21 Aug Supply Chain Disruption Planning
Supply chain disruptions are a costly problem for businesses. Planning for it and proper supply chain disruption planning can save your business millions of dollars and hours in lost time and profits. Today’s guest has been helping companies properly mitigate supply chain risks with good supply chain disruption planning for many years.
In this week’s The Faces of Business Episode, our guest speaker was Patrick Ward. Patrick is the Managing Director at International Supply Chain Consulting. Moreover, he is also a Manager at Global Ocean Group. Patrick helps companies reduce their operational risk with proper supply chain disruption planning.
The conversation started with Damon asking Patrick about where he started his journey from. To this, Patrick said that in the beginning, he was mainly working in the domestic manufacturing field. In addition, he also set up packaging and balloon manufacturing from scratch. He even saw the company grow from a garage to a 70,000 square feet factory.
Furthermore, Damon asked Patrick about the supply chain disruption that he has observed. To this, Patrick said that they have seen a little disruption over the years, but nothing like the situation in the 1800s, where there was war all around.
Moving on, Patrick said that we have a very fragile supply chain these days. He said that even back in the War days, we didn’t see situations where people ran out of toilet paper. This is why manufacturers always have to prepare for supply chain disruption beforehand.
Adding to this, he also said that when it comes to costs, having a single source of things sounds nice in the supply chain. However, if a situation occurs where this single source dies down, what other solution do we have to stop the supply chain disruption? Therefore, it is always good to prepare for any circumstances.
After this, Patrick explained with an example of being prepared. He said that when the Covid-19 hit the world, people still had a few months before it came to their part of the world. Between these months, if everyone was prepared with a plan it would’ve been easier.
However, since no one was, it caused a major supply chain disruption in many sectors. Moreover, Patrick said that there are many ways you can stay prepared for the unforeseen circumstances ahead.
By the end of the conversation, Damon asked Patrick, if he saw a change in people’s behavior towards planning. To this, Patrick said that there is a willingness among the people. However, they are still facing a cultural change with the new ways, so it will take time for them to implement something like this.
The conversation ended with Damon thanking Roy for his time.
Patrick Ward is the Managing Director at International Supply Chain Consulting. At his company, he helps other companies establish their supply chains with a focus on consumer goods and mass-market retailers. Apart from this, he is also a Manager at Global Ocean Group. Before this, Patrick was an Overseas Sourcing and Manufacturing Leads at Minted.
He was also a Business Consultant at PDRW. Patrick is also the Co-Founder at NoMiddleMan. Moreover, he was also the Executive Vice President at NorthStar Balloons and a Commercial Real Estate Credit Analyst at FBOP Corporation.
As for his education, Patrick holds a BA in International Politics, Economics, and Spanish. Moreover, he has an MBA from the University of California.
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Supply Chain Disruption Planning
The Exit Your Way Business Round Table Live Stream
supply chain, business, people, companies, disruption, problem, risk, products, mass market, suppliers, lived, point, crop failure, major, talking, sell, months, price, patrick, choke points
Damon Pistulka, Patrick Ward
Damon Pistulka 00:06
All right, everyone. Welcome once again, this is Damon Pistulka with the phases of business, talking with interesting people about life and business. And with me today, I’ve got Patrick ward. Patrick, thanks for being here today. Thanks, Sam. It’s a pleasure. Yeah. So today with Patrick, we’re going to be talking about supply chain disruption planning. That’s a mouthful, first of all, but it’s something that’s hitting us squarely in the face, it seems like every day now.
Patrick Ward 00:36
Yeah, that’s certainly the case. And it’s something that I think that for probably about the last 40 years at least, hasn’t been signed, that we’ve really had to think a lot about, because things have been running pretty well.
Damon Pistulka 00:47
Yeah, that’s a great point, Pat. Patrick, it’s it really is, is that and we talked a little bit before we got on, and we’ll uncover some of that. But before we get into our topic for today, let’s go back aways and and talk about your background and how you really got into supply chain disruption planning because you know, that’s not like, it’s not super popular, first of all, but you’ve been in it a while, you’ve been doing a lot of different things with it. So just talk about it.
Patrick Ward 01:19
Yeah, so I actually started my event in in consumer packaged goods, CPG products, essentially, my entire professional career that started out on really on the manufacturing side domestically in the United States. And we were manufacturing, I was part of the group that started a packaging and balloon manufacturing operation from scratch in the US to the point of bolting machinery together.
And then, you know, we scaled from a garage activity into a full factory that was about 70,000 square feet, with extensive printing equipment, all the rest of that. So I saw that grow from nothing to where we had about 50 employees and had invested 10s of millions of dollars. And I touched everything there from as I mentioned, bolting things together all the way through doing sales internationally to major party goods and packaging companies around the world.
Damon Pistulka 02:15
Patrick Ward 02:16
Um, so I moved out of that, and I started a company importing furniture directly into the US for sale to consumers. And that got me out of just the manufacturing side of things into the sourcing and all the rest of the supply chain activities from managing other manufacturers all the way through to the logistics and delivery.
