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2017

I interviewed Jeegar Shah who discussed The Challenges of Industry 4.0.

 

 

 

 

 

 

You’ve been a Microprocessor design engineer, co-founder of a SaaS startup in the life sciences space and then a management consultant with McKinsey & Co - so what brings you to Falkonry?

 

Hi, Dustin, first up thank you for having me - excited to be doing this. Before I give you a long twisted answer - let me just cut to the chase and get to the 3 reasons as to “Why Falkonry?” - this is one key trait that you’ll see with ex-McKinsey consultants.

 

  1. Well, The obvious promise - There’s been a lot of buzz about Industry 4.0 and the $11T IoT opportunity with 50B connected devices - you’ve heard all the pundits so I don’t need to repeat myself, but the take away here is that Industrial IoT holds the biggest promise - about $4T. Yes, there is hype and uncertainty but I am convinced we are at the cusp of something big.
  2. The geek factor - I’ve been around geeks that bump into glass doors and I’ve been around buttoned up professionals that can sell a Lamborghini while biting into a doughnut. I am personally more comfortable around geeks - I’ve come around working with people who have bruised foreheads. And the geek factor at Falkonry hits the roof!! Yah not even the glass doors.
  3. The product - Machine learning/ pattern recognition may be buzz words but I was sold when I learnt about Falkonry. It all made sense. It was intuitive and I could connect the dots. Fortunately, my HW and SW background perfectly fit into the Falkonry product journey. Seemed like the best way to put my engineering, product and management consulting experience into practice.

 

Well, that’s 3 reasons but I did end up giving you a long twisted answer. Guess I was never cut out to be a management consultant after all and another reason why I am here.

 

In your opinion, what are some of the ways of capturing value from Industry 4.0 applications?

 

There really isn’t a text book answer for this and the answer will vary depending on the subject and context at hand. But if I were to generalize I would say:

 

Digital enablement:  In my opinion providing a digital gateway to manufacturing can accelerate existing lean processes, and help to build a data-driven mindset, thus laying the foundation for more advanced technologies that will in turn pave the way for efficiencies and optimizations needed for Industry 4.0 to succeed. Digital dashboards for example help support performance analysis to achieve OEE improvement by increasing engagement of frontline operators and management. People often don’t realize that performance data usually persists beyond the shop-floor whiteboard. It supports normalized calculations and reporting, allowing KPIs across previously siloed functions, plants, and business units to be shared and benchmarked for consistency and best-practice sharing

 

Automation: When we talk automation, we imagine robots taking over the floor and displacing humans. Yes, for sure we expect significant adoption of robots on factory floors. This trend is expected to further accelerate because of advances being made in sensing the data (and hence the buzz on sensors) and making sense of the data (which leads us to the discussion on Artificial Intelligence). So it’s not just the invasion of robots and automation on the factory floors. Automation can also apply to decision making, resource allocation, demand forecasting, order management, etc

 

Throughput optimization: Factories stay competitive by maximizing throughput and managing costs. So the digitized data that we spoke of before can be used for process control systems to optimize yield. Now, in manufacturing operations, a lot of operational intelligence characterized by time series data stays hidden. Identifying bottlenecks OR processes that are largely responsible for impacting quality OR levers that impact the yield are hard to decipher for a human. Throwing the right technologies to get a better real time measure of operational efficiency can lead to higher throughput and higher profits.

 

Predictive maintenance: Predictive maintenance typically is geared to see an increase in machine availability and a reduction in maintenance costs – based on the introduction of new predictive maintenance algorithms. Companies need three components to be successful in predictive maintenance: knowledge of the respective asset, strong advanced analytics know-how (such as machine learning), and the appropriate change management capabilities.

 

If you notice, all these capabilities are not orthogonal to each other. Digital enablement leads to Predictive maintenance which is turn leads to Throughput optimization. Automation is needed to ensure scalability of all these capabilities. But the take away here then is that a disciplined, data-driven and measured approach are the key enablers to Industry 4.0.               

                              

You mentioned Industry 4.0 and the buzz. So where do you see some of the challenges?

 

Industry 4.0 has raised definitely high expectations, and not all have been met yet. And there definitely is the accompanying buzz of Operations optimization, predictive maintenance, inventory optimization, health and safety - you name it - not all of which has been measured in terms of expectations and measures of success. Everyone, wants a magic wand. But Industry 4.0 implementation is a multiyear process, and more applications will develop as technologies mature further. It is imperative that manufacturers across the world start now with a set of concrete applications.

 

There’s been a degree of disillusionment in the actual implementation and results so far are mixed. On the one hand, we still see high uncertainty among manufacturers regarding what implementing Industry 4.0 really requires of them – and many are still struggling to even get started. On the other hand, most technology suppliers have moved relatively fast in adjusting for Industry 4.0. Very few technology providers and manufacturers have an overall strategy in place and even fewer have assigned clear responsibilities and goals.

 

Industry 4.0 requires a plethora of technology requirements - both IT and OT. Whenever you have a confluence of varied technology stacks, you can easily find yourself in implementation mayhem where half-baked solutions that are often patchy and in hindsight the solution stack not scalable or portable. Executives are driving Industry 4.0 strategies without understanding and appreciating the nuances and limitations of machine learning, big data, OT/IT protocols, connectivity standards, etc. For eg. executives clamor for more data and throw resources at big data technologies. Big data is more often dumb data with little contextualization. The secret lies in marrying human experience with algorithmic power to identify patterns that are more conclusive, useful and actionable.

 

 

I guess you are heading somewhere with that - and so how do you think Falkonry fits the bill here?

 

Yah, sure! But before I get started with that - let’s dig a little deeper into the motivation. Peter Thiel in his book “From zero to one” - picks up on an interesting discussion. There’s this ominous outlook and concern of AI and machines taking over the world, humans being replaced from their jobs and Skynet beaming humans out of existence. This all calls for some interesting science fiction but he cites several examples where human skills are complementary to opportunities that can be enabled through computers and AI. Machines can toss gigabytes around but aren’t as great at making judgements. Case in point, you can train a model to recognize cats with 90% accuracy after scrumming through thousands of training images but that’s something a 4 year old can do easily.

 

Falkonry builds up from this premise. While Falkonry can use advanced signal processing and machine learning techniques to identify temporal patterns in time series data, the data gets enriched when a subject matter expert annotates his experience on top of those temporal patterns. With a more contextual perspective to these patterns, it suddenly makes much more sense. Thus, Falkonry is a tool for subject matter experts - a tool that empowers them to cut the cord of dependence on data scientists and programmers that work in their own bubble. It also helps minimize context that is lost in translation as humans talk to each other and instead provides a paintbrush for subject matter experts that understand the operational data best.

 

So to sum it up, the answer maybe lies in the fact that it would be misleading to look for an all encompassing solution that works as a magic wand - A wand that would minimize human interaction and propel us into an automated world of connected devices that make smart decisions. What’s really needed is a way to equip, enhance and complement human judgement with better data enabled decision markers - and that’s Falkonry to the Industry 4.0 challenge.

 

 

About Jeegar Shah

 

 

 

 

 

Jeegar Shah

 

Sr Director at Falkonry

 

LinkedIn Profile

 

I interviewed Wayne Yoshida who discussed Recruitment in Transportation and Logistics.

 

 

 

 

 

 

Today we're speaking with Wayne Yoshida, and we're going to discuss Recruitment in Transportation and Logistics. So, Wayne, could you first provide a brief background of yourself?

 

Yes, thank you very much, Dustin, for taking the time to chat with me today. I've been in Japan for about 11 years now, originally from Canada, in recruitment for four years, specifically in logistics and transportation mainly, but also looking after supply for some positions, logistics and transportation, covering anything from freight forwarding, shipping lines, 3PL, express, and that on the maker side as well as the industry of logistics itself. I'm in charge of the logistics and transportation here for Focus Corp in Japan and overseeing position in, obviously, Japan, as well as Myanmar, Hong Kong, and Singapore.

 

What is the current status of recruitment in transportation and logistics?

