July IBAW Newsletter

18 July, 2022

Written by Bob Gross, President, Gross Automation

Can Automation Alleviate Many Supply Chain Labor Issues & Increase U.S. Manufacturing?

On June 7th 2022, I had the honor of addressing the local chapter of the MBBI of Wisconsin (Midwest Business Broker and Intermediaries) on this subject at the Wisconsin Club. I would like to share some of my thoughts and ideas on this subject. Please, as I stated before, understand that these are my thoughts and opinions and not necessarily those of Gross Automation, their suppliers, their customers, or the organizations to which they belong. This is the first in a three-part discussion on the topic.

As a bit of background, I am the founder and visionary of Gross Automation, an automation and controls distributorship located here in Brookfield, WI. Using my degree in electrical engineering (BSEE-Marquette ’81) and my experience in the automation and controls business, I have built a company comprised currently of 28 engaged employees representing 63 lives and spanning the last 32 years. Using a diverse, multinational supply chain, Gross Automation sources products from all over the globe and sells those solutions to multiple industries in multiple countries. From simple automation controls to complex industrial systems, the team of engineers and technologists at Gross Automation has been increasing their customer’s productivity by turning energy into useful work.

The Supply Chain Issue

When we went into lockdown in March of 2020, many factories and offices closed down. We had never experienced this before and did not know how to respond. In the end, we stopped producing the goods and services needed by our economy. Meanwhile, the government gave us and our employees money to stay home. All this resulted in too much money chasing too few goods and services.

Now fast forward to today. Some factories have yet to re-open to full capacity. The supply chain is experiencing what I consider to be the big four reasons of concern.

Lead Time Changes – In the past we used to be able to order materials and get them in 2-4 weeks, sometimes longer, but almost always in a reasonable amount of time. At the time I gave this presentation, our record lead time was 110 weeks ARO (After Receipt of Order). That has now been replaced by an entire product family from one of our largest suppliers at 800 working days. That’s right, go ahead and do the math on that one! And yes, these are current products and current designs and not at the end of their life.

Substantial Price Increases – Because of the chasing of few raw materials, the increased inbound shipping costs, and the lack of fully staffing their production areas, many suppliers/manufacturers have implemented not just one or two, but are already on their third price increase this year even though we are now only at the halfway point of 2022.

Accelerated Product Obsolescence – When the deliveries started getting way out there, multiple organizations sat back and looked at their portfolio and made decisions to drop underperforming products and particularly things that were coming close to the end of their life cycle, but just not quite there yet. Many manufacturers have a small number of products that they make specifically for a customer or a customer’s need as well. Many of these were also moved into the obsolescence phase of a product’s life cycle. In many instances, there was no ability to do a last-time buy as the end was rather abrupt.

Pressure on Inventory – We have become a “just-in-time” delivery system as we try to take costs out of the channel. Holding inventory costs money and ties up capital. Perhaps nowhere was this more pronounced than in the automotive industry. Have you tried to buy a car these days? I placed a Mustang on order last August and still have not received it. One of our suppliers came right out and “accused” us, their channel, of causing this crisis by not buffering their manufacturing through our inventory. Then they proceeded to apply all kinds of penalties to us having their inventory by suspending all returns, adding a 75% order cancellation fee to their products, and taking deliveries out well past 26 weeks.

The ongoing implementation of COVID policies in China has resulted in various supply chain disruptions. Unfortunately, all factories, including Finland and New Berlin, WI continue to experience material shortages from key suppliers because of these disruptions. We are currently working on a recovery plan with our suppliers as well as Finland to provide an efficient resolution when operations resume. Until then, some orders may be rescheduled to a future date, based on availability.

In the August IBAW Newsletter, I will continue this discussion by exploring some of the labor issues that we have experienced and why. Then in the September IBAW Newsletter, I will wrap this up by discussing what is automation and then bring it home with some helpful solutions.