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The Element Podcast - The Supply Chain Imperative, Episode 1

Last year’s global lockdown orders shocked supply chains worldwide, and exposed cracks in its agility and resilience. On this episode we explore how 2020 put supply chains at the front and center of business, helping to accelerate their digital transformation and create a more sustainable future.

 Host: Peggy Smedley, Content Influencer, Podcaster, President/Editorial Director Specialty Publishing Media

Interviewees: 
Alexis Bateman, Research Scientist and Director of MIT Sustainable Supply chains
Mark Bakker, Global Operations for Hewlett Packard Enterprise

 

 

Transcript

Peggy Smedley:

Welcome to The Element Podcast from HPE, where we explore the latest technology trends and more. I'm your host, Peggy Smedley. This season, we're focusing on the need for companies, nonprofits, NGOs and governments to accelerate their digital transformations. And we're starting off by taking a deep dive into the supply chain. Between lockdown orders around the globe and ongoing risk of COVID-19, companies experienced a shock to the system during the past year, especially in the supply chain. With our guests today, we are going to examine the impact of how the experience underscores the need for greater agility and resilience and how it creates opportunities for a more data rich and environmentally responsible flow of materials and goods.

The big question here is how do we ensure that technology is applied to create this more dynamic and digital future? My guests today are Alexis Bateman, Research Scientist and Director of Sustainable Supply Chains at the MIT Center for Transportation and Logistics  and Mark Bakker, Senior Vice President, and General Manager of Global Operations at HPE. Alexis, and Mark, welcome to the show. 

Alexis Bateman:

Hello.

Mark Bakker:

Hey, thank you.

Peggy:

Well, you know, these are exciting, but challenging times. I want to start with you Alexis first, talk about what happened in the supply chains in this past year.

Alexis:

Well, I think that to answer your question, you know, what didn't happen with supply chains in the last year? some of the really big change was that supply chains became prominent to people that really didn't recognize that, supply chains run the world. that was by virtue of when they couldn't get their toilet paper or their critical needs and how much pivoting and disruption,  the supply chain experienced.

So that narrative around supply chains as a cost source really changed to a very critical part of businesses, of our world, of serving our needs. even as a somewhat silly anecdote, but my own dad who hasn't known what I've done for many, many years suddenly realized what a supply chain does when he could not get toilet paper.

That recognition, both the criticality of supply chains, but also a huge social and environmental impact. So not just the recognition of what they are, but the scope and scale of them globally, in many dimensions. that has been a huge change from 2020 into 2021, that it became on the radar. And there was such a clear recognition of what their role is going forward in terms of resilience and risk management, as we exit COVID-19 and are preparing for future disruptions and other opportunities.

Peggy:

Who would have thought supply chains would be aware to us all because of toilet paper?

Alexis:

(laughs).

Peggy:

So Mark, have you seen this past year evolve, in some cases transform, our supply chains in ways that you never imagined?

Mark:

Yeah, what was different, as a supply chain practitioner, for many, many years I've seen disruptions happen from time to time. We face fires in factories or flooding or earthquakes or volcanoes eruptions, or even port strikes. Most of the time with those, they are however, kind of isolated.

They happen in one factory or one country. What was different last year with this is that it basically affected everybody and all supply chains from, pharmaceutical to toilet paper to the tech industry. It affected all supply chain and in multiple countries and it's spread, from the large manufacturing base, for tech in China and Southeast Asia, to where we deliver products to customers.

That's where you saw the impact on society, and obviously, this has had a huge impact on supply chain around the world. First of all, in the ability to bring product to shelves, as Alexis highlighted, but also, it transformed the way of thinking about supply chains going forward. The fact that we need to be more resilient, which is going to be high on the agenda of many, many people,.

Peggy:

One of the interesting things I think we have to think about is just in time manufacturing where they had to learn about efficiency and lower inventory costs. Can you talk a little bit about how the pandemic has changed our thinking in just in time approaches? We thought that just-in-time was very critical, but one of the most important things we learned from it is you can't rely on one company or one country because countries got shut down.

