Increasing Visibility Across the Supply Chain with New Tech, From Planning to Logistics

Colin Gilbert: All right, gentlemen, welcome. My name’s Colin Gilbert. I’m Head of Research Science at Zero100. In the room today, we have some heavy hitters from the solutions space that help us accelerate towards 0% Carbon, 100% Digital supply chains of the future. With the talent in the room today, we can solve any number of problems, whether that’s control towers, omnichannel logistics, or real-time visibility.

What I’d like to do is just get a brief introduction from each of you and what company you’re representing, and where, generally speaking, you fit in the overall ecosystem. And anyone that says everything, everywhere, all at once, is automatically disqualified.

Chakri Gottenmukkala: On all the Oscars, though.

Colin Gilbert: True enough. So Chakri, Karl, and Tim, we’ll start with you.
 
Chakri Gottenmukkala: I’m Chakri Gottenmukkala. I’m the Co-Founder and CEO of o9. o9 is a software platform for driving what’s become essentially a very, very important thing in transforming supply chains. It’s integrated planning. We are helping companies across industry verticals, from CPG companies to apparel footwear companies, retailers to industrial manufacturers and semiconductors, match demand and supply in much more real-time. And that’s a capability that’s become extremely important for companies as they move towards digitization.

Karl Siebrecht: I’m Karl Siebrecht, I’m the Founder and CEO of Flexe. We provide omnichannel logistics programs for big Fortune 500 enterprise companies. What that means is we are in the execution part of supply chain management, and we provide very flexible, dynamic, and agile warehousing solutions for retailers, CPG companies, industrial manufacturers, food and bev.

Colin Gilbert: As the name of the company implies.

Karl Siebrecht: There you go.

Colin Gilbert: That’s convenient.

Karl Siebrecht: Not an accident.

Tim Bertrand: Sounds like someone we should be partners with. o9, a partner of ours. I’m Tim Bertrand, and I’m President of Field Ops at Project 44. We are the world’s leading real-time visibility platform. So we connect, to use one of our founders’ nomenclature, trucks, trains, planes, barges, rickshaws. We help customers gain visibility into their inventory in motion. So while the o9 team helps companies with inventory planning as an example, we feed into that platform helping large global shippers understand where their inventory is in motion in real-time.

Colin Gilbert: Excellent. So Chakri, I wanted to return to you. In the past, you’ve spoken quite eloquently about the fact that in enterprise software, disruption happens very predictably in cycles, but those cycles aren’t always measured in years, they’re measured in decades. It feels like all the stars are aligning for this mammoth step change with regard to supply chain planning. Why do you think that is?

Chakri Gottenmukkala: Yes, there are three megatrends I think have converged, quite frankly. One is that digitization has been a mantra that’s been going on for some time. Companies have been trying to digitize their processes, digitize their products, but the shocks that the pandemic sent with the volatility of demand and supply has made supply chain a boardroom topic. There’s a material impact of supply chain disruptions on the performance of the company. They have realized the complexity of the supply chain that is operating and the capabilities to balance demand and supply and mitigate risk. That’s number two. And the third is sustainability in the supply chain, we see this is highly interconnected. So consumers, customers, and stakeholders are demanding sustainable products, sustainable solutions. Most of the sustainability impact is these complex supply chains of the big corporations. It’s become a topic where digitization, demand-supply matching, the shocks of the supply chain, sustainability, all these things have converged into essentially the same solution set that’s required to handle all three. And so those are three megatrends I think are driving the accelerated awareness and transformation of the supply chain.

Colin Gilbert: Absolutely. I think that resonates with everybody. Karl, a related question, switching specifically to delivery and logistics. Flexe uses the term programmatic to distinguish what you do in terms of logistics, warehousing, and transportation. Can you help define why that word matters in today’s operating environment that we just defined?