Damon Pistulka 02:40
Was that selling e commerce? Or was that selling through physical stores?
Patrick Ward 02:44
We’re doing e commerce. Yeah. That was a direct delivery model. So I saw furnitures a funny activity that it’s, there’s a reason that there’s not a whole lot of econ furniture on flat pack is a big deal that Yeah, the logistical side of that is extremely important, because the damage rates are so high. Yeah, and the actual shipping costs of moving furniture around are pretty, insanely high. Yeah. And there’s also I mentioned damage, so there’s a reverse logistics aspect of it, that I had no clue when we got into the business was going to be such a big part of it.
Yeah. So um, so I would say that that was a learned the hard way on e commerce and logistics, business activity, I eventually transitioned out of that into doing more consulting, and with a particular focus on helping companies establish their supply chains. And advance what as well, my ideal client, when I started the consulting business was somebody who just signed up a mass market retailer.
So somebody didn’t know how to do it. But they had a bright idea, and wanted to move into those larger companies, but really needs the help on how are we going to deliver millions of dollars worth of product that is properly packaged on time, has all the quality assurance has all the safety is properly labeled, all those things that you kind of don’t think about when you’re the creator who’s just sold something. So that’s what that’s what I would say my primary businesses during the time of COVID. Like most people, everything’s been hijacked by COVID.
And I’ve ended up doing similar work primarily for companies that are working with fortune 100 firms like companies that you would major companies you would have worked with, where they’ve had supply chain planning failures, and have really had to go out of their normal set of vendors to get those problems solves. Great example that I got is there’s an I’m not going to name names, but there’s a major company Many in the Bay Area that had in their slps in their manufacturing processes had specified pure L, like the brand PRL as the only acceptable solution for keeping your hand sanitized. Yeah. You may remember the pure l was suddenly on avail. Yeah,
Damon Pistulka 05:17
yeah, you couldn’t
Patrick Ward 05:18
get it for months. Exactly. So what it is that? Yeah, so he say, I gotta have PRL. There’s no PRL, you know, how are we going to square this, eventually, they of course, had to make an exception on the slps and go back out and solve the problem that way. But that’s a good example of where there was a supply chain failure with the traditional vendor. And that I think it might have been purely it may have been their reseller, but there was a supply chain failure there that required somebody to get in and sort the whole thing out and move forward.
That was outside of the scope of the not so much the scope of the supply chain activity, but the thinking of the supply chain team, that they didn’t really have a perspective on how to solve the problem, which is saying that I’ve seen all across a lot of companies have, we’ve always been doing it this way, or we don’t know what we’re doing. And they need a fresh set of eyes on a problem.
Damon Pistulka 06:11
Yeah, because it, there are things in your your background, a first of all, starting in a wide range of background, you have seen warehousing operations, you’ve seen manufacturing operations, and you’ve seen supply chain operations and how you have to deliver those things. As you said, Take a CPG products go into mass market retailers, most most people don’t have a clue what that means. Other than it’s Whoo, we got this big, you know, we’re going out into just for example, a target, you know, and they have no idea what the next steps are in that
Patrick Ward 06:49
exactly my wife and I actually thinking it was it would have been four COVID. But we were it was November, December, and we were walking through target. And we stopped in an area of the store that I’d been working on some of the products and there. And my wife turned to me and said, nobody in the store knows the sheer amount of work that it took to get this product to this location.
Damon Pistulka 07:12
Yeah, yeah, that’s exactly it. It’s in. So when you talk about that, and talk about your history and your background, and what you’ve done, you’ve had to figure some of these situations out. And let’s let’s back up a little bit and talk about and we’ll talk about more about helping in the mass market and supply chain disruption planning in a more normalized environment. But one of the things you touched on, when we first started here is we’ve lived largely in a period where there was lack of supply chain disruption. Can you explain a little bit more about what you mean there?
Patrick Ward 07:49
Yeah, so I, the way I can think about this is, in the era, since the end of World War Two, we’ve had relatively few disruptions on a national and a global scale. Yeah, I can say that we had an oil shock. And we’ve had, you know, the occasional crop failure here and there, but nothing on the scale of what you would have been used to living through, if you’d been born in say, 1840, where you would have seen several major wars across the entire world that you’d have seen, you know, multiple rounds of the dustbowl. A lot of stuff like that happen. And that a lot of that there’s a sense that that stopped happening around 1945.
So I use my father as an example, who was born in 1941. And for essentially his entire life, nothing major has gone wrong, that I think the biggest event that he can remember, was the 1964, Alaska earthquake, that was a big deal to him. Those sorts of shocks are kind of like par for the course, for people who are younger, where they’re saying, seeing that sort of thing on a regular basis. The other thing that’s happened during that period of time is, well, part of what the Cold War was keeping everything stable, our government was really, really concerned with making sure that the Western world works.
The other thing that happened was, we had the rise of China, but the Chinese government was also really concerned with making sure that China works for us as customers. So we’ve had two forces coming together to make life really easy for a lot of people and things of, for the most part for the backglass I don’t know, 80 years, really gotten a lot better for people and gotten a lot easier for people. And I see this as our first major disruption. A lot, you know, going forward into a new era where there’s gonna be less stability and we need to have this we need to be really be thinking about how we’re going to address this from a supply chain disruption planning standpoint.
