This is What's Helping Us (as a Manufacturer) Manage Supply Chain Shortages and Slowdowns
Not every problem has a clear solution. But there is always an alternative way.
Zebra’s hardware supply chain is highly complex. We ship our printers, mobile computers, scanners and other products from our manufacturing partners around the world into our four global distribution centers (DC) or through multiple cross-dock locations, before they ultimately ship out to our customers. But, to the surprise of most, we ship very little via full truckloads (FTL) directly from Zebra-owned distribution centers. We are very heavy users of air freight, parcel, rail and – previous to the port crisis – ocean freight. (So, yes, we are feeling the pricing pain just like you and trying to de-burden customers from rising shipping costs. We want to protect their bottom lines and preserve their ability to innovate and evolve to meet their customers’ demands.)
Of course, as a technology manufacturer, we are also tremendous consumers of electronics components, especially semiconductors, which we know have been hard to come by for the past year. This has made for an interesting problem-solving exercise, as have the third-party labor shortage impacts spanning from factories and warehouses to roads, rails and oceans. And don’t even get us started on the weather, construction, and other external factors that can further complicate fulfillment. If we were ever curious how creative and agile we could be, we’re not anymore.
A team of very dedicated supply chain and logistics professionals has been working around the clock for months trying to find workarounds to each new issue that has emerged. Together with suppliers, partners, sales team members and procurement leaders, they have been making several strategic decisions in real time to ensure as much product arrives on time to our customers as possible, since we certainly appreciate the fact that you are undoubtedly facing your own set of inventory and fulfillment challenges and our products and solutions are so critical to the operation of supply chains across the world
- Mike Hafner, Vice President of Global Outsourcing at Zebra,
- Jaime Weidler, Senior Director of Procurement at Zebra,
- Kim Segel, Director of Global Transportation at Zebra, and
- Deanna Self, Director of Operations, North America and Latin America at Zebra.
Given that many of you are facing the same situation we are at Zebra, I asked each of them to shed some light on the best practices they have relied on to stabilize our supply chain as best as possible and save many (many) committed shipments from going astray:
Rob: From shipping delays to supply shortages to an increase in natural disasters and other disruptive events, the four of you have probably felt like you’ve been climbing a mountain for nearly two years straight. How would you sum up your experience in one sentence?
Deanna: I think it has taught me even more so to not become complacent and to keep asking “what if” type questions to ensure resiliency.
Kim: To be successful in this market, it is critical to have multiple backup plans ready and the agility to pivot at any given moment.
Mike: The most important thing we have learned over the past two years is that flexibility and preparedness are critical.
Jaime: Challenging or overwhelming are probably the right words, and certainly unexpected.
Rob: What is the biggest problem you’re trying to solve for right now?
Kim: Transit times. They’re just not reliable anymore. We’re constantly in this flux of readjusting the transit times each month due to multiple black swan events. However, even when we re-evaluate, we experience bottlenecks that we just can’t foresee. It’s impossible to know when there will be congestion, a shutdown, or an extreme labor shortage.
Mike: The components shortage, though that’s a problem mutually shared with every other manufacturer that either needs them to produce goods or set up more lines to expand production capacity. As I mentioned in a recent podcast with Stratix, COVID-19 impacts around the world, coupled with a massive logistics misalignment, have amplified a situation where demand is higher than supply. So, we’ve had to adjust our outsourcing strategy accordingly.
Jaime: As consumers, we went wild with our spending on electronics while we were home for months on end. And now that’s catching up to us. However, one way we have been able to manage the impact of these shortages on Zebra’s business is by maintaining strong relationships with our suppliers. But there is only so long I can go without seeing my suppliers in person, as relationships can only be maintained so much over video.
