Transcript: What the Duck?! Episode 66

What the Duck?! Episode 66 Transcript

DICEY DECISIONS: Clear-Cut SOP Strategies with Dyci Sfregola

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 Dyci Sfregola—I probably butchered her last name—and we’re going to discuss processes and SOPs around direct material procurement. If you work for a manufacturer and are looking for ways to improve direct material processes that tie directly to ROI, then this episode is for you.

Dyci is a growth consultant committed to helping small- and medium-sized manufacturers improve their ways of working, productivity, quality, and profit margins by adopting digital technologies. Welcome to the show, Dyci.

Thank you for having me, Sarah. Good to see you again.

So, I feel like we are both bundled up in our winter clothes. I spent four months in 100-plus degree weather in Austin, and I’m working remotely this week. I’m speaking at a marketing conference on Thursday, so I’m in the Bay Area, and it is absolutely freezing here, and I think I’m in five layers.

It actually isn’t that bad here in Atlanta. I think it’s like mid-70s today, so outside, I did not have my jacket on. But of course, in the office, it’s like—I mean, even last week when it was cold and I was bundled up, I still had a blanket because it’s cold outside, plus the AC is on, so it’s, you know, it’s—I’m cold-natured, so I always keep a jacket on, but it’s not that bad here. Nice blue skies, no clouds that I can see out the window here.

Well, and I will be seeing you next week. I am heading into town for the Procurement Foundry conference, so hopefully, the good weather lasts.

So, Dyci, you have done so much in your career, and you’ve touched on many different areas. I want to start by going back in time and have you talk about how you got started working in direct materials procurement.

Oh my goodness, I don’t even know. I’ve never thought about it. So, I mean, the long story would be, you know, ‘Four score and seven years ago…’ I went back to school. I actually started my career in sales and marketing, so I was on your path in marketing for a while, and I was working for Jaguar Land Rover and doing marketing—as an automotive product specialist—going around to all the different car shows and working with the dealers and figuring out what customers wanted and things like that, and interfacing with corporate.

So, I did that with Mazda and then Jaguar Land Rover. I was actually at the LA Auto Show in November of some year that I don’t remember, and I met some engineers. They were doing really cool stuff with AI, with data, like sleep-at-the-wheel monitoring, driver behavior, things like that. And I said, “I actually think that I would be more interested in starting a career in that.” So, I looked at some… I was also living in Milan at the time, in Italy, and I—interesting—I feel like that’s another podcast episode, on living in Milan. Yes, we will save that for another podcast, or a coffee, or lunch next week when you’re in town.

And I started to look at going back to school. My first degree was actually in Spanish linguistics and literature, and I avoided math and science like the plague. If I did not have to take it, I did not take it. So, I actually had to go back to school. I couldn’t go into a master’s; I had to do a bachelor’s in industrial engineering in order to get back into the math and science and everything. One of the courses that I took was Introduction to Industrial Engineering, and the professor just talked a lot about supply chain. I was like a full adult at this time, with a husband and life. So, I had a job, also had a full-time job, and I was in school full-time. I was working for a 3PL, and that was my first dip my toe into supply chain.

Then, you know, six, seven years of just projects from the consulting side and doing software implementations. And somehow, along the way, it became procurement of materials and how do we make sure we have what we need, in the right place, at the right time, in the right quantity. “Why does our item master data say 40 days, but my POs show that I’m actually getting stuff in 75, 65, and 80 days? How do I manage safety stock to this? Do I need to talk to the supplier?” I don’t know, at some point, that’s what happened, and here we are today.

So you mentioned 3PL. I like to keep things very simple and easy to understand, so can you explain to our listeners what 3PL means?

Yes, a third-party logistics company. So, when you, as a shipper, as a company—especially as a manufacturer—you might not want to take on warehousing, order fulfillment, having a WMS, etc., interfacing with carriers, trying to figure out which carriers to use. So you’ll outsource that process of supply chain and those business functions to a company whose core competency is dealing with carriers, fulfilling orders, picking, and packing things like that. So I worked with a company who did all of that, specifically for small and medium businesses.

And actually, now that I think about it, one of my best customers at that company was a very small manufacturer of luxury dog houses here in Atlanta, about 30 minutes north of the city. And we had a proprietary TMS that helped him determine if he was, you know, who to go with, who to run the load with from an LTL perspective, if he was going to do full truckload. We had many a conversation around quality versus cost. You know, he always went with the cheapest carrier, and he was always on my phone on the day that something was supposed to get picked up.