Damon Pistulka 09:55
Yeah, yeah. And that’s interesting when you think about like, because yeah, there have been dead You know, the oil embargoes are but we’ve largely worked that out with with different sources and, you know, on their string things like you said crop failures, steel, whatever their Switzer 911 that would have been a big 911. That was a big thing for us. Even when you talk about Vietnam and golf or things like that, they’re obviously huge events, but they’re not global type World War One World War Two or COVID type events.
Patrick Ward 10:28
Yeah, nobody ran out of toilet paper or during the 2008. financial crash that was solved. Yeah. And there was always food.
Damon Pistulka 10:35
Yeah, yeah. Yeah. It’s interesting. And what that’s what’s that’s basically done then is from what you’re saying is, because there’s been a long period where there was lack of disruption, do you think that allowed us to create supply chains that were a lot more fragile than we should have?
Patrick Ward 10:56
Yeah, I really do think that was the case that we’ve really emphasized. We throw around words like, you know, Lean and Agile and Justin time, and all of those methodologies have a place, but what they’ve been really used to do is to cut costs.
And the lack of disruption has served to mask the amount of risk that was being brought into the supply chains by progressively cutting costs, that I feel like every week, there’s another sector of industry that I find out is essentially down to extreme geographic concentration. Or we’re down to single source, like single source suppliers or near misses on things. And that single source is great from the standpoint of controlling costs and getting the lowest possible price as a buyer, but single source carries an obvious risk that if it’s a single source, and that source goes down, what’s your plan?
Damon Pistulka 12:01
Yeah, yeah, that’s, I mean, both of those example, examples, extreme geographic conditions, you know, something could happen. Like, you know, there’s just tons of things that could happen to to really hose things up there, or the single source and I and I, I think the single source now is where a lot of people have really fallen off, especially as you look at year over year comfort with, we need to drive costs down.
And you go to bigger contracts with your suppliers, bigger contracts for fear suppliers, and then pretty soon you’re standing there, and we’ve only got one supplier, because we’ve gone, we’ve tried to cut costs and cut costs by going into bigger and bigger contracts with people. And then you’re you’re left in that situation.
Patrick Ward 12:49
Yep, you really are. And that’s fine if I only care about whatever the next period is, and nothing goes wrong. So but in the long run, you are of course, setting yourself up for a major problem.
Damon Pistulka 13:02
Yeah, yeah. Well, I think about things and goo and somewhat goofy things are, like, not thought about things like bananas. I mean, oh, bananas are great examples. You know, because it’s, they’re, they’re derived from one plant. And we’ve got a we’ve got something it’s attacking that plant now, and they don’t know what they’re gonna do to replace it.
Patrick Ward 13:24
Yep. And as I am not an expert on bananas, but not either, you know, read up about it, there is a real there’s a real risk that in the foreseeable future, the next 10 years, we’re not going to have banana says we understand bananas today. Yeah, this is just one type of banana that. I don’t know. And this is where I would go back to the banana producers and that of the entire supply chain that uses bananas, and be asking, what’s the plan? Got this?
You can see this coming. But what’s the plan? Are you going to substitute oranges and apples for bananas? You know, are you going to create a new banana an area of the world that is free of the pathogen? You know, what’s the plan, but you got to be thinking about it?
Damon Pistulka 14:11
Yeah. Yeah. Yeah. Cuz I mean, because as you said, and this is I think this is the key thing that you talked about two key things. One is cost cutting was adding risk. at each step. We are doing this and we didn’t really understand that risk. Yep. And when you combine that, and that provides gains for this period or the time we’re looking at, but it doesn’t really protect it doesn’t really consider the risk factor for the long term. That’s that’s one huge thing. Along with the fact that we’re living in we were living at a time of too long of uninterrupted supply chains.
Patrick Ward 14:55
And uninterrupted supply chains allows you to do two things. You can demand lower prices, because the perception of the risk is lower. And you know, as you mentioned earlier, not a lot of people are in supply chain. That’s because for a long time, it was just kind of a place where nothing was doing. So you didn’t have the best and the brightest going supply chain. They’re all off working Google somewhere doing marketing of some sort. Yeah. not focused on supply chain disruption planning.
Damon Pistulka 15:20
Yeah. Oh, you’re right. I mean, it was a year when you bring it there, when you bring it to light the way that you did, talking about how long we’ve lived in period of just relatively minor disruptions, real short period of time, disruptions, even you’ll you mentioned before we got on the hurricane or crop failure or something, but really in our environment.
Now a crop failure only means probably until that we go north, north or south southern hemisphere, because we have the other crop coming off in six months from now. So that’s, that’s about the barley drought. And and you know, the same thing kind of thing with a hurricane or something else. They’re just not that devastating on a on a large enough scale, that six months out, it’s gonna be a huge thing anymore.
