What the Duck?! Episode 14 Transcript
STARTED FROM THE BOTTOM NOW WE’RE HERE: Building Supply Chains From Scratch with Peter Hasenkamp
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. 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 going to be joined by Peter Hasenkamp and we’re going to discuss how to build a supply chain from scratch. If you work for a manufacturer and are struggling to build a supply chain department from the ground up, then this episode is for you. Peter has spent the last seven years building a supply chain from scratch for electric vehicle maker Lucid Motors across 2000 plus purchase items in 250 suppliers.
Peter did the same thing previously at Tesla for the Model S. Welcome to the show, Peter. Oh, thank you so much, Sarah. I appreciate the invitation to be here. So, Peter, I’d, I’d like to begin with your personal story, which I find very fascinating cuz you kind of had an interesting route about how you landed up in the world of supply chain in, in particular as a direct procurement.
So you actually started your career as a research engineer at NASA. What was it like working for NASA? It was fascinating, you know, I grew up in the San Francisco Bay area and was always technically inclined, went into engineering school and was always fascinated by what NASA does. There’s a local research center here in Moffitt Field and one of the departments there was hiring and I spent some time working for the Center for Mars Exploration there back this would’ve been the yeah late nineties as they were compiling you know, landing location information for future, future rovers. So it’s been very interesting to see some of that work go into kind of the future missions and where the lands have actually selected to go to Mars and do research and experiments there.
Favorite thing you learned while working at NASA? You know, I, I think one of the, one of the seasoned engineers gave me a good piece of advice that I still use to this day and it’s the KISS principle. Keep it simple, stupid, right? And I think that applies to engineering as well as supply chain really.
Especially any kind of manufacturing or, or operations kind of environment or problem, people tend to sometimes get caught up in, in details or in, in making things more complicated and it’s, you know, if you can boil things down and keep it simple, you know, that’s usually the, the fastest and easiest way to get a good solution, at least as a sort of a stop gap measure.
So it was the KISS principle that I learned from NASA. At SourceDay, we use Slack and I, I think they’ve done a really good job I feel like it’s super simple and easy to use and everyone at our company has replaced that verse by sending internal emails but I think about if that system had been cumbersome or challenging to use, we probably would’ve been still sending emails and working off emails versus something a little more modern in hip.
So, You left NASA and you wound up working in the automotive industry. So how did you wind up working at Ford? Sure, sure, so I’ve always had an inclination for for cars growing up and, and in engineering school, I enjoyed kind of the blend of electrical and mechanical engineering that goes into making a car, right
You’ve got computers, operating mechanical systems in a car, did an internship with Ford when I was still in college, enjoyed it, and so it took a full time job there. I think I was one of the few people I knew that moved from California to Detroit rather than the other way around but you know, it was at the time.
The only place to work on, on the automotive industry, and I had a passion for automobiles. So I went to Detroit and had 10 great years. Really, you know, learning how a large production company you know, builds products, designs, consumer products that are, are very, very complex. Have a lot of suppliers, have a lot of collaboration with suppliers, right?
The auto makers, generally assemble cars, but a lot of the engineering and obviously a tremendous amount of the manufacturing that goes into making a car happens in the supply chain, right, and you use, you know, I think one of the things that’s most fascinating about the automotive industry is that you use virtually every manufacturing technology known to known to humankind.
You know, you’ve got leathers and, and plastics and paints on the interior of the car, you’ve got ceramics, you’ve got electronics, you’ve got steel, aluminum, forging, stampings, you know, all different kinds of technology. So, especially in supply chain, you see this, this really wide variety of manufacturing technologies and companies, right?
It’s a very global supply chain. So you’ve got very large mature companies participating in it, and you’ve also got much smaller ones and you’ve got a wide variety, you know, of, of, of technologies, super high, complex assembly lines or electronic, fabrication suppliers as well as very, very manual processes to, to this day, the best way to make a wiring harness even for high volume car production is, is people, right?
People working on a large assembly line, so kind of seeing that diversity of the supply chain has been really interesting, so it makes me think of the movie Ford Versus Ferrari. I am not a big car person, but I have to say I absolutely loved that movie, that’s as a, I got a little upset, I got a little frustrated at the end.
