How automation affects your supply chain

We’re excited to bring you our first-ever podcast series, Enabling Automation. This monthly podcast series will bring together industry leaders from across ATS Automation to discuss the latest industry trends, new innovations and more!

In our second episode of season 2, host Simon Drexler is joined by Steve Emery to discuss How automation affects your supply chain.

What we discuss:

• Why is it a mistake to not consider supply chain in your automation project
• Key changes for incorporating new technologies
• Do suppliers change once the implementation of automation or technology happens
• Does process, data, automation help with general processing and administration of supply chain?

Host: Simon Drexler, ATS Corporation (ATS Products Group)

Simon has been in the automation industry for approximately 15 years in a variety of roles, ranging from application engineering to business leadership, as well as serving several different industries and phases of the automation lifecycle.

Guest: Steve Emery, ATS Corporation 

Steve is the Vice President of Global Procurement for ATS Corporation. He has worked in supply chain in engineering companies for over 30 years now and for the last 14 years has lead supply chain for ATS Corporation.

——Full Transcript of Enabling Automation: S2, E2——

SD: Welcome to episode two of season two of our Enabling Automation podcast, where we bring experts from across the ATS group of machine builders to provide insight to those looking to either implement or level up automation with inside within their operation.

SD: My name is Simon Drexler. I’ll be your host for today. I’m the general manager of the products group inside of ATS, focused on standardization across our machine builders and industries. I’ve been in the automation world for about 15 years in a variety of different roles in both startups and large corporations. I’m really excited about the topic we have for today “how automation affects your supply chain” because it’s an often overlooked part of the automation world in that we focus so much on the robots and the motion and the technology that we sometimes forget about how the implementation of that technology impacts those supporting functions and the different parts of our operation. We have a great guest today to have that conversation. Steve Emery. Steve, could you give an introduction to the listeners?

SE: Yeah, thanks Simon. I’m Steve Emery. I’m vice president of global procurement for ATS Corporation. I’ve worked in supply chain in engineering companies for over 30 years now and for the last 14 years leading supply chain for ATS Corporation. And I’m really looking forward to this conversation and how automation and supply chain link together.

SD: And thank you again for joining us today. A lot of our listeners are really looking to automate for the first time. And so listening for some advice, some direction, general context on how to do this more effectively than they could on their own. Let’s just start with why would it be a mistake for someone looking to automate for the first time, someone to look at driving new technology into their operation, why would it be a mistake for them to not consider supply chain?

SE: Well, in in any manufacturing business, supply chain is an integral part of the overall operation. So whatever you’re doing, you need to consider it. But I would come back to think about why you’re automating in the first place. Normally, companies are going into automation to increase production output, to reduce floorspace, support the growth of their business, improve efficiency, reduce costs, lots of lots of good reason to do it. But then if you think about those objectives that you’re driving into your operation and then think about the supply chain and how it feeds your operation, you’ve got to consider supply chain within your planning for automation. Just considering the increased output that you’re aiming to achieve by doing that, all of your upstream processes could become a bottleneck. You know, the material feeding into the machine could now become the bottleneck in the overall operation. And so you’ve got to think about how you’re going to manage that bottleneck. It’s a great problem to have. It’s not a bad thing that it’s the bottleneck because it’s a bottleneck that can be easily solved, easily expanded in capacity.

SD: That touches on a horror story actually from my past, where we implemented a new piece of technology in a company that was trying to do something new, you know, brand new innovation. And we focused so much on getting the automation process to work that we ignored the parts coming into the system. And once the actual piece of automation was on the floor, we recognized that we couldn’t take the package from the supplier and put it directly into the automation. So we had to actually put a person there and a person was doing work and it impacted the ROI of the entire project right from the very beginning.

SE: Right. Yeah, of course it will. And there’s, you know, even before we think about the material flow within the operation and getting the material to the machine, I start with thinking about the suppliers and what is their understanding of what you’re doing with your operation and what demand it’s going to put on them. Because first of all, you’re going to have higher production output, which means that you’re going to need more materials. So the first thing to do for me is to check with your suppliers. Do they have the capacity to support your new production throughput and how are you going to work with the suppliers to make sure that they do and to help them through the journey as well? So, you know, with like any business for suppliers having good forecast information and understanding if there’s going to be, you know, a sudden ramp up in demand for your business is very important to them so that they can support it with the products that you need.

