Transcript: What the Duck?! Episode 9

What the Duck?! Episode 9 Transcript

LEVEL-HEADED: How To Achieve Optimal Inventory Levels With Hannah Fallon Suka

Welcome to What the Duck?! A podcast with real experts talking about real issues in direct spend supply chain. And now, here’s your host, SourceDay’s very own supply chain Maven, Sarah Scudder. 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. Today, I’m going to be joined by Hannah Suka, and we’re going to discuss how to achieve optimal inventory levels. If you are working for a manufacturer and are struggling to figure out how much supply to buy and when to buy it, then this episode is for you. I’m @SarahScudder on LinkedIn and @SScudder on Twitter. If you are new to the show, make sure to follow this podcast so you don’t miss any of our direct spend supply chain content. Today, I’m excited to be joined by Hannah Suka, and I have known each other for, I want to say, a little over three years. I actually met her when she was in college trying to figure out how to land her very first supply chain job when she graduated.

Hannah is a senior buyer at Deerland Probiotics and Enzymes. Deerland creates customized enzyme and probiotic-based formulas. She analyzes MRP reports and makes purchasing decisions based on inventory levels, demand, open orders, and market knowledge. Trying to achieve optimal inventory levels is a main aspect of your job, as well as managing vendor relationships with key suppliers. Welcome to the show, Hannah.

Hi, Sarah. Nice to be here.

So, Hannah, when you and I were prepping for the show, and I know this about you just because of our friendship over the last couple years, one of the things that I think is so cool is something that your mom used to tell you when you were a kid. So, what was the phrase that your mom repeated over and over to you in your childhood?

Yes, my mom would tell me, “You’re not bossy, you’re a leader,” and we laugh about that all the time, mostly because my brothers and sisters, you know, they come to her and they’d be like, “Hannah is so bossy,” and her response was always, “No, she’s the leader.” But I’m really thankful for that encouragement from my mom, and it’s really given me the confidence to act on my leadership skills, especially being new in my career. It’s given me just that extra edge I needed to speak up when I have an idea or to share my thoughts when a question is asked.

So, I’d like to begin by discussing your personal journey. One of the things that I think is most unique about you is you actually chose to major in supply chain and chose to pursue a career in our industry. So, talk to me about how that all happened.

Yeah, so in college, I was a women’s rugby player, and I was in a position where I could either graduate with an extra year of eligibility or carry out that additional year of my scholarship eligibility. So, I had to make a decision, right? I had to either forego that extra year or I could pick up another major, and I was talking with some friends in the College of Business, and they were telling me about supply chain management, and it just became very interesting to me, and I just became fascinated with the projects that they were working on and the things that they got to do. So, our college was an hour and a half east of Seattle, so there’s some big companies in the area. We have Boeing and Microsoft to name just a couple of them, and our college did a lot of partnerships with them. 

So, listening to those projects is obviously obviously really cool because those are two big players in supply chain and kind of industry leaders in that area. So I decided to go full force and carry out that extra year of eligibility, and I began taking my supply chain classes. During that experience, I got to do a practicum course with a company called Treetop, and I worked on an inventory management project for them. It was a lean stigma project, and I got to lead that. What we did is we conducted an EVC analysis where we categorized the variety of fruits and came up with an inventory solution to prevent some of the apples that they had staged for production from going bad before they were ready to be used. It was really just an awesome experience, and it’s what made me fall in love fall in love with supply chain, and I just knew it was something that I wanted to do.

Why manufacturing? So I kind of touched on that in my last sentence, but really you just get to experience the magic of it when you get to see that your hard work and your skills helped contribute to a product, and it’s making people’s lives better. And I work in the health and wellness industry now, and I’m a huge advocate for living a healthy lifestyle. Still working in that industry and for a company who shares those values is really important to me. But just seeing that you’re contributing to something that’s really making someone’s life better is ultimately a huge reward, and working in manufacturing specifically, it’s tangible. Right? I think that’s a really cool part of our job, something that our president constantly reiterates to the team. Anytime he is leading a presentation or speaking, you’ll hear him say this, but the products that we make go into somebody’s body, and sometimes that body belongs to a child, and it really helps instill a sense of purpose and direction in the work that we do.