 

I can mainly speak for Japan. Transportation is specifically...it's an aging male-dominated industry. Very few new grads or young people are coming in the industry, just maybe because of a little bit of lack of information early on, or maybe because the industry is known as a male-dominated, older-gentleman type of industry at the moment, but it's slowly changing with more and more big company looking after, obviously, logistics, supply chain, and all the transportation companies like DHL and Maersk always have new-grad programs that brings in the new blood.

 

We're, as a country, I think, we're always looking for good sales people — good sales people in the industry of logistics and transportation. It's a rare commodity for bilingual, young candidates. So you really have to go out and work your network, I would say, getting referrals. LinkedIn is very underused in Japan. Very few people are using LinkedIn yet, so we need to have a very strong network to be able to find the people.


How can supply chain professionals and hiring companies take advantage of new developments that are happening in the industry?

 

I would say overall, the market at this moment, they are looking very much after qualified procurement specialists as well as demand planning. A lot of companies here in Japan are, I would say, compared to other places in the world, are still implementing a CP or other ERP. A lot of companies are working out of Xcel still. So qualified candidates have a [inaudible 00:04:17] Oracle ERP experience are very looked after,people with good procurement, negotiation skills as well. We find that the bilinguals that can do direct and indirect procurement are very little. So people that have these skills, the companies are very looking forward to that.

 

Do you have any final recommendations or comments about the recruitment in transportation and logistics in Japan?

 

Recommendations — I would say it's a good industry. Logistics supply chain is not going anywhere. Companies are spending a lot of money to better themselves, to improve their supply chain, their logistics. So I think in the future, it's going to be an industry that will still grow. So I think in Japan, the image of an aging industry will change. It might take some time, but it will change, and I think the industry is very wide-covering, like we talked about. The procurement, demand planning, planning the transportation — that will also offer a lot of opportunities. Transportation, you might have seen in the news recently. I think it's everywhere globally. There's a lack of drivers. So new opportunities on the IT side for self-driving vans. New ideas will have to come to the industry to improve it, to make it, I would say, more sexy. But I think in the future, supply chain logistics, transportation will continue to grow and help us in our daily lives.

 

Well, thanks for sharing today, Wayne.

 

Thank you, Dustin.

 

 

About Wayne Yoshida

 

 

 

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Wayne Yoshida

 

APAC Business Manager - FocusCore Group

 

LinkedIn Profile

I interviewed Nikunj Mehta who discussed Why is it hard to find insights in operations & time series data?.

 

 

 

 

 

 

Today we are speaking with Nikunj Mehta, who is the founder and CEO of Falkonry. Falkonry does intelligent pattern recognition for operations effectiveness. We are going to be discussing why it's hard to find insights in operations and time series data. Nikunj, can you first provide a brief background of yourself?

 

I'm a long-term time series geek, and I have been helping companies gain insights in their operations data. And I'm also an enterprise software architect. For a long time, I've realized that the industrial world is where there is a lot of action in terms of interpreting data that they produce and understanding what it means.

 

Can you talk more about why you decided to do this kind of work?

 

I think it's evident, as see industrial IoT and a lot of these machine-learning buzzwords take place in the marketing world, that there is a lot of pent-up demand for extracting insights from operations data. Much of this data that is automatically collected tends to be of a time-series nature. For example, the way temperatures inside rooms change or the way in which electrical wiring varies in terms of the current it conducts over time. And operations is all about behaviors and behaviors that are all happening over time. So in order to understand how we can do better in our industrial and other production operations, we need to have a sense of what's going on as well as what's about to happen. And that requires understanding time series behaviors.

 

When I was at my previous employer, I saw a very large company struggle with making sense out of their time series data, and I realized then that the software world had done very little to actually assist these operations experts to interpret the data that they were producing. And I saw that there was a very broad opportunity to help them and realize that one of the best ways to help them was through starting a company, Falkonry.

 

Who cares most about this?

 

These are operations experts. Many of these go by titles like process engineers or manufacturing engineers. It's their job to gain improvements in operational efficiency, to continuously improve whatever it is that the production is about — whether it is power or widgets or internet service or, for that matter, even healthcare outcomes that people feel happy about.

 

Because they're constantly striving to improve operations, they're looking for ways to understand where those opportunities lie, and that requires that they gain new insights from wherever. It could be science or it could be data. One of the harder aspects of the improvement business is that after a while, there are no easy low-hanging-fruit type of opportunities left. All that's left is the hard stuff. And we think that in the industrial world, that's where people are at, that everything ahead of them is hard. And at the same time, they know that because it is relatively cheap to collect data, computation is so cheap, software is increasingly seen as an answer for a lot of problems, and most importantly, you pay as you go. So you don't have to make a huge investment up front. These people have been trying to figure out how can we benefit from it. So we're working with people in manufacturing, in industrial operations, transportation, and others, who have a lot of need to gain insights from their time series data.

 

Can you talk about how things have been changing and whether it's getting easier now?

 

I [inaudible 00:04:08] some of the general trends that are happening in and around computers and software. So certainly that's happening. Another important thing that has happened is software for analyzing data has become a lot more pervasive. And many techniques for analyzing software have emerged to a point where people see a likely solution for time series data as well.

 

Now there has also been a substantial crossover effort.People who would have traditionally been focused on selling business process improvement techniques, such as what is common in enterprise software and data, where I come from, have realized that that's a shrinking market and there are large emerging and growing markets in the industrial world that need a lot of software. And so there's been this sudden, new influx of talent going into the industrial world that is looking at time series data, [inaudible 00:05:08].

 

Secondly, techniques that have in the past been applied to small problems, such as analyzing the cardiac function time series data to understand heart health, are now, through better computational techniques, being applied to solve very complex industrial problems, like understanding what is really going on in a power drive used in a manufacturing plant and be causing it to shut down improperly. Those techniques were just hard to apply to large problems. But software experts, such as those at Falkonry, are able to figure out how to solve these more complex problems using the same type of basic math.So that is one major improvement that has happened in the recent past.

 

And then, of course, various people are approaching it many different ways. Some try to make it easy for people to express what they are looking for. Others extract insights directly from the data and help people interpret it visually and provide some feedback and subject matter expertise back into the computer so that the system overall gets better over time.

 

Do you have any final recommendations for operations experts?

 

I would suggest people, that they take a look at time series techniques, especially those that focus on subject-matter-expert usage. It is very hard to solve problems through developers and data scientists because there are just not enough of them. And it's hard to translate the knowledge of subject-matter experts to a form that data scientists and developers can understand. So when looking for insights in operations data, look for techniques that are subject-matter expert friendly. Number one.

 

Number two, look for techniques that will surface insights automatically, rather than one where you have to do a lot of setup and provide a lot of input.

 

And then thirdly, look for techniques where you can solve problems and pay only for the value you're able to get based on the problems that are solved rather than an upfront major investment in new frameworks and technology platforms.

 

So those are my recommendations. And Falkonry, of course, embodies all three of them. It is designed for subject matter experts. It does not require a lot of upfront work on the part of the subject matter expert. And you only pay for the value you get. So that sort of creates a win-win for these operations experts and their businesses.

 

Thanks for sharing today, Nikunj.

 

 

About Nikunj Mehta

 

 

 

AAEAAQAAAAAAAAhvAAAAJDIzOGM3YjRjLTI1YzYtNGI4NC1iOTlmLTk5ZWQ5N2E2NTdmYQ.jpg

 

 

 

Nikunj Mehta

 

Founder and CEO of Falkonry

 

LinkedIn Profile

I interviewed Andreas Jones who discussed The Value of Supply Chains to Organizations

 

 

 

 

 

 

Andreas, can you first provide a brief background of yourself?

 

Great.Absolutely.So my supply chain background started in the military.I served nine years in the US Army, did a plethora of supply-chain-related activities, including inventory management, supply chain operations, contracting, and transportation. And so my time in the military gave me a 360 view of supply chain, as far as niche-ing out into supply chain to figure out what's going on at each point.

