Transcript: What the Duck?! Episode 44

What the Duck?! Episode 44 Transcript

THE NEED FOR SPEED: The Impact of Production Speed on Negotiations with Nico Taormina

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. Thank you 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 @Sarah Scudder 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 Nico Taormina, and we’re going to discuss how production speed heavily impacts negotiations. If you work for a manufacturer struggling to balance production speed with the availability of supply, then this episode is for you. Nico has been a buyer for a decade with experience buying a little bit of everything. He’s procured raw materials, anything from Raw Bars and blocks to Inconel powder for 3D printing. So, well, I actually don’t know what Inconel powder is, so we’ll have to dive into that a little bit in the interview. So, welcome to the show, Nico. Hi, thank you for having me. So, Nico, when I was doing a little bit of research prepping for our conversation today, I found it interesting that you started your career at Boeing, a very, very large company heavily regulated. So, why did you choose to work for Boeing to kind of kick off your procurement career? And maybe expand a little bit on what you did for them. Okay, yeah, so I right out of college got a job with Boeing. I come from an Aerospace family. I have both my parents met working for Hughes back in the day, which Boeing ended up buying out over here in the El Segundo location. So, I had a lot of connections within the Aerospace Community. I interviewed with a few of the aerospace companies that are down here in the South Bay, and you know, Boeing just seemed like a good fit. While I was there, so I was there for about three and a half years. I was part of Boeing Defense, Space, and Security as part of their General procurement team. So, I bought everything from raw material standards, which is like nuts, bolts, screws, electrical components, anything triple E machine parts and tooling. So, I kind of bounced around the team. The general procurement team was a lot more of the smaller dollar purchases. So, a smaller dollar for Boeing is still rather large just in the general scope of everything, but it wasn’t the massive, you know, multi-year tens of millions, 100 million dollar contracts that Boeing does. So, it’s a lot more quick turn, and I kind of really learned, you know, all of my kind of procurement chops, of really how, you know, it should work in a general sense. You know, and then as you said, yes, very regulated, very bureaucratic, but yeah, all the policies, procedures, really, really got a good understanding of, you know, how procurement should be going and why we do kind of what we do. Most important thing you learned working there? Yeah, that yes, these policies and procedures can be a headache, but structure is important at a lot of these companies. So now, you know, I’ve been, as well, I’m sure we’ll go over, I’ve been at startups, I’ve been at big, you know, Fortune 100 companies, and structure is important, having some sort of structure to allow for, you know, your employees to work in the correct direction, everybody moving in the same direction is very important. And so that’s kind of what Boeing, you know, what Boeing really taught me there.

Who did Virgin Orbit… So why the change? So you know, I was young and I was trying to get out of the bureaucracy. And so, I also love TV, I love movies, and so I wanted to see if supply chain for a media company would bring kind of like different opportunities, different learning experiences for me, and it did. So I kind of went away from direct materials and I bought a lot more consumer electronics. So stuff you would find at places like CDW, Best Buy, B&H, companies like that. So I would buy a lot for the control rooms. I worked on the Fox lot that’s here in Century City, California. So I worked on the floor above where, if anybody ever watches NFL Sunday mornings on Fox, where all the guys do their whole talk show, Colin Cowherd and Skip and Shannon and all those guys. So I worked right above them. And then I pretty much bought for the entire site, all the electronics, any sort of remodeling that was being done to the buildings, and then anything, any weird thing you could think of for set design that was there, that was needed. You know, a car. So what would you describe as something that’s weird? I’m very curious about obscure purchases, people. So yeah, you… I mean, we would… It’d be anything that, like, set would need that day for, you know, anything from, like, a used car that they would just use for a minute to show someone walking by on, like, a street or something like that, or just very interesting, like, art pieces or fabric clothing, like, whatever, you know, whatever the set would need. So very weird in the sense of, you know, I went away from buying, like, industry-standard screws to now with these really nice and luxurious fabrics and stuff like that. So it’s just a bit of a turn. But yeah, so then I was there, you know, for… Yes, a short time, and, you know, didn’t really escape the bureaucracy that I was hoping to escape. So I really started to look towards startups and wanting to get into a startup atmosphere. I had a lot of friends that were working in San Francisco, and so it just kind of sounded like, “Oh, this is maybe what I’d like to be in the environment of.” And I was approached by Virgin Orbit, and, you know, “RIP to them at this point now,” but that I had a great time at Virgin Orbit. That was a very fun experience, again, another huge learning experience for me back in Aerospace. But it’s night and day what was happening at Virgin Orbit. 