What’s a day in the life of Hannah the buyer look like? Yeah, so contrary to the title buyer, there’s a lot that I get to do outside of buying. I like to think of myself as a relationship builder, someone who leads process improvement and automation projects. I do a lot of work with data. I get to manage our data, and there’s a lot of cross-functional teams that I get to be a part of where we are evaluating either some issues or process improvement ideas together, and really, we’re just working together to keep manufacturing up and running and keep our processes flowing so that we can get our orders out on time and ultimately meet our customers’ satisfaction goals.

So, when we were prepping for the interview, one of the things that you mentioned is a part of your job is buying, but not only the buying piece, but managing inventory. Yeah, how do you do this? So managing inventory is definitely a team effort. In procurement, specifically in my role, there is a lot of data analysis that we do to ensure anything we’re buying is something that we actually need or something that we should actually keep stock of. So our team is always looking for ways to streamline our reporting, make sure that we have accurate data so that we are able to make better and faster purchasing decisions. But ultimately, what we do to kind of manage that inventory and set our minimum inventory levels is we categorize our raw materials, and by level of importance, and then we’ll plug it into a formula based on the data that we have collected for that product, and we’ll come up with a minimum inventory level. And then there’s also outside data and market knowledge and information that we have to determine if that number looks correct. And this isn’t something that we do just one time.

It’s not a one and done. It’s something that we are constantly evaluating, constantly thinking about. We have to take historical data, but there’s a lot of forward-looking data that is also taken into account when we are determining our minimum inventory levels or deciding how much material to buy. How would you describe your inventory management strategy?

So, I work for a company that makes custom products, and with that, there’s a lot of unique data that we have to consider before we stock something. Ultimately, like many other businesses, our goal is to lower our procurement costs by stocking only the inventory that’s important to us. And I touched on it earlier, but we’ve implemented a classification system, but we also meet as a group regularly to discuss what the minimum level should be. We keep tabs on those orders and on those materials that are most strategic.

What advice do you have for buyers that are listening and struggling to figure out how to find off their optimal inventory levels?

The first thing that I would say is to understand your overall business model. So, for example, you have make-to-stock versus make-to-order companies, and oftentimes those can have very different strategies when you’re approaching inventory. So with make-to-stock, you’re making the product and then you’re waiting for a customer order, so it’s kind of just sitting there waiting for someone to come grab it. But with make-to-order, manufacturing doesn’t really begin until after the order is received. So with our company being custom, we do have a more make-to-order approach, but we also have a large number of SKUs that we’re producing for different customers, so they’re each very unique. That would be my first piece of advice, figure out what your business model is, and then work to determine your inventory strategy.

There are also a ton of great resources online. One resource that I like to refer to is Apex, the Association for Supply Chain Management. They have tons of different articles. You can get certified as an inventory manager through Apex. LinkedIn Learning can be a great place to understand different methods and strategies for determining optimal inventory levels. There’s a lot of calculations that you can do, formulas you can follow, and then just getting familiar with your network and what other people in your network, and like people in your industry, are doing. That’s a very great way to kind of determine what best suits the situation that you’re in.

One of the things that must be super important for all of this is data. So what data is important to you and how are you tracking and getting this data?

Yeah, so the data that we use most frequently when determining optimal inventory levels is actually our past or historical usage. So when looking at a material, if it’s something that you’re using a lot of, and usually that data is kept in your ERP or whatever system you’re using. When looking at your usage, and if it’s a high usage item, you’re probably going to want to keep more inventory of it, right? Think of like baking bread, flour is going to be your main ingredient that you’re going to want to have a lot of flour on hand. Another thing to consider is lead time. Some of the materials that we buy can often have very long lead times, and if that’s the case and it’s something that you need to make sure you have enough of to keep you up and running, then you’re going to want to hold a little bit more inventory there. We saw that with COVID, right? We ran into a situation where some of our suppliers had to increase their lead times for many reasons, and it was a struggle for a long time to try to determine: okay what does our optimal inventory level look like now

with the situation we’re in? And now that we have worked past some of those problems, we’re kind of reevaluating to where we’re at inventory wise and having those discussions with our suppliers and learning about the various ingredients.