So, you mentioned you did consulting for about six years, and that’s how you got some experience working with manufacturers and with direct materials. Let’s have you share your favorite direct materials or manufacturing story because I know you worked on a lot of different projects, and with a lot of different… What was the one that really stands out as, ‘Wow, I really learned something from this?’

Oh, that’s a good question.

From a manufacturing perspective, because, actually, the first project that stands out right at the top of my mind was actually retail. They didn’t manufacture any of the goods, but it was a really good learning opportunity to understand what it’s like to interface with manufacturers and to be on the other side—you know, from the customer’s perspective—of trying to interface and have the relationships. Because the manufacturer needed to know how much to produce, you’re working in tandem with the customer to figure out: Do you need to increase capacity? Does it make sense to increase capacity? In what context does it make sense to increase capacity? So, my first interaction was actually from the other side, as opposed to like the materials from that perspective. I don’t know if I’m explaining myself properly, but that stood out to me.

Because once I did transition to working with the manufacturers, that’s when I was like, “Oh, okay. Now I get it.” And my most recent experience has been with helping a stone and tile manufacturer manage—they both call it “purchased for resale”—so anything that they are acquiring directly from a vendor that they will resell as is, or any raw materials that they are then creating a finished good. So the management of the BOMs and components, ABC classification, understanding, you know, what your service level should be—ultimately, what we’re trying to do is figure out what point solutions will sit on top of the ERP to help with what we talked about, you know, you mentioned in the very beginning SOPs, automation of certain things.

They have thousands and thousands of SKUs and a team of about a dozen people between buyers and, you know, manufacturing planners. So, there’s a lot of data that goes into it, and that’s the biggest thing that has stood out to me. That, you know, one of the first steps that we did, because there was nothing—you know, they’re using JD Edwards as, when you say “nothing,” meaning no process, no one’s looking at it, it’s “Oh, there are stockouts. How do we fix it?” Everything’s very reactive: “How do we fix it?” And of course, the board’s like, “Oh, let’s throw in a system, you know. Let’s automate it.” And we say, “Okay, well, the first thing that we need to do is to actually create a process around it.

And we started with just, “Okay, if we were to do this in Excel, what would it look like?” Because once you do that step, you can figure out, “Okay, well, what are the limitations of Excel? And what would I be looking for to enable and improve this process through automations? What point solutions do we need? What requirements are we telling the vendors that we’re looking for? How do we connect this with the ERP system?

And that has stood out to me because I very specifically remember thinking, “Oh, I’m gonna get some data from the team, and I need, you know, six data points,” and I got 26 files back that hodgepodge together to eventually come up with the data that we needed. “Nobody’s looking at this, or using it. Yes? No?” AKA, no one has ever asked for this information. So it became the team, you know, coming together and saying, “Oh, well, do we pull this out of the ERP, or do we pull it out of Power BI, or does someone else have a file somewhere that they’re using? Like, where does information come from?

And what they actually realized is that they didn’t really have a process for new product introduction. So, we were working with items that were being phased out, and, you know, these were finished goods. And then, if you’re thinking about, “Okay, well, the finished good is being phased out, you need to now have a forecast for the finished good, the cannibalization, etc., for the new item.” But on top of that, all of the components—which are your direct materials—that you need to actually build the new… “Okay, well, how do we now come up with a forecast for that? And determine safety stock, and work with the supplier for lead times, and, you know, all of that?”

So, that project recently stands out to me because it’s the most recent, and I’m like in it right now, trying to figure it out.

Okay, so Dyci, I know you have worked with a medical device manufacturer and helped them implement a piece of software. So, I would like to have you talk through some of the challenges that you had to overcome in helping them with the selection and the implementation of this piece of software. And the reason I ask is, software can be really scary, and especially if you’re a small organization, you don’t have a lot of budget, and you don’t have a lot of resources to do a project like this.

So, one that comes to mind—so, yes, 100%, you don’t have a lot of budget, you don’t have a lot of resources, I get it. And one thing that we haven’t mentioned is that, as a career consultant, at—I would say maybe about three months ago, no, in the summer, like July, August, maybe a little bit longer—I said, “I want to do the work.” You know, it’s—I think it’s one thing to sit on the other side and talk best practices, and this is what we learned, and this is what I’ve seen at other companies. And then it’s a different thing to actually be able to say, “No, I did this thing, and this is how it worked, and I owned this, and these were the challenges, and these were the experiences.

