unit, this part that we needed, was coming from Europe, and everyone knows what happened with Europe. So, those were things that what we should have investigated a little bit more. So, that’s why I wouldn’t I would recommend for any small to medium manufacturers is look at where is that part coming from, is there something stateside, is there a suggested, you know, a different unit that you could have just in case. But what are the ones that it’s like it has to be the branded one, and that’s where you want to spend your money, that’s where you realize you’re going to lose more money if you don’t have it compared to just investing and keeping that, you know, in your four walls. But a lot of times, you can work with the manufacturers and find out where they’re at on their critical parts of storing themselves and then figure that out for what’s best for your business. Yeah, good, good, the priority ranking, I think, is really important, and often just because it’s the biggest spend doesn’t mean it’s the most important. You need to look at what’s going to be most critical to revenue impact. Very, very important. And if I can just build on Sarah’s comment real quick, there, the other thing that you can always look at doing, because she absolutely has a great insight into working with the manufacturers, you can also work with your manufacturers and distributors when you’re looking at contract negotiations and talk about how can we have a reserved spare inventory that we don’t own but you have reserved for us for those critical spares and partnering with them on identifying your own critical spares. That way you at least know that they are committed to a certain level of sparing. And even with smaller-sized businesses, you might not be able to have a lot of spares, you might not have the leverage for that, but thinking about putting those in the contracts as well is another method that you can look at to manage your risk.
But I agree, Sarah did an excellent job with the creativity in partnering with the manufacturer to get through the chiller issue. I say I like to say that supply chain people are magicians, we just make things happen. So, Michael, welcome to the show. I would love to have you do a quick intro, and then my first question for you is when we were prepping for the show, you told me about a story where you had major inventory discrepancies. So, we’d like to have you share that.
So, we’d like to have you share that.
Sure, I’d be happy to, Sarah. Thank you for having me today. My name is Mike Ryan, and I am the owner and founder of the very creatively named M. Ryan Group. What I do is help manufacturers take friction out of their supply chain. So, if there are supply chain problems, inventory problems, cash flow problems, we begin with the end in mind, identify the symptoms, and then run them to ground to identify the root cause and put solutions in place.
So, inventory problems… it’s interesting because typically, you know, people tend to forget that inventory is an output. It’s the result of the balance or imbalance between supply and demand. So, if there is a mountain of inventory or a molehill of inventory, it’s a direct result of something upstream. It could be an optimistic sales forecast; it could be a procurement agent that got a bargain and bought a year’s supply of a raw material.
Beginning with the end in mind, we figure out okay, where’s the pain and then what caused that pain. And to answer your question about catastrophic inventory problems, I had an opportunity to work with a client where they were having some serious cash flow issues. And one of the first things we do is really identify the buckets. We take the balance sheet, look at raw materials, work in process, finished goods, as a way to start narrowing down where the problem is occurring.
With this client, it was raw materials that were really through the roof. And the easiest thing to do and the typical approach is just dump the balance sheet and sort it from highest to lowest. And one of the raw materials in the top ten that caught my eye was brown craft paper, and they had something to the tune of three hundred and eighty thousand dollars of brown craft paper on the books.
So, I’m sitting down with the CFO, and I said, ‘Hey, I’m just really curious. Can you show me where this is? Because I can’t even imagine what $370,000 of brown craft paper looks like.’ And he explains that it’s packing material, you know, they would tear up sheets, crumple them up, put it in a box, and I’m like okay, I understand what it’s used for, but what is three hundred and seventy thousand dollars worth of craft paper look like? And he kind of demurred and he says, ‘Yeah, we know what that is.’ I’m like okay, well, it’s on the books, and he’s like yeah, it’s an expense item. Somebody was supposed to include it in the bill of materials, so the inventory got consumed every time a part was shipped, but the engineers never figured out how to do that.
So, we true it up during physical inventory, and I’m like okay, so how much Brown craft paper do you really have? And he’s like, ‘I don’t know, like twelve thousand dollars worth,’ and I’m like okay, so you need to take a write-down for $358,000. Like you need to raise the flag on that. And he’s like, ‘What do you mean?’ I’m like, we have to go to ownership and let them know that there’s going to be a $350,000 inventory adjustment. He’s like, ‘Well, I don’t want to do that.’ I’m like, you have to do that, right? If you don’t want to do it, I’ll do it. I’m happy to, but we’ve got to get this fixed.
