What the Duck?! Episode 28 Transcript
FOR THE LOVE OF PROCUREMENT! How to Keep Transportation Costs Under Control with Andy Neilson
Welcome to What the Duck?! A podcast with real experts talking about direct spend 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 the 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 materials supply chain content. Today, I’m going to be joined by Andy Nielsen, and we’re going to discuss how to keep your transportation costs under control. If you work for a manufacturer and are struggling to manage logistics costs, then this episode is for you. Andy has bought direct materials for ceramics, food and ready meals, personal care, and heavy engineering. Welcome to the show, Andy. Thank you very much, Sarah. Good to be here.
So, Andy, I am in Austin today. You are joining us somewhere else in the world. I think it’s evening time for you, so just about dinner time. That’s right. Yes, I’m currently in Dubai. And what’s going on in Dubai? Are you living there? Are you traveling the world? Sounds like an interesting adventure. I’m here on behalf of a client. So, I’m helping a client as a procurement and supply chain coach currently. Okay. So, Andy, you and I, I think we’ve been connected now for a couple of years. Initially, we were connected through LinkedIn, and we’ve had some conversations. So, one of the things that really stands out to me about you is you have this incredible passion for procurement. I feel like it comes through in everything that you do. So, why the love for procurement? That’s a very good question. I think if you ask many procurement people, the majority of society, we fell into it. I’m not sure anybody chooses it as a career within school. I wish they would. I fell into it simply because I was asked to go in and organize a stores and a warehouse. Could I keep before computers were even born? So, that’s how old I am. And really, the love and the passion just grew from there in terms of the impact it could have, the value it adds to an organization. I’d like to think that I’m reasonably good at it. I’ve been doing it for 30 odd years now. And yeah, I think it touches many parts of an organization, and I see, I think it’s the best job in the world. So, slightly biased, but that’s how I fell into it anyway. Well, I agree. I think it’s awesome, and I’m kind of obsessed with our industry, and I think there are really fun, cool people in our space. One of the other things that stands out to me about your background, if you look at your LinkedIn profile, you have worked at so many different companies and done so many different things in the direct space. What do you think is required to be a great buyer today, meaning in 2023? I think it’s thinking laterally, but I still think that the structure, the procurement tools that we use as a basic, are still relevant. I’m pleased to say that a lot more buyers are open to developing the relationships with suppliers rather than it just being a cost transaction. It’s now about a proper relationship, and I do think it’s how do you generate innovation from your supply base. You know, I’ve bought many categories, but I’m an expert in none of them because that’s where the expertise lies in the supply base. So buyers nowadays, in my opinion, are more about facilitation agents. Whether that be in direct materials, indirect, and I think you see a lot of the innovation in the marketplace as a result of relationship development, partnerships, collaboration. But I still hold true by the… by the, you know the values that procurement have held for many many years which is about control and governance.
It’s about the structure. It’s not about being a procurement dinosaur. It’s about doing the basics right, but understanding where the value needs to be added, and also where the efficiencies need to be focused, and the waste to be removed. So, it’s that constant check-in, if you like, that everything is as it should be, and what else could it be really?
And I think you have to be pretty thick-skinned as well nowadays. I think it’s challenging being a buyer nowadays with the supply chain challenges that we have, and you have to try and maintain a sense of humor as best as you can. So, we work with a lot of buyers in the manufacturing space, and I would say I’ve noticed in the last 12 to 18 months a pretty big mindset shift with this idea of it’s no longer US versus them. We’re not out to screw our supplier, we’re not out to nickel and dime them. And I feel like, at least in manufacturing, that was very much the case several years ago. So, that’s been a nice change that I’ve noticed, and I think it’s going to continue. It’s more about “we” and working together and collaborating. Yeah, I agree. I agree.