So, what was going on at Boeing? So, I really learned a lot on just kind of better understanding what I was buying. You know, at Boeing, you’re supporting programs across the country. You might not get to see your parts that you buy, where they go, you know, even what they really look like in person. You’re just looking at a drawing or something like that. Whereas at Virgin Orbit, I was buying parts I could touch. They’re coming in through the door of the building that I’m in. They’re being installed by the engineers that I’m working with day to day. And so, through my time there at Virgin Orbit, then I really learned how to kind of ask the proper questions with the engineers. I could kind of go back and forth. By the end of my time there, you know, like, do we really need this outside process? Do we need this type of finish? You know, maybe could we go with a different type of tolerance here? Or, you know, I could really go back and forth kind of with the engineer and be a lot bigger part and a bigger impact and in my eyes, too, you know, what we’re doing as a company. So, I really enjoyed my time there at Virgin Orbit. So, then you pivoted to a company called Canoe. Am I saying that correctly? Yes, yeah, you are. It’s spelled a little funky. Yes, yeah. So, one of the things that stood out when you and I were prepping for our chat today is that you were able to successfully source things ahead of schedule, which is really, really challenging to do, especially in direct materials procurement, where a lot of what you’re doing is at the whim and at the… You’re kind of tied to what the suppliers’ capabilities are. So, being ahead is a big deal. So, yes, explain to our listeners what you mean by this and how you were able to accomplish this. So, Canoe is an electric car startup. They are going to hopefully come out with their production and get cars off the line here this year, I believe is what was recently stated. But yeah, so I was there for a year and a half. I was the lead for low voltage sourcing for the production vehicle, which is anything from your USB-C plug in the car to the entire wire harness of the vehicle. And so, we… I came on board seven months after the company started, like just started from complete scratch. So, I was a very, very early on employee. I’ve… I’ve worked at startups my entire career, but I’ve never joined one that early in their life cycle. Yes, day one, I was given a computer, and then they took me to an old supply closet, and then I sat on a foldaway plastic chair with a foldaway plastic table as my table and a laptop. And then by the time I left, we were in, like, a state-of-the-art facility that was a really beautiful HQ that they had that we ended up building out. But yeah, there’s something to be said for closet offices, though. It was definitely… It was like an old… The building was an old medical device manufacturing facility, so they’re just closets everywhere that we just ripped the door out, and then everybody just would sit where they could. But yeah, very early in the process, and so design itself was extremely early. We had the mock-ups of what the car would look like. We had very, very basic mock-ups of… So, for like the wire harness of where it would wire through the vehicle, extremely basic.