Deanna: We’re also trying to rethink the front-line worker experience in our distribution centers (DC) so we can move out of recruitment mentality and into continuous retention and elevated productivity. This includes, but really moves well past wages. We’re diving into areas like training and upskilling, elevating job progressions, radical flexibility and gig jobs, the workplace environment and moving it closer to that of our office workers. And, of course, we’re looking closely at the technology they use by leveraging our Zebra4Zebra program, which is a program designed specifically to support Operations across the globe with Zebra’s own state of the art technology. This team of individuals helps us to choose which technology makes the most sense based on use case and opportunity.
Rob: Have you found a sustainable solution yet? Or do you find that you’re relying on temporary workarounds in many cases?
Deanna: In our DCs, we’re finding we have lots of areas for quick wins, like broadcasting loud and clear and in multiple forums the job opportunities and gig assignments we offer. We’re also highlighting job promotions and investing in leveling up our people managers’ skills in areas like empathetic leadership, coaching, and actioning leadership. While we have made adjustments to wages, changes to our benefits structure and the technology needed to enable radical shift flexibility are longer-pole projects. But they are actively underway with aggressive implementation schedules.
Rob: I’m sure it helps that we utilize Zebra solutions to maximize visibility of our inventory and frontline workers throughout our supply chain.
Deanna: It does. Alongside all the people-facing work, we’re continuously pushing on digital automation through tactics like Robotic Process Automation (RPA) to reduce the burden of low-value repetitive work. We’re ensuring that we leverage our Zebra4Zebra program to squeeze every ounce of functionality out of the Zebra products and solutions we use in the DCs to minimize wasted work. That’s why one of the most prevalent issues at this time is resolving the bottlenecks that are occurring outside of our own operations in the broader value chain.
Rob: Have you found a sustainable solution yet to some of those outside issues? Or do you find that you’re relying on temporary workarounds in many cases?
Kim: We’re having to review and revise our door-to-door transit times as well as our air, ocean and other shipping lanes about once a month. It’s the only way to ensure we’re putting enough lead time into our supply chain. Though it’s not ideal to have to extend our lead times, that’s what we’re having to do in many cases. This is very different than the once-a-year review and reset we were accustomed to before the pandemic.
Jaime: The one thing the keeps me up at night is a fear of the unknown. We have a perspective on how things are going to play out in 2022, but one unforeseen supply chain constraint can be the straw that breaks the camel’s back. That’s why our approach to problem-solving right now is to treat every issue seriously and commit our full resources to solving it strategically and quickly. Like Jennifer said, we’re trying to make sure we have the right team in place and upscaling our capabilities so we can continue to be agile and effective no matter what.
Something else that’s playing in our favor is our understanding of our suppliers’ corporate strategies. If we know how they’re thinking and what matters most to them, we can anticipate how we fit into that picture and the level of support – or components – we will or won’t receive in certain situations. For example, one supplier may favor money over relationship longevity.
Mike: Fortunately, Zebra also has a strong balance sheet, and that has allowed us to be more aggressive with our supplier negotiations. We can enter into more non-cancellable and non-changeable agreements. It doesn’t necessarily give us priority positioning or exclusivity with suppliers, but it does give us more tools and flexibility so we can maintain a steady production level, albeit still constrained.
Rob: Can you elaborate on that a bit from a procurement perspective?
Jaime: No two suppliers are operating the same way right now when it comes to contract agreements. That’s why I spend my days doing everything I can to maintain our supplier relationships and understand where our suppliers are coming from when they’re making decisions on who to prioritize for orders. One supplier may say, “We’re going to keep shipping to our largest customers as we always have,” while another may essentially make us bid for a long-term contract with them but still limit our ordering volume.
We leverage our relationships wherever we can, especially at the senior executive level, to secure parts and ensure we can maintain our production and inventory levels. That said, the reason Zebra is winning right now is because we never let our foot off the gas. We have always given extra care to our supplier relationships, so we have benefitted from having people in our corner who are willing to think outside the box or give us the truth about a situation so we can prepare.
Rob: Speaking of thinking outside the box...let’s talk about shipping. I know Zebra ships a lot by air today, but it hasn’t always been that way, right?
