What the Duck?! Episode 27 Transcript
PUTTING THE PUZZLE TOGETHER: Automating as Much Data as Possible with Nathan Cunningham
Welcome to What the Duck?! A podcast with real experts talking about direct spin challenges and experiences, and now here’s your host, SourceDay’s very own manufacturing 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. If you are new to the show, make sure to follow this podcast so you don’t miss any of our direct materials supply chain content. Today, I’m going to be joined by Nathan Cunningham, and we’re going to discuss why you should automate as much of your data as possible so you can spend more time on building and maintaining supplier relationships. If you work for a manufacturer and are spending a lot of time on data and not as much time as you would like working with your suppliers, then this episode is for you. For the last nine years, Nathan has been heavily involved in various manufacturing supply chains, including Ingersoll Rand and Tesla. Welcome to the show, Nathan. Great to be here, Sarah. Thanks for inviting me. You look like a very techy person. It looks like you are in some sort of computer lab where you have computer stuff surrounding you in your office. You know, I give off that vibe. Yeah, I enjoy tech. I have a 3D printer and yeah, but I still got the trusty whiteboard as well, so you know, some low tech, some high-tech stuff. So yeah, no, our offices at SourceDay, our walls are writable, so we’ve actually upgraded from getting rid of the whiteboards to just writing directly on the walls. I love that. So, Nathan, when you and I were preparing for our convo today, one of the things that you told me is that you absolutely love puzzles. Why is this? I do. You know, I think that there’s this great feeling of accomplishment when you solve this puzzle. You know, I think a lot of people, especially in supply chain, are very natural problem solvers, and to me, like, this is a great place to put my problem-solving skills.
I’m doing a puzzle right now where I don’t actually know what the image looks like at the end, and it’s very challenging, but it’s fun because at the end, there’s this great feeling of accomplishment that like I made something beautiful, you know, so I kind of enjoyed the artistry of it and a little bit of the technical because everything has to fit perfectly, you know, so I am the oldest of four, I grew up puzzle-loving family, my parents and sisters did many puzzles, I don’t even know if I can count how many. I am not a puzzle person, but I can appreciate because I was surrounded by puzzles most of my childhood. So, Nathan, why supply chain? Why did you choose this crazy industry? You know, it just kind of stumbled into it, so when I was going to college, I had to choose a business track, supply chain was one of four, and no offense to the others, but I wasn’t really interested in HR, marketing, or finance, but when I was interviewing for my first supply chain role out of college, I really finally connected with supply chain in that I realized that I had the very unique ability to connect with people and interpret data, and I really like the balance of that with supply chain.
There’s a lot of relationships, there’s a lot of people management, and there’s also a lot of data. There’s a lot of technical side as well, and so I’ve really enjoyed kind of threading that needle between the two, and I think I’m okay at both, you know, I enjoy both. So going a little further, not only do you have this love for data and supply chain, but you also took a special interest in manufacturing and direct materials procurement. Why? You know, again, I think it’s a little bit of stumbling upon it, but I do enjoy it. You know, I think I like tangible things. Ingersoll Rand is the company I worked for initially, and they had train air conditioning at the time, as well as golf carts and a few other things, but anytime I would see those things in the wild, so to speak, it just brought me a lot of joy. It’s like, yeah, I helped make that, you know? I think that there’s a lot of joy for me in seeing things that are actually working, and anytime I hear about a supply chain manager who procures legal services or marketing services, it just sounds so boring to me.
Like, no offense to my friends, but it just sounds boring. I love the tangible aspect of direct materials. It’s how the world moves, you know? So yeah, I enjoy that. So, you started your career a little bit of a different track in that you were a commodity analyst. So, what did you do in this role? Yeah, so at Ingersoll Rand, I was on a team of 10 or so. I think there were about five or six commodity managers, and they were responsible for specific categories, like machine parts, fasteners, powdered metal, gears, bearings, plastics, things like that. And my role was to support all of those commodity managers for whatever they needed. So, they would go into a negotiation, and I would help prep them for the negotiation. Right. You know, one of the things I did that was probably one of the biggest impacts I had was I created an inflation deflation model that grabbed data from our raw material various raw material indexes/indices, and I forecasted what next quarter would be, next six months would be. And one quarter, I got over 90% accuracy, and I was very proud of that. And even when I left, someone actually called me and said, “Hey, how does this work? I heard it works really well. I just want to make sure I understand some of these fields.” So, that was kind of a fun feeling. But it was a lot of support, you know. It was kind of an entry-level analyst support type role, and I looked at a lot of drawings, a lot of machine part drawings, and things like that to figure out what these things were, data analysis and things like that. So, it was a really fun entry-level supply chain role.