 

With that experience, it allowed me to be uniquely qualified, once I got out of the military, to then go into the corporate world where I've branched out into sourcing and procurement and also supply chain project management.

 

Can you share with us what is the value of supply chains to organizations?

 

That's a great question. The value of supply chain... Supply chain is really a value-add organization. Normally what happens with supply chain organization is that it's only seen as a tactical organization versus a strategic unit within the business. So the value of a supply chain is allowing the business to have a unbiased strategy of purchasing and delivering their service or product to their end-clients or customers. And so what supply chain is built around is, first and foremost, building relationships. With those relationships, you're able to drive value and derive value from those relationships as your strategic partners get to understand your organization and the goal of your organization. And so when it comes to things like saving for the organization, you're able to do that because you have these strategic partners that you have built relationships with who understand what your business needs are and understand how to help you achieve your goals.

 

How is value created and delivered?

 

So value is created first and foremost in understanding the business requirements. The supply chain activity starts with the business units have a need. And then once you understand the business need, then you can go out and start looking for solutions to that need. So the value you get is that you now have multiple opportunities to get the same result in that you have formed these partnerships with your suppliers and you know that for that need, they would be the best suited to handle and meet the business requirements. Before you go out and do any supply chain related activity, it means you've got to make sure that you have absolute clarity in what the business requirements are and what the end-goal is for that project or initiative. And so value delivered is then done on the back end where you could show tangible savings — either soft or hard savings — and you can show how partnering with that company now allows us to have better transactions going forward and continuity in support after the project goes over and stuff like that.

 

Do you have any success stories you could share?

 

One success story for me would be, in one of my corporate roles, I went in and basically they were going through a lot of changes. They had acquired a couple other companies. So they were in the process of merging those companies. So what I was able to do was to go in and meet with all the company that they acquired, meet their leaders, meet their business units and figure out how to bridge the gap between all three so we would have a seamless supply chain operation that could support the business as we were growing and acquiring more companies. So that entailed looking into their contracts, looking for the overlaps of the companies that had the same supplies and stuff like that, so a lot of deep work and a lot of details. But the end goal was that we were able to bridge the gap. We were able to consolidate the three supply chains of the company to one global process, which really worked out and helped us position the business better off.

 

Do you have any final recommendations for supply chain managers and executives?

 

For supply chain managers and executives, I'll say the number one thing you want to establish in your organization is definitely leadership. And leadership and the fact that supply chain is not a one-man operation and a business is not really a one-man operation. It's a lot of dependencies there. So as a manager, as an executive, you have to be able to cast a vision and get buy-in from all parties, from your workers, from your teams, from your suppliers, and everyone in between. You have buy-in to what the vision is. So as management and an executive, definitely you want to have leadership. You want to have clarity. You want to have focus, and you want to have good execution and adjustments along the way.

 

Thanks for sharing today, Andreas.

 

Thank you.

 

 

About Andreas Jones

 

 

 

AAEAAQAAAAAAAAi3AAAAJGVhYzQwNDVmLTkwNmEtNDY3OC1iOTVmLTkzMGZkMzgzMmJkZA.jpg

 

 

Andreas Jones

 

Global Procurement and Sourcing Leader I Supply Chain and Logistics Leader. Army Combat Veteran.

 

LinkedIn Profile

I interviewed Mark Burgess who discussed the Food Supply Chain

 

 

 

 

 

 

It's good to speak to you today, Mark. Looking forward to hearing your views on food supply chain in the Middle East. Before we start, could you give a brief background of yourself?

 

Well, I'm a 55 years and a “lifer” in operations and supply chain. I've never really done anything else since leaving school at 16. My first role was in the purchasing department of a public authority in the UK, I then moved into the stock control department before the company decided I should be an accountant. So I they sent me off to study at college but I quickly realized this vocation was not for me. I had an opportunity to play guitar for a living so I left the business before qualification and did this for a few months whilst I tried to figure out what to do next.

 

I ended up taking a job back in supply chain when I met my first wife and managed to get a job in production planning and procurement. I think I was fortunate enough to be able to get a job at that point because being a musician hardly qualifies you for the 9-5 working world in the opinion of many. Luckily for me my new boss wanted to learn play guitar so I guess he was a kindred spirit and he figured on cheap lessons ha-ha

 

I spent 1985 working in the office equipment industry in a company who were an early adopter of MRP1. After a year, another local company also in the same industry were hiring and looking to implement A DEC MRP 2 system and they needed people with experience to help them do it. I guess I sold myself well at the interview and had to learn quickly. I used to go to bed reading manuals and anything else I could get my hands on about MRP2 and operations planning. The business was a terrific grounding for me the DEC system was excellent especially in terms of production planning, method study, and production. I learnt a lot quickly. In whatever I have done since the knowledge from this time has become a constant reference point for me, irrespective of the system used it could be Oracle or SAP etc. they all have their own foibles, but the basis and logic is the same as then. Most people who have been around a while understand there is very little that is new.

 

I've worked in supply chain in Food, Office equipment, FMCG (with many types of manufacturing within that) and Healthcare, So I've pretty much run the gauntlet of many of the different disciplines within supply chain, certainly on the manufacturing and logistics side.

 

Can you talk about some of the challenges that you faced within food supply chain in the Middle East?

 

Supply chain in the Middle East is evolving because the Middle East is changing rapidly. I first went there around eight years ago as a supply chain and purchasing manager for a bakery business called Western Bakeries who are owned by Almarai who are the biggest vertically integrated Dairy business in the world and the biggest food group in the MENA Region.

 

At that time 2009 supply chain really was in its infancy. It wasn't something that was well understood. I was very fortunate to with a UK nationality operations manager who understood what was required and recruited me and a CEO who gave me the authority to go ahead and do it. I had I previously worked as Supply chain director in the UK and as an internal supply chain and manufacturing consultant in a business that was split between manufacturing, and repacking but I had also worked for Manor Bakeries the Mr. Kipling / Cadbury leg of RHM foods. So I was able to effectively bring quite a lot of experience to the table.

 

The first thing that struck me was the quality of the staff in the Middle East. To be honest people quality was fairly poor at that point in time (its changed now) and there was not many who had the basic skills or understanding of supply chain. The business itself had world class equipment and systems but was not totally sure how to optimize them. The 1st requirement was a matter of really educating the business management to understand the systems they had bought and what they could do for the business. Only then then could they progress in learning how to use them to enhance their operation and start to make a strong stable operational supply platform for the business.

 

Traditional regional supply chain back in 2009 was all about having high inventory to protect from stock outs, buying what was available, and when you ran out you would just buy more. Gaps in supply were not popular but commonplace. There is a further issue in Saudi Arabia where I was based in that flour is provided from government flour mills. This is because the government understood the importance of bread to the kingdom and its people and provides the flour at a subsidized rate to sell at a reasonable price. This however gives you no choice in the supplier due the cost of acquisition from elsewhere and provides you with another set of problems as quality of flour is inconsistent due to raw material availability.

 

This meant you needed good quality production managers or “Master bakers” (if you could get them) to adjust the mixes on plant. The Bills of Material therefore could be wildly in accurate versus reality and the volume of expensive ingredients could be wildly understated as the tendency was always to do the cost roll up at the minimum cost with little waste in the bill.

Because of the poor skill sets and understanding inherent at the time, implementations of systems were rarely done well and there would be huge anomalies in the BOMS. When you compound that with implementations that were shall we say “done quickly “in a bid to prove “The quality of consultancy by showing speed”! Then you generate a cornucopia of problems.

 

So we had a scenario were we have a variable mix against a production standard from a badly written inaccurate BOM. If you couple that with a desire to keep anything other than production direct operatives to a minimum and no desire to bring in “computer users”.

