Sylvester & Matthias Ruegge: Building Resilient Supply Chains - PODCAST TRANSCRIPT

Editor's note: The following is the transcript of a live interview with Senior Director of Supply Chain Matt Sylvester and Senior Director of Procurement Matthias Ruegge from USG. You can read the interview below or listen to the podcast.

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Hello and welcome to Roofing Road Trips from Roofer's Coffee Shop. My name is Heidi Ellsworth and one of the topics for the last five years has been supply chain and what's happening out there. We see a lot of great progress, but we really don't know. So we asked the experts at USG to come and visit with us about supply chain and really building a resilient supply chain, which is important for everyone's business. So I am very happy to welcome Matt Sylvester and Mattias Ruegge to the show. Welcome, gentlemen.

Matt Sylvester: Thank you.

Mattias Ruegge: Good afternoon.

Heidi J. Ellsworth: I think I said that it should be Ruegge. Is that right, Mattias?

Mattias Ruegge: That's perfect. Absolutely, you nailed.

Heidi J. Ellsworth: I'm getting close here. That is great. Well, let's start with some introductions. So Matt, can you introduce yourself and tell us a little bit about your role at USG?

Matt Sylvester: Yeah, my name's Matt Sylvester. I'm the senior director of supply chain at USG Supply chain has different functions depending on what company you work with. For USG, it really consists of supply chain planning, the operations, inbound-outbound logistics and transportation. We manage from a geographical standpoint everything in the US and Canada. That includes our full product portfolio, Sheetrock brand products and Sheetrock brand roughing products, two examples. And I've been with the company for 24 years.

Heidi J. Ellsworth: 24 years. Wow. Congratulations. That's awesome. Mattias, if you could introduce yourself and tell us what's your role with USG.

Mattias Ruegge: Absolutely. So first of all, thanks for the invitation. I'm very honored to be here, Heidi and nice to meet you. So my name is Mattias Ruegge and we were going back and forth on the pronunciation. German name, originally from Germany, moved to the US in 2011. I'm the senior director of procurement, responsible for procuring all our raw materials in North America that go into basically all our final products. So that includes our roughing products, but also Sheetrock and so forth.

We're also responsible for capital procurement services, all the indirect side and also energy. I joined USG three years ago basically at the height of the supply chain disruptions. So that was an interesting start and we talk about resiliency today. So that was really a start, that was basically putting out fires on a day-to-day basis. So excited to talk about this today,

Heidi J. Ellsworth: Really, I mean, you came in, I mean talk about coming into the battle as the battle was going. That was everything. And I think a lot of times contractors don't always, I realize they do realize it, but maybe even as consumers, we don't realize how much goes in. It's not just getting that product to us, but it's everything that goes into that product also. So I'm excited to talk about that. So Matt, let's start with you. Can you tell us a bit about supply chains? What are some of the components that people are less aware of, kind of like what we're talking about? How does that all work?

Matt Sylvester: Yeah, so I'll focus on manufacturing specifically. That's kind of my area of expertise, but I would just say overall they have very long tentacles. So they're not contained within USG. We're dealing with our suppliers, our suppliers' suppliers. We're dealing with our customers and at times our customers' customers. So it's very broad. I would say, when I look at USG, one of the critical supply chain decisions we've made is to be vertically integrated in some parts of our businesses. We control our rock supply, we control our paper supply. So those key raw materials where you need ownership, we've made those investments.

On the manufacturing standpoint, I would say people are very aware of the outbound logistics quite a bit, especially contractors. Is a truck showing up on time? Are all the products available at the time I order? But it's really the inbound piece that takes the most amount of work, making sure that we have the raw materials in place at our plants to produce the products. If we miss a truck or raw material and we shut a plant down, it doesn't matter if we don't have a truck on the outbound side.

So we manage 80 different vehicle types. We do everything, rail, barge, lakers, trains, trucks. And the other thing we have is a nationwide footprint. So we don't have a nationwide manufacturing footprint for all of our products, but some of the products we do and we're able to utilize that from a warehousing perspective to redistribute our inventories and put them in place closer to the market so they're more readily available when the customer wants them.