Karl Siebrecht: For decades, supply chains were generally thought of as big cost centers. And the goal was, at minimal risk, to take cost out of the system. So don’t lose stuff, don’t break stuff, save me a point or two a margin, and you’ll get promoted to the next rung of the supply chain profession. But that was at a time when changes in the industry happened on ten or twenty-year cycles. In a world driven by consumer behaviors, it’s been driven by technology disruption. So change happens much more rapidly. In that environment, supply chains can and must become revenue drivers. If you can bring agility into the supply chain, you can react faster to things that you didn’t anticipate. So we talk about programmatic logistics as a way to create a series of logistics programs that are like building blocks, and you put those building blocks in the best formation they should be in, but then you’ve got to have the ability to switch the building blocks around quickly when things change, and you didn’t expect them to change. That’s what we mean by programmatic logistics as a way through technology to sort of arrange and constantly rearrange.

Tim Bertrand: I think that’s really interesting. We call a lot of what you just talked about the Amazon Effect at P44. So you have now up-and-coming chief supply chain officers, and you see this combination of chief digital officers and chief supply chain officers starting to really take hold. We’re seeing that happen in the B2B world as well, where customers want the same visibility and transparency in their job as they do when they order something from Amazon online. It’s really driving this whole digitalization effort in most of the customers that we work with.

Chakri Gottenmukkala: The term that’s being used often is, now, we’re always playing defense. Now supply chain is becoming a force for offense. It’s playing the full-court game if you use a basketball analogy. You have got to play defense and offense together. As customer preferences have gone up, supply chains have become much more agile and resilient versus just being a cost center. And to speak to what Flexe does, for example, we are doing planning, and all the time, the decisions are related to trade-offs of, like, hey, I need extra capacity, but I need short-term capacity. So it’s about the ability to understand this from a cost standpoint. If the demand is going from 100 to 120 or 140, do I operate the supply chain at 100, or should I operate the supply chain at 140? Well, I have to invest a little more in flex capacity if I need to operate at 140, but the demand might not come through. So that’s a risk-based decision we have to make. And so the ability to have much more flexibility and resiliency in the supply chain, which is taking the cost down and investing in that, has become really, really important.

Colin Gilbert: Absolutely. Project 44 describes themselves as a supply chain visibility platform. Can you break down for our listeners the components of that platform and touch on how you disaggregate between enhanced visibility versus value-added insights?

Tim Bertrand: Sure.

Colin Gilbert: Because sometimes we conflate those two terms.

Tim Bertrand: It’s a problem that, today, is solved by emails, spreadsheets. We look at some of the companies that we all aspire to be like, and you get inside of their supply chains, a lot of these companies are still a hodgepodge of this person handing this person a spreadsheet who uploads it over here, who types an email to this person over here, who uploads it to a portal over here. If I think about the building blocks, the first building block, it’s really the carrier network. So it’s being able to provide insight into that carrier network so that is connecting to all the truckload carriers in the US, for example, connecting to all the less-than-truckload carriers in the US, either connecting directly to the telematics devices that are on the trucks and trailers, connecting to the APIs of the systems that these carriers use which might be proprietary transportation management systems. And then it’s also about expanding and stitching that together with the other modes of transportation. The story that we like to tell is about one of our customers who’s a major coffee company (coffee we all often drink when we’re either in airports or hotels or what have you), they want visibility from the time that a cup gets made at a paper processing plant to the time that someone’s drinking out of that cup in one of their stores, in a borough in downtown Brooklyn, for example.

The second is being able to stitch these different modes together so that as you have a piece of inventory moving across the different modes, you can track and stitch that together. And then, over time, it’s really about providing insights and analytics and using those analytics to know that truck traveled up and down, say, this lane 5,000 times in the last year. The on-time arrival for this carrier, for this particular lane, is X. And then we should expect Y when we’re working with this particular carrier. That knowledge is super important. What that does is it allows our customers to take a truck and treat it like a rolling warehouse or a steamship line or container and treat it like a floating warehouse. That’s super important because now we can start to take the inventory that is in motion and treat it very similarly to the inventory that we have in the warehouse. And if you look at the companies that we work with that have the most efficient supply chains, those that are not playing defense but playing offense, I think of Amazon as a great example, that’s really where I think the magic starts to come into play. It allows customers to have these deep analytics at their fingertips so they can treat this real-time visibility as inventory. Motion that they have visibility into is just super important. I think it’ll drive huge impact and offensive impact for customers going forward.