What was the biggest impact that you feel you had in that role? You know, I think part of that inflation deflation ties into that biggest impact part of the puzzle. I feel like my biggest impact was really freeing up the commodity managers. And that, and this kind of goes to the theme of the show, is, you know, I was good with data, and I could kind of interpret what the commodity managers needed, and I was able to execute the data side really quickly because they needed data. They needed to get the information, figure out the information, but they didn’t have the time to because they had a hundred other things that they needed to do. And so, I was able to help kind of, you know, free up their time to make these really impactful negotiations where they were negotiating multi-million dollar deals and trying to save hundreds of thousands of dollars over the course of a yea,r or a few years, and drive really big financial impacts for the company. And, but they couldn’t really do that unless they had good data at their fingertips that they could use in their negotiations, in their conversations with their suppliers. Something that was a really big impact. So after you had your commodity analyst role, you then became an associate commodity manager. So tell me a little bit about what you did in this role.
Yeah, so for that, I was responsible for a specific scope of part numbers, and in this case, it was injection-molded plastics. And I was responsible for, you know, a commodity manager role in general. That’s what they’re responsible for, is the commercial relationship with your suppliers. So all legal contracts, that was on me, and all disputes, you know, there’s times when payments become an issue, or there’s quality defects, and there’s warranty rebates that you need to get. So that all kind of fell on a commodity manager type role. So you mentioned, you just mentioned it, and when we were prepping you, you mentioned the story a couple of times. Why was your injection molded plastics project so important for the company? What was the impact? Yes, so what I did was I went through what’s called a seven-step strategic sourcing methodology. And the seventh step strategy process is really a comprehensive strategy design and implementation. And the basic premise is, you start from scratch and you say, ‘Okay, plastics, what are plastics, you know, what drives plastics costs?’ And so, really going down to the basics and then, what are the plastics in our company, you know, how do I segment those so that the right suppliers get the right products and the right part numbers? Because often what happens in a lot of direct material and supply chain in general is, you go with your favorite suppliers. ‘Hey, this is easy, here you go, can you also sell me this thing, right? Can you also do this? I don’t want to add a new supplier, can you also just do this?’ And, you know, they’re trying to make sales. So yeah, they’re gonna say yes. In your experience, why did people not want to add new suppliers? What was the hesitance towards doing that? I mean, there is a cost, but I think, you know, my mother is a communications professor, and she shows me this diagram every once in a while where it’s like, if you’re talking to everybody, it’s like that’s unsustainable. So you have to have somebody in the middle, and so there’s only really so many people that you can have solid relationships with. And so if you need to add a new supplier, there’s nobody else on the planet that can do it fine, but if you can avoid adding a new supplier, then your relationships do become more impactful. And going back to the seven-step sourcing, I wasn’t necessarily trying to get rid of suppliers, so we did it times when needed, but really there were some parts that were out of supplier that I wanted to give to somebody else, but I just wanted to swap, like, ‘Hey, you do this and you do this, you guys have much better capabilities to do the other thing, right?’ And it was really a realignment on what suppliers should be doing.
Efficient into another role at Tesla, I think you were at Tesla about five years, most of your time at Tesla, last at least your last three and a half years, you were a senior materials planner. Now, I know at Tesla, while your title seems to be direct focused, you actually did a lot on the indirect side, but it’s still relevant to the topic of our conversation today. So one of the things that you had to do is work with suppliers, collab with suppliers. What was the most difficult relationship problem you encountered when you were at Tesla? Yeah, that’s a great question.
