Whether current or looming, the supply chain is constantly at risk of disruption, and supply chain professionals are faced with mitigating that risk while ensuring positive experiences with customers, as well as partners.
Quartz Network Executive Correspondent, Britt Erler, discusses how to navigate these turbulent waters with Mike Abrams, Corporate Vice President of Global Distribution Operations at Future Electronics.
Mike shares insight and advice on:
- Overcoming lingering pandemic challenges
- The power of partnership
- Being prepared for the unpreparable
Quartz Network: Would you mind providing the audience with some context about your background and your current role?
Mike Abrams: I’m currently the Corporate Vice President of Distribution Operations for Future Electronics, which is a fancy way of saying if something goes wrong, pick up the phone and call Mike, whether that’s on the supplier side, or whether that is on the customer side. I have full responsibility for all the discharge global distribution centers, as well as supply chain logistics, global trade and compliance, and the value-added services team. Prior to that, I spent 25 years with Ingram Micro, a fortune 100 company in a myriad of different roles, all the way from being Senior Director of Canadian Distribution to my last role, which was Vice President of Global Fulfillment Operations, managing our three PL customers in our three PL environment.
Quartz Network: Supply Chain was hit perhaps the hardest, during the pandemic. What do you think are the top three challenges still facing global supply chains after everything we experienced?
Mike Abrams: I think one of the things that Supply Chain operators, we used to have the luxury of kind of being in the background. And that’s no longer the case today. There are a lot of folks that have a tremendous amount of interest in what we’re doing to protect that customer experience. And rightfully so.
There are three things I see continuing to be problematic, and they’re all around capacity. The first is labor capacity. The second is carrier and transportation capacity. And the third is really knowledge and experience capacity.
We’ll start with the first one. There’s a ton of reasons why people are hesitant to enter the workforce today, particularly folks that are required in distribution centers, or in Manufacturing. I read an article the other day that said that there were five open positions for every single person that was unemployed in certain states. So how do you attract that singular person that may be out there looking for work? Again, a lot of people don’t want to enter the workforce yet. There are reasons from the federal government that may make it more attractive for people to stay at home, there are daycare issues, there are folks who are still concerned and nervous to enter the workforce. So, understanding that is problematic in the first place. You really have to look at your attraction strategy. And it’s very easy to overlook some of the things that make you a good employer that make people want to come into your environment in the first place.
I think we’re all doing things that are very similar. There are billboards that are up, we’re removing our rates to make sure we remain competitive in the marketplace, we’re doing radio ads, anything to try and reach that person who may not know Future Electronics because we may not have the same level of branding that other organizations have. So, it forced us to do things a little bit more creatively. And one of the things that we’ve been very thankful for is we have a very creative HR team. Not only did they take some of the traditional methodologies, but really stepped up and looked at how we could use social media to help connect directly within the environment we’re located in, but also to expand that to see if we can attract folks that wouldn’t normally come into the distribution environment.
The second thing that team did was to try some non-conventional ways to recruit people. For example, there’s an outdoor mall close to our facility where we’d spend Saturdays and Sundays handing out marketing collateral, trying to articulate why coming to Future Electronics would be a successful endeavor.
The other thing that we did was look at injection sites for COVID-19 and talk to some of those folks, selling the reasons why we would be a good place to come, highlighting the protocols we had put in place to protect our existing employees and using that as a marketing angle to bring some of those potential new folks in. We’re all at the same starting rate, plus or minus a few dollars, so it’s important to really differentiate yourself from what your competitors are doing in the marketplace.
Along with that, you really need to understand what’s going to keep those folks there, because one of the biggest things that we’re seeing is churn at the newer, entry-level positions. Somebody sees an extra 25 – 50 cents an hour in another location that may be meaningful and impactful to that person, they may want to go do that. What we did was slightly different. When we onboard folks, we let them know we’re going to onboard them slowly, we’re going to bring them on board get them acclimatized, not throw them to the wolves right out of the gate and give them a robust onboarding process. That really helped us reduce that turnover rate dramatically at the entry-level position.
Now you have the other problem of a tenured workforce that has been with you for a considerable amount of time. Some of the things that would have made you a great employer to them in the past may not make you such a great employer right now. We talked about the overtime, whether that’s considered scheduled or mandatory, even if it’s voluntary. There’s a high expectation that people are working a tremendous number of hours. We need to make sure if we’re going to take that step, we do it jointly, and we work with our teams to build schedules that help them at least mitigate some of the work-life balance challenges they’re experiencing. And again, making sure the safety protocols are absolutely being followed, and letting those folks know it’s not just the safety protocols around COVID, but also the health and safety protocols around tiredness and fatigue. Because, if we’re not managing and taking care of those folks, that’s going to manifest itself into a different turnover problem in the future, or negatively impact what really should be your best marketing. Your best marketing to a potential employee should be when they walk into your place, they say, “This is a great place to work. I want to work here.”
If your existing workforce views it as a negative work environment, you’ve probably lost your best form of marketing. And quite frankly, that stickiness you should have with your employees, no longer exists. You need to absolutely stay laser-focused on making sure those folks feel comfortable they’re taken care of, and that you are working hard to address their needs.