So, you know, we put together just a really simple one-pager to explain what the problem was, what the root cause was, and how they were going to fix it moving forward. But, you know, at this point I think it was September, so they still had about three months to fix it. And I’m like, listen, you may want to take that $358,000 and write it down a third, a third, a third this month, next month, a month after, but it has to be addressed.
So, you know, that to me is one of the textbook examples of, you know, either awkward practices or awkward processes showing up on the balance sheet and ultimately impacting the cash flow and the results of the business.
Bo or Sarah, any insights or comments we want to make on Mike’s story?
Yeah, I know that this happens a lot in many different types of businesses. When I worked in food, when I worked in medical devices, in just raw consumer materials, and this happens so often. That’s one of the things is making sure that the engineering team or whoever is part of the programming team understands the impact upstream of ensuring that consumption is pulling out correctly and also at the correct rate too. You know, I know for the industry that I was in, we always had issues when it came to fasteners. They would only plan for a certain amount, but the team on the manufacturing floor was using double the fasteners. Well, no wonder why we were always running out of fasteners. So, understanding how having correct BOMs in the consumption of BOMs really impacts the whole financial performance of the company is super critical. And that’s something that I don’t think enough people upstream when they’re doing design, when they’re doing loading of the data, way at the front end, people a lot of times don’t come back and revisit it. And that is something that I think companies need to be okay with spending that money for reprogramming or re-entry or whatever it is because it’s actually going to save you a ton of money on the back end.
To build on that a little bit because I agree with everything that’s been said, is that in addition to making sure that the BOMs are accurate like Sarah mentions, you’ve also got to make sure that the engineers that are putting the BOMs together are taking the technical ownership for what they need the BOM for. So, that they understand what is available, what may be going end of life, what may be going into service, what the new replacement is. Is it like for like? Does it need to be qualified internally? All of those kinds of things, because what we see a lot is a tendency to go to procurement for those things. Right? ‘What is available? Is it a one for one?’ And the reality is that we can negotiate the best deal for you. That’s what we do, right? That’s our bread and butter. But at the same time, we need you to own the piece on the technical side so that we make sure you get exactly what you need. And really working to communicate that change if it is a change your organization needs and managing it and explaining the value add and the risk.
Which I think we’re seeing a lot in the retail space, Bo, where supply chain teams completely stockpiled. They pivoted from just-in-time to having a year or two year supply. Crazy amounts of inventory. Now, we’re seeing lots of fire sales and I think we’re going to see significant discounting through the holiday seasons this year because people over purchased and now they’re trying to unload and get something for their inventory.
So Bo, when we were prepping for the show, one of the things that you told me about was a strategic supplier failure. So, I’d like to have you tell me about a time when your strategic supplier failed to perform for you when something was super urgent, and then what did you do about it?
Sure, so I had an incident occur on a Friday afternoon around three o’clock because, of course, that’s when the emergencies are always going to happen, right? So, in the manufacturing environment, that’s the way that it works. The failure on the supplier’s part is that we had a very large contract with a supplier to provide all of our filters on a global basis for all of our sites, and we’re talking dozens and dozens of sites.
The issue was that one of our sites overseas needed a filter urgently; otherwise, it was going to shut a key component down in the manufacturing process, and it’s basically going to bring the plant down. So, we only had a few days to actually go ahead and get the replacement in before the plant shut down.
They reached out to me to say the supplier can’t get us this. What can we do? What options do we have? They’re telling us that they can’t get it locally. Can you get it from the U.S. and have it hotshotted to us? What are our options?
So, I went to our incumbent supplier, and the reality was they just didn’t have any stock globally, which was a separate issue as far as contract availability requirements are concerned, and we addressed that later. But the emergent issue was the reality is they didn’t have it and weren’t going to be able to get it for us in time.
So, what I had done previously that really came into a benefit in this specific situation was that even when I negotiated the contract and awarded it to who ultimately became the incumbent that I was talking about, I made sure that I actually verbally connected with all the suppliers that went through my sourcing activity.
