Supplier Relationship Management: Driving Success in Modern Supply Chains

[Transcript]

[00:00:00] Jan Griffiths: This is the Auto Supply Chain Prophets Podcast, where you'll hear from experts of all facets of supply chain in the auto industry to help you prepare for the future. I'm Jan Griffiths, your co-host and producer.

[00:00:17] Terry Onica: I'm Terry Onica, your podcast co-host. Let's dive in.

[00:00:23] Jan Griffiths: Hello, and welcome to another episode of the Auto Supply Chain Prophets Podcast. Let's check in with my co-host, Terry Onica. Terry, what have you been up to?

[00:00:31] Terry Onica: Well, it's nice actually to record a podcast on a Saturday. I got up this morning, and I ran seven miles. And it was just beautiful outside with a light breeze; I couldn't ask for a better, nicer run. Got home; I was in Belgium last week, unpacked, got a repack, to go to Chattanooga on Monday. So, able to get that done. All rested, relaxed, and ready to go for the podcast.

[00:00:54] Jan Griffiths: Yeah. You've been busy. You've been busy. Well, it's been a week for me. It's been a great week. I was on the news again this week. Did you catch it?

[00:01:02] Terry Onica: No, I didn't know about that, but I was out of the country, so I wouldn't have thought.

[00:01:05] Jan Griffiths: Yeah. The most recent action that Stellantis took with the layoffs was making me think, Terry, about the relationship between the OEMs and the UAW. It's very transactional. It's very tit-for-tat. And I talked a lot about this during the UAW strike last year, but it's not collaborative. It's not about working together to solve an industry problem. It's just very transactional. And it took me back to my supply chain, my purchasing days, trying to manage the transactional and develop a collaborative relationship. It's not as easy as it sounds. Is it?

[00:01:48] Terry Onica: It's definitely not as easy as it sounds. It's interesting that you mentioned that because last week, when I was in Belgium, I did a conference, and we talked about supplier relationship management and what are the things you need to be looking at in today's world with supplier performance. And it is complex. You've got internal groups that really need to be collaborating together. You've got corporate purchasing, quality, the materials manager at the plant getting the execution feedback, and the plant manager. So, you got a lot of internal collaboration. And then, you got to collaborate with suppliers, right? You've got so many actors. So, the supply chain is really tough, and I'm really excited that today we're going to talk about supplier performance, and what we really need to be doing in the industry, and kind of a good checklist to go back and say, are we doing this in our organization between all the parties that I just mentioned?

[00:02:36] Jan Griffiths: Yeah, we really need to tear into the subject because going back to my supply chain days, I remember getting ready for a negotiation; you're maybe considering a supplier for a big piece of business for a new product. And then, you say, okay, well, let's go get the data out of the system. And you would pull it, and you would have some of it, you know, you might have delivery, but then, there was always a but. Somebody always doubted the data. Somebody always said, "Yeah, but I don't know that delivery date is correct. So, we can't use that." And then, the quality, well, yeah, but it doesn't really have this or that in it, and I don't know if it's really good enough. So, you had some data. Thinking back on it, I don't know if I ever truly relied on the data coming out of the system from a supplier performance report. Isn't that a terrible thing to say?

[00:03:25] Terry Onica: Yeah, that is a terrible thing. But I think today, with the technologies that you have out there, you've got your supplier relationship management tool, which contains all your core data about your suppliers, their performance, their assessments, and their certifications. And they allow the organization to collaborate with their supplier. So, there's one version of the truth. You can see that. Then, the other thing that's really good is that they can take feeds from your quality system, and they can take feeds from your delivery systems and then create that scorecard. So, again, there's one version of the truth. Everybody's looking at the same thing. And oh, by the way, if you get a corrective action as a supplier, that's going to appear. You're going to know that. So, there shouldn't be any surprises. We have a lot of customers today who are having a lot of great success with relationship management tools, especially since we get a lot of great feedback from our German customers because of ESG. You realize, let's scope three, I got to start surveying my suppliers, and how do you do that? How do you do that easily? And they report back that when you have these tools, it just makes it so much easier to gather that data and have the suppliers, again, in one place to input it. So, we're all speaking from the same page, and we're not trying to gather information from everywhere to figure out what's going on.