SD: Right. Volume would definitely be one of the changes that need to be driven in the supply chain. Have you seen technology changes, tolerance changes, part changes to accommodate the implementation of technology?

SE: For sure. I mean, first of all, with your design, I mean, if you’re assembling something manually, it’s not necessarily given that the design lends itself to automation and there are some tweaks in the design that are needed. So you could find that there are some tweaks to the products that you’re using. I’m fortunate enough to spend a lot of my time visiting our suppliers and seeing what they do, and it’s really cool because you see a wide, a wide range, a wide spectrum of their operation and you see how they’re using technology to not just automate their own production, but how they’re using it upstream in their own supply chain from the warehousing into triggering orders from their own suppliers. This can all be automated and it can all be linked in their IT systems. And then you’ve got a lot more stability, you know less manual intervention, less room for error in the end. But a faster, more efficient and more cost effective supply chain.

SD: You touched on an opportunity with the implementation of technology to link I.T. systems and actually drive a different type of automation?

SE: Yeah, I think that once you’ve got automation in the production, it actually does lead to a lot of opportunity and particularly in the supply chain. I mean, you you’ve almost got visual management heaven once you’ve got automation, because the data that you can get from your system, not just from the supply chain system, but from the assembly system, gives you such a lot of rich information about material flow that you can use and you can feedback in your own visual management system and sharing it with suppliers so that they understand more about your operation and how they can best support it.

SD: That’s an interesting stream of conversation. As you know, once you have the technology, it’s driving this data. It actually provides you a tool where you can more effectively manage your supply chain.

SE: Yeah, absolutely. And suppliers will appreciate it as well, because if you think about it when you automate your production, you’re going to have higher volume and you’re going to have more stable throughput. Those two things, higher volume and stability are very important to suppliers, highly valued by suppliers and something that makes it easier for them to serve your business. And if it’s easier for them to serve your business in the end, you know, with my supply chain hat on, it’s a material cost reduction opportunity for your business too. Because you’ve got a legitimate win-win proposition to put to your material suppliers in the context of your new operation.

SD: In my background, you don’t often see that type of information built into the ROI, the return on investment for the automation. But it actually it could be.

SE: Absolutely, yeah, absolutely it could be. I think that for me, if you go into automation with the features that you’re changing in your supply chain, you should absolutely expect an ROI in your material acquisition.

SD: We talked about volume and stability as two very key drivers for changing the way we manage the supply base. Do suppliers often change once the implementation of automation or the implementation of technology happens?

SE: When you say do they change? You mean do they change their operation to suit or.

SD: Oh, I guess both. I actually meant do you actually change your supplier? You change your supply base based on the implementation. But your interpretation of the question is equally interesting. So maybe we can do both.

SE: So the way I would look at it is when you’re making that change within our business, we’re very clear about which suppliers we want to use in the future, which are strategic to us and which supplies we want to grow with our business. So for those suppliers, we would have a very clear conversation ahead of time to let them know what we’re doing and in the end instill some excitement in their business about what we’re doing so they can be part of the overall growth. And so look with them at how it can change their operation, how it can improve the working operation between us, improve processes between us for the benefit of both companies. Now, with a supplier who’s not part of our long term growth program, you know, when you’re implementing this, it could be a good opportunity to look at the supply base a little broader and see if there are other suppliers out there that would better suit your future business model with automation.

SD: On the one side of that question where working with key partners and utilizing technology as a way to drive improved process. Could you give the listeners a couple of examples of what that might look like?

SE: Yes. So I mean, it could be as simple as think about once you’ve got your supplier capacity, understood, the next thing you’re going to want to deal with is your material handling processes internally in order to meet that the demands of the automation that you now have in production. So likely it’s going to result in a need for increased flow of material. And there’s lots of ways you can do that. But with the partner suppliers, I mean you can look at Kanban processes where they replenish against stock levels, predefined stock levels. You may want to increase the safety stock, in that case. You may want to increase the frequency of checking of course, with the IT connection and understanding the material flow that becomes super easy for them to match their forecasting to your throughput. So, you know, the simple level, just looking at the material fulfillment process and the role the supplier can play in a Kanban process, for example. And then as you get more sophisticated looking at giving the suppliers access to your material flow from the machine so that they can preplan and make sure that there’s no chance of stock outs.

