What the Duck?! Episode 10 Transcript
TIMES ARE CHANGING: Purchasing Plans In Ever-Changing Lead Times With John Brown
Welcome to What The Duck?! A podcast with real experts talking about real issues in direct spend supply chain. And now, here’s your host, SourceDay’s very own supply chain maven, Sarah Scudder.
Thanks for joining me for What the Duck?! Another Supply Chain Podcast brought to you by SourceDay. I’m your host, Sarah Scudder, and this is the podcast for people working in the direct materials part of supply chain. Today, I’m going to be joined by John Brown, and we’re going to discuss how to create a purchasing plan when the lead times suppliers give you can suddenly shift, often in a pretty big way. If you work for a manufacturer and are struggling to build a purchasing plan this year, then this episode is for you. I’m @SarahScudder on LinkedIn and @SScudder on Twitter. If you are new to the show, make sure to follow this podcast so you don’t miss any of our direct spend supply chain content.
Today, I’m excited to be joined by John Brown. John is the senior education manager at the Lake Companies. The Lake Companies helps discrete manufacturers in Wisconsin, Minnesota, and Upper Michigan implement in four ERP software. John helps Syteline users to set up the advanced planning and scheduling system that tells them what to buy and when. Welcome to the show, John. Hi, happy to be here.
I’d like to start with your personal journey. One of the things that fascinates me most about you is that you are an award-winning author and trainer. So, how did you wind up working in the ERP space? Well, I started off with a degree in accounting and joined Arthur Anderson in San Francisco just maybe a year or two before the Enron scandal broke. So, luckily I left just before that and landed a job with what was then Simex, which is the company that developed and originated the Syteline ERP product. I moved out to Ohio and used my training and accounting skills there. So, that’s how I got into it. While you work in the ERP space, you also have your own, I don’t know if we want to call it a side hustle, and you write books. What do you write about? So, I write action thrillers and science fiction and fantasy novels. If you think about Lord of the Rings or Lee Child’s work, you know that’s the type of stuff that I write. So, how did this happen? How did you become an author? How did I become an author? With a lot of work and craziness, I guess. I was sitting in a class at my college. There was this year-long class my first year, and I knew I loved writing. I’d always liked stories, but I was in this class and we were talking about Emily Dickinson, and she said that she knew she had a great story or a great poem when it felt like the top of her head was being taken off. And I, at that moment, was that is what I want to do. I want to take the tops of people’s heads off. I don’t want to do it medically. I want to do it emotionally. And so, at that point, I said I need to learn how to write. And so, I got an English undergrad and took all the creative writing courses that I could, and it just went on from there.
So how does someone become an author? What’s involved with that? Well, just a lot of work, right? I guess the key thing is, if you think about it, it’s like a product, actually. It’s like any product or service. There’s a certain thing that your customer is coming to you for, and so if you want to deliver that to them, you’ve gotta figure out, well, what is that thing? Right, how do I, how do I, what do I need to do to generate that? And then because this is a creative endeavor, how do I go about getting ideas for that? Those are the three key things. So if you think about a story, if you think about fiction stories, they’re a guided emotional experience, it’s a guided ride. It’s like a rollercoaster or some of the rides at an amusement park, and so you need to, and each genre is a little bit different. So you have to understand, this is what I’m trying to go for, this is the type of ride I’m trying to take my reader on, and then you’ve gotta understand, well, how do I do that? Like, how do I use character and plot and events and all these things to generate that type of experience? And then you gotta learn, well, okay, great, that’s how it works, but there are certain techniques and tricks and principles for coming up with ideas and developing that and creating that. So if somebody wants to become a writer, they need to learn those three things, and however they do that, they need to learn it, and it’s a lot of learning by doing. That’s the path to becoming a fiction author.
And what are the three things? The three things are: you have to know what it is that you’re delivering to the customer, you have to know the principles for creating that, and then you need to know the principles for coming up with ideas, that creative process. Those three things, those are the three things for killer stories, and you gotta learn that. And it takes a while, it’s a complex cognitive skill, you gotta be able to understand all of that, but those are the three things that you need to know.