And the other thing that I think may be a blind spot for some people when they think about supply chain is how much time we spend on planning. Planning and supply chain is huge. We have monthly plans, weekly plans, daily plans and this really helps us execute. And then when things go wrong, creating all those plans allows us to understand our constraints. We talk with sales on regular basis, understand customer needs. So when issues arise, we're able to make quick decisions and work our way out of any hole we may be in hopefully before it impacts our customers.

Heidi J. Ellsworth: Having a little bit of a crystal ball is really important, isn't it, Matt?

Matt Sylvester: Yeah, sometimes that crystal ball can be pretty foggy. The other thing that you always hear the bad things about supply chains, it can actually be a very rewarding career as well. If you like solving problems, you like being in the middle of the day to day, the hustle, it can be very rewarding as well.

Heidi J. Ellsworth: Yeah, it sounds fun. It's like a big puzzle, making sure that it all works together. Mattias, talk to us a little bit about what Matt's saying and that is sourcing it to make sure everything is getting manufactured, the plants are running, everything is, talk to us a little bit about that.

Mattias Ruegge: So we're basically moving upstream in our supply chain really towards our suppliers. And the way you have to picture this is we have hundreds of suppliers with the raw materials and very different things from recycled paper, from minerals, metals, additives, chemical additives and so forth. And all these supply chains look very, very different. And so we have very short and local supply chains for our minerals especially. So these are heavy low-value products in many cases. Think of calcium carbonates or other minerals that go into our products. And then you have chemical additives, for example, that are globally sourced and these suppliers in Asia or Europe are also sourcing globally. So much extended supply chains with a lot of potential breakpoints and also risks. And they're dealing with very different risks than for example, a local small supplier that is close by. So this is basically what you have to think of in terms of managing risks and also how diverse the different parties and supply chains we are dealing with are. That helps.

Heidi J. Ellsworth: So what are some of the things, I mean we know Covid, we're just going to put that out there. Covid was a disruptor. But it goes a lot deeper than that of why it was a disruptor. So Matt, what are some of the things that can disrupt that supply chain that maybe us as consumers, contractors, we just aren't aware of some of those disruptions.

Matt Sylvester: So there's a lot of things that can go wrong within supply chain. One of the things I talk to my team about is really controlling the controllables. So no self-inflicted wounds. Working with our customers and understanding demand and demand spikes that may be coming up. That's something within our control. Capital planning and the downtime. So we spend millions and millions of dollars investing in our network of plants. So how we manage those investments, when plants go down, how we manage the inventories around that are all within our control.

And then just unplanned downtime. Manufacturing plants, they're not 100% reliable. You should expect them to go down and putting standard work and stuff around that. And really controlling the controllables before it gets to the customer is our primary focus. But then there's the other non-controllables. The COVIDs, the transportation rail embargoes, high rivers, labor strikes, port strikes and weather and hurricane season. So one of the things, you can't plan for a hurricane per se, but you know they're going to come and you know they're going to come between August and November. And you know it's either going to hit on the Gulf Coast or the East Coast or the United States are the higher risk. So how do you mitigate that and bring in raw materials, make sure you have healthy inventories across your network heading into those seasons, making sure that your capital plans have already been executed for the plants close to the ports are all key in just managing disruptions that may come.

Heidi J. Ellsworth: There's a lot of disruptions. I mean all those things you just mentioned, I'm like going, yeah, it's all the stuff we see in the news every night. One of the things you didn't mention and Mattias would love, we won't get into really the politics, but there's a lot that goes on too that disruptions that can come from geopolitics or even from international.

Mattias Ruegge: No, that's right. And also for those you can't prepare a hundred percent. So the way we typically try to think about this is 70% planning and the rest is just scrambling. And this really starts early on when we look at our different raw material categories, we try to think of how critical is this raw material really for what we are doing? How critical is it for the performance of our product? And then how many options are out there? Can we easily switch? How critical are the suppliers that we're working with? How long does it take you to qualify a new supplier, for example?

So based on that and really doing that planning work helps us to identify the critical points in our supply chain and also the suppliers that are extremely important that we want to plan around and we want to have deep relationships and partnerships to make sure that some of those risks are mitigated.