Mark:

Right. Very good point and obviously, the pandemic has created, an even higher sense of urgency to think about supply chains a little bit different than before. Just in time manufacturing has been a trend for many years, as you said, focusing on lower inventory, lower cost. But the change in approach started before [00:07:30] the pandemic actually hit and the pandemic actually only amplified the need to change.

What happened before the pandemic was two things that had an impact on supply chains practically in every industry. First of all, trade tensions, protectionism in certain countries, introduction of import duties, other barrier related [00:08:00] things, have led companies to think more about what is the right supply chain network, what is the right supply chain strategy? That, combined with what I call the Amazon effect. All of us are very used to nowadays placing an order with Amazon and expect delivery of that maybe the same day, or maybe in two days.

With new generations also entering the workforce, those expectations, they get introduced in professional life as well, and therefore, increased or improved service levels, shorter turnaround time, shorter lead times are expected from many companies for their products. So that was already happening before the pandemic and the pandemic hit. And we had all these disruptions and country lock downs,  factories, closing, air transportation, reduced significantly reduced capacity.

As you said, stimulated even more thinking around changing some of those models and being more resilient, more agile, thoughts around moving manufacturing, closer to markets, introduction of carrying [00:09:30] more inventory rather than less, all those things are, actual conversations in many supply chains around the world currently.

Peggy:

Alexis, that makes me think about the research you've done, about the sustainable supply chains, because if we have this socially engaged community that wants things faster, but we have to think about our environment, our world differently, and the supply chains as a result have changed dramatically.

Alexis:

Yes, absolutely. We've been obviously tracking the change in supply chain in the last year, but also added in years, and also adding in what that means for sustainability and particularly sustainable supply chains.  Not that they necessarily have to be in conflict, but there's just a bigger scope of factors that you have to account for socially and environmentally. In terms of last mile delivery and getting things there faster, what are the modal choices you have to make to keep in that same scope of hourly delivery and can there be different alternatives that  meet those same customer centric goals, but also reduce our overall impact.

These are questions that have been on the radar for quite some time for many companies, but kind of escalated and advanced in the last year because of the disruption that change was possible, that things are moving faster than they ever have before added [00:11:30] to the fact that the scale and scope of impact was so visible, even very simple symbolic things such as the air clearing when we were all on lockdown.

But simple changes at a very massive scale can have a significant impact on our earth, our world. And also the social dimensions that the people running our supply are the frontline labor. If they cannot continue to operate because they're ill or because they don't feel protected, then the way that our supply chains have operated for so long, just aren't sustainable in both the environmental and social way, but also in the business continuity way. So those definitions of sustainability and and risk resilience are no longer separate definitions.

They're overlapping in the minds of many business folk that used to see them as different goals and different objectives. And how can we pursue these efforts as we're rebuilding supply chains and redefining what a supply chain means in a more strategic way. And not that this change is going to happen overnight. It's a lot of work, but I think those perspectives have began to merge more than they have in the past.

Mark:

Alexis is spot on there, right? Nowadays the conversation is around how do we balance in all three of these very critical things, cost, resilience and agility and the sustainability? We have customers actually asking questions during tender phase, how we run our supply chain and our agenda [00:13:30] around sustainability, but also around how resilient is your supply chain to serve my needs?

It's good to have those conversations and try to find the right balance.

Peggy:

So Mark, talk a little bit about digital transformation and the acceleration that you're seeing now, because of COVID we're seeing so much more than what we have to do from end to end.

Mark:

Yeah, no, absolutely. The thing is it's supply chain environment, it's a value chain, right? It's made up of different, elements of the chain all locked together, working in synchronization. It's a super data rich environment as well nowadays. And with the availability of high performance compute, machine learning, artificial intelligence, getting introduced that gives us a huge opportunity to continue to automate,  more in the supply chain.

It's very data rich, but at the same time, pieces of the supply chain tend to speak in different languages. When you talk to a customer, you may talk about a product or a unit when you translate that into the logistics world, they care more about kilograms, they care about pallets, containers, airplane, ULDS, things like that.