SD: And kind of coming back to one of the topics that we touched on was that data that’s available and for someone who’s looking to automate for the first time, you now have this piece of automation that’s providing you operational data that you haven’t had before. It gives you that backbone, that opportunity to drive those types of relationships with the supply base, the Kanbans or whatever replenishment process works for, works for the business.

 

SE:  What I would encourage is to be very intentional with the way that you use that data because in supply chain, data is the foundation of everything. There’s so much that we can do and so much that we do using our supply chain data to improve our business in many different ways. I think that for a business needs to be very intentional in the way they analyze the data and the way they use it and what they choose to visualize, what they choose to measure KPI and what they choose to share with suppliers.

SD: These are all fantastic opportunities to improve the business. You mentioned choose supplier, and I just generally like to think about that, that company in between not a small company doing manual processing, not a large, large company with the highest of high end automation somewhere in between, working to scale the process, working to scale the business, how should they be looking at their supply base differently once they have that piece of technology? They’ve probably moving from relationships that have developed over time, worked very closely to help scale the business, has a good understanding of who they were, but that may not be who they’re becoming.

SE: That’s a great question because I think that as a company grows and is ready to take this journey, you know, we started off thinking about why you should consider supply chain within this. At that point, their supply chain operation is ready and should become more sophisticated as well. So, you know, in terms of how do you take those first steps as a company in that position? What I would say is that as you’re planning, look at the opportunity within the data that you’re going to be gathering and again, be very intentional about how you use it because there’s a great opportunity there. You mentioned something before about when you’re looking at this, when you when you’re working the ROI of the automation investment, you really think about the supply chain opportunity and the ROI. So what I’d what I’d encourage for a company, a small company in that position is think through the data opportunity that you’re going to create and think through the ROI in the supply base with the data that you now have access to, because I think that will unlock a different way of thinking and a different way of approaching the suppliers.

SD: And does that different way, does it unlock a different decision criteria for what makes a good supplier, or does that stay consistent?

SE:  I think in terms of what makes a good supplier, I think that stays consistent. I don’t think it necessarily changes that. It will force you or cause you to reevaluate a little what you consider a good supplier to be. That and that’s and that’s fine. That’s something we should all be doing all the time anyway. That’s a constant process. But, you know, you start looking at the way that your suppliers can support your process. You know, if you, if you make important data available to them, are they going to be able to use it? Do they have the sophistication to use it? In most cases, the answer’s going to be yes. And if they’re a good supplier and they’re a growth partner, you’ll figure out together and both companies will win out of it.

SD: Over the course of your career, I would expect that you’ve seen a couple of really good examples of that. And even when I ask the question, you know, does the supplier need to change? I was thinking about changing suppliers, but the partner can actually change and grow with you. Have you seen a good example of that happening?

SE: Yeah, I’ve seen good examples of that. I mean, if we think about the way that we manage small, inexpensive parts on the shop floor, you know, the type of parts that you’re consuming every day, you know, long time in the past we would purchase those parts and then we moved onto Kanban type systems and using those well, we work with suppliers now who have developed more and more sophisticated vending solutions for those kind of parts. So you can have machines that the very easily accessible that have the built in intelligence to know when replenishment is needed and send the signals back to the supplier. So a high level of sophistication is developed just in the management of those simple shopfloor MRO type parts.

SD: Is sophistication or sophistication in the approach to supply chain? Is it directly related to volume only or are there other considerations?

SE: Not necessarily, because I think you’ve got to start with your customers and what you’re trying to fulfill on the customer side. And then again, you come back to the automation and the reason that you are choosing to invest in automation and then the supply chain just follows from there. So it will have to, if you want to call it this way, it will have to keep pace with the sophistication that you’re building into your own customer fulfillment model. And again, you know, there are many suppliers out there and a lot of them, they’re running their business. They’re thinking the same way like this. And, you know, they have good capability that we can tap into and use for our business.

SD: I think you touched on another really key theme, actually of the Enabling Automation podcast is no one does it alone. You start to tap into your partners, you start to tap into good suppliers, people with knowledge, those that that can help. And for someone that’s looking to automate or make a major change in technology, how can they leverage their existing supply chain to be more effective?