We didn’t really know really what any of the parts would be, how thick the wiring would be, the connectors, where the inline connectors would be. We just had… we were extremely flexible. And so, the way we stayed ahead of schedule was really relationship-driven. So, we went out for a quote and sourced a supplier based on, like, virtually nothing. Right? We gave them these very basic drawings, these very basic layouts. They gave us a swag, essentially, of just like, “This is what we think the production vehicle might cost to do this.” And the engineers and myself, you know, we visited the supplier. We had them come out and visit the entire supply base that we bit out to. So, we really concentrated for, like, six months on relationship. Who do we think we want to work with? Who is, you know, saying all the right answers? Who’s communicating right away? Who’s responding to emails, calls? And we chose a supplier, a partner, really, of, like, “Okay, we’re gonna both kind of go through this. This is going to be difficult. We need help designing it.” And so, we essentially almost brought them in, you know, as like another employee for the company, almost. And so, that way, we were then able to ensure that we hit our program schedule of when we needed to release the original beta cars. And so, that was one of the things that Canoe was very proud of, and I think the people that worked there are very proud of, as they were from inception of the company to the first beta vehicle, which is like your initial test vehicles that are coming off the line, was 19 months, which is virtually unheard of in the car industry. Yeah, it’s just not the number that usually comes out. And in order to hit that, everybody had to, you know, it’s really relationship-driven. All those supply chain teams that were there, it was, we had to really rely and trust on the partners that we selected to, you know, help us get to that point. And so, being that close with the supplier is kind of how we stayed ahead of schedule. Right? The supplier is kind of the experts on… and this is why we chose them. This is their expertise in their field. They know what’s going on with each component, each part, and really kind of trusting them on part selection and, you know, where they can bend and where they can’t on certain design aspects of those parts. So, that was kind of how we stayed ahead. Okay.

You were then at a company called Northrop Grumman. Yeah, they’re another… for just about two and a half years. So, what was the most important thing you accomplished for them?

So, again, I think maintaining schedule during… So, I was there, I started in May of 2020, which there was obviously a large event, a global event that happened. So, I started in May of 2020 and really had to work… I worked fully remote. No cameras due to security reasons. So, I never saw or met really anybody that I ever worked with when I was at Virgin Orbit. Kind of unbelievable, actually. I must say, I think you’re the first person I’ve spoken to that didn’t actually able to see their teammates, at least on camera. Yeah. So, Northrop is another big aerospace company down here, work primarily with the government. A lot of prime contracts go to Northrop. And so, for security purposes, a lot of the computers do not have cameras. And yeah, so in the beginning, my team fully remote, no cameras. About two and a half years of… It was very isolating. But I think what I took from that and what I think was really successful is the team I was on, we were able to support all the program needs. There were no late programs at that point. And we did all this again just relationship building, but you know, a whole different type of relationship building. It’s much more difficult, yeah, one based almost primarily on performance and written communication, it seems like. And that was something that I… I think during that time, I really improved and learned how to better, you know, better communicate in emails, in phone calls, and meetings and presentations that you’re doing. You know, I, in person, I’m… I like to believe I’m a little more animated, and I do a better job of the presentations, and I can hold a conversation and do all that. But when you can’t see the person and you can’t judge how maybe you try to say a joke or you try and, like, lighten the mood, and there’s just dead silence because everybody’s on mute, it… It’s very difficult to judge if your message is landing at all.

So, I really had to, you know, have faith that like what I was saying made sense. I had to, you know, create presentations that were simple, to the point, yeah, made sure that everybody coming out of the meeting really understood why we were there, what happened in the meeting, actions going forward. So, it, you know, I think I learned quite a lot from being at Northrop as well. What would you say was the best mistake you made while you were there?

I think there’s a lot to learn from the things that we don’t necessarily do so well the first time. Yes, so the probably the best mistake, it did have to come from communication. So, I think originally, and I think everybody in supply chain understands, you have a lot of like supplier recovery or not sure how other companies really call it, but when a supplier needs some sort of improvement to how they’ve been operating, happens a lot of the large companies, the larger companies end up coming up with a very presentation kind of forward way of fixing the problem, where you have to create quad charts and create all these statistics and plans and all these types of stuff. So, I did not create a good quad chart or good presentation or did just not get my message across up front. And obviously, you’re presenting this up to management, so it was quite a side step to start my Northrop career there. But, you know, luckily these things don’t happen overnight. The suppliers don’t immediately become the best supplier from being on these improvement plans. So, I had a lot more opportunities to kind of prove myself that I was not incapable of relaying the message that I was trying to get. And so, it’s just learning, learning how to better communicate. And I really had to kind of figure that out fast. And that was probably the best mistake, you know, that I made there.