Patrick Ward 16:07
Yeah. But unfortunately, and this is where geographic risk really comes into play is. Texas is the perfect example a hurricane hits the Gulf Coast, we have a major freeze, and another hurricane. And we’ve knocked out a lot of the high end petroleum processing in this world. So we’re out of all sorts of random products from PVC pipe to foam. Yeah, yeah. Had I thought about that.
No, I’m not doing a lot of foam sourcing. But if your primary business, let’s say you’re a, I don’t know, your Mattress Firm, that your primary business is selling mattresses that require foam, you should probably have a pretty good idea of where that foam is coming from, and what it means if there’s a major problem, and how you’re going to mitigate for that. But we’re just now come around to the idea that we have to think our way through these things, and come up with the plan to address the problem. However, you need to find the problem and how you need to find the solution. But we actually have to have a player.
Damon Pistulka 17:09
Yeah. And it’s a great example. I was I was talking to a friend of mine, actually on the show here I am on because he’s he’s been an injection molding for many years. He He’s a technical person for a plastics company that sells the little beads that turn into all the plastic stuff that we do. And they were he was talking about how that in in Texas, they’re screwed up that industry so bad. And now it’s bad enough that they came in and got a whatever, once every 250 year kinda freeze that went on or 500 year whatever, it was a horrible freeze for that area.
But then he said, You added the fact that COVID was preventing the workers from going in and working normal as they would in normal quarters, close quarters all that they had to, instead of just exacerbated the problem in significantly increased the time to come back online. Yep. So you make you make a great point is that what are what are the chances of a historically low temperatures for an extended period of time in the southern part of the United States along with a pandemic that we haven’t seen since? What the whatever 1900s when the fan in the early 1900s. And the Spanish flu is around?
Patrick Ward 18:34
and abstract that sounds like saying that? What are the chances? Well, the pandemic had been going on for a while. So you had at that point, I would if I would have recommended that leadership say this thing? Is it going anywhere. So we are in a different risk environment, and we need to recalibrate everything we’re doing. Because that happen.
At the same time that COVID showed up. It happened, what eight, you know, what, six, eight months after COVID showed up? Obviously, this is going to be a major problem. So I don’t obviously don’t know what the thought process was of all those companies in that supply chain. But at a certain point, it’s obvious that the risk has increased in this environment.
Damon Pistulka 19:18
You make a great point there. Because even if it’s not affecting you today, the fact that there is a problem should make us go back and should at least cause us to go back and think about where else can we find problems, see problems, because we’re now in a new situation. And it’s almost like I’ve always safe driving my car. But if I’m driving my car in this neighborhood that may not be quite as safe. Maybe I need to recalibrate the my thought process and I shouldn’t be rolling down a window or, you know, getting out of my car or whatever you want to call it. I’m just a horrible example. Probably But something like that.
Patrick Ward 20:01
So I think that’s a great example of as on a personal basis, it makes sense you have this is a sketchy neighborhood, maybe I don’t leave my briefcase sitting on the passenger seat. Yeah. You recalibrated your expectations of, well, not so much the expectation, but your perception of the odds that something bad is going to happen. There you go. Yeah. And, obviously, if I have my laptop, it probably shouldn’t leave it on the passenger seat anyway.
But um, I’m gonna be extra careful about that in certain areas versus another as a probably a lot less worried about a fancy shopping mall and be like, yeah, who cares? Right or wrong? That’s my perception. We should do the same thing on a, on a global, at least regional but not global scale. When we think about how to do business that we’ve got firefight, or fires going all over the western United States right now. So what does that really mean? Well, in Colorado, it means that I 70, and the railroad with it got washed out a couple of weeks ago.
So we’ve lost a major transportation corridor. We now know that that is a potential risk anywhere in the western United States. So anybody who’s listening to this, who’s moving stuff Via Rail or via truck, you should probably be looking at this and saying, is there a choke point in my transportation network? That if that choke point went down, it would have a serious impact on me? What does that mean to me? And my guess is that for a lot of people, the answer is going to be yes. And at a bare minimum, you need to be aware of that. It would be better if you had a plan to work around that. But you need to have have some basic understanding of the rest of the effects.
Damon Pistulka 21:48
That is a great piece of insight right there because I wrote it down. Because if you do have these choke points, it’s like, it’s like most things, your supply chain is a system like any others. And if you look at your choke points, identify them first, and then go back to those you’re not wandering around trying to find where you really need to look, you need to look at those points like that, that that are your choke points that this was unable to do, what is doing today?
Where are you? How is that going to affect? And where are those spots along with ace in this like saamy? guy, I got 10 different sources, I can do multiple ways, it really doesn’t matter. But when you get down to there is no way the way to do this, then that right there. Those are the ones where you can key in on.
Patrick Ward 22:39
Yeah, and I see a lot of this as kind of expanded common sense. There’s a lot of methodologies that we can use. Yeah, point of like, let’s rank the risk. Let’s decide the odds of this happening, and what’s the potential outcome? And what’s the financial impact of that. But it all comes back down to correctly identifying what the risks are in figuring out how you’re going to live within those constraints, whatever they may be.
