What the Duck?! Episode 52 Transcript
FLIGHT PLAN: Turbulent Tales of Chris Locati’s Continuous Struggle in Aerospace Parts and Materials
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. Today, I’m going to be joined by Chris Locati, and we’re going to discuss his continuous struggle to get his parts and materials on time working in Aerospace. If you work for a manufacturer and are struggling to deal with late deliveries because your suppliers are understaffed, then this episode is for you. Chris lives in Oregon with his wife and two kids and has 13 years of experience in supply chain. He began his career with a stainless steel fabrication shop, supporting industrial kitchens, construction, and semiconductor processing. That was a mouthful. Welcome to the show, Chris. Thank you, Sarah. I’m excited to be here, and I appreciate you having me on the show. I’m very jealous of your weather right now.
I’ve lived in California for most of my life. I moved to Austin to join the SourceDay team, and we have been under a heat warning for the last two or three months. I don’t think it’s been below a hundred degrees here for the last 60ish days. So, enjoy your ability to be able to walk outside, exercise, and get some sunshine whenever you want. Yeah, that’s pretty hot.
So, I’d like to start off all of our interviews with your personal story, telling about how you got your start in supply chain.
Yeah, I started—I kind of snuck my way into supply chain. I was working construction in Walla Walla, Washington, and I was currently working a temporary job. But we wanted to move to the Portland area, and my wife was working at a bank. She got an opportunity to transfer, so I took that opportunity to look for jobs over here. My uncle, who’s who became my boss, actually owned and ran Pacific Stainless. So, I just called him up and said, “Hey, are there any jobs I can apply for? We’re looking to move to the area.” And he said, “I got the perfect role for you.” He brought me in as an expediter to move the parts for the shop. But with that came some inventory management and kitting. I currently had a buyer who was buying the raw materials, all components, and everything. But that buyer left, and as he was leaving, he said, “Hey, why don’t you take on some of the purchasing for screws and hardware, the smaller things like that?” So, I started doing that, and then eventually, it just kind of grew into buying all of the components, all of the shop supplies, and handling maintenance things like that. So, that’s kind of how I got into it. The more I learned about it, the more I realized I liked it. I enjoyed supply, and I asked, “How can I learn more?” That’s when my uncle, my boss, turned me on to Apex and certifications so I could start learning more about supply chain and business processes.
So, when you were at Pacific Stainless Steel Products, you were what’s called an MRO (Maintenance, Repair, and Operations) buyer. What were you responsible for in this role? And I’d like to have you touch on what you thought was some of the most difficult parts of the job because coming in and working in direct materials is not easy, and there’s a lot of things that we need to learn.
Yeah, and it was certainly a unique situation at Pacific because they are a Job Shop. So, you didn’t have a real steady stream of the same thing over and over again. So, the predictability was definitely the hardest part of that.
So for those who aren’t aware, Chris, what is a Job Shop?
A Job Shop is basically, you kind of custom—it’s not going to be a repetitive line style, or you know, making the same thing over and over again. It might be similar products or a similar thing with different configurations. But unique stuff comes up all the time because it’s just basically, “Hey, a lot of things they did were like restaurants.” So, yeah, the restaurant needed tables, but they needed this length table and this cabinet with this many doors, or you know, maybe casters or maybe legs or whatever. So, it was always different products going through the shop.
So, it’s based on a job rather than on, which makes managing supply and inventory that much more challenging, correct?
Yeah, yeah. So, we would come, I mean, there would be kind of the repetitive things that we did buy and keep in stock, and the only thing you had to do with that was manage the quantity or the amount you kept on hand. But then there were occasional times when something completely unique comes up that you’ve never purchased before. Sometimes you have to deal with minim buys or just even sourcing, trying to find somebody who actually provides that product. So, that was always a challenge or something completely unique came up that we’ve never purchased.
So, what was the strategy then? I mean, some things were a little predictable and you were able to have suppliers secured or things set up. But you can get orders first for a design or creating something that you don’t necessarily have product in stock for, and/or you need to source new things. So, what was your strategy for managing the supply for this unique business model?