To not only let them know out of respect and professional courtesy that they were not successful but also to communicate in a way to talk to them about not breaking the relationship, right? My philosophy has always been your incumbent supplier is going to run into an issue at some point where they can’t deliver something for you, and it’s going to be an emergency.”
So, you don’t break the relationships with the other potential suppliers, not only when the contract’s up for its next sourcing event but when those emergencies happen that your incumbent can’t handle, you need an alternative. So, I’ve always employed that methodology in my own negotiations, and fortunately, I called one of the bidders that was not successful and I said, ‘Hey, I know y’all didn’t win the contract, but we need part XYZ. Can you help us? We need to get it overnighted immediately.’
So, we’re getting close to four or five o’clock at this point, and he said, ‘Oh, man, let me see,’ and so they basically worked all weekend to get that part shipped and hotshot overseas to the plant to avoid a shutdown. Not only did that philosophy prevent a shutdown and prevent potentially millions and dollars of lost revenue, not to mention delayed restart if something went wrong when you shut down a process on an emergency basis.
But it helped give visibility to that other supplier that was not the incumbent and gave them a little bit of internal publicity to help them at the next renewal within the appropriate guidelines. Right? And I communicated that to them. We’ll bring this up at the next renewal sourcing event so that everyone knows what you did while we’re considering the RFI and RFP stages. So, it all worked out very nicely in the end. It was a little bit hectic and stressful for a couple of days until we got it all worked out.
But at the end of the day, the engineering director over that continent where that plant was located was ultimately ecstatic about the fact that we prevented the shutdown, and I got some nice kudos as well. So, for me, the lesson learned there is never break relationships with good suppliers, even if they don’t win the contract. If they’re still qualified and you’re willing to entertain them, you’re probably going to need them at some point when your incumbent can’t deliver, right?
Yeah, but I would argue the supplier is your most important stakeholder, more important than internal stakeholders. And the key to that story, I think I might put something in the comments about it as well, is that you had that relationship ahead of time before the disaster happened. Had you not focused on that collaboration and building that rapport, you would not have had that supplier working throughout the weekend to deliver and allow you to get your product out the door.
So, supplier collaboration, supplier relationships are super important and are going to be essential for manufacturers to have resilient supply chains. So, a really good example of the power of supplier relationships. I would also say that I think one of the most common things we’ve heard on the show this year is the importance of having multiple suppliers for every important thing that you buy.
So many companies had single-sourced products or materials or items and were completely devastated over the last couple of years. So, if something is critical to revenue, make sure you have multiple sources for it, even if it’s a two-cent part, even if it’s a 10-cent part.
Completely agree. So, Sarah, one of the teams that you worked with focused on custom manufacturing of luxury doors and windows.
At the height of the supply chain crisis, how is the sourcing custom parts during that time, and what type of challenges did you experience with that because the luxury market is very, very different.
Yeah, it’s extremely challenging, especially when you’re in the custom space. Mostly because the fact that it’s hard to have a secondary source because a lot of times customers will spec in a very custom, unique part that’s only from one manufacturer, and it’s near impossible to find an adequate sub. So my team and I, we had to get pretty creative of where we were going to source these parts from, and at first, we were like okay, maybe this is just we just need a band-aid, maybe we just need a few to get us through. And so we were able to actually source some of these parts off of Amazon and Home Depot, but the incredible amount of price gouging that was the markup from it, of these locks, you know they were supposed to be about $250, but we were having to source them and we were getting them off of Amazon for $700. I mean, what, how do you even plan for that when it’s, you know, two, three, four times the price of what you had originally budgeted? So that was really difficult, kind of at the height of everything, and there really was no other option.
So you know, one of the things that I would recommend anyone is that when you’re getting into having to do anything custom or it will be kind of a sole source, really talk about first the contract of what does that entail if it’s a customer request. As we ended up bringing the customer into the conversation and said, “Okay, we covered the first initial five that we sourced from creative locations, but moving forward is we’re gonna have to roll some of these costs to you.” And luckily, we had that relationship with the customers. We said, “Unless you can push the manufacturer around the direct manufacturer on it, we’re gonna have to slide some of these costs to you.” And then kind of a shared thing is that a few of the extra ones we were able to source and then they helped us contact the main manufacturer and figure out an allocation plan. Okay, well, we need 10 for this next month, 10 for the following month, 10 for the next month, and that way we were able to say, “Okay, we don’t need all 50 right now, we need at least 10 to get us through.
