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 @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 material supply chain content.

Today, I’m going to be joined by Mud Ahmed, and we’re going to discuss how to determine which supplier development strategy to adopt. If you work for a manufacturer struggling to build solid relationships with your suppliers, then this episode is for you. Mud has spent 17 years working in manufacturing as a divisional supply chain leader for Eaton and Bridgestone. Welcome to the show, Mud. I’m fine, thank you. I hope you’re doing well. Now, I know you are quite the world traveler, so where are we doing our interview from today? Right now, I’m back in Dubai. I was in Canada, I think, two days ago. Before that, I was in Mexico. Yeah, so right now, back to Dubai.

Okay, so I want to go back in time when you had first started your career and you were a technical officer, and I’m probably going to butcher this, Karachi. Karachi, yeah, it’s the biggest city in Pakistan. Yeah, so what is this? Where is this? And why was this initial role as this technical officer so pivotal in your career? I think it’s like any first job, so I was… I did my degree in textiles, right, because that was the main industry, and it’s a big thing in Karachi because you can get the job easily. And I think before my… when I finished my degree, I got to interview one of the companies, and they said, “Yeah, come and join us.” And it was a company named ICA chemicals. It’s a bad British chemicals. It used not… I think it went back to normal, and it was a pretty fancy environment to start a career and learn about the corporate culture, what is sales marketing. I was mainly into product development, so I learned the basics and nuances of product development, and I think how important the role of supply chain is even during the product development.

So after this, you kind of had your start in that role, you became a Six Sigma researcher at Volvo. So yeah, I would like to have you maybe explain to our listeners what this means. I think that the Six Sigma something is not necessarily common to everyone, especially people working for small and mid-sized manufacturers.

I, I think Six Sigma is probably the second most famous continuous improvement methodology after Lean, right? So Sigma is defined as a major analyzer-proof control. It was invented by Motorola in the early ’90s. I think it gained fire when GE, sorry, General Motors adopted it, then GE erupted, and therefore Volvo, almost every automotive company. So I was doing my masters in Sweden at Chalmers University of Technology in Gothenburg. And, you know, like any storage company in Gothenburg, it has been surrounded by Volvo cars, Ericsson, all these big brands, also Dutch brands. You know, what’s the name of the bus? I forget. Saab. Yeah, Saab was there as well. So while I was working for Volvo Cars, they put me through the Six Sigma training as a Black Belt. And actually, my job was to manage only Six Sigma projects. So I managed about 150 different projects for various people. It’s always like a coordinator. So it was fascinating because not just you’re solving your own problem, you are looking at various different projects as well because what Six Sigma does for you is to give you a structured framework on how to solve a problem. That means you have to define the problem, then measure the problem, analyze the problem, and improve and control, which is a slightly different thought process if you think about a conventional engineering approach because the engineering approach is, ‘Okay, let’s do and improve the product.’ Because I think more than half the time, the product is not an issue. It’s everything around the product that’s an issue, mm-hmm.

So why was getting this Six Sigma certification so important to you? Like, what did it mean to you to have this? I think it has given me a very, very structured framework of thinking. So whenever I see a problem, I always try to think, ‘Okay, can we define the problem better?’ Because most of the time, people dance around the problem, not actually the problem. As the famous saying goes, which is, ‘If you know the problem, then the problem is half solved.’ So the structured approach towards defining the problem and then you measure it because again, a lot of people come in and they complain about, ‘Oh, I don’t have stock. Everything is wrong.’ I say, ‘Okay, can you please quantify it for me? Okay, that means I’ll be missing 20 of the deliveries or missing 30 deliveries.’ Even the 30 degrees, how much is the supply ratio? How much is until a manufacturing shoe? So you always train your brain to back up the problem with quantifiable data. You know, there’s a famous thing from Deming, ‘In God, we trust. Everybody else, bring the data.’ So it’s one of those things. So if you really have to convince people that the problem you are highlighting is basically a data problem, yeah.

