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I recently interviewed Kathy Bornheimer who discussed small manufacturing innovation with a Wisconsin perspective. What Kathy is seeing right now in Milwaukee Wisconsin is that the larger companies are still doing the laying off and the smaller companies need a work force. Sometimes there is a disconnect. Wisconsin has the advantage of diversity in manufacturing. Kathy likes to say that “as long as people are eating, drinking and going to the bathroom there will be manufacturing in Wisconsin because of what we do up here.” The suppliers of the large organizations are also still predominant.


Kathy loves the world of business, engineering and manufacturing. It is really a true reality TV because it is full of suspense and intrigue. You just need to keep your wits about you to stay ahead of the pack. In summary, Kathy has seen the world from the outside and the inside.


Small manufacturers really are the backbone of the US economy


Kathy really believes small manufacturers are the backbone of the US economy and she takes that phrase to heart. A lot of politicians use the phrase but don’t really understand what it means. Small organizations have the flexibility, they can change quicker, and hopefully they have smart people at the leadership.


The global economy is going through cycles. There was the big push for offshore outsourcing. You had Wisconsin, Minnesota and Michigan referred to as the ‘rust belt’ because it was very heavy metals manufacturing. Everything went offshore and Kathy thinks it went too far, resulting in the need to bring things back to the United States. It has to do with the cost of logistics, transportation, shipping and quality. How much control do you really have with quality? The small organizations have greater control because they have fewer layers and more people involved, versus technology and machines. They also have more direct contact with the customer and they can change with the customer more quickly, as long as the customer is reasonable.


We went from an agrarian society, to an industrial economy and then we tried to go service. In one of the group discussions for manufacturers which Kathy has been involved with she quoted the now retired CEO of Allen Edmonds Shoes; “We have to make something”. We as a society, culture and country cannot succeed or survive being a service provider economy. We have to make something and we still do. Allen Edmons Shoes is still in Wisconsin. They are one of the few shoe manufactures that actually has a difficult time finding people out on the floor because it is a dying art. A lot of the small manufacturers can take advantage of the mistakes of the larger companies. They can try to find the people who know the technology and procedures.


Several years ago Kathy did an assignment for a retained recruiter for a senior processing engineer who was well versed in zinc and aluminum die casting. Being a retained recruiter he was not used to going to the bowels of the company and finding this type of person. Kathy was able to figure out how to do it because it had become a dying art. It was in the luxury automotive. They were moving from plastics for automotive trim back to zinc and aluminum trim. They couldn’t find people who remembered or knew how to do it.


The small manufactures have an advantage over the bigger companies and they will be hiring before the larger companies do. If the small company is smart they will be able to find the right people.


Becoming more competitive


Small US manufacturers can become more competitive by learning from the big guy’s mistakes and don’t’ repeat them. You also have to be mindful you don’t have the money or resources. We are talking about the type of technology used, the machines, systems, processes and more importantly the people. Look at your job function and what you are doing for a living. Make sure you are doing something where technology is enhancing your ability and not replacing you.


Kathy has done some workshops for computer programmers. The recurring theme was that ‘what technology giveth, technology taketh away’. Some of them realized they had created the technology which replaced them!


When it comes to manufacturing from the 80s, 90s and 2000s; there were fewer people on the floor. When she did plant tours there were fewer people on the floor producing products and more people in the other part of the business. It used to be it was more intensive with people on the floor. You can’t just have a machine operator. You need a machinist who can program, troubleshoot, repair and operate. What small employers have to do is become more creative in the people, not just the systems.


We also now have 2 generations of a workforce who have not gone into manufacturing and the skilled trades; they have been discouraged from doing it partly because they saw what happened to their fathers and increasingly their mothers who after spending 20-25 years got laid off.


In Wisconsin the mistakenly had directed the young people towards the bachelors degree and not the skilled trades or 2 year associates degree. As a small employer, you have to start developing collaborations and alliances at the high school level. In the Milwaukee are there is an organization called ‘Second Chance Partners’. The organization is actually employers partnering with high schools because we have a population of high school students who are not going to get their high school diploma the traditional way, it just isn’t going to happen. We are not just going to throw them away.


These companies are actually providing education geared towards manufacturing. The students actually can do math, they can read and do blueprints. They also learn how to function since they are working while they get their high school diploma, not a GED. This program was started by Generac, which is a sizeable manufacturer of generators and power systems. Now other smaller companies are also part of Second Chance Partners.


These are the types of things that the small manufacturers can do without the big name or money, because they don’t have either one. Kathy knows what it is like to recruit for a company which no one has ever heard of, versus being able to throw out a big name. Yet, she still had to find the same level of person. They just need to get more creative and people oriented with partnerships, and collaboration combining with each other where they are not in competition but collaboration. Instead of re-inventing the wheel all of the time, get people to help you. Engineers are fantastic. Manufacturing people understand make versus buy.


Let’s apply the make versus buy to everything that you do to be more competitive.


Concluding advice to smaller US manufacturers


Kathy thinks you need to ask yourself how much of a risk taker and visionary you are. You need to ask you can do things differently. One of Kathy’s colleagues and friends Bob Gross, is the founder and owner of Gross Automation. He has won a few awards over the last few years in Milwaukee for his innovation and success. He was interviewed in a local business publication where he said he was not going to follow the pack. He did things differently. He values his workforce and employs roughly 25-27 people.


Bob is a BSEE, yet he doesn’t sit there designing. He is a people person and he uses the technical background for his organization. Bob started from scratch and he is doing things differently. He teaches people in the equation.


It starts with leadership, what are we doing, how are we doing it, how will we be better than our competition, how will we satisfy our customers and how do we do it with people?


About Kathy Bornheimer



Kathy Bornheimer has a varied background from over a 30 year time period. She actually had 4 careers where she worked her way to where she is now as an employment specialist. She has had 4 careers and 4 different employers over 30 years. Kathy also had the advantage of working for 2 startup companies. As such she has been able to see the life cycle of an organization at a much faster pace. With small organizations, of which all of Kathy’s employers have been, you as the employee have a greater impact on what happens in that company. What happens in that company also has a greater impact on you as an employee. The employee has the opportunity to actually experience all of these things.