And being able to have that open dialogue of what it is that we need to keep our line going for that particular unit is super important. And that’s some things that I think a lot of what we’ve seen in the retail space is that a lot of them, you know, whooped the fact and said, “Okay, I’ll just take whatever I can get. Give me six months’ worth of inventory.” And then now they’re sitting there really heavy on that. At the time we didn’t need to have 50, so instead of kind of getting a little greedy and worrisome and over buying, it’s better to talk about an allocation plan or a forecast plan and say, “This is what will keep me going. This isn’t going to starve you. Then also too, as I’m not then, you know, drowning my inventory levels of having too much.” And really then you could just kind of spread your focus across some of the other critical parts that you’re good for now and could kind of come back to revisit it. It was hard to manage in the manual process of updating POS and all that income and confirming those different invoices, but it is possible if you just have really good relationships with your customers, with your suppliers, with your manufacturers, and talk about what are those critical elements, whether it’s on the contract terms, the finances, an allocation plan. So those are all different strategies that people need to take into effect when it comes to sourcing custom parts at critical times.
Sarah, we’ve got a couple of comments coming in during what you were just discussing. We’ve got Larry Lane joining us from Canada. He said, “Bringing the customer in.” And then V;af, I’ll pull this up on the screen so we can see it, said, “If the Supplier Readiness Assessment is integrated part of the supplier performance process and the natural disaster plan or any other emergency response plan is embedded in the Supplier Readiness Assessment, then emergencies will be a little more predictable. In simple terms, there is no question if there is a question when and how you are prepared.” Yeah, that is something that I think COVID was really kind of the first of, of being able to have that be part of the disaster plan for supply chains. You know, when I went through my supply chain certificate program with ASU, that was actually one of the courses that we talked about, and at the time I was like, “Yeah, you know what, I don’t need to spend all this time worried about all the things that are gonna go wrong.” And then right when it was like January and I started hearing about this thing about COVID, and I had just gotten done with my program, I was like, “Oh my goodness.” So I literally made all those calls to line up my critical suppliers, setting up my secondary suppliers, just stuff like my, these professors, they said this for some reason, they’re the experts more than I am, I’m gonna listen to them. And then sure enough, is that during right when it was that March, the February-March when everything just kind of shut down and people didn’t know what was going to happen, I was able to kind of lay out the plan to my company. So yes, I think that is at least needs to be visited once a year of that critical disaster plan or, you know, whatever your company acronyms want to tie around to it, but you really do need to have that readiness evaluation of your supply chain no matter what industry you’re in, no matter what size your business is, and really take some time because it’s going to save you a ton of money down the road if you just spend those exercises of doing like a war room exercise for a week or whatever it is. It’s going to save you so much time, and I think it’s important that the entire company is aligned. If you do that in a silo and you don’t have buy-in from key stakeholders and the executive team, it’s not going to go very far. So making sure that there’s sign-off from everyone that’s needed is important as well.
One of the other things that I think is also really important to talk about in the manufacturing space is the relationship between sales and its impact on supply chain. And so, Michael, when we were prepping for the show, you shared an example of when sales wanted to go the extra mile but fell flat.
Sarah, this I will never forget this example. So this was December 29th, and the business that I was working for, they recognized revenue when a shipment left the building. The customer recognized the receivable once it hit the dock. So had a sales guy, he was trying to make his number, he was trying to make the number for the business, and said, “Hey, I need your help.” I’m like, “Okay, Bill, what can I, you know, in what ways can it be of service?” He’s like, “Can you ship this but forget that you shipped it so he doesn’t get it until January 2nd?” I’m like, “No, I can’t do that, I can’t do that. Can you put it in your trunk?” I’m like, “No, I can’t do that.” I said, “But, right, like we recognize it when it ships, they don’t recognize the receipt until it hits their dock.” I said, “Why don’t we, why don’t we send this the slowest way possible?” Because typically everything was FedEx. I said, “What about if we did the post office?” And he’s like, “Oh, that’s a good idea.” And this was a shipment that was worth like $250,000, right? It was boxes of industrial diamond. So, you know, invoice it, I’m like, “Okay, Bill, you’re coming with me.” And put it in my car, drove it over to the post office. And because of the sheer value of the shipment, it was all returned, received, insured delivery confirmation, the whole nine yards. So we ended up spending, it was probably close to $400 to ship all this product, right, the slowest way possible.