Kim: Prior to the pandemic, we leaned toward a 70/30 and strived for a 80/20 balance of ocean/air. But now we’re shipping virtually nothing by ocean and are converting everything to air freight. Anything shipped from Asia-Pacific (APAC) to the U.S., for example, is now going via air. And in Europe, we’re now utilizing rail and exploring truck-rail-truck. We are also exploring sea-air mode combinations for all regions. It’s the only way to keep products moving to customers.
Rob: Shipping costs have increased across all channels, but some people argue air freight is even more inflated due to fuel prices and the simple fact that it has always been the most expensive way to ship. Have you found a way to absorb the costs in a sustainable way?
Kim: Early on, we decided to primarily use standard air freight. We didn’t use express shipping services until recently when lead times really became compressed given the imbalance of supply and demand and the urgency to get products to customers who, like us, are trying to keep their supply chains on track.
Fortunately, our base rates have not changed. Our strategy has been focused on minimizing our peak season surcharges, and depending on the rate fluctuations, we have been able to lock in some of our surcharges quarterly or even longer. Of course, when some major disrupting factors emerge, such as limited pilot availability or port or border closures, shippers may ask that we go back to a monthly or bi-weekly rate assessment temporarily. And there’s not much we can do about that. However, the cost of reliable shipping is worth it given the alternative, which is not being able to deliver anything on time – or at all.
Rob: How do you determine the right lane for each shipment?
Kim: As you know, there are major capacity considerations, along with weather, construction and even labor factors. The driver shortage is no secret, and we know that no transportation provider is going to suddenly multiply its fleet size by two or three-fold. That could take months or years. So, every day, with every shipment, we’re looking at how we can creatively move our products out of, across or around certain regions via each channel.
Mike: Every diversion is a calculated decision, and we live by the mantra “know your market.” We tap into local sources of intelligence to assess our markets daily. Not just the locales we’re shipping in and out of, either. We’re looking at entire routes and the potential roadblocks those shipments could encounter, as Kim alluded to. If there’s a typhoon off the coast somewhere, we have to decide if the risk of grounded flights is higher or lower than the impact on rail or road diversions to another air cargo hub.
Rob: We know global supply chain and labor constraints have eroded trust on a broad scale. Customers are wondering if businesses will actually deliver as promised. Companies want to know if they can trust vendors and partners to properly represent and uphold agreements. Many are concerned smaller customers will get dropped for bigger customers, that some suppliers may not be in business much longer, and that inventory levels or delivery schedules will change unexpectedly. So, what is Zebra doing to build and sustain relationships with suppliers and shippers so that we can mitigate issues that could impact our distributors, partners and customers’ trust in our ability to deliver?
Jaime: That’s a great question. I’m trying to do a lot of little things to maintain that trust with our suppliers and remind them we are thinking about them and are invested in them. I can’t fly in to meet with many of our suppliers around the world. And sending someone else who is local to be the face of Zebra in an office isn’t necessarily going to have the same impact, as my team and I are the ones who have nurtured those relationships and built that trust over many years. So, the little things matter, like sending a note on a Friday night to a supplier in APAC letting them know I’m thinking about them and sharing a funny story they remember from when we did last meet in person. That helps to maintain a connection. I don't have any other magic silver bullets outside of that.
From a customer perspective, because there are many situations beyond our control, we have also learned to be strategic and pragmatic about which products and components we are going to put effort in to redesigning to mitigate fulfillment issues. It’s quite possible the parts we need just aren’t going to be produced much longer because a supplier is permanently shutting down a fab line. In that case, we have to adapt. Or if lead times are going to be too long and the limited number of suppliers for specialized parts means we can’t go elsewhere, we have to find an alternative way forward. We are always thinking about how we can maintain continuity for our business, because that’s how we can help customers maintain continuity in theirs.
Mike: The market has been so volatile and there are so many factors that are out of our hands when it comes to being able to get the components we need. We make sure that we have open lines of communication with our suppliers and partners and that there is a clear understanding of what to expect. Of course, we want to be able to deliver all products by the requested dates, but when unforeseen circumstances create a delay, we make sure to explore all our options and work with our suppliers and partners on delivering an alternative solution or timeline. That transparency in communication goes a long way with building and maintaining trust.
