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Supply chain and logistics issues seem to be everywhere this fall, and executives at publicly traded manufacturing companies in southeastern Wisconsin received their share of questions about how their teams were dealing with them during recent analyst calls.
Ken Bockhorst, chief executive officer of Brown Deer-based Badger Meter, said it might be mentioned a record number of times during his company’s earnings call. Todd Adams, chairman, president and CEO of Milwaukee-based Zurn said, while there were issues during the quarter, he wouldn’t break out the harmonica to play the supply chain blues.
While the executives at larger public companies are the ones being asked about supply chain, it is an even more acute issue for smaller manufacturers. In a recent Wisconsin Center for Manufacturing and Productivity survey, cost and availability of materials were the top two issues of concern for companies with fewer than 50 employees or less than $5 million in revenue. Finding and keeping employees were the top two issues for larger companies.
“Supply chain has jumped up now and joined workforce as the two predominant issues facing manufacturers across the state, and they really are intertwined,” Buckley Brinkman, chief executive officer of WCMP, said on a recent episode of the BizTimes MKE Podcast.
Bockhorst and Adams were among those crediting their teams with managing through supply chain disruptions during the quarter. Bockhorst said Badger Meter’s teams worked with customers to manage priorities and expectations, redesigned parts to provide sourcing flexibility and continually managed logistics to maximize customer deliveries.
“The breadth of these challenges is greater than what we’ve experienced previously, but the playbook for addressing them is not new,” said Bockhorst.
Executives often compared the supply chain issues to whack-a-mole or putting out a different fire every day.
Adams said about 50 of the 900 containers that Zurn, which was previously known as Rexnord, planned to import during the quarter were delayed in arriving. Some of the delays were due to COVID-19 shutting down ports in Asia and half were delayed in being picked up at U.S. ports by a shortage of drivers or trailers.
“The good news is it’s not a labor shortage at Zurn, it’s not a product supply base performance issue, it’s not a component availability issue, … it’s the compounding impact of a whole lot of things colliding,” Adams said, describing the issue as a “logistics knot” that has to be untangled.
Adams said the company had previously made a conscious decision to eliminate the risk of having too much of its supply chain in China by onshoring and seeking a global network of suppliers with redundant capabilities.
He also said supply chain can be addressed in product design, pointing to one of Zurn’s offerings that weighs 75% less than its competitor. Less weight means fewer materials, which means a lower price and the chance to save on freight.
Racine-based Twin Disc saw its own freight challenges. CEO John Batten said the time it takes for a container to reach the U.S. from India had been six weeks but basically doubled in the past few quarters. The components are generally cheaper from India, but Twin Disc can get them in the U.S.
Batten said there are capacity constraints, so the company may get 80% of what it wants from a supplier.
“The big thing that we’re focusing on, though, is making sure that we’re all on the same page so that the 80% that we’re asking for the bearings … is going to be the same 80% that we’re giving as a priority list to a foundry or a casting supplier,” he said.
Glendale-based Strattec Security Corp., a maker of automotive locks and vehicle access systems, found itself at the heart of the supply chain challenges. Its customers, giant car makers like Ford, GM and Chrysler, shut down production amid a shortage of semiconductors. At one point in September, GM had 10 of 16 North American plants shut down.
Instead of shutting down its operations too, Strattec used the down time to build inventory and improve the productivity of its plants.
Frank Krejci, president and CEO of Strattec, said that many times new equipment purchases don’t get set up in the ideal spot on the factory floor because of the pressures of day-to-day production.
“You do that over and over again over a 10- or 20-year period, pretty soon you’ve got a bunch of things that (are) OK but not optimized,” he said.
Using customer shutdowns to focus on its own operations allowed Strattec to tackle projects in a month that might have taken a year with production running.
“It’s also got our people excited because they’re seeing some of the benefits of this, so as we’re making changes, now they’re coming up with additional ideas,” Krejci said.
Supply chain lessons
- Manage customer expectations and priorities.
- Ensure alignment in supplier deliveries where possible.
- Use forced downtime to invest in your productivity.