Bob Trebilcock: Welcome to The Rebound, where we'll explore the issues facing supply chain managers as our industry gets back up and running in a post COVID world. This podcast is hosted by Abe Eshkenazi, CEO of the Association for Supply Chain Management, and Bob Trebilcock, editorial director of Supply Chain Management Review. Remember that Abe and Bob will welcome your comments. Now to today's episode. Welcome to today's episode of The Rebound: We're Going to Need a Bigger Boat. I'm Bob Trebilcock.
Abe Eshkenazi: I may have Abe Eshkenazi.
Bob: Joining us today is Ben Amaba. Ben is the chief technology officer for the industrial sector at IBM data analytics and artificial intelligence. Ben, welcome.
Ben Amaba: Thank you very much. It's an honor to collaborate with ASCM.
Bob: We're thrilled to have you here today and to learn a little bit more about the boat. If like me you're a fan of Jaws, you know the movie's most famous line by heart. Roy Scheider, Richard Dreyfuss, and Robert Shaw are out in a fishing boat when Scheider gets his first glimpse of a giant shark terrorizing the island. "You're going to need a bigger boat," he tells Shaw, the ship captain leading the hunt. As Ben will tell us in a moment, supply chain is in the midst of a digital transformation. To that end, boat is an important concept for supply chain managers that want to compress latency, improve productivity, and reduce costs.
In fact, we may need a bigger boat than what we've been accustomed to working with. I'm not going to steal his thunder and I'm going to let Ben explain what we're talking about. It's also important to note that IBM is working with ASCM to develop a risk management tool where this boat is going to come into play. Ben, why don't we start really at the beginning, tell us about the initiative that IBM is working on with ASCM. What are you doing together and what do both organizations bring to the table?
Ben: A wonderful question. We are working very closely with ASCM on what a lot of people termed as supply chain tower. It's about the disruptions in the supply chain, whether it's COVID-19, bottlenecks within the routes, or even shipping containers, which is so appropriate about the boats. What we're finding is that our new world is a little bit more fragile and unable to cope with some of the changes, whether they are external or internal to an institution. If you can imagine, there's four flows and they're getting more and more complex. There's inventory flow that we saw from the just-in-time error, workflow from specialization, cash flow from the financial error.
This new error of information and data is providing a flow or a turbulence out there. As a society, we are connected more than ever with this invisible thread they call technology software. We, along with IBM, ASCM, still have to deal with the physical laws of science and trade on a global scale because whether we're here or halfway around the world, we're not immune to this change. We're starting to be very much interconnected, but we require innovations in interdisciplinary areas. That's why diversity inclusion is important to us as well when working with ASCM.
No longer can we just be in silos or single entities. The new supply chain requires interdependencies that are constantly moving like an ocean of data that's very turbulent at times. IBM and ASCM are designing a better platform using the know-how of ASCM, specifically the strategy, the process, the people integrated into the technology. What we want to do is keep this technology on an open hybrid platform so that we can democratize the intellect, the know-how of ASCM so that our customers around the world can both visualize and adapt to a changing environment.
Abe: Ben, let's dig into this a little bit more. We're using the boat analogy, which indicates that we may not have been anticipating what we're seeing right now, and it's causing us to reevaluate what our tools, our resources are. Why do we need this concept of we need a bigger or a more sophisticated tool system to think differently about the resources and the tools necessary?
Ben: Great question, Abe. You know why we need the boat, unlike in the past, our ocean is connecting to rivers, lakes, and areas. When we were traveling on more simple supply chains, we could get away with maybe a smaller or maybe a simplified boat where we didn't need a lot of technology or the organization could be very hierarchal. It was less complex. Why I use the term boat because it does two things for us with IBM and ASCM when you work with us. It allows us to assess what the environment looks like today, but more importantly, it prepares that boat, that vessel, that organization to travel not only today's turbulent waters but plan for tomorrow's turbulent waters.
I use the term boat as a way to assess and remind us that there are interdependencies and there's a balance required. Although IBM is seen as a technology company, we understand the B, the O, the A, and the T, and the importance that if you have a boat that's perfectly balanced and you end up putting the technology in the rear of the boat, it off balances the boat. You could just physically imagine like we were talking about Jaws, the end of the boat starts to tip down into the water. The front of the boat starts going up, and everybody slides into the jaws of a change. We use B for the business, O for the organization, very important. A, I use for algorithm.
Why I use A for algorithm because it includes both the process that we see at the score model and ASCM certification, as well as the models themselves. T finally for the technology. From our viewpoint, many people believe, and sometimes are misconstrued by putting more technology in the boat whether you're an institution, organization, company, or individual that you become more effective and faster. in most cases, it's called technology myopia. You start imbalancing the boat and people start sliding off the boat.