[00:04:44] Jan Griffiths: Yeah. The need for compliance, particularly when we talk about MMOG/LE and IATF 16949, is that the requirements are so much stricter now than they were when I was in the supply chain. And I'm not talking decades ago, we're talking six, seven years ago, but even in that period of time, they have evolved. So, Terry, as our supply chain leader, listeners are out there right now, listening to this podcast; what do they really need to know from a compliance perspective that they've got to get their arms around? I mean, for me, it was like a nice to have, and let's get our arms around supplier performance, but now, it's more of a, we've got to have this.

[00:05:31] Terry Onica: You're exactly right. And I think COVID changed a lot of things. And over the past few years, all the disruptions, I think it's putting more emphasis on risk management not only do you have to do it internally, but now you need to be passing that down to your suppliers and making sure they're doing risk management and risk assessment. So, in MMOG/LE, there's a whole chapter dedicated to how do you manage your suppliers. And even I have to admit, probably six, seven years ago, it was always the last chapter we looked at, and we didn't spend a lot of time on it, but the last two versions, it's the chapter we're spending the most time on it because of all the disruptions. So, when you look at it today, you know, it's a great checklist to go back to again and say, "Am I doing this?" Last week, I created, for lack of a better word I'd want to call it a flyer, but it contains all the MMOG/LE requirements and what you need to look for. And I'm going to make sure I drop that in the show notes so that everybody can grab it. And what I would recommend is that purchasing, materials, and even plant management all get together and quality, absolutely. Get on the same page and review what I have written there and what is in the MMOG/LE requirements because oftentimes, people really focus on the quality, and I think Cathy Fisher used to say, when you look at most scorecards, probably 20, 30 percent is related to delivery and a lot of it is more related to quality, right? So, you know, and Jan, I really think it's because we're just firefighting supply chain. And so, if we firefight, we get it, the product is there in time, and we did a great job, but we don't think about all the costs. Do you agree?

[00:07:09] Jan Griffiths: I totally agree. I totally agree. And I like what you said earlier about one version of the truth. We need one source of data that we can all agree on. And I don't want quality sniping, going, oh yeah, but that came out of the purchasing system, so we know that's not really right. Oh, we've got this spreadsheet that we use at the plant, and it's much more accurate. Those days are gone. They have to be gone because here's the thing: if we do not get our arms around the transactional, because as much as we like to say, "Oh, we need to be more strategic and collaborative." You've got to have the transactional basics in place before you can even launch into more of a collaborative type of relationship. And now, we've got the technology, you know, it's out there, it's available, but we've got to figure out a way to implement it, but more importantly, let's get all the stakeholders together to agree on this one source of truth, and all use it. Let's all use it together. It's in our system, people. It's not on spreadsheets. It's not on four different systems. This is what it is. And then, when the supplier knows that and they agree with the data. Oh, I mean, what a great starting point.

[00:08:26] Terry Onica: Absolutely. And you figure if there's one version of the truth, anybody at any time can go in and look at it. And if the data looks questionable you can start asking questions right away. You don't have to wait till your annual risk assessment on your suppliers, or you have to wait till the supplier really does something problematic, right? You can be looking at that ahead of time and fixing those problems, right? It's not hidden. And when everything's pocketed away in different systems, that's why I think suppliers get frustrated. It's like, can't you all see what each other's doing? And I think that's what the beauty is of these supplier relationship management tools. And I'm really happy to see that a lot of our customers are really excited. I saw a few customer testimonials last week on how much this is really helping their organizations.