I mean, talking about global implications, we're talking about tariffs, we're talking about potential political instability in certain countries, export limitations and so forth. This is something we try to plan poor so that we always, if for example, we have a supplier from a more risky region, that we also have a secondary supplier or a threat supplier that is maybe more closer by or in another country so that we can easily switch, if it helps.

Heidi J. Ellsworth: Yeah, it does because it really has me thinking through a lot of this. And I know when we went through the material shortages and the supply chain after Covid, how important it was, Matt, for contractors to be aware of this and to have... I love what you just said, Matthias, about building relationships with your suppliers, but then also how important it is for contractors to build relationships with their suppliers and really how that can go. So maybe Matt, talk a little bit about contractors understanding disruptions, understanding how important the relationships are to kind of work together to get past those.

Matt Sylvester: So one of the processes we have in place to help get contractor and customer feedback is our sales and operations planning process. So every month we'll sit down in a meeting with Tiffany and Derek, who's our director of sales for our roofing products and really understand what their customers are wanting in terms of demand, skew mix, geographical location, so we can run that through our operating models and put that inventory in place for when they want it. So that communication that comes from the customers directly gets passed on to supply chains, we're able to execute. So I would say that's key.

Another thing, when you're doing planning, we're not going to be able to correct all the issues. There are going to be times when things go wrong, but companies that really focus on planning and resiliency shouldn't be blindsided. So hopefully we can give you as much of a heads-up as possible if we think we are going to have a delay. So that communication does work both ways. So you can better plan labor, crane times, whatever's impacting the job site.

Heidi J. Ellsworth: Put that through. What are, kind of taking that next step. So as contractors are understanding their suppliers, understanding what they're doing, what are some of the practices that you all have put into place to make the supply chain more resilient? I think it's important that contractors actually understand what does help that and that they can ask those questions as they're making decisions on who they're going to work with.

Matt Sylvester: So I just touched on the sales and operations planning, so that is a key one. But then we also do daily production planning. We do daily transportation planning. Some products have to be railed three weeks in advance to get to the market so they can be shipped. So there is a long lead time in terms of just distributing product to the market.
And then good inventory planning, having healthy inventories is key, especially when you look at our roofing demand. It's highly cyclical. So you see a peak in the summertime, it trails off in the winter, but that's not the same in every geography. Florida is much different than Northeast. So understanding all of those trends allows us to position our inventories better. So if you have jobs that may be outside of those trends or a unique product that you don't buy that much, that information would be extremely helpful when we're thinking about how we're managing our operations and positioning our inventory.

Heidi J. Ellsworth: And what about the moving away, I know before Covid we very much were becoming a just-in-time with manufacturing planning, but now we're moving away from that a little bit. It seems like there's a little bit of a balancing going on there. Matthias or Matt?

Mattias Ruegge: I think the balancing is actually an important word or an important concept because obviously you can mitigate all risks, not all risks, but you can a lot of risks by throwing a lot of money at it. But at the same time we also want to be cost-competitive. So with everything we do, we always have to manage the trade-off between cost and supply resiliency. So for example, if you split up your volumes and I'm talking from a supplier perspective, you split up your volumes, so you get less discounts. So you always have to balance these and you have multiple of these trade-offs that you have to keep in mind.

So really for those critical items on the sourcing side that I just mentioned earlier, it's really important to have long-term partnerships. So really investing into those long-term partnerships, having commitments, volume commitments, long-term, actually going even beyond that and jointly develop new products, joint innovation, close integration on an RD side. So those are things that really help you develop relationships that when you're being punched in the face by an emergency, help you to really get out of this and mitigate and manage the situation appropriately.

Heidi J. Ellsworth: And Matt, kind of to that point when we're looking at getting it to the contractors and you mentioned this before but I kind of want to hit on it again, is that network, that network of warehouses, of manufacturing and of having enough inventory so it's not just in time in case anything happens. Talk to us a little bit about that. Because that seems like there's a lot of planning.

Matt Sylvester: So it is a lot of planning. The reason you do it is, one, to have inventory in place on the customer places the order, but you also understand all your constraints. How many rails can a warehouse receive in a week? So how long it's going to take to build up the inventory? So when are the plants going to have to produce the product? So that's all balancing. And we've got 46 plants, I think 176 production lines that we're balancing the entire network of U.S. and Canada. So it's really understanding all the constraints and building the plan in place so you can produce the raw material, have the right raw materials, produce the right finished good and place them appropriately for when the customer does place the order.