So after your time at full certification, you joined Eaton, and you stayed there for over 12 years, which is a long time in my book. Yes, yes, not many people do. I am an Eaton product through and through. My real actual career in supply chain kicks off in India. It’s actually a slightly interesting story as well. I started my PhD. I was a full-time PhD scholar. I went to England. You have this thing called job centers, so you just walk in, and they have walk-in interviews through the job center. So I went with him, and I was not even supposed to give an interview. I just did it for fun, really. I said, “Okay, I’ll just do that.” And he didn’t get selected. I was, and I just told them, you know, because I can speak multiple languages, and they need somebody who can speak Hindi and a few other languages. I said, “Okay.” And it was a job of a buyer. That was my first job with them, right? And so I was trying to work with them in terms of, you know, they were erring fitting a lot. They were spending a lot of money in basically poor supply chain planning. So I started working with them as a buyer. Then I moved from a full-time PhD scholar to a part-time PhD scholar. The company funded, and this is where I did my PhD in supply development. So I did a lot of jobs in supply chain, from buyer to demand planner, supply chain manager for two different businesses. Then I did a job of a manufacturing manager, divisional supply chain manager, so managing from a very small plant. I think my last job was managing more than half a billion dollar business on 11 different plants, traveling to China, Romania, Germany, France every month. Pretty cool job. So whatever I know in supply chain, I am very thankful to Eaton for training me.

So, Mud, what would you say was the most challenging direct materials problem that you encountered when you were at Eaton? I think the issue with direct materials is not all suppliers have contracts in place, right? And what generally happens is your category commodities managers, they do have contracts in place with, for example, your strategic suppliers, which is your 80% discount. But they are 20% of your number of suppliers. So, as a classic example, if you have 400 suppliers, I’m pretty sure half of them will not have contracts. Having said that, all those 200 suppliers or half-way suppliers, if you don’t have a contract, are equally important to manufacture on time, to provide the right customer service for your customers. So when you go and try to measure them against a certain set of KPIs, which could be on-time delivery, purchase lead time, MOQ, BOQ, supplier information, and so on and so forth, you can’t measure them to the same level of scrutiny because you just don’t have the right contracts in place, which is, I think, is the number one issue. The second issue I see with direct materials is that there is not enough, let’s call it, statistical analysis being done with the supply. What I mean by that is quantitative analysis.

For example, supply chain class, right? I see supplies and strategy. You know, I teach Masters. When I go into my first class, I ask them this question. This is a direct material form, by the way. I say, “Okay, you have four suppliers to make, just call it this Mouse. Yeah, four parts by four suppliers. Okay, each supplier has an on-time delivery of 95 percent. So, four suppliers, each supplier 25. What are your chances of getting all those suppliers to supply parts at the same time?” And most people give me random numbers. Actually, the answer is four factorial. So, the chances of getting the four parts at the same time is less than 37 percent, sadly speaking. And therefore, managing the performance of your suppliers, having contracts in place, having regular reviews, I mean, assessing their performance, giving them feedback, doing the right evaluation is actually as important as you do with your internal employees or your internal manufacturing capacities. Because what people do is they do a contract, then they send them a PO (purchase order) first, initial PO, and then they forget about them. There are no regular reviews, no contract reviews. They don’t measure performance, they don’t give feedback. So, as commodity managers and category leaders, it’s of prime importance that they continue to do so, not only when there is a problem or when something is short and supply is out of capacity. If you would have been proactively reviewing the performance, then you know there’s something about to go wrong, and you can take initiatives. So, while I said the first, and I’m not really if you think about how I define the problem here, in fact, you ask me the question, “What is the biggest problem with the direct material supplier?” The way I have explained the problem, actually, I’m not blaming the suppliers at all here. I have not even mentioned that. What I’m saying is the problem of the review systems and the lack of a structured contractual approach.

So my counter to that would be, it’s really, really hard to find time as a buyer to get out of the tactical mode of spending so much time in email and spreadsheets and firefighting all day. How did you set up programs that actually worked or that were successful at Eaton to better manage suppliers? Because what you’re saying makes complete sense, but actually executing and putting something in place is a very different story.

Yes, and this is where the operations mindset comes in, right? Because again, our category commodity managers won’t like it. What I hear is, somehow they think, again, I’m not talking about buyers, by the way, there’s always a debate between “I’m a buyer” and “I’m an operational buyer.” I mean, what’s the difference? 