The second piece is access to capacity from carriers. The supply chain here was tremendously disrupted and continues to be disrupted. Access to capacity has never been harder to get. Back in the old days, carriers would build out infrastructure to support peak season, then they’d come to you and beg you for capacity and non-peak in order to fill that idle capacity. That ship has sailed, pardon the pun. Those days are long gone. Today, you’re lucky to even get capacity, or if you have capacity, to retain that capacity. You’re fortunate if you can keep your standard carrier pickup times. Carriers have gone and said, “All our service metrics and delivery metrics, they don’t really exist in the manner in which they used to before.” Also, what’s problematic, surcharges. As the service level continues to degrade, our costs continue to accelerate.
One of the things we worked very, very hard at, right at the outset of the outbreak of COVID-19, was to understand our carriers’ limitations and what we could do as a partner to help mitigate those limitations.
One of the things that came through loud and clear was as shelter in place orders were rolling out across the country. The ability to deliver packages was severely constrained. That was creating another issue with undeliverable packages being stuck in a network, holding up rolling stock. I think we all know some of the challenges that that brought to us. So, we implemented a process from scratch in our ERP that allowed us to contact every customer for every delivery to ensure that business was open. If that business was not open, we did not tender that package, and we told them we’d work with them to make sure we don’t have any unnecessary packages entering their network. And that we will make sure that only anybody with a delivery capability will be tendered to you. So that worked very well, for us. Again, it was a laborious process on our side. But our partners truly viewed that as a partnership.
When we talk about cost, and we talk about some of the impacts of the surcharges, this allowed us to go back to them and say, “Listen, we weren’t part of the punitive activity that was hitting your supply chain. As a matter of fact, we’ve been good neighbors. We’ve been very conscious of the challenges that you had. Therefore, we don’t believe that those surcharges should be applicable.” Now, of course, I can’t guarantee that this works for everybody. But we were able to reduce those surcharges considerably. And in most cases, we were able to have zero surcharges. Again, it really was viewing them as a partner, rather than a commodity that allowed us to do that. So, I would encourage people to make those partners feel like your partners. And if they don’t feel like a partner, you have to find a way to make them feel that way.
Quartz Network: What do you see as the long-term effects of all of this? And how are you still protecting that customer experience
Mike Abrams: I think the real challenge is the customer experience. And I’m not specifically talking about end users. I’m talking about more on the B2B side, that may have been altered forever. I don’t know if we can ever go back to the way things were. And specifically, I’m talking about the just-in-time inventory program.
A lot of supply chains had set up very robustly to be laser focused on cost. The service and delivery were always table stakes. There was always an expectation that you were going to be able to execute that. And then what really started to happen was, focusing on working capital metrics and cost kept small inventory pools close to where some of those organizations may exist. As those inventory pools became depleted, and as it became very challenging to bring goods in from overseas, or within the infrastructure in the Americas, we started to see real complexities in the supply chain and breakdowns. We saw layoffs with manufacturers.
The challenge to the semiconductor industry is a perfect example. There’s not very much access to the inventory. And when you do have access to that inventory, what’s the best way to mitigate that timeline to get it to your customer? The truth is there’s not one simple answer. And what we discovered was it made more sense for us to go back to our customers and their suppliers—and like we did with our partners on the carrier side—really understand where their gaps were and how we help solve for those gaps.
We did a couple different things. One, we implemented a Foreign Trade Zone, just after the section 301 tariffs went into place. So, we told some suppliers that we can hold inventory for longer periods of time, we can help customers, maybe they’re not even a customer of ours, but they’re a customer of yours that you’re going to export to, you can leverage our Foreign Trade Zone, we can help you with duty drawback, if necessary, but there’s things that we can do in order to get more access to inventory within the Americas.
The other thing we did was look at virtual inventory programs. We set up some of our other regions, the Asia and America and EMEA regions, and we had virtual inventories that were destined specifically for other regions. So, if something was manufactured in China, and we could get it to Singapore much quicker and have access to it, then we could ship it out of Singapore, we would do that rather than trying to bring it over to the Americas and run it through our supply chain here. Whatever was the quickest way to get that product to customers was what we were concerned with. There are cost implications to that, so clearly, you need finance and everybody else joined at the hip before making those decisions.
There was another thing we did that I thought was creative. We didn’t have access to infrastructure under the southern US border, and a lot of our customers manufacture in Mexico. So, we partnered with other providers who had the wherewithal, the capacity, the intellect, and the experience to help us. So, we would serve as an aggregator on the southern U.S. border. And again, knowing a customer has a challenge, we said, “We get that utilizing us for this may not be a singular solution. But if we bring all of your partner’s product in, we consolidate that for you, we ship that for you, you’ll save on costs, you’ll have a unique delivery experience, and you still be able to receive that inventory on time”.