SE: I think it’s a really good point that nobody does it alone, but the supply base is there is so much experience in that supply base for first of all. I visited a supplier in Germany last year and they had a very sophisticated automated operation that was fun to watch right down to an automated warehouse that fed their production system. But they explained to me how the I.T infrastructure was all linked so that for their suppliers, all of the trigger points were automated in their system and they were getting information about what was happening in their production and when to expect, you know, fulfillment of new orders. So that’s a great story. And my question to them was how do you link your IT systems into your customer side? So as a customer of yours, can we benefit from this? Can we look at our forecasting feed you information that you can use in your production and also give us visibility of what’s happening? And this has become a lot more important and a lot more prevalent in the last two years where we’ve had supply chain disruptions across the world in all sorts of different ways. And a lot of, you know, in supply chain companies across the world, a lot of difficult situations and a lot of agility needed to keep production moving in that environment. This can become even more powerful because you get much earlier warning flags that something could be going awry in in suppliers facility with their sub suppliers and you’re just seeing it sooner and if you’re seeing it sooner of course you can react to it more quickly and generate more options to solve the problem.

SD: And that comes back to the fact that once you have that data availability, being intentional about it helps you be more agile, helps you adapt to changes in circumstance, changes and reschedules whatever might be disruptive, that information is really key to being able to adapt.

SE: Yeah, absolutely. Absolutely. And depending on the product you’re making, you know, you’ve got a limited number of suppliers. It’s very easy to set them all up in this way so that you’ve got a very highly integrated IT picture and data picture of your complete product and its supply chain.

SD: Yeah, and I like what you said there about you have a highly integrated supply chain after your starting to invest in technology, really stabilize your process, stabilize your approach, drive volume, drive stability. You have partners now, you’ve gone beyond, you know, buying components and putting them together. And it actually didn’t dawn on me until this conversation. I’ve worked for a number of startups before and working through the scale up, you’re often so focused on what’s happening inside of your four walls that we might be missing an opportunity to look outside of our four walls for help. Being able to go to critical suppliers, key suppliers understand their process does nothing but provide us more information, more benchmarks, more examples of what could be. And that’s an opportunity that would be available to most of our listeners, I would think where you have suppliers, you have people and companies that we rely on that I think would be happy to open the door and show how they do things.

SE: I said before, I feel like I’m very fortunate to be in a position where I go to visit these the suppliers and see what they’re doing. And one thing that they all have in common is they love showing you their production. They love showing you the shop floor. They love showing you what they do, how they do it. So, you know, sharing that type of information just is just a natural part of doing business.

SD: Yeah, I always look at that because I also feel fortunate I get to travel and look at applications where people are looking to automate. I don’t even take advantage of going and traveling to our supply base and understanding how they do things and learn from those that are driving volume have a stable supply chain. I think I might prioritize a few visits myself actually, after this conversation I learned something new today as well. But for the listener base and for those that are looking to drive change, driving step change in their organization, you have an opportunity, you have partners. There is going to be part of your supply base that has already done this. They’ve already gone through it. You can go and you can see it and then if you can see it, you can understand if that’s what you want to be. But it gives you a benchmark. It gives you more information.

SE: That’s right. Yeah, that’s right. You’re getting the experience from your from your suppliers and using that and applying it to what you want to do.

SD: Not an area where I expected the conversation to go today but I’m very happy that it did. Coming back to supply chain process data automation. Does it help with the general processing and administration of the supply chain as well? Supply chain oftentimes it’s about, you know, parts in the door. And the reason we focus so much on that is because once the parts are in the door, then we can do work. But there’s so much more that goes into supply chain, even order processing payments, negotiations, master services agreements. Does the implementation of technology change those as well?

SE: Yeah, for sure. It does mean the process flow, the data that you generate can just smooth the process flow throughout from procurement right through to the payments cycle. If you think about it, when everything’s automated, there’s less chance of errors, even invoice queries, that kind of thing, less chance of error because the systems are more connected.

SD: And I think that comes back to the line of discussion around stability. If you have less disruption, your operation experiences less disruptions, therefore it is more stable and more efficient.

