Between the pandemic, blocks in the Suez Canal and major shortages of key electronic components, there’s a continual list of supply chain issues businesses must contend with.
Quartz Network Executive Correspondent Britt Erler sat down with Susan Johnson, EVP of Global Connections and Supply Chain at AT&T to discuss their supply chain and sourcing strategies along with technological advancements that have helped the company persevere.
Susan shares ways to:
- Utilize technology to identify choke points and get ahead of the next disruption
- Focus on de-risking the supply chain to avoid shortages and encourage diversity
- Work with suppliers to gain trust and gather intelligence
Quartz Network: Can you talk a little bit more about your role within AT&T and a bit about AT&T’s broader overall strategy?
Susan Johnson: Over the past several years, AT&T has grown into a modern media company. It’s brought together a unique blend of assets. We serve our customers with an awesome mobile network and high-speed fiber access, and we serve all our global customers on the enterprise level.
Then across Warner Media, we deliver premium content, which is the HBO Max platform, but also other platforms such as Turner Broadcasting and CNN, just to name a few. All of that comes down to the importance of connections and the strength of our network. Pretty significant investments.
My team comes in to try to drive both the efficiency of how we deliver products and services at stores and field technicians, which is my logistics operations with a nationwide distribution network.
Then, I have a sourcing team that manages our spend on an annual basis. My team does all the global infrastructure interconnection, so global roaming, as well as access to serve our customers. Our goal is to support that industry-leading cost structure, which is so important as we’re looking to grow customers in this ruthlessly competitive industry that we call home for AT&T.
Quartz Network: Is there a downside to supplier diversification?
Susan Johnson: One of the things I’ve learned in my job is sometimes we can be penny wise and pound foolish, to use an old adage. I can have one small component that I’m short on and I have a whole bunch of inventory that we can’t even ship out to the field because it’s irrelevant. I need that one component. So that thoughtful thinking about how we are de-risking the supply chain and where we need to build up higher inventory and buffer stock is really important. It’s one we’re spending a lot of time on right now.
Just given all the shortages, I can imagine that many of the people, like me, are pulling their hair out about some of the craziness with resin shortages and wood shortages. Of course, we’re going to talk about chip shortages. It’s an interesting time.
So de-risking is the message I’m sending to most of my suppliers. Let’s think through where there are component shortages. Let’s think through where we have lack of diversity. And how do we think about getting smarter to make sure that, at AT&T, we’re still getting our customers the services and supplies and devices we need and that we’re making our build.
Quartz Network: Has the shortage of semiconductors impacted AT&T? If so, what have been some contingency plans that you continue to work towards?
Susan Johnson: Out of all the shortages I’m dealing with, this is the one I’m most concerned about. I’m most concerned because we live with shortages in supply chains. It’s what we all do. The last couple years between terrorists and bankruptcies of shipping conglomerates and Suez Canal shut down. We can all tell so many hair-raising tales.
I’m most concerned about the chips shortage right now, because I don’t think there’s going to be a short-term fix. It is a long-term structural issue. For AT&T, we are building networks that are heavily reliant on semiconductors. We are obviously working hard to better understand how we can get out in front of this, but it’s affecting the whole industry. Apple has announced that it is affecting them and their ability to deliver their products. Samsung is also trying to rebalance the chips in the right products to sell.
If you take a look at this problem, it’s much more long term in nature. Building a foundry is such a complex process. It’s not like you and I can agree we need more capacity, go out, and fix the problem in eight months, It’s more of a three-year lead time.
We talked about the importance of diversity, about 70% of the chips that we are all using to work and live from home come from two primary suppliers, TSMC and Samsung. The vast majority of the higher end chips are all coming from one country, Taiwan.
So I am hopeful that we’re going to get the best minds thinking about how to solve this problem. There’s a lot of work going on at the White House. There’s a lot of work going on with the Commerce Secretary that is trying to stimulate some answers to this.
Then, we’ve seen big announcements of new investments from Samsung and TSMC, just to name a few. But from an AT&T standpoint, we are very focused on this right now. We are working on doing much better forecasting for a lot of the areas of business. At AT&T we were used to saying, “Okay, here’s my quarterly forecast. Here’s my next quarter forecast.”
We’re not doing that anymore. I’m looking at 50-week lead times for some of the chips we buy. We’ve got to work with our internal clients to let them know that we’ve got to be thoughtful about longer-term planning.
We’re also working to be smarter about chips. Some of the chips, particularly those are the 200-millimeter wafers, are the ones that are most constrained. So, in some cases, can we swap products? Can we do the engineering qualifications of different sets of chips to try to get out in front of it? So, a lot of better planning, a lot of collaboration with the chip manufacturers, and a lot of better collaboration with our supply chain.
We need to get more focused on solving the longer-term problems of supply chains per chips to make sure with the level of investment that is required to get under this. I’m hearing many forecasts in the trillions of dollars. Given the demand that is increasing so rapidly, ideally, we’d spend that money to try and fix the underlying supply chain problems, and make sure that we’ve got more flexibility and more redundancy from a geographic standpoint in the overall supply chain.
Quartz Network: What technology is most effective to manage your supply chain?
Susan Johnson: We’ve recently launched a new platform under the guise of Don’t Waste a Crisis. We launched this platform to try to get under this visibility intelligence of our supply chain. It is helping give us better insights into where our suppliers manufacture, and even where their suppliers are manufacturing critical components.
There’s lots of platforms out there. The one we’re using right now is Resilinc. I am sitting down with many of my suppliers saying, “We need more trust in the industry. I need this data from you not because I’m going to start going to your subcomponents suppliers and cutting you out.”
There’s got to be this element of trust. I think we would all benefit from more trust across the industry and the sharing of information. So not only does this type of intelligence help us better understand the geographical risk, but it also helps us with something that we’re looking at now called Peer Benchmarking. I can look into our supply chain and identify certain regions where we have significantly lower or higher density than our peer group that we’re comparing ourselves to.
It has also helped us with some fascinating data on critical choke points. So as an example, we all spend a lot of time focusing on our Tier One suppliers. When we put all the data out there from our suppliers and their suppliers, we became aware that we had one single upstream supplier making power cables. We were single threaded on power cables, so no visibility on it. It’s not a critical component, but do I want to be single threaded on something as important as power cables?
We’ve learned a lot from the intelligence this tool is giving us. I think all of this information is going to make us smarter for the next pandemic, lockdown, or fire. I also think that the opportunities with machine learning and automation are really fantastic. We are trying to infuse more of those smarter capabilities to help us to be more proactive rather than reactive.
For example, we’re using more machine learning into the way we’re forecasting to give us better insights to how well we forecast versus the history of our data. But also for us to understand if you’re forecasting only six weeks out, and there’s a constraint on that, you’re going to have to forecast further out. So how can we get more proactive through thinking about our forecasting?
Another example I use on just better intelligence is we take a lot of these devices back from our customers that are coming back from warranty turn in or buyer’s remorse. We take lots of those devices back. We can use more automation to check the quality of the device so we can figure out where it is in terms of value, what needs to be fixed, if it’s going to be auctioned off then what we can expect in terms of auction value. All of that is making us more efficient. Helping my team spend time at some of the higher value add things where we need their brains working.
Across the board, we’re really focused on automation and bots. I’ve asked my team, “If you’re doing something that you think can be automated, raise your hand.” I’m sick of doing this Excel spreadsheet to Excel spreadsheet thing. The opportunity is there across many organizations to start investing in simple things that really make life easier.
For more industry best practices and insights from leading supply chain executives like Susan, join Quartz Network.