You also mentioned having thick skin. I think if you don’t, you won’t, I don’t even know if you’d last a day being a buyer this day and age with the just absolute craziness with you’re not able to get supply and everything changing so last minute. You absolutely have to just have a good sense of who you are and do the best you can and not take everything so personally, which is difficult for most people, myself included. You know, I think many buyers take everything personally. I think that’s just within our nature, to be honest with you, but we all try and learn from it and get better as a result, is my experience.
Company for 11 years, what was the biggest challenge you faced as you were starting your career as a buyer? Oh, not really knowing what I’m supposed to be doing. I think I was very naive, particularly clueless and insular, if you like, to the ways of the world. So, I was working in ceramics in England when ceramics were made in England, sadly not much anymore, and there was a lot to learn around relationships. There was a lot to learn around supply chains as well. And the one thing I did learn is I couldn’t do it on my own, and that wasn’t really about the internal relationships, which naturally exist, but the external relationships. I didn’t know enough about my category. I didn’t know enough about my supply chains. So, when somebody said, “You can’t do that,” when I made a request, I didn’t know why I couldn’t. So, I asked, I guess, the silly questions, “Well, why can’t I do this? What do I need to do better?” And I think any good buyer listens more than they speak. I think it’s about being educated by your suppliers as to what the true parameters are in which you can work. I was sat there, you know, in my little Ideal World, saying, “Well, if I just have to say yes, and you go away and do it, surely that wasn’t obviously the case.” So, that was a few bumps along the road. Like I said, I learned to listen a lot more than I spoke. It took a while because I think that youthful approach, perhaps should I say, sometimes got the better of me in terms of, “What do you mean you can’t tell me what to do? I’m a buyer,” sort of thing.So, but I quickly had that arrogance knocked out of me. I’m very pleased to say and did learn that it’s really good to listen because there’s so many things you can learn from your suppliers. They are the experts. They’re the ones that really going to add the true value ,and they’re going to make you look good in your job.
So there you they are, your best friends. That was the thing that I learned quite early on, and that mentality and mindset drives your strategy and approach, which I think has really helped elevate your career. So, you held several procurement jobs, including a few head of procurement roles and a VP of supply chain gig. What do you think made you so good at working in supply chain that you were able to get those very high-level leadership positions where you’re managing teams of people, versus just being an individual contributor?
It’s a really good question. I guess, for me, it’s about demonstrating the passion to not only get results but get sustainable results. I’d like to think I’m a people person. I’d like to think I’d put people first, no matter whether they’re working for me or working for somebody else, or working in a different organization. I think you take a huge responsibility with people’s careers when you’re managing them and they’re within your own function. What allowed me to get those jobs, I guess it’s that expression of the passion behind, you know, trying to do a great job. Obviously, I’ve worked with some great people. I’ve worked in some fantastic organizations. Not everything has been brilliant, not everything has been particularly good at times. You know, we’ve all had our challenges. We can all look back and go, “Oh, I really wish I hadn’t done that.” But I’d like to find somebody in the world who can’t do that and say, “Yeah.” But I guess now, developing my career through qualifications as well, so through the Chartered Institute of Procurement & Supply, Charted Institute of Logistics and Transport, and the Institute of Supply Chain Management, I’ve always been very passionate about being able to demonstrate that I can do what I say because I think that’s really important. Not that it’s not just for the accolade of being qualified, but I do think it holds a great deal of credibility when you’re dealing with suppliers. I think there’s a, I’d like to think, a bit of respect for the fact that I can do what I say. I’m very open and honest. I’d like to think I’m very structured and organized, and I think that’s how I come across. That’s certainly the feedback that I get. And I’d like to think that, you know, the success, if you like, in the last five years, I’ve been a dreaded consultant, has been as a result of the relationships, if you like, and the results of the last 25 years prior to that. So that would be another interesting topic for an interview about the reputation of consultants in our industry.
Absolutely, yes. With any industry, there are good and bad reputations and there are good and bad results, aren’t there? But I think consultants do get a bit of a bad name at times, perhaps quite rightly in some cases and probably not in a lot of cases. But it is a bit of gamekeeper turn poacher, which is probably a very much an English analogy. But yeah, jump in that fence, it gives you a different perspective, shall we say.