So, I have several friends that are entrepreneurs that have written books in the last five years, and the common feedback or complaints that I’ve heard from all of them is that it’s hard to make time. They get busy in their life in their day, and they never actually block off time to sit down to write their books. Yeah, that’s a common difficulty when it’s a side hustle, and it’s compounded because most new writers, they don’t even know that you need these three things, right? They’re trying to feel their way in the dark, and so if these are projects can be big, big projects, 200 hours, 400-hour projects, and so you got this big project, you don’t know what the heck you’re doing. It becomes difficult, but if you understand what it is that you need and then you have just a couple of hacks to, you know, even if it’s just an hour, an hour and a half a day, you can get it done. Mary Higgins Clark is a great example of that. She was a single mom and had kids and had to get them off to work, and so the only thing she could do is get up. She would get up at 5 o’clock or 5:30 and write for about an hour a day, and that allowed her to have an amazing career as a bestselling author.
You definitely, definitely have to have… Yeah, you definitely have to find time. Your mind is like an oven, and if you don’t have consistent time, you’re constantly warming the oven up just to get it ready to bake, right? And so, consistent time is important, so that’s definitely true. So, you write for pleasure, you also write for work, yep. So, you worked for a company called Infor for about 20 years. What is Infor?
Infor is a large software company. They provide enterprise resource planning software, so software to run manufacturing companies in a lot of different industries. So, they’ve got a lot of different ERP packages, and then they have a lot of add-ons that you add to those ERP packages to help fill out all the things that you might need to run your business. That’s what Infor does. They sell the software and they sell services for the software.
What problem is their software solving? Well, there are a lot of problems. An enterprise resource planning software can solve the customer relationship management problem, right? I need to track my leads, I need to be able to see what I need to do to manage my funnels, so there’s one problem, right? On the customer order entry side, I need to track the fact that I’ve made promises to customers, so what are those customer orders, and how do I collect the money? Once we’ve shipped that stuff and they’ve accepted shipment, on the purchasing side, which I know SourceDay has a lot to do with, I’ve got to be able to track my purchase orders and when I received those in and then I got a voucher and pay those types of things.
The space that I’m working in, or the part of it that I’m working, is the planning and scheduling. If you think about a manufacturing firm, they get hundreds of orders, hundreds of custom orders, and that might translate into thousands of operations out on their shop floor and the purchase of thousands of different materials, right? So, how do you orchestrate all of that and make sure that you can give your customer when they call and they say, ‘Hey, I need 15 of these items at this date. Can you get it to me?’
You definitely, definitely have to have, yeah, you definitely have to find time. Your mind is like an oven, and if you don’t have consistent time, you’re constantly warming the oven up just to get it ready to bake, right? And so, consistent time is important. That’s definitely true. So, you write for pleasure, and you also write for work.
Yep, so you worked for a company called Infor for about 20 years. What is Infor? Infor is a large software company. They provide enterprise resource planning software, so software to run manufacturing companies in a lot of different industries. So, they’ve got a lot of different ERP packages, and then they have a lot of add-ons that you add to those ERP packages to help fill out all the things that you might need to run your business.
So, that’s what Infor does, and one of their products is a product called Syteline. You know, I mentioned that I worked for Simex, and they eventually acquired that product, and so that’s what Infor does. They sell the software and they sell services for the software. What problem is their software solving?
Well, there’s a lot of problems. So, an enterprise resource planning software can solve, “How do I, you know, it can solve the customer relationship management problem, right? I need to track my leads. I need to be able to see what I need to do to manage my funnels.” So, there’s one problem, right?
On the customer order entry side, “I need to track the fact that I’ve made promises to customers. So, what are those customer orders, and how do I collect the money? Once we’ve shipped that stuff and they’ve accepted shipment.” On the purchasing side, which I know SourceDay has a lot to do with, “I’ve got to be able to track my purchase orders and when I received those in, and then I got a voucher and pay those types of things.” The space that I’m working in or the part of it that I’m working is the planning and scheduling.