I think it’s control that you can—you can look on history and kind of get an average, get something that looks like, “Hey, this is what we’ve been doing, these are the volumes we’re doing.” You can also get with the sales team and say, “Hey, what are you seeing coming down the line?” and kind of look ahead. So, the things that you can predict a little bit more, you can—you just need to kind of fluctuate the inventory. So, looking at, “Hey, how many jobs have you got on the books next month?” We can start beefing up the orders or backing them down. But then, it’s so what you do is you control those things that you can. So, when the things that come up that are out of the norm, you have the capacity, you have the room to put in the extra work to source those and supply them.
So, for the last six years, you’ve worked for Precision Aircraft Solutions, yes, which is in the Aerospace industry, which is a very unique industry. Our company does some work in Aerospace, and I have friends who work in Aerospace as well, so kind of a different animal in some cases. So, let’s talk through first, what does your company do? Let’s maybe explain that for the audience.
Yeah, it’s very unique. When I got hired on here, I was excited about it because I, at first, just being in Aerospace, I love planes, I love how they work. But Precision converts passenger aircraft like airline aircraft, 757s have been the main aircraft that we’ve done. We’ve done up to 170 planes on the boat, or that’s how many we’ve done in the past, I should say. And now we’re starting the Airbus A321. So, we convert those from passenger to freighter. The freight world is going strong and high need, so it’s an industry that’s very good to be in right now, as far as Aerospace goes. And then, why the transition? Why did you decide to pivot from Pacific Stainless Steel into Precision Aircraft?
I would say there’s a few reasons. One of the main reasons was strictly family, personal related. Yeah, I was commuting 45 minutes each way to work at Pacific, and so I loved it there. I love working with my family. It’s a family-owned company. You know, I love the people there, really enjoy the job. So, that was a big thing, though, was just the proximity, because it was going from a 45-minute commute to a 10-minute commute. Apart from that, also career-wise, it was more stepping into a little bit more of the larger supply chain work that I had learned how to do but wasn’t really utilizing that as much in the job shop environment.
So, in your role at Precision, what are you specifically responsible for?
So, I’m personally responsible for managing basically 2500 or more direct parts that go into the aircraft conversion. We also do assemblies here. We assemble cargo doors and the fuselage reinforcements, which we call Sills. Those are actually made here in Beaverton, and then they’re shipped with the kit to the MROs (Maintenance, Repair, and Overhaul facilities) that actually do the conversion of the aircraft. So, I’m responsible for buying those 2500 kit parts that go with the cargo door and the Sills.
Of those 2500 parts that you’re responsible for, what has been the most difficult to procure this year?
This year, I mean, everything’s gotten a little bit more difficult, just with the materials, raw materials, especially metal has gone up in lead time, up in price, and everything. Even with the labor force, everything’s just gotten a lot more challenging. But I would say that in Aerospace, the things that are probably the most challenging right now are electronic parts, anything that has a relay or a PCB board. For whatever reason, those have been the harder items to procure, given the long lead times or things that we’ve had on order have had major delays because of PCB board shortages and electronic component delays. And I think that is a lot due to labor shortages that we’ve been seeing.
So, what are you doing to overcome that, given you’ve had such a challenge sourcing some of these things?
Yeah, one thing that we do a lot, and I would say it’s probably not typical, is to actually manage shortages. I mean, managing shortages obviously is common, but we do a lot of that ahead of time. So, we actually manage the shortages that are late now and that we’re needing now or in the past, and we’re trying to get those to recover and come back in. But we also do look ahead, and we have a pretty steady schedule. We call it a slot schedule of aircraft builds when the kits are needed, there’s up to about 18 months worth of demand shown. So, with that, we’re able to look ahead and go, “Okay, what parts are needed for those aircraft?” And then we can get with the suppliers, and we constantly are saying, “Hey, is this on track? Is this on track?” We send out weekly open order reports so that we can look ahead and see if there’s any issues. The vendor can come back and give us notes and say, “Hey, we’re seeing issues with this, this might cause some delays,” and then we can begin to work on providing solutions.