 

Not being totally cognoscente of the situation but understanding the need for speed the implementation consultant will roll out extensive “Back Flushing” leading to inaccurate inventories that are never corrected until the annual stock count as only the “standard” is issued from the one location (that of a single warehouse(remember “speed is of the essence”). With this scenario you get flawed purchasing plans (where they existed). After a while sorting out these issues within Bakery division I was promoted to run the whole of the Operational supply chain for the Bakery Dairy and Juice division of Almarai which at the time was 5 times the size of Bakery and had a similar set of problems that needed to be corrected. This takes time because you have to go through the loops again of education of why its important to have default consumption locations at the lines themselves and why aggregate numbers put through on a weekly basis for consumption is inadequate.There is good understanding of spreadsheets and these are often over used to the point the mainframe systems are used as typewriters. This “reality” is often a hard sell especially when the company believes they are doing really well with their systems development but a few presentations later on reality and support is usually forthcoming from executive level who are always keen to see results improve.

 

A lot of work therefore had to be done in order to reduce some of these internal issues. Over time knowledge was built and investment made in technical, NPD, people and systems development to cope and eliminate the problems. No company is an island and that is especially true in this region as you then have to face external issues of supply chain into you.

 

The middle east I think it is fair to say has been slow to develop a customer service ethic. Other factors are important like pricing which can be very keenly negotiated. Margin is everything. In times of prosperity you do not have to be amazingly good to make money. I do not believe that even now many companies are heavily enough into supply chain to understand its potential positive impact on cost of sales. Supply chain in the region is governed by overstocking at all levels. This is because heavy inventories are still held to guard against poor service from suppliers. It may not necessarily be the supplier you’re directly dealing with but perhaps the supplier that provides to them. As you drift further down the food chain the supply chain is less sophisticated and the risk therefore greater of stock out outs with a ripple effect taking place.

 

This is not limited to raw materials if you take for instance packaging many companies do not measure vendor performance. Pricing is still seen as the key metric. The cost of non delivery is therefore mitigated by holding high stock in order to guard against supply issues. I think its fair to say that inventories in Europe are significantly lower and stock turns will continue to be higher than in the middle east whilst the supply chain revolution develops.

 

For me It’s all about building that service ethic. I chaired only last year a supply chain conference and one of the questions I put to the floor was “how many of of you actually measure the service from your suppliers or your own customer service. Of nearly one hundred delegates less than four claimed they did and two of them did it by sending out customer satisfaction surveys.

 

I would say for sure, that's the biggest challenge, the fact that customer service as a concept is in its infancy and people invariably make up for that by holding onto stocks and see it as being a prerequisite to doing business. I do not see that changing in the short term unless the market leaders take so much of the market that that forces change with the competitive set.

 

And how is the inbound supply chain in the Middle East changing today? What changes are taking place?

 

I think the Middle East companies tend to fall these days into two distinct groups of companies. Those that really, really work hard at customer service and those that don't and are happy to put up with the noise and cost that comes from having a weak supply chain. Over the last year or so with the oil price dropping there is more of a tendency to want to be in the former not a latter

 

I was lucky enough to work for one of the early adopters of this service culture in Almarai and can attest to the fact they are absolutely customer orientated. That's why the company has grown to the level it has because they that they really believe in achieving the magical 99.% plus into their sales division.

 

They’re used to be every Sunday morning. A general managers meeting with the CEO to present the service from the previous week (yes people had to work through the weekends to get the numbers) and there was a grand inquisition if the number fellow below the 99% target.

 

The companies that have actually taken “service” on board are the companies that really, really prospered out in the Middle East. They really have become much more profitable because they deliver, and they do what they say they're going to do.

 

Unfortunately, some companies have not followed suit yet and are content with competing for 2nd place. Only when this changes will supply chain thrive. One of the interesting things in the middle east is the fact that the same suppliers will have different service ethics for different customers, this is not always based on profitability but usually based on volume. This is because either overhead recovery is important or more likely based on commission levels of account managers.

 

The typical GCC customer is demanding of respect and of service especially at the consumer front end. There is not the percentage market share yet that Europe has with National accounts for grocery. Bakalas (which are local shops) are still the mainstay of peoples shopping. However, market share in national accounts is growing strongly every year as people look more to the “one stop shop solution” and are offered huge shopping Malls driven by people like Alshay a retail group providing European and and USA brands  and plenty of and most importantly plenty of “out of home” dining opportunities which is really important in the regional shopper.

 

As this trend continues and the buying power of the National accounts like Panda, Othaim, Carrefour etc.increase they will look to gain a more competitive pricing structure and take cost out. This in turn will put even more pressure on the suppliers that sell to them and apply pressure on their suppliers to reduce cost other than the regions typical price down system of negotiation which is well understood and easily digestible by all. This I think will be a big enabler for the growth of supply chain as people look to reduce waste and cost to serve in response to the demands of the growing national accounts.

 

The people challenges out there are interesting. There's a huge push on the employment of nationals and rightly so. The oil driven economy the governments recognize is in decline and there are active plans to generate new investment throughout the whole of the GCC. I believe because Supply chain is still a relatively new profession the demand for GCC supply chain professionals is higher than supply. Companies either have a choice to bring expatriate managers in or put local people in the jobs who in some cases are not yet ready due to the fact Supply chain as we know it has not been in existence that long and the level of adoption is very mixed and varied.

 

The problem supply chain has with many of the business leaders is they do not yet fully understand the concept of supply chain efficiency and perhaps more so capability and its direct relationship to cost. They still believe supply chain is about purchasing price downs and running a warehouse. Local hires will get there for sure in terms of ability indeed I have recently met some really strong gifted nationals from the GCC, but demand for them outstrips supply. Ultimately I think this is one of the biggest issues facing the region in terms of short term progress. People moving to the region as supply chain leaders need to understand they are guests in the region and have an obligation to train the next generation of local leaders.

 

There's a big issue at the moment in the regionin that there is not an awful lot of third party Logistics and Transport companies that have actually operated at a very highest levels. Actually, there's not that many third party logistics peoplehere. There’s certainly opportunity for that.Some of the big companies out there actually still run their own supply chain and do it very well. I would say that quality logistics in the Middle East is a very, very difficult thing to achieve and here’s why. The areas of population are dense and widespread which means heavy investment lots of miles on the clock and time.

 

It’s is a huge issue for the Middle East, particularly in products which are vulnerable to shelf-life issues. You have areas that going to drop down to a minimum of only about 16 degrees and other parts of the region you're going to freezing in the winter, you've got completely different requirements from one side to the other. The same with high humidity in places like Dubai and Jeddah so there's an issue with product sweating and mould growth conversely there are a different set of challenges are in other regions it's very, very, dry and at times can be like having a hairdryer blowing in your face. So there are different challenges for the logistics operations out in the Middle East and this makes third party less attractive than most.

 

In summary the region for supply chain opportunity is thriving and will continue to do so for a good while. Yes, the landscape is changing and the pace of it may not be inline with some other areas. But those that do this well and embrace service excellence are achieving great growth and profits The others are just going to have to catch up.

 

 

About Mark Burgess

 

 

 

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Mark Burgess

 

Director of Supply Chain / Manufacturing

 

LinkedIn Profile

I interviewed Atul Doshi who Exploring Innovations in e-Learning Models.

 

This is an interesting topic which brings up questions about the future of education and supply chain education beginning early on in life.

 

 

 

 

 

Please provide a brief background of yourself

 

I am Atul Doshi, Chartered Accountant and working as ‘honorary director and team leader’ at Letstute. We are a ‘not for profit’ organization based in Mumbai, India. We create math,science... logical.... our aim is not to treat education as a business. We are a team of 25 people. Our content is explained with some real life example and it is explained in a logical manner. Student should understand and need not try to remember concept or formulae.

 

What are the challenges with e-learning and how do you address these challenges?

 

New concept, difficult to accept ‘self learning’ against spoon feeding by current education system. We do try to create awareness by taking help of social media and meeting students/teachers/parents on ground.

But, current high education cost is itself diverting students to e-learning and availability of quality education is also an issue. It is very difficult to find good teachers in each and every part of country.

 

What kind of core competencies does a student in an e-learning environment develop which will help him/her in their future careers?

 

Self-learning ability, confidence... learn at his speed/convenience.. no need to get compared with others... shy students generally do not dare to ask questions in classroom ..because they fear that some may laugh at him..

