Transcript: What the Duck?! Episode 60

What the Duck?! Episode 60 Transcript

THE DVD IS BACK, BABY!: Diving into Vendor Dilemmas & Supply Chain Disasters with Denise, Vineetha and David

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 am going to be joined by three manufacturing supply chain experts. We have Vineetha, David, and Denise. All of them have extensive experience in the industry and have lived through their fair share of nightmares. So I’ve asked them to come on and share some of their biggest train wreck craziest stories. 

So, Denise, I am going to start with you.

Absolutely. So first off, thank you, Sarah, for inviting me to this prestigious and experience-filled panel. I’m just so thrilled to be here. Hi everyone, my name is Denise Sena. I’ve been in the life science Biotech Industry my entire career. I’ve spanned over many different Industries such as Pharmaceuticals, vaccines, Animal Health. The lion’s share of my experiences in supply chain. I have a couple of years of marketing, so my forte is end-to-end supply chain. It’s great to be here.

Thanks Sarah. So, David Berger, director of America’s procurement strategy for CBRE, a real estate conglomerate where we have a lot of supply chain and manufacturing companies. I’ve worked in procurement and supply chain my entire career, worked a lot in heavy manufacturing as well as a lot in consumer products and a little bit in life sciences as well. 

So, Vineetha, would love to have you introduce yourself, and then my question to key up your first train wreck story is to tell me about a time when you unexpectedly ran out of stock for a critical hardware component due to high demand.

Thank you, thank you, Sarah. First of all, I feel really honored to be on this panel with Denise and David and to learn from their supply chain experiences as well. I work in direct materials procurement. I’ve been in procurement supply chain for the last 10 years. I started my career in supply of development procurement analytics for a pressure-sensitive materials manufacturing company, and from there, I moved on to category management for the last eight years within direct materials, mainly metal processing-related categories. So, you talk about castings, machining, sheet metal fabrications, extrusions, roll forming. So, that’s basically what I manage. So yeah, going back to Sarah’s question, quite often we find, especially in the last three years, where we do have cases where hardware components or any small components that go into critical assemblies, right, there’s always a shortage of that. And in some cases, the reason for that is usually unforecasted demand, right? So if it is forecasted demand, you know that you can always have a stocking agreement with the supplier, you can always prepare for that internally with the safety stock, you know, you could always add on for a buffer stock. But what happens when you get an unexpected order or an unexpected, you know, volume comes in that you are not prepared for, which wipes out all your internal safety stock, you know? And that’s exactly what happened, and we had to meet the customer lead time. The customer lead time is already promised, right? So if, let’s say, it’s four weeks, then what do you do in those situations? And so that has always been a point of contention for us. So we go back to the supplier, the existing supplier, and we say, “Hey, we want to know if you have any stock available.” And in case they do have a stocking program with us, we may have already consumed all of that stock. It’s going to take them some time to reorder that material or those parts again, right? Or make those parts again. So that was the first step, is to go back to this current supplier and understand whether they had any stock available. The second step was we looked at, you know, whether there were any off-the-shelf parts, you know, because most of these components are usually custom components or made-to-order components. So whether you look at off-the-shelf parts, you know, are there any substitutes that could be used in those assemblies? Or of course, you know, we look at dual sourcing, right? We look at other vendors or any distributors. If there are off-the-shelf parts, then you look for other vendors or distributors. But I think the biggest learning for us was, you know, what worked for us was, you know, we looked at other off-the-shelf versions, and we went with an off-the-shelf component that could meet the needs of the customer. You know, we went back to the customer, and we said, “Hey, would this work?” And they said, “Yes, you know, this will work for us.” So that’s how we solved the problem. But the biggest learning for us was, because this is a one-time order, right? Because it’s not going to happen again and again. So it’s very hard for us to go back to a supplier that we have never worked with and say, “Hey, we need you for this one-time order, and that’s it,” right? 

So that’s where this question of transactional relationships makes a big difference, because you want to build relationships with suppliers who you may not necessarily do a lot of business with, you know? But you want to go back to them whenever there is a need, and there is an understanding between that supplier and you and the company, right? That there is going to be these short-term orders that you’re going to be getting a couple of times a year. So those transactional relationships with suppliers are also very important, or transactional suppliers are also very important. 