Kathy cut her teeth in engineering and manufacturing as a recruiter; a ‘contingency headhunter’. She wears that as a badge of honor because if you can make it as a contingency headhunter you know what you are doing. You have to do things quickly and correctly, otherwise you don’t get a fee and you don’t get paid. She has essentially worked straight commission or self employment during her entire career. As a result Kathy has an outcomes based compensation, which small companies also are as a whole.


In the late 1980s she entered recruiting in engineering and manufacturing, primarily in Wisconsin and the Midwest. She did have some larger clients such as Rockwell or a Manpower type of environment where she supported the Siemens power in Milwaukee. However, most of Kathy’s clients were small manufacturing companies.


In the late 1990s she transferred to information technology, but her first love has always been engineering and manufacturing because she seems to connect with those people better. She started off on her own so that she could do it her way. Kathy double dipped in career and recruitment on a contract basis. She charged by the hour and found companies more receptive to her advice and her procedures more when paid by the hour, versus contingency. They gave her more as a consultant and it just worked out better.





Career and Employment Specialist,

"friend" of the Job Forum/40+SE WI,

Speaker on dealing with Satisfying Employment

Kathy's LinkedIn Profile

I recently interviewed Kwame Varga, a freelance supply chain consultant who just finished an organic food supply chain project. Kwame’s project involved helping a start-up natural foods distribution company. What they saw was that from initial launches to going nation-wide provided several challenges. Expiration date is one of the biggest constraints when dealing with very perishable products and with new vendors that have new organic products.



If you are trying to find the next great food product and your product is very perishable (2 to 4 weeks of shelf life) and you need to buy the product from your vendor, it becomes very delicate because as soon as you start to sell across the country you lose a week of time in delivery. Unless your forecast is very good and you have good market knowledge, any part of the product which goes bad you will need to buy back. This could be 50% or more of your product. This eats into your margins and can become almost loss making.


Kwame realized that when working with a company such as a Whole Foods it is good to start very local. Once you have a good local footing in place and have picked products that have local reach with a shelf life of less than 3 weeks you can then look at finding products with longer shelf lives of 5 to 6 weeks and start making selling them nation-wide or regional. You want to make sure you have enough shelf life so that your product will sell out, given the amount you buy.


Also, what was very noticeable in this project was vendor management and forecasting. A lot of the small producers don’t really understand their own capacity. They don’t understand their own supply chains. You almost have to go out and help them build their businesses so that you can maintain adequate supply. You will be stuck if you find a product that works adequately well but your vendor can’t get it to you because they don’t have control over their processes.


You can have product in a market selling fantastically but you may have to wait two months in order to get the product because your vendor did not bother to fully understand their supply.


Kwame also recommends to work on consignments. If you have a new vendor that wants to try to test the market and you have a name brand or capital behind your company and what you are doing, then work with your vendor by saying “we are happy to carry your product and are happy to move it to new markets, but the financial impact of getting it there and keeping it on the shelves will either be split or we are going to pay for the product only when it goes through the register”.


In essence the distribution company doesn’t take on the risk of having a lot of having to buy product back. This comes with the negotiations you have up front with your vendors and partners.




The challenge was trying to get the vendors to understand how to really understand their own supply chain. For example, Kwame was working with one vendor who makes natural juices. There was a carrot shortage this year. The vendor didn’t look at alternative sourcing for carrots. They were getting carrots from a few places locally. They could have gotten carrots from out of state. However, they really didn’t have back up supply chain plans. The vendors needed to learn how to understand and qualify a back-up supply route for product in case a provider could not supply when needed. Many vendors simply stick to one person or group and hope for the best. They do not engineer for potential hiccups in their supply chain.


Work more on consignments. Products that are perishable don’t travel very far, especially from young vendors. Work with the vendors you have in place to make sure their supply chain processes are working very well. Otherwise, you stand to lose sales by a lack of available product.


The future of organic food distribution is local. Anything that is perishable is local. Things such as salsa or tofu based products have a shelf life of 2 weeks. If you lose a week in transit time you are doing yourself a disservice. Food should be grown local and be ready to be consumed locally.


About Kwame Varga


Varga.jpgKwame Varga is a freelance supply chain management consultant. His background includes doing business process engineering for a mid-tier ERP firm based out of Budapest Hungary, with projects in Argentina, Switzerland, Croatia, Russia and more. He then did an MBA and was hired by Johnson & Johnson in Europe to re-design their pharma supply chain and to pilot their inventory management, S&OP and forecast management processes. Kwame then became involved in a global re-organization for a global pharmaceutical supply chain. This took him to Russia where he built the Johnson & Johnson Russia supply chain. After that Kwame became a freelance supply chain consultant.


LinkedIn Profile

I interviewed Jeff Boudreau who discussed how to improve the supply chain without a captial budget.



We are a professional services firm, and we provide supply chain consulting, labor management and sustainable operations services for companies, primarily with labor-intense operations or complex supply chains. I think that traditionally executives look for strategy, process and technology to improve their supply chain. Oftentimes there might be a software, technology, or hardware piece behind that. Therefore, they try to project in their budgets for the following year what they might need and what they anticipate spending. What we have seen this year and what we have heard pretty much across many industries is that there are no capital budgets left for this year. They’ve been capped, or in more cases than not, they have just been cut off. As a result, we are finding executives have operating budgets, but they have no Cap X budget to spend or invest in new upgrades for their supply chain.



However, at the same time we are seeing, coincidentally with the downturn in the market, that supersizing has slowed down. This is really a year to pause, breathe and catch up. Now they can optimize their supply chain rather than supersize their supply chain.



Without this capital budget, we are seeing a couple things. We are seeing that initiatives are getting elevated to get approval. In the past a vice president could approve a project. Now it is getting elevated to a senior vice president, an executive vice president or perhaps even the CFO. We are certainly seeing a lot more active CFO involvement even in modest initiatives.



The second thing we are seeing is that there is almost no spending on new technology. During the past few years of rapid growth on the other hand, there had been so much spending on new technology and there was tight timeframes to get it in and working. There has been a massive overlook in getting these technologies and processes optimized. As a result, we are seeing that it is now time to optimize and not supersize.