One thing I want to go back to some of the things that people need to be looking at definitely need to be understanding ESG. So, you need to make sure your suppliers are considering the ESG, right? They got to get that into their culture as well, too. So that's business ethics, working conditions, things like that. And then, you have to confirm, if you're Tier One, that your suppliers are doing the same, that they're passing that requirement down. So, in MMOG/LE, the last few versions, there's a lot of stuff that needs to be passed down really to get the supply chain connected, but looking at your formal agreement, so your Terms and Conditions from a delivery perspective, or a supply chain perspective, supplier mapping. We know how important that is now as we move suppliers around, or as we have these disruptions, make sure they have a risk assessment, contingency planning, they're doing EDI, or they can do a web-based tool, but again, passing that demand down quickly. We have to make sure they do that capacity, production flexibility, ops lessons, packaging and labeling, and shipping specifications, just to name a few. So, you know, again, get together between all those groups and are we doing that? It's not just about quality, right? We got to make sure they're doing all these delivery things. We don't want late parts, and we know how important the supply chain is right now. So, this is that list that I've created that we'll put in the show notes. It's just a great checklist. Let's look at, again, purchasing, materials, and quality, and I even include the plant manager and get that feedback. Are we doing these things?

[00:10:48] Jan Griffiths: I'm so glad, Terry, that you've got these documents and you're up to speed with all of these requirements. And we're able to share that with our audience because I would not want to start from scratch. You know, I'm really glad that you've done all this legwork. And somebody can run through that checklist and have a sense of where they stand in terms of compliance and where they need to focus because I will tell you, as a supply chain purchasing person, listening to you, listening to all the things that you're talking about, one of the things that's going through their heads right now is people. I don't have the people. I don't have the resources. This is going to come back to leadership because usually, supply chain people and purchasing people are focused on cost and delivery for the most part. Yeah. Okay, maybe a little bit of new program launch, but that's the main driver, particularly in the auto industry. And you've got a certain amount of resources, and now, with volumes being all over the place with EVs pulling back. Not knowing what the mix is going to be, what it's going to look like in a lot of volatility, and there is some fear in the air right now in terms of what the volumes will be and what the business projections will be for the future. So, the squeeze on resources is going to be even tighter, but this is where leadership and culture come in because it can't be just a supply chain thing. This is much bigger than just a supply chain thing. I mean, suppliers support the business, not just one function. So, this is a perfect opportunity for supply chain quality operations to get together, look at this, and come up with a meaningful plan that will work for the business, not just for one silo; one function for the business.

[00:12:42] Terry Onica: And, you know, I would argue with any executive, how can you afford not to? These are things that are checks that are going to be in place to make sure you have your businesses smooth. And I would argue that once you do this and have this in place, you go back and just check your terms and conditions. Are we talking about all these things? I would imagine many, they may be talking about, there may be some nuggets, there may be like supplier mapping, and when you look at even supplier mapping, doing it internally, as you know, look at the last four years, we're starting to localize everything, but you've got to figure out who do you have here? Who do you need to move from point to point? When a disruption happens, my favorite example was General Motors back in the tsunami, nobody mapped. Remember when that tsunami hit? Nobody knew how bad it got. It hit everybody. But then, after that, General Motors implemented supplier mapping. I think it was like two years later, there was another one and it took them like six weeks the first time to identify their supply base. It took them like six days the next time. Just by implementing something as mapping. And so, that's why when we put these in the standards, we do this because we know it's going to help you to get better. And again, a lot of people say, "Oh, this is a lot of work," but it's probably not. And the things that you're missing are probably things that you really should have. The list that I read, I would say you wouldn't argue with me that you should be asking all your suppliers to do that, right?

[00:14:04] Jan Griffiths: Yes, but here's the thing. Okay. Ready? I'm going to fall on the sword now. The requirements even six, seven years ago, always, you know, round packaging, EDI, all of these things, they were all there. Having the requirements is one thing; making sure that the suppliers are compliant and actually follow through and do all those things is quite another.

[00:14:30] Terry Onica: Right.

