Ace Hardware manages a supplier base numbering in the thousands. Kevin Kryscio, senior director of supply chain, discusses how the company ensures consistent supplier performance in a constrained supply-chain world.
Q: What are some of the major supply chain challenges that you’re facing today at Ace Hardware?
Kryscio: Some are new, and some are existing issues. We’re always tethered to our supply base in terms of our success measures. We have to work with suppliers to be competitive to the marketplace. The thing that’s new is that we're going through a retail industry and digital transformation. We see record low unemployment at 3.9 percent, which obviously impacts us across the industry. We see issues in transportation. We track things like our load to truck transportation ratios. We see tariffs, which are continuing to hit us across the industry. At Ace, we’re deeply engaging with our supply base to understand their challenges, how we can work together and give them visibility, toward the goal of getting things to the shelf on time.
Q: What are some of the challenges that you’ve faced in keeping tabs on the supply base?
Kryscio: We work with over 2,000 vendors. The top 150 are the big hitters, so we focus extensively on them, to understand what's going on with their supply chains. Among the challenges we see are industry consolidations. ERP [enterprise resource planning] implementations and warehouse moves cause disruption, so we usually get engaged when those things occur. Everyone says, “Don't worry. It will go smoothly." And typically it doesn't.
One of the things that's really encouraging within the supply base is increased demand-planning activities, including S&OP [sales and operations planning] and integrative business activities. Supply chain is getting a higher seat at the table in terms of decisions and discussions around the company's operations. That’s really important for success.
Q: How good a job are you doing in getting demand signals at the point of purchase, and propagating that up through your organization and to the supplier base?
Kryscio: Certainly it's a challenge. We're working toward that. Our marketing team does a fantastic job of gathering consumer data. What the supply chain's doing now is trying to latch onto that same data, and then raise our game in terms of looking at point-of-sale data as well. We’re seeing new demand streams, including dotcom. And we’ve acquired two businesses that we're integrating with the company. Consumer expectations are getting higher and higher, and the margin of error is getting narrower.
Q: A lot of companies are taking more of a risk-management perspective in the way they manage their suppliers. Is that the case with you?
Kryscio: I would say yes. We're looking at the risk element from an engagement perspective. We’re giving extensive data to our vendor base. We provide them a portal that can see the forecast, our inventory levels, our service to retailers, and sales. Risk is a shared conversation.
Q: How deep into your supplier base do you want to have visibility?
Kryscio: We love to get visibility, but there's an issue of practicality that comes into play here. With the top 150 vendors, we have to understand the principles of supply chain. Lead times and inventory strategies need to be a broader conversation from a sourcing perspective. We go through a checklist of 20 different items. Some things are very positive, and others need some work. We empower the suppliers and develop that strategy together.
Q: What kinds of technology are you looking at these days to help you with those goals?
Kryscio: The priority for us is around demand planning, and tools that help us to predict demand. The organization typically has been very functional in nature, but now we’re focusing on achieving a total cost view. How do you buy things in such a way that you balance inventory, service, labor and freight?
Q: Looking to the future, what do you consider to be the biggest potential constraints and challenges that you face at Ace Hardware?
Kryscio: We're being asked to respond faster and better, so we're thinking about strategies and tools that can help us to achieve that. How do you blend the traditional Ace strategy with dotcom requirements? Also, acquisitions will continue to occur in our industry, so how do you react to those? How do you become seamless in integrating those things? With the transformation of digital and retail, we have to stay ahead of the game.
Our CEO tells us that the heart of who we are as a wholesaler is about supply chain and delivering on time the right way. We’re proud to say we support over 5,000 retailers across the globe, 4,500 of whom are in the U.S. Some of them are single owners, and this is their means of making a living.