And, you know, yeah, you said 10 suppliers. In my little town, just north of San Francisco, I’m gonna say they’re six separate grocery stores. So the odds of the town running out of water today on bottled water today are pretty slim. But I also know there’s only two ways in and out of town. So if we have an earthquake, the odds that we run out of bottled water are really, really, really high. Yeah, if I’m running my home as a business, I should be aware of that. And also, if I’m running a business in this town, I should be thinking about what that means to me, you in that way of thinking out to the whole world, and the rest of all the all the other things that touch you and our potential risks.
Damon Pistulka 23:52
When you make a good point is it’s not just if we’re talking about in business, but we should use this a bit in our personal lives as well, when we think about things because water is a great example. You know, if you don’t have water, it’s a that’s that’s problem becomes a problem very fast. So what are you so we talk about these problems now. But are you seeing people do anything?
Patrick Ward 24:21
I think that the willingness to think about doing things is there. But I think it’s I think we are in the midst of a we’re in the midst of a cultural change from the old way of doing things to actually dealing with doing things that I saw a lot of companies that I was working with vendors work with the companies over the last year where they accomplished a lot during the the immediate emergency of COVID.
And once that perception of emergency went away earlier this year, obviously it’s back in The old way of doing things reasserted itself, and kind of got people back to square one where they weren’t really prepared to address the fundamental issues. I’m guessing that this, this current Delta wave that we’re in, is probably going to shake things up a lot.
But I’m not yet seeing on a massive scale across all the people that I talked to a fundamental reevaluation of like, the way we’re doing things and why that’s hard, you know, that. You got to have a lot of willingness to be introspective, about yourself about your company, but agriculture to really address those things. And you know, there’s a lot of things people are doing in their lives and introspection isn’t saying the world particularly good at you know, I don’t I don’t like thinking about all the things that are wrong with me. It kind of sucks. Yeah. Do I want to do this every day?
Damon Pistulka 25:55
Yeah. Yeah, that’s a great point. And I think you’re right, I think that we we got, we all got tired of being kind of limited and what we could do, and when the when the light kind of started to turn back on, we were like, Oh, great. And just a big sigh of relief, and everybody rushes out. And it’s this is this is over in mostly because we’ve lived this long time without these kind of challenges. And, you know, for us, certainly never saw anything like this at this scale nearly closely by anybody’s measure in our lifetimes. And
Patrick Ward 26:34
to your question about, like, changing culture, I don’t think we’re there yet. My wife is a business continuity consultant, that she works for a major consulting firm doing that. And so she sees all the job postings to come through. And there’s a lot of people looking for a very junior person to do business continuity, you would think in the RF COVID. That would be senior job. But we’re not yet seeing the up leveling of the responsibility. That senior management in a lot of companies isn’t there yet. Wow.
Damon Pistulka 27:06
Yeah. Yeah. Yeah. This is, this is getting getting more interesting all the time. It’s getting a lot of time, because we have maybe this was a good wake up call. Maybe it wasn’t. But I just don’t, you just don’t know. And it certainly doesn’t seem and I’m not just talking about the fact that we read through the COVID are still in COVID. And all this good stuff, is talking about the fact that the odds are against us living without these things for as long as we did before. Oh, without a doubt there. Yeah.
When you talk about anything that people can disagree or agree on, or whatever, changing climate fires, war or geopolitical, you know, whatever you’re talking about, I mean, we we’ve been able to to live in a as you said, and I agree it’s a relatively undisturbed, huge, without undisturbed from huge overacting overarching things like a world war or something like that. And they I just, I just get, it’s kind of concerning that we aren’t having having more of the conversations around.
What are we really doing to work on work on and we’re talking about today, supply chain disruption planning , considering the fact that we’ve seen what we’ve seen over the last year, just over the last year and go, Okay, how much? How much? Did it really hurt your business over the last year? Because you couldn’t get product for for free for months, like you want out of the year? How much did it cost you because of that? How much did it cost you in the fact that you had stuff sole sourced out of one place in the world that couldn’t ship you product for five months?
Patrick Ward 28:54
or whatever, or it’s tied up in port right now? Because Yeah, you didn’t have your processes together to get it done sooner than last minute, which is what we’re saying at the moment.
Damon Pistulka 29:06
Yeah, yeah. And, and I was I had somebody on, I think, earlier this week, or last week, I have a few supply chain people on but he was mentioning that the price I was I was flabbergasted the price of container shipments from China to Long Beach. Because I mean, I grew up in the day where it was three $4,000 something like that to bring a container and now it’s it got up over $15,000 to do it. I was like, Holy moly. That’s
Patrick Ward 29:34
a lot. Yep. Yep. Certainly. I had the same experience when when I first started shipping things overseas. I just plugged in $4,000 Yeah, it might have been 3800 it might have been 4200. I didn’t know what it was gonna be at the end of the day, but I know it’s gonna be about $4,000 like, yeah, and it was really eye opening to get caught in this cycle of increased prices and Not being able to push that through. Because when you negotiate those things, when you’re putting these chains together, you think you’re going to solve for this much. And you know, that requires pricing to be here. Well, it’s ratcheting up on. Yeah.
