Supply Chain Management: Vendor Relationships, Collaboration Critical
Strong vendor relationships, collaboration, and preparation are critical to overcoming supply chain disruptions.
At the Oct. 27 Made in Connecticut: Manufacturing Summit in Wallingford, business leaders shared how they are navigating supply chain bottlenecks.
Grant Thornton national managing principal Robert Hersh moderated the discussion, which featured Belimo Americas vice president of production Dan Hobbs, Miller Foods president Capri Brighenti, and Ulbrich Stainless Steels & Special Metals chair and CEO Chris Ulbrich [pictured above, from left to right].
The 2022 Connecticut Manufacturing Report shows a staggering 93% of manufacturers were impacted by supply chain disruptions in 2022, with 11% citing supply chain bottlenecks as the biggest factor driving their losses.
Seventy-one percent of respondents reported issues with product availability, with an additional 19% citing higher costs and 6% losing business or revenue.
Ulbrich said lead times have risen to 40-60 weeks, and even then, suppliers were only meeting delivery schedules 15% of the time.
“So 60 weeks from now, they get it to us late, and then we have to make it,” he told an audience of more than 220 manufacturing leaders at the Oakdale Theatre.
“Sometimes it takes 15-20 weeks for us to make it.”
Managing Disruptions
Ulbrich said his company manufactures supplies for the defense, medical, and automotive sectors, so inventories increased dramatically to ensure products were made on time.
“You don’t want to read about us in the newspaper, about how Ford has 50,000 cars stopped because of Ulbrich,” he said.
Brighenti said building strong, long-term relationships and having additional vendors was critical to managing disruptions.
“Vendor relationships are important, and then building on those relationships and having a backup to a backup,” she said.
“Getting in front of someone makes a big difference.”
Miller Foods’ Capri Brighenti
“It’s really about how you make the adjustments.”
She added that the best way to develop relationships with vendors was literally meeting them where they are.
“It’s getting on the phone,” she said. “You need to talk, and see, and visit, and spend time” with vendors, she said.
“You get on planes, trains—whatever it takes. You have to get there, because getting in front of someone makes a big difference.”
Relationships
Hobbs agreed, saying these relationships must go back years to be successful.
“If you were starting to repair a supply chain problem in 2020, you started way, way too late,” he said, adding “the supply chain is really all about relationships.”
Hobbs said simple things like being responsive to your vendor and paying your bills on time strengthens the relationship and keeps the supply chain flowing.
Ulbrich noted that as the world has changed, so too has relationships with vendors.
“Cost is out the window in a lot of cases right now.”
Ulbrich Stainless Steels’ Chris Ulbrich
Pre-pandemic, a 2% increase in prices would have met heavy resistance, Ulbrich said. Since COVID, some prices have increased 38%.
“It was a one minute conversation,” with vendors, he said, and “the rest of the two hours is reliability and when can I get it.
“Cost is out the window in a lot of cases right now.
“There’s not enough people, inflation, post-COVID issues. People have moved off cost in some cases. It’s still important, but you need the stuff.”
Reshoring
All three business leaders encouraged reshoring—moving overseas operations to the company’s home country.
Ulbrich said moving operations from Asia back to North America helped with sourcing and lowering prices.
“We’ve been down in Mexico for 25 years,” he said. “Lots and lots of car companies are going there.”
Brighenti said the only supplies imported for Miller Foods are those that cannot be produced in the U.S.
“So we’re here—made in Connecticut,” Brighenti said.
“We need found in Connecticut. Found regionally. Found in the USA.”
The survey, produced by CBIA with affiliates CONNSTEP and ReadyCT in collaboration with RSM, shows nearly all (98%) surveyed manufacturers have their primary facility in Connecticut, with 90% making all products in the state and 10% locating partial production here.
“Manufacturing in the U.S. is up tremendously,” Brighenti continued. “It’s a great field, but it’s also critical to our survival.”
Hobbs said reshoring is fashionable, but cautioned against rushing into the process.
He encouraged manufacturers to consider sustainability issues, the costs of trucking versus the ocean shipping, and interest rates when deciding where to buy supplies.
If manufacturers rush to reshore, Hobbs added, they may “drown our local supply base with requirements that they will gladly accept, but may have challenges supporting.”