SE: These are direct cost drivers as well. These will help you reduce the cost of your internal processing and reduce the cost of your supplier’s processing as well. All of this can be built into the material pricing, the material cost that feeds into your product and is part of the ROI.

SD:  And then ultimately drives more value for the customer base, which is what we want to do in the end anyways. Serve our customer most effectively.

SE: Yeah, exactly. Exactly. One thing I would say is I, I heed with any production, there’s always a concern around the risk of being sole source, the risk of being tied to one supplier. And it’s something that we have to think about in supply chain all the time, how we, how we manage that. When you’re going into automation, the principles of supply chain, like, like having a second source, it doesn’t change. I think I’d just want to emphasize that point. It doesn’t change. You can have two sources that you set these processes up with both, and by doing that, you’ve just de-risked your supply chain. If one of those suppliers does have a production issue or a glitch or a supply issue, then you know, you can shift a little more business to the second one. But having a dual source where you’ve got sort of a split of the material coming in from two different sources is actually a great way to support this automated system anyway.

SD: Right. And that’s a good reinforcement of the of the point that a good the criteria for a good supplier doesn’t change.

SE: Exactly. Yeah, exactly.

SD: You touched on something there that just brought up another question that, you know, coming back to the story from my past where we implement technology and didn’t drive the change in the supply base that’s required for someone that’s looking to implement technology, what types of information should they be communicating to their key suppliers to ensure that that my story doesn’t happen to them? You know, you put in a piece of technology and you don’t get the ROI because all things are working together seamlessly like that.

SE: Yeah, I would start with the conversation around what you’re doing and how it’s going to impact their business. So explain that it’s a good news story. The business is growing. We’re changing our production processes to keep up with the growth and it’s going to result in a demand that’s going to double, triple, quadruple for your products. So, first of all, be aware this is coming. Then have the discussion around their capacity. And is that something that they can continue to support and to fulfill? Every of course, every business will like the growth proposition. And so they’ll do everything they can to match it and to meet it. And then you can shift the discussion to this intentional use of data and the processes between the two companies for material acquisition and how that may change. You can start exploring if you already have a Kanban system, it could be as simple as let’s re-discuss the campaign levels, the safety stock and the replenishment cycles. Let’s discuss those things to match the new production process that we have. Or it could be that you don’t have those in place at all and it now makes sense to put them in place and to have a different way of fulfilling the orders. And from there, of course, you can go on to discussing the pricing of the material. You’re offering higher volume, you’re offering stability and you’re offering improved process on both sides. All of those things relate to lower material cost. And so you can have the discussion around how the material cost is going to change with the with the new operation.

SD: That was such a good summary and an excellent framework for those listening of how you approach your supplier to drive change when you’re driving change and drive it together. Because you’re absolutely right. It’s a good news story. You want to excite your partners to utilize your success or your change should to drive change as well.

SE: Yeah, I’ve always believed that obviously when we’re working with suppliers, a win-win is always the best outcome. We have volume and stability to offer. That’s something that has high value to the suppliers and they will want to work with us on that. They will want to make it work. Now we have things that we need as well. Of course, And again, if we’re going into automation, we’re looking for all of the reasons to automate. We’re looking for higher production output with a smaller floor space at a lower cost with improved efficiency. All of all of these things feed into having the automated solution, so the suppliers are part of the journey.

SD: It’s great. Steve, thank you so much for joining the podcast today for sharing your thoughts and insights with the listener base. Before we close off, was there anything that we didn’t touch on that you wanted to make sure that we did? I think we covered a lot of ground and I think we covered it very well.

SE: Maybe I would just go back and emphasize a point around the value of the data that this automation system is going to give you to your supply base, to your suppliers, some really, really good information that’s going to help them to support your business even better.

SD: Great. And likewise, for me, I think we covered a lot of ground here and even some unexpected ground. And that’s why I like doing these podcasts so much as I never know where the conversation is going to go. But we went some really interesting places today. So thank you very much for the conversation.

SE: Thank you for having me.

SD: To the listener base, I hope you enjoyed the episode today and I would look forward to having a discussion with you again next time, which is episode three Building Partnerships Through Automation, which will have us joined by Udo Panenka, one of the executives inside of the ATS Corporation. I look forward to talking again next time. Thank you for joining us today.