So, now you’re a buyer at a company called Rocket Lab. What is the biggest challenge you’re dealing with right now? If I, I said, you know, it’s June of 2023, biggest pain point or struggle that you and your team are dealing with?

So, the biggest pain point is just the availability and lead times and trying to meet schedule. We are the, I would say, the leading small payload rocket launch company in the world. I think right now, we have acquired companies in the last year to be more of a vertically integrated company. We are trying to have our fingerprints on kind of every aspect of space, of anything with space systems. And so, with that, we are growing, you know, 100% year over year, just doubling the last three years. And we have very aggressive schedules. We launched over 10 rockets last year. We’re now trying to get our satellites that we’re building at this facility here. And you can’t miss dates when we’re talking about a rocket launch or trying to get a satellite into orbit. You just cannot miss the date. There’s a day that the rocket goes up. If you’re not ready to go, then, you know, larger problems happen. So, schedule is very important. It’s always at the top of everybody’s list. Price also very important. And so, figuring out that balance of, “Hey, this part’s available. We can get it by the before launch date for production. It’s cheaper, do we go with that, or, oh, this lead time’s gonna maybe get there before production, it’s much cheaper, can we go with that?” And so, it’s just like a constant, constant struggle of what do we do. And then obviously, also just with kind of the whole supply chain, the global supply chain, kind of getting up and running in the last year and really having struggles the last couple of years. But, you know, the parts that typically were available are less available, finding those parts. If you can’t find those parts, then having to do like redesigns to get new parts, that all takes time, that all eats into schedule. And when you talk about schedule, no one ever goes really to the engineer to understand why design happened. It’s always, you know, to the supply chain of, you know, where do we get the part, how do we get it on time. So, a lot of the pressure of schedule and price typically falls on our backs. And so, that’s really what we’re dealing with here. But, so fun, fun problems.

So, you said availability and lead times are your big struggles this year and have been for a while. How are you combating these challenges? Like, what are specific things that you’re doing that have made an impact?

Specifically, to me and the team here, we really are working hand in hand with the planning team. The planning team also very important in this whole situation. We work with them to better understand the rolling dates and quantities and what we have and being like step and step with them, understanding what parts we’re low on, what parts are needed, ensuring that we have the right lead times built into the system so that our MRP and our ERP systems are working correctly to make sure they’re releasing parts out. Again, relationships with the suppliers to better understand what parts are possibly about to reach a, you know, some sort of availability issue or, you know, talking with manufacturers to understand what manufacturing lead times are starting to push out into. And so, it’s really a lot of communication, a lot of relationship building, both internally and externally, in order to make sure that this all goes smoothly.

So, you mentioned supplier relationships and how those are so important to you to make sure that you’re getting the supply in full on time when you need it. What have you found that’s worked well in building and maintaining those relationships? Because actually doing that can be challenging.

Yes, I think, you know, starting with honesty is always good, and I think trying to work more towards a partnership is definitely something that I kind of push for. A lot of the times, you can have a supply chain team that really sees it more as, like, they make us the parts and we just beat them down on price, beat them down on schedule, and it’s really, like, a one-sided street. But I think in this business, really, for it to have any real success, you really need to have those relationships be very strong, and it needs to be more of a partnership. You know, price discounts, any sort of real price savings, like, the suppliers aren’t just going to give that to their most hated partner. So, having a good relationship that helps with price, having a good relationship can help with schedule. You know, somebody who you’re much more in a friendly relationship with is gonna release more information to you when it happens. If they don’t really want to talk to you, they’re not really going to want to give you bad news or anything like that. So, if you are building those relationships, you know, being honest, keeping everything, not hiding any kind of information from anyone at any point, I think it really helps.