So, one of the things when I think of Aerospace, the first thing that comes to mind for me is super long lead times, yeah. And then the second thing is high regulations, meaning lots of government and third-party regulations and codes and things you have to follow. Why are there such long lead times in Aerospace?
Yeah, the long lead times have to do probably with the specific materials and specifications that we have to follow. Aerospace and military-grade items are highly watched, and they have to be heavily certified. Because of that, it’s kind of a niche, and so there’s not any company that can just go out and make that. They have to be certified to do that and approved by the FAA. So, I think that has a lot to do with it. I think also the labor force, it’s a very specific industry. Just because you work in a machine shop or work in a forming shop or hardware shop, that doesn’t necessarily mean that you’re ready for Aerospace. So, it is kind of getting skilled labor that’s able to go into that workforce and know those regulations and know how those things work. It’s probably just a lot of that. There’s not as many companies that are making those specific parts. Yeah, so there’s a lot of demand for it, especially when you have your OEM Airlines like Boeing and Airbus that are constantly increasing their production. We’ve actually just seen that they’re increasing their production. So, that’s taking up a lot of the capacity. If you’re in a smaller aftermarket-style business, then you don’t get quite as much priority there. So, it does take a lot longer to get parts. One of the things that you mentioned when we were prepping for the call is labor shortages with your suppliers, meaning they physically don’t have enough people, so they’re delayed in getting their orders out to you.
Yeah, how are you problem solving this with your suppliers? I mean, I feel like this is a tough challenge. When you know, the thought of introducing Robotics and AI into your suppliers’ business is not necessarily your decision, correct?
Yeah, I think for our company to be able to mitigate that, we do need to have a wider Supply base. So, we try to have multiple vendors that are able to make most of our parts. There are obviously ones that are single-sourced or sole-sourced suppliers based on our engineering and FAA approvals, but for the majority of our parts, we can go to multiple machine shops, multiple forming shops, to be able to have either dual source or alternate source parts. And so, that helps mitigate it for us. I do discuss this with our vendors, you know, just like how is the labor shortage affecting them. I went over to a local vendor, and they said that’s the main problem, that they have the capabilities, they have the machines to do it, they’re just trying to keep skilled labor in there to be able to run them and run at the full capacity they want to be able to. It has been a really big challenge for them. So, I think it’s just encouraging them. I think that what we do here to kind of keep our labor force up is we actually do contracts. We hire contract annex engineers to join our team and work with us, and we try to keep them fairly long-term so they get a good understanding of how our process works. But, it definitely helps to keep our labor going.
Chris, when we were prepping for the call, you told me a story that I’d like to have you share in the interview, and it’s about a time you had a part that was over seven months late. So, you have phase one of the part being late, but then there was another issue with a distributor which made it even later. Why was this part so late, and what did the distributor do to make this an even much bigger issue than it already was?
Yeah, we never actually got the full story of why it was late, at least not the details. But we were going through a distributor here in the U.S. that is obtaining it from a manufacturer overseas. So, there’s kind of that disconnect there. But we didn’t know it was going to be late. They kept pushing the date out and kept saying, “We’re contacting the manufacturer,” but we’re not knowing, you know, we’re not getting any responses. And I’m guessing it probably has to do with material, probably labor, maybe capacity. Those have just been the constant excuses or reasons. And once they finally did get the parts, we were like, “Oh, great, you got the parts, okay.” But then they said, “Well, we don’t have the paperwork that’s required for now.” So, we’re reaching out to the manufacturers, trying to get the paperwork, we’re not getting any responses. This went on for probably about two weeks. And then I finally said, “Okay, I’ve got to do something else about this.” So, yeah, I began to work on trying to find my own way to get that paperwork.
So, this to me goes back to a big piece of what I think is really important in supply chain, which is supplier relationships and supplier management, which can be challenging when you’re managing a portfolio like yours, which is over 2500 parts. So, I’d like to have you walk me through your supplier management strategy and process. Like, what are you doing today, and maybe there are some things that aren’t working so well, and you know that you’re looking to improve in the future?
