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ASCM Insights

Episode 24: What It Takes to Innovate

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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 Ashkenazi CEO of the Association for Supply Chain Management and Bob Trebilcock Editorial Director of Supply Chain Management Review. Remember that Abe and Bob welcome your comments. Now to today's episode.

Welcome to today's episode of the Rebound, what it takes to innovate? I'm Bob Trebilcock.

Abe Eshkenazi: I'm Abe Ashkenazi.

Bob: Joining us today is Gina Chung. Gina is Vice President Innovation America's at DHL where she is responsible for DHL's America's Innovation Center. Gina, welcome.

Gina Chung: Thank you, Bob and Abe. It's great to be here.

Bob: We're thrilled to have you. Addie Ignatius, the editor of Harvard Business Review, once wrote that we're not quite sure exactly who coined the phrase innovate or die, but the sentiment in business today is gospel. You either stay ahead of the pace of change or you're toast. Who wouldn't want to be an innovator? After all today's most innovative companies think Tesla, Apple, Google, and Amazon have been rewarded with riches beyond imagination by the investment community, and who wouldn't want a piece of that? I think innovation goes beyond stock price rewards.

As Ignatius suggested, the ability to innovate, to ferret out the technologies that will transform a process and deliver a competitive advantage is becoming not just a differentiator, but a supply chain imperative if you don't want to become toast and no one wants that. What does it take to innovate in the supply chain? That's what we're going to talk about with Gina. Gina, why don't we start with the basics as head of innovation at DHL, what does innovation mean to you and how do you define it?

Gina: First, you summed up the imperative for supply chain innovation perfectly. I think at the time that supply chain professionals really start to digitalize and make plans to innovate and do things differently. In my role at DHL, heading innovation for America's region, I drive a customer-centric and open innovation approach. I'll break that down a little bit. What I mean by customer-centric innovation is we follow how our customer's organizations, their industries are evolving and we listen to what their changes will then, in turn, mean for the supply chains that we operate.

The second part about open innovation means that, for us as a company, innovation is something that we deliver through partnership with startups, as well as other technology companies and organizations. That's in contrast to the US, a lot of companies that have wonderful in-house teams that can develop robots and the latest AI and all sorts of other things for us. For us, we know that we're really good at logistics so we try to partner with companies that are developing that technology. In summary, I would say innovation, a lot of times isn't about developing brand new digital business models and spinning goes out of DHL.

Most of the time its ways that we can increase operational efficiency -- could be process optimization, but a lot of the times now it's very exciting that operational efficiency could mean introducing the latest warehousing robotics to help get orders out faster for our customers. It could be innovation to improve our customer experience. Simple things like digitalizing the interaction points with our customers, but also allowing them to get access to our data, to have more visibility and control. That's in a nutshell, what we're focusing on when it comes to innovation.

Abe: Gina, it really interesting that you're bringing up a lot of desparate points to this. A lot of individuals would say, "Well, DHL is such a large company. They have the resources, they have the focus to be able to manage or focus resources on it." Organizations that may not be as mature as DHL, can they set up an innovation center? What does it take to build that team?

Gina: One of my favorite pastimes is just exchanging with other innovations centers at other companies. There is a secret to the success of an innovation center. I think any company can set one up, but there are a few things that have to be very clear. We'll take a few steps back and share what is our innovation center. They are physical facilities designed to showcase new innovations and engage on innovation with our customers after the visit.

In our showroom, I manage a 28,000 square foot facility. In our showroom, we have the latest robotic phones on display to 10 different kinds of sustainable packaging innovations under our roof and our customers essentially come here. They explore, they interact with all these different innovations. We do extremely tailored tours so that if you're in retail, we focus on retail innovations versus an automotive customer. Out of the tour, we then brainstorm several joint initiatives to then further pursue with our customers. I manage one of four different innovation centers we have across the globe.

In terms of your original question, how do you set up a successful innovation center? I would say first thing is to be extremely clear on what the facility will be used for and what it will deliver on. For us, that's engaging our top 100 top 200 customers on innovation via tours, workshops, events, et cetera, at our facility. We measure that by satisfaction and NPS of our customers who come. Then we trigger innovation projects and measure how many projects are coming out and also how that impacts the overall customer relationship that we have. The next part would be, if you're sitting up an innovation center, be clear how you connect and drive a pipeline of visitors, but also being to some innovation labs, spiderwebs, and whatnot on it.

You need to connect and understand if you're trying to reach customers, who's your primary audience, how do you actually make sure that the organization is helping you to continuously try to pipeline? One question I always get is where are you guys situated within DHL being such a large company? We actually fall under the organization about chief commercial officer. My time has been working very closely with our business development teams and account management teams at DHL. That in turn, brings customers to a facility.