Colin Gilbert: For sure. And that’s a perfect tee-up because I want to stick to that theme of building blocks. Chakri, I wanted to ask you, I’m curious about your thoughts on the tech foundations to enable that next step in the ladder, the step in the sequence.

Chakri Gottenmukkala: The fundamentals are the same, but as you’re moving towards regenerative business planning, the whole idea is, number one, how do I spot risks and opportunities faster and faster? On the demand side, I need to have a better understanding of not just my immediate customers but what really drives demand. So if I’m a CPG company, there are consumer drivers, there are competitive drivers, there are retailer drivers. If I’m an auto supplier, it’s all driven by my car schedules and the driving car demand. So it’s no longer just about looking at my immediate customer. One of the most innovative companies is a company that does robotic surgeries. They’re doing forecasting and replenishment, it’s a razor blade model. You have this big capital equipment that’s going into hospitals; the scalpels and everything gets attached to the robots through a replenishment model. The forecasting of that was a big problem. But now, with IoT sensors that are embedded into the technology, you have new data that’s coming in every day on usage, of how many surgeries are done. So there’s a revenue opportunity where now you can use the same data, not just to forecast, but to say, hey, you need to reorder this stuff. There are new sources of data tapping into consumer sentiment data, a lot of external sources of data to transform demand sensing, demand forecasting; this is one big area.

On the supply side, I have a great appreciation for the visibility P44 is bringing. We do all that scenario planning, but my appreciation for how I get that visibility, there’s a lot of complexity in tracking that across the entire supply chain network. That’s what we rely on P44 for. But I’ll extend it further. How do I get visibility into my multi-tier supply chain network now?

That’s where the risk and opportunities are emerging, two tiers down. And so the first layer is what I would call risk and opportunity enablement. How do I get early warning sensors from various technologies on demand and supply? On top of that is a technology layer. The idea is like it’s a digital brain of the enterprise where all the decision-making is happening. We are creating a modeling framework where we can model all aspects of these decisions and run scenarios to help companies really make these decisions in an integrated fashion. That is becoming a very, very critical capability. So visibility plus scenario planning, that ties all the planning processes together.

Colin Gilbert: Absolutely. And sticking to the theme of agility, Karl, I wanted to go to you. What are the hallmarks of one of those agile organizations or, for the people that reach out to you for help, where do they need to implement different solutions to unlock that agility that they were lacking during the height of the crisis?

Karl Siebrecht: That’s the logistics markets, 1.6 trillion, something like that. 8% of GDP. And almost 2/3 of that is spent on transportation. 10% is spent on warehousing. Another big chunk is spent on technology. And then there’s inventory carrying cost, inventory in motion. What is the most, if not one of the most rigid, piece of the flow of the goods? It’s the warehouse because the economic construct of a warehouse is a long-term lease. You have nodes and arcs in your network; the nodes are the warehouses, the arcs are the transportation lanes, and your nodes are relatively fixed. If you can free up those nodes and make them flexible, you can completely rethink how you optimize the flow of goods. And that hasn’t been possible. It’s why we built this business, frankly. So under that construct, layer in the fact that there’s a pandemic, what are we going to do?

Well, at first, there was a rush to people saying, I need more e-commerce fulfillment capacity. It was originally going to serve the whole country, but then shipping stuff in seven days wasn’t fast enough. So now I’m trying to regionalize, but I need capacity now. So the ability to flex up that capacity was hugely valuable. Then there was the no more supply phase, and then when supply came back on, they were like, I need more inventory. I don’t want to run that risk again, so I bought a lot of inventory and had to put that somewhere. And again, all these are secondary, tertiary effects where one of the solutions is, if I’m doing planning, I’ve got a more agile way to predict what’s going to happen.

