Transcript: What the Duck?! Episode 57

What the Duck?! Episode 57 Transcript

THREE’S A CROWD: Triumphs, Tangles and Tactical Wisdom with Bo Bradshaw, Mike Ryan and
Sarah Hardecopf

Thanks for joining me for What the Duck?! Another Supply Chain Podcast brought to you by SourceDay. I’m your host, Sarah Scudder, and this is the podcast for people working in the direct materials part of supply chain and manufacturing. I’m @SarahScudder on LinkedIn and @Sscudder on Twitter. I’ve decided to change things up a bit and incorporate past interviews I’ve conducted from our LinkedIn live events because I feel the content is good and relevant to our podcast audience. So, today, here’s an interview from a LinkedIn live show I hosted earlier this year.

Thank you, Sarah. Happy to be here. So, hello, everyone. I’m Bo Bradshaw. I’m the procurement director at Edgio Incorporated. So, I am really responsible for building and guiding the procurement department at Edgio for all things supplier and supply chain related. And I have an extensive manufacturing procurement background. I was at Dow Chemical for eight years prior to joining Edgio.

Alright, Sarah. Happy to have you today. You’ve kind of done a career pivot recently. So, I would love to have you do a quick intro, talk a little bit about your background, and what you’re doing now.

Yeah, so I’ve spent the last 15 years working at different levels of supply chain for some of the largest Fortune 500 companies – Kellogg, Stryker, Pella, DHL. And I’ve taken my experience from all these large corporations, and a lot of them have these endless budgets, but yet there were still these huge gaps in their supply chain management and procurement activities. A lot was just manual processes that we had to do on the side. But kind of built this relentlessness for dealing with stockouts, shortages, backorders, but really passionate about sharing my experiences to help other businesses build their resiliency when it comes to supply chain. So, recently now, co-founded Tron Solutions Group, which is a women-diversity owned business consulting group. We focus on supply chain and hopefully going to help small to medium businesses in the industrial, construction, and manufacturing spaces help build more resiliency when it comes to their supply chain. So, really happy to be here and hopefully, there’s no pressure to be the other Sarah, who is also a woman of supporter of women in manufacturing, and hope I represent as well. But yeah, so thanks for having me.

Awesome, and congrats on your new endeavor. Being an entrepreneur is not easy, just ask Mike. It’s a, it’s you, you control your own schedule and your own destiny, but you work a lot.

Michael, welcome to the show. I would love to have you do a quick intro, and then my first question for you is when we were prepping for the show, you told me about a story where you had major inventory discrepancies. So, we’d like to have you share that.

So, we’d like to have you share that.

Sure, I’d be happy to, Sarah. Thank you for having me today. My name is Mike Ryan, and I am the owner and founder of the very creatively named M. Ryan Group. What I do is help manufacturers take friction out of their supply chain. So, if there are supply chain problems, inventory problems, cash flow problems, we begin with the end in mind, identify the symptoms, and then run them to ground to identify the root cause and put solutions in place.

So, inventory problems… it’s interesting because typically, you know, people tend to forget that inventory is an output. It’s the result of the balance or imbalance between supply and demand. So, if there is a mountain of inventory or a molehill of inventory, it’s a direct result of something upstream. It could be an optimistic sales forecast; it could be a procurement agent that got a bargain and bought a year’s supply of a raw material.

Beginning with the end in mind, we figure out okay, where’s the pain and then what caused that pain. And to answer your question about catastrophic inventory problems, I had an opportunity to work with a client where they were having some serious cash flow issues. And one of the first things we do is really identify the buckets. We take the balance sheet, look at raw materials, work in process, finished goods, as a way to start narrowing down where the problem is occurring.

With this client, it was raw materials that were really through the roof. And the easiest thing to do and the typical approach is just dump the balance sheet and sort it from highest to lowest. And one of the raw materials in the top ten that caught my eye was brown craft paper, and they had something to the tune of three hundred and eighty thousand dollars of brown craft paper on the books.