That was a quick way for us to expand our footprint. It was a quicker way for us to expand our reach into an that continues to be very robust for us. A lot of customers took advantage of it, it was very good for our carrier partners, and it worked for us. We were able to reduce our entry costs and we were able to consolidate and get more traction in terms of cubic requirement, so it turned out to be a win-win. But it all started with talking specifically to those customers.
As Supply Chain professionals, we tend to assume what customers need and what customers want. But I can tell you having that dialogue, meeting face to face, and having somebody look at you, knowing that you’re the one responsible for delivering the product is very impactful. It works very well from a customer perspective, and it helps foster that longer-term relationship.
Quartz Network: As you’re putting these new strategies and processes in place with your partnerships and your customers, what does the future of supply chain look like? And how does automation play a role in that?
Mike Abrams: Although that chapter has yet to be written, if you’re not currently focused on automation, you’re already behind. And part of the issue is that everybody is now looking at their entire process from start to finish and trying to find the best way to augment their existing supply chain with automation. What’s important is to really look at the right automation for you and the right automation for your environment.
We used to calculate the ROI on automation on labor savings. How much labor are we going to save? If that’s the model you’re going to use today, you may not clear that hurdle. You may only use that automation to augment, not offset cost. If you’re in a market that doesn’t have labor availability, the automation is really just to take advantage of when we potentially have some downtime.
In one of our distribution centers, we do not operate 24/7. We have limited automation. It’s nowhere near as automated as our other facilities. But the goal wasn’t to replicate what we had in those other facilities. The goal was to look at this as a unique experience and what makes the most sense for us. What made the most sense for us was to find ways to leverage that downtime. So, if the building was going to be idle for X number of hours a day, we wanted to be able to look at automation that would enhance the timeline that we were actually in the building.
So, we partnered with an organization that could build us a golden pick zone that we can have automation replenished based on orders that are existing in your batching profile, so that when your people come in first thing in the morning, all they’re focused on is picking—that’s all they’re focused on. It was a great solution for us.
The other opportunity and advantage today is everything is as a service. So, the capital investment up front is not nearly as intensive as it was previously. You can use “robots as a service” as an example, which is one of the things that we looked at. That allows you to sign a shorter-term deal and not be so heavily invested in your capital. As we’ve seen over the course of the past three years, things have changed so dramatically, that if we’re tethered to a singular solution, that singular solution may not work for us three years down the road. It gives you an opportunity to reinvigorate your automation every few years and make sure it’s still the right solution for you without finance breathing down your back in regards to a massive capital investment.
Quartz Network: What do you believe are some of the key areas that supply chain professionals should focus on to prepare for this?
Mike Abrams: You need to be prepared for what is considered the unpreparable. It’s the preparedness around everything that may or may not happen. If you look at issues that impacted fuel, impacted access to meat, the Suez Canal—those are things that none of us would have probably thought would be an issue. But as supply chain professionals, we don’t have the luxury of using those as a reason for not performing.
My suggestion to supply chain professionals would be to look at your business continuity plan, or BCP, and ask yourself if it’s satisfactory. And the answer is probably, “No.” We’ve been so busy the past 15 months, I doubt anybody’s really given it a second look. But the truth of the matter is that there’s commonality amongst the BCP that—if it’s not specific to the issue you’re having today—at least gives you a framework to start from. Look at your IT systems. Look at your people. Look at your environmental conditions, geopolitical concerns, academics, etcetera. All these things prove to be problematic. But if you start with your BCP, and you realize that even though there may not be a direct impact to your business, the challenge that somebody else has in the supply chain will most likely migrate towards you in some form or another. Whether it’s poaching your employees because they’ve got challenges with their own resources. It’s just being in tune with everything else that’s transpiring outside of the four walls of your distribution center and being acutely aware of all of the conditions that are impacting the market. And having an action plan around that.
We often hear people say, “It is what it is right.” I don’t subscribe to that theory. Even though that may be the case. What that says to me is we’ve given up. It can’t be. We have to keep driving and drilling down to the next level. If we’re not paranoid about supply chain, if we’re not paranoid about the weather, for now paranoid about, you know what the federal government is doing or what local government is doing or who’s moving into your neighborhood, we’re doing it wrong. We have to be paranoid. That paranoia needs to be in the business continuity plan, and that business continuity plan needs to resonate with the balance of the organization so there is at least a common acceptance of what we’re going to do when this type of disaster strikes. And I think if we keep that level of paranoia up, it’ll allow us a fighting chance to be successful.
Quartz Network: Any final pieces of advice or lessons learned for other professionals out there?
Mike Abrams: I would say impart your knowledge. Those of us that have lived through these past three years are now very worldly and wisely experienced professionals. What I worry about is where the next level of folks come from. I’ll go back to what I said at the beginning, it’s all about partnership. For me, you’re partnering with your suppliers, your customers, your providers, and making sure you’ve got that holistic view, but then making sure to share the knowledge from the things you’ve been able to do successfully. Be the one that can translate that to folks who are junior in their career. If something works for you best practice, share it with your neighbor, even with a competitor. Because at the end of the day, we want to build that community so that if your BCP requires you to go outside of your own four walls, you’ve got those relationships out there that can help you in those times of need.
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