When you go into the supply base, it goes into components and how many components and what kind of components do you need? So there's different units of measurement, , that are used in different parts of the supply chain, all generating data. And  the opportunity there is with digital transformation and the new tools is to integrate that data more, have better access to that data to then do proper analytics, predictive, prescriptive, and make better decisions that ultimately help us to create more velocity in the supply chain.

And that will serve us in all those dimensions. More velocity helps us reduce costs. It will help us to provide a better service to customers and partners. And ultimately the faster we are with these things, the better it is for our employees as well as the sustainable aspect we just discussed.

Peggy:

So if I'm hearing you correctly, Alexis, in the end, it sounds like you have to have the right information to make the best decisions for all the people that are involved?

Alexis:

Yeah. And it's not an easy task to tackle. And to Mark's point about each business unit,  each player speaking a different language. This is a critical element that's a barrier to aligning some of the efforts towards digital transformation.

So it's become clear that this transparency imperative within the supply chain, within the players that speak to each other, but also, sharing information more than they ever were before for these risk issues that have become so prominent as a result of COVID, but also publicly in terms of disclosure.

The more that firms can know in terms of having more visibility upstream in the full supply chain map and where their deep tier suppliers sit and what's happening on the ground, but then also knowing enough that they can feel confident that they can publicly disclose about some of their supply chain impacts and where they're headed in terms of those sustainability elements.

 I do think that the digital transformation sustainability objectives are aligned because there is a need for more information upstream to build out that bigger picture much far beyond your tier one supplier, and really have that understanding of where your potential risks sit. Are there hidden labor issues  in your supply chain? Are there hidden environmental issues that you aren't aware of? You can't really ignore those hidden issues anymore and just say, " it's not my business. I'm not responsible” because supply chain is now becoming, more connected and intertwined with that.

And just wanted to add one more element here is that this isn't just a risk drive anymore. There's increasing due diligence requirements, such as the EU due diligence law that just was passed, or putting on that onus onto the business and have actual financial penalties if businesses can't report on the due diligence for human and environmental rights, protection that as stipulated in the regulation. So it's a evolving space. It's not just this risk management element, but it's a precautionary one as well.

Mark:

If I could add a couple of comments there to Alexis's point – The wider and the deeper we can go into the supply chain across different companies’ supply [00:20:30] base. It allows us to get more information that will help make sure that products are produced in the right environment. That sustainability both from human rights as well as environment are taken into consideration. If you take that data and you use that well through the value chain, it can actually help to make decisions early.

If I have visibility on what you know is arriving [00:21:00] into my factories at a certain point in time with high levels of accuracy, we can reintroduce this notion of just-in-time more, which can lead to having less trucks on the road to reduce the amount of warehouses and warehouse space that needs to be utilized, consolidation of shipments,  less empty containers, half empty containers and things like that, which help the sustainability [00:21:30] agenda and optimize the supply chain to the max. So it's usually beneficial to have that visibility, lots of data, and use that data, to optimize.

Peggy:

So Mark, are you saying that supply chains are really having to change everything?

You have to think differently. You have your supplies, but you can't ignore the global market. You have to shift your mindset now.

Mark:

Oh, for sure. There is quite a few people that talk about this concept of glocal, right? It's  you have a global operation, but you need to serve customers locally. The end user is in a geography in a country, in a county in a city somewhere buying, wanting to buy something. And from a supply chain point of view, I have to always take that into consideration in the way we design our networks, from a supply chain perspective and partner with either internal or external partners to make all of that work.

And with all of that, the importance of supply chain within the society, as well as in a corporate environment, supply chain becomes a boardroom agenda item. And supply [00:24:00] chain leaders, have a seat at the table and decisions that are being made around the future of the company and the strategies that are there. Having said that, for every company, it starts with a product, right? If you don't have a product, you don't have a supply chain.

It's as simple as that, but it has a much more strategic importance for companies to be successful in addressing not only the share holder, needs, but also the customer needs as well as societal needs around sustainability.

Peggy:

And is there anything Alexa, you'd like to add about what business leaders need to be thinking about for the future?