The third thing that we are seeing is that CFOs are being very receptive to schedule an initiative or a new supply chain improvement to become funded directly from existing operating budgets. A few examples for that might be that they have a ten-million-dollar annual labor budget. They can get a performance improvement project started that might include some software, some engineering, some training and performance management. All of that would need to be funded right out of that labor budget. Therefore, it takes a little different tack on how they go about doing this, where month-by-month cash flow, the savings, are matching or achieving the expenditures to get the project done. This can happen in labor and transportation. Alternatively, they can optimize processes around transportation, they can negotiate their transportation rates again even if they have just done it. We are now seeing increased use of outside professionals to help negotiate transportation rates.



A fourth thing is inventory. Actually, I think the U.S. has done almost too good of a job here, where they have done massive productions and inventory positions, freeing up all kinds of capital, really creating an instant line of credit. However, it is almost at a risk of destroying their supply base. We are seeing a lot of ripple effects with contract manufacturers; it’s completely drying up. I’m not sure if it’s gone too far, if they’re trying to match demand, and I think their thinking is, they’d rather lose the sale than carry a high inventory position. It’s just that this has been so quick to respond to in this downturn more than any other downturn in the past that it’s just created a massive disruption to the supply base like they’ve never seen before. In other countries there are hundreds of thousands of workers in the low-cost countries doing a massive migration back to their home towns.




A fifth thing we are seeing is a technique which has been used in the past, but I think it’s more important now. The technique is to actually bundle several initiatives together so that the savings from one part of the initiative can actually fund another. An example might be a labor of management program that kicks off a lot of labor savings; then use that to pay for a new supply chain execution or warehouse management software installation. Or we are seeing executives go back and negotiate just about every contract they have, from telecom and support services to rent, and then use those savings to pay for upgrades or new technology.



The sixth thing we are seeing is that there has been a big increase in outsourcing day-to-day activities. Transportation has been outsourced for decades; you’ve seen 3PLs do a lot of outsourcing of inventory, warehousing, Pick, Pack & Ship.  However, I think it is even more important now to maintain day-to-day activities and outsource special projects or one-off initiatives that require a lot of distraction and outside expertise. With the explosion of available experts out there—just look at LinkedIn—we are seeing more and more people engaging experts on one-off initiatives. More people are actually taking short-term gigs to help a company with a project. And we are seeing a big shift away from the big consulting firms and more toward the network of experienced, specialized professionals to help out with pretty big projects at big companies.



We are certainly seeing is a “use what we’ve got” mentality. I think the cost to upgrade or the useful life of technology and applications was considered so short. A lot of companies rarely realized the full functionality of their technology, their software and their systems. There has been a lot of turnover in companies in the past. People moved around to different jobs. Now we are seeing that voluntary turnover has just about stopped. There is now an opportunity to really build expertise with folks learning how to better use the business systems and technologies to optimize and run their business. I think this is a unique opportunity that hasn’t been around for quite a long time.



Improve cash flow..working capital..



The money in the supply chain is in transportation and labor. Transportation rates have been dropping fast. I am not sure how much lower rates are going to be able to go. However, labor is still a big untapped opportunity. Labor management has really started to get some traction in the past 6 to 7 years. Although the concept is well over a hundred years old, and has been a mainstay in manufacturing for decades, it has only been getting traction in supply chain in the last 10 to 15 years. There is a big untapped opportunity for companies to understand how to transform their labor-intense operations to a performance-focused culture. If I look at all the supply chain initiatives or strategies companies can take, labor typically floats to the top in terms of highest ROI.



This is application to labor intense businesses, such as retail and consumer products distribution, high-tech refurbishing and kitting, field service operations and customer care operations. There are new technologies that can help companies report on performance versus expectation. We can compare their actual performance versus the performance goal. We can then report that to management in terms of a score, and use that to evaluate, motivate and even incent people to take charge of their own performance.



Traditionally, this has been somewhat difficult to do in jobs that are not direct labor. However, there are new techniques now to look at what we call white-collar and support operations, where there might be some thought intensity or there might be time in task, there might be customer interaction. It is not a directly measurable amount of work, and those have always classically been a challenge for engineers to figure out what is good performance for that person over some period of time. We can use new techniques out there that have become a more prevalent, more widely used, and use them as a part of a comprehensive performance-management program; what we like to call workforce motivation.



Other countries



In India it’s pretty much the norm in distribution operations to pay for performance—by far the most prevalent way of compensation. In Western Europe it is a little bit more complicated, though we are seeing some changes there, and it is primarily because of regulations from the states and how they compensate people. We are seeing the ability to engage people and let them take part in a true taste of capitalism, where they can actually, in a small way, be in business for themselves when they are actually at work as an employee for a company.



Finding the Money



Look at where are the big operating budgets, and those are most likely your biggest opportunities from which to fund an initiative. It is likely going to be your labor and transportation budgets. There are also additional outside expenses and technology and support and services. Go where the money is—that would be the first place to look. If it’s related to labor, workers may misunderstand and think you are changing the way that the value they add to their workday is perceived. It is all about the people, and it is all about creating the right culture and the right workforce strategy. Unfortunately, we are seeing this pushed or promoted as a software initiative or as an engineering project. Those are two important and necessary components of a labor and management project. However, they are certainly not the overarching emphasis or the underlying theme for what these programs need to be to be successful.



One of the biggest risks of doing a program like this is in the past, when you had to buy a new piece of technology or a new piece of automation or a new software system, you had to get those things working to run the business. If you put in a new warehouse management system, you had no choice but to get it to work or else the business would fail. With a labor-management program or paid-for performance, it’s clearly optional. It is like going to the gym; it’s not something you have to do, but if you do it, you get great results. Since it is optional, therein lies its greatest risk. The risk is that once the economy turns around, or there is a merger or divestiture, or something else that takes management’s attention. Management will think that they have got the management program licked and they take all their attention away from it. These programs can easily wither on the vine and die.


“It is a big opportunity for companies to improve their supply chain without any capital, but they need to understand the commitment they’re going to make once they head down that road.”



We did research for a supply chain national convention a few years ago, the CFCNT meeting. We interviewed dozens of executives who had done this program recently. Many years ago we had a variety of folks who had experience from all different angles. The average performance improvement that we saw across all those programs was about 45%. Then when we looked at what the top ten—the top-tier programs, the ones who had done just about everything right. We came up with some qualifications to what defined a top-performing program in terms of coverage, technical expertise, executive support etc. Those top performing companies that use these programs averaged a 62% productivity improvement. A 62% improvement means that if the facility is pumping out 100 units per hour, at the end of the program, they are getting 162 per man hour. So it is a tremendous improvement; either they are getting far more output with the same people or they are getting the same output with fewer people.