What do you think is the most important role in your supply chain career?
I think there’s been a few. I think that going back a number of years, I worked at a UK retailer called Halfords who’s looking selling cycles and car accessories. And that was having worked at the ceramics business for 11 years, that was my first role out of that kind of steady, safe role. And it was very much about fast-moving consumer goods. And I was looking after cycle accessories, which are not the most exciting of categories to look after. Not being a cyclist myself, I just didn’t get it. I didn’t get the passion. But for me, it was a really huge turning point in terms of my appreciation of how supply chains worked. First, we exposure to the Far East supply chain. First, we’ll exposure to, you know, sea freight taking so long. So all of Christmas, if you like, was already sorted by August of every year, which took a lot to get around, get my head around. But, you know, I think it was the most important for me because the people at the time I was working with at Halfords were just extraordinary. Yeah, the team I was working in, the line manager, Nigel Watson, and just absolutely stunning in terms of the level of support, level investment that they put into me, the patients, and the forgiveness, if you like, when things went slightly wrong because they did. But I think as a result of that work and the result of feeling safe and secure and be able to learn and develop new things, that then paved the way for, you know, where I am now, to be honest with you. I’ve held more powerful roles, I’ve held a lot better roles, but I think that was the most informative role for me because I learned a lot about myself. I was suddenly away from the safe role that I had for 11 years. I was exposed. I was lost at one point because I sat there going, “I haven’t got a clue what I’m supposed to be doing,” but the team around me helped and it was good. There were some good years and that’s why it was, that’s why it’s really important for me. I encourage people that I talk to and mentor and give career advice that it’s really important to take a role like that. You may, it may be a demotion in your mind, you may take a pay cut, but in some cases, that’s the role you need to get the experience you need to catapult your career later, yes. Yeah, and I’m still in contact with a number of them now, you know, and they’ve all gone on to bigger and better things. I said I was far from perfect. I was a pain in the backside for quite a bit of the time, so. But they were, they were superb, you know, the organization simply one of the best I’ve worked for, to be honest with you. So, you just mentioned when you were describing this role a little bit about transportation and how that was kind of your first exposure, and for some reason, that has really seemed to stick with you, and one of the things that you’ve continued to focus on your career is transportation costs.
Why has that become such a passion and focus for you? I think that as you develop your career within supply chain and procurement, it’s not just about buying something and it just arriving on time, in full. Whenever you look at your own supply chains, whenever you map your supply chain, you immediately can see where the pinch points are, where the highest levels of cost are, and transportation is one of those. Rather than just be a blinkered buyer in terms of, well, I’m paying DDP or whatever INCO terms, you still have a need to ensure continuity of supply, and you still have a need to have awareness of what the market is doing, what can you do as a buyer to make it easier for the transportation providers to get into you. So, I think it’s about that flexibility and adaptability to suit the supply chain, rather than getting the supply chain to suit you. How do you utilize the transportation network to your advantage, rather than just think you’re in isolation and therefore they must adapt to your ways? So, I’ve always looked at it from that perspective, what can I do to change, to help, and that’s kind of followed me throughout my whole career, whether it be personal care, whether it be in food or whatever. There’s always been transportation as part of that role, and sometimes I wish it hadn’t, to be perfectly blunt, no disrespect to all the partners I work with, but certainly the last couple of years have been challenging, we see freight rates, but again, you find out pretty quickly the strength of your trading relationships with your third-party providers based on to continue to supply the solutions that they could offer, that they potentially wouldn’t offer other customers they don’t have such a good relationship with. But I think that as the original question, I think the transportation element is something that is sometimes overlooked as an opportunity to create efficiencies, and again, I’ve been very lucky to work with some very, very talented and knowledgeable people within transportation, a lot of men furnace in the US, and again, huge learning curve for me. And I think that’s the key thing about every role I’ve taken on, is I’ve always learned something and tried to then play it back into the next role or next situation. But I just think transportation plays a massive part in everything and every buying decision that you make, therefore you have to consider it, and you have to dive into it in terms of, well, yeah, what if I did this? What if I sourced it from here? What would we do with rail freight instead of sea freight or road freight, etc.?