Damon Pistulka 30:15
Yeah. And when you think about that, and you go, if I’m going to sell something into a mass mass market retailer, and I’m going to sell it for, just say, I’m going to sell for 10 bucks, and and on a container, a $10 item on a container, what do you think you can get $200,000 worth of that on a on a container package? I mean, not. Maybe it is what it is what it is, you know, it is exactly.
But if that if that price goes from 4000 to 15,000, or four, you know, goes up by $10,000. That’s a significant amount when you look at the overall margins on your product that you’re trying to do. Because at the other end, you don’t just go Okay, we’re going to we’re going to get to raise prices to you. Yep. And, again, back to something else that you you help people with in your, in your mass market, understanding what your mat and taking things to the mass market retailers understanding what the contracts really bind you to.
Patrick Ward 31:17
Yeah, and that’s actually a containerships are a great example of where you need to understand how your supply chain is going to work and what your options are. So let’s say that we’re selling things to Walmart. And this is a theoretical example, just to be clear that Yeah, yeah, Walmart has the ability to pick up things in most overseas locations, they also are going to take a given amount of stuff where you are going to provide the transit worldwide for Walmart. So let’s say you deliver it in Los Angeles instead of delivery in Shenzhen.
If you can get Walmart to take it overseas, you know, your transportation problem is false. You know, like, yeah, Walmart has the scale that they can either raise prices to they can control the prices, or they can keep that overall price level low. versus if I, you know, Patrick doing business as Patrick King, and getting 10 containers from overseas. I have no control, and I mercy in market. And that scenario on the price taker. So the question is, what can I do to lock in that price? The answer is very little, because the freight lines are just not honoring locked in pricing?
Or can I work with my vendor, it’s or not my vendor, my customer, so that they take it earlier on, so that I don’t get killed. And we continue to provide this solution to the final consumer. But yeah, I think that’s a great example, where you have to think back through what is really possible, and where you can make the changes. And it may be difficult and may require some difficult conversations, but get get those conversations going now get everybody attenuated to the idea that we’re gonna have to do something different. And don’t wait till it’s a failure. Well, yeah, there’s
Damon Pistulka 33:07
there’s been a lot of businesses have gone under in the last year and a half, because they haven’t dealt with it. And they, they just didn’t, didn’t already have the uncomfortable conversations with what they needed to do. So as we look forward in some of these things, I mean, some people would look at it and say, Hey, we just need inventory. Some people need whatever. So what are you thinking some of the things that we really need to do when we’re looking at? You know, I’m, I’m an OEM manufacturer in the middle United States, I’ve got global supply chain things coming from everywhere. I mean, what are some of the things that we really shouldn’t be doing?
Patrick Ward 33:44
Well, I look at it as a, there’s a procession of things that you should do, we’ve talked a lot about understanding your supply chain and understanding your risks. So that’s really like the top level item is if you do nothing else, at least dig into everything and make sure you understand your entire chain, you you go digging underneath, you know, the stuff over there, we’ve got three suppliers to make sure that they’re not sole sourcing from somebody else, so that you figure out where you actually have these reps. Number.
So once you’ve done the analysis, number two would be in my mind, you’ve got to process that and see what what is worth the investment. So you mentioned to we, you know, bring on more inventory. That’s kind of like down on my list of things to do that. I’d like to instead See, can we do something with our existing supply chain to reduce our overall risks that are we going to be late for because I do a lot with mass market. Are we going to be late for Christmas?
How can we not be late for Christmas? Well, we can stick with our design and production timelines so that we’re not shipping late. So that means going back through the entire business, and saying when we say we need to start developing for holiday 12 months in advance, actually getting it done, not waiting for six months and then rushing it and then asking supply chain to pick up the slack and everything. So think examining processes is probably number two.
And only after that, and when you’ve said we’ve tightened up our processes, this entire organization now understands what we need to do. Now we can have a discussion of do we bring on additional suppliers, we bring on excess inventory, and really looking at those as tactical mitigation responses rather than a primary way of doing things. So I’d rather tell you that you’re your business can run better today, by making sure your product design team actually designs on time. And yeah, these are going to be hard things to do. Nobody wants to be wrong about things. But making sure you hit those timelines upfront is going to be a lot better than missing Christmas.
Damon Pistulka 35:53
Yeah. And that’s a great point, because it’s just it’s like you said, we’ve been able to because there’s not been many disruptions, we can accelerate the supply chain, if we need to kind of gotten used to that. We have gotten used to that. So and that’s just not going to be the case.
I mean, it can because the example is like when they were stopping production of very popular automobile lines in the last because they couldn’t get ice chips, or other products, or, you know, major truck manufacturers is in one of my friends runs an up fitting company and a large, larger one on the West Coast here. And it’s they’re getting trucks delivered without the hardware to roll the windows up on the on the driver and passenger side. You know, and that’s going to be added later. But they don’t have it now. I mean, what were these people? I mean, what was
Patrick Ward 36:52
going on? Exactly what were they doing that? I thought a lot about that one? Because it’s such a major failure? Yeah. Okay. But I’ve got to believe that it comes back down to and we know that with the car companies, let’s be clear, they have as far as we’re concerned, all the money in the world. They have no, there’s not No. Yeah. of resources. Exactly. But I view that one fundamentally is a cultural thing, that if take on GM, if you worked for GM, you’re you’re used to your vendors, being super willing to do whatever they can to get your business.