Do if you think about a manufacturing firm, they get hundreds of orders, hundreds of custom orders, and that might translate into thousands of operations out on their shop floor and the purchase of thousands of different materials, right? So, how do you orchestrate all of that and make sure that you can give your customer when they call and they say, “Hey, I need 15 of these items at this date,” that with a click of a button, you can say, “Yeah, yep, that’s feasible.” And it’s not just, “Oh, cross my fingers, hope and pray that’s feasible.” But, yeah, no, this is actually feasible. We’ve got everything in place or we can get it and get it to you. So, the chief problem that I’m working with is that how do you orchestrate that so that you can make a good promise and then orchestrate the production plan so you can get it out the door and orchestrate the purchasing plan so that it can support that production plan, so that you’re able to make good promises and ship on time? That’s the big problem that I’m working with in that software.
So, you were at Infor for a long time. You most recently made a pivot to join the Lake Companies group. What drew you to this new organization? Well, I was at Infor a very long time, and it was certainly beneficial to have a change. And what excited me about the Lake Companies is this software, the advanced planning and scheduling software that we have within Syteline is a terrific help. It can help people achieve all sorts of great outcomes, but it is tricky. It is tricky to get it up and running, and it’s not just the software itself, because when you’re implementing software like this, it’s the software, it’s the records that go into the software, how do you make sure you maintain those, and it’s how you use it. And so what the Lake Companies was offering was to allow me to start a new service offering, basically a new business to do an entrepreneurial type of thing to come up with an approach with tools and software and services and a process to make all of that easier, and that’s our aPS made Easier program. It’s been exciting; I’ve been with the Lake Companies now almost three years, and just starting from nothing and getting this established and getting out and helping clients, and so it’s been an entrepreneurial endeavor and helping people make all of that easier.
So, I wanna rewind a little bit. You talked about helping with purchasing plans, something that’s excited you and why you decided to join the Lakes Companies. What is a purchasing plan? Let’s start from the very, very basics, down and dirty. Yeah, yeah, sure. So, you have a customer order, you have forecasts, you have this independent demand that comes into your company, your site, and so alright, I gotta make, as a manufacturer, I gotta make all of these things. I gotta make this yacht or I gotta make these radars or I gotta make these shock absorbers, whatever it is, I gotta make it. Now, I’m not gonna hold, normally I don’t hold stock of every single part that I need. I want to have more of a just in time approach because if I hold stock of every part that I need, that’s, that’s millions of dollars usually worth of inventory. There’s a carrying cost or that I don’t wanna have that stock around, so I might have some safety stock that I need to hold or I might have some things that are trickling down from my forecast. I need to orchestrate if I’m gonna have this production plan, build this on this day and build this on the next day and build this on the next day, right? And I might have all sorts of items that I need to build each day. Then, the purchasing plan is, well okay, based on that production schedule, what do I need to purchase and when? And that’s all gotta be, that’s all gonna be synced up, right? It’s all gotta be synced up, and so that’s what the purchasing plan is. It’s a plan of, and the software itself comes up with that, right? You say these are my inputs, these are my records, everything else you put that in, and you say okay, tell me what I should in which quantities and when, and that’s what the software does. So that’s what that purchasing plan is.
What industry does a purchasing plan make the most sense for? And maybe there’s more than one, maybe there are multiple industries that should be considering this. Well, with what we’re doing, this is anytime you’re doing manufacturing, you need a plan because you don’t make everything in-house, right?