So that was December 29th, right? I’m like, “Okay, boom, get this off my back, Bill’s happy.” The next morning he comes into my office, and his nickname for me was DMR, damn Mike Ryan. So he comes in, he’s like, “God damn it, DMR, what the hell did you do?” I’m like, “Good morning, Bill, it’s nice to see you.” He’s like, “What did you do?” I’m like, “What do you mean, what did I do?” “We took it to the post office and we shipped it.” He’s like, “They got it on their dock that afternoon.” I was like, he’s like, “You need to find out what happened.” I’m like, “Okay.” So I’m like, “All right, I probably should get out of the office for a minute.” I go to the post office and I said, “Hey, do you remember me?” They’re like, “Oh yeah.” I said, “I have a question, it’s going to sound a little bit delicate, so I’m going to apologize in advance. I didn’t expect this shipment to get there so quickly, can you help me explain what happened?” And he’s like, “Oh my God.” He goes, “Because the shipment was so high value, so expensive, we actually put a person in a truck and had them drive it to Indy.” And I was like, “Okay, cool, thank you.” So I go back to the office, I said, “Hey, Bill, here’s the situation, right? The post office was concerned because of the value of the shipment, so they hand-carried it.” He’s like, “Well, what am I supposed to do?” I’m like, “Man, that’s entirely up to you, right? We played the game, we recognized the revenue, you booked the sale, the business got the revenue in terms of your customer, I am not offering any opinion or any suggestions on that matter.” So it was an example of, you know, quite often supply chain, we find ourselves in the middle, we find ourselves in the middle between sales and supply chain, or, excuse me, sales and operations, or operations and sales, and the customer, you know, this weird love triangle. And we quite often, you know, as you said earlier, have to be magicians and try to figure things out, realizing that, I know I try to make everybody happy, but it’s not always humanly possible. So this was an example where, you know, try to work with sales, try to come up with a creative solution, and unfortunately, the solution didn’t work.
So the moral of the story was, the following year when I saw Bill in the hall, I’m like, “Dude, don’t, I’m like, don’t even ask me, because I’m not doing it. You learned last year, I learned last year.” So you work it out with your customer when you want to ship it and how you want to ship it, but I am not playing that reindeer game this year. So sometimes we can help sales, sometimes we can help operations, oftentimes, right, ultimately what we try to do is serve the customer, but a key lesson is you cannot always make everybody happy. So, yeah, the relationship with sales is challenging with all departments, but in particular, I think it’s overlooked about the importance of sales and supply chain aligning and having mutual respect because they have a big impact on each other.
Very true. Bo, next question for you, and before you answer, I’d also like to have you share a fun or interesting personal fact about yourself. I always like to learn a little bit about each of our panelists. So my question for you is, can you share an example of when a supplier failed to deliver the performance that you expected, and then what did you do about it?
Sure, so I’m at the age where I embrace the nerdiness and geekiness. I have been a Star Trek fan all my life. This is one of my Star Trek mugs. I’ve been to a few events, I’ll put it that way, and I’ve met a few of the stars. I’ve met William Shatner, which was really cool. So that’s a little geeky fact about me. But as far as supplier performance, a few years ago I had a supplier in an engineered equipment space. It was in the engine and engineered equipment space. We had several suppliers that provided the same product, just with different features and compatibility for the plant, things of that nature. So I was working with this supplier, and it very quickly came to my attention, once I had taken over the space, that this supplier was routinely behind on their order deliveries. Almost every Capital PO that we issued fell behind on the order promise date. And so, of course, the plants were screaming, “What’s going on? What’s going on? We can’t get these for our projects. It’s going to delay return to operations (RTO). Why can’t they deliver?