I didn’t want it to end the way that it did. I thought it wasn’t fair. It’s a fantastic movie. You know, and, and certainly a lot of fun for folks like me who spent a little time at Ford. I actually also have been to Marinello and, and met with some of the team at Ferrari. So I can say from personal experience that those scenes between the, the Ford and, and Ferrari executive teams were quite representative of, of reality and the types of personalities and the different I, perspectives and, and goals and, and personalities involved from the, from those two very, very different companies, both making cars.
So I know we want to focus a lot of our discussion around what you’re doing today, but a couple more questions because I think your experience at Ford is so interesting. You oversaw the development of two all new commercial vehicles. Can you talk a little bit about that and the excitement and challenges and kind of some of the learnings from that?
Because that’s huge. Sure, yeah and it was very, very interesting. You know, my, my, the 10 years I was at Ford were all spent on kind of the car and commercial vehicle application side of things, which are super challenging from a, from a business perspective. The, the cars and, and commercial vehicles are very narrow margin products.
You know, it’s the big trucks and the SUVs that’s where all the profits are but the automakers typically have, have made the cars right to, to build up their fuel economy, balance out their fuel economy averages so that they can be enabled to sell 700,000 F150s a year. So they’re very narrow margins, very challenging commercially.
And from an engineering perspective, you, you know, you have to design to cost as well as to function. You know, with the, the, with the work I did on the Transit and Transit Connect, they were also very international programs. I spent a better part of a year there living and working in Istanbul, Turkey on the Transit Connect program, you know, and saw a very different side of Ford.
You know, got a lot of international exposure. Also that project was a collaboration with a local partner. So it was you know, you didn’t have all the Ford standards. You were in a much more scrappy type of international setting and things weren’t done the same way that they were done in, in Dearborn that you would see in kind of the big main machine of, of Ford motor companies.
So it was a chance to kind of, you know, see a different way of doing business also having to collaborate more with partners. Right. And I think that’s obviously a, you know, a huge part of, of supply chain is, is being able to collaborate with suppliers, being able to, you know, the purchasing teams or the sales teams that suppliers have a similar role of being this intermediary or managing internal stakeholders as well as external stakeholders.
Bringing, bringing the teams together right to, to, to a common goal and not you know, not getting into kind of combative relationships or, or managing differences of opinions. And I saw a lot of that, you know, working internationally on those, those commercial vehicle programs. A lot of complexity, a lot of cost driven and a lot of collaboration that had to be, had to be done a little bit different than when in Dearborn, in your big Ford motor company and can just tell people what you want them to do and have a lot of clout, you know, in, out, in the, out in the abroad and international projects. You, you have a lot more need for partnership and collaboration and compromise. You can’t just sort of force your will upon other people.
I would argue though that even for a company like Ford that’s changed significantly throughout the pandemic and the model from we to I versus you has really shifted and I think even large, large companies like Ford have had to focus on collaboration to guarantee continued supply. So I do think there’s been a pivot, which is in some cases a good.
Well, and yeah, and you certainly see that in certain segments, right? Certain commodity areas, electronics, for example, right? The automakers have never had a direct linkage with semiconductor companies in the past, right? That’s, they’ve been sort of taken for granted and now all of a sudden you know, these, these suppliers are in pivotal roles and cannot possibly satisfy all their customers. Right?
So that’s certainly a situation and also in some of the newer technologies like automotive, automated driving you know, those technologies are very new and the suppliers that have key knowledge in those areas right, Have a choice of, have a choice of customers.
So, yeah and I think you’re, I think you’re spot on. So one of the things that was interesting when you and I were prepping for our interview today is that when you were at Ford, you were actually in engineering, you, you weren’t in supply chain. So, how does engineering interface with supply chain. Yeah.
And it’s, you know, I see after having spent, you know, 22 years in, in automotive in the last 12, 12, 13 years in supply chain, you know, I’ve seen just a really wide range of backgrounds of people that come into supply chain. Some people go to school for supply chain, know that’s what they want to do.
Right. But I, I guess, at least in my, in my view, probably 70% of the people that I’ve, I’ve hired or worked with you know, come from different backgrounds. Not, not supply chain, whether they come from finance, legal engineering, et cetera. You know, they sort of end up in supply chain. You know, and, and personally, I think, you know, an engineering background is great for a direct materials type of procurement role. It gives you that appreciation for the parts, the manufacturing, how the parts are actually made, right? If you want to get the right cost, or if you want to manage the timeline of development, the rate and flow of materials you know, it helps to have a direct understanding of how they’re made, where they come from.
