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The Resilient Supply Chain: Does Supplier Negotiation Work?

October 29th, 2018

In today’s Amazonian environment, it is quite clear that the customer’s experience is #1.  It doesn’t matter what issues you have.  If you cannot make sure that your product or service is delivered on-time with a value-add at a reasonable price, you will lose the business.  

The Squeeze
In talking with a group of aerospace CEOs who are being squeezed between the Tier 1/2 suppliers (those who supply Boeing and Airbus with plane ready parts) and their suppliers who are metals suppliers (mills/metals service centers) and outside processors, it is a tough position to hold!  However, just as Mirna Elnar, CEO of Acrua Spas said in our supply chain resiliency video series, there is always a solution when you think innovation.

The Win-Win
In this example, many of the suggested solutions from executives and procurement resources alike were to find opportunities to redesign/improve the product and process to achieve a “win” for the Tier 1/2 suppliers (improved manufacturability with better efficiencies and/or less scrap, less materials while maintaining specs/ performance, having the “right” inventory in the “right” place at the “right” time etc.) while also achieving a “win” for the CEO (better margins/ better cash flow) and ideally a “win” for their suppliers (more predictable demand, etc.).  A win-win-win is achievable if you look hard enough.

A Dose of Reality
This relates to a situation I found myself in while VP of Operations & Supply Chain for a mid-market manufacturer.  We found private-equity backers and were able to make cash flow by the “skin of our teeth”. We even were able to convince suppliers to take a haircut.  So far, so good. Then, oil and gas prices rose which impacted 70% of our material cost which impacted 70% of overall cost. NOT good. Also, we found that our product lines were all mixed up (which ones cost less to produce vs. the sales price for various customer segments) because we had recently merged three companies into one.  Also NOT good.

Our customers were a bit angry about service issues that arose when we cut over to a new system and merged the three businesses into one.  Also NOT good. And the largest segment of the business hadn’t updated products in years because they planned to sell and were desperate need of an upgrade to grow sales.  A fact but also NOT good. Lastly, our product is light but fluffy (which makes it larger in size) which carries a high transportation cost. NOT good either. But we had good suppliers and an innovative and committed team.  GOOD! So, how did we turn this into a “win-win-win”?

We decided to kick off a redesign project to find a way to straighten out the product tiers, improve performance of the product, reduce the cost of the product and reduce the freight cost associated with the product to boot.  A bit of a tall order? Yes, but a challenge as well!

We were successful in achieving ALL of these objectives by turning supplier negotiation on its head.  Instead of demanding price concessions, we partnered, provided upfront information on our objectives (including cost reduction objectives), collaborated on the design of new/improved materials, redesigned products and packaging, collaborated with customers to make sure we aligned with their needs and priorities, collaborated with equipment suppliers to put it all together and turned supplier negotiation into customer collaboration. 

The Result? We achieved a win for our customers, our business (and therefore our private-equity backers) as well as our suppliers.  There are too many people to thank but a quick shout out to Bill Weber, Keith White and Rick Finlayson seems appropriate.

Are you stuck in thinking about cost concessions or are you looking for the “win-win-win”?



Supply Chain Resiliency: Video Interview on Global Competitiveness

October 26th, 2018

To kick off our supply chain resiliency value series, we are excited to share an interview with Mirna Elnar, CEO Acura Spa Systems Inc.  Thanks to Mirna for sharing her expertise at the  APICS Inland Empire Executive Panel & Networking Symposium panel is Spring!   

Mirna is responding to a question related to supply chain resiliency.  In essence, the key question for manufacturers is how to be competitive with overseas manufacturers in low cost countries.  Clearly, we are NOT likely to be competitive on cost (especially labor cost) alone.  However, all is not lost!

In her comments, Mirna provides several ideas and strategies for how to navigate these rough waters successfully.  

                                                   

Success Responds to Resilience and Repetition
Our most successful clients build innovation into their daily routine.  It is no accident that they are the most resilient as conditions change.  In today’s Amazonian environment which is full of volatility and changing conditions, resiliency has become a “must”!

Mirna also gave a compelling story about exporting to Brazil.  Instead of giving up when she found out the tariffs were unfair, she devised a way to collaborate with a company in Brazil and find a win-win opportunity.  We walked away thinking if she could turn an unfair advantage into an opportunity, why aren’t we looking further for these innovative ideas?

 



The Resilient Supply Chain: Do You Have Resilient Employees?

October 24th, 2018

Resiliency isn’t easy,  If it were, every organization would have already perfected it.  Yet, in today’s volatile, Amazon impacted, disruption-heavy environment, you must build resilience.  

What is Resilience
Let’s start by talking about our meaning of resilience.  In addition to having the ability to adjust and recover quickly to changing business conditions.  A company must also have the capability to proactively think through the most likely disruptors and develop strategies to thrive amidst the chaos.   

Are your employees resilient?
If a customer changes his mind, how does your team handle it?  Do they see it as a challenge or a chore? Do they complain or start asking questions to understand what’s behind the change and whether it is likely to impact future orders?  Do they communicate upstream and downstream so all parties are in the loop and aware of what is coming?