Yeah, we keep in pretty good touch with most of our suppliers. This particular supplier in that case is a more online, internet software-based kind of company. They don’t do as much face-to-face.
So, that was a little harder to work with. I had to really push and reach out to try to get contact with them. But we do maintain supplier relationships with weekly calls with a lot of them. Like I said, those weekly open order reports, we send those and then use that as kind of a base to communicate with them and make sure we’re on the same page, make sure they have all of the POS we’ve released, and make sure there are no issues along the way. So, we do collaborate pretty well with our suppliers. I think systems-wise, we kind of have a lack there because we don’t have any system sharing software or anything like that that we can do things in the system collaborating with vendors. One thing we are starting to implement, though, is a Supplier scorecard. Our supply chain manager is out kind of preparing for that right now and trying to build that program so that we can give our suppliers a score and just say, “Here’s where your strengths are, here’s where your weaknesses are. Let’s look at that.”
Now, what about managing inventory levels? How are you handling that? Because you want to have enough so you can fulfill your orders, but you don’t want to have too much where something becomes obsolete or becomes irrelevant.
Yeah, yeah, and it’s interesting that you bring that up because that is something that’s a challenge. One thing, because we have parts that are over a year lead time in our kit, it’s not a high percentage of them, but a short lead time is probably about 12 to 16 weeks right now. So, we do have the span of long lead times that we’re having to manage. So, we do have to keep a decent level of inventory in order to make sure that we’re able to supply our kits. And we did, during COVID, when it was so much more volatile, not knowing whether we were going to get parts on time or not knowing whether we’re going to actually be able to get them at all, then we kind of had this strategy. We’re going out, we’re buying out to this many number of kits. You can bring them in whenever you want to. We can keep inventory on hand and we’re just going to do that because we’re going to make sure that we have the parts when we need them. And that was a strategy that, you know, normally you wouldn’t do that because you wouldn’t want to keep that much carrying cost on hand. But we did that in order to mitigate. We figured it was worth it because the cost of not being able to supply those is way higher than the inventory cost would be. Now that we’re through that a little bit more, we’re backing that down to where we’re trying to get, we’re working with our vendors to supply smaller amounts and more frequent drops to where we can get that inventory level just a little bit lower and more aligned with our demand and with our actual kits. So, that’s something we’re working on right now.
What about demand planning in your industry? Is it relatively steady, inconsistent, or how do you factor that in as you’re doing your inventory planning?
Yeah, we have kind of a unique system with that. We provide slots basically for our customers to say, “Hey, if you have an aircraft that you want converted, we can do it on these, you know, here’s our slots, and we can put it into one of those slots.” We have to book MRO time, maintenance facility time, in order to do those conversions. So, we take those slots and we say, “Okay, we’re going to start on this date, we’re planning to finish on this date,” and so we actually have those slots already planned out, and then we just let our customers fill that when they have an aircraft that they need to route. That’s pretty cool. I think a lot of our listeners would love to have a situation where they have plenty of demand and customers are scheduling time around their workflow. So, good for you. You know, because you worked in a previous industry, it doesn’t always work that way.
Yeah, on the 757 program that we’re working on right now, the 757 program only had so many planes that could be converted, and we did almost 200 of those. The A321s, they’re still making those aircraft, and so we have lots of demand for it. They’re narrow-body freighters, so they can actually go into smaller airports than a larger cargo aircraft, and they can’t carry quite as much, but they have a lot more access and still have a pretty decent capacity. So, they’re in pretty high demand right now. So, the struggle has actually been how many can we do, not can we get enough to do.
Yeah, it’s been a good program to have. What’s your biggest priority for the rest of the year? My biggest priority for the rest of the year… would you say like personally or it relates to your supply chain and direct materials?
If you focus on the supply chain and direct materials.