Kim: From a shipping perspective, we actually had a consultant assess our transportation strategy in late 2020, and we learned that we didn’t have as many relationships with transportation partners as other companies our size. So, we have since established relationships with two other transportation partners and that has helped us add capacity and sustain fulfillment capabilities. One even has a virtual charter system, which has allowed us to gain some reliability in transit times. Unfortunately, we can’t move all shipments to this carrier or system, which would be ideal. But at least we do have a way now to move super critical products fast and get them to customers on time.
Deanna: And though we rely heavily on our channel to fulfill orders, we do fulfill orders directly from our distribution centers to help relieve the burden on some partners and – increasingly more often – we ship direct to our channel through cross-docks located in each region. Through this process, we can reduce the fulfillment turnaround time by at least four days. But this takes trust, global collaboration and a mutual commitment to customer satisfaction. When we’re in a time crunch or we’re seeing breakdowns somewhere in the chain that could have a customer implication, we all have to come together and say, “what’s best for the customer?” So, in that sense I’m grateful we have such strong relationships with our global channel partners and suppliers.
Rob: Jaime, I know procurement professionals around the world have been tirelessly trying to expand and diversify supplier networks for their organizations to have more options. Have you found it easy to build new relationships when demand is so high and everyone’s resources are constrained?
Jaime: Well, you always have keep looking at new suppliers and at diversifying suppliers. But that can be hard to orchestrate when you’re virtual. You just have to do it to the best of your ability using the resources available. So far, I think we’ve been quite successful. We have local supplier development engineers on the ground throughout the world that can physically visit supplier factories, assess capabilities, quality measures and perform site audits, so we haven’t been limited there. Trying to onboard new suppliers is just more limiting from a relationship management perspective. You have to be really, really careful – very strategic really – to understand the “why.” “Why do you want to do business with Zebra?” “Why does Zebra want to do business with you?” “What makes this a good fit for our two companies?”
Rob: Are you finding it more important to prioritize supplier diversity in a certain part of the portfolio or for certain parts based on the challenges you’re having from a procurement perspective?
Jaime: I really have to bifurcate two areas. The first is strategic procurement, which covers anything that's critical to our products, such as printheads for our thermal printers or image sensors for our scan engines and data capture products – things that make them unique and different. Then there are procurement teams focused on mechanical categories, which includes plastics, metals, etc.
Many of the mechanical items, you can get almost anywhere in the world, and they’re used widely across the business, so it’s not as challenging to localize your supply base in close proximity to your Tier I manufacturer. In the strategic categories, your supplier options and supply chain locations are well defined, and driving resiliency can be more challenging. You’re dealing with the biggest companies in the world. They have a specific number of qualified wafer fabs, assembly and test houses, and the specific component that you are procuring may only have mask sets in production at one facility, or qualified in one assembly and test site. The challenge is obtaining the data and doing the due diligence for all your components, and then determining how you drive a more resilient supply-chain. You’re not changing your procurement strategy overnight. It’s not easy to say I’m using supplier X today and supplier Y tomorrow.
However, in the mechanical space, localization is a critical initiative right now. It's one of the top initiatives in procurement, especially as we expand our network strategy, which is one of the key strategic initiatives for Zebra. So, we’re leveraging a lot of our tier one suppliers in the regions and the work they have done for us, but we’re also determining if we need to put local procurement resources in certain regions to make sure we can get what we need and to help us manage issues that could arise due to labor, shipping and other factors.
Rob: Final question for each of you. We know failure is not an option for anyone. Every business, regardless of age or size, wants to come out the other side of this situation in one piece. If you think about what you’ve learned and experienced in your respective functions this past year, what will it take to survive 2022? How can your team – and your peers facing similar situations within their organizations and supply chains – strengthen capabilities amid uncertainty?