Also an appreciation of how they’re designed, right? So much, especially in the automotive world you know, versus distribution or other direct materials, procurement types of, of industries. So much of the automotive procurement and supply chain work is done up front, right?
You spend two, three years working with suppliers before a product gets to market. So there’s a lot of program management, there’s a lot of engineering development and iterations and evolution that happens along the way, and, and if you, if you understand the engineering work, what that timeline, what that product development process looks like, what that maturation of the designs looks like, right then, it puts you in a better position to manage the commercial side of the business and anticipate where you’re going to have challenges during the product launch or, or development.
So you were at Ford for a few years and then you transitioned to Tesla. So I was born and raised in California, grew up in the Bay Area before I moved to Austin to join SourceDay. I think almost everyone around me owned a Tesla. It’s like a thing in the Bay Area. So what was the pivotal moment that made you move from engineering at Ford to Tesla’s procurement team? That’s quite a big shift.
It is and it isn’t. And, and, and I guess now you’re in Austin you should be surrounded by Tesla’s there as well. Yeah. Elon’s moved Tesla, not as many. Elon has moved his house. One of my dear friends that moved here in January is an obsessive Tesla owner, but I would say in my neighborhood where I’m currently renting, I see a lot less Teslas than where I lived in the area.
Well, hopefully you’ll see some lucids soon. But yeah, you know, I, so in, I moved to Tesla in August of 2009. It was during the time when the automotive industry and the whole, you know, the whole economy was tanking. You know, GM and Chrysler were going bankrupt, Ford was on the brink, and Tesla had just lined up the ATVM loan.
So it was the governmental loan that was meant to support alternative transportation. I’m trying to remember what the acronym stands for, but it, it was alternative energy vehicles basically, and, and revitalization of car factories, manufacturing locations in the U.S. Tesla had lined up alone to bring the model S to production, and I thought it was a huge opportunity to bring a good electric vehicle to market.
I thought Elon had the right vision for making a good electric vehicle, one that was attractive, spacious, went a long distance on a single charge and could recharge very quickly. Right? So not making any major compromises on function, which from what I had seen was, was holding back the technology.
All the big automakers were looking at electric vehicles as compliance vehicles, right. Only the only people that they thought would buy them were, were interested, were commuters who were looking at an alternative to gas and Elon said, Hey, let’s make a really modern car, right, that’s good for the environment.
But it doesn’t make any major compromises, right? Just goes as far as a gas engine vehicle does, and can be recharged quickly and I thought they had a, I thought they had, they had enough money to make a go of it, and so for me, joining Tesla was a chance to keep doing automotive work, come back to where I grew up in the Bay Area, you know, and I thought Tesla had the right combination of people, product, and funding to make a, a good, have a good chance of being successful.
My concern was more around whether the car, the company, could make a good product, a high quality product and bring it to market before they ran out of money. You know, I always thought that the, the, the vehicle and, and Elon’s vision for Tesla, you know, had had potentially be very successful. For me it was more could the company make a quality product and could they get it to market before they ran out of.
I also must note it’s a much sexier looking car than a Prius. Indeed, indeed. My parents bought a Prius and I, and I cringe every time I see it. It’s one of my least favorite looking cars, and then you compare that to the Tesla. What was some of the most exciting supply chain projects that you worked on when you were at Tesla?
You know, it was, it was a variety of challenges there, right? You were starting really from scratch and you had to set up a supply chain that didn’t exist at all, and you had to convince suppliers to take a chance, right? Because the conventional wisdom at that time was that, you know, no one would buy electric vehicles and that you couldn’t make a startup car company successful.
Nobody had done it in 50 years, right? The last company to go public was Ford in the late 1950s and DeLorean was the only guy that got close to starting a car company since then. So the biggest challenge is we’re trying to find those right partners and I think this is where, you know, I really learned that at the end of the day, you know sourcing works if there’s a mutual best, if there’s a mutual strategic interest in the business.
Right. Trying to find why does the supplier want this business? Right? Okay. You, as, as the company are looking for parts, right? In direct procurement, but you know, If the supplier’s interest is just on a financial basis and a commercial one, right? You’re, you’re going to reach a certain level of success, possibly, right?
But you’re never going to really knock it out of the park unless you’ve got and reach the kind of a partnership level of, of supplier collaboration unless there’s really mutual strategic interest and the supplier sees value in your business beyond just a simple commercial transaction. Right? And that’s, that’s where we tried, you know, Where I tried to find the right partners at Tesla.