Yeah, relationships are tricky and I think everybody knows that Tesla is tricky as well, you know, especially the last five years. Tesla’s been in the news a lot. Sometimes good, sometimes not so good. I have a few friends that want to marry Elon and that are Tesla-only households. Yep, yep. And suppliers want business, right? So, you know, we have a lot of leverage in that regard from a supplier-customer perspective. But in terms of the most challenging relationship, there’s one that stands out. They were my top spend supplier, and similar to printers and ink, right? When you buy a printer and you have to buy all the ink that goes with it, we bought a lot of equipment that required consumables to keep that equipment running. Now, that was indirect, so I apologize to the viewers of your show, but they were consumables that happened regularly, and so it acted in a very similar direct material-type way. They were also very expensive, and we had dozens of conversations about how to reduce cost, like every good Supply manager should do. But my challenge was I need to figure out a way to reduce cost while simultaneously never shutting down the factory and navigating all of the complexities of what all the different people wanted internally as well as externally. It’s a challenge because, you know, Tesla needed to save money. It’s like, you know, we were losing lots of money. Every supply chain manager on the planet faces the same challenge where, “Hey, we gotta save costs somewhere, right?” It’s like we’ve got to find ways to reduce costs. But at the same time, if we ever stopped, like, production’s down, and I’m the one getting fired from it, right? Because it’s like my whole job is to ensure that the production doesn’t stop because of these parts, you know? So, that was difficult to navigate and ensuring correct inventory levels and forecasting, and you know, things like that, and communicating well with the supplier and stuff. So, yeah, what did you think? Did you get parts when you needed them? That’s a great question.
I think there’s lots of turmoil over time, but I think where we landed was we had some really good conversations with the supplier about some of the things that they needed, some real conversations about their lead times, some real conversations about their capabilities, their inventory capabilities, whatever, and we came up with a new process. We basically created a process for them because these items were so critical. We created a new process for them that gave them more information than we probably would have shared with others, but helped them forecast. We did a lot of math. We did a lot of calculations, and again, that goes to the data side where we did a lot of data work, and we spent a ton of time on data. But ultimately, it came down to us sharing the data with the supplier and saying, “Hey, does this work for you? Can we establish it this way and can we build a better relationship so that this is no longer a concern? Can we execute this process in this way so our relationship stays strong?” And the relationship was good at the end.
You know what? So what you’re saying you did, let me make sure I’m understanding this correctly, is you’ve had some process internally to pull historical and try to expect predicted sales, and you had your data analysis, and then you were completely transparent and shared that with your suppliers?
Yeah, and you know, we obviously can’t share everything, but we shared as much as we could, and that was enough for the supplier to forecast better for them, you know, because they have a business to run, and so it was from a relationship perspective, it was me understanding where they were coming from and me them understanding where I was coming from and finding a middle ground. So, you were collaborating quite a bit, going back and forth on the data, then you’d issue a purchase order. How would you continue that collaboration after a PO has been issued because there’s a lot that happens after the purchase order?
Yes, so a little bit of a pitch for SourceDay, we did not manage our PO changes very well, but we tried our best, right? Like we had the discipline, and we forced ourselves to review these specific parts every week and manually adjust the purchase order, calling the supplier, emailing the supplier, saying, “These are the adjustments we’re making,” and then them telling us if they need to make adjustments, right? So, it was very manually intensive, and I’m sure SourceDay, if I knew about it, could have been a great solution, but yeah, it was, you know, we just had the discipline, and I think if you don’t have a good tech solution, you have to have good processes and good discipline, if the outcome is what you want, right? So, it’s like, okay, this is the outcome we need to hit the outcome, no questions asked, and because we didn’t have SourceDay as our saving grace, we had to do something, so yeah, we just had the force ourselves to do it, to manually do it.
What was your backup plan, and if one of your main suppliers wasn’t able to fulfill a complete order, how did you handle having second and third-tier suppliers queued up if there were challenges that happened?
Yeah, happened plenty of times, I’m sure, as many of the people in the audience, I’m sure, have dealt with as well. So, as soon as I joined Tesla, and this was 2017, okay, so I joined Tesla 2015, from the very first day that I started joining them and I started to understand the scope of what we’re doing, I started creating a repository of potential alternatives, and I leaned on that so much, and eventually we built it into our kind of, our everyday process. So that it wasn’t just me whole like hoarding an Excel sheet, right? Like we’ve… we incorporated that into the process that everybody could use and it took years. I mean it really did it took years of time to figure out who could do what and but worth it. You know, a thousand times percent worth it, you know.