So, I’m sitting down with the CFO, and I said, ‘Hey, I’m just really curious. Can you show me where this is? Because I can’t even imagine what $370,000 of brown craft paper looks like.’ And he explains that it’s packing material, you know, they would tear up sheets, crumple them up, put it in a box, and I’m like okay, I understand what it’s used for, but what is three hundred and seventy thousand dollars worth of craft paper look like? And he kind of demurred and he says, ‘Yeah, we know what that is.’ I’m like okay, well, it’s on the books, and he’s like yeah, it’s an expense item. Somebody was supposed to include it in the bill of materials, so the inventory got consumed every time a part was shipped, but the engineers never figured out how to do that.

So, we true it up during physical inventory, and I’m like okay, so how much Brown craft paper do you really have? And he’s like, ‘I don’t know, like twelve thousand dollars worth,’ and I’m like okay, so you need to take a write-down for $358,000. Like you need to raise the flag on that. And he’s like, ‘What do you mean?’ I’m like, we have to go to ownership and let them know that there’s going to be a $350,000 inventory adjustment. He’s like, ‘Well, I don’t want to do that.’ I’m like, you have to do that, right? If you don’t want to do it, I’ll do it. I’m happy to, but we’ve got to get this fixed.

So, you know, we put together just a really simple one-pager to explain what the problem was, what the root cause was, and how they were going to fix it moving forward. But, you know, at this point I think it was September, so they still had about three months to fix it. And I’m like, listen, you may want to take that $358,000 and write it down a third, a third, a third this month, next month, a month after, but it has to be addressed.

So, you know, that to me is one of the textbook examples of, you know, either awkward practices or awkward processes showing up on the balance sheet and ultimately impacting the cash flow and the results of the business.

Yeah, I know that this happens a lot in many different types of businesses. When I worked in food, when I worked in medical devices, in just raw consumer materials, and this happens so often. That’s one of the things is making sure that the engineering team or whoever is part of the programming team understands the impact upstream of ensuring that consumption is pulling out correctly and also at the correct rate too. You know, I know for the industry that I was in, we always had issues when it came to fasteners. They would only plan for a certain amount, but the team on the manufacturing floor was using double the fasteners. Well, no wonder why we were always running out of fasteners. So, understanding how having correct BOMs in the consumption of BOMs really impacts the whole financial performance of the company is super critical. And that’s something that I don’t think enough people upstream when they’re doing design, when they’re doing loading of the data, way at the front end, people a lot of times don’t come back and revisit it. And that is something that I think companies need to be okay with spending that money for reprogramming or re-entry or whatever it is because it’s actually going to save you a ton of money on the back end.

To build on that a little bit because I agree with everything that’s been said, is that in addition to making sure that the BOMs are accurate like Sarah mentions, you’ve also got to make sure that the engineers that are putting the BOMs together are taking the technical ownership for what they need the BOM for. So, that they understand what is available, what may be going end of life, what may be going into service, what the new replacement is. Is it like for like? Does it need to be qualified internally? All of those kinds of things, because what we see a lot is a tendency to go to procurement for those things. Right? ‘What is available? Is it a one for one?’ And the reality is that we can negotiate the best deal for you. That’s what we do, right? That’s our bread and butter. But at the same time, we need you to own the piece on the technical side so that we make sure you get exactly what you need. And really working to communicate that change if it is a change your organization needs and managing it and explaining the value add and the risk.

Which I think we’re seeing a lot in the retail space, Bo, where supply chain teams completely stockpiled. They pivoted from just-in-time to having a year or two year supply. Crazy amounts of inventory. Now, we’re seeing lots of fire sales and I think we’re going to see significant discounting through the holiday seasons this year because people over purchased and now they’re trying to unload and get something for their inventory.

So, I’d like to have you tell me about a time when your strategic supplier failed to perform for you when something was super urgent, and then what did you do about it?

Sure, so I had an incident occur on a Friday afternoon around three o’clock because, of course, that’s when the emergencies are always going to happen, right? So, in the manufacturing environment, that’s the way that it works. The failure on the supplier’s part is that we had a very large contract with a supplier to provide all of our filters on a global basis for all of our sites, and we’re talking dozens and dozens of sites.