And components we buy to understand the market better for each item specifically, and that’s where we’re kind of relying on historical data. Can be a challenge, right? Because you don’t always know the outside information that you get from suppliers and talking to salespeople and people kind of directly involved with the manufacturer of the products that you’re buying. And I would argue historical almost has been thrown out the window for a lot of companies given what happened during COVID. Yeah, I think that’s a fair assumption. I know I have friends that work in the supply chain at companies where, you know, their usage went down 500 percent. So if you were to go off historicals, you would be completely missing the mark if you weren’t looking at almost real-time or hourly or daily data. And then you’ve got the reverse side from product companies where their sales tripled or quadrupled. And again, if those brands had gone off historical continuously, they would have had challenges producing enough product to meet the increase in demand. Yeah, and I think that’s why it’s so important right now for us to make sure that we are automating whatever we can and we’re having reports and ways of looking at that real-time data. But also, just getting your team together and talking about your minimums has been very beneficial for us as a group because you’re not just relying on a number that was set maybe last quarter when things in the market were very different.

So, during our prep for our interview, you mentioned your biggest direct spend challenge this year has been finding second sources for materials and then managing these alternatives. Why is this so difficult?

So, there are a lot of quality factors that we have to consider when we’re looking for an alternative material, and it can complicate the approval process because it’s not just sourcing or procurement looking for an item, but there are different processes that take place internally to qualify a new component, a new ingredient, new raw material. And then, since we’re a contract manufacturer, there is also the added challenge of talking to our customers when we need to bring something new in or we need to make a substitution in their recipe. So, it can add some time; it can add a little bit of complication. But, you know, we always make sure that anything new meets not only our internal specifications and our customer specifications but that we’re staying in compliance with all of our quality certifications. And one thing I love about Deerland is our focus on quality. If you are buying a product that was manufactured at Deerland, you can rest assured quality is top-notch. So, although it is a challenge on the sourcing side sometimes, ultimately it’s for the benefit of our customers and for the people consuming the product. And then when we’re finding an additional source, first, we have to do our product research; we have to really understand the details about what we’re sourcing before we contact any suppliers. And there is a lot of information that we have to collect from other people, other departments, and we need to know like the anticipated purchase volume, what can our vendors expect us to, you know, what volume can our vendors expect us to be placing orders for  

And then the manufacturing application: How is this going to be used? Why is it being used? Why do we need this specific material? Any special customer request?

Sometimes, our customers will want, you know, certain trademarked items in their formulas because of research done on that product. Or any formulation needs. One of the products we make are stick packs, and we have a stick pack formulation specialist who is really, really great, and we refer to her a lot to educate us on different flavor profiles and stick packs, and certain sugars that should be avoided or should be used in Stick packs. So, there’s a lot of research being done when we’re looking for an additional source. And then, once we have all those details, we contact our network of suppliers and we request samples. We bring them in-house, our product development team works to prototype them, and it obviously goes through a stringent quality review to make sure it’s all good to go. But then, once that’s done and we’ve settled on the best option after we’ve collected a couple of different samples, we can go ahead and get the purchasing information from the supplier and get an order placed. So that’s kind of our process for finding an additional source.

Okay, once you find an alternative supplier that’s going to work, it’s not your specifications, you’ve tested it, they’ve got the green light, how do you manage your suppliers ongoing?