I have, frankly, a better understanding of how right I am and the ability to start to layer this in as part of the fabric of your supply chain. There are certain parts of your business where there’s a higher level of certainty, and then there are other things, it could be a new product launch, where there could be an exogenous factor, like a geopolitical situation or a strike in a port. So the ability to make the nodes flexible because the arcs already have quite a bit of flexibility is a big unlock.

Chakri Gottenmukkala: With respect to omnichannel, we’re finding a few trends. Building on what was said here, there are companies that are digital-first, Amazon, etcetera. And then traditional operating model companies, brick-and-mortar companies, are putting in an omnichannel capability. Their approach to digital transformation a lot of times has been a little myopic in the sense that there are dots of transformation. But Amazon is connecting those dots. The data that I get from the website, the data that I get from the warehouses, all of it is flowing into how I make decisions related to forecast, how I procure from suppliers, how I shape demand. If I’m short on something, how do I change things on the website so that I can immediately shape demand away from short supply and shape it towards what I have in stock? All of that is connected, and that’s the real power of a digital operating model.

Most traditional companies, we want to drive digital transformation. They have started pockets of digitization. There’s a consumer engagement application, there is factory automation or a warehouse automation application, and there are analytics and planning, but the dots are not getting connected. And the power of omnichannel is getting closer to the consumer or the customer. I need to use that data to drive the transformation of planning and decision-making, to connect the dots. I need to use the power of the automated warehouses, the real-time visibility from execution to change how I make decisions. I think the companies that really need to get to what I call a digital operating model, true digitization, need to connect these dots of digital transformation.

Colin Gilbert: Absolutely. Isn’t a major challenge for all of you this multi-tier supplier problem? I’m interested to know to what degree you guys view the interoperability or the data federation problem as a blessing versus a curse. And I know, Tim, your company depends heavily on APIs to fix this problem. Is that the magic bullet solution? Or do people that have to build stuff from scratch just have a structural advantage?

Tim Bertrand: I would say what we found on the supplier side is this is a really hard problem because if you are a large global company, your suppliers are likely using a whole multitude of systems. They were built in different eras, they have different levels of APIs available. There’s really been no standardization yet on the supplier side. So we started to see some touches of data standardization, for example, with the LTL digital council in the US and our part of the business. But on the supplier side, this is a super hard problem. There’s no silver bullet to solve this problem. This is why there are massive systems integration efforts when companies look to integrate their suppliers into one view. It’s why all of our companies exist because we’re trying to give pieces of visibility into whether it be planning, warehouse flexibility, or real-time transportation visibility. But when you get down one level, you’re now working with these companies to give visibility within their supplier base. So, for example, what inbound inventory is coming in from my suppliers? What we’ve learned is this is just hard work that has to be done. There are definitely nuances. It’s not an easy problem to solve, but there’s a lot of effort going on in the industry working with both our customer base and their suppliers to try to begin standardizing the data between the two parties.

Chakri Gottenmukkala: There’s the kind of visibility of inventory moving or warehouse capacity, but the challenge of the multi-tier supply chain problem, let’s take the semiconductor problem that’s emerged as an example. If I have an auto EM, in many, many industries, I relied on semiconductor chips, and there’s a lot of shortage. But the semiconductor chip manufacturers are two levels removed from the auto EMs. There are intermediate manufacturers. So they all realize, hey, how do I get early visibility into that?

But that is not just a technology problem. There’s a fundamental, who are my suppliers’ suppliers? Well, there’s master data related to that, there’s ways to get that. But then, how much capacity do they have? Will semiconductor supply be constrained or not? I think there is a variety of data that is required. How much capacity do they have? Who are they supplying? What’s the likelihood that they will go short based on overall demand? So it’s a much more complex problem, and right now, we’re just starting to scratch the surface of how to really model the multi-tier supply chain.