Alexis:

Mark outlined it pretty nicely there, but just to add a few more perspectives in terms of supply chains, moving out of the cost source, the pain point into a strategic opportunity and the ability to enable rapid pivots, clear innovation to go to market and to serve a customer needs, it's just changed the discussion around it and put it in a more strategic lens to think about how can we design supply chains that both operate and serve global needs, but also think in the language of the local communities they're serving that they're sourcing their human resources and their staff from.

And so this picture that is multi-dimensional lens, that isn't sort of a single source need of costs and efficiency, it's much more complex than that, and I think one of the key things that leaders are recognizing is we can't have organizational amnesia. In the past with floods and with volcanoes and all those as we discussed before, everyone's just in a rush to get back to normal. Like, "Okay, that was terrible. We got through it. But let's just keep going back to normal."

And COVID, and this last year have been so widespread that most leaders are realizing we can't just go back to normal. So what are the key points and elements, whether they include this digital transformation, whether they include sustainability, to really have a more holistic sense of how our supply chains are gonna operate going forward. That fundamental shift just won't allow us to go back to normal and business leaders are increasingly recognizing what are the key changes they need to have in place. So we never get back to this.

Peggy:

Finally, Alexis, if you don't mind, I'd love to wrap up getting your take on the workplace of the future, because I think it's so important that we talk about this.

Alexis:

Yeah. So, so happy to weigh in there on the workforce of the future and having had this experience of working remotely really changed the dynamics of access and ability for  folks around the world, to collaborate. I think that that has changed fundamentally, the virtual opportunities to be able to integrate, engage with so many around the world and just to make a relationship to one of our programs we have online, which is a digital credential for supply chain professionals, which is offered exclusively virtually. That has seen a huge uptick in the last year, because 1) people recognized supply chain as a fundamental career choice that they really probably had didn't have enough awareness 

sitting in a university, my advice to professionals that are either new entrants or developing their careers and becoming more supply chain professionals and treating that strategically is to have that continuous learning mindset, because the one thing about supply chain. Okay, there's many things about supply chains, but one critical thing is that they're always changing and they're always innovating and there's always advancing, you can't have a static knowledge around supply chain. Being able to access new information, access, new perspectives, get those global perspectives is going to be more critical than ever going forward.

Mark:

We have learned to work remotely, all of us working from home offices and so on in supply chain land is no different. And if you think about it, supply chain has always been a very travel-rich environment. Visiting factories, visiting suppliers, working with logistics providers, going to warehouses – things like that happened a lot. It's good to see  that we have learned to do those things more remotely, which has helped tremendously this past year.

Everybody in the supply chain world has learned to adapt to that as well, which I think is great because that can help from a sustainability perspective. And from a career perspective as a supply chain geek myself, I can only give great encouragement to young people to think about supply chain as a career, as supply chain becomes a strategic asset for any company, has a seat in the boardroom nowadays and influences corporate strategies.

There's great opportunities for careers. And as Alexis said, "Supply chain always innovate, always change." So there's a lot of opportunity to do fantastic stuff in a supply chain environment. And last but not least with the topic of digital transformation and the abundance of data and how to integrate all of that data and using all of that. It also introduces different kinds of roles and opportunities in supply chain for careers.

Five years ago, I would not even have thought about hiring data scientists. Nowadays,  that's what we're doing because we want to use the data. We want to do more machine learning to be more predictable and to have a better look on what forward looking demand we may expect in certain markets for certain products, and using machine learning and AI is going to help us tremendously, but for that, you need these incremental skills that we didn't realize we needed back in the day  when I started in supply chain. So great opportunities for career, it's a fun place to be. Like I said, I encourage everybody to consider because this is where you can change the world.

Peggy:

Mark, I love that you talk about the next generation and future generations can change the world. That's a great point to end on today. Alexis, Mark. Thank you so much for speaking with me, you've given us a deeper understanding and appreciation for the supply chain and actually how technology is enabling all sorts of new capabilities that create more resilient supply chain, which makes for more resilient business.

I'm Peggy Smedley. And this has been The Element Podcast from HPE. Thanks for listening everyone. Don't miss our upcoming episodes this season on digital transformation and FinTech,  5g, and inclusion.

 


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