An operational buyer is someone who sends a purchase order. Of course, you are a buyer, right? But if you think about the strict roles of the category and commodity managers, they think their role is strategic and commercial. They do not want to get involved in the day-to-day operations of the supplier, such as late deliveries or quality issues, and so on and so forth, which I think is a wrong mindset. Again, I’m just sharing my experience. It may not be true for certain companies, I don’t know. Just sharing my experience. And for a classic example of that is, if you ask any category or commodity managers, “join me in the SNOP sales and operations planning review.” They’ll say, “Why do you want me to be there? What am I supposed to do there? I’ve done my bit. I’ve got my contracts. I’ve got my SRM strategy. I’m good, right? But that’s not true because the reason they have to come is because they should understand what’s happening in the business, what is the demand going forward, so they can work with their suppliers correctly to negotiate price better, you know, give us leverage or even tell suppliers the certain product line is about to go obsolete and we should not be spending so much money on it or should not have so much stock, so on and so forth.

Now coming back to what I’ve done, so it all started from your concept of plans for every part. If you go to SCMDOJO, we, in fact, have a guide which is my company, right? We have a guide which is how to manage, so plan for every part. In fact, the strategy started from the lean manufacturing background, which basically tells you what are your ABC categories, what are your made-to-stock, made-to-order part numbers. So you need to start from there. Like anything in life, you have to have 80 percent of your web value volume and frequency comes from 20 to 30 percent of your part numbers. You know, that generally the ball game is. Then you have to identify, okay, who are the suppliers who actually supply those parts? Again, if you extrapolate and go upstream, you will find the same thing, that even though your focus supplies 20 to 30 percent of them are actually who’s contributing the most. Okay, and we introduced a concept called vendor management, no? Okay, there’s a difference between vendor management and consigned inventory, right? I’m not a big fan of consign, but I’m definitely a big fan of randomized inventory. Okay, sorry, the other way around. Not a big fan of vendor-managed inventory, but a big fan of consignment inventory, right? So consignment is a good concept because if you have committed volume to your supplier against a certain volume to supply at a set price, then the volume you have committed is secured, and it’s easy to secure if you know your planning strategies, you know what’s your ABC item, what’s your safety stock. So rather than having a lot of inventory of components at your place, what you say to a supplier is, “Actually, you’re gonna keep it, right? And you’re gonna send me reports of how you’re managing your A and B items.” So we worked with our procurement manager at that time, her name is Ross Coburn as well. I think they’re connected with me, probably in a lesson or not. They didn’t. They were not convinced because it’s a lot of negotiations for them. You know, think about a buyer going to talk to a supplier saying, “You know what, you supply me 200 part numbers. I want these 20 items to be in stock.” They’ll say, “Why do you want to do that? Because you’re asking me to invest money into cash flow.”

You’re asking me to put money into inventory. I don’t want to do it, but then this is where you have to say, “Okay, you’re a strategic supplier. We see you as a high-value supplier. We want to do business with you, and therefore, we want you to do this. It will improve your on-time delivery, it will strengthen our relationship, we will supply parts to our customers on time, our sales will grow. Therefore, your sales will grow.” So, this is where the whole strategic conversation comes in with the suppliers. Okay, they did that right, and we have had a massive success because we have reduced our lead time from three months to six weeks. So, suppliers, our customers are super happy because we can get parts on time, we can make it quickly, we can ship it out quickly. Therefore, our sales have gone up. At the same time, because once you shrink the lead, so everybody asked me, “Okay, give me the, you know, how can I do this inventory?” I said, “Don’t look into quantity, look into lead time because if you reduce the lead time, the inventory will reduce anyway, right?” So, because we shrunk the lead time, therefore the inventory supply chain, both for our customers and for us, has gone down. Therefore, less investment in the inventory, therefore more improvement in cash on return, therefore the business has become profitable. Everybody was happy. It’s all because of one simple initiative, thinking about your 20/20 of the part numbers which gives you 80% of better delivery or stock availability. I can give you more examples, but that’s just one of them. So, you mentioned the importance of reducing lead times because when you reduce lead times and you have less inventory, which means it’ll free up cash flow so you can reinvest in the business.