Heidi J. Ellsworth: One of the things we hit on just lately at the very beginning, but I think is well worth coming back to because when I think about and Mattias, I'm coming back to you because I think about some of the chemicals that weren't available after the freezes in Texas a couple of years ago and that really was the polyiso world, I believe, where that was hit. But natural disasters, I mean from snow and freezes that shut down plants to earthquakes to everything. And we're not talking just in the US-Canada, we're talking internationally that you're having to juggle to make sure that all of those natural disasters you're working around them. Talk a little bit about that and dealing with managing that.

Mattias Ruegge: So again, I think as I said earlier, I think it's all about the preparation sometimes years in advance, to make sure that for those critical raw materials that we really deem important to our product's performance, that we have backup plans so that we can switch. And that's also, that requires us to work with our suppliers, but also with our own formulators, with our R&D departments. But when the situation hits, when it actually happens. So you try to be ready, it hits and then you're able to either move to another supplier. If you can't, sometimes that's not that easy. It doesn't work immediately.

So what that requires really in those situations is close collaboration internally with our supply chain colleagues, with manufacturing, with our R&D colleagues to really make sure that we find an immediate response. And that requires sometimes some scrambling, but just making sure that we have open communication channels internally, everybody knows what needs to be done and who does what in order to make sure that we have products for our customers available. So there's not a single solution to it. But again, the 30% scrambling, you can also prepare for that by having emergency forums and platforms that you use. But it's really about open communication, collaboration and having a sense of urgency.

Heidi J. Ellsworth: And when you're looking forward and into the future of everything. I know one of the things is also innovation. Innovation that maybe it's time to change and use more common materials or having to switch. As you're looking at things right now and you're looking years in the future and you know that these chemicals are not going to be mined, maybe there's some problems, different things. How do you go about that innovation with you getting back with Matt working and I mean obviously all your scientists and everything.

Mattias Ruegge: So for us, giving you one example, a big theme for us is sustainability. So really coming up with innovation that is driving sustainability and sustainable final products. And that very often requires to reformulate and come up with solutions that are not there yet. So that's an important thing where we also have to rely on our suppliers to be innovative and come up with solutions and then we have to see if these solutions that they're proposing are actually performing as we need them to perform to actually make our customers happy.

So there's a lot of collaboration, again, collaboration is a word that I can probably use a hundred times a day between our teams, between our suppliers, our CSE, our manufacturing teams and Matt's supply chain teams to make sure that we keep the performance or even, I mean ideally enhance the performance of our products with sustainability in mind. So we want to reduce our CO2 emissions, but also have red list chemical free products. So those are important objectives where we need our suppliers to also contribute.

Heidi J. Ellsworth: Matt?

Matt Sylvester: Yeah, I was going to say, when we think about agility and resiliency, our innovation team plays a huge role in that. They're able to reformulate quickly. Sometimes they have formulations already on the shelves, maybe they're a little bit higher cost, we're not using them, but that gives us an option to trade into. So we're not running our plants out of materials. It just may be a different formulation change or maybe a different supplier. So that really helps us a lot when you have specific issues like say around latex or something like that.

Heidi J. Ellsworth: And I like how you're both saying sometimes just the requirements of the industry, of the market, especially around sustainability or energy, those things are changing. So Matt, I'd really love you to share with the contractors out there, what they can do to be that great partner, to really help giving those insights, not just real quick for what's happening on jobs and stuff, but also what they're seeing from trends from the architects. I know you have a whole division on that, but how is some of that handled and what can people do?

Matt Sylvester: So one, timely and clear communication. So if they see things that could be innovative or if they're having issues, I bring those up with your sales reps, let them bring that back to our CIC so they can see if there's something we can do to help navigate any pains that they're feeling in the marketplace and on the job sites.

But then also if you got large jobs coming up, even if you understand that you need X amount of trucks over a certain period, getting that into our hands sooner allows us to prepare for it better and then we can manage the job and track it with our sales group. So if delays change or it gets bumped out a month or two, it's already in our planning process, it's already on our schedule to produce, it's already in our schedule to redistribute and ship to the customer. So I would just say timely, clear communication in terms of what you want and need and that's going to help us service you the best.