Jaime: First, everyone has to take care of their own wellness. I don't know about you, but by Friday I am more tired than if I just went and played an hour of hockey. So, we must figure out how to balance everything that's going on and take care of ourselves and get the support from leadership that’s needed. In fact, I have to congratulate Zebra’s leaders, including Mike, Tami Froese and Steve Williams, on their efforts to put people first. They are so supportive. Instead of trying to whip the horse, they are constantly telling us, “We know…we're listening. We hear the problems, we want to understand the problems, and we want you to know that this is not your fault. You're not in this alone.” They know we must shift our thinking and our strategies and shape demand versus trying to keep up with it because, as we head into 2022, there are no parts in the broker market anymore. The only way to get what you need is through the supplier. But that’s why we also must all find a way to be more present and comfortably get back to face-to-face quarterly business reviews. We need to build and strengthen these relationships.
Kim: I agree. In addition to strong supplier relationships, strong relationships and transparency with your transportation partners and key stakeholder teams are critical. With our transportation partners, we are fortunate they do not hesitate to proactively notify us when they foresee a challenge moving our freight, and they offer solutions using alternate port/mode discussions. Sometimes, they recommend we utilize our other core partners to recover the potential shortfall. With our key stakeholders, we have built a strong trust where difficult transportation conversations can normally get resolved via email or a short conversion with multiple teams to gain quick buy-in on the proposed solutions.
Mike: I echo what others have said. We don’t know what’s coming next or what new challenge could emerge. So, it will be imperative to plan early, expect longer lead times, and look for alternatives in every aspect of your supply chain operation. Plan for tradeoffs and don’t be afraid to go back to your forecasting and planning basics. Transparency is also key to building trust and staying focused on the end goal. The more people understand the situation, the more they’ll be looking for a solution and appreciating the lengths you’ve already gone to in meeting expectations.
We must also continue to be selective about how we ship goods and utilize tools that make it easier to select the best shipping mode in that moment. It’s also important to constantly measure the performance of shipping channels. We’re constantly asking, “does the old way work?” If not, make an informed change. In fact, we now have a cross-functional team talking about freight. It used to only be the shipping team. Now, it’s multiple parties within the supply chain function as well as sales, finance and others. This is really a push-pull scenario that changes by the minute. We can’t make the right call in a silo – and neither can any other organization that operationally relies on a supply chain, which is almost every public and private sector organization these days.
Jaime: To that point, we – meaning procurement and other supply chain functions – must stay informed and bring any new information back to stakeholders which, at Zebra, are the business units. We don't have to have all the answers, but we do have to have a perspective. We do have to bring people together. We do have to play that connector role to make sure that everyone understands what's going on. And we must be thorough. We can’t become numb to what I call disasters, those issues that crop up that could be that straw. We must understand the impact and then get the situation socialized in front of the right team with a full set of information. We must be able to articulate the challenge and what recovery looks like. And we must be able to confirm if this is a problem we can throw money at or if there’s an alternative solution. Once we provide a recommendation on what we can or should do, then we can use our group thought to make a decision and move forward.
Rob: That’s a good point. I know Zebra marketing and sales teams are staying in close touch with all of you to ensure the whole company is working from a single plan and single set of facts. We have a strong culture of collaboration and two-way communication between the teams, which helps ensure the supply chain team has a direct line to customers, distributors and partners and that all stakeholders are seen and heard in every business decision. If we are seeing a shortage or issue on one product, I know you alert the sales and marketing teams so they can redirect efforts and investments in an area that does not have that challenge. We don’t want to mislead anyone regarding availability or lead times.
So, perhaps some of the best advice we can give others is to strengthen relationships and increase the communication cadence between the back-office and front-line teams, especially supply chain, sales, marketing, channel, procurement, and finance. When everyone internally is in the loop, it becomes easier to keep external stakeholders such as distributors, partners, and customers fully updated. That transparency is key to building trust, and it helps to ensure alignment – or at least understanding – when unpredictable challenges arise and hard decisions or abrupt changes need to be made.
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