I’m a buyer, I’m working for a smaller mid-size manufacturer, and I’ve seen my lead times double, triple, going from a couple of months to over a year. So how do I reduce my lead times? What is the strategy that you recommend or some things that I might be able to do to actually help in that area? Okay, so first of all, why are lead times going up? What’s the root cause? What do you think?

Well, I would, yeah, I’ll give an example. Chips are primarily produced overseas in a couple of countries or limited suppliers, and the lead times have extended to over a year in some cases. Yes, and chips are a problem. We don’t have a cause these days. Laptops are super expensive, and there is a capacity issue, right? There’s a classic example where the whole world is dependent on China and a few other suppliers, one in the Netherlands, and now they got a problem. So, it’s not an easy problem. There’s no short answer for that. Right now, the investments are coming in, it’s going to be a longer lead time. But if you think about, let’s take an example of plastics. Historically, all the plastic parts were moved to China because it was just so very cost-effective, right? And it was their producing millions. But now, what happened is, if you can’t get out of China, then you have to focus on near-shoring, as we have the famous concept going on right now. And if you should hear what I say, if you want to reduce the lead time and you just want to study this to work with the supplier, improve it, and put inventory in. But if the supply cannot produce, they cannot produce. But what’s your alternative strategies, right? Again, I’m going to give you a real example. We were in England, we had a supply in India. They had the same issue, can’t get the production out, lead time, labor issues, you name it, logistics. So, we got it. Then we found a supplier in Romania. It’s making the same product, but they were like 15% more expensive as a cost of goods sold (COGS) of the product. But if you’re going to compare the cost of a product of manufacturing versus copper production in India, China, you’re never going to find that your near-shoring supply or home manufacturing is cheaper, which is, for me, the wrong way to look into it. The right way to look into that is to look into the total cost of acquisition, which is TOC. Again, we have a function in SCMDOJO. We have a fantastic course on total cost of acquisition. People can have a look. One of the best courses.

So the whole idea is you have to see all the elements in the supply chain, right? So one is the production or the COGS, which is the cost of purchase anyway. Then how much is the transportation cost? Then, of course, if you’re buying from a longer lead-time supplier, then you have to carry, you have to put it in the warehouse. There’s a dislocation cost, additional inbound outbound cost, digital inventory carrying cost. Furthermore, there’s always the cost of poor quality involved because if you’re buying from a supplier who is on the long lead time, it takes time to basically, you know, if something goes wrong, the cost of poor quality is high. From a supplier who is near to you, the cost of poor quality is not that high. So if you put all this together, and we did the study, actually, the supplier in Romania was one to two percent cheaper, right? So sometimes if you think, “I’m buying from a supplier, I can’t reduce it,” okay, have you gone ahead and seen, do you have any other alternative opportunity? And if your total cost of acquisition is even the same, then it’s still better to buy from a local supplier, which is near to you, i.e., shorter lead time. Mm-hmm.

So, how has your, I mean, one of the key parts of your career before you went out and started your own company, which we’ll talk about in a minute, has really been around supplier relationship management programs as it relates to reducing cost and reducing lead time? For somebody who’s listening and has no supplier relationship management program in place, nothing formal, it’s more something that’s ad hoc and it’s more kind of firefighting mode, where do you recommend that somebody gets started who has very limited resources? Right, they’re not going to have the bandwidth to go after every supplier and spend, you know, 20-30 hours a week. But they want to get started and kind of ease into it. Is supplier management easy to, yeah, I missed that part, easy news, yeah.

So, for somebody who has limited resources working on a small team, they don’t have a formal supplier relationship management program in place, they want to get started. What one or two things can you recommend or somebody can, you know, kind of jump in and start putting a foundation in place to set up a program for them? I think you have to start with one of the basic strategies: segment your suppliers, right?