And, you know, you had this, this massive David versus Goliath type of setup where, you know, the automotive industry was, was in the tank. So suppliers would, would take really any kind of business just to keep them afloat and, and take kind of engineering development fees. You know, but a lot of them didn’t really believe that the product could be successful.
Elon Musk wasn’t a very well known person at that point. Everyone kind of chuckled and about as he was trying to build rockets and, and electric cars or sometimes put electric cars on rockets. So, you know, so there were a lot of challenges you know, all along the way, but you know, at the end of the day, I think the biggest challenge was just trying to find those right partnerships.
You know, where suppliers saw, saw that this was going to be an industry that, that could be successful and had a, had a real interest in participating. So the focus of our show today is on building a supply chain from scratch. So coming into a company that has no real department, no function, no process for supply chain, and this is kind of what you did at Tesla, hence why we’re having this conversation today.
What were the initial priorities and things that you focused on when you were trying to create this new. Yeah, for sure. When I joined Tesla in 2009, there were a few hundred people in the company. I think there were five people in supply chain. You know, they, they, it was, it was tiny and they were producing the Roadster vehicle a few hundred a year, and it was really just spot bys, right?
They had a partnership with Lotus, Lotus built the, the, the cars with some, you know, some, some Tesla skin panels on it. And Tesla built the battery in the motor and, and the cars came over and Tesla put the battery and motor in. You know, all the procurement was done just spot bys of a hundred parts here, a hundred parts there.
It was really, really manual and, and nothing, you know, sort of strategic, sustainable, or scalable about it. So, you know, the, the, the, and there was really no one that had any automotive background, which was one of the things that led me from engineering to, to supply chain was at Ford. You know, the engineering team did a lot of the program management, the industrialization, the supplier management, the, the supply chain procurement organization basically established the, the, the selected supplier. Right, and then engineering led a lot of the development side of things. You know, so in Tesla there was an opportunity to influence the business more.
You know, and, and help drive kind of the overall business a bit more. The engineers had their hands super full just trying to design parts from scratch, right? Which is with no history or, or established prior standard specifications, et cetera. So you know, basically set up, started out by setting up you know, aligning with engineering.
Okay? Here are break the, break the car down into 250 or so commodities. You know, glass seats, wheels, tires you know, those sorts of functional groupings of parts and then prioritize those into sort of three waves of sourcing. What are the most critical parts that need to be sourced first? Either they’re very, very long lead time tooling.
Or they have engineering needs suppliers on board to, to co engineer things like a, a seating system in a car. It’s one of the first things you have to design in a car cuz you’re designing the car around people and the seats you know, set up a lot of your, your geometry of the, of the vehicle.
And a lot of that seating is, is very, very complicated for all the mechanisms and moving parts of it. So you need a supplier to do a lot of engineering part engineering work upfront. The, the, the automaker designs, kind of where does the person sit, what’s the range of motion, what do you want the seats to do, heated, massaging, et cetera.
And then the supplier has to do all the detailed engineering. So, you know, kind of establishing that, that order of precedent across the, the, with engineering. So we know that procurement’s working on the same priorities as engineering and our, our main customer you know, we’re aligned with that customer on needs.
Also setting up with the finance team, Okay, what, what are the targets? What are we trying to, trying to hit in terms of the cost of this stuff? Right? You know, and, and so it was kind of setting up those, those strategic relationships across the different groups to, to say, Okay. Make sure that we’re working on the right priority of things, right?
Procurement, supply chain’s a support organization. Right? Want to make sure that our, our primary customers, you know, are, are happy with what we’re doing and how we’re doing it, what order we’re doing it in, what the criticality is, and beyond that, it was just, it was a lot of, of, of just running as fast as you can because you’re, you’re starting with, with nothing.
You don’t have general terms and conditions, right? You don’t have an established supply base, you don’t even have an RFQ, you know, RFQ package, right? Of, of how are, how are we even going to quote things? So, you know, it was a lot of long hours and having to build those kind of core documents and business processes at the same time as you’re doing it.
Right. We talk a lot about building the plane as you’re flying it. You know, and, and, but I think it was, initially it was really around, you know, trying to, trying to help. The small supply chain team understands automotive product development, what that timeline looks like. Okay, we’ve got three years to get this car on the road.
This is what happens in year one. So what happens in year two? This is what happens in year three, and then with the, the key customers, engineering, finance, et cetera, you know, lining up, you know, what those priorities were and, and kind of, you can’t eat the elephant all at once. You have to eat the elephant a bite at a time.