We are also seeing a lot of qualitative improvement to the supply chain in terms of strengthened and bolstered management skills. We’re seeing lower turnover. We are seeing a shift over time to a higher mix of people in the workforce. So think of it going from a rec soccer team to the travel club soccer team. The mix of players on the team has been elevated over time; so the folks who are drawn to that type of environment tend to stick around.



We are also seeing an interesting side effect. We found that all the prior investments in software technology automation became improved. We heard material handling companies say, ‘We’ve got this great installation with the latest technology and sortation and storage and retrieval, but, frankly, we’re disappointed with our customer. We don’t even think they’re qualified to have the keys to run it.’ After a program like this, even with voice-picking technology, it improves the utilization, the throughput, the compliance, and the intention of doing a good job. They get much more return on assets or much more utilization out of their existing infrastructure.



It is always a surprise when doing a people-focused program. For example, we approached a retail distribution labor-management program a few years ago. It had fairly average performance in the facility and we started in one department and the CEO cautioned us by saying, ‘Look, listen, the manager of this department, I’m not sure he’s going to make it. He’s got one foot out the door. We’ve been counseling him, so we can give it a shot there, but I’m not sure he’s gonna be our greatest supporter.’



Six months later, after working with him and giving him new tools on how to operate and run his department, giving him all the feedback and performance scores from which he could now coach his associates for higher performance, and giving him the training on how to become a coach, he became the most effective manager, or most effective coach, in the entire building. He went from nearly being out the door to being the best coach in the building because we and the management gave him a new set of tools, grabbed him by the collar, pulled him up and showed him how to be successful. It completely transformed his personal life and his professional life.






Jeffrey Boudreau

Partner, XCD Performance Consulting - Supply chain specialist

LinkedIn Profile

I recently interviewed Robinson Balestero who discussed his views on supply chain risk management. Robinson graduated from a university in Brazil where he studied foreign trade, which is a popular topic in Brazil due to the explosion of import and export operations over the last 10 years. He then went to an MBA course at Babson College in the US. The focus of the MBA was entrepreneurship. Robison then graduated from another MBA course from Fundação Getulio Vargas, which is one of the most prominent colleges in Brazil.



Why supply chain risk is increasing


For example, technological advancement is one factor leading to the rise in supply chain risk. Technological progress has led us to apply new skills which were not required in the past. Globalization and worldwide communications integration require the management of supply chain in most markets. The management of supply chains is becoming increasingly challenging.


Supply chain is requiring a lot more of engagement and skills to be properly and efficiently managed. Rapid responses are increasingly required now that we have all of these elements working together in this modern world. This demand leads to increased risk.


The real challenge is to know how to manage this risk. For example, is it wise to spend more on freight and less on inventory, or more with inventory and less with transportation? Robinson thinks the wise answer usually is neither of these two. There must be a breakeven point between these two factors.


To summarize, supply chain risk is increasing due to many elements present in our modern world.


Minimizing risk


The key to minimizing risk is assessment. One must properly assess the situation. In order to get good results you need an analysis capacity and skills. This is of foremost importance. For companies to get this analysis capacity and ability to properly assess the risk situation, they need to properly invest in training. They need to train their managers and decision making employees. Otherwise, their ability to properly assess a situation will be hindered.


The key is proper assessment of supply chain risk.



Robinson’s experience with supply chain risk management


Robinson is currently acting as supply chain director with a company which provides language and professional education. They operate under a franchise model. Each brand of school has more than 1,000 schools per brand. The company has many books for each school brand. Many books are required because each student will go through many stages or steps. The beginner starts with step 1, step 2 etc. To supply the customers who are the franchisees, the company needs to get books ready to ship whenever they place an order. This requires a lot of inventory and transportation.


Therefore, the company recently assessed the risk situation and came to the conclusion that outsourcing of the logistics would be more efficient. As a result, the best financial result would be realized. This is an example of how a company needs to assess a situation in order to properly manage supply chain risk.


About Robinson Balestero




Supply Chain Director

Multi Holding


LinkedIn Profile

I recently interviewd David Williams who shared his views on why small manufacturers are the backbone of North America. David has been in consulting for over 30 years. His original background was in non-destructive testing, radiology, and magnetic particle work for the nuclear and aerospace industries. During the 1980s he then went on the develop quality management systems for companies in various industrial sectors, many of which were machine shops and fabricators either wanting to qualify to get into the nuclear or aerospace industries, or to meet a requirement within those industries. In the 1990s David got involved with research and development to help companies get R&D tax credits. This morphed into innovation today where a lot of these organizations wanted to be more innovative and sustainable in their ongoing innovation systems.



Why small manufacturers are the backbone of North America


David still works with some small manufacturers today to help them with their R&D tax credits or through their innovation programs. He has always found small manufacturers keep the large manufacturers going through their entrepreneurial way of doing things. David had a client that was developing a laboratory process for a major airline manufacturer. The team of engineers would give you 5 or 6 reasons why you can’t do something. On the other hand, small manufacturers such as David’s client can give you 5 or 6 reasons why you can do it, and sure enough they did it.


David always found that small manufacturers can provide solutions where the larger companies slot you into a position when you work for them, usually in one discipline. However, an entrepreneurial (typically an owner/operator) machine/fab shop will take on anything. They see it from all different angles, not just one perspective. The small business will receive a CAD drawing of a part. They will look at it and find there are things missing or that things just don’t add up and will end up developing a better part. A lot of such companies have become very successful over the years.


How to strengthen manufacturing in the US


David believes we really need to strengthen manufacturing in the US. In David’s opinion the larger companies simply continue to see cost reductions. They have to go off-shore. However, many are finding that the quality and service is not where it should be. David does not see off-shore companies being able to provide technical solutions. Straight widget manufacturing high production perhaps may have a place off-shore. However, we are just not getting the service that we can get from North American manufacturers.


The companies David is dealing with will take on work for a new customer but they also would like to visit the customer. They will see what their processes are all about and provide the type of solutions and services which you can’t get off-shore.