 

What is the role of the teacher in an e-learning environment?

 

A very good teacher with quality content knowledge will live for years, like an immortal, he will be there in form of his ‘recorded content’ being watched by students across globe. Whereas other teachers will be a mentor, guide and friend.. he will be there to help if student is not able to understand something... and he will also help him in his overall development besides curriculum, text book and exams.

 

We (www.letstute.com) are an online education company based in Mumbai,India which provides quality education @ NIl cost. We are registered as Section-8 Company (not for profit). We do provide math, science, accountancy and value education videos and other study materials. Links for some videos are enclosed herewith. All our content are designed in such a manner that it helps student to understand concept logically and he need not remember or mug up anything. We try to take examples of real life to explain any topic.

 

All our content is available on our website and on youtube channels. Our content is suitable for any students from any country. All our content is in ‘neutral’ English. Students across globe are watching our content- India, US, Philippines, Pakistan, Canada, Malaysia, UK, Bangladesh, Nepal, UAE and almost all other countries.

Atul Doshi

Hon. Director & Team Leader

0091-9821127475

 

 

About Atul Doshi

 

 

 

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Atul Doshi

 

Chartered Accountant | Honorary Director | Team Leader at Letstute

 

LinkedIn Profile

dustinmattison1974

Cost to Serve

Posted by dustinmattison1974 May 11, 2017

I interviewed Richard Wilding who discussed Cost to Serve.

 

( Apology for some background noise I interviewed Richard from my mountain cabin using Skype and forgot to mute, you will hear in the background some nature sounds :-) )

 

 

 

 

It's good to speak with you again, Richard. This is going to be an interesting topic on Cost to Serve. Before we start, can you provide a brief background of yourself?

 

Yes, of course. I'm Professor Richard Wilding. I'm professor of supply chain strategy at Cranfield School of Management in the UK. It's one of Europe's and globally one of the leading supply chain universities which is there. I'm also chairman of the Charter Institute of Logistics and Transport, and that has 18,000 member in the United Kingdom, 33,000 worldwide, and those are all professionals involved in the movement of goods and people and their associated supply chains. So that's a little bit a be me.

 

Thanks. So can you talk about Cost to Serve? What is it, and what's happening in this space?

 

One of the challenges that we have in the supply chain really is getting true transparency of costs. What we're finding is some of the traditional costing approaches don't quite work when it comes to supply chains. If you think about it, often what we do is we take a sort of an average approach. So what we will basically say is that I've got a warehouse. It costs me — I don't know; I'll make up some silly numbers here to make it simple. But it costs me $4,000 a year to run it. I have a thousand items in it, so therefore, for each item, I will allocate a cost of about $4. We go through a very simple calculation like that. The problem is that's basically saying if I'm wanting to make a small pen — if we're talking about an office furniture supply chain — in that warehouse, we're saying it costs the same to move a pen as it does to move, say, a desk and a chain. And we know, as supply chain professionals, that is totally ridiculous.

 

Now that then leads to some major problems in terms of how we run our supply chain. So one of the laws of logistics, which myself and a gentleman called Alan Braithwaite came up with, and this was published in the Financial Times handbook a number of years ago. Basically one of the laws is basically the total cost of sourcing, converting, and delivering product is seldom the sum of the lowest functional costs of each element of the supply chain. What that's basically saying is if you optimize each individual silo within the business, generally you're going to end up with higher costs than if you try and actually focus on the thinking about the totality of what's happening in terms of the cost. Now that proves very challenging for businesses.

 

One particular soft drinks that we were working with, for example, they put in a new process. This was very successful. It was going to actually give them a 2.7% reduction in costs within that supply chain. But actually that required their transport operations to increase their cost by 2.8%, their production people to increase their cost by 15.6%, but that would then mean that they could save, dramatically reduced, their finished goods by nearly 37% and their finish goods stop finance and also their raw materials. But can you, in your business, turn around to your production director and say, "Hey, we want you to increase your cost by 15.6%”? And this is all part of really truly understanding the cost to serve and what's going on.

 

So if we can get a savings through the supply chain of 2.7% and that's worth having. But of course, it may mean that some functions within the supply chain actually have to work differently which might increase their costs. But of course that's going to prove very challenging for performance metrics within the business and so on and so forth.

 

Now the thing that we really often overlook is that when you actually look at, if you like, the profitability of products, what we have is a curve which we often term a whale curve. If you can image a whale breaking out of the surface of the ocean, it creates a curve which goes up and then it comes down. And that curve is basically telling us that we're making lots of profit on, say, some of our products, but then we reach a plateau, and then we may be losing money on lots of other products, which gives us the overall profitability of the company. That is we don't make money on everything we do, and it's the same with customer.

 

Some of our customers are really expensive to serve, so we might make money on some customers, but then we lose lots of money on other customers. I mean, a great example I came across with basically a tire manufacturer, what they were doing was they were having this vehicle delivering tires to automotive centers. You can also buy cycle inner tubes from them as well. And what would happen is you'd fold up the organization and a small cycle shop would say, "We need four of these cycle inner tubes. Can you drop them in on your next round?" They do a [inaudible 00:05:44] round. They go around all these automotive depots delivering tires, but they also have these small other tires.

 

Now the example I remember was we found out that they were doing a 30-minute detour from their normal route to deliver four cycle inner tubes. Now 30 minutes to the cycle shop, 30 minutes back. Let's just have a think about that. How much money are we going to sell the cycle inner tubes for? Well typically, these might be — I don't know — five, six dollars. Right?And so we've got four of them so that's going to cost us not too much — $24. But how much is it costing us to run that particular vehicle?

 

Now in the United Kingdom, in Europe, there's a rule of thumb. We say it's going to cost around about, probably around about £60 an hour or €60 an hour, around that sort of ballpark figure. That's about ballpark. So it will be probably around about $60, $70 to fun that vehicle. So we've just to spend $70 delivering that item and actually the total amount of money we're going to be bringing in is going to be a very small amount. Maybe only about $24.So we've just lost loads and loads of money because of the delivery option.

 

Now we're not saying we shouldn’t deliver to that organization. What we should be thinking about doing is can we change the way we actually serve that customer? So it may be the best option might be put the things in the post rather than delivering to them. It will be far cheaper. You're going to lose far less money.

 

Now what we've done recently is we've done some work with GS1, you know, the global standards organization. And you can find this research if you just google GS1 UK cost to serve. There's some reports you can download. That's GS1 UK cost to serve. There's also a link which perhaps we can even share, Dustin, if that's appropriate. But we did this work with GS1, a specialist's consultancy which specialize in cost to serve called LCP Consulting and CranfieldUniversity. What we were looking at was apparel. This is clothing, shoes, all these types of things. Because one of the challenges they're finding is that, what we're finding is that sales are going up but the profits are falling. And we're seeing this all the time now. So if you look at Bonmarché recently, they basically said sales are up but profits are down. That was in the recent press. Vivienne Westwood, the brand profits fall. At Vivienne Westwood, sales are up, however. Uniquelos, profits continued to slide. Those sales were up. The net profits declined almost 50%.

 

Now part of this is because of people thinking about cost to serve because what you have to think about is you have to think about the customer. You have to think about the product or the SKU that you're delivering to them. And you have to think of the service level that you're offering to those customers as well and all those things are factored in the cost to serve.

 

So I guess it's worth just sharing some of the challenges that people have with this whole area. There are three key things. Network complexity is increasing in the supply chain, particularly in apparel, how things are sourced. Market volatility, critical one. Customers, they're finding demand trends are getting more volatile. But also really important, lack of visibility. That's becoming a really, really critical thing.

 

So what this research showed is actually two key things that we have to actually consider if we want to improve our cost to serve. First of all, think about the information flows. Think about information flows, you need to think about supply relationship management. You need to think about inventory management and centralization. Very important. Think about [inaudible 00:10:13] integrity. Think about your systems, integration, and also very much the internal structures within the business.