Heidi J. Ellsworth: And I know over the last couple of years, the contractors who have worked closely with their manufacturers who've worked closely with you, Matt and your team and Mattias, they are the ones who actually came out of a lot of the supply chain issues ahead and they were able to deliver to their building owners and to their customers or at least have that clear, concise communication because they knew. Mattias is saying how important it's for you to have that deep great relationship with your vendors and suppliers is the exact same thing for the contractors. So talk to us a little bit about contractors taking the time to build those relationships so that when these things do happen, you can work together as partners.

Mattias Ruegge: I can tell you, and it's not necessarily not talking about the immediate emergency where you have an immediate supply risk. But I think what I would encourage, what we are expecting from our suppliers also, but really makes the difference is to not only talk about the immediate product that they're using from us and think about, "Hey, what do you not like or what can be improved?" But really talk more generally and think more generally about the pain points that they're facing on a job site. So what keeps them up at night? What is something that they really need to be addressed somehow? And maybe they don't even necessarily think about us as a solution provider or someone who can actually solve for that problem, but maybe if we think outside the box, we find a totally different way of coming up with an innovative product that addresses their solution.

I think we have some good examples also in other business units and also the roofing side, but this is what we are expecting from our suppliers. Really having joint innovation sessions where we are talking about pain points and then coming up with creative solutions. Not all of them are valid at the end, but this open innovation or this open pain point sharing and discussing these pain points really leads to sometimes very unexpected outcomes. And so I think that's the long-term view, but the short-term view is always open communication. If you have an emergency, just reach out immediately, say what you need and what the issues are so that we can address.

Heidi J. Ellsworth: So one of the things, Matt, that you said early on and I just want to kind of end on that, is how enjoyable your job is. I love hearing that. That is just so fun. So really as you are solving the puzzles of the supply chains and the resiliency of supply chains, and I guess my final thing is some final thoughts to the contractors out there about this kind of unseen part of the business that is just so critical to their success. Basically your thoughts to the contractors on really understanding the supply chain that really they don't see a whole lot of, they don't get to see that part of the business and what a great job you all do.

Matt Sylvester: So sometimes I take that as a compliment. Sometimes when you get no feedback, that's a compliment that things are going right. Hopefully we're getting the negative feedback if things go wrong. So we can put corrective actions in place. But I would just say it's also important when you see things done well or you see something that you liked that was done, provide that feedback too because that's going to help us in terms of continuous improvement, training with our employees, et cetera. It is really going to go a long way and it might be something that we can replicate and scale across the network as well, whether it's for a certain contractor or a certain segment of our business.

Heidi J. Ellsworth: I love it. Great advice.

Mattias Ruegge: I can tell you, Heidi, on the sourcing side, procurement side, we are a bit detached from the contractors. We are a bit further upstream. But if you're working in a customer-centric organization and you learn about a win and you've contributed to the win, even though you're further upstream and you have helped something materialize or helped out to get to a great outcome, that's the most motivating thing and that really excites the teams. And I think also within USG the customer-centricity and that orientation towards the end customer who really uses our products and helping them win is super rewarding.

Heidi J. Ellsworth: Okay, I love this podcast. This is something we don't get to do very often to really dive in and talk about this and how important it is to the industry. So I want to just say thank you to both of you. I have learned a lot, so informational and thank you for keeping the wheels rolling. Thank you for making everything happen in the industry.

Matt Sylvester: All right, thank you.

Mattias Ruegge: Absolute pleasure. Thank you, Heidi, it was great to meet you.

Outro: Thank you. Great to meet both of you. I look forward to talking again in the future. And for everybody out there listening, please check out the USG directory. See who your sales reps are, get that relationship and get the information back because you can obviously hear from this podcast that there is a lot of contractor-driven innovation going on at USG and it's exactly where you need to be. So check it out and get all that information. Also, please be sure to check out all of our podcasts under the read, listen, watch navigation, be sure to subscribe and set your notifications so you don't miss a single episode. We'll be seeing you next time on Roofing Road trips.

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