If a supplier runs into a capacity issue and is late to deliver, what do your employees do?  Actually, let’s back up – do they know about the delay in advance? If so, has it been communicated?  What approach is taken with the supplier in these circumstances? Do you know whether your demands are realistic or not?  Or are you overloading your low cost supplier so you don’t get beat up for purchase price variances? Think about these questions and then go back to answering the resiliency question.  

Learning from Failure
Here is another key question:  What does your team do if they fail?  Do they look for the person to blame? Does the leader blame the weakest link?  Or does the leader blame “them” (next level management)? Or does the leader accept responsibility even if it isn’t his/her fault?  No matter who is at fault, how does the team react? Do they jump on the situation and look for solutions? Will they be more likely or less likely to collaborate upstream or downstream to find answers or ideas to test?  Perhaps most importantly, will they hide under a rock or spur into action?


Start by understanding your resiliency culture.  Then, you can purposefully change it to focus on resiliency.  



Announcing the Association for Supply Chain Management (ASCM)

October 22nd, 2018

At APICS 2018, the global supply chain conference by the leading trade association in end-to-end supply chain, the CEO of APICS announced the new Association for Supply Chain Management (ASCM).

APICS has been leading this field for 60 years focused on end-to-end supply chain management.  Now, they are taking it to the next level as supply chain drives success across the globe.  Listen to the video (click on the logo link below and you’ll gain access to the video.)

 

 

What Happens Next
APICS isn’t going away.  ASCM will continue to provide industry-leading APICS certifications for professionals in the supply chain.  It will be supplemented with an additional focus on corporate transformations and making an impact.

The great news is that this aligns well with ASCM/APICS Inland Empire’s vision to provide value for manufacturers and logistics organizations and related professionals.

If you are in Southern CA, please check us out and join us at our Fall Executive Panel & Networking Symposium on Nov 3rd on “Advancing Innovation and Navigating Global Trends”.  We have a diverse panel including the COO of the National Association of Manufacturers, the Deputy Executive Director, Stakeholder Engagement of the Port of Los Angeles and Healthcare Innovation Leader and Chairman, Department of Surgery of the City of Hope, as well as a well-known Manufacturing/Supply Chain Executive.

What Should We Consider and/or What Impacts Could Arise?
The key takeaway is that the supply chain is growing in importance, relevance and executive power as it relates to business success.  Supply chain professionals and related support systems (including trade associations) must be innovative, resilient and fast to stay ahead of the curve to successfully navigate these waters.  How do you stack up?  Will you be left in the dust?

Clients in multiple industries that are our sweet spot (aerospace, consumer products) are experiencing the “squeeze” (feeling supply chain and cost pressures from both sides in the supply chain).

How can you navigate these waters if you aren’t on top of your game?  Perhaps it’s time to take your game to the next level (or jump a few with radical change)….

 



Harvey Mudd Executive Roundtable, Growth Strategies & Idea Velocity

October 19th, 2018

 

Kash Gokli, Director of Clinic Programs and Head of the Manufacturing Practice at Harvey Mudd and I recently led our 13th Harvey Mudd Executive Roundtable.  We had some engaging discussions on growth strategies from multiple vantage points – small and medium-sized, closely held businesses, non-profit business, large complex, global organizations and private-equity backed companies.  It is amazing how much we had in common – no matter the industry, company size or footprint, every executive was concerned about culture and its impact on growth strategy.

I found one CEO’s comment especially intriguing – he mentioned the concept of “idea velocity“.  This topic has increased in importance in my business recently.

It turns out that the “be all, end all” in success for consulting comes down to “idea velocity”.  What are you doing to stimulate ideas? I think this is essential no matter the industry. What executive or company will be successful in today’s Amazonian marketplace if short on ideas?  Not many!

One tip to implement this week:
Don’t despair if you aren’t an idea factory.  First, undoubtedly, you have more ideas in you than you think.  The key is to help them make their way to the surface.

For example, when I interviewed for my promotion to VP of Operations and Supply Chain (as it required an interview by our new private equity backers), although I knew I could get results, I wasn’t too sure about my creative idea generation abilities because I viewed it as “developing the new sticky pad (3M)”.  It turns out that it’s all about repackaging and recombining of key information, products and services. We all have the ability to do that! However, you do not have to do it alone. That’s the point of having a team, colleagues, advisors and supply chain partners who can help spur ideas.

With that said, I recently was in an idea rut even though I surround myself with all of these resources – and more.  I didn’t realize it at the time but not enough was bubbling to the surface. What turned that around was expanding my circle of influencers  (a bit of diversity goes a long way) and realizing that not all idea collaborators are created the same (for each person and what works for him/her).  Finding that right combination “worked”.

Instead of groaning when “assigned to a team with someone you are less than thrilled to be paired with”, see it as an opportunity.  You never know who will spur an interesting idea or who is particularly good at brainstorming with you. Some exciting new ideas might just jump to the surface.  

Put yourself out there and it will happen.