So that’s why it always plays an important part in my opinion. Our audience is primarily manufacturing-focused, so a lot of our listeners are working for small and mid-sized manufacturers. I bring this up because I feel like a lot of buyers out of manufacturing facilities don’t have the resources to have a dedicated person focused on freight and logistics. So I might be working on a team of two or three or four people, and we don’t have the luxury of saying, “Okay, you focus on this, you focus on transportation.” So as a buyer, I need to know enough so I can factor that in and manage that, but I’m also doing everything else that a buyer does. So why, when we were prepping for the call which hence it’s the conversation of our topic today, you said the biggest challenge you faced last year, meaning you as a consultant now working with clients, was excessive sea freight costs. Why did these costs get so out of control? Of course, we know the blanket thing will be COVID, but I would like your explanation of why sea freight just became so outrageous.
I can give you my opinion. I’m not sure whether it’s accurate or not, but certainly my impression and my opinion, I think COVID, in essence, stopped a lot of transportation initially. I think containers and materials ended up in the wrong place. I think there was a lot of equipment that had to be repatriated in order to get them into the right position. I think as soon as the trading opportunities opened again, there was a huge suppressed demand that the shipping lines took an opportunity around, in my opinion. You know, prices going up, and they make record profits. There’s a direct correlation there, and at the end of the day, if you wanted to ship something via sea freight, the challenge is you’d have to go probably as a small to medium enterprise and use an LCL. So your buying power is quite low, therefore you are at the mercy, if you like, of the shipping lines or freight forwarders who are then at the mercy of the shipping lines in terms of one, availability of equipment, and two, costs. And yeah, I think it was hugely challenging when people were seeing 20-foot containers going from, I don’t know, two thousand dollars to fifteen to eighteen thousand dollars.
I mean, in some cases, I heard – I mean, we had clients it was five or 10x what they had normally paid, and it’s like, how do you even prepare or manage or plan for that? Wait, you can’t, can you? That’s the thing, and I think that as a result of that sort of activity, a lot of clients, a lot of people in the manufacturing space I’m seeing are near-shoring their activities now and looking to source closer to home, and whilst the cost of the product may be more expensive, the overall supply chain cost will be lower, and the supply chain risk will be mitigated to a greater degree because certainly, in a U.S. situation, sourcing it from the Americas will be a hell of a lot cheaper than sourcing it from the Far East, given that the logistics costs, although obviously now that and thankfully it is changing, but yeah, the last 18 months, I’ve never seen anything like it to be honest with you, but we, you know, my clients, yeah, we got through it, you know, it wasn’t ideal, well, it was, it was one of those things that was a global event, as it were, so, but as to the reasons, well, I only have my views, shall we say, I wouldn’t mind you’d own a very, very big boat at the time, that’s what I’m saying. I mean, someone could have made a lot of money getting into the boat industry in the last couple of years, yes, yeah, and I think people did make a lot, but that’s commerce, isn’t it, you know, you either go and pay it or you find another solution, and I think that’s where organizations became quite smart and innovative around what can we do that’s different, what can we do that de-risks the situation and de-risks that, you know, the cost implications. So, yeah, I think in my experience, you know, my clients have, certainly, the landscape has changed as a result, so they’re less reliant on that kind of fluctuation, you know, potential fluctuation in the markets now, because they made their supply chains more robust, I would suggest.
So, I’m a buyer for a mid-size manufacturer, let’s say. What should I do right now in 2023 to better manage my transportation costs this year? I don’t have a dedicated resource managing freight and logistics procurement. It’s one of the many things that I have to focus on and prioritize, so I don’t have a ton of time, but I want to make sure that I’m conscious and doing the best I can for my organization.