So I think that’s the key learning from that, and, you know, that’s how we met the customer lead time was looking at substitutes or off-the-shelf versions of this critical part. We could, you know, convince the customer, and even though we didn’t meet the lead time of four weeks, we still got it done in six weeks. But the contingency plan was making sure that you had, you know, a dual sourcing or maintaining a relationship with a supplier that you don’t normally do business with. So that is my story. David, any or Denise, any experiences with off-the-shelf substitutes as well?

Yeah, well, the same, similar, similar to the same company I was mentioning, the energy manufacturer, we constantly had to deal with substitutes, but everything had to go past an engineer because it has a highly controlled environment, so they would spec out their preference, but we would have to get creative when we couldn’t find parts. So we’d have to, particularly in the areas of fasteners and whatnot, you know, a lot of times those things are acceptable, but you know, we would buy highly engineered components to our specs, but sometimes we’d have to deal with the substitutes. And just to add, you know, I hear supply chain folks were very operational, we’re very efficient, right? But we’re also very creative. Think about it, we’re problem solvers, right? So I love what you said, many times, if we had an overstock of the 20 milligrams and a back order on the 40, it seems pretty easy to say, “Can you take two of the smaller ones?” And typically, the supply chain team that’s offering that solution, right, are the stoppers. To your point, David, or anything plastic during COVID, there is no way that you could get your hands on. So what could you do? And we relied on our procurement team to, which thankfully, they had engineering degrees as well, could help us with the chemicals and the materials in the bags to help our quality team says, “Yes, you can use this substitute.” This is always a team effort, but I love the creativity and the problem-solving that supply chain brings to the organization. Good point, yeah. I felt like when I was in that role, I felt like I was a procurement professional, but I was also in sales, like walking down the hall to the engineers, trying to convince them that this product was acceptable, too. Yeah, yeah, I’d say, I would say that if you want to go in supply chain, you should do a six-month rotation as a sales rep. It’s no longer just marketing. Absolutely. 

I remember when I first joined my company, in my first company, years ago, eight years ago, I walked down the aisle, I could see all these mechanical engineers, and I’m not a mechanical engineer, so I had to really know how to read drawings and things like that, which was very new for me, coming from a supply chain operations research background and getting into heavy industrial manufacturing. So I completely echo the thoughts of what Denise and David said.

I’d like to have you share a time when you had to get really creative to address some supply chain demands. So, I think back a little bit to the early part of my career. I was working for a large manufacturer that basically built equipment for power plants, and the whole nature of that job, we always had to be creative. So, we supported a service-based industry where we basically took down the power plants and serviced and maintained them, and for every hour that we would take them down off of operation, it would cost literally hundreds of millions of dollars. So, we’d service equipment and we would stock and have as many parts ready to go as possible, but undoubtedly, there was always circumstances that you can’t plan for, and you know, literally spare no expense, do what you can to get the part. And so, like, we as a team would, we’d have a pager that we’d rotate and carry, and whoever was on duty would have to make things work. So, you know, I’ll give a couple of examples, but I mean, like first, we would, you know, when we turned to our manufacturing plants and say, “Hey, could you make this?” And a lot of times, they couldn’t, but you know, we would often turn to our suppliers, ask them to work on a weekend, work overnight into the wee hours, and I, we literally would have to charter planes to make it work. You know, so like, we didn’t care about price because literally, like I said, every hour was costing us hundreds of thousands of dollars. So, I chartered a plane from Philadelphia to take a part down the Mississippi once, but I mean, that wasn’t a regular thing. So, I guess the message is, prepare to be renewable. It’s not always about price, and just do whatever you can to meet the customer needs and demands. And it just gives you a much different lens on things when you’re talking about the energy supply of this country and the potential impacts and costs that would be, you know, so that was a much different dynamic. Like in that organization, it was less, like I said, less about price, more of just get the parts there, deliver.