You’re gonna get some of your materials that are required in the process. You’re gonna get those from some vendor, and so anytime you have that situation, you need a purchasing plan. So I mean, even, I mean, even, even if you look in the food and beverage, right? That’s kind of, it’s not necessarily what we think of as discrete manufacturing, but even food and beverage, I’m not, I’m not making hamburger bun, right? We’re not doing that. We’re gonna buy the hamburger buns. We’re gonna buy the beef or whatever it is, so I need to have that. People that work in retail need it now. The software that we’re using and the industry that we’re focused on is the manufacturing industry, the discrete manufacturing industry.
What does discrete manufacturing mean? Discrete is individual units, so you have stuff that’s like process manufacturing where maybe you’re creating things like the Red Bull liquid, right? Or maybe you’re doing things like aspirin, and you just have a gazillion little tablets and stuff like that. So those are, you know, they’re manufacturing, but they’re doing a different thing. A discrete manufacturer is making individual, usually individual units of something. That’s what discrete manufacturing is.
So, does that make sense? Like an individual computer or a chipboard or whatever it might be? Who, at a manufacturing company, should be creating this purchasing plan? Well, usually, it’s the planner’s responsibility to make sure that the plan is created, and you use software. I mean, we go into companies, and some of them are using Excel to try to figure that out. That’s a hugely manual process and takes a large team to really get everything done.
So what normally we recommend is, well, what we recommend is to get the software to do that for you, and the planner is usually responsible for that. However, the purchasing team has key responsibilities to make sure that the records that the software uses, that they’re up to date and that they have the right information. So, for example, on any item that you purchase for a vendor, in order to make a plan, you need to know, well, how long does it take me to get that from my vendor? And once I have an order with my vendor, if it changes, I gotta update that, right? I gotta update that, the dates and the quantities and make sure that the planning engine has the right information.
So, there are things that the purchasing department, they’re going to do to make sure that the plan has good data, and then when they’re using the plan, there are things that they need to do. But usually, it’s the planner’s responsibility to make sure that everything is set up, and the plan is generated appropriately, and it’s there for the purchasing folks to use.
So how should a planner go about creating a purchasing plan? Well, like I said, it should, you should use some software. If you’ve got hundreds of orders and thousands of operations and thousands of parts, it becomes a monumental task to keep all of that orchestrated. So I mean, if you get down to the basics of it, you just set up a routine to run at night, and the software runs that. The key is making sure you have that you’ve got a process in place to maintain the records. So how much inventory do I have on stock? What are the lead times for the purchase part? What are the purchase orders that are coming in? How much of them have I received? All etc. You want to make sure that you’ve got a process in place to maintain those records to keep them accurate.
The planner then will set up the planning engine, all the dials and switches within the software to make sure that it’s set up correctly for your site. And then there are a number of critical operating procedures, or critical work instructions, or a critical process if you wanna call it that way for actually using the plan. So you know the software does it in the background, but you have those three things that have to be in place for you to be able to push the button and have the software spit out the purchase plan for you and then use it appropriately if that makes sense. What are key things that a planner should look for when sourcing it or trying to find purchasing or purchasing planning software to buy? There’s a lot out there and a lot of information, what are the key things to look for?
Well, usually, you know there are some that are add-ons. Normally every ERP product has one of those, right? And for me, I think the key is the business objectives. You have certain tasks or jobs that you need to do as a business. There are certain outcomes that you wanna have. And so you wanna look for a software engine that, and I’ll just hit a couple of these things that do the following. Number one, you want a software engine that, when the customer calls, you can, at the click of a button, be able to know is their request feasible? What’s a feasible date, an actual feasible date, given the inventory that we have and the supplies that we have coming in and what’s happening on our shop floor? What’s an actual feasible date to get that in? I wanna be able to make that question as easy as possible to answer, so that would be number one.
Along with that, you’ll get pressure from sales or from management to accept an order just to drop one in, right? That maybe isn’t feasible and push a bunch of other orders out. Well, you don’t wanna do that blind. You might push out some very, very important customers, right? And so you need a software package that allows you to drop the to in a what-if sandbox area, drop that in and what orders would we put at risk? Is this really worth it? Okay, so those are two things there. Then, I need when it comes to actually generating the plan, I need something that orchestrates both the shop floor and the materials. MRP was an old planning engine, a planning logic, or a planning approach that was developed back in the 1960s, became popular in the late 1970s, early eighties. But it doesn’t do a lot of these things. One of them is it doesn’t coordinate your shop floor. It doesn’t see what your capacity is and plan around that. So, I would want something that does that, that way that takes it away from me having to manually do that and figure that out.