You’re not used to Taiwan, semiconductor manufacturing being like, you guys cancelled your orders, and we sold it all to Apple, we don’t really care about you, you know that, that this is something where you you, again, in the overall strategic view of your supply chain, he didn’t understand where you really fit into that market, which was you’re a secondary or tertiary customer for that, that semiconductor line, not a primary customer where everything was going to be done for you.
Damon Pistulka 37:59
And when and when the overall capacity got shrunk back. The secondary and tertiary customers are the ones that paid the price.
Patrick Ward 38:08
Yep. Because the overall we had the disruption. Those we know in the with the auto guys, they didn’t all it was was they cancelled all their orders on the assumption they were just going to be able to turn it back on. And that capacity either went away permanently, or it was given to somebody else who do. I don’t let’s say Microsoft one more xboxes? Because, yeah, it’ll be at home. Well, you know, Microsoft got their first guys. That’s kind of cool. Yes,
Damon Pistulka 38:35
yeah. They took the capacity, and it wasn’t there for them to use. And the capacity had already leaned out to where W’s kind of changes are hard to ramp up. Yeah. It’s it’s just amazing to me. But now that you look at it, you go back and look at like you said, you know, we’ve lived for so long with relatively few long term supply chain disruptions that this is, you can see why it’s happened.
Patrick Ward 39:02
Oh, totally. And that with the semiconductor shortage for cars, that’s one where I view that as a failure of just in time manufacturing, that nothing happened for however many years, you know, we’d never had a problem. We were using more set more chips, there was never a problem. There’s always enough. And you could lean down your inventory of chips. They ended down laying it down and just in time was working.
But that lack of disruption masks to that underlying risk of what happens if, and you know, we got the F. Yeah. I’m sure that there were plenty of analyst calls with the Wall Street firms where they said Why are you guys holding so many chips? And you know, again, the pressure was to reduce the amount of inventory on hand. Yeah, so yeah, I can see both sides of this one. I still think it’s unacceptable, but I can see both sides.
Damon Pistulka 39:59
Yeah. Yeah, I mean, because it is it is. It is hard to comprehend. I mean, it’s hard to comprehend that an automotive company, any of them really, you can’t, can’t find, you’re not gonna be able to produce cars you’re gonna, you know, put that whole thing and into a standstill, because you can’t get a few of the items you need to get for that. Yep. And yeah, anyway, that that’s, that’s a it’s an example of and you said like you said before, to the the stuff in Houston with especially products and the freeze and the COVID. I mean, we’ve had so many things in the last in the last year, that that have combined together to really make this this interesting, if nothing else
Patrick Ward 40:48
for the outside. My hope is that people in these different industries, look at those people in small business as well and say, how, what can I do with my operations today? to at least have? I’m not even saying having a plan, just have a recognition of what the risk is that at least then you’re not snowing yourself?
Damon Pistulka 41:09
Yeah. Yeah. So you know, this is this is has it? We’re talking about big problems, big companies. Now, how are you seeing? Or do you? Do you get around, like local ish businesses and see the things that are happening with them that really, really change that too?
Patrick Ward 41:27
Yeah, with the local businesses, you there, it’s a harder sell. I view that as more of a design challenge than anything else, but it’s a harder sell to go back to you and say, Hey, you know, what you really need to do is I know, you’re always short on cash. So you got four employees, and you don’t know how you’re gonna make rent next month, but you know, you’ve really got to go do whatever that’s gonna cost you $100,000? Nobody?
Yeah, um, but a good example is I’m working with a company right now that is standing up a new seafood line, that they’re intending to ship from the East Coast into the Mountain West. And there, I feel like it can add a lot of value because we can, they’re going to have to pack seafood somewhere, right? It’s got to be packed and frozen. There’s an obvious risk of if your Packers refrigeration goes down, or do you going to do the mitigation is pretty simple. We just need to find another Packer.
But because we’re seeing that up front, this is going to be not costly. Versus the day that the primary Packer says, Sorry, we burned up yesterday, we know you got you know, seafood on the way, but we can’t do anything about it. That’s a major problem, the verses that we’ve already identified Plan B, that’s a relatively minor problem of just turning the truck in different direction. Yeah, local businesses, that’s really where I see that you have an opportunity in the design phase of your business, really figuring out what you’re going to what you’re going to do and how you’re going to be doing.
Damon Pistulka 42:59
Yeah, that’s a great example. Because it is, when you’re thinking about it in the beginning, thinking again, those points where you could have problems and working through that it’s a lot less costly than it is when you’re dealing with it at the end.
Patrick Ward 43:13
Yep. You know, it’s a classic, you know? Well, you know, ounce of prevention is worth a pound of cure that, yeah, if we can do that up front. And this, this really starts on the small scale and works up. If we can design more resilient systems, or at least be aware of our faults, then we’re going to be in a lot better shape.