You know, and, and supply chain can’t, with five people, you can’t source a whole car overnight. So you’re going to have to do it in waves, right? And, and, and that, and that worked for the most part. It was a very, very hectic three year development cycle and obviously we had a lot of growth and recruiting to do during that process, but that helped make it manageable.
So one of the things that a lot of organizations struggle with is the branding of supply chain and procurement itself. It is not often thought of as a cool, sexy, oh my gosh, this is the most amazing industry that I want to join. So recruitment can be very challenging, getting top talent, but also getting.
Visibility and building a reputation internally can be very, very hard. So how did you tackle this? Oh, that’s a, that’s a great question, right? Cause I, I think you’re, you’re absolutely right and, and, and you know, as I look at supply chain, right? Yeah. I guess I see sort of different maturity levels.
In supply chain, right? You’ve kind of got the base level that’s a very tactical place, purchase orders, manage commercial terms, manage deliveries, you know, support all the business functions. Right and then as you, as you evolve up, you know, I guess higher, I would say in, in the organization, right? The, the, the procurement, the supply chain team, you know, can be, can be right if it’s, if it’s a well run team.
It can be a very influential part of the business. You know, especially in a, in a startup because, or in a, in a manufacturing type of company, like a car, right? 80% of a car’s cost of goods sold is purchased parts, right? So you’re, you have a huge amount of, tremendous amount of influence on the business.
If, and, and if we’re able, if I’m able to grasp, you know, all the costs and the suppliers’ situations, right? That really influences the finances of the company. It can even, it can even impact the marketing and sales, right? If, you know, marketing wants to offer this feature on the vehicle and they can sell it for $300 a, a, a vehicle, but I, I can’t buy it for less than 250.
Right? That margin on that option might be so little that it doesn’t make sense. Right? and we should scrap the option or we need to go back and re-engineer that feature on the vehicle to make it more affordable, more profitable and it’s, it’s really the procurement team that’s at the tip of the sword here to, to know, to learn right from, okay, what suppliers are available to us?
What does this concept for engineering really cost? You know, and, and ultimately play a much larger role. You know, in, on the commercial and financial side of things of driving the business and saying, Hey, it doesn’t make sense, right? The complexity here on this supplier to have them provide 37 variants of this part doesn’t make sense.
But, you know, if you, if you narrow that option down to 12, right? We can reduce our investment by this much and still recover 80 or 90% of the margin we were looking for. So it’s, it’s those sorts of, kind of higher level bus business strategies that, you know, I, I’ve always tried to build a team that could influence greater you know, the overall business.
Right. On, on, on and again, that my, my role covers, you know, purchasing supplier quality and logistics. So similarly on, on the quality side of things, I’ve always tried to have a, a, a supplier quality team it can drive design for manufacturability, right? Because if, if the parts you know, the engineers can design something that is wonderful and you can make one of, but if you can’t make 10,000 of repeatedly at a good cost, you know, the company’s not profitable, it can’t scale or it has terrible quality problems, right?
You know, and that’s, so that’s another element where you can go from being kind of a procurement, sourcing back office type of, supply chain, right? To being at the forefront of driving the business and saying, you know, no engineering, you shouldn’t do that because we can’t make that part, right? We can’t make it repeatable.
We can’t make it at a cost, right? We’re not going to be able to scale this thing and, and achieve a profitable business. Right? Or, hey, marketing and sales, right? You’ve got too many configurations here. It’s too much investment for us to have all these different variants. Pick two and we’ll cut our investment in half to tool it up and you’ll still.
You know, 80% of your, your margin on those options. You, So I, it, it’s, it’s always been about trying to build a team that had that skill set and could bring that level of value to the business and then therefore have, you know, that, that seat at the table right, because you, you, you have the potential to influence the overall business tremendously.
Again, if you’re, if you’re able to. Kind of rule up all of that sourcing complexity and supply chain and procurement information into summary form that can help the CFO, the CMO, the CEO, make these product content decisions. You know I think again, you can elevate supply chain to a much higher level and that some.
Kind of the sales pitch when I’m trying to recruit people for a startup like Tesla or Lucid is if you come here as a startup, you know you’re going to, everything is a white board, right? We don’t have a lot of systems processes set up. You have a tremendous opportunity, right, to apply business fundamentals.