Then the last part is so, so crucial is teams and resources. Things get outdated very quickly at any innovation lab. Nobody wants to see something they saw 10 years ago. You need the resources, financial investment. You do not just invest in a center once but constantly updated, bringing the latest robotics, bringing the latest analytics technologies to keep that innovation center alive. Then of course you need to have a team to actually run it and being knowledgeable and stay up-to-date with the latest and greatest happening on the market.

Bob: Gina, if your inbox looks like mine, I get about 50 emails a day from startups, some doing a me too. There seems to be about 9,000 robotics startups these days. Some also talking about new technologies and then there's established companies that are also doing new. With all of that happening first, how do you and your team stay abreast of what's happening? Do you go to shows, do you go on tours? What do you do just to keep on top of what's emerging? Then from all of that, how do you identify the technologies that you think are going to hold promise for DHL? Where do you start?

Gina: First off, I didn't like that you were describing my inbox as well. There are a lot of different startups out there right now. When we both saw that some of our startup engagements some nine years ago, there were not as many on the market, but now there's so many different awesome startups. They're developing solutions for our industry. That's in one hand, a big opportunity, but also a challenge to your point on how do you actually filter?

How do you also benchmark which of the tens of different robotics companies working on a single use case is the one that you should work with? The first part is actually understanding what are the trends that you need to be looking out for? I mentioned earlier that our customers come to our innovation centers. That's roughly around 14,000 visitors a year. That means that we get all of this rich insight into what's actually happening on the market. We also then connect with various different technology and innovation professionals. We distill that into what we call our Logistics Trend Radar. It's a document -- a tool essentially that we update every two years that captures the top 30 different trends impacting the logistics industry over the next 5 to 10 years. It's a public document. If you're listening and you want to check it out, it's on DHL's website, you can download a copy or play around with the interactive tool. It's just knowledge that we share back to the industry of where we think some of these trends are developing.

For us internally, the trend radar really sets the foundation for all the different trends that we're scouting for. That doesn't mean that we're unfocused scouting for 30 trends constantly, but we flipped the trend radar in a way that it shows the core trends that you should be scouting for. Once we know that -- we think artificial intelligence will have a huge impact on our industry, robotics, and automation, cloud computing, omnichannel logistics, rethinking packaging as another trend, We then keep an eye out for these startups. Sometimes these startups approach DHL, just purely because of the brand that we built the last nine years of being very active in the ecosystem.

A lot of the times we find these startups through scouting partners, through VCs, there's a lot more supply chain and logistics focus VCs than in 5 to 15 in just 5 years ago. Then a lot of our technology partners, industrial partners, bring in new companies as well that they're partnering with. That's how we come and find these solutions. I would say it's a very kind of organic approach. Sometimes we find them, sometimes they find us, sometimes it comes through a partner.

Abe: Gina, really interesting in terms of a world out there, that dynamic world of innovation and technology. As you're thinking about transforming the processes, you're saying you're getting a lot of input from your customer base, but whether it's robotics, blockchain or even drones. How do you get to the next level? Do the organizations raise their hand and say, "I want a participant, not a proof of concept or the method coax into doing this." Give me a sense of how you get the customer based on a pilot or to innovate in real-time?

Gina: I think that journey is getting always easier and easier, how we started off the podcast, the imperative to innovate and supply chains now. Now there's even more customers saying, "We got to do something, let's do that together." Again, I just like the startup scouting. It's a very organic process. Sometimes we approach, sometimes our customers approach us. In terms of how we go from trend radar, finding a startup to a proof of concept or pilot, when we know for a visit to the innovation center, for example, that we have a specific challenge from a customer's operation that we could improve it using X technology.

We do this, we set up a proof of concept by partnering with the business unit. If you're a cross-functional innovation team like me and you serve multiple business units, you just can't do it yourself. You can't do it behind closed doors, and then pat yourself on the shoulder afterward, because it's just not going to then get the buy-in to be implemented and stable afterwards. We partner from the get-go with a business unit, with senior sponsors so that it is something that has buy-in throughout the organization. We then set up the proof of concept in a live operation.

We haven't really gone through the lips, have an offline kind of dummy generic warehouse, we test things. That might be the Innovation Center to a certain extent in the very early technology. I would say the vast majority of our pilots are done in the live operation so that we can actually see how it's working in a production environment. We do it with a business unit. We have our startup partners, I mentioned open innovation. We love the partner to find solutions. Then, many times our customers are also directly involved. We run a pilot depending on what it is. It's very different.

If it's a robotics pilot, if it is an analytics project, we run it from anything from, I would say, one to eight weeks. We get the results and either take that decision to implement it at the site if it's something very specific for a single operation or warehouse. If it is scalable, which is what we're always trying to go after. That's the biggest challenge many corporate spaces, you have something that's scalable, and then the next part is getting it from one facility to 2,000, without it taking 10 years,

Bob: Without giving away the company store, can you give us some examples of projects that the Innovation Center has worked on, or some of the technologies that you're following and piloting now that you think are really going to make a difference in supply chain? What are you working on?