Damon Pistulka 43:33
Yeah, yeah. Good stuff. I just, it’s so fascinating to me. When you look at the perspective that you outlined, you know, we’ve lived in this time without disruption, the lien and the other things have allowed us to to be kind of lulled into the fact that we’re increasing risk by reducing inventory and sole sourcing and, and getting really focused geographically on our sources from a product. What are some of the things that that you think we’re gonna see five years from now that?
Patrick Ward 44:11
That’s a great question, I think we’re gonna see a lot of emphasis on companies being scrappier and able to stand up their own supply chains in locations, they haven’t been doing it before, whether or not that’s domestically or in areas like the Americas where we’re not doing as much manufacturing as you might think we’re doing that’s going to require that we bring a lot more resources in house versus just outsourcing everything to a supplier in China who can kind of do the whole thing for us.
That’s been the way we’ve been doing things. And I don’t, I don’t think that model is going to be considered acceptable going forward. I do think we’re going to see higher prices as a result. And frankly, I think that we should see higher prices that are lower or lower. Prices are, you know, it’s like cheap, empty calories. That feels good right now, but we pay a price later.
Damon Pistulka 45:07
Yeah, yeah, I’ve thought that for a number of years is that we are we’re living in a false sense of reality with our pricing. And, and we, I mean, I think that’s across the board, I think it’s energy, I think it’s products, I think it’s everything. We’re not, we’re not gonna, we’re gonna have to come and pay the price sooner or later. And I think you’re right, because when you look at the way a company is set up, it’s not gonna be as simple to just go, Okay. Take Boeing, for example.
And I don’t know, so someone says, I’m wrong, I’m wrong. But you know, the the fuselage is designed and manufactured by somebody else, the wings designed and manufactured by somebody else. You know, Boeing lays out the designs and stuff to a certain extent, but how much they do compared to somebody else. Like you’re saying, and Mike more that might have to be in house, because then we can specify what we want, that can go to six different places and get done. And we may have to do some more of it ourselves. Yeah.
Patrick Ward 46:05
And I think God’s a good example, that all the things get outsourced and going there. If I were going, I’d be looking at the world saying what of our core competencies should be understanding our entire manufacturing process, not just between design and the plane marketing, but manufacturing planes is really what we do we better understand how these things are manufactured. Yeah, yeah, it’s gonna be a shock when you find out that we can design air conditioning to save our lives, or whatever it is.
Damon Pistulka 46:35
Yeah. Yeah. Yeah, it’s good stuff. It’s really interesting, because I think we’re at a crossroads here. And I think we’re going to be a lot of exciting stuff in your world and supply chain disruption planning, and really figuring some things out and, and causes us to rethink to I mean, it’s it is going to make make some companies rethink, because if you look at loss opportunity, because of the supply chain disruption, and what that really cost, I think we’re gonna see a lot more if nothing else, if we see more do duplicate suppliers, or rather than sole source suppliers and things like that, that will help us a lot.
Yeah. And, and as you said, Get it out of the same geographic zone and those kinds of things that could really make a difference. Yep.
Patrick Ward 47:18
Yeah, one. I don’t know how that’s going to play out. But I know that the pressure is, is going to be on to get that done, that there’s just no way that we can continue to operate with you know, what’s going on right now. So,
Damon Pistulka 47:34
yeah, yeah, it’s good stuff. Well, we have one more thing we got we got Peter stepped in for said said, excellent discussion. Thanks for listening, Peter. Thanks, man. Appreciate that. Yeah. But Patrick, it was awesome having you on today. Because this this kind of stuff. You know, as you said, This usually just happens in the background.
We’re sitting here going, Yeah, the products show up, we get, you know, in manufacturing, and retail and all this. And we work on all these little details around the outside. But this has really given us some challenges that are kind of caused us to rethink the way we source products around the world around the corner. And and how we run our businesses. Yep.
Patrick Ward 48:17
Yeah. David, I really appreciate the conversation that it’s, it’s, uh, it’s gonna sound funny. It’s good to be heard on these things that a lot of people like, you know, I started explaining this like, we What are you talking about? Man, this is gonna suck.
Damon Pistulka 48:31
So, yeah, yeah. Yeah. Good stuff.
Damon Pistulka 48:35
if someone wants to get a hold of you, what’s the best way to get ahold of you?
Patrick Ward 48:38
Um, well, you can reach out to me obviously on LinkedIn, Patrick board, or you can reach out to me directly at my email, Patrick dot Ward at is c dash ma.com. It’s called international supply consulting. And the website is ISC dash na.com.
Damon Pistulka 48:58
Awesome. Awesome. Well, Patrick, thanks so much for being here today. Thanks, everyone, for listening to faces a business. We appreciate you. We love your input. And we hope you’re going to be back again next week with us. Oh, no. Next week, I am taking a summer break. It’s awesome. We’re going to enjoy a little August time off and we will be back the following week after that with some more guests talking about interesting things in life and business. Thanks so much. Thank you