We try to hire MBAs and engineers. Right. Who can do that kind of analysis and, and not just say, here’s three quotes and engineering. We quoted three things. All three of them are way too more expensive than what finance wants, you know? But go that extra level and say, hey, we got a fourth quote, and, and, or if you took the best of this one and the best of this one, or if we cut out these, you know, we reduced the number of options that we’re quoting.
We don’t need six colors of this part, we only need two, right? We can meet the financial target and still bring value to the business. So I, I think it’s, it’s, it’s that kind of a long winded answer to your question, but that’s, that’s what gets, gets me excited about supply chain and, and that’s where I think, you know, supply chain can bring, bring a lot of value and, and elevate the, the profile.
Yeah. So you built out a pretty rockstar team at Tesla. You were there a few years, and then you decided you wanted your next adventure, and you joined Lucid. So why did you decide to join Lucid? What was the key driver behind that decision? Yeah, I think there were, there were a couple, couple factors there.
You know, Tesla had scaled up. I’d achieved what I was hoping to at Tesla and I thought there was room in the automotive industry for more startups to succeed. Tesla was making great products, but at the time, so it was 2000, beginning 2015, I went over to the lucid and the company was also very much in a nascent stage.
There were about 50 people in the company at the time, but the chief engineer was Peter Rawlinson, who I, who had been the chief engineer on the Tesla model S, so I knew his capabilities very well. They had a good chunk of money lined up so it was another combination of people, product and funding that I thought had potential to be successful and I didn’t see anybody else really moving into the EV space, the big OEMs were still moving very slowly, not bringing great products to market, you know, and I, I thought there was room to diversify beyond just what Tesla was offering the market and, and start you know, contributing to pull more people out of traditional vehicles and into EVs.
So when you joined, decided to join Lucid, what did the supply chain organization look like? So it was even smaller. When I joined Lucid, I was the only one. It was a, it was a, it was a team of one. They had nobody, no one. There was no product being made and I was, I was the one and only person when I joined.
Today we’ve got about 300 people in supply chain, so it’s scaled quite a bit.
How would you describe the evolution of scaling a supply chain when you are the first employee now to a team of over 300? It’s you know, it’s been a tremendous evolution. I’ve been here for almost, yeah, seven and a half of going on eight years. You know, and similar, similar to what I did at Tesla you know, but really starting completely from scratch here.
Having to build you know, at Tesla I built, I was working mostly in the procurement side of things. At Lucid, I took on supplier quality and logistics as well, so had to build those functions. Also similar methodology, right? Building out the, the, the kind of waves of sourcing the, the alignment with, with key stakeholders and customers, right?
Trying to focus on bringing value to the total business and providing that strategic guidance on how we built the business. You know, how did we, how do we, how do we design the features of the vehicle to be profitable? How do we, how do we put together financial forecasts for total investment required?
You know, so it was a simple, similar methodology. I’d just say it was, it was a much wider, wider scope but also been very, very you know fun to see all, all come together and be successful. It’s fun to see. You got to bring in people into, especially into the procurement organization who have, you know, kind of a certain slice of background in, in the procurement and, and supply chain skill, but most of the time they don’t have the whole kind of Swiss Army knife, right?
Because if you come from an established company, you know, you’ve got a legal department that handles general terms and conditions. You’ve got a program management comp you know, division that handles timelines, and industrialization. You’ve got cost estimating teams, you know, in a, in a startup.
You’re doing all that stuff from scratch. So you, you kind of have to build people into the Swiss Army knife. They have to know a little bit about contract law. To do general terms and conditions you know, they have to know a good bit about cost estimating, right? To be able to, and, and negotiations and be able to source things and negotiate those prices.
They have to do a fair amount of program management to manage the timeline of development and tooling readiness and all of these sorts of complexities. And I, you know, I’ve, I’ve regularly run into situations with suppliers who’ve, who. Never had to do some of these things from scratch or employees as well because this, this stuff has all been set up.
They’ve been working in automotive companies or suppliers. They’ve been around for 30, 40, 50 years, you know, and most of these, those functions are already built. So it’s been I think it’s, I think it’s a great training ground for, for people to round out their skill sets. So you joined Tesla as the first supply chain leader, built out a team, spent several years there.
What made you decide to leave? Sure. You know, I think when I joined Tesla, I saw an opportunity in the market. Right for, for a good electric vehicle to, to start transitioning the industry and, it was great to see all the successes that Tesla had. You know, but in 2015 I was approached by Lucid, you know, they had a chief engineer named Peter Rollinson on board.