The issue was that one of our sites overseas needed a filter urgently; otherwise, it was going to shut a key component down in the manufacturing process, and it’s basically going to bring the plant down. So, we only had a few days to actually go ahead and get the replacement in before the plant shut down.

They reached out to me to say the supplier can’t get us this. What can we do? What options do we have? They’re telling us that they can’t get it locally. Can you get it from the U.S. and have it hotshotted to us? What are our options?

So, I went to our incumbent supplier, and the reality was they just didn’t have any stock globally, which was a separate issue as far as contract availability requirements are concerned, and we addressed that later. But the emergent issue was the reality is they didn’t have it and weren’t going to be able to get it for us in time.

So, what I had done previously that really came into a benefit in this specific situation was that even when I negotiated the contract and awarded it to who ultimately became the incumbent that I was talking about, I made sure that I actually verbally connected with all the suppliers that went through my sourcing activity.

To not only let them know out of respect and professional courtesy that they were not successful but also to communicate in a way to talk to them about not breaking the relationship, right? My philosophy has always been your incumbent supplier is going to run into an issue at some point where they can’t deliver something for you, and it’s going to be an emergency.”

So, you don’t break the relationships with the other potential suppliers, not only when the contract’s up for its next sourcing event but when those emergencies happen that your incumbent can’t handle, you need an alternative. So, I’ve always employed that methodology in my own negotiations, and fortunately, I called one of the bidders that was not successful and I said, ‘Hey, I know y’all didn’t win the contract, but we need part XYZ. Can you help us? We need to get it overnighted immediately.’

So, we’re getting close to four or five o’clock at this point, and he said, ‘Oh, man, let me see,’ and so they basically worked all weekend to get that part shipped and hotshot overseas to the plant to avoid a shutdown. Not only did that philosophy prevent a shutdown and prevent potentially millions and dollars of lost revenue, not to mention delayed restart if something went wrong when you shut down a process on an emergency basis.

But it helped give visibility to that other supplier that was not the incumbent and gave them a little bit of internal publicity to help them at the next renewal within the appropriate guidelines. Right? And I communicated that to them. We’ll bring this up at the next renewal sourcing event so that everyone knows what you did while we’re considering the RFI and RFP stages. So, it all worked out very nicely in the end. It was a little bit hectic and stressful for a couple of days until we got it all worked out.

But at the end of the day, the engineering director over that continent where that plant was located was ultimately ecstatic about the fact that we prevented the shutdown, and I got some nice kudos as well. So, for me, the lesson learned there is never break relationships with good suppliers, even if they don’t win the contract. If they’re still qualified and you’re willing to entertain them, you’re probably going to need them at some point when your incumbent can’t deliver, right?

Yeah, but I would argue the supplier is your most important stakeholder, more important than internal stakeholders. And the key to that story, I think I might put something in the comments about it as well, is that you had that relationship ahead of time before the disaster happened. Had you not focused on that collaboration and building that rapport, you would not have had that supplier working throughout the weekend to deliver and allow you to get your product out the door.

So, supplier collaboration, supplier relationships are super important and are going to be essential for manufacturers to have resilient supply chains. So, a really good example of the power of supplier relationships. I would also say that I think one of the most common things we’ve heard on the show this year is the importance of having multiple suppliers for every important thing that you buy.

So many companies had single-sourced products or materials or items and were completely devastated over the last couple of years. So, if something is critical to revenue, make sure you have multiple sources for it, even if it’s a two-cent part, even if it’s a 10-cent part.

Completely agree.

One of the other things that I think is also really important to talk about in the manufacturing space is the relationship between sales and its impact on supply chain. And so, Michael, when we were prepping for the show, you shared an example of when sales wanted to go the extra mile but fell flat.