Who are your, you know, steady suppliers? Who are your retained suppliers? Who are your replacement suppliers? So clearly, it’s not into the benefit of a buyer or, you know, firefighting organization who doesn’t have a lot of resources is to find a time for the, you know, even forget the replacement suppliers, even the retained suppliers. You know, it’s not a good idea, which is some resources. However, it’s a good start to build your relationship with your steady suppliers and really get them on board as your partner. You know, saying, “You know what, we work with you, we like you, we like your product, we want to grow, we need your help. How can you help us?” And if you ask, I don’t know, 10-12 suppliers, I can tell you this, two of them will show you some generosity. And I think you should take advantage of those generosity, right? It’s all about asking the question somehow, not just always, you know, have a classical approach of, you know, “I’m the buyer, I am right, you listen to me.” I don’t think it works in this modern day and age. This modern day and age is all about partnership. It’s all about finding synergies and growth opportunities for each other, you know, for all of us. So, in that case, if you again identify your steady suppliers, talk to them, maybe have a half-hour call. Guys, this is our business, look like this is our new initiatives going forward. Do you think you can help us in whatever? I don’t know, I don’t exactly know what help you can ask for, but if you’re gonna ask for help, I can tell you this, you’ll get help.

Yeah, I would also add to that, Mud. I think it’s really important to share data with your suppliers. Don’t keep that so hidden and guarded. The more open and freely you’re willing to communicate and give them metrics and insight, they’re gonna be able to better come back with solutions and a program that’s going to help you. I can second that 100%, with a real example, in fact. So, when I joined as a supply chain manager in the plant in Warwick for Eaton, it was an acquisition. It was actually an SME they bought for, I think, 60-70 million, not a few hundred. And despite having a couple of hundred, two, I think 230 suppliers, they never used to send them any forecasts. And I’m thinking, “How do you even expect them to supply you on time? Please tell me also, what business?” And then we send them POs and they ship it to us, like really? Right, I couldn’t get it. So when we started the SNOP process, and given the fact your in-house manufacturing is only 50%, and 50% is depending on the factored goods or percentage goods which just comes in and goes out of your warehouse, you are 100% relying on your suppliers to supply on time. So not sending them forecasts is a sin, actually. Not just bad, it’s actually a sin in my books. So my job, buyers’ response, one of the important standard work was every time we finish the SNOP cycle, we create our forecast. As soon as we upload it into our ERP for MRP to run, one of the jobs for buyers was to come and confirm to me, “Yes, they have sent the forecast to their suppliers.” Not just that, ask them for feedback. Have they looked into the forecast? And do they see any issues going forward? Do they have enough capacity? Because if the same supplier or same buyer comes and tells me, “Oh, sorry, I cannot supply two months later,” I’m going to say, “Where were you two months ago? We sent you the forecast. Did you look into it?” So it’s super important, not just sending, but also asking for feedback. Do you see any issues? Can you do it? And for strategic solutions, so maybe there’s an idea that they have, where like you mentioned earlier, maybe they can stockpile some inventory in their warehouse for you instead of needing to send so much at one time, or maybe there’s an alternative product that they have that might make sense. So there’s a lot you can do when you exchange that information and talk about it. Yeah, and if an alternative product, which may require some, I don’t know, engineering approvals or whatever, you can react on time. Yeah.

So, Mud, you spent much of your career in manufacturing and working with direct materials procurement, both as an individual contributor and managing global teams. You made a pretty big move about a year and a half ago. You did what I call “left” the corporate world and became an entrepreneur. So, why did you decide to start your own company? That’s pretty big, and someone who’s got a very good corporate job that pays ten thousand dollars tax-free. You’ve got to be stupid to do that. So let me define my stupidity, right? Because you’ve got to be crazy to do these things, and we haven’t really taken any money yet. We are a bootstrap startup, and we are like seven people, six or seven people right now. I just hired today, so seven now. 