David, looking back, and Denise and Veneetha, feel free to step in if you have a presentation on his story as well. Looking back, what would you have done differently so everything wasn’t such a fire drill? I mean, the only thing I can think of is we probably could have done a better job with forecasting for these service averages. So, knowing what we were going to bring down and trying to keep it in stock or keep it on the ready. The challenges that we were supporting equipment that’s, you know, sometimes 50, 60 years old, and you can’t just talk for everything. But I do think we could have, within our systems and our processes, we could have done a better job with planning for that and to have more parts stocked. And, you know, probably also have communicated with some of our suppliers and have them on the ready for potential part mixes and whatnot. Yeah, I know I’ll just compliment what David said. I’m a big believer in sales and operation planning that brings together different teams to draw consensus on the safety stock metrics, whether it’s just in time or just in case, doesn’t matter, but there’s an agreement so everybody knows. And I love David, what you said about creating that dual sourcing strategy and building the relationship with the sourcing team and the suppliers so when you need something, they’ll be there for you. Yeah, yeah, I mean we would turn internally first to see if our manufacturing plans could support, but often, you know, they couldn’t, and we’d have to rely on our suppliers to help save the day. Yeah, I agree as well with what Denise mentioned because I think it’s important to have relationships with transactional suppliers, you know. So most often, we try to build relationships with suppliers for regular orders and regular demand, but in some cases, it’s always important to have relationships with suppliers who you can go to once or twice or a couple of times a year instead of having that regular relationship with those suppliers. So, those transactional suppliers are also very important, I feel, in the supply chain, especially when you have unexpected disruptions like this, right, where you’re struggling to find another source or you’re trying to fix things internally. So, definitely.

So, Denise, I’d like to have you now share an experience where you had to recover from a completely inaccurate forecast and successfully adapt. It seems like inaccurate forecasting and planning is kind of a theme today for some of our stories. Oh yeah, yeah, my gosh, I have many of them. I had a hard time selecting just one, but I think one that is really relevant is I dealt with life cycle management, launches, mature products, and also sunsetting projects or products. And it was at this juncture that we had a sunset of one of our products, and it was going to compete with generics. We were going to actually ask another CMO to manufacture this white label and sell it as a generic. I think what happened was for six months, we actually just clipped the forecast. It just started to decrease, decrease. The supply planning teams were kind of hanging up their apron, manufacturing just didn’t tool anymore, and we were just slowly stopping to produce. We would present at the IBP/SNOP, “This is the forecast, this is the health of this product, everybody’s on top of it.” And there were many moving parts, and I remember talking to our U.S. marketing team too, and they’re like, “We’re all on track, everything is going great.” It was probably three weeks before LOE, the loss of exclusivity, when one of the planners said, “It’s not going to happen. The CMO is not ready. They did not get GMP approval.” And so, we still have to deliver this product at the same volume that we did six months ago, which is, it’s that six-minute mile again, right? And so, it was unexpected. It was a breakdown in communication, not only in the planning team but throughout the entire organization. It was something that was presented to our C-1 that we got this, everything is fine. So, how we had to recover is we had to rely on our supply planning team to put pen to paper. They had to reprioritize, they had to move the lines around, they had to bring in a second shift in our Switzerland manufacturing plant. They explained the situation over and over again to our manufacturing team, and it was a success story again. We all pulled together from a patient-centric mindset to then make three months of stock within a matter of three weeks, and we were able to get the product to the patient. However, we also had to say, “What went wrong? Why did this happen? Why did we have to expedite? Bring in a different shift? What was it?” And it really was all around the communication and roles and responsibilities, right? They thought supply chain had it, supply chain thought marketing, marketing thought the patent attorneys had it, right? And so, just having that relationship, to what Vineetha was saying before, when you have that relationship across the organization and you’re cross-pollinating, people are vested in you. Like, they want to help you. So when you pick up the phone and say, “Uncle,” they’re there, right? And so, I think that’s what really helped us recover and make a seamless delivery to our patients. David or Vineetha, any thoughts or comments on her experience and the power of communication? I think it goes a long way.

Yeah, no, I would emphasize that. I mean, I think the biggest, what I mean, people always talk about, like, you know, hey, the technical aspects of things and pricing and whatnot, but I’ve seen too many circumstances where things fall down just because we haven’t communicated properly. The right hand doesn’t know what the left hand is doing. And I also want to emphasize emphasis as well, you know, to Denise’s point, you know, their communication is critical, but also it has to be very transparent and it has to be very clear because oftentimes we kind of assume a couple of things in the relationship, you know, that this is taken for granted, okay, the supplier should already be knowing about this or a commercial team should already be knowing about this. So it’s important for that alignment to happen so that there is no miscommunication in such critical situations. I think that is very important, in my opinion. That is a really good point. I think even when I look back and on it now, like, we knew the strategic imperatives have changed. We were also launching two biologics, and we knew that all the resources, all the energy, it was really sexy to be on the biologic launch. It wasn’t too cool to be focusing on an LOE because we knew that in the back of our mind, but we didn’t know what does that mean. We couldn’t translate it. And so that’s the translational piece, that business acumen that we all bring to the table if we can connect the dots. So, in addition to being creative, right, we’re also connectors of the dots.