I want the computer program to do that, and I want these plans, if possible, to be just in time as possible, meaning I’m not gonna order things or tell the shop floor to do things before we actually need to do them because when I do that, it inflates my cost, it inflates all sorts of manual issues downstream. So there’s one, I’ll just say one more, there are others, but here’s another important one, and that is, in the manufacturing environment, things change every day. We, you know, people don’t show up for work, our machine breaks down, or our vendors don’t deliver on time, or our customers change their minds, and the question is, given all those changes that just happened in the last 24 hours, we made all these promises, are we still on track to keep those promises? And if not, which promises are at risk? And if they’re at risk, what’s the issue? Is it a purchased part? Is it the shop floor? Like what’s going on? What is the risk? I wanna be able to see that so that I can get back on track, and so, and I wanna see those problems coming down the pike two months, three months in the future, four weeks in the future, whatever it is, so that I can fix it now, so that when it’s, you know, it’s not hitting the shop floor, and then we have a fire on the shop floor that we gotta put out.
So in my mind, if I were selecting planning system, those are four key things that I would be looking at. There are, of course, a lot of other things, like, can it handle forecast, can plant safety stock, etc., but those are four key things that I’d be looking at when I was considering planning software.
How much should planning software cost? Boy, that’s good, that’s a good question. That’s above my pay. I don’t know the current cost of planning software because it’s in the world that I live in, it’s embedded into the ERP software, and the ERP software is taking care of inventory and customer service and purchasing and planning and all sorts of other things, sales, and all that, so it’s part of it, but it’s not just a little add-on. I mean, like I said, there are some add-on products out there, but usually, the customers that we’re dealing with, they’ve already got an ERP system, and so it’s just all part of that broader cost of the ERP.
How long should it take a planner to get planning software up and running? Yeah, that’s a good question.
I don’t know, it doesn’t have to take long. Let me tell you, let me say it that way, right? It can take a matter of weeks, not months or years, if you’ve got the right process. And that’s part of what we do at the APS made easier program. We’ve streamlined things, simplified things, made it so things that used to take a long time to get up and running and start and get good plans. We’ve tried to get all of that dialed in so that you can really move and get that in a matter of weeks. Now, all of that depends on a company’s, you know, the number of people that they have that they can assign to this project, etc. But based on our experience and what we’re doing, that’s really what we target.
So, a planner selects software, whether it’s part of their ERP package or an add-on, yeah, they get it up and running, what should they avoid? What should they avoid? Well, I boy, there’s a lot of ways that you can make mistakes. One thing that you need to avoid is thinking that just having all of the software dials and switches and parameters, thinking that that’s what you’re trying to do. That’s one of the fastest paths to a failed implementation. Because, like I was saying before, the software, fine. It’s a, and I like to use the analogy of a car, the software can be, you know, it’s like an engine block, awesome great engine block. But if I don’t have a water pump, if I don’t have wheels, that car isn’t going anywhere very fast, right? And so there are some other critical things that you have to have in place for that engine to even do what it needs to do.
And the one thing is, you’ve got to have those accurate records, and we’ve talked about some of those. The other thing is, I could have golden records, I could have a setup of the software, you know, a configuration that the angels sing about. But if I’m not using it correctly, if I don’t have the right process in place for using the plan, it won’t matter. And one of those key things, like I’ve mentioned before, is planning really starts when you take the order and you promise the shipment date. And I need right from that moment to be able to know what a feasible date is and then lock it down. It’s like when you’re looking for seats set on an airline, you know with orbits or travel velocity, and you look and you’re like, “Hey, do you have seats?