So, I am in the middle of building out a complete, just digital tech stack, data system integrations, figuring out the people aspect of it—who’s going to do what, how do we interface with the external suppliers and customers, what is all of this going to look like—completely building it out from nothing. Because up until this point, they’ve outsourced a lot to actually a 4PL—a fourth-party logistics company—that just—they just did everything. And a new CFO came in and said, “Okay, it’s time for us to—I like to say, from, you know, baby’s first supply chain.” So, we had everything outsourced; now we’re going to take it in ourselves. And I thought this was a great time to practice what I preach and to say, “Build it out the right way from the beginning.

They’re not a manufacturer, so not a super fun story, but with the medical device manufacturer that you mentioned, I would say that probably the biggest challenge in the software selection process is honestly that there are so many different tools. And then when you talk to—especially if you talk to—you know, when you talk to—being overwhelmed as the buyer, everyone says, “Yes, we can do that.” And in a world where, “Okay, but can you really do exactly what I need you to do?” So, like, that was the most challenging piece of finding the software: going through all these demos and really trying to figure out that the salesperson is saying, “Yes, the tool can do this,” but how do I actually know that it can do it in the way that I need it to be done?

And making sure that you’re very cognizant of, “Let’s not get a tool we really like and then change the process to match the tool. What is the process?”

And how this company was different from the company that I just mentioned, which was like, you know, carte blanche, green—you know, new slate—do whatever you think makes sense, this is a billion-dollar company that has existed…

So, you don’t just take the processes and say, “Okay, we have these new tools; let’s change all of our processes to match these tools.” You have to find the right tool and be really cognizant of the SOP and make sure the tool is enabling it. So, like, the selection piece of it, that was really complex and, honestly, what I ended up doing was calling friends that I knew at different tools. I used to implement Anaplan. I worked with a close friend who also used to implement Anaplan, and then she moved to Kinaxis. And you know, maybe someone’s going to shoot the messenger here, but she went through her training with Kinaxis, and she was like, “It does the same thing. Like, ultimately, you know, it does the same thing.

And even now that, you know, I do EDI integrations, middleware advisory, BI tools—like really, just anything that’s digital and can enhance automation—there are a lot of times when I talk to other advisors, and, you know, I’m not a middleware expert. Yeah, I’m not an EDI expert. My very strong expertise is very much in the planning side, you know, ERPs, point solutions for demand planning, procurement, contract management, things like that. And I’ve had data analysts and integration developers who I really trust, who all say, “Is it Google Cloud, or do I do AWS, or do I do Snowflake?” And they say, “Dude, go with whoever gives you the best deal, you know what I mean?”

So, I think it’s easy to get into this analysis paralysis of tools and just not executing on anything because there are so many opportunities. So what I have found in overcoming that challenge is very much like, “It’s six of one, half a dozen of the other,” sometimes. So, I have started to take the advice that so many people have told me: Go with the salesperson and the team that you think really gets your business. Not that they’ve done 15 implementations in your industry, but that they can understand and at least, you know, take the information and the business experience that they have had in the past and be able to connect that in some way to your business.

Because I actually think that having someone that’s done a bunch of implementations in your industry can sometimes be a hindrance because they want to do what other people have done instead of innovating and saying, “Oh well, you are in heavy machinery; what is Pharma doing that you guys could replicate in your own nuances?” And I’ve been finding a lot of that in like the industrialized construction and modular manufacturers.

So, when you think about the construction supply chain, there’s not a lot out there, you know? I don’t know a ton of supply chain experts and ERP experts who have done modular or construction. So, what I have found that’s been very refreshing is that I say, “Look, guys, this is only my second modular project, but I’ve done a lot in retail. I’ve done a lot in, you know, other industries. I’ve got experience in aviation; I have experience in chemicals. Let’s take some cool stuff that other industries are doing and see if it’ll work here. You know, what would be the limitations?

So, that’s a complete tangent from the question that you asked me, but I think to piggyback on the tangent, the hard part was the selection process for this manufacturer. A couple of other things that I’ve seen in my experience is, it’s really important to talk to the key stakeholders within your organization and understand what they really, really need. And that was a challenge, right? Not what they—not what somebody just sent you a list of on a piece of paper with 15 bullet points, but actually talking to the stakeholders and asking, “Why?” Yeah, asking, “Why? Well, why is that important? Well, why is that?” And people don’t like ‘why’ because they take it as a challenge, and it’s not always a challenge. It’s literally like, “No, like why is that important? Like, why do—?” Because that is how you figure out what the SOP should look like.

Because if it’s something that’s very important, maybe you want to touch it more often, maybe you’re going to communicate in a certain way, maybe the workflow looks a different way, maybe the cadence is different. So the ‘why’ isn’t always a challenge, just like, “Oh, do you really need this?” as much as just like, “You know, well, what is the value that it’s going to provide?”