Yeah, so as a procurement group, we have identified some of our strategic suppliers, and we evaluate their performance based on some of the data and information that we have, and usually, that comes from our ERP. Our quality team is really good about letting us know if there are any issues with testing or material that we’re receiving from a supplier. So, for the materials and categories that I manage, I meet frequently with my suppliers, and I pay extra attention to the suppliers who are handling a large percentage of our orders or maybe those who are kind of struggling to keep up on our orders or who I know are facing some issues with supply. And then determining what frequency to meet with each supplier kind of varies. So, if we’re experiencing a lot of quality issues, they might be meeting with that supplier more frequently, or if I’m just touching base with that supplier just to talk about maybe some goals or just catch up on what’s going on in the market, that might be a little less frequent, like once a month. But ultimately, it’s just staying in close contact with those suppliers.

How are you managing day-to-day communication back and forth with the suppliers, especially around purchase orders, open orders, and shipments you’re expecting to come in?

Yes, so we have a lot of email communication with suppliers, and it depends on how that supplier operates. But oftentimes, I’ll pick up the phone and give them a call if there is some information I need from them on a PO, or if there’s maybe an issue that I’ve noticed with one of our orders. But it’s a lot of email, a lot of phone conversations, virtual meetings like Microsoft Teams, Skype – that would be the mode of communication with the majority of our suppliers. And then, of course, we have face-to-face meetings with some of our suppliers who will come in and show us some of their new products or talk about different ways to improve maybe what they’re currently supplying us with.

How is your team embracing technology?

Our team is really great at thinking of new ways to implement new technologies or to use our systems in a way that we haven’t used them before. So what we’ve discovered as a procurement team is that there are a lot of capabilities in our ERP and some of our other systems that we weren’t utilizing. And we’ve been able to kind of take what we have and build out new processes that have allowed us to automate and streamline our work processes.

One thing that buyers struggle with is getting other people to adopt and use technology. So you mentioned your team is very big on it, but how are you managing the change management across the organization with new technology or expanding existing technology that you have?

We have an awesome IT director who helps educate different teams when new processes are created. And it’s really just constant reminders like, “Hey, this is how we’re doing it now,” or providing kind of one-on-one training to people who are not quite grasping the new technology yet. But overall, I think the environment at our company is very accepting of new technologies and new systems and learning ways to be more efficient given the resources that we have.

With everything that you juggle on a day-to-day basis, how do you know where to focus your energy?

Something that’s really cool that Geralyn does is we have this awesome system called 40x that we follow. Basically, what that allows us to do is it allows us to separate kind of the firefighting tasks from the more strategic goals or the wildly important goals. We call those our “WIGs” (Wildly Important Goals). So we spend about 80% of the time managing the Whirlwind, so these firefighting urgent tasks that you’re faced with on a day-to-day basis. And then we spend about 20% of our time on the wildly important goal, and that’s kind of broken up by week.

When I’m dealing with the Whirlwind, right, because that’s the day-to-day urgent firefighting tasks, I like to focus my energy on the materials that matter most or our sales team and production. So if there are any delays on purchase orders, I communicate that right away, explore all of our options, and come up with a solution to either get that material there sooner or maybe call a different vendor that I know also carries that material. But you know, focusing on the more pressing matters, maybe we have something scheduled in two weeks and that material is delayed a week, so it’s just a conversation with planning and sales: “Do we need to find something sooner? Does this customer need it? Can we push this order out?” and just really keeping that communication flowing.

What new initiative are you most excited about this year?

That is a really good question. I would have to say our automation projects. Without getting into too much detail, we’ve implemented Power BI recently, and we are starting to build out reports and kind of collect our data all in one central location. We’ve already started using Power BI to inform our inventory decisions, and I found that to be extremely helpful in allowing our team and other people to understand where the data is coming from and why we’re making the decisions that we are. So definitely looking at any automation projects is really exciting to me because then we don’t have to focus so much on the Whirlwind. We can be more strategic in our day-to-day.

If people want to check you out, where do you want to send them?

You can go to my LinkedIn at Hannah Fallon Suka.

Thanks for discussing how to achieve optimal inventory levels with us today, Hannah. If you missed anything, you can check out the show notes. If you are new to the show, make sure to follow this podcast so you don’t miss any of our direct spend supply chain content. I’m @SarahScudder on LinkedIn and @SScudderon 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 I’ll be back next week.