David works with US manufacturers to help them be more innovative. He helps them build innovation into their systems, such as their ISO management systems. He is seeing success where companies are taking on new technologies such as 3D printing. A few of David’s clients have taken this on to better service the end user. It is all about service and adopting every technology you can. This will go a long way to strengthen the small manufacturers.


Examples of success


David has one client that provides laboratory services who has taken it to a whole new level where they can actually strengthen parts without traditional heat treating. They can actually get a lighter gauge material and make it stronger. The potential applications for this technology is huge. In addition, they can increase the life of rotary and wear parts by at least 25%. David has been working with them on this for about 2.5 years. They will be ready to commercialize their first machine this September.


Another little machine shop with roughly 80 employees took on an assignment to supply the military. In the end they came up with a technical solution and re-designed a complete unit. With their entrepreneurial spirit they went down to talk to the soldiers and the hospitals to ask them about the issues they have in the field. As a result, they got the contract and ended up re-building all of the turrets for the Canadian Army. This has opened the doors for them to do work with companies such as General Dynamics.


Another example would be a machine shop where a pharmaceutical company was having problems with contamination on the valves of the pill machine. This particular company had 4 additional pill machines just to compensate for the ones breaking down every 2 weeks. The client re-designed the valve to help with the contamination issues and to appease the FDA, which was quite successful. Over a period of 1.5 years they completely re-designed the pill machine. It’s up time is now probably 400% better the original machine which was made off-shore.


About David Williams




Director, Standards Manager

North American Sustainable Innovation (NASI)

LinkedIn Profile

I recently interviewed Pasquale Gioia, a Research Analyst with the Procurement Intelligence Unit in London. Pasquale shared his views on why Mexico is more suitable than China for the US supply chain.



Why is Mexico more suitable than China for the US supply chain?



1.      Geography: With salaries increasing in China at a faster pace than in Mexico, increasing transport costs may become an issue for US companies, which can be easily slashed when relocating to the closer Mexico.


2.      Time: Being closer to the US a Mexican plant can respond quicker than a Chinese plant to changes in demand, and can manage with lower inventory levels, therefore saving on inventory costs.



3.      Quality & transparency: The quality and transparency of materials used in China have always been a concern for Western companies. It can be easier to check the quality of production in Mexican plants because of the greater ease of physical inspections.


4.      Patents and rights: Mexico does not have a problem with intellectual property infringements.


5.      Green and CSR: Mexican companies keep a closer eye on issues such as the environment and human rights. This is a field that is very hard to manage in China. It has been proven that awareness of such issues can bring many benefits to brand image and market reputation.



6.      Culture & training: Mexican education is more in line with the US. Compared with Chinese, many Mexicans have often undertaken studies in the US or even been trained there.


7.      Language: Communication along the supply chain is key for efficiency. No matter how efficient single tasks are, if there is no communication within the organisation the risks of disruption to the final product are higher. In general terms Mexicans speak better English than the Chinese and Mexico is the first Spanish-speaking country in the world making it easier for the US to sell in other Latin American countries.


8.      Existing relationships: there is already a considerable Mexican presence in the US supply chain. Business relationships, as well as cultural relationships, are already in place; all the US needs to do is upgrade existing relationships to make them more profitable.



What is the future?


Opening a plant requires a long-term view and certain factors must be taken into consideration.



1.        Robot industry: The robot industry is growing and replacing the so-called low-skilled labour force. What would be then the benefit of moving an industry so far away if the cheap labour draw factor disappears?


2.        Raw Materials: Latin America has a surplus of raw materials compared to Asia. In the future an important source of raw materials will be produced by waste recycling. The major source of waste is definitely the developed economies and in particular the US. Mexico is in an ideal position between the natural resources of South America and the possible new sources coming from the US in terms of waste.



3.        Possible slowdown of China: How sustainable is China’s growth going to be in the future? We have witnessed the incredible growth of the Chinese economy over the past 20 years, mainly boosted by infrastructure development and export. With inflation, rising wages, an ageing population and increased competition by other emerging Asian countries, things are now becoming tougher for the big giant in my opinion. This is a critical point that US multinationals have to bear in mind nowadays.



4.        Staying competitive on the markets: The governing authorities must prevent an overshooting of the currency to stay competitive and make sure the financial system remains solid, as it is now. Being more flexible and less bureaucratic will be the key. Mexico is on track with its improvement plan to expand its trading horizons to other Latin American countries and Europe, as well as towards Asia.


5.        Value added opportunities: Mexico is trying to offer more value added services, exploiting the capabilities that the country already has. Consulting, telecommunications, finance, R&D and many other service industries are already feasible in the country.





What Mexico should do to improve?




1.      Infrastructure: Improvement to the transport system and infrastructure assets can still be made and are essential to link between the US and the rest of the supply chain or end markets.


2.      Education: Education is one of the key assets for the future and can give Mexico new generations the right capabilities to face the future. This will improve the value they can add in the supply chain to create wealth and more remunerative job opportunities. This could go some way to improving some of the country’s historical issues such as crime and corruption.



About Pasquale Gioia




Research Analyst

Procurement Intelligence Unit

London, UK


LinkedIn Profile

Michael Gunther has been working with small businesses since 1995, helping them put the infrastructures and processes in place for them to really grow their businesses to be sustainable and profitable. His company works with people in the supply chain management arena, as well as many other industries.



What it means to collaborate in business


Collaboration in business has been a buzz word that has come out the last few years. The big push started after the boom, where many high tech companies realized they didn’t have to be knowledgeable in every area and that they could rely on other people in the supply chain providing other technology. This would help make a better product or to better service their clients.


That movement has now moved into all areas of business. People realize the benefit of collaborating, even with their competitors. They realize that by bringing competitors in on a piece of a project you are able to service your client better. Sometimes a project may be outside your scope and you know someone in your industry who does it better.


Being able to collaborate with someone is a huge thing because the clients will always see you as that resource. Working together and collaborating can be both internal in organizations or external working with various suppliers within the supply chain.


Another component Michael has seen is collaborating with your clients through the process. A lot of businesses miss the opportunity to get engaged with their client. The client may be buying a product or service with them, but they never really address other problems or issues they may be facing, even outside their realm. If outside your realm you still may have access to other resources in your network who could help solve the issue.