Global Partnerships
Hobbs said when jobs were offshored in the 1980s, critical skills went with them.
This year’s survey shows 87% of manufacturers have difficulty finding and/or retaining employees, and 44% say the lack of skilled applicants is the greatest obstacle to growth.
To regain those skills, Hobbs approached multiple suppliers with a global footprint and encouraged them to establish themselves in the Americas.
“As we’re suffering on the receiving side, they’re suffering on the sending side.”
Belimo Americas’ Dan Hobbs
“Many European and Asian suppliers see the need to do this, because as we’re suffering on the receiving side, they’re suffering on the sending side,” he said.
“If it takes six months or four months for goods to transfer from Asia to the Americas, they’re not getting paid.
“So they’re not really willing to ship stuff unless they’re going to generate some revenue from that.”
Inflation
With inflation at a four decades-high, each of the manufacturing leaders shared their experiences and how they managed price increases.
Ulbrich said supply prices skyrocketed, citing an electricity supply contract that jumped to $1.10 per kilowatt from nine cents.
“Inflation is real,” he said.
Price increases are not unusual, with more than three-quarters (77%) of surveyed manufacturers raising prices to combat inflation.
Seventy-two percent saw margins erode, while 24% invested less in equipment and other capital assets and 6% laid off employees.
“Inflation is real.”
Ulbrich
Brighenti said that while she appreciated state’s temporary suspension of the gas tax until the end of November, she wished the same applied to diesel fuel.
“We could really use that. That would be helpful,” she said. “These are real costs.
“Getting things to these manufacturing plants—no matter where it is across the world.
“But we’re dealing in Connecticut, so this is where we are. But I think that’s a factor that we need to start digging into a little bit.”
Hobbs said Belimo Americas has a history of doing an annual price change, which customers expect, but don’t know by how much.
“Having a customer base that knows that that’s coming is very helpful for us.”
Preparation
Hersh asked panelists how they are preparing for events expected over the next few years.
Ulbrich warned of a continued lack of materials due to supply chain bottlenecks and the war in Ukraine.
He forecasts a 45% price increase from domestic titanium mills and higher energy costs in Europe.
“The numbers have to be pushed up, without a doubt,” he said. “Those two things are big.”
Brighenti said employers need to rethink how they manage their workforces.
“The workforce has changed in a pretty significant way,” she said, “and I think we need to make the adjustments.”
“Even though we’re buying locally or nationally, we’re really in a global footprint.”
Hobbs
“There are needs, and then people have real life challenges.
“In life we have to be very aware as employers that we are really part of a bigger system. We’re part of a community. We have responsibilities.”
Hobbs encouraged manufacturers to view the market on a global scale.
When a freeze in Texas shut down petroleum-generating facilities in spring of 2020, it impacted supply acquisition at Belimo Americas 18 months later.
“The story I take from that is that even though we’re buying locally or nationally, we’re really in a global footprint here,” he said.
“So things that go on all over the globe are impacting your business everyday. And you have to pay attention to these things.”
Hobbs recommended thinking “about bigger events and how they might impact your supply chain six to 12 months in the future, and try to contemplate what you can do to build in some insurance.”
Resources
Brighenti said one challenge facing manufacturers is that while there are many available resources, they can be difficult to find.
She added that CBIA provides easily accessible information in one spot.
“Having the opportunity to share all of our experiences is important across all industries,” she said.
Hersh said resources like CBIA, the National Association of Manufacturers, and The Manufacturing Institute are critical for manufacturers.
“It helps me connect the dots and help my clients,” he said. “There’s a lot of stuff out there—all you have to do is ask.”
“There’s a lot of stuff out there—all you have to do is ask.”
Grant Thornton’s Bob Hersh
The panelists also cited CBIA’s newsletters and events as a way to share information.
“Just coming to events like this and sharing your thoughts with the people in this room,” Hersh said.
“That’s how you build those insights and pick up little pieces all over the place,”.
Hobbs recommended talking to suppliers and customers.
“In your industry, they’re feeling the same challenges that you are, and it helps develop that relationship,” he said.
“All information is good information—you just have to decide what you’re going to do with it.”
The 2022 Made in Connecticut: Manufacturing Summit was produced by CBIA, CONNSTEP, and ReadyCT and made possible through the generous support of TD Bank, with additional support from RSM and Grant Thornton.
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