 

And the other key thing is balancing the service position. So think about how you manage peak. When we've got peak demand coming in, the big Black Friday. It could be Christmas. It could

be other times of the year. Think through that. Think about the service promise and the proposition management and also how you invested infrastructure. You have to sort of go through how do we actually deal with those particular areas there.

 

So really, lever one, we need a balancing the strategy proposition. So part of that is quick wins can be charging for home delivery even, avoiding Black Friday. We've got organizations in the United Kingdom now who are just not doing Black Friday. [Inaudible 00:11:08] things swiftly, and we understand that this can really detract from customer service if we don't get it right. But for long-term sustainability, you need to think through improving those information flows. So that actually leads us to think about how much of this can we do electronically. Can we use EDI? Can we use RFID? What we need to be able to do is to automate things, to drive out cost, and improve the overall flow of information within the supply chain.

 

So I think that critically understanding your cost to serve is a foundational to gaining competitive advantage. And from my experience, some of the big challenges are many organizations just are not set up yet to really understand cost to serve. Therefore, they're serving customers, effectively they’re just pouring money down the drain because they don't understand how much this really truly costs them.

 

Well thanks for sharing today, Richard.

 

No problem at all, Dustin.

 

 

About Richard Wilding

 

 

 

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Richard Wilding

 

Professor of Supply Chain Strategy @ Cranfield School of Management | Chairman @ CILT (UK)| Supply Chain Expert |

 

LinkedIn Profile

Wikipedia

Website

Twitter

I interviewed Ranjan Sinha who discussed Why there is a dearth of Supply Chain talent and how do we mitigate it?.

 

 

 

 

 

 

Hi Dustin, Its great to talk to you again.

 

I will be speaking today about ‘Why there is a dearth of Supply Chain talent and how do we mitigate it “ ?

 

Why is the supply chain talent shortage so worrisome?

 

Well .. consider this Scenario :

 

Situation: An automaker planned to launch a complex new vehicle, and produce the car in four different global locations based on its platform strategy. Two of the four locations were in emerging markets, where lack of infrastructure and availability of skilled supply chain managers complicated an already difficult launch.

 

Problem: Lack of supply chain expertise in the two emerging markets ended up causing multiple points of failure in the automaker’s supply chain. Supplier capacity management, supply chain network design, production line parts/ component sequencing and supply chain risk management – none were up to the complex task.

 

Impact: Supply chain costs exceeded budgeted program costs by more than 15 percent. The OEM was forced to use premium freight transportation to ensure continuity of supply. Even so, final product launch was delayed three weeks, which ultimately resulted in a 5 percent drop in market share that year in the two new markets.

 

Lessons like these are painful reminders of what happens when a supply chain fails. Such failures will become more common if companies lack sufficient supply chain expertise, as a growing number of OEMs, suppliers and their supply chain partners are realizing.

 

A recent study by the University of Tennessee, Knoxville, revealed through surveys of companies that 90 percent of CEOs believe they should be doing more to attract supply chain talent. In a similar Deloitte survey, only 38 percent of executives interviewed were extremely or very confident that their organisations possess the competencies needed to deal with today’s supply chain issues.

 

That’s a huge problem.The global supply chain is a $26 trillion per year industry and it’s only getting more complicated. Between 2010 and 2020, it is estimated that the number of available jobs in supply chain will grow by 26 percent. Currently, the demand-to-supply ratio of jobs to qualified individuals is six to one. In a few years, that could be as high as nine to one. Most of the openings exist in middle management positions, in which there is a current shortage of 54 percent.

 

What is it about the supply chain industry that led to such a dearth of qualified professionals?

 

There are broadly four Reasons for the Shortage of qualified professionals :

 

1. The Industry Is Expanding Faster than Workers Are Becoming Qualified

 

Over the past two decades, globalization led to an ease of outsourcing and a rush to manufacture in multiple countries. Parts are being manufactured across the world from each other, cutting costs, but at the same time, increasing complexity. In the past, managing a supply chain just wasn’t as hectic.

Inventory was cheap—it wasn’t a consideration. But in the last 5 to 10 years, we saw a sea change in the way people view procurement, transportation and supply chain management. Suddenly, companies are losing money as their shipments fall prey to disruptions both unforeseen and avoidable—and much of it comes down to not having enough qualified people making invaluable decisions. Most of the people had agreed to that 20 years ago, those who wanted to make money went into marketing or finance—never procurement. Now it’s a hugely important industry, but no one has the necessary experience.

 

2. The Qualifications Needed for Supply Chain Careers Are Expanding

 

David Closs, a professor of supply chain management at MSU, believes that one big issue behind the talent shortage is the amount of talent required from each individual. If you’re in procurement, you’d better be good at procurement. But these days, it also means you have to manage corporate social responsibility, and understand political issues like trade, taxation and customs. It becomes much more complex. This is  partly because of our education system and partly because the world has changed.”

 

It’s a tough but important issue to face: People who work in supply chains today need to be dynamic. They need to be able to work long hours, to travel across the world. It’s a demanding field that—unfortunately—doesn’t carry the same prestige as equally taxing careers. It’s not enough for someone to understand logistics. They have to be able to be politicians, managers, designers as well, if they want their companies to truly benefit from their manufacturing and transportation process.

 

3. There’s an Education Shortage and Companies Have Trouble Gauging a Good Supply Chain Mind

 

According to the DHL report, the number of full-time business faculty in supply chain management and logistics was “consistently below 1.3 percent of all-field business faculty both in the United States and worldwide” over the past few years. Hau Lee, a professor of supply chain management at Stanford, said that there “just aren’t that many universities finding the number of people needed” to fill supply chain positions. While a number of universities are implementing programs to increase interest and encourage students to choose a career—more on that later—it’s hard to pump out enough graduates who are prepared for such a demanding job.

 

On the other side of things, many companies don’t accept the versatility inherent in supply chain jobs. Professor Lee gave the example of someone in procurement who might help change the way a prototype is designed and produced. That’s not old-school procurement, sure—but it would greatly affect manufacturing and help the company, so upper-level managers should be aware that a supply chain manager might do a lot for another department—but it all comes back to the supply chain.

 

4. Supply Chain Has an Image Problem

 

Richard Wilding, a professor of supply chain management at the University of Cranfield, UK, said that most people he knows just “stumbled into supply chain” from engineering or business. Very few people actually make the decision—especially at a college level—to study the world of supply chain. Many people don’t even know what the term means. And until recently, that wasn’t a huge problem. But now, working in the global supply chain necessitates a thorough understanding of how it works—meaning that it may become harder for professionals to fall into that career path.

It’s time for the industry to accept that supply chain doesn’t have the best connotation. While the career itself is dynamic, demanding and an integral part of any company, most people would say it sounds pretty boring.

 

So, Why the huge disparity? Partly because of the changing global environment and partly because efforts to change that perception are also pretty new. But many people believe that a shift in connotation can stem from a clearer understanding of what supply chain professionals do and lead to a big increase in supply chain talent.

 

To secure its future, the industry must tackle the supply chain talent shortage head on and develop more effective talent acquisition, development and retention strategies.

 

So, how do you then resolve the talent gap ?

 

Well.. there are some mitigation measures which applied can resolve the problem.

 

1. INDUSTRY COLLABORATION

 

The automotive industry – OEMS, suppliers, third-party logistics service providers (3PLs) and academic institutions – has begun to take a proactive stand on resolving the talent gap. Leaders in the industry are working with universities and trade associations to develop supply chain education programs designed expressly for the sector.

 

2. EXPANDED IN-HOUSE AND EXTERNAL EDUCATION OPTIONS

 

Faced with a lack of educational resources tailored to supply chain and the automotive industry, a growing number of firms are taking matters into their own hands and developing their own education programs. “Our biggest concern is to make sure there are no huge gaps in our people’s education,” reports Ehm of Infineon. To remedy this problem, Infineon founded an internal e-learning academy. The modules we developed cover about 100 topics, and they have trained 1,000 people on these modules so far.