Oh, that’s a good question. I would say that the number one priority really is on-time delivery. We were running at completely zero shortages for quite a while with 757. The A321s are newer, so we’re still kind of in, you know, designing configuration changes, things like that that we’re still kind of working out. With that, we’re really narrowing those shortages down. We’re getting less and less, and so our goal is really to get down to zero shortages at the time of shipping.
So, kind of transitioning now into a couple of personal things. When you and I were chatting, you had said that one of the most important things you’ve learned in your career is to never accept a dead end. Yes. So, what do you mean by this and why is this important?
There are so many times where a vendor will come to you and say, “There’s nothing else we can do, you know, this is the best we can do.” Sometimes that may be the case, but I’ve found that rarely it actually is. Like in the situation with those oxygen mask boxes, they had said, “Well, we’re reaching out to the vendors, they’re not responding, but we’re going to just keep trying, that’s the best we can do.” And what I did was I actually went to the manufacturers. It’s called an AOG desk, AOG means Aircraft On Ground, and that’s when the aircraft should be running, but it’s not and it costs a lot of money for a lot of people. So, they take those very seriously.
Well, I went to it and because the plane is in conversion, the original scheduled date had been moved slightly out because of the shortages, and they had said, “Well, your return to service date actually isn’t within our seven-day window of a true AOG.” And so, I pushed back. I said, “Well, I understand that, but we had to move the date out, and so it’s actually past what we were originally planning to return service, so that’s costing a lot of money every day.” So, with that, they were able to come back and be like, “Okay, we’re going to take your case, we’re going to help you out.” Within a few days, we were able to get the paperwork from the manufacturer to the distributor, and they were able to ship the parts. I’ve seen that so many times play out where we’re being told one thing and you could just stop and accept it and just go, “There’s nothing else we can do,” throw your hands up. Or you can keep looking for a solution. You, of course, have to weigh in balance whether it’s worth the time, whether it’s really that much of a priority, but when it is a major priority like that, you don’t stop at “no.” You keep going, and you see what else there is you can do. And you’ll often find that there’s another door that can be open, and you might have to push on it a little bit, it might be a little stuck, but you can get it open.
So, a big accomplishment for you personally was getting your CSCM, CSCP, right? Did I say that correctly?
Why was this so important to you?
You know, I actually dropped out of high school when I was a teenager, and I went back and got my GED, and that did teach me that I could accomplish something, and this was something I wanted, I did on my own.
I actually ended up going to a Bible college, but due to finances, couldn’t continue through that at the time. I had kind of a rough start at the workforce when I was younger, and so it just took me a while to kind of get my footing under me. But when I found supply chain and I found Apex, I got my, actually got my CPIM first, Certified Purchasing and Inventory Management. That took three years and it was hard work and taking some classes. My company was very supportive and paid for the classes and I was able to get that completed. And it was a pretty big accomplishment because I don’t have a college degree, I call it a college degree, and so this was a way for me to learn what I needed to know and be able to apply it to the work that I was already doing. And then when I came here, I was able to get my next certification. I did about a year of self-study on that one and was able to get that, and so I worked really hard for it, and so to me that was a pretty major accomplishment because of the effort that I had to put into it. And it really helps me feel like there’s a confidence that I know what I’m doing, you know?
So, what’s next? You’ve done two pretty major effort certifications.
You know, I don’t know at this point. I think that focusing on applying at my job and trying to do well to increase and improve what we do here. We’re looking to hire another buyer right now and we’re trying to rebuild our team back up a little bit because we did lose someone. And so with that, we’ve got a program to build here, and I just kind of want to continue moving forward and offering whatever expertise I can and continue to grow and learn here. So, we’ll see though if there’s any other certifications or any other classes or next steps that come along the way.
Thank you for discussing your continuous struggle to get your parts and materials on time while working in Aerospace with me today, Chris. Where would you like to send people to find you if your story inspired them or if they want to reach out and connect with you?
LinkedIn is the best place, it’s pretty much the only social media I have, and it’s a great place to connect with me. If you missed anything, you can check out our 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” to ensure you don’t miss a single episode. Make sure to follow this podcast and subscribe to us on YouTube. You can find me @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.