Collaboration is a big word and there is a lot of opportunities for collaboration within business.


Collaboration is important across the supply chain


In today’s economic times and in this competitive marketplace it is invaluable to be able to collaboration. Collaboration provides innovation, efficiency, and productivity. Organizations that don’t allow for collaboration are not participating and will lose in the long run.


Collaboration is an important element to think about. For example, Michael and his team were working with a client in the fish industry. They were a fish wholesaler looking to be sustainable and were looking to create a better product for their client. The company had to go out and collaboration with the fisherman, the fish farms, the delivery business and truckers, storage etc. They had to develop standards and processes which would give them a better product. To stay competitive it is important to think about more than what you provide. This is a great example of an organization that helped to create standards for the whole supply chain, based on what they thought would be important to their end-user client.


Collaboration done effectively




The first piece to effective collaboration is the relationships and getting the right people on board. With any time of group or organization you bring together you first need to have someone who will spearhead the project. This person needs to be able to sell the big picture. Then it is about develop the relationships with the people in the marketplace. Not everyone will be willing to collaborate. All competitors will be able to see the value of you coming together and working together.


Not everyone in the supply chain will say “hey let’s work on this project together”. They are not going to necessarily jump in. You need someone who will see the vision and the value in collaboration to the end user client.


If you are the person spearheading the collaboration project, part of the process is identifying what it is you are really trying to do? Why are you trying to get these people together? What do you expect the end game to be?




The second piece to effective collaboration is the processes which support the relationships. A lot times people get together but they don’t have any ongoing process to come back around based on the innovative ideas. They are not coming up with any standards for managing the process.

The key is to identify how you will work together and communicate. How often will you communicate with each other? What issues are ok to bring to the table? Which issues shouldn’t we bring to the table?


How are we going to effectively setup systems or processes so that we can work well together throughout the whole process? A lot of times people will get together but it isn’t long lasting. Part of the problem is that they don’t put in the right systems or structure to support them.




The last piece is measurements. What are some of the key measurements you will be able to evaluate to determine if this collaboration is working or not? Up front you should identify some key measurements, such as improved delivery time, improved innovation, improved communication, improved efficiency, improved sales and growth. What are we hoping to measure and note that we are doing it well? Those measurements will let us know of those processes or relationships are the ones to help us achieve our goal.


In summary, to do collaboration well you need relationships clearly identified and to get the right people on board. You need the right processes and structures to support them. Finally, you need the right measurements to make sure your relationships and processes are working effectively toward your end goal.


Examples of effective collaboration in the supply chain


You can look all over the landscape these days and see it. For example, Apple Computer has really collaborated on the design side developing applications. Prior to the iphone there was the ipod. Apple collaborated with everyone in the supply chain to get that developed. In addition, what came out of it were about 2,000 other companies who they worked with to develop all of the accessories and tools which went along with it. Apple is a good example of an organization which is collaborating throughout the whole supply chain.


On a smaller scale you can look at the seafood company mentioned above. They are a $15 million dollar. They chose to take the lead because it was what their end customer wanted and the industry wasn’t supplying it. If you are in an industry or a situation where your clients are wanting something you can’t deliver because other people in your supply chain are not, those are good opportunities to take a step back and say “let’s reevaluate, are there players in the marketplace and supply chain where we can come back and build a collaborative effort to really help meet that end user client’s needs?” That is where the first company was able to provide the fish product which the end user consumer wanted.


About Michael Gunther




Founder and Managing Partner

Collaboration LLC

LinkedIn Profile


I recently interviewed Samer Almadhoun who discussed the supply chain implications of Jordan joining the GCC. Samer is Jordanian who has been in the supply chain field roughly 15 years. His professional education was earned from international professional institutes such as APICS and The Chartered Institute of Logistics & Transport (UK). Samer has also acted as a consultant and instructor on a part-time basis, while also maintaining his full-time job in the supply chain field.



Supply chain implications of Jordan joining the GCC


The GCC is the Gulf Cooperation Council. It is a political and economic union of the Arab state constituting the Arabian Peninsula, namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. In 2011 there was a request by Jordan to join the GCC, which is currently being formally considered.

This area has some of the fastest growing economies in the world, mostly due to the boom in oil and natural gas. This is coupled by the building and investment boom backed by the decades of saving petroleum revenues.


GCC-Map.jpgThe GCC was formed in 1981 with the objective of formalizing and formulating similar regulations in various fields such as economy, finance, trade, Customs, legalization and administration. A common currency similar to the EURO was also established. It also unified a military presence as the peninsula chief force. The current proposed currency is called Khaleeji.


If the GCC monetary union is realized it would be the second most important super national monetary union in the world after the EURO area.


Jordon requested to join the GCC in 2011 and has been welcomed. Despite the fact that Jordan has no coastline and the differences in tribal societies between the GCC and Jordan, it does have a military expertise. Jordan can provide military assistance to combat political reform. This is one of the many assumptions to explain why the GCC would welcome Jordan. Samer believes it has much to do with the political situation of the revolutionary Arabian States.


When it comes to supply chain, joining the GCC would have its impact. Jordan heavy relies on Customs as a form of international income for the country. Joining the GCC will change the formula. In addition, the smooth trade Jordan will enjoy with the GCC Union will definitely re-shape the Jordanian supply chain.


The port of Aqaba as a regional hub will increase. The transportation in Jordan in general will be different. Samer believes there will be a huge impact on trade between countries and the GCC. According to the Jordanian professionals in the supply chain field, they have a lot to do over the next few years. It will open new markets for new products and there will be more visibility created with Jordanian suppliers and their global supply chain partners. It will also smooth the movement of labor from one country to another, basically from Jordan to the GCC.


Samer believes there will be a huge impact on the Jordanian supply chain after it joins the GCC.


Recommendations for global supply chain managers


It is naïve and unprofessional to believe that local policies and procedures are applicable abroad. The differences in culture between countries make it important for regional supply chain managers to understand the culture. Each country has its own culture, procedures, etc. There should be an understanding of political and economic situation of any country in order to get it right with that country.


About Samer Almadhoun




Samer (M) Almadhoun MBA,CPM

Supply Chain Manager at MMSD

LinkedIn Profile

Jim Carr is the president of CARR Machine & Tool Company in Elk Grove IL. They have been in business since 1972. Jim has a 33 year tenure with the company. He started from the ground up, learning all of the different aspects of the business throughout the years. In 2004 he became the sole shareholder of the company where he took it from his father.