Absolutely, yeah. I think the immediate solution is you could probably employ me. If you don’t want to employ me, which is fair enough, I think you’ve got great organizations out there within the freight forwarding world. You’ve obviously got the big players in small parcel who are not just small parcel. I would recommend that you start by conducting a thorough review of your current transportation costs and identifying areas where you can potentially reduce expenses. This could involve negotiating better rates with your existing carriers, exploring alternative transportation modes, or optimizing your shipping schedules to reduce the amount of freight you need to move. It may also be helpful to establish relationships with reliable freight forwarders or third-party logistics providers who can assist you with transportation procurement and management. Additionally, consider investing in transportation management software or other technology tools that can help you streamline your logistics processes and improve visibility into your supply chain. Finally, stay informed about industry trends and market conditions that may impact transportation costs, so you can be proactive in responding to any potential challenges.
So yeah, UPS and the FedExes of this world. And just because you’re a small to medium enterprise, it doesn’t mean that your business is not attractive. And I think that any buyer should remember there’s always value in your brand, there’s always value in your business. But if you’re moving, I don’t know, say 120-foot container a month, you’re probably not going to find many people go adapt their supply chains to suit you. So I would look at how you could adapt your supply chain and your ordering profile to best suit a transportation solution. I work for an organization, and I worked in the US, and we are at our warehouse on the East Coast, and we were importing to the West Coast. So, you know, you could either take it by train from west to east, or you could go through the canal and bring it into New York, etc. But it’s about balancing the solutions and being as flexible as possible and appreciating that you’re probably not going to be the biggest customer to the provider. So again, it’s probably a bit more about listening rather than dictating or demanding and considering all the options. You know, can you look to make your buying lots bigger and less frequent? Can you look to actually, what I’ve done previously is that certain organizations will come in and do an audit of how you transport and how you transport goods in and out, and then they can go away and make a more informed decision about what the best solution that they could offer you. And certainly, when I was dealing with UPS in the US, we amended our outbound delivery network to suit UPS because it made sense. Meaning, you weren’t necessarily using UPS or not as much, and you decided to pivot and make them a main supplier. Well, they’re already a main supplier, but we would, and I’m using these times as an example now, but we were saying, ‘Right, we’re going to dispatch at 10 A.M.,’ but they were saying, ‘Well, actually, that means we had to put a dedicated wagon on, and it would be better at 3 P.M.’ So we kind of changed our schedules to suit their network because it made sense. Because they were here, there, and everywhere. And it was about efficiencies and about adaptability and the ability to be flexible to suit the transportation network. So my advice really would be to talk to providers, talk to the experts, and understand what is possible and what you are able to amend and change to suit. I think you’d be, as a buyer, if you haven’t done this process, you’d be amazed at what the potential benefit could be. A lot of the providers nowadays are true outsourcing partners.
It’s not just a question of, you know, stick in the stick in the box on the back of a trailer and off it goes. You know, these organizations are there to help around your schedule and your routine. They’re looking to utilize their space as much as they can, and you could be a great partner with them, even if you’re driving less than full container loads every single month. I guess the thing is, don’t be afraid to ask. You know, there’s nothing wrong with being a small customer. You won’t necessarily be the biggest, but you could certainly be the best customer, and that would keep some people coming back to you for saying, ‘Right, you know what else can we do to help you, etc.’ So let’s face it, people like to deal with nice people, people like to trade with genuine people who listen and are flexible. I’m sure we’re all the same, none of us like to have inflexible solutions forced upon us. We react naturally and go, ‘No, no, I don’t like that.’ So that’d be my advice. You could look at consolidation as well in terms of other local organizations, you know, so maximizing utilization of the containers or the transportation, the wagons, etc. I think, you know, no idea is a bad idea when it comes to what could help me, but I, all joking aside, there are also some fantastic external third parties that can help you around network design and supply chain solutions, facility transportation. You know, there are some great ones in the US. Again, don’t be afraid to ask. You know, don’t be afraid to extend an invitation to people to come to talk to you. I think a request for information to be sent out to transportation providers is not only a good proactive move, it’s also very educational as well. So, yes, people may not have much time, but you’ve always got time to learn in my opinion. Yeah, and a key takeaway is it kind of sounds like something that manufacturers should really focus on is instead of trying to get a third party to pivot and accommodate your needs, find what’s already in the market, and if there’s a solution that’s working well, see if you can modify your process to fit into a better model, right? Especially if you’re a small organization, people aren’t going to necessarily go out of their way to make major changes, but if you can fit yourself into something that’s already working well, you might be able to come up with a nice solution. Yeah, I liked it to air travel, for example, so yeah, I would never go to Delta or United and say, ‘I want to fly to Dulles at 10:14 on a Tuesday. Can you put a plane on for me, please?’ I can imagine the answer I would get, and it’s probably pretty similar to what transportation providers would say to SMEs in terms of, ‘Okay, yeah, you’ve got three boxes, but you know, we’ve got 50 containers.’ So that’ll be my analogy. You need to be flexible and you need to adapt to other people’s roots, etc. So, and that’s okay, that’s fine, you know, there’s thousands of people who do it very, very well. There are. There is always a solution, there’s always an answer, and there’s always somebody in the world that has solved the problem you’ve got. I don’t think I’ve got any problem that hasn’t been solved by somebody else. You just gotta find it and steal it. What innovation is happening in transportation that manufacturers should pay attention to this year? Something that really stands out that you think, you know, could have a big impact and maybe it’s new and it’s starting, but it’s something that people should… buyers should think about and put on their radars.
I think the key one is around sustainability. I think the new sustainable measures around sea freight, the electrification of fleets, delivery fleets, I think that will continue. I’m not particularly clever enough to say what innovations may or may not be coming up, but certainly, I think we need to appreciate the fact that transportation organizations are again adapting to suit the needs of the environment. They’re all being challenged with the cost of fossil fuels, etc. So I’m quite interested to see what that looks like. I think you see various pictures of ships with commercial ships with sales to take advantage of wind power. I’d say I think it’s going to be an interesting space in the next couple of years as people look to understand how we can become more efficient with what we’ve got, and you need to get people on board with these sorts of things. Excuse the pun, but yeah, there’s obviously the drone thing as well, isn’t there, for household deliveries? I’m not so sure about the drone delivery. I’ve seen some TikTok videos with the drone deliveries. I question the viability, especially in the commercial space. Yes, yeah, I can’t see many 20-foot containers being delivered by a drone, maybe a hell of a big drone, but yeah, I think the fueling and the sustainability element of transportation is really where the focus is, and I think there are some quite incredibly talented people looking at that, but for the likes of normal people like me…
You know, I’m really looking for the providers to come with solutions that are flexible to clients’ needs and be proactive about it as well. You know, they’ve got a massive potential audience out there, of that in the SME market, and they need to ensure it’s not just the big players there for–did you say the SME market? Oh, okay, I was gonna ask you to explain that, but you meant the small business market. Yes, yeah, so they need to provide accessible solutions and solutions that can work for the smaller enterprises on a global basis.
Well, thanks for discussing how to keep your transportation costs under control today, Andy. Where would you like to send people to find you? You have your own company now, we’ve got a kind of cool fun name, Twisted Orange. So, where should people get more intel?
I think the probably best thing to do is find me on LinkedIn, so Andy Nielsen on LinkedIn. Obviously, yeah, Twisted Orange is our business, so for a while we like to do things slightly differently as per the name, but we try and have some fun with it as well. And, like I said, yeah, I think supply chain procurement, best job in the world, I love talking about it, I could talk and talk and talk. So please, you know, get in touch, it would be good to see how I could help. And if I can’t help, then I’m sure I know people that can, but I’m not unwilling to pass people on to the best people that can help.
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 include “Another Supply Chain Podcast” at the end of 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 yet another episode of “What the Duck?! Another Supply Chain Podcast.” I’m your host, Sarah Scudder, and I’ll be back next week.