So why did I do it? Okay, so once I finished my PhD in 2015, July-August, I had too much time on my hands, but I also had too much content in my hand as well. So I’ve got this, always, I don’t know, maybe there is luck there in making all my life since I’ve become a supply chain professional since 2005. I was collecting a lot of good information. I was just keeping it in my hard drive. Don’t ask me why I was doing it. So a lot of information. I didn’t know anything about blogging or vlogging or digital marketing, but what I do is I had to share this information, and I was too lazy to write research papers because research papers take years and months to share. I’m thinking, “I can’t do this.” I had two research papers, but I didn’t do more after that. So then I came across this concept of blogging because right now in the Google feed, you see some interesting items coming, like “What is SEO?” or “What is social media marketing?” or “10 tips to become a LinkedIn influencer.” Whatever. And I think I like this, this “how-to” and “tips” sort of articles, and that suits my brain, actually. So, you know, I just don’t want to read 2,000 or 3,000 words of long text. Give me seven tips or something, and I’ll just want to apply five of them. So what I did was I started a blog in 2016, I think, called “mudassarism,” which is just my name, and I just started sharing snippets, you know, small chunks of my thesis because my thesis was the most original content I could have, right? So, for example, if you even search right now, “difference between strategic and reactive supply development,” you’re probably gonna find my blog, maybe written like more than five years ago. Right? Like, “Okay, give me what is direct and indirect supply development activities.” You’ll find my blog.

So, I started writing, and somehow people liked what I was writing. Then I moved to Dubai for work, starting from Bridgestone, and people started inviting me to conferences. I remember this March 20, 2018, someone paid me to speak in Estonia, Tallinn, and I never thought someone would pay me to go and speak at conferences. I went there, met more people, and someone else invited me to Kiev in 2018 as well to speak. Okay, that’s good. So, the blog got recognition. Then I thought some people wanted to contribute because the blog was my name. It was not representing anything to do with supply chain. So, I thought I should rebrand it to SCMDOJO because “dojo” is a Japanese word that means “a place to stay and meditate.” You know, it’s coming from Judo, karate, like a discipline thing. So, SCM is Supply Chain Management, and Dojo means a place to stay and meditate. So, again, we’re working from 2019, July. I rebranded. It’s the same logo, same brand, and we launched a newsletter. We launched our eco-podcast during COVID called “The Supply Chain Show.” We have 12,000+ followers now on YouTube only. I don’t have any other channels on podcasts. And then COVID happened, and during COVID, a couple of startups hired me as an advisor and started paying me. And Musk has hired me as their advisor as well, Musk being one of the biggest giants. And then I started making some money out of that. But then, what I realized is that what I do outside my job, so what I do in my job impacts hundreds of people, right? But what I do in my blogging and vlogging impacts hundreds of thousands of people. And I saw a problem. So the problem was a lot of people want to educate themselves and are looking for supply chain solutions. And it’s predominantly handicapped by two bodies, and let me name them. It’s okay. I mean, I’m not criticizing them, but they’ve done a great job, which is Apex or ASCM.

Now in the USA and slips in the UK, and they are basically, if you want to do BSCP, you have to spend three and a half thousand dollars minimum, and that’s without giving it to a college. Or if you want to do steps, you have to do more and longer. Then in the covered days, the whole idea of on-demand learning got progress like 10x, like any digitalization, right? And I started delivering some courses and started providing basically my consultancy services, and a few of my friends sitting online, right? So, we are helping companies in the USA, we are helping companies in Qatar, helping companies in Canada, right? And I thought, okay, so I think I’ve got a business because if you are doing something for others and making money and solving their problems, that’s it. So, SCMDOJO right now is essentially an on-demand marketplace for knowledge and experts. That’s what we do. Our experts are co-creating content for us. We already have the biggest library of courses, and we’re gonna just continue to build with our experts. And the idea is to work with brands as well. For example, if you are solving a direct material problem very specifically, which is updating the PO, so the customer would have the right information, it’s a very, very specific problem you’re solving. Therefore, you know the problem better than most people. Therefore, you know the solution better than most people. So, if you end up creating a course on that special problem, we would love to host it, and we would love to give it to our 50,000 subscribers. So, this is our core value of the business, to find experts and give them the opportunity to solve problems for others. And hence, our tagline, “And we help supply chain thrive.”

Thank you for discussing how to determine which supplier development strategy to adopt with me today, Mud. Where would you like to send people to find you?

Just search my name, and they will find me.

Typing in “What the Duck?! Another Supply Chain Podcast” in Google to have the 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’m your host Sarah Scudder, and we’ll be back next week.