And then the other piece, which you have to have the right person doing the interviews, but really talking to some of the software providers’ clients. No one’s going to give you a bad reference, so just remember that, right? But actually talking to some of the end-users or people that were involved with the implementation, I think you can learn a lot. And people will tell you, people will be honest and say, “This worked really well, this was terrible. If I was doing this, I would do this again,” and that can help guide and help you figure out and navigate, you know, which system is best for you.

And I actually like the point that you just mentioned about like, “No one’s going to give you a bad reference,” because I specifically remember a couple of years ago, I was up at a manufacturer in Chicago, and they were considering a tool. They had four different ERP systems, and they were a school supply manufacturer—school and office supplies. And they said, “Okay, you guys keep talking about how great this tool is, but like, what happens when it goes wrong? Why does it go wrong?” And that was a really good question that only that person has ever asked.

And I know that I have had bad experiences with implementation partners and tools that other people have had wonderful experiences with. I would love a, like, you know, like “rag on the vendors” reference pool to be able to say, “Okay, but like really, what happened? What could I have done better? What could they have done better?” Because also, you know, I say all the time, you also have to be a good customer. You also, on your end, have to do your part. It’s not just all finger-pointing at the vendor, the consultant, you know, whoever.

But what you were talking about, with like talking to the stakeholders and making sure that you really understand why you’re doing something and what the value is going to be, that particular medical device company actually called me back. So, I was a subject matter expert, kind of advisory level, on their initial implementation. They called me back to actually do a deep dive into, you know, what could have potentially gone off the rails as to why people aren’t using this, and what it really came down to is that they just hadn’t communicated the value across all the stakeholders.

So, they weren’t getting the data refreshes that they needed for the tool to actually be useful, you know. Going long-term, it’s only as good as the stuff you put into it. If people don’t have the confidence in what is coming out of it, they’re going to stop using it, and that’s what they were experiencing. And then, they didn’t have enough knowledge transfer within the organization. To where, when key users left, or key champions left, it just kind of fell off with them, and that’s something that I don’t think… and it’s a challenge for small companies and small teams, because so many times there are multiple people wearing many different hats. And if that person leaves, and they were the subject matter expert that interfaced with the implementation partner, and they helped build out the SOPs, and they were really the change champion and they trained everyone, well, then if they go away, you know, what do you do? So, having that contingency plan, having that continuous improvement plan, to make sure it’s not just all falling on the shoulder of one person, even if it is falling on the proverbial shoulders, but that person is like documenting every single little thing. There are videos and why we did this, and why we did that, and screenshots, etc., etc., which then other people will tell me, ‘DYCI, no one has time to do that.’ But, do you have time to not do it? Also, you know, because again, the risk is that this person leaves, and you’ve implemented this tool, you’ve spent all the time, all the energy, and now you’re getting nothing out of it. I mean, it’s like having a risk management plan throughout your supply chain. You have to prepare for what may happen, not that it’s going to, but you have to be prepared absolutely. So, DYCI, you mentioned something called SOP, or Standard Operating Procedures. Would like to have you describe what that means to you, and why having SOPs is so important for a small and midsized manufacturer.

So, first of all, why it’s important is because it allows you to be proactive and set a cadence and a pace of the business that is not always reactionary, and it’s not always firefighting. Because when things go the way that we expect them to go, which, you know, rarely happens, everyone’s fine like, ‘Oh, this is what it’s supposed to happen when I come to work today.’ But, because in the world of supply chain operations, nothing ever works the way that you expect it to do. Well, if you don’t have the SOPs that govern the way you do business, the way workflows happen, the way approvals happen, then it becomes just everyone running around trying to figure out, ‘Okay, well, who’s going to do this? Who’s going to do this thing?’ And there are two things that happen: the collective ‘we’ of ‘we’re going to get this done’, and then nobody gets it done, because there’s no actual accountable resource to do it. Or, we’re all going to do some things, but we’re not going to be doing it as a unit. So, I might be working on something, you might be working on something, and actually, that might be the same thing, because we’re not communicating. So, it’s getting done, but it’s double the effort, which means that something else is getting neglected. So, for me, having SOPs… I always use CIPO: Supplier, Input, Process, Output, Customer. Say that one more time: CIPO – Supplier, Input, Process, Output, Customer. For anything you do, you know who is providing the data, the information, whatever it is, who is providing it, what is happening with it, what comes out of it, and who consumes it. So, having visibility into everything you do at your company – Accounting, Finance, Manufacturing, Procurement, Data Systems, like everything – the data flows, the financial flows, the cash flows, having a step one, step two, step three, if-then, around all of the core processes. And you can’t… I mean, I don’t… I used to live in a world when I was a consultant, now that I’m actually doing it, I’m like, ‘Okay, that was stupid when I was telling people to do that.’ But, you can’t, like, there are so many little things, and like we call it the tribal knowledge, but that’s going to always exist, especially within small teams, because so many of these tasks are one-offs. And the time that it would take to standardize an operating procedure and to document it, the juice just isn’t worth the squeeze, you know? It just is what it is.