The company does low volume, close tolerance, multi-axis machining in 9 CNC vertical machining centers. It has been the niche of their business for roughly the past 10 years when they decided to chisel and narrow their niche down to just doing multi-access machining. They felt that was their strength and was more lucrative. By maintaining a small presence they could run lean and profitably.



Making America’s supply chains more dynamic and innovative


Jim believes the American attitude is improving regarding in-shoring. Based on what he has been hearing from his peers, a lot of the off-shoring product is coming back to the US. Jim estimates he hears twice per week that another product line is being brought back from overseas. This really makes Jim feel good. He believes the attitude of the American people lately has been to buy American, keep it here and keep us employed. Jim thinks it is really a good attitude to have amongst the American people.


Once manufacturing does come back, sustainability and keeping it in the US will be crucial. Jim says America is a great country and all we have to do is figure out how to make it work well for us. We need to really give our customers what they want, which ultimately is service and quality.


Over the next 5 to 10 years Jim believes it won’t be about price anymore. Major OEMs that push their work down the supply chain will be looking for a quality vendor that is really married to them and can supply them with a quality product on-time.


Smaller suppliers providing innovation to large multi-nationals


Technology is everything nowadays. You have to keep yourself relevant. You should keep your machine tools, your IT and information there. It is very important to stay top of mind. Jim truly believes in social networking for your business to build your brand and make you look relevant amongst your competition.


Large firms reaching out to smaller suppliers


Larger firms should go to their trade associations and local chambers and find those smaller companies at are there that can help and assist you with your projects. The small companies are out there, we just need to know how to connect. This appears to be the biggest obstacle we are facing these days. The smaller companies are out there but their presence is so hidden.


You need to build your SEO on the Internet. You need a dynamic website which shows you are dynamic and aggressive. Small companies need to go to the trade associations to become obvious and present. Getting to know people not in your industry is important because people talk and will give recommendations. It is really all about that personal network, in addition to the social networking and website SEO work. It all works together as one big package to keep your brand high and to keep yourself relevant in your industry.


Jim’s experiences


Jim has been doing quite a bit of social media marketing for his business over the last 11 months. He most recently has been asked to present his experiences at the local TMA association in Park Ridge, IL. TMA is Illinois premier full service manufacturing association. Jim presented to about 60 people where he shared his experience with social networking and specifically with paid target marketing on Facebook. He discussed how you can drill down to your ideal target audience.


Regarding in-shoring trends, Jim has not seen an increase personally with his business. However, he has talked to a lot of his peers over the last few months. He has also need many discussions and mentions on social media that a lot of off-shoring is coming back to the US. Jim was at a networking event roughly 4 months ago where he as introduced to a medical manufacturer in Elk Grove Village, IL. This manufacturer said he was pulling everything from his Asian vendor and bringing it back to the US.


Unfortunately, Jim could not service him because it was not a good fit for the manufacturing he was looking for. Instead, Jim gave him a good quality introduction to one of his partners. As a result, someone locally in the Chicago area picked up new work to replace an Asian option.


Final Recommendations


We need to realize who we will be selling to over the next 5 to 10 years. All of the young adults who were born 1980 and on are so connected with their social media and smart phones. Jim believes the corporations going forward should really get involved and embrace that culture which the generation Y’s are using because it is a great way to get in front and them and network with them.


In terms of marketing, branding and sales over the next 5 to 10 years; Jim believes social media will be leading the way in ways that small and larger corporations reach out to a new customer base.


About Jim Carr




President, CARR Machine & Tool, Inc.

LinkedIn Profile

I recently interviewed Harry Moser, Founder of the Reshoring Initiative. He discussed how to make America's supply chains more dynamic and innovative. Harry’s background is in manufacturing. His family for several generations had been in manufacturing. Harry’s grandfather was a foreman and system superintendent at Singer Sewing Machine, a huge factory in Elizabeth New Jersey. At one time it was the largest building in the world. The building is no longer there and the products are made elsewhere. Harry that happening and felt he needed to do something to reverse that trend and bring manufacturing back to the US. That was the motivation for the initiative.


Harry has a BS and MS in Engineering from MIT and an MBA from the University of Chicago. Harry ran machine tool companies for roughly 35 years, most recently AgieCharmilles LLC which makes EDM and high speed milling machines.



How to make America’s Supply Chains more dynamic and innovative


This can be broken down into two or three topics. Dynamic suggests fast response. You get faster response with shorter supply chains with quicker delivery times, JIT delivery etc. The things which are supposed to be driving the supply chain today, except perhaps price, are enabled by re-shoring or re-evaluating the trade-offs between off-shoring and re-shoring. By re-shoring you get faster more dynamic response. Smaller inventories allow the customer to make decisions more rapidly.


In terms of innovation, there has been a lot of study, mostly notably by professors Gary P. Pisano and Willy C. Shih from Harvard Business School, showing that when you separate manufacturing from engineering by off-shoring your manufacturing but keeping your engineering and marketing on-shore innovation declines because the marketing and engineering people need to talk to the tool & die maker or foreman who is half way around the world and who doesn’t speak your language. The ability to make that innovation efficiently is reduced.


These professors have talked about this. The people at MIT, the defense department, etc have also discussed how you cannot separate the two and still be an innovation country, which everyone says we are supposed to be.


Harry would add that another item about supply chains is stability. We have seen the impact of natural disasters such as in Japan and the volcanoes in Europe which disrupted air freight. We have seen political instability in the Middle East. Obviously, these things are not consistent with the stability or sustainability of the supply chain. Harry read one article where an economics professor suggested that the long supply chains actually helped cause the great recession we recently went through.


This is because US companies would have extended supply chains with months of inventory in the pipeline. When orders were reduced the inventory in the supply chain suddenly went up from 3 months to 6 months, for example. As a result they stopped ordering from all of their vendors in order to get their turns right and their balance sheets to be ok. According to the professor who wrote this article it was a major cause of the recent great recessions. By having the long supply chain you make it less stable for yourself as well as for everyone around you in your culture.