So, David, you have a story about some train wrecks and disasters that happened dealing with mergers and acquisitions? Yeah, I definitely have a couple of stories. I don’t know if the first one is a train wreck, but it could have been. So, I was working with a large Fortune 500 Aerospace and Defense government contractor. They were in talks to acquire a large division of another DOD company. We were brought in as a procurement organization to help negotiate transition support agreements. What that is, is basically to ensure that our top-tier key suppliers, like our tier one, tier two, and tier two suppliers, would honor the pricing. Because, you know, hey, we now have a new contract with a new supplier, and a lot of times our suppliers will use that as an opportunity to stick it to you or raise the prices. But the merger was contingent upon that, from the financials, that we would be able to successfully continue with the supplier pricing that was in place. So, we, over the course of a month or two, had to negotiate with about 200 suppliers, setting up these transition agreements. We were reporting out to the executive leadership on both sides of it, both companies. So, very high visibility, and people’s jobs were at stake. They say whether the merger was going to go through. It was at stake from negotiating these agreements that I will say, thankfully, we did a good job, and the merger did go through. I guess the other, just to add to it, another quick example of a kind of merger and acquisition interesting story was, I was working with a life science manufacturer. They had grown by acquisition but had never taken the time to invest in their systems and processes. So, in the manufacturing plant, they literally were running three different ERP systems for their forecasting and procurement. It was, put it bluntly, a nightmare. So, finally, the company decided enough is enough. We went on a large Greenfield ERP implementation to consolidate things and make our workforces’ lives a little bit easier. And we were going all along the path, probably a year into the project, and then we find out that we were acquired. So, all our work was basically canceled and discontinued because now we were about to be acquired. It’s just interesting how mergers and acquisitions can have such a drastic effect on operational… it’s not simple switch and there are people that have staked and made their careers and lost their careers on M&A. Hmm, neither Denise, have you either of you lived through mergers and acquisitions? I’m assuming Denise you have because I know you’ve worked for some pretty big companies.

I have, David. I love that story, and Sarah, thank you. I appreciate it. I was fortunate enough to execute on the strategy of the acquired company. So, I worked for one company that had a blockbuster drug in cardiovascular, and it was cheap to make. It was a pill. It cost like three cents to make. So, we kept tons of inventory throughout the entire value chain and whip and raw materials. We had manufacturing sites all over the world. The forecast accuracy was close to 98, if not 99 percent. When we got acquired by the new company, they said, “Why do we have all this inventory if we have such a high forecast, right?” And so, with the acquisition came new ways of working, came new strategies, came new ways of working together. So, as a value stream leader that I was responsible for the end-to-end, we had to cut that. We had to move into, at that time, the just-in-time was very, very popular of slimming down the inventory at different nodes, reducing the cycle time, finding out where the gaps are, why do we bring the boat to Switzerland if it’s going to Germany, right? Tax reasons, right? So, you have a product flow, you have a financial flow, and it took about 18 months, something like that, to bring it down to meet the strategic imperatives. But I have to tell you, doing the just-in-time approach, in many, many years that one product, first time ever, had an administration hold, which means something happened at the manufacturing site that they had to hold production. So, here I’m reducing the inventory down to just in time, we’re implementing a continuous make model, and now we got to shut it down, and there was panic throughout the organization. But luckily, we didn’t slim it down to the point that we couldn’t recover, but that actually happened twice in one year when it hasn’t happened at all within like 20 years of making this product. But it just goes to show, I think, David, you were talking about the agility, the nimbleness in the supply chain. So, it really doesn’t matter how much stock you have. If you’re nimble and you can turn on the diamond, you can react quickly, that’s the most important part. So, the acquisition, you know, and the strategy worked out to be successful, but I did get a few gray hairs out of it, for sure.

Denise, David, Veneetha, thank you for sharing some of your train wreck stories today. I encourage our listeners to reach out to each of them on LinkedIn, follow what they are doing. 

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.