Sarah, this I will never forget this example. So this was December 29th, and the business that I was working for, they recognized revenue when a shipment left the building. The customer recognized the receivable once it hit the dock. So had a sales guy, he was trying to make his number, he was trying to make the number for the business, and said, “Hey, I need your help.” I’m like, “Okay, Bill, what can I, you know, in what ways can it be of service?” He’s like, “Can you ship this but forget that you shipped it so he doesn’t get it until January 2nd?” I’m like, “No, I can’t do that, I can’t do that. Can you put it in your trunk?” I’m like, “No, I can’t do that.” I said, “But, right, like we recognize it when it ships, they don’t recognize the receipt until it hits their dock.” I said, “Why don’t we, why don’t we send this the slowest way possible?” Because typically everything was FedEx. I said, “What about if we did the post office?” And he’s like, “Oh, that’s a good idea.” And this was a shipment that was worth like $250,000, right? It was boxes of industrial diamond. So, you know, invoice it, I’m like, “Okay, Bill, you’re coming with me.” And put it in my car, drove it over to the post office. And because of the sheer value of the shipment, it was all returned, received, insured delivery confirmation, the whole nine yards. So we ended up spending, it was probably close to $400 to ship all this product, right, the slowest way possible.

So that was December 29th, right? I’m like, “Okay, boom, get this off my back, Bill’s happy.” The next morning he comes into my office, and his nickname for me was DMR, damn Mike Ryan. So he comes in, he’s like, “God damn it, DMR, what the hell did you do?” I’m like, “Good morning, Bill, it’s nice to see you.” He’s like, “What did you do?” I’m like, “What do you mean, what did I do?” “We took it to the post office and we shipped it.” He’s like, “They got it on their dock that afternoon.” I was like, he’s like, “You need to find out what happened.” I’m like, “Okay.” So I’m like, “All right, I probably should get out of the office for a minute.” I go to the post office and I said, “Hey, do you remember me?” They’re like, “Oh yeah.” I said, “I have a question, it’s going to sound a little bit delicate, so I’m going to apologize in advance. I didn’t expect this shipment to get there so quickly, can you help me explain what happened?” And he’s like, “Oh my God.” He goes, “Because the shipment was so high value, so expensive, we actually put a person in a truck and had them drive it to Indy.” And I was like, “Okay, cool, thank you.” So I go back to the office, I said, “Hey, Bill, here’s the situation, right? The post office was concerned because of the value of the shipment, so they hand-carried it.” He’s like, “Well, what am I supposed to do?” I’m like, “Man, that’s entirely up to you, right? We played the game, we recognized the revenue, you booked the sale, the business got the revenue in terms of your customer, I am not offering any opinion or any suggestions on that matter.” So it was an example of, you know, quite often supply chain, we find ourselves in the middle, we find ourselves in the middle between sales and supply chain, or, excuse me, sales and operations, or operations and sales, and the customer, you know, this weird love triangle. And we quite often, you know, as you said earlier, have to be magicians and try to figure things out, realizing that, I know I try to make everybody happy, but it’s not always humanly possible. So this was an example where, you know, try to work with sales, try to come up with a creative solution, and unfortunately, the solution didn’t work.

So the moral of the story was, the following year when I saw Bill in the hall, I’m like, “Dude, don’t, I’m like, don’t even ask me, because I’m not doing it. You learned last year, I learned last year.” So you work it out with your customer when you want to ship it and how you want to ship it, but I am not playing that reindeer game this year. So sometimes we can help sales, sometimes we can help operations, oftentimes, right, ultimately what we try to do is serve the customer, but a key lesson is you cannot always make everybody happy. So, yeah, the relationship with sales is challenging with all departments, but in particular, I think it’s overlooked about the importance of sales and supply chain aligning and having mutual respect because they have a big impact on each other.

So, one of the other things that I think has really had a big impact on supply chain and manufacturing in the last couple of years is crazy long lead times. So, buyers being able to order something two, three weeks out now taking 12 months. Really, really big changes. So, Sarah, my question for you is about extended lead times. So, what type of lead time changes did you see, and what did you do to come up with creative solutions or how did you deal with these really long lead times?

In the industries that I’ve worked in, is that a lot of the challenges that we saw was, you know, these crazy long lead times. There was, you know, when I was in aluminum, just the sheer lead time to get something within two weeks now is taking 30 weeks. And a lot of it was based off of kind of the raw commodity struggles with when it came to aluminum. Just getting the raw billets into the aluminum press manufacturers, they were hugely constrained.