Small suppliers providing innovation to large multinationals


Obviously they are here and can cluster with the big companies. Professor Michael Porter at Harvard Business School writes a lot about clustering and how when a company has its vendors, suppliers, local universities etc, all working physically close together it is much more efficient and innovative.

Harry recommends to the smaller companies to use this argument to convince the big companies that even if their price may not be as good as in Asia, they should look at the total cost of ownership. This could convince the big company to source locally and get those supply chain benefits from the local sourcing.


Large firms reaching out to small suppliers


First they need to be willing to do so. Large firms need to re-evaluate their sourcing. Currently, big companies tend to bonus their supply chain managers on price reduction. Instead, they should bonus them on total cost of ownership reduction. If they did this the supply chain managers would be more willing to look to domestic suppliers who may not have the best price but has a superior total cost of ownership.


Harry’s Experiences


One company Harry has worked closely with is Morey Corp in Woodridge IL. They produce printed circuit boards and telematics which they sell to big companies like Caterpillar and John Deer. They give an example of a component they were buying from China. They had a quality problem and had to bring the product back for quality reasons and to let the customer see that they were taking action to overcome the problem. When they brought the sourcing from China back to a local supplier they reduced their inventory by a factor of 18!


This is the kind of economic benefits which can outweigh any price differential between the off-shore source and the domestic source.

In addition, Harry is working on the Reshoring Initiative which has a library of 100 articles with different cases about re-shoring. There will soon be 200 articles available. Companies can go in and see how their competitors or others in their industry have benefited from re-shoring.


If anyone has any re-shoring cases where they have successfully re-shored Harry would love to hear from you. If anyone needs help there is a total cost of ownership calculator on the website. Harry can also be emailed directly at Harry.Moser (at) Harry’s organization is a non-profit and they don’t charge anything for the service because they believe it is in the user’s interest and the countries interest.


About Harry Moser





Reshoring Initiative

LinkedIn Profile

I recently interviewed Erik DiCarlo. Erik works for credit risk monitor. They provide an aggregate of data online in real-time. It is an information monitoring service that allows you to monitor companies globally that may be in your supply chain or vendor list. They could also be customers or counter parties of any kind.




The idea is to simplify your analysis and monitoring process so that when significant changes occur within those companies which have an impact on your supply chain, you will be notified real-time.


The website can be found at It is an unlimited subscription based service where you build a portfolio of companies of interest to yourself. These could be companies that are critical suppliers, vendors, partners, or other counter parties of interest. You can get aggregated financial risk analysis data on these companies so that you can monitor the financial solvency conditions, trending patterns, and critical financial activities. This will help you to be nimble so that you can react, make changes and identify alternatives in terms of contingency planning in the event of a potential disruption to your supply chain.



The Credit Risk Monitor team attended the ISM (International Supply Management) conference in Orlando in May. What they found from feedback they gathered is that supply chain and procurement directors are watching everyone these days. Tier 1, Tier 2 and Tier 3 suppliers are also collecting financial statements from companies they do business with. They are utilizing certain indexes such as the Z-Score, to get an overview of the trending patterns of the companies they are working with. Supply chain management is becoming a bigger concern and a broader concern overall in terms of risk management with these companies.



Initially, the Credit Risk Monitor service was geared towards credit risk, specifically the risk management perspective of watching and monitoring your customers. For example, credit managers and controllers are watching clients and seeing how they are trending in terms of if they had a large credit line extended so that they know what their risk is at these companies.



Credit Risk Monitor has found that an increasing number of supply chain departments are becoming actively involved in this process. They are seeing this trend continuing and growing. Initially, they were probably speaking with a greater ratio of credit managers to supply chain managers. However, now it is becoming more evened out. When Credit Risk Monitor talks to companies they are seeing procurement departments getting involved in this risk analysis process.



What to expect?



Credit Risk Monitor aggregates data from multiple verified sources. Sources include Thomson Reuters, 5 and 10 year quarterly spreads in terms of the financial data that can be easily downloaded. They provide templates where you can perform your own analysis. Credit Risk Monitor also includes Moody’s S&P ratings, research findings and information. Also, include are Market Wire, Business Wire, updated filings information directly from the SEC, and other sources. Visitors to the site can find updated information that is aggregated on the website.


Credit Risk Monitor also provides squaring indexes. The Z Score is a default probability trending index which is very pertinent to many supply chain managers in terms of their risk analysis of critical suppliers. Credit Risk Monitor calculates the Z Score and provides it on their site. They also provide a score called the Proprietary Index which is the Bankruptcy Probability Index (FRISK) which is forward looking. It is meant to give you a 12 month window of the probability of a potential bankruptcy.


They also provide a tool. If you are collecting financial statements yourself directly from suppliers you are working with there is a confidential tool built into the site which allows you to upload and integrate the company information collected on a confidential basis. No one else has access to it but yourself as a subscriber. The site will calculate a Z Score and a Bankruptcy Probability Index Score (FRISK).



Feedback received from supply chain and procurement managers is that getting the calculate of the Z Score is very pertinent to the type of work they are doing in their analysis of suppliers.



The best way to get a grasp of what Credit Risk Monitor can do for you is to get a trail demonstration which they provide. You can use the site and compare it to the other tools you use.



Once you are a subscriber, you get a dedicated account manager to assist you throughout the subscription period to provide training to help you customize the site as needed.



Recommendations for supply chain risk managers



The key idea is that in our current environment you can never to too safe in terms of keeping an eye on who you are doing business with on supply or the customer side. Having tools available that allow you to keep an eye on what is going on in real time help you to be nimble and to react to subtle or significant changes as they occur. The tools will also help you to perform analysis and forecast long term.



The feedback Credit Risk Monitor receives is that for the value provided, the price point is very palatable compared to a Bloomberg or other services out there. For example, there world-wide service consists of global coverage of companies for $7,950 per year. Their nation-wide North American coverage is under $4,000/yr. for unlimited access.



About Credit Risk Monitor



The following are two different case studies that demonstrate how the different aspects of the Credit Risk Monitor site work together to provide a comprehensive real-time view of the financial status, trending risk patterns, and critical financial activities of companies in real-time.




CASE STUDY: The Great Atlantic & Pacific Tea Company


CASE STUDY: Tronox Incorporated




About Erik DiCarlo



Account Executive at Credit Risk Monitor

LinkedIN Profile