Yeah, I mean in some industries like medical or food, and probably even in the automotive, you’ve got such strict regulatory standards. You’ve got to factor in approvals, testing, you know, does somebody have the right certification? So there’s a lot that goes into sourcing alternative suppliers. Yeah, one thing I will say is in all of my experiences, you know, Ingress, I ran Tesla, every time I’ve been in a situation where we’d qualify a new supplier, we go through quality approvals immediately. Prices go down because, and quality improves because that because all of a sudden now your supply chain is less risky, and so because it’s less risky, you can take a risk, you can be a little bit more aggressive in your negotiations if you need to, or if the supplier is being annoying sometimes that happens. I love most of my suppliers, but you know, it’s a thing, you can push a little bit more and you can tell them, “Hey, listen, I have somebody else, and I don’t want to use them, but I can,” and as soon as that’s there, all of a sudden relationships improve because there’s not so much dependence on each other. I think, you know, I shouldn’t have a supplier that I’m so reliant on, and they shouldn’t have a customer that they’re so reliant on. I don’t want to be more than 30% of their business, right? I want them to have a diversified customer base, right? Because they improve, you know, so anyway, kind of a tangent, but yeah, going through quality approvals, qualifying new suppliers always improves supply chain 100%. Yeah, and I would also throw in that you’ve got to look at location as well. You can’t have your entire supply base based in one country, so you need to look at, do you have domestic suppliers? If not, where are your suppliers based? In what country? And can you have alternative suppliers in other locations? The world shuts down in one region, and that could shut down your entire supply chain if you’re not geographically dispersed. Can I nerd out a little bit? I love that there’s a metric that hardly anybody tracks, and I want to track it for people. So, if anybody’s listening that wants me to do this for them, I’d love to do it for them. It’s the percentage of your revenue or your profit that is tied to a specific supplier or a specific country. So, if you have a supplier that supports every single one of your product lines, they’re 100% of your revenue, and that’s bad. That’s bad. It’s very risky. Yeah, it’s very risky. And again, if 90% of your revenue comes from one country/supplier location, but there are a lot of dots to connect, and that goes back to the puzzle. Like, I those are puzzle pieces that I would love to fit together because it’s a metric that a lot of companies should measure and they’re not, and there’s a lot of risk.
So when we were prepping, probably the thing that stood out the most to me with our conversation, hence why the title and topic of our interview today, is that you’ve told me that you’ve learned there’s so much more to direct materials than data. Data is great and is needed, and I would argue most companies have bad data, whether it’s bad data in your ERP, whether it’s bad data in your MRP. Data cleanliness and having good data is really important, but you said relationships between companies are where the biggest value is provided. So why do you feel that this is so important? Yeah, and if people know anything about me, they might be surprised for me to say this because I love data. I love spreadsheets. My wife made me a birthday cake once in the shape of an Excel spreadsheet, so you know, that’s my core.
Relationships matter because we are humans. Data is computers and robots and systems. Those are very important, but ultimately, it’s a people-to-people relationship. I’d love to share a story about Tesla. Before I joined, I joined in 2017, in 2014, Panasonic agreed to help Tesla with this massive gigafactory. Now, that term was never used before, and Panasonic was prepared in 2014, three years before production started, to spend a billion dollars on Tesla. Now, I don’t care how much data Tesla shared. There is not a chance that it would have happened, that Panasonic would have agreed to that, if it wasn’t for a good relationship. And I’m sure the Tesla team shared tons of data, and they should have, and it was probably helpful in the decision making to make it a logical thing. But we’re emotional creatures, and people make decisions, and people make decisions based on relationships and how they feel, not about what numbers say. And yeah, data is great, and what I want to do, and I want to help people with their data, but I want to help because you need to spend more time with people. People are how business is done.
So, if you were building out a direct materials procurement organization tomorrow, what is the number one piece of advice you would give your team around how to establish and maintain supplier relationships? It’s easier said than done. I’ve seen it fail a lot. Yeah, I think I start at a place of trust, right? That’s where I start. And a lot of times, I would coach my team, or if I was doing it myself, I would do this myself. I would always tell suppliers that I’m working with, “I trust you 100 percent right now, today, even though we don’t have a previous working relationship. But as soon as you break that trust, it’s like it goes to zero. It’s like there’s not a, it can be a 50. If you build it back up, you can build up back to 100, but it goes from 100 to zero, and then it requires building. It doesn’t go from 100 to 90, right?” And so I would make sure that suppliers understand that, and trust comes with competency as well as intent, right?