What is the deal? So, the technical SME and I that co-chaired the supplier management team, we went ahead and talked to the supplier directly. And when we were unable to get an answer from the BDM (Business Development Manager) that I dealt with all the time, I went ahead and escalated it all the way up to the VP of Sales at that supplier. And this supplier is a very large, well-known Fortune 500 organization, so it was a pretty big deal to go that high. So, we developed a plan where it was very painful. We would go and review every two weeks every PO (Purchase Order) order that we had with that supplier. Where it’s at in the manufacturing process, where your bottlenecks are, what your action plan is, what the promise date is, and what the projected delivery date is. And if there’s a delta, what are you doing to close the gap, right? So, we did that process for a year, and like I said, it was very painful, but we were able to communicate to the supplier along the way when we found a pattern on things that they needed to change.
An example within that was we found out that their parts allocation system was set up so that if one of our orders was missing a component and they would go ahead and take the components that that specific unit needed and reallocate them to other customers while we were waiting on another component. Because they had some of these had to be put together in sequence. So, if something was missing and you had the downstream sequence pieces of equipment, what would end up happening is while we were waiting for piece A, so we could install B, C, and D, and B, C, and D were all in stock, they would get reallocated to an entirely different customer of that supplier. So, when piece A came in, then we had to wait on B, C, and D, right? And so, we found out about that and said you need to stop that. That’s not going to cut it. Our relationship is too big. You’re allowing one delay to domino the rest of the manufacturing process. So, we resolved that issue and worked through a few others. That was a big example. And you’ll appreciate this, Sarah, that was really an ERP issue more than anything else.
So, we resolved all these issues, and so fast forward about a year from the time we started, and things are really starting to look up. The technical SME and I are really happy with how things are going. Now we’re just kind of monitoring the pattern to see if we can go ahead and discontinue our bi-weekly meetings or at least reduce the frequency. And so, we’re in that phase where we’re looking to ramp down. And then, all of a sudden, in one of the meetings, the bottom drops out. And eighty percent of our orders go from on time two weeks ago to behind schedule. And it was shocking, to say the least. It was extremely disappointing. And so, when that happened, of course, then I have to have an awkward conversation with the project managers. Your parts delayed, here’s why, here’s what we’re doing. And so, at that point, I told the supplier, ‘Look, this is not going to be acceptable. We have spent an ungodly amount of time on a tactical issue that you should have been able to resolve yourself. I’ve aligned internally, and I’m going to suspend all of your capital orders, and you’re not going to get any capital orders from us until this is fixed.’
So, I sent them a letter on company letterhead, I signed it, I mailed it, I emailed it, and I mailed it first class mail so that they knew that we were serious. And with large organizations, you can hear that from the suppliers, hear that from the customers, ‘We’re going to stop buying from you.’ But if you do have control in your system and you can suspend the vendor codes, you can actually make it happen. And that’s what we did, and it got the supplier’s attention when that revenue dropped. And so, that is what it finally took to actually get it across the finish line and bring their performance back to where it needed to be. When we realized the collaboration and the carrot approach wasn’t working, then we kind of had to pull out the stick a little bit. So, fortunately, things got resolved, and that supplier was able to largely mend their reputation within our organization. But it was a pretty extensive process, especially with some of those project managers that have long memories about things that have happened in the past.
Sarah, Mike, any comments or thoughts on that story? I think we all can relate in some way.
So, one of the other things that I think has really had a big impact on supply chain and manufacturing in the last couple of years is crazy long lead times. So, buyers being able to order something two, three weeks out now taking 12 months. Really, really big changes. So, Sarah, would love to have you share a funner personal fact about yourself as well. And then my question for you is about extended lead times. So, what type of lead time changes did you see, and what did you do to come up with creative solutions or how did you deal with these really long lead times?