You’re always going to have those little workflows or tasks that you don’t really know, but I always say, at least for month-end close from a financial perspective—opening and closing your books, order to cash, and procure to pay—at least knowing what are the core steps to those things. And especially if we’re talking about direct materials, what does it take to get the stuff and to pay for it? All those steps, you at least want to have documented. Know who’s doing what, know when it is supposed to happen, how often it’s supposed to happen, what day of the week, who is going to do the approval, what are the bases for an approval. Is it over a certain threshold of, you know, dollars? Is it over a certain threshold of volume? Really understanding then, who consumes that and who does the next step. Is it an external partner? Is it an internal partner? Is it an outsourced consultant? Is it a full-time resource? Is it, you know, a temp resource? Because all of that matters. Within business, we interface with all of those different types of resources in a different way, and our expectations are different.

So then, okay, what is the communication method that needs to happen? Because if the output of this process needs to be sent to an external supplier, you’re going to have a different communication path than you have if it were, you know, an internal team member. So really having visibility, and at least having those two processes—or I guess three processes: month-end, and, you know, opening and closing your books, order to cash, and procure to pay processes.

So, you—I liked how you described it. You said you can’t have an SOP for everything because there’s random one-offs, and that the time it would take to put it together probably doesn’t make sense. But you want to have a process for getting your stuff in the door and out the door. Exactly. So getting paid means it’s out the door. ‘Show me the money,’ yes.

So, if I am working for a smaller midsize manufacturer right now and I’m planning for 2024, and I don’t have a solid SOP process in place, and this is on my list of things to do, what steps would you advise that I take? Ooh, just because right now is the end of the year, so you’re probably also budgeting. But, in a world where the budget is done, I would definitely say take those three processes—order to cash, procure to pay, and month-end close—whatever your accounting systems are, and use that CIPO: supplier, input, process, output, customer. From my experience, most small teams, especially small and midsize manufacturers, have not done that. So even if it’s just step one, step two, step three. In a perfect world, you have something in Microsoft Visio or Lucidchart. In a way, we just need to have visibility and get everyone on the same page. Put it in Excel, column step one, step two, step three, step four, and the things that we just are like, ‘What are we doing? Who’s consuming, and who’s giving us stuff?’ And sit down with the people who are all involved in that process.

So you know, accounting is involved in the order to cash as well as the procure to pay process. And I think that as operators, we often forget about like the sales team, and the marketing team, and, you know, accounts payable and accounts receivable. But all of those people play a role in paying for materials and getting money for whatever finished good we’re sending out.

So, just getting everyone on the team in a room—and I’ve honestly done both of those processes in as little as two and a half hours—because if you also give yourself a small timeframe, you won’t go into analysis paralysis of, ‘Well, actually we should do this because there are three times a year that this one random supplier does this.’ And it’s like, ‘Dude, 80/20. 80% of the time, what is happening? The other 20%, let’s leave that for another time. Let’s put it in the parking lot. Let’s say we will really tackle this at some point.’ But today is November 27th, World Thanksgiving is coming up, the holidays are coming up; we just want to get this done before December 31st. Two and a half hours, get the teams, step one through 10, step one through five, whatever it is, high-level, and then identify under those what are level two and level three processes that you may or may not get to. But right now, at least have the visibility to okay, we need to put this on a roadmap to do it at some point.

Well, thank you for coming on the show today, DYCI. Where would you like to send people to find you if they want to connect or know more about you? I can be reached at LinkedIn; that is the only place I exist. I can’t keep up with all the social platforms. I am only active on LinkedIn. There are accounts I will not respond to you because I don’t even have the apps on my phone anymore. LinkedIn or email, you can email me at [email protected], and then is our website. 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. If to have optimal search results, make sure to add ‘Another Supply Chain Podcast’ at the end of your search.

This brings us to the end of another episode of ‘What the Duck?! Another Supply Chain Podcast.’ I’m your host, Sarah Scudder, and I’ll be back next week.