When I look at this, I think of this boat again as balanced, it cannot be capsized. In order to do that again, together with IBM, ASCM, I believe that ASCM has the know-how knowledge for the business, the organization, and the algorithm. I also want to remind the audience that the algorithm is more than just the model itself. It's actually the process. When it's balanced and we're in the right, whether it's a river or a lake or the ocean, now the boat can go swiftly, but accurately across the journey.
More importantly, we envision when you go on a boat, you make plans. Those plans are your strategy. That is the process. You're going to travel the people. Again, going back to ASCM certification, and then the technology. If we put all those in place, we have the people, the process, and it allows the technology to align in the boat without capsizing the boat.
In fact, one of the things that I always remember is Deming. If you don't understand the process, you probably don't know what you're doing. Again, that's where ASCM certification, SCOR model, and the consortium itself allows us to understand the process down to a level of granularity that we can actually take this journey with confidence.
Bob: You talked about the roles of latency, productivity, and cost in the supply chain. If we think about it, the first two, latency and productivity, they're going to have a major impact on costs. As supply chains are moving from the traditional analog to this digital supply chain, what's it take in this new environment to address those issues to reduce costs?
Ben: See, I also believe that latency and productivity are joined at the hip as well as costs. It's an optimization question. You have a timeline, which is latency. You have resources. We talk about materials, manpower, machinery, measurements, and methods, and then we actually have a level of quality. Again, quality has got to be high productivity aside, and you've got to remove latency. It's called Little's law because the more that there's time in the system, the more likely of errors, bias, drift, or maybe even mistakes. We hate to hear that term mistakes.
When I look at these latencies, I see there's three types of latencies that we need to compress to get the productivity, the quality, and the resource-saving to prevent, one, Little's law errors, as well as the bullwhip effect. Latency has got to be removed on three levels. The parameters, what exactly is out there in the ocean, and what I have to deal with workflow, inventory flow, cash flow, and information flow? They're symbiotic. When the ship gets hit by a wave, there could be another way changing.
By understanding these latencies in the parameters or features, and then understanding it as part of your decision, and then being able to act on those decisions much faster with a more stable boat or vessel, I think you remove errors which improves productivity and quality and then compresses latency. Again, we don't want to be in the habit of creating slack and surplus in the supply chain. That's very short-term. We end up having excess personnel, which we talked about earlier that it's very difficult to find a workforce, train a workforce. The cost of training and replacing that workforce is now becoming too excessive.
We know the materials today, whether it's the COVID-19 or bottlenecks in our canal or transportation system is not allowing us to get the materials we need. More importantly, without those materials MRO, we can't repair the machinery or it can't operate at the optimal speed. Then that's where it takes down our productivity, measurements, and forces us to change methods without transparency. We need to get better in the areas of process, data, talent, and trust. We can make our maps for the journey, which includes our strategy, our process, the people, and then the technology. Everything comes together quite well if you can imagine you taking a long journey around the globe during turbulent times.
Bob: If I could, Abe, allow me to just ask one more question because I think it'll lead into the technology question. As we move from analog to digital, what does this idea of digital bring to the table in terms of productivity, efficiency, and latency?
Ben: The good thing about digital, which you can't totally replace the physical world or the analog world because they are all laws of physics, thermodynamics. Eventually, as individuals, we consume the physical world. The digital world is quite good because it's simple. It's a binary zero, one, no, or yes. Unlike analog measurements, there is this continuous flow, is it 4.5, is it 4.6, or is it 4.7? Those differentials can make a huge difference.
In temperature, for example, 212 degrees versus 213 degrees. At 212 degrees, water boils, which makes steam that fires up engines that can move mountains. The analog world, it was very difficult to see where that measurement is. With the digital world, specifically AI, machine learning, data analytics, blockchain, IoT, and now robotic process automation allows our analog world to be a little bit more accurate and a little bit more precise.
Abe: Ben, that's really interesting when you're starting to talk about the technologies. Obviously, IBM is not only on the cutting edge but among the most qualified and capable technology organizations out there. Obviously, leading digital transformations are enabling organizations to go through their digital transformation. When you take a look at the technologies from the terms balance the boat, give me a sense of the technologies that we ought to pay attention to and where do they fit?
Ben: Very, very good. The five technologies that keep surfacing that are going from the innovative curve to the operations occur again, of course, data, artificial intelligence, and machine learning is surfacing very, very rapidly. The monetization of data takes a huge role, blockchain, the internet of things. In fact, billions of sensors are being rolled out now but still need to be followed by actuators. Then this concept of edge and/or cloud computing seem to be rising as the top five. What I will say about these top five is they are the technology in the boat. If the B, the O, and the A are not aligned to the technology, it could cause a disruption.