So, as soon as I was finding out some of our aluminum manufacturers were getting these massive lead time increases, I just spent some time doing a little research. And as much as a lot of the strategies have been moving things to near-sourcing and local sourcing, one of the things that I actually was discovering in my research was the fact that aluminum’s commodity market wasn’t fluctuating nearly as much just over the border in Canada. They didn’t have tariffs; they didn’t have as much limitations of where they were getting their raw aluminum to then go into become billets for aluminum manufacturing. So, what we actually did is that we then were trying to explore using aluminum manufacturers that were just over the border in Canada. And we actually found one, and at the time, their lead time was six weeks compared to our current manufacturer that was giving us 22, 26, 28 weeks. And I said, even if we have to buy new dies and have to have a brand new startup process and has to go through the whole commissioning of the dies and going through the die shop and fine-tuning it, it’s still going to be much shorter than 26, 27 weeks. So, we ended up going and working with a Canadian aluminum supplier in order to get on board. But it was a challenge height of COVID; you know, to go across the border was a challenge; they really weren’t allowing a lot of people. And then the argument of what was considered critical business or not critical business. And as soon as they allowed us to go, the first week we were on the first plane to go, but you had to get a certain COVID test and you got over there. And then once you were there, the other things that we experienced was the fact that they, everything in Canada for their vaccination cards was all digital. And when we would show up to like go to a restaurant to eat, everyone thought that our vaccination cards were fake because they were handwritten. I’m like, ‘No, we’re just from the United States.’ And they’re like, ‘Oh, yeah, that makes sense.’ And so then we would have to go, and we get the table way in the back because they just weren’t sure about us. But so, and then while we were there, you know, crazy things happen. The hotel we were staying in, middle of the night, there was a fire alarm that got pulled. And, you know, to get back into the hotel, no one had grabbed their masks, but they wouldn’t let anyone back into the hotel without having a mask. So, it’s just all these challenges. And finally, the next morning, when we were able to get to the supplier and have those face-to-face or, you know, mask-to-mask conversations is building those relationships. And, you know, it’s all about relationship management is that we knew that we were the new guys coming and asking them for a favor.

We’re the ones that were coming from Arizona; it was snowing in Canada; we didn’t have proper winter clothes. But we made it work. And but by doing that and thinking a little bit more creatively and understanding what our neighboring countries’ limitations were and if they were able to get if they were able to get raw billets, is that we were able to then create these new partnerships, get materials that were manufactured in Canada, still North American made, but then was able to be shipped down to Arizona for our process. And that reduced our lead time, you know, from being 22, 24, 26 weeks and then getting to about it was about 10 weeks the first pushes and then, you know, four to six weeks after that. So, yes, lead time was a huge challenge, but the biggest thing was is that we did have to try to establish new relationships, which because we didn’t have them prior, but that was because we were new to the organization. But really making sure that the new manufacturer and supplier understood the importance of the personal relationship. You know, we always said that it’s about, it’s not about how many pounds that we’re going to push; it’s about partnership. So, let’s work together; let’s try to figure out a way for us to get you guys some new business, get you into some new markets that you haven’t been in. We’ll share some costs on some things. But then also, is that we were able to then just start manufacturing because we were able to get these new parts. So, thinking a little bit creatively when it comes to, you know, working around extended lead times is something that you have to be able to research different markets, you have to understand the different trends, you have to, you know, some of the things that even when it was like our team was in charge of sourcing the different cleaning supplies when COVID was happening and thinking, okay, well, schools are shutting down, so we’re able to get cleaning supplies from school cleaning you know, companies because they had the access of it. So, understanding the full market and who’s using it and where those constraints are really was something that helped our business kind of be able to continue to move forward during those limitations of those extended lead times.

Yeah, and Sarah, I think it goes back to the kind of the theme around supplier collaboration, longer lead times. You need to have visibility into every step of the way, what’s happening with the supplier, and you want to have that constant communication so you know if there’s going to be a delay or something happens, you have time to plan versus just the unexpected and something’s supposed to arrive, and it doesn’t in the last-minute scramble.

Thanks for tuning in today. 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.’ This brings us to the end of What the Duck?! Another Supply Chain Podcast. I’m your host, Sarah Scudder, and we’ll be back next week.