 

3. JOB ROTATION PROGRAMS

 

Formal job rotation programs can be an effective way to grow people. “Rotating supply chain professionals through different departments and functions enriches their skills and gives them a broader perspective of the business. A global services company calls its job rotation program a ‘talent exchange’ and uses these placements to promote cross-functional development. In one program, employees – who include new recruits from universities as well as more experienced folks – complete a two year rotation that involves six-month stints in different functions,” says Ken Cottrill of the MIT Center for Logistics and Transport.

 

4. FORMALISED KNOWLEDGE TRANSFER

 

With so many retirements looming on the horizon, the industry must get serious about capturing its people’s knowledge before it literally walks out the door. Companies could set up formal programs where their soon-to-retire supply chain professionals transfer their knowledge to their younger colleagues under a formal program.

 

5. BECOMING AN EMPLOYER OF CHOICE

 

Companies will need to do more to retain the supply chain talent they have – and that means taking steps to ensure they are an attractive place to work. Our industry needs to provide incentive to people to stay in supply chain, and that comes from providing competitive salaries and establishing attractive career paths.

 

What are these incentives?

 

They obviously  include better pay and a formal career path with clear opportunity for advancement. The less obvious, but equally important, include a recognition within the organization that a career in supply chain is valued by senior management.

 

We need to eliminate the perception that supply chain isn’t a valuable profession, or is less valuable than other careers such as finance or marketing. Supply chain can’t be seen as a ‘fallback’ position, as a less worthy profession. This means corporate culture needs to change – and that change must come from the C-level.

 

Thank you Ranjan for sharing your thoughts on this subject …

 

Thank you Dustin.. its my pleasure…

 

About Ranjan Sinha

 

 

 

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Ranjan Sinha

 

Supply Chain Professional

 

LinkedIn Profile

I interviewed Richard Wilding who discussed Social Supply Chain Management.

 

( Apology for some background noise I interviewed Richard from my mountain cabin using Skype and forgot to mute, you will hear in the background some nature sounds :-) )

 

 

 

 

 

Can you provide a brief background of yourself?

 

Yes, Dustin. I'm Professor Richard Wilding. I'm professor of supply chain strategy at Crownfield School of Management. I also currently have a role of chairman of the Charter Institute of Logistics and Transport in the United Kingdom. That means I've got 18 and a half thousand members in the UK. Then there's 33,000 members worldwide. And those members are all professionals working in the area of the movement of goods and people, and they're associated supply chain. So it covers a very broad group of individuals.

 

And really, one of the things which is really quite interesting about institutes like this, charted institutes — it’s our 100th anniversary in just a couple of years in 1919 — it's about innovation. And that's what I to actually pick up on on this discussion with you today, Dustin. Because innovation to me, innovation is taking ideas which are new to you and create economic, social, or environmental value.So professional institutions and universities are key to creating innovation.And the social supply chain — and I'll define that in just a moment — is also critical in creating innovation within organizations. So that's a bit quick insight into me. I think you can find me on Wikipedia now and just google me. You'll find more.

 

Can you talk about what is social supply chain.

 

Yeah, so social supply chain... Social supply chain management seeks to incorporate the social network, social interactions, and so data to enhance relationship management with all stakeholders in order to maximize value in the final marketplace at less cost to the supply chain as a whole. That's the long definition I came up with.

 

But critically, what we're trying to do here is to use, if you like, social media approaches, social interaction. It could be data as well, big data from social media, really to really improve the supply chain, to maximize value for the customers, of course, but also reducing costs for the supply chain as a whole. That's really what we're trying to achieve with this.

 

And this sort of concept has been sort of ticking away for a while, but it's really starting to come into its own currently. The Financial Times a couple of years ago did some... There's an article just picking up on the use of social media within organizations. And they found that companies adopting social collaboration tools obtained a 15% boost in productivity — which that's pretty significant gains — by using such techniques. And also, what people are starting to find is that... I mean, there was some work done by Yammer, which is an internal social network. Some organizations might be using it. But they found that [inaudible 00:03:28] achieved 76% more visibility into other departments or locations when using Yammer.

 

So what it's actually doing is it's also enabling people to trade greater levels of transparency within the organization. They were also finding, for example, that it was getting a 37% increase in project collaboration. And 93% of business leaders agreed that these enterprise social tools stimulated innovation within their business. In other words, ideas were shared. And going back to my definition, innovation is all about taking ideas which are new to you and creating economic, social, or environmental value.

 

So this is something which is coming to a [inaudible 00:04:19]. And I think one of the challenges that we have is that many organizations still try to manage their supply chains effectively through emails. And I don't know if you're all like me, but I'm getting 100+ a day now of emails. And the problem is how do we know which ones are important and which ones are really doing well. What you find in your structure in your social networks, the important stuff comes to the surface, and it's much more sort of real time in terms of what's happening.

 

So that's an overview. I've got a couple of cases I could share with if you, if that would be helpful, Dustin.

 

Yes, that would be interesting.

 

Then just a couple of examples. In the United Kingdom, there's a group called Travis Perkins Group. And this is a pretty large organization. They're basic builders, merchants, and tools, and do-it-yourself outlets. Basically they've got about 1900 outlets across the United Kingdom, 24,000 employees. They have gone down the routes of just using Google. And so they're using Google apps.

 

One of the managers basically said, "Look. What we'll do is we'll set up with Google Plus group," thinking that probably in a few weeks this all would be forgotten about and nobody will move forward with it.

 

The initiative was called Availability Plus. What they did was they've got a Wix which is business-to-consumer. Wix is an organization I can pop into and pick up do-it-yourself stuff and everything else. What they did was they set up this Google Plus group. It's especially across their 200 retail outlets. And something very strange started to happen. People started sharing. What's great about Google, of course, Google Plus environment was that they all have Google mobile phones. So instead of people sending emails about things, they would take a photo and send it.

 

So in a store, if something arrived from a supplier and it didn't look great, or there was a problem with it, they'd take a photo. If, for example, the store management system was saying, "Look, this is not i] stock," they were getting quite angry. They would take the photos and send it through. The people in the head office were connected with this as well.

 

What used to happen was on supply chain or supply issues or store issues, it could take up to three days for a problem to be resolved in the old world of email. They're now actually getting problem resolution within an hour. And in fact, at the moment, there's a bit of competition going on within the organization. The last time I talked to them, they were getting proper resolution within 34 minutes quite often. So things like if something was supplied and it was supplied incorrectly, they had for example a set a screws which had a screwdriver within the package. So it had the screws and the screwdriver.It turned out that on some of the packages, they had an incorrectly sized screwdriver, so it wouldn't work together.

 

Now of course, that would be taken back to the store. The store would then put that on the Google Plus and ask all the other stores in the network, "Have you got a similar problem?" That way, they're being able to raise, improve customer service. They've been able to reduce costs dramatically. They've been able to create innovation because people do something great in a store. To display things, they take a photo of it, and then all the other store do it as well. They think, what a great idea. So what they've really found is that's made some massive changes within their industry.

 

One final little example, Dustin, because I know we're a bit short on time here, there's an organization called 2degrees. They're working currently with organizations like Unilever, GSK, Asta, and Tesco in the United Kingdom. What they're actually using is they've built a collaboration platform. And what they call it is fully-linked collaboration. And what this does is it's a proactively managed — if you like — social network. So what they're able to do is they measure exchanges of knowledge between the individuals in the supply chain. So if you're looking at, say, one of the big retailers, which they've when working with, they've got over 300 companies on this. It's called the sustain-and-save initiative. And they're getting massive benefits. For example, some of the data I've got from them within the last year of so... From having this launched, this initiative, 42 companies are saving £34 million pounds in operational costs. So you can multiply that by about 3.1 if you want dollars. They recon the total estimate is savings of over 100 million. And investments of about 16 million in various projects. The way this works is it's built around sustainability and saving money appropriately.

 

Somebody might say, "We're building a new warehouse. We want to have LED lighting. Somebody must have done this. Can anybody give us some advice?" And people are able to share that knowledge around different things. So once again, it's innovation. It's sharing knowledge to create value for the different parties. It's been a major success. And one quote from Barry Williams who is chief merchandising officer of Asta— of course, that's one of the Walmart companies, he basically has said the exchange is creating value, not extracting value from the supply chain. The measure of success is that people are already saving money.

