Geoffrey Fry, Global VP of Supply Chain, Cree Lighting
For some companies, the pandemic that has beset us and our customers for the last 10 months has been a boon, driving record sales growth and profits. Think on-line retailers, grocery and food delivery, video gaming and streaming, as well as medical and PPE companies. My company is not one of those. Like many other companies, we are coming out of the pandemic struggling to re-gain our sales growth and working capital health, while, at the same time, dealing with on-going challenges regarding the availability of people, working capital, and raw materials.
I am sitting down at the beginning of 2021, looking back at the lofty goals set at the beginning of 2020, envisioning even loftier goals for the coming year, and recognizing the need to re-think how we progress these strategic goals with fewer resources and less capital investment. I, for one, will not use the pandemic as an excuse to step back or slow down, but, instead, challenge myself and my team to press forward with our strategic improvements, looking for ways to implement them without large capital investments or large projects consuming the time of already over-taxed subject matter experts.
In the forward to the book, Jugaad Innovation, which specifically deals with driving innovation with a frugal mindset, Kevin Roberts, the former CEO of Saatchi & Saatchi, stated that “creativity overcomes scarcity”. A very succinct summation of the solution to the dilemma my teams and I face in 2021. I want us to think of ourselves as the astronauts in the Apollo 13 space capsule who had limited time and people to build a carbon-dioxide scrubber from only raw materials they already had on board and could salvage. They solved the problem and survived through (a) the recognition of the scarcity, (b) some creative thinking that saw new purposes for items already at hand, and (c) a high-level of teamwork and collaboration.
Collaboration is a strength during any time of scarcity, and some of the most powerful constituents with whom you can collaborate are your suppliers. If you have strategically curated your supply base, their capabilities and resources are available for promoting your strategic objectives.
Here are just a few examples that we have either implemented or are discussing implementing, this year to further our strategic goal of a lean supply chain with shorter lead times and efficient use of working capital:
Supplier provides the hardware and systems on your site to implement a demand-pull or replenishment system:
• RFID terminals or bar code scanners are often provided in exchange for a commitment to a significant piece of business from hardware, MRO, and electronics.
• Logistics companies can provide shipping stations (printers, scanners, etc.) to streamline the packing and shipping process.
• MRO distributors can provide your Production and Engineering teams with vending machines which allow you to (a) save on transactional procurement costs; (b) streamline accounting, as their systems track the department associated with the person extracting the items, and (c) save on working capital, as they own the inventory until it is pulled from the machine.
Supplier dedicates equipment to your production needs, instead of your company investing in your own work centers or production equipment:
• A supplier can also be asked to staff and provide equipment for a small work center in your plant. I believe this can only be accomplished with a commitment of a certain level of business, and also to fund the fixed costs of the dedicated work center, if a business does not reach a pre-defined minimum level. An example of this could be a small machining center adjacent to your production floor.
• An advantage of having your own manufacturing equipment or work center is the freedom to schedule and prioritize the work yourself and make last-minute changes when required. This is especially helpful in high-mix, low volume businesses. If your manufacturing needs are not great enough to consume close to 100% of the capacity of a work center, you can still enjoy that freedom through supplier capacity reservation programs. You can collaborate with a supplier and agree on a pre-defined level of utilization or pre-defined number of hours on their equipment in their factory, where you provide the work schedule to them, and they do not schedule it themselves. Capacity reservation thereby preserves the freedom and control of owning the equipment or work center, without the upfront cost of purchasing it. I have used these programs successfully in the past in metal stamping production.
Supplier provides the people needed to get the jobs done:
In my company, our subject matter experts are over-taxed with requests to lead or assist with strategic improvements, and this will be more true than ever in 2021.
• To expand the people’s resources, you can ask your supplier to fund a resource, and, if a lack of resources is the key to them getting more business, they will readily do it. I have used this in past roles for software implementation initiatives, tactical procurement, and international shipping, but am now in discussions with a key supplier regarding funding a project management resource responsible for launching new private label products.
The point is that you can push yourself and your team to continue to drive strategic improvements, even when funding and resources are scarce. It just takes some collaboration and creativity.