Yeah, so I guess one fun fact is I have traveled to 43 of the 50 states. And one of the things that I wanted to do, you know, all 50 states before I’m 50, but I’m pacing a bit ahead of that. So, I’m actually hoping to get all 50 by the time I turn 40. So, I have a few years for that. It’ll be good. But it’s all thanks to supply chain and being in supply chain and procurement and sourcing and having to travel and have it go to weird states that a lot of people haven’t been able to, like South Dakota and Delaware, all those ones that people just aren’t able to get to. So, I always tell college students, you know, I was like, ‘Go into supply chain, you get to travel. You get to do, you know, you wouldn’t even imagine how much you get to travel.’ But yeah, so in the industries that I’ve worked in, is that a lot of the challenges that we saw was, you know, these crazy long lead times. There was, you know, when I was in aluminum, just the sheer lead time to get something within two weeks now is taking 30 weeks. And a lot of it was based off of kind of the raw commodity struggles with when it came to aluminum. Just getting the raw billets into the aluminum press manufacturers, they were hugely constrained.
So, as soon as I was finding out some of our aluminum manufacturers were getting these massive lead time increases, I just spent some time doing a little research. And as much as a lot of the strategies have been moving things to near-sourcing and local sourcing, one of the things that I actually was discovering in my research was the fact that aluminum’s commodity market wasn’t fluctuating nearly as much just over the border in Canada. They didn’t have tariffs; they didn’t have as much limitations of where they were getting their raw aluminum to then go into become billets for aluminum manufacturing. So, what we actually did is that we then were trying to explore using aluminum manufacturers that were just over the border in Canada. And we actually found one, and at the time, their lead time was six weeks compared to our current manufacturer that was giving us 22, 26, 28 weeks. And I said, even if we have to buy new dies and have to have a brand new startup process and has to go through the whole commissioning of the dies and going through the die shop and fine-tuning it, it’s still going to be much shorter than 26, 27 weeks. So, we ended up going and working with a Canadian aluminum supplier in order to get on board. But it was a challenge height of COVID; you know, to go across the border was a challenge; they really weren’t allowing a lot of people. And then the argument of what was considered critical business or not critical business. And as soon as they allowed us to go, the first week we were on the first plane to go, but you had to get a certain COVID test and you got over there. And then once you were there, the other things that we experienced was the fact that they, everything in Canada for their vaccination cards was all digital. And when we would show up to like go to a restaurant to eat, everyone thought that our vaccination cards were fake because they were handwritten. I’m like, ‘No, we’re just from the United States.’ And they’re like, ‘Oh, yeah, that makes sense.’ And so then we would have to go, and we get the table way in the back because they just weren’t sure about us. But so, and then while we were there, you know, crazy things happen. The hotel we were staying in, middle of the night, there was a fire alarm that got pulled. And, you know, to get back into the hotel, no one had grabbed their masks, but they wouldn’t let anyone back into the hotel without having a mask. So, it’s just all these challenges. And finally, the next morning, when we were able to get to the supplier and have those face-to-face or, you know, mask-to-mask conversations is building those relationships. And, you know, it’s all about relationship management is that we knew that we were the new guys coming and asking them for a favor.
We’re the ones that were coming from Arizona; it was snowing in Canada; we didn’t have proper winter clothes. But we made it work. And but by doing that and thinking a little bit more creatively and understanding what our neighboring countries’ limitations were and if they were able to get if they were able to get raw billets, is that we were able to then create these new partnerships, get materials that were manufactured in Canada, still North American made, but then was able to be shipped down to Arizona for our process. And that reduced our lead time, you know, from being 22, 24, 26 weeks and then getting to about it was about 10 weeks the first pushes and then, you know, four to six weeks after that. So, yes, lead time was a huge challenge, but the biggest thing was is that we did have to try to establish new relationships, which because we didn’t have them prior, but that was because we were new to the organization. But really making sure that the new manufacturer and supplier understood the importance of the personal relationship. You know, we always said that it’s about, it’s not about how many pounds that we’re going to push; it’s about partnership. So, let’s work together; let’s try to figure out a way for us to get you guys some new business, get you into some new markets that you haven’t been in. We’ll share some costs on some things. But then also, is that we were able to then just start manufacturing because we were able to get these new parts. So, thinking a little bit creatively when it comes to, you know, working around extended lead times is something that you have to be able to research different markets, you have to understand the different trends, you have to, you know, some of the things that even when it was like our team was in charge of sourcing the different cleaning supplies when COVID was happening and thinking, okay, well, schools are shutting down, so we’re able to get cleaning supplies from school cleaning you know, companies because they had the access of it. So, understanding the full market and who’s using it and where those constraints are really was something that helped our business kind of be able to continue to move forward during those limitations of those extended lead times.