He was the chief engineer at the Model S originally at Tesla and I had a lot of respect for his talents as an engineering leader, and I saw the potential at Lucid. Give a shot, you know, at least have a chance to do the same thing over again and, and continue to broaden the electric vehicle penetration in the market.
Right? Tesla makes great products but there are some people who still prefer Mercedes and BMW and Audis. You know, and I thought there was a real opportunity for another company also to move into the market and not, not so much compete with Tesla, but just shift more people faster into electrification.
And I thought Lucid had the right combination of people, product and funding to give it a, to give it a chance of success and I thought it’d be really exciting to see if we could do it all over again and do it twice. So you joined the Lucid team, what did the supply chain organization look like when you started?
Yeah, it was even scrappier than when I joined Tesla. So I was, I was literally an army of one. When I joined Lucid. There was no one in supply chain. Lucid had nothing in production in the States. It was basically a research and development organization of about 50 people, so you know, the methodology of, of scaling and, and ramping was similar to Tesla, right?
You, you have to eat the elephant one bite at a time. So we had to, you know, align with engineering on the prioritization of sourcing of which suppliers, which commodities needed to happen first, second, and third, build a financial model with the finance team, right, Based on our own industrial benchmarking knowledge.
Right to try and triangulate a profitable business structure for the, for the company, write contracts, forms, RFQ templates, and all of that material from scratch and also then recruit a lot of people to, to help with the journey, you know, and look for a good mix of people who could you know, survive and thrive in a, in a startup, in an unstructured startup environment, right?
Where you know, so you ask a question and you get an assignment and, and you know, and that takes kind of a unique personality, right? Not everyone’s comfortable in those situations, not everyone can be successful, you know, people are.. procurement follows a, you know, a certain discipline and structure in most companies.
Most companies have a lot of the history and documentation and business processes, well defined systems, ERP systems in place you know, and, and so you need to find a team that can, can create a lot of that from scratch and problem solve their way through it. So the topic of our show today is around building a supply chain organization from scratch, which you’ve done several times and you did again most recently at Lucid.
What advice do you have for our listeners who are a team of one, a team of two, and they are looking to build out a supply chain organization? I’d like to have you share some of the learnings that you would advise someone who’s going through that right now. Sure, you know, and I guess I give people that join, whether it was Lucid or Tesla.
I give people a little bit of advice in terms of, you know, you’re, you’re never going to be able to do everything that you see a need for, right? In a startup or a, you know, a procurement supply chain organization that doesn’t, doesn’t exist, right? You can, you see all the stuff you need to do and need to build.
So you really, it’s really a matter of prioritization, right? What are the critical business tools you have to have in place? What are your critical customers and what are their, what are their priorities, right? So you know, purchasing is a support organization you know, you need to, need to know your customer base well and need to be able to prioritize, right?
Is it absolutely critical that you have signed 20 page general terms and conditions with every single supplier upfront before you do any business with them? Probably not, that’s probably not the highest priority. If you’re doing low volume, low dollar value business initially, it’s probably more important that you get you know, the right kind of engineering support, technical support for your engineering and product development team so that they can, you know, move the product.
Product development schedule along, so prioritize and execute. Be comfortable being uncomfortable, right? Find a, find a balance where, you know, you do the most crucial stuff and you, you have a, you have a plan and a roadmap to, to do all the most critical things, but you get comfortable letting a few things slide or, or
allowing certain things not to be done as well as, you know, that they should be done as well as you’d like to do them, you know, and, and, and knowing what you’re, what you’re, you know, that those are things that you’ll need to do as the company grows and matures, right? Lucid today is 5, 6,000 people, right.
We have 250 suppliers. We’ve got a you know, multi-billion dollar business in production now, right? Our priorities today are a heck of a lot different than they were 5, 6, 7 years ago and, and that’s okay. Right? So some of the things that we’re working on today, we’ve let slide a bit for the last few years because they weren’t a priority in the early days
and so yeah, having that judgment of, of what, what needs to be done today and what can, what can wait for tomorrow? And then I’d say also finding people, as I was saying, finding the right kind of people who can, who can survive and thrive in this kind of unstructured environment.
It’s not always easy If you’ve got people who are used to a much larger company or a much stricter way of doing business, how, you know, where, where can you find people who’ve got the business acumen, the general knowledge, right? To know what to prioritize, and also know where to, to sort of bend the rules a bit make, make business compromises, right?