Gina: Yes, sure. In terms of what we've worked on in the past, for example, in recent past, we made some of the very first robotics projects for assisted picking and warehousing. This was around 2015, 2016, where we embarked on our first project with Locus Robotics. They are a well-known start-up in the logistics industry by now. That was a great project. We then fast forward to 2021, we're just committed to the point 2,000, then 2022 also look into the first use of smart glasses for case picking. That was also back in 2015/16, now that's rolled out to multiple warehouses in North America.

In terms of what we're looking at now, a lot of it is, on one hand, operational innovation. We have also some projects that are developing new services around analytics, risk management on the latest on robotics, just naturally being in the US, I have a strong emphasis on that. We've been focused a lot on robotic arms enhanced with artificial intelligence software. In an earlier podcast from the Rebound, I was listening to you on small parcels. Bob, you mentioned that every day is Cyber Monday these days for e-commerce companies and possible logistics providers.

Here we've been working on implementing robotic arm cells that basically take a package that a human operator has to put on a belt and that sorts it into various different locations based on support. By using robotic arms, we're able to actually support 35% more packages per hour and each actual robotic cell for over a thousand pieces per hour. That's just one project that now we're translating over to a variety of different use cases now that we're confident with the partner that was involved in that project, we're confident in actually what robotic arms as a technology and AI is able to provide. We can now apply it to secondary sortation, that's a project that's currently live. We're about to go into an induction as well as also sort to put wall, which then ties in directly with our customers.

Abe: Gina, really interesting in terms of some of the cutting-edge activities. Let me go to the other side, there's a number of axioms out there about innovation that you said, fail small, fail fast, in order to mitigate a lot of the significant investment, not every idea is going to work. From DHL's perspective, what are the criteria for you to say, "You know what we need to move on to a different technology or different project?" How do you negotiate or communicate that to your partners, as you're saying you do so in a collaborative fashion? Do you sometimes frustrate your partners by pulling out of investments or innovations that you don't believe are going to be sustainable in the long run?

Gina: I always like to say that failure is going to be an option as an outcome of a project that we're pursuing. To your point, that the key thing is, how do we actually fail fast and not spend a year's resource just pursuing a project that isn't going to work out? What I can say is now nine years of having done this and having visited so many operations and being familiar with solutions on the market is that, while failure still happens and that's okay, that's part of the innovation process. I would go in a lot better to fail less. We do that by continuously applying the learnings of past projects, past providers, even as well.

Many of those learnings are not just passed across our organization to give a heads-up that, "Hey, if you're looking into exosuits now, we did a pilot two years ago, and it wasn't very successful. These were the reasons, this is the project closure document, just consider it, but great that you're looking into it now with a few vendors. A lot of the times I would also say that we pass these learnings directly onto startups that are developing new solution. If we have, again in 2021, some exosuit companies developing solutions for warehousing, we would share that document with them and say, "Hey, we've done this in the past. How will your solution beat this because it wasn't successful?"

They would actually then take that and try to improve upon it. The learnings should be passed in any organization, not just internally, but also to these very eager startups, trying to just develop the best solution possible for the market and may not be as familiar with some of the rich history of what's happened in the past. An example that I can give on top of that is, when we stepped back recently, we're looking at automated movement of non-conveyables in one of our operations great use case, they could definitely benefit from that all being automated. After speaking to a variety of different companies, we just realized there's no good solution on the market today that works for the very dynamic space that we have and the tight space that we have with that particular operation, so we parked it. Now, we might not be pursuing that project any longer, it's in our parking lot, but we do keep our eye out for a solution perhaps at the next Promet or Modex or just in conversations, and we'll be like, "Okay that one thing should overcome some of the challenges that we saw from investigating that use case.

Bob: Gina, last question, and perhaps this should have been the first question, but it got me thinking as I was listening to this. About 10 years ago, I met a guy named Rick Sherman, who at the time, had a title at AMR Research as futurist. I remember saying to Rick, "How do you get a job as a futurist? Is there a major for that in school?" You have innovation in your title, what was your background? How do you become an innovation leader?

Gina: I have an interesting background. You might hear from my accent, I'm not from the area, I'm from New Zealand. Actually, during my studies in New Zealand, I sought my major in supply chain management just because I found it so fascinating. I'm a supply chain major, and then afterwards, I just joined DHL Innovation Department some nine years ago and I've stuck through it because it's been such an incredibly exciting and dynamic space. That's, I guess, how I've become an innovation person and innovation leader if you want to call me that, but that's been the secret to how I've gotten to where I am today.

Bob: Thank you. That's all the time we have today. A special thanks to our guest, Gina Chung. I really found this interesting, so we really appreciate having you on. Thank you, our listeners for joining. We hope you'll be back for our next episode for The Rebound, I'm Bob Trebilcock.

Abe: I'm Abe Eshkenazi.

Bob: The Rebound is a joint production for 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.

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