That’s Logistics!

Look Out Below

I’d say that most supply chain pros are thoroughly familiar with their top suppliers. Call them critical suppliers or tier 1 suppliers, these are the companies where we spend the most money, have a sole source or bottleneck situation, or incur some other level of concern. While the relationships with Tier 1 suppliers are often quite strong, visibility into their suppliers is often opaque at best. It is often the performance of sub tier suppliers that lead to supply interruptions, higher prices, and poor supplier performance. And in most cases we are powerless to fix the problems.

We tend to get involved into the operation of tier two suppliers when there is a technical issue to solve or a substantial performance issue. Sure, we tell our tier 1 suppliers that we want to know what is going on in the supply chain but that communication channel is often quite narrow and often censored. Most tier 1 suppliers don’t want you working with, or ‘interfering’ with their suppliers. Just ask your marketing folks how they resist your customers getting involved in operational issues.

As part of my routine supplier visitation process, I always stopped by the procurement department to introduce myself and offer my assistance in any supply chain problem that might impact their performance. I’d get a couple of business cards, a firm handshake, maybe a smile, and then a cold stare into the back of my head when I turned to leave.

Here’s an assignment for you. Pick a critical supplier or two and map out their supply chain. Identify at least three sub-tier suppliers, maybe more. Make a few calls and maybe a visit or two. You might be pleasantly surprised just how good these suppliers are. Or, you may be horrified.

Innovation in Action

It was certainly an innovative PMAB membership meeting last Monday night in Lexington. It seems that a transformer at the Museum of Our National Heritage Museum failed and the power was supplied by a back-up generator. There as even a lantern at the podium.

But those of us in supply management are an innovative lot…and seemingly quite flexible. So were our speakers who handled the use of portable lighting with aplomb. The audience was fine as well, networking and enjoying a nice meal. Sure it was a bit cramped and warm but everyone, well most everyone, had a smile on their face.

Under Bob’s and Dave’s leadership this year is shaping up quite well. PMAB is undergoing some innovation of their own. Stay tuned.

Oh, and we’ll keep the lights on for you.

Next?

They got Gary, my friend from the gym. Gary is a dedicated operations manager; one who worked obscene hours to make sure his company met their manufacturing commitments. But, they needed to cut some of the larger salaries and eventually came for Gary. He was laid off last week.

We run into each other at the gym every couple of weeks and we chat about business. Sure he was worried about his job but he was held in high regard. And, this far into the downturn, he felt that he had survived. He might not have seen that left hook aimed at his head. He was far too busy running the plant.

I did my best to put on a happy face and told Gary I would introduce him to some folks in my network. I’ll add him to the list of the others I am trying to help. Operations people, procurement people, sales people, planning people, and even some academics. Far too many are looking for jobs…jobs that don’t seem to exist today….or tomorrow.

The optimism of summer is over and we are quickly heading into winter. While there are some positive signs that the economy is getting better, it looks to be a long recovery that may not include everyone.

Sorry that I’m not so optimistic today. After all, they got Gary. Who’s next?

Renewed Focus on Indirect Spend

Managing indirect spend is fashionable! And, supply management execs are finally getting to dig into spend areas such as marketing, legal, utilities and health benefits. For too long buyers of indirect spend were relegated to cutting purchase orders for office supplies, the tool crib, snow plowing, and processing facilities management invoices. Oh, the progressive ones got involved in IT and travel but those companies that supported buyers working on expensive and important indirect commodities were few and far between.

But things are changing. Fast. A senior manager friend of mine works primarily for non-manufacturing companies. In their multi-billion companies, spend analysis for any commodity is on the table. That included areas that were formerly off limits to purchasing folks. Once you get behind the HR or marketing doors there is no turning back!

I worked for traditional, albeit high tech, manufacturing companies and we always put our worst people on indirect spend. They had to earn their way into buying products for inventory. Do a good job buying tools for the tool crib one day and you too can buy o-rings and fasteners. That was me 30 something years ago….and I was happy with the promotion. Thankfully, times change.

In many companies lean manufacturing, coupled with some good spend analysis and sourcing, has rung out much of the wasted cost in the manufacturing bill of materials. The savings these days are coming from managing indirect spend…the area where the cool kids are working!

Family First

I teach both undergraduate (younger) and graduate (older) students. Both have different needs, requirements and responsibilities. Recently I’ve had a rash of issues with students that needed to attend to family issues, either with parents or children; sometimes both. These are not ‘the dog at my homework’ issues, but real life situations. You can tell it on their faces because they look you in the eye, often with a tear or creaky voice. I’ve been around long enough as a manager and teacher to know when my students are sincere, and most, if not all, are indeed so.

I think what surprises them most is that I immediately say attend to your family issues and we’ll do a work around on the school work. I’ve been fortunate to work for managers over the years that have either had family responsibilities themselves or at least appreciated and understood them. I was able to arrange travel around family obligations, coach youth sports, attend school events, and tend to sick members of my family. Sure I had to do some additional workarounds (nights and weekends), or cover for a colleague who picked up my slack, but all in all it was a relief to think family first. I passed that same philosophy onto my staff as well.

Years ago I interviewed a human resources manager for a magazine article who said that every one comes to work with a bag of rocks. Some days the bag is heavy and on other days lighter. That concept really stuck with me and I use that example in all of my classes. The younger students may not really understand it but my older ones sure do.

Oh and when I am teaching adults I tell them it is okay to have their cell phones on vibrate during the class and to take emergency family or work calls if they need to. Life doesn’t stop when they are in the classroom. Their relief at a simple courtesy, and understanding, is visible on their faces. I like to lighten those bags of rocks whenever I can.

Due Dilligence

I’m sure that I’m only getting part of the story here but it is worth reporting. A friend of the family is losing his job as a machine operator at a local machine shop. This in itself is not breaking news but seemingly a regular occurrence in an industry segment that has been under bombardment for the past decade. But the story bears telling.

Their largest customer had moved all of their business to China in search of lower prices. This customer was 50% of their business and the loss was devastating to the machine shop. They were never able to recover and began to dissolve the business. However, the customer who moved their purchases to China was unhappy with the quality of the products they were getting and tried to resource back to the machine shop. It was too late. The shop was in the process of liquidation. The business went to the shop’s largest competitor who is fortunately hiring some of the operators of the defunct business.

It seems as if there is a lot of blame to go around. My first reaction was to berate the buyer for allowing themselves to be 50% of anyone’s business. The rule of thumb is 30-35% and even that is high in my opinion. Even if the supplier is unconcerned with becoming a captive shop the buyer should be keeping an eye on things. The buyer is cold, uncaring, or inexperienced. I hope it is the later.

Moving products to China is not done overnight. It can be a slow, tedious, and time consuming process that can take a year or more. Order quantities must have been getting lower and families of parts must have gone missing. The seller must have been aware that this was happening. But, again I am going to say that the buyer has the responsibility to notify the supplier of their change in sourcing. It is the responsible and ethical thing to do. Of course, the seller needs to replace that business. It seems as if they were unable to do so.

Our family friend said that they were all surprised by this turn of events. To me, this was a problem incubating for a long time. A sad outcome, Yes. A surprise? Hardly.