Yeah, and Sarah, I think it goes back to the kind of the theme around supplier collaboration, longer lead times. You need to have visibility into every step of the way, what’s happening with the supplier, and you want to have that constant communication so you know if there’s going to be a delay or something happens, you have time to plan versus just the unexpected and something’s supposed to arrive, and it doesn’t in the last-minute scramble. So, really, really good story going along with that. Mike, would love to have you share a fun fact and then an example of when laziness created more work than if it had been done properly.
All right, so fun fact. I grew up in Long Island, New York, and both my folks were cops. My mom and my dad were both cops. My mom was one of the first two female police officers. And one of the things I got from my folks is the ability to speak with virtually anyone, you know, on a virtually daily basis. They were in uncomfortable situations and learning how to speak calmly and with respect definitely made everybody’s lives a little bit easier. So, that’s one of my fun facts. So, an example where laziness created more work than it had just been done right the first time, I was VP of Ops for a family office-owned manufacturing business. We were working to consolidate two different locations. So, one location was in Tulsa, Oklahoma, the other location was in Ohio.
And on a pretty routine basis, we’d have parts shipped from Tulsa to Ohio, and in some cases, you know, going back to Sarah’s example of critical parts, we had an overnight shipment where we needed – there was a part that was going to keep a $135 thousand dollar vehicle from shipping. So, we needed this part yesterday. Get a panicked call from our uh, you know, the receiving supervisor says we’re missing a box. I’m like, okay, well, what do you mean? He’s like, we got six boxes, but one of the boxes is empty. I’m like, okay, so are we missing a box? Are we missing parts? He’s like, I don’t know yet. Like, all right, well, how about I come out there and we’ll go through it? So, you know, look at he’s lined up the boxes on the table. Boxes one through five contain parts; box six is empty, right? And the labels were one of six, two of six. So, I said, okay, we’ll get the packing list, and let’s go through the packing list and see whether or not we’re missing parts. So, this created just this big mad scramble. Go through the packing list, everything is there. Like, okay, so we have the part we need; that’s the bottom line. But what’s up with this empty box?
So, I call out to Tulsa and I said, hey, we’ve got a problem, all right? You shipped the six boxes, and while everything on the packing list appears to be there, the sixth box is empty. And the guy on the other end of the phone starts laughing. He’s like, oh yeah, he’s like, yeah, that was my mistake. I’m like, I’m like, please. And this is where the gentle and respectful comes into play. I’m like, help me understand what the mistake was. Oh well, I thought it was going to be six boxes, so I just printed six labels, and then it only took five boxes, so I just shipped the empty box. And I’m like, all right, I’m going to count to ten, and I said, okay, first of all, there are better ways you could have handled it, and why not just put a note in the sixth box that said ‘shipped intentionally empty’ or ‘shipped empty,’ or a damn smiley face on a piece of paper. He’s like, oh, I didn’t think about that. And I’m like, well, you’re gonna have the rest of the afternoon to go home and think about it, because you caused so much angst and consternation. Whereas, instead of just voiding out the six labels and reprinting five labels, which should have taken all of 40 seconds, you created a lot of problems on this end.
So that is one of my most memorable examples where, you know, literally taking an extra 30 seconds to a minute could have saved hours and hours of angst and aggravation on the other side. So, you know, and again, I think it comes to seeing the whole supply chain and understanding whether it’s an inventory issue, a PO issue, a critical spare issue, a supplier relationship issue. Understanding how all these pieces of the puzzle, all these dots in the chain, connect, and when there’s a broken link, how it can impact just the entire supply chain. Yeah, attention to detail matters, and cutting corners is not the way to go. Saving 30 seconds can cause a team, you know, hours and hours of work. And the goal is supply chain resiliency. I feel like that’s going to be the theme of 2023 in the manufacturing space. Our next show is December 13th, so 12 to 1 Central time. We’ll have a new round of panelists that will be coming on to share their train wreck and nightmare manufacturing supply chain stories, also the wisdom that they’ve learned, so our listeners can take away some learnings and hopefully become better buyers and supply chain leaders. Enjoy your afternoons.