They’ve got two seats and you lock it down. Well, I wanna be able to do that with my shop floor and my materials and everything else. Do I have seats? Can I actually do this? Yep, boom! I wanna make sure that I have that. So, you know, the mistakes things that they wanna avoid is that narrow thinking of “it’s just the software”. No, you’ve gotta have processes in place to maintain those records, and you gotta have the right process for using it for planning it, so you’re not shooting yourself in the foot. I mean, there are a lot of other ways that you could cause problems, but I think that would be it in managing, you know, if you wanna think about it at a big picture level, managing the expectations that folks have about, you know, the software planning.
So, I’ve got my planning software up and running, I’ve put the change management piece, I’m trying to avoid those things that you just mentioned. Where does data fit into all of this? Well, data fits into that record part, right? And if you’re thinking about purchasing, in particular, that’s a key input, because I’ve got stuff I gotta make, and there are things I gotta purchase in order to make that stuff, and so some of the data, and I’ll just focus on purchasing right now, because we have what’s on hand in inventory, we have our orders, we have all sorts of stuff, but one of them is our purchase parts.
And here’s some of the data that’s really important. Number one is what’s the lead time for each one of those purchase parts? And some of those purchase parts, you might have a lead time, and it’s fixed, it’s hard constraint. I’m not gonna get it any earlier than 90 days, never gonna happen to get it 60 days, or it would cost an arm or leg, we’re not gonna do it. Others have a flexible lead time. Others you might say, “I know what? They’re non-constraints.” So I need to have that type of data in there, my purchase orders. I need to know what exactly I’ve ordered, when it’s supposed to come in, right? That type of data. And I need to make sure that that data is up to date. And as far as inventory goes for my purchase parts, what’s on stock, what’s in stock, right? I need to make sure that that data is good. So that’s the purchasing data that feeds into the plan, and then there’s, of course, stuff that’s there’s planning information that’s output from the plant, but that’s, I think, would be the key data that we’re talking about here.
When should a planner use a consultant to help them create this purchasing plan and get the software working properly, get this all set up? Yeah, well, you know if what they’ve tried isn’t working, hey, that’s a pretty good sign, right? If you’re new to the software, that’s a pretty good time to get somebody to come in because really, you might think, “Wow, man, I don’t know. Is it worth the expense?” And usually, I mean, we’re talking about millions of dollars worth of inventory, we’re talking about getting your customer orders shipped on time, and we’re talking about millions of dollars worth of customer orders. And so, it ends up, if you don’t get somebody who knows what they’re doing, a sherpa that’s been up to the top of the mountain and down, you’re gonna fall into all sorts of problems and usually, it becomes much more expensive very quickly, prolong and delay getting this planning system up to date. So, if it’s a if you have any type of complex manufacturing where you’ve got like I said, hundreds of orders and thousands of operations and thousands of materials, it’s just faster, quicker, cheaper to get a consultant in there to help you, a consultant that’s done it right to get you in there and help you do it. Now there are other folks, they’ve got a simple operation, they’re managing it, they’ve got high on-time shipment rates, it’s not a problem. Well then, I would be the last person in the world to say change what you’re doing, it’s working, do it, keep doing it. But if you’re not in that situation, that’s when usually you need some help, and particularly for the folks that are running Syteline and they’re trying to do APS, you know, all of those criteria would apply. I think if people wanna check you out, John, where do you wanna send? Yeah, they can just go to our website, it’s www.lakeco.com. That’s it. Thanks for discussing how to create a purchasing plan when the lead time suppliers can give suddenly shift out with us today, John. If you missed anything, you can check out the show notes. If you are new to the show, make sure to follow this podcast so you don’t miss any of our direct spend supply chain content. I’m @SarahScudder on LinkedIn and @SScudder on Twitter. This brings us to the end of another episode of What the Duck?! Another Supply Chain Podcast. I’m your host, Sarah Scudder, and we’ll be back next week.