You know, that prioritizes the greatest business need over necessarily perhaps the strictest purchasing, sourcing policies and processes that you’d see large companies follow. So you’ve mentioned talent and recruitment a few times in our conversation.
How have you been able to find good talent when you’re building a team from scratch? Yeah, I know it’s a great question, right? I think it’s on top of everyone’s mind these days, right? As talent is scarce, there’s a lot of war for talent on and it has been for the last couple of years here. Yeah, I think on the positive side, it helps to work for a kind of a fun electric vehicle company where people are passionate about the product, right?
They, they have, they have a direct you know you know, understanding of, of cars and, and it’s an everyday consumer product, right? So it’s easy for people to grasp and get excited about. You know, I think it’s also a matter of looking broadly, right? Not just in your own industry you know, but I’ve had good success pulling people from engineering, from manufacturing roles internationally looking in consumer electronics industries, not just automotive industry.
Looking in the consulting industries and supply chain consulting houses as well as, you know, necessarily direct procurement. So sometimes also looking for, looking outside of your particular market space and you know, looking for personality skill sets one possibly more so than, than direct procurement experience, if that makes sense.
What would you say success looks like to you as you’re building out a team from nothing into something? How do you know when you’ve been successful? Yeah, it’s a good question. My happiest moments are when I can go to a meeting and not say anything, right, because that means my team is doing their jobs and they don’t need me.
Right? So if I, if I see success as you know, not, you know, having to help drive, you know, strategic priorities for the team and for the company, but having built a team and trained a team and recruited a team with talent and skill set and knowledge right to handle the business, to handle everyday operations, to handle escalations problems, right and, and be able to sit in a meeting while people are discussing a problem and not have to chip in.
And to have a team that can jump into a new, new problem you know, and solve it and, at least bring suggestions to the table and say, here’s, you know, here’s, here’s a couple of different solutions and, and I, what do you think is the best one?
But at least have taken that initiative, so that’s, you know, the success for me is, is seeing, you know, the team around me able to, to handle business, handle disruptions and problems you know, with, with minimal guidance for me and that means I’ve done a good job training and recruiting the right kind of people and, and setting up an organization that’s able to handle them.
Thank you for discussing how to build a supply chain from scratch with us today. Peter, if you have anything to promote or a project you want our audience to know about, now’s the time. So tell us a bit about what keeps you busy nowadays and where people can go to find you. Sure thing, by all means, please visit www.lucidmotors.com.
Have a look at our products, our vehicle’s been for sale now for about a year, and we’re starting to get into new markets in, in Europe and overseas. It’s a great product, really great technology you know, and a lot of exciting. Exciting new products coming down the pipeline, still a lot of work to be done to, to build up the supply chain, the business operations here.
I’m on LinkedIn you know, and, and Lucid is, is actively recruiting in a lot of different geographical areas to, to grow the business further. And are some of those positions remote? I know that’s always a question we get when we have guests that say they have open roles. Yeah, no as it’s becoming a, a, you know, a bigger and bigger topic of interest with people these days.
I will say that most of our roles are not, remote. It’s you know, as a startup we’re moving very quickly. We don’t have all those structures and processes in place kind of the guidelines to, to curb people along the avenues and get to get their work done. You know, we still need to do a lot of face to face problem solving.
Think all the leadership here believes that you’re more productive talking face to face with people The. The technical solutions of Zoom and whatnot are great and they’re big business enablers, but they’re not, they don’t really solve problems. They help you, but they’re not, they’re not a solution in and of itself.
So most of the roles are not remote. We try to be, as a small startup, still larger, but still a fairly small startup. You know, we try to be fast and nimble and we we’re, we’re able to be fast and nimble by having people work together face to face, you know, in our offices in California, Arizona, or else.
Yeah, same Sourceday. We’re very in the office culture as well. We have a hybrid model in the office, three days remote too. Where are your major locations located? Where are your headquarters? Where are you hiring? Just so we can give people a demographic sense. Sure. So our headquarters are in Newark, California, Not Newark, New Jersey, but Newark, California, which is the San Francisco Bay Area and our factory manufacturing operations and some supply chain operations are also, are based outside of Phoenix, Arizona. So Phoenix and the San Francisco Bay Area are our two big hubs. We do have offices now, I don’t know how far you are you listening, folks reach, but in, in Europe, in Amsterdam and, and Munich as well no.
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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.