The real problem is the data is not available because no one will share the data. Why would I give my capacity data out when I would get beaten down on price? So you have to figure out a way to estimate using public sources and triangulate to figure out what the supply chain risks are. And that’s where a lot of innovation is going. How do I get a combination of public data and other data to create my version of the multi-tier supply chain model? Whoever is the best, all you need to be is 10% better than your competitor in understanding a multi-tier supply chain. Then you can really take advantage of that. And that’s really the game right now.

Colin Gilbert: I want to conclude on a pragmatic note. All of the solutions that you collectively described represent long-term investments, multiphase implementation, progressive ROI over years and decades. What can people do on Monday in terms of figuring out what they need and mapping these solutions against their digital roadmap, some of which are still in their infancy? Karl, I want to start with you.

Karl Siebrecht: Sure. I’m happy to start. Almost all of our big customers started with us with a relatively small and simple need. It’s a great way to dip your toe in the water. Again, almost all those customers, after starting from a very small scale, saying, for example, hey, I need more port deconsolidation capacity in the northwest. Great, we can solve that for you quickly. We work on that problem. We earn the right to be seen as a good provider. And then they say, well, actually, I have that need on the East Coast and the Southeast, and oh, by the way, BOPUS is going great for me, which I love, except my store shelves are getting stocked out. Can you help me replenish my stores twice a week instead of once a week? We can evolve into that. It’s a real test-and-learn model. And with these customers of ours who are so big, there are problems everywhere. It’s like, pick one or two, find one, get started, and then we can grow from there.

Chakri Gottenmukkala: We have a slightly different approach because we are trying to solve pretty complex problems. Integrated planning, by its very definition, is bringing end-to-end and silos together. So it’s a big change management problem, it’s a big data problem. There’s a practical way to do that. We call it a building block approach as well, where you take any planning process involving demand or supply, and there are foundational building blocks you can lay in,  then you put the more advanced stuff in down the line. For example, if you take demand planning, there can be a lot of value leaking just because, even with the sales and supply chain organizations, the demand signals are not connected. So one simple mantra is: follow the spreadsheets, digitize the spreadsheets. Then you connect the demand signals, and you’re starting to get the data and the information flowing. A lot of biases, a lot of sandbagging, a lot of gaming goes on in big companies because data is not connected. So there’s huge value to be derived by doing a simple foundation, and then you can be putting in the data muscle. That’s when ML, AI, the learning algorithms can come in to automate the forecasting process and put a lot more intelligence into it. We have become very good at helping companies based on their maturity. We know where we want to get them to, the true integrated end-to-end vision, based on where the value is leaking, based on their maturity. It’s a building block approach where, every three months, you’re getting incremental value, but over a two-year timeframe, you’re building a very, very solid foundation of a transformation capability.

Tim Bertrand: And I’ll conclude. We take a very, very similar approach where we actually work in a value engineering sense with customers to identify what the top leakage issues are that they have in their supply chain, where they have the least amount of visibility, where we can drive the quickest impact with customers. Instead of a boil-the-ocean approach, as I previously said, we’re trying to stitch all these different modes together. That’s a journey that you take with the customers, but a lot of times, you’ll discover they don’t have basic visibility on their international ocean freight today. If we can help them gain basic visibility as to where containers are and when they will be delivered, customers then can begin to do things like cut down on safety stock, cut down on excess inventory and warehouses, plan better from a warehouse planning perspective, and so on. We typically do take one of these lower-hanging fruit problems that generate very, very high impact for the customer. Start there and then build around that problem over time.

Colin Gilbert: Well, that was a fascinating conversation, gentlemen. I just want to thank each of you, Chakri, Karl, and Tim, for contributing your knowledge and subject matter expertise to solving the mammoth undertaking that is Zero100 supply chains.

This episode of Radical Reinvention was produced by Brian Egan, Catherine Parry, Mike Silverman, Ursalaan Khan, Duda Rodrigues, Nick Heinimann, and me, Anna Wooding. Ko Takasugi-Czernowin composed our theme music. To find out more about Zero100 and to check out our content library, go to Zero100.com. If you are interested in joining our community of contributors, send us a note at hello@zero100.com.