I need to know that they can do this right, and if they can run a good business and give me the parts I need, great. If they’re shady, not great, you know? But if they’re great people but they just don’t know how to run a business, I still don’t trust them, right? And so I would, you know, the great book that I love is “The Speed of Trust,” and that’s kind of where that comes from. I would lean on that and try to build trust as much as possible. I think trust is where a lot of relationships fail, and I think communicating “this is where I trust you, and where I don’t trust you yet” is a good place to help suppliers understand what they can do. I’m a very transparent person. Obviously, we can’t share everything with our suppliers, but I have no problem telling them exactly where I view them or how I view them and giving as much data as I can because I want them to be successful, and I want them to know that they can trust me, that I’m not going to be a bad customer because I know they have bad customers, right? So it’s trust, and then I would tell my team, if it was the team that I was running, I would say, “you know, be a customer they can trust,” and inform them that you expect trust, you know, and do the best you can. It’s not perfect, so you build these relationships, you have trust two or three years in, how do you maintain and keep those relationships going?
You know it’s tough, and I’ll be the first to admit that I haven’t been in a supply chain role long enough to really see those things pan out over 10 years, right? And people move around. I think the stability comes when you have a good person kind of running the day-to-day operations and a good person running the day-to-day operations on the supplier and a customer, right? And you know there’s always ways to be innovative in that respect. I think Supply Chain’s a lot like marketing because you can always do things to improve your brand, there’s always things you can do to improve your supply relationships, hosting conferences, and going out periodically, and you know whatever else, right? Like it’s a business and it’s people, and you know you just gotta try. I think trying is half the battle. You have to put it part of your forefront of your mind, you know? So I did a post a couple cups ago, one of my favorite digital futurists is a guy named Rashad, who keynoted a conference that I helped put on a couple years ago, and he said the future of marketing is people, and I absolutely agree. That at the end of the day, to be an excellent marketer, you need to understand people, and what you’re saying is very similar for supply chain, yeah? And I think that we need better tools to do marketing, we need better tools to do supply chain, and that kind of goes to the theme. It’s like you shouldn’t be spending tons of time on data, but you kind of have to because you don’t have any other choice, right? You know, and we’re just, you know, once the tools are in a place, yeah, I agree. It’s like the future is people, it’s always going to be people.
Thank you for discussing why we should automate as much of our data as possible, so we can spend more time on building and maintaining supplier relationships today, Nathan. Now that you have since left Tesla and gone out on your own, and started your own company, I’d like you to share what problem you help people in direct materials solve, and where would you like to send people to find you?
Yeah, so first, where to find me, I’m on LinkedIn constantly, way too much probably, but I do love it there, and I try my best to message people back, have good conversations, add me on LinkedIn, I’ll accept. In terms of the new company, yeah, I started a company called WHIP Data, which stands for Warehouse Inventory Procurement and Planning. My focus is very similar to the theme of the show, which is to build tools for supply chain professionals so that they don’t have to, right? And we build dashboards, we can take any source of data and put it in any format and do any calculations that we want. It’s very custom, it’s high customer service, it’s not like, “We sell you and then you can email us for support.” People jump on calls whenever you need and whatever to help you understand your data because we know how important it is.
And for me, what I’m hoping that this solves from a pain point perspective is that a lot of companies, a lot of supply chain professionals, direct material, they spend a lot of time on their data, but they think about hiring a data analyst. They’re like, “Hey, we’re spending all this time, maybe we should hire an analyst to do this for us.” And my goal is to help reduce the amount of time you have to spend analyzing so you don’t have to hire somebody, right? It’s like, we can do the right calculations, and we can predict what you’re going to want. You know, we’ve been around a long time, I have lots of good partners that have done supply chain and analytics, and we know some of the things that you might want, even if you don’t know that you want it. And so we can help prepare your data in a way that future-proofs what you want, that gives you what you want now, can help prepare you for the future, all those things.
So yeah, it’s really to give you a tool so that, again, you can spend more time with people. If you missed anything, you can check out the show notes. You can find us by typing in “What the Duck?! Another Supply Chain Podcast” in Google. To have optimal search results, make sure to add “Another Supply Chain Podcast” in your search to ensure you don’t miss a single episode. Make sure to follow this podcast and subscribe to us on YouTube. 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.