[00:14:31] Jan Griffiths: And somebody who's never lived in the automotive supply chain probably says, "Well, you know, you just tell them what to do, and they do it, right?" Uh-huh. No, it doesn't quite work like that. No, not at all. So, it's making sure that you have, and I'm going to use a word that I learned from Volkswagen I don't credit Volkswagen for too much, but I will credit them with their ability to launch new products in the systems that they have. They used this word with me once, and I'll never forget it. "Rigor." The rigor of your implementation, particularly during new program launch. Making sure that you've got all of these things in place. You can't launch a VW program and with a checklist and go, "Yeah, we've translated all your requirements down to our supply base. Yeah, we're good." Yeah. No, that doesn't fly. They'll have people in your facility and checking with your suppliers to make sure that it's all done. And it's this word rigor, and that's what we need. We need more rigor. It's more in the how and the approach than it is in the what.

[00:15:30] Terry Onica: Yes. And you know, it's interesting you mentioned that because I think that's the weakest part of automotive suppliers when it comes to managing them is the actual going out and doing the assessment. So, I teach the AIAG MMOG/LE training and I always throw an exercise in this around how do you identify risk management? How do you manage your risk assessments and your supplier performance? How are you pulling all that data together? And when I ask, "What's the assessment that you use, it's just like a deer in the headlights?" I don't think in the supply chain we go out, even on initial on a new supplier or a problematic supplier, I don't; when I see the feedback on the checklist, that's very sparse when it comes to delivery. Fully loaded, you know, more loaded on quality, but not so loaded on delivery. There's not a lot of requirements there. And that's one of the nice things. MMOG/LE has a basic tool that would allow you to give an assessment to start in that area. And it's exciting to see a lot of the Tier One starting to adopt that because right now, what they have is just not enough. The key thing is going out and doing those checks. And I don't think they're happening very much at the Tier One level as much as they should be. And I don't know if to me, start off with your critical suppliers, or at least start off when you award them new business to make sure that they're doing that. I do see from my work with MMOG/LE, if the OEM takes their eyes off of them, sometimes they fall off the tracks and all those good things they did on the new award of business kind of fall away. So, we really have to kind of go out there and do some checks along the way. With MMOG/LE, that's why a lot of OEMs tell you to go back every year and just take a look at it. Suppliers think, "Oh, it's going to take a lot of work." I'm like, "No, it's not." If you have your work instructions there. Each year, just go back and check on them. Did anything change? If nothing changes, move on, right? I don't think it's an astronomical thing to do as what most people think it is to go back and just make sure we're doing the right things. And with people coming and going, Jan, you got to check to make sure somebody new didn't come in, and now, they don't even understand what they're supposed to be doing. They could be just doing things by hand when there's a way they could be doing it in the system. Again, go back and check, how are we really doing things from a supply chain perspective?

[00:17:44] Jan Griffiths: I got to ask you this, and this is a little bit off track, but I got to ask you this question. How on earth do you stay so relentlessly positive? I mean, you're not, you've been in this industry a long time. You and I been in this industry a long time.

[00:18:00] Terry Onica: Yeah.

[00:18:00] Jan Griffiths: You've been beaten, you know, for doing something, doing something wrong, not doing something. I know you know exactly what it takes to implement these systems at a Tier One and a Tier Two level. I know you know it. You know the work, right? How on earth have you been able to survive all these years and still stay so passionate about it and so relentlessly positive? How?

[00:18:25] Terry Onica: Cause, Jan, I've seen it work. I go out with suppliers, and a lot of times, they're problematic ones. And I come in there, and they bring me in there. And I tell you, the first day we're kind of going through MMOG/LE, I'm like Swiss cheese, you know, they're just shooting holes through me. Why do I got to do this? Why do I got to do that? And it's really interesting every time, by the end of day one, because I take the time to explain to them why. I think a lot of people do this. Why do they care? Everybody just looks. They're just trying to annoy me. No, your customer's not trying to annoy you. They're trying to explain to you something that you need to do because if you don't do it, it's going to cause you problems, right? So, just seeing that transition from, I don't know what it is, at the end of the first day, I'm finally okay. They finally like me, right? And then, they're more engaged on the second day. So, I think that's one thing.