When you and I were chatting prior to our convo today, you mentioned something several times, which is why I thought it would kind of be the theme of the show and the value that we’re really going to provide to our listeners. You said you believe production speed heavily impacts negotiations. What do you mean by this, and why?

So, it was something that I kind of learned going into the automotive industry, and so price is very important in the automotive industry, and it is a lot due to the production speed of how they operate. So, when you look at rockets or planes or helicopters, those are huge 30-year contracts. You’re probably pumping out, you know, 50 a year, maybe that’s max volume, somewhere around there, a hundred even. Cars, if you look at, like, the F-150, is doing hundreds of thousands a year. So, when I got to the automotive industry, suddenly the price negotiations became extremely granular and very detailed, and it’s something that I’ve tried to bring with me back into the Aerospace industry.

But if you think about a wire harness on a vehicle that’s producing, you know, 200,000 a year, you’re talking something’s moving off the production line every 20 minutes. So, if you save a cent now, suddenly one cent over the year is a big number, one cent over the life of the production vehicle is a huge number. And so, the impact of these price negotiations becomes just immense.

So, in the auto industry, it was very granular of what each piece price of every single part was. You would break it down into just the most minute detail. Like, where’s this being manufactured? Can you manufacture it over here? Can you do this? Is this connector the right connector? Is this wiring too big? Do we really need it here? Can it fit over this way? And you really, the questions never end, the negotiations really never end. So, that was something I, as soon as I chose the supplier, then I began negotiations, and those didn’t end. I left, I handed it off to the next person to continue negotiations. They just until the contract is signed for that production thing, the negotiations were just constantly going. So, that’s kind of what I try to bring in here, now that I’m back in Aerospace, really try to get granular, really try to figure out all the details. Sometimes, the bigger suppliers don’t want to give that to you, but again, back to relationships, as long as you’re building those correctly, you’ll get more information from the people you work with on a day-to-day, and so it really helps with negotiations instead of just getting like an overall value or something like that.

To go off on a trick or tip you can share with our listeners about price negotiations, something that you’ve done that’s worked well.

I think negotiations, to a point, obviously are difficult. I think I’ve heard a lot of different suggestions of what to do. A lot of people, there’s the old thing of, you know, whoever talks first loses. So that one’s a funny one. I have a hard time with that. I typically say a joke or something right off the bat. But, I would just say, you know, have a number, be prepared, understand where your number’s coming from. Make sure your number makes sense, make sure you can get to your number based on, you know, whatever you’re building in with labor, material, anything like that. Make sure that you can actually get to that number and then it makes sense. And then just be strong with it and go with it. If you’ve done the work and you’ve put in the time and that number is correct and you know how to get there, then that’s something that you can win that negotiation if that all works out. But it’s difficult to if you don’t know how to get to that number.

A lot of times, that big aerospace companies, that happens. You just have these kind of financial goals that you need to hit and then, you know, by the time it gets to you at these large companies, it goes down the levels and it’s just, you know, 10 off here, 10 off here, 10 off here. And then by the time I get to you, it’s just this number that you have no idea where it came from. Those are hard negotiations to do when you go and you say, “Hey, we need to hit this number in the suppliers because there’s no way we can’t hit that number. How did you even get to that number?” Well, then it’s, you know, what do you do at that point? So, as long as you come prepared, have your number, make sure you can get to the number, and then go from there.

Well, thank you for discussing how production speed heavily impacts negotiations and some pricing negotiation tips as well with me today, Nico. Where would you like to send people to find you?

You can find me on my LinkedIn. It’s Nico Taormina. That’s about it. Maybe come visit me at Rocket Lab. I’ll give you a tour.

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” 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 at @SScudder on Twitter. This brings us to the end of another episode of What the Duck?! Another Supply Chain Podcast. I am your host, Sarah Scudder, and we’ll be back next week. Thank you.