"I have the pulse of my floor, do we have the pulse of our suppliers' floors? Are they moving the needle forward?"
As CFO for Bonfiglioli USA, a leader in global power transmission and control in Hebron, KY, Scott Guy is passionate about continuous improvement. Consistently recognized for analyzing complex business problems, Scott's everyday role requires making tough decisions while considering their long-term effects to the bottom line.
One way Scott contributes to Bonfiglioli's growth and profitability is through its supplier base. We interviewed Scott on how he's formed partnerships with suppliers who share Bonfiglioli's core values, and ensures their development towards mutual success.
As a CFO, what are your business goals and how do you continually work to achieve them?
"You can’t operate for the long term in “launch-mode."
My number one goal is the profitability of Bonfiglioli USA. But my other goals surround the effective implementation of systems. Having lived through an extreme growth phase at my prior employer, I learned a lot. It’s one thing to grow, it’s another thing to grow right, profitably and strong. Executing a large-scale growth plan in a profitable way is what I bring to the table. You have to keep the customer happy while not losing your focus on eventual profitability. Maybe it’s one month after launch, or maybe it’s six - but you can’t operate long term in “launch-mode."
"Live in your operation."
Second - as a leader - you have to live in your operation. You can’t financially lead a company from an office. You need to be in touch with everyone from your VP of operations, to the guy who is banding finished goods and shipping them out the door. Much like a consultant, it's important to understand what their days look like, their complications, and the tools you can provide to make every second of those days easier and streamlined. If I’m not in touch with the floor, I’m not adding real value to the company. Each of those things impact the bottom line. I can then develop the right KPIs that tell the right story. If I’m moving people forward, my bottom line will take care of itself.
"Many companies are competing for the same skillset."
Finding enough of the required skillsets in the market place, and ensuring we’re retaining that skillset is a challenge. Many companies are competing for the same skillset -- especially locally. Its availability is diminished compared to what it was 10-15 years ago. The life of a manufacturing operator is much different than what it was. There’s a lot more people going to college, and not necessarily finding appeal in the manufacturing environment.
How do you APPROACH SUPPLIER DEVELOPMENT?
"It starts with strategic sourcing to find the right partner."
It starts with stratgic sourcing to find the right partner. My time is limited. I need the right partners dealing with certain expertise on a regular and reliable basis. Whether it’s my banking partners managing a solid risk management plan for foreign currency, or other business partners pointing me in the right direction so that the company’s not exposed -- finding the right partner is key.
I also look for vendors with proven, long-term financial viability. If we're 60-70% of a vendor's revenue stream, that might be a red flag. It's best to have supplier diversity so you're equipped to weather various storms.
"Focus on the right improvements."
From there, you need to focus on the right improvements. For example, some cashflow decisions are superficial improvements. They can deliver a one-time benefit to improve the cash to cash cycle. But in the end, the additional charges and complexities make it less optimal for the long term.
"Know your vendors and industry."
You need to know your individual vendors and industry trends. When changing terms, look at the vendor. Is it 'mom and pop' or major player? Work through them individually. Is there an easy trade-off? Can we increase terms in exchange for an overall increase in purchase price?
If there's little risk involved, capitalize on those opportunities. Or, blanket with exceptions. For example, we made a blanket move from net 30 to net 60 payment terms with our suppliers. It was a global initiative and I had some reservations. But as we started living through it, I was shocked; less than 10 percent of vendors said one word about it. Some of their biggest customers were already on that path, and it was accepted with little conversation.
What are other companies in your industry doing? If they're aligned with the direction you're heading, you’re a fool not to proceed and benefit. The path has already been laid.
Relative to the supply base, outside of exchange rates, what are operational hurdles to your business growth and sustainment?
"You can visually see their quality control system at a glance when you walk in the door."
At the end of the day, we require a high level of precision. We focus on quality control and supplier development to ensure we’re getting that precision. You can visually see their quality control system at a glance when you walk in the door. If I see an unorganized workplace and no visual management, how can I trust they can handle a $500K book of business? If I see process documentation and standard work in place, I have confidence that every part of Bonfiglioli's coming off that line is the exact same. No supplier is ever at 100%, but if you can walk into a facility and see those controls, you have a foundation of trust and reliability that can be repeated hour by hour, day by day.
Vendors that were great suppliers five years ago can go stagnate, and the first things to go are often attention to detail and organization.
Cost is important, but the cost of partnering with the wrong vendor can be much much worse. A dollar or two on piece price is better than a quality catastrophe. If you get in bed with the wrong vendor, you have to live with them for sometimes years before another sourcing event. Make sure you’re partnering with someone who shares your same core values vs. putting your company at risk.
Any parting words on the future of supply chain? Anything to keep an eye out for?
"Incidents down the road can be prevented if you're diligent on the font-end."
Be diligent on the upfront development of the commercial supplier relationship. If you prioritize formal, structured, supplier audit procredures, supplier performance will be much higher. Time, resources, and other excuses shouldn’t stand in the way of not doing this. Incidents down the road can be prevented if you're diligent on the front-end.
I ask myself, "I have the pulse of my floor, do we have the pulse of our suppliers' floors? Are they moving the needle forward?"
Posted by Derek Browning
As a Director of Consulting services, Derek directs a portfolio of end-to-end supply chain projects for companies in a wide array of sizes and industries. He's trained thousands of professionals in lean, six-sigma, leadership, and supply chain through LeanCor and leading education partners. Derek complements his experience with an MBA, a bachelor’s degree in marketing, and several professional certificates.Facebook LinkedIn Twitter Google+