 

And just an update on this, 2degrees have just launched an amazing new network, which is aimed at manufacturing, so it might be worth having a look at that link. So that's probably manufacture2030.com. And this is, once again, one of these big exchanges where people can basically innovate through them.

 

So we're finding social supply chain hitting the supply base. Of course, I could spend plenty of time talking a how we could use social data to interact with customers, delivery, of course, as well. So we're starting to good apps which are updating on delivery performance, things like that, particularly going to the consumer. All sorts of stuff which is going on...

 

And so I think we're going to see some dramatic changes within the way we manage supply chains, and we're also even finding that social media is being tapped into in supply chain risk as well.

 

But, Dustin, I just thought I'd share a final thought with you. This was a tweet I saw from a guy called @MattCutts and he basically says, "When you've got five minutes to fill, Twitter is a great way to fill 35 minutes." And an unknown tweet here which is, "On Twitter, we get excited if someone follows us. In real life, we get really scared and run away."

 

So I think the key thing about using these networks, understand they are different. You need to sort of dedicate appropriate time, but there's an also lot of interesting stuff going on in this area. I've got a couple of papers out about it. And I'm going to be presenting at quite a few conferences coming up around this whole area in more detail, if people want to come have a listen. And of course, you can find me on Twitter at @supplychainprof. So there we are. There's another social advert.

 

Thanks, Richard, for sharing today.

 

No problem at all, Dustin.

 

 

 

About Richard Wilding

 

 

 

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Richard Wilding

 

Professor of Supply Chain Strategy @ Cranfield School of Management | Chairman @ CILT (UK)| Supply Chain Expert |

 

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I interviewed Marcus Arbelbide who discussed E-commerce Supply-Chain Challenges and Solutions.

 

 

 

 

 

 

Today we're speaking with Marcus Arbelbide, and the topic is e-commerce supply-chain challenges and solutions. Marcus, can you first provide an introduction to this topic and a brief background of yourself?

 

Absolutely, Dustin. I appreciate you having me on the show and giving me the ability to talk to your audience and add to your blog. I have about 14 years’ experience, in so far as the logistics/supply chain market. I currently am VP of supply chain solution at Gateway Supply Chain. And what we do is center on a lot of e-commerce kind of solutions for customers. What we're going to talk about today is kind of what the challenges are faced with somebody getting into the e-commerce supply chain and what the market kind of looks like right now.

 

Right now, the market is really... Today's e-commerce market is only 9% of the whole retail market. The other 91% is still brick and mortar — people going to stores, actually buying the product right there and driving it home. So what's happening right now, because of the possibility of a trillion-dollar market right now, you have the Amazon.com of the world. You have the The Home Depot starting to get into e-commerce. You have Lowes starting to get into e-commerce. You have Wal-Mart. You have Jet Delivery. You have all these companies that want to gobble up that other 91% because it's over a trillion-dollar market. The market is ripe, and people want to get into that market because it's fast; it’s growing; it's innovative. Andit costs you less to set up an e-commerce kind of solution than it would be to set up a Wal-Mart with 3200 stores at that point.

 

And that’s where the challenge is. What's happening right now is people are going out there, developing a website, developing a product, and they don't know how. So they have a website. They have basically a user interface right there. The customer is saying, "Hey. I want to buy that product." Now what happens is you're talking to somebody that's more technical and they built the website. They got a product innovation. They don't know how to ship it.

 

So the challenges you're faced with right now is being able to, because you buy a product online, now it's a different kind of channel of shipping and different avenue of how to get that product to that customer. We call it an omnichannel because what happens at that point is you have parcel; you have truckloads with larger trucks delivering the product. You have smaller trucks. You have cargo vans. You have, basically, parcel. So you have the USPS parcel service delivering this product to that door. So how do you integrate a website into a supply chain? So that's one of the big challenges we're faced with right now of people being innovative but they don't know how to do all the ins and outs and all the way from cradle to grave, as a lot of people like to say.

 

In today's market, the challenge is trying to get that. Amazon is disrupting that market, because they are coming up with innovative ways of two-hour deliveries, setting up Uber driver, setting up all these different avenues, trying to get to the customer quicker to swim away from going to brick-and-mortar store of having that immediate satisfaction is what they've been getting for so many years, and now they're looking at it saying, "Hey, I've got that craving. I want to go to Amazon, hit the button right there, have a notification, and I want that same two-hour delivery —not two-day delivery — I want two-hour delivery at that point. I want the dominoes kind of experience where I can go there and it says, ‘It's hot, fresh. I want it now.’”And that's where they're disrupting the market right now.

 

The challenges are going to continue facing is now you're going to move away the standard supply chain model. In the US — use an example — you bring in a container from China. You're going to bring it in there. You're going to pull that product off that container. You're going to set it up and put it other another truck. That other truck is going to go from the port of Los Angeles. It's going to go over to a distribution center of, say, we're going to use BestBuy as an example. It's going to go to Fresno right there. From Fresno, it's going to get deconsolidated right there and so in smaller delivery trucks and delivered to those stores.

 

What happens there at that point, now you've got all these regular lanes that are shipping this way, and they're shipping pallet-size orders to stores. Now you're going to have to change that model that Best Buy has perfected over the last 20 years of developing that product, make it more efficient, having their suppliers ship to their DCs. Now they were to say, "I gotta ship that DVD player from my DC or from my supplier to that end customer. How do I do that? How do I do that, maintain the same customer service and same visibility?" That's the biggest challenge that people are faced with.

 

It's not just the DVD player now because now it's going to be an elliptical machine. It's going to be a TV. It's going to be somebody wants to order tile online. They go to BuildDirect.com, and they order a pallet of tile, and they need to get it at their house. How do you do that? The supply chain right now is getting disrupted because the typical LTL carriers, less than truckload carriers, are used to going pallet-in-pallet-out and doing a 15-minute delivery. A typical household delivery is an hour and 35 minutes. So at that point, the cost effectiveness of going that way, your cost to deliver that one pallet is three times it would have been the cost if it would have been just to-pallet-to-pallet, to-DC-to-DC.

 

Do you have any recommendations for companies who want to move into the omnichannel retail market?

 

Absolutely.There are a few solutions out there right now. And I would say what they really have to do is look at what their supply chain and how their product is developed and how it's moving. I always suggest looking at it from the start is where their product is getting developed and where they're actually going to be shipping it, and where they're going to be housing it. There are a few partners out there. There's not a lot of partners that have really perfected the final mile, the white-glove-delivery kind of solution at that point. So you need to really go out there, do your research, and say, "Hey, what third-party logistics has this down right now? What company can give them an end-to-end solution, give me the visibility, can give me, basically, the omnichannel from parcel to samples to LTL, to truckload, to global, to the final mile, to white-glove delivery/assembly?"

 

You have to do your research and partner up with the company that has the technology that can integrate into your shopping cart. Because if you can do more automation, streamline your product, your product-purchase power, basically from your customers hitting the button, they know what it's going to cost for shipping to the final mile it's delivered, that's going to create more conversions. If you have to do a manual process where they have to call back and get a quote for shipping or they don't know what the tracking is, you're going to lose that customer. You may get one or two shipments out of them or purchases out of that customer, but the [inaudible 00:07:10] experience, they want the Amazon experience where everything is automated. Everything is getting a text. Everything is going fully bore to automation to end-to-end.

 

Well, thanks, Marcus, for sharing today. Did we cover all the points you wanted to discuss today?

 

We did. We did. And I think the one topic I would say that a lot of these companies getting into e-commerce that have a supply chain, they've really got to look at it and say, “Hey, we've got to look at the full picture instead of just developing a website.” Think about the end-to-end and partner with a company that's going to partner with you.

 

Great. Thank you.

 

Thank you so much, Dustin.

 

 

About Marcus Arbelbide

 

 

 

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Marcus Arbelbide

 

VP of Supply Chain Solutions at Gateway Supply Chain

 

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