The other thing is after I go do MMOG/LE assessments, I always follow up six months later and I always say, "Give me your honest feedback. Was it a waste of time, or did it help?" And you know, it's always like your parents, they're telling you, do this, do that. You hate hearing it, right? And then, as you grow older and you understand, you're like, "Oh, they were right. I understand why they were beating me over the head to do that or why they were making sure." But, Jan, I see the results. Anywhere from 15 to 60 percent reduction in inventory just by picking up some best practices. A lot of times, they're doing a lot of good things. There are just a few big things you are missing, right? That just makes me feel so good. I hear a lot of times, "Oh, our suppliers aren't going to want to do EDI with us. It's every assessment; they're not going to want to do it."

[00:20:05] Jan Griffiths: You know, I was one of those people.

[00:20:07] Terry Onica: But you know what? But once they do it, they're back, "Oh, our suppliers are so much happier." Even though sometimes our demand is bad because the OEM is changing things. They're still seeing it faster. It's not taking them two weeks later to find out the OEM just changed the demand on it, right? At least they get to see what I'm seeing more quickly. And that whole just rapidness of movement of data, when you automate everything, it just takes inventory out of the system. So, that's why I stay so positive because I see it, Jan. I have never, ever, in my 35-year career, had a supplier come back and say, "This was a waste of time. We got nothing out of this."

[00:20:46] Jan Griffiths: I know we can't offer you up to everybody. I know we can't do that. But if there is somebody in our listener group, in our audience that wants a shot of Terry's energy and positivity and passion and knowledge about this subject. Could you do a few could you do a few visits, maybe?

[00:21:09] Terry Onica: Yes, I could. In fact, go to the Auto Supply Chain Prophets website and get ahold of me. Absolutely. Email real quick, tjo@qad.com. So, reach out to me, but absolutely. In fact, I'm doing, I'm so excited, I'm doing two of these deep dives into supplier performance with two suppliers. So, one has more of an ESG, one I really check. Are we doing the ESG component, right? And the other supplier, just in general, looking at performance. So, I'm starting to see a lot of benefits about the work that I'm doing, as well. And I have to share one, and I'm so excited at our conference in November; I'm going to be doing the same presentation. So, I did it in Europe, and I'm going to do it here. And you know who's going to join me? You would never guess.

[00:21:54] Jan Griffiths: Who?

[00:21:55] Terry Onica: Moog medical. They make the IV bags. And I went in with them with the 24 processes, and we looked at supplier performance, and they're coming to speak at my session on how much it helped. They're not even automotive. They're not even automotive.

[00:22:10] Jan Griffiths: Wow.

[00:22:11] Terry Onica: And I think it was really great because they started to realize, "Boy, we're really not monitoring our suppliers at all as we should be." And IT realized that like, "Wow, I didn't realize these are all the things that they should be doing." So, I'm really looking forward to their kind of testimonial and what they have to say to the audience about how much it helped. Again, if it can help a medical company or a life sciences company, I'm sure it can do a lot of good things for automotive suppliers. So, I see it work in other industries, too. So, it's just I have the opportunity to really sit with people, help them to understand, and then see those positive results. I wish everybody could see what I see.

[00:22:47] Jan Griffiths: Yeah, that's great. And, of course, if any of our listeners want to join us for a more in-depth discussion, you can meet us at the Transform Conference in Chicago the first week of November. Terry and I will both be there in person. If you want to email either one of us to make sure we set up a time to talk, or just come by and say hello. We'd love to meet you. And with that, Terry, I think we're done. This is our Saturday morning. Great to talk to you.

[00:23:13] Terry Onica: Fun Saturday morning.

[00:23:14] Jan Griffiths: Okay, I'll see you next time.

Are you ready to find the money in your supply chain? Visit www.autosupplychainprophets.com to learn how or click the link in the show notes below.