When I look at these technologies and why they're rising to the top, we find that technology is generally composed of four key elements. The sensor, the actual analysis, the actuator, the movement of certain things, and then the power. Sometimes we forget about the power and why sustainability is very important to us. When you think of all of these four or five technologies from blockchain to AI, they play a role in either sensing, analyzing, moving something, or taking action, and then power. What I do like specifically about blockchain is it does allow us this invisible software thread to double-check the sensor, the analysis, the actuator, and that the power is there.
Bob: Ben, talking about the tool again, I just want to bring you back to that for a second. I know this is in development. What's the timeline? Where are we? What comes next?
Ben: I always think it's sometimes difficult to measure the timeline. A lot of people would say, especially the Fortune article that came out early in the 2000s, I think it was Harvard Business Review, that AI won't replace managers, but managers who use AI will replace those that don't. Our colleagues at a lot of the universities, specifically Carnegie Mellon, Dr. Salvato says AI specifically, I'm just going to choose the first one because everything trickles down from there, that AI is no longer science fiction, but science fact.
We're seeing that all over the world today whether it's our smartwatch, whether it is a podcast, whether it's a recommendation of a book, a movie, or a trip around the world. I think they're arriving today, specifically those five technologies. They've arrived in a form of a proof of concept or a MVP. In order to actually operationalize them, we need that body of knowledge so that we have the talent to implement it, the talent to govern it, and the trust within those systems.
I say the technology is right, but operationalizing and scaling it will require a consortium of individuals that can build the talent, trust the change, and truly see the transparency of the process and data at work. Has it arrived? Yes, it has. Has it been scaled and operationalized? That's where the opportunity is.
Abe: Ben, you brought up a couple of really key points as you were talking about the implementation of technology and that in and of itself, it's not the end of the process. You talked a little bit before about process, you talked about people, you talked about governance. It's easy for a lot of organizations to view technology as the solution is you view it. As the implementation starts to affect organizations, where does the real focus for supply chain managers need to be in addition to the investment in technology? Where do they need to focus on to balance that investment?
Ben: Excellent. Again, the technology is at the end of the boat. I believe there's seven steps to get to where we need before we start using the technology, which is building the model and choosing the methodology. That generally comes in the fourth step of the seven steps. The three steps prior to that is where professionals from the ASCM, Supply Chain Managers really need to focus. The first step is understanding the business, whether it's a certification in operations, supply chain, or procurement, that is single 17% to 18% focus where they need to focus. By the way, the first three steps should be 50 plus effort and focus.
By understanding the business knowledge, the semantics, the language, what can be automated, and what should be manual is a key area. That's domain one. I call it understanding the business. The second step that we all as experts or professionals in supply chain also need to do in the second step is then framing it analytically. Now with the data there, again, with things like blockchain, IoT, and the edge, we have the ability to frame the problem like a word problem into a mathematical problem. That should be another 17%, maybe even 18% as high as 20%, because what we don't want to do is solve a problem that either doesn't exist or is not important. We manage what we measure.
The third and final domain is just because we're getting a flood of data, doesn't mean that it's turned into information much less turned into knowledge. Understand your data, where's it coming from? Is it high fidelity? Is it changing? Is it volatile? How can we use it? Where you should focus, domain one, understanding the business problem, domain two, framing it analytically, and domain three, where's this data that I'm making these assumptions, or even making the assumptions for the machine to act on?
If we can focus 50% plus of our time in those three areas, number four and five, six, and seven will come to play. That means choosing the methodology, building the models, understanding and deploying those models, and then doing the lifecycle. That's where, as professionals, we need to understand the business.
Abe: Quick follow-up. Do we have the right talent today to effect this?
Ben: I think we're lacking in that talent. I think that we got complacent. There wasn't a lot of disruptions or at least disruptions that were stochastic in nature. Specifically the last two big, major events, we were unable to change. It caught us off guard. In order to build and I guess satisfy that, we've got to be on the focus of building the talent, not to deal with not only stability but change. I think we need to build the talent today. Prepare not only the generation that's currently working there, but the generation coming in because some understand the business, some understand the technology.
Again, is the back of the boat talking to the rear of the boat? Not only do we need to know our own silos, we need to understand the interdependencies between the business, the organization, application, or algorithm to the technology. I think we've got a journey to build skills, education, and experience, and that is the opportunity what we should be chasing.
Abe: Ben, I want to thank you so much for sharing your insights into what for a lot of individuals is a current journey. I think you provided them some insight in terms of how to make sure that they're doing this in a very concentric and a very measured way. Thank you so much. Thank you for our listeners for joining today. I hope you'll be back for our next episode. For The Rebound, I'm Abe Eshkenazi.
Bob: I'm Bob Trebilcock. The Rebound is a joint production of the Association for Supply Chain Management and Supply Chain Management Review. For more information, be sure to visit ascm.org and scmr.com. We hope you'll join us again.