Announcer: 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 welcome your comments. Now to today's episode.
Bob Trebilcock: Good afternoon and welcome to The Great Supply Chain Disruption. This is a special episode of The Rebound coming to you live from ASCM Connect. Now, we've never done this before. We're doing it without a net. I'm Bob Trebilcock. I'm the editorial director of Supply Chain Management Review magazine.
Abe Eshkenazi: I'm joining Bob. This is Abe Eshkenazi. Welcome, everyone.
Bob: Joining me and Abe today are three experienced supply chain professionals who we know you're going to want to hear from. Now, before I introduce our guests, a quick note. Immediately following this event, you can join us in the Connection Cafe for an interactive discussion, one where you get to chime in, share your thoughts, and your experiences with me, and Pat Bower, who I'm about to introduce. Pat, briefly tell us a little about yourself, the company you work for, and your role.
Pat Bower: Sure. My name is Pat Bower. I work for a company called Aceto. We make a whole variety of chemicals, including pharmaceutical intermediates, excipients those products, and make vaccines more available to consumers. One of the more interesting things I've changed jobs during COVID. Hopefully, I'll talk a little bit about that.
Abe: First, let me introduce Marcia Brey. Marcia is Vice President of Distribution for GE Appliances, which is involved in all facets of delivering a world-class service to US companies, including warehousing logistics. Over the years, Marcia has worked in design and engineering. Quite a bit of different roles and responsibilities. Then finally, we have Chris Pickett. Chris is the Chief Strategy Officer for Flock Freight, a provider of non-asset share truckload services. Chris has more than 20 years of experience in global supply chain management, enterprise software development, and transportation market economics. Welcome to the three of you. Bob?
Bob: Thanks, everyone. Thanks, Abe. When we started this podcast about 18 months ago, it was because the supply chain was in the news, thanks to shortages of essentials of daily life like toilet paper and household cleansers, and chicken parts, and in honor of GE Appliances, appliances, right? People were wondering what is this supply chain thing? Why isn't it working? Because of the great supply chain disruption. Abe?
Abe: This is an extraordinary time, I'm sure for each one of your organizations, as well as for you and your teams. We're living in an extremely dynamic environment. It wasn't that long ago that consumers' expectations for a high variety, rapid delivery, and reasonable costs were the hallmarks of almost every supply chain on the market. There's no doubt that we're living in what has been described as the great supply chain disruption. Whether we're talking about COVID, or whether we're talking about cybersecurity of the Suez Canal, environmental challenges, we're talking about a significant challenge to the demand as well as the supply for supply chains today.
This has been a significant increase in role responsibilities for supply chain professionals at almost every level of the organization, not to mention the leadership required to coordinate all the various aspects of response and recovery as well as sustainability for supply chains. Let's get into this and get from our experts here. Some of the insights and some of the learnings that they've had from the disruptions and hopefully some of the things that you can do as a participant, not only enable your organization to withstand these shocks, but hopefully bounce back even better in the future.
Let's get started. First to each of you, you represent three very different industries in the supply chain. Life sciences, appliance manufacturing, and logistics. How your organization's not only experience the disruption but some of the learnings that you had from it? Pat, let's start with you. Life sciences has been on everybody's topic recently with vaccines tests as well as treatments. Give us a sense of what's going on from your perspective.
Pat: I think it's mostly what folks would expect. We have all the normal supply chain disruptions that are very much in the public. We make excipients in pharmaceutical and intermediates. Excipients are those products that help vaccines work better. They help medicine, in general, work better. They make the actives more bioavailable inside the body. You can imagine that there's been an uptick in that volume. There's also been an uptick across the broad chemical spectrum. Consumers are buying an awful lot of products of all different types.
A lot of consumer goods, a lot of products that are cleaning products, almost anything that has a surfactant or some chemical agents in there that is disinfecting has certainly seen an uptick in demand. Obviously, my company provides them. I think one of the universal themes-- I moved from consumer goods to the chemical industry. One of the real oddities is that the expectations of customers are nearly identical. There's that tremendous desire for really timely material availability. That hasn't changed.
All the behaviors that we saw on the consumer side, all of those let me get the extra roll of toilet paper, let me get an extra box of pasta are happening inside of the everyday purchasing agent side. I'm curious what Marcia saw because I think it's probably very similar side of GE Appliances as it is inside of Aceto.
Abe: Marcia, let's pick it up. Quite a bit of different production. Quite a bit of focus on the appliance industry as well as warehousing distribution and logistics almost on everybody's agenda today. Give us a sense of some of the impact and learnings.
Marcia Brey: Certainly, I think Pat said it well, and you absolutely can take his comments and apply it to the appliance industry. I think what surprised us the most as maybe some several manufacturers, is just how fast the demand change happened for GE Appliances in such a short period of time, especially for a business that-- we've been around over a hundred years. I'd like to think that we have good forecasting models, but like many, our forecasts for the future dependent on the past. All of a sudden, you had to throw all that out the window.
Essentially, for GE Appliances, within a matter of months, probably six weeks, we went from a make-to-stock business to a make-to-order business because we had drained all of our inventory throughout our network across the United States in such a short period of time, and the demand kept coming. Fortunately, we had started to invest in certain areas of growth that helped us overcome but in a short period of time, we immediately went into tactical one by one problem-solving. How do we meet our commitments to our customers? How do we create commitments we can deliver? It all had to change.
The way we were used to getting promise dates to customers, we had to evolve that, and unfortunately, keeping open lines of communication with our customers as we've learned in this environment how to work there, and we're still learning from that perspective. From a long term, it's about growth. How do you expand your capabilities in your supply chain to deliver more products to satisfy the demand and be able to, again, ensure that you're communicating effectively?
Abe: Chris, give me from your perspective some of the challenges that you've encountered?
Chris Pickett: I think to build on Pat and Marcia's comments, what Flock and other non-asset-based logistics providers, you already play a role. It's being an extension of all the supply chains running into the same problems. I don't think we had a single shipping customer in any industry vertical that wasn't profoundly impacted by this wild gyration of consumption patterns, where you think back to your March, April 2020, all the sudden, things were literally shut down to support virus mitigation efforts.
The entire auto industry, entire services sector, and as a result, you saw this massive swing of surge into eat at home. Groceries, cleaning products, your medical supplies. Supply and demand. Freight flows that didn't exist before. How do you adapt to that and how do you do the best job of leveraging the resources that you have to get the right product to the right place at the right time? I think on the onset, just like any office network, we went from 100% on-site in the office to 100% work from home almost literally overnight. How do you adapt to that? I think supply chain has done an impressive job of doing just that. We were under this phase of almost unforeseen collaboration where everyone's in it together. How do we get trucks to run faster? How do we support touchless delivery, electronic bills of lading, try to keep everyone safe as the supply chains try to stand operation? Became this really galvanizing event where-- I think I speak for everyone on the side of supporting supply chains, it's create this mission where I think we all got behind.
It became a process of, what can we figure out? How can we leverage technology? What are the different things we can do to support these different supply chains in different ways as we've muddled our way through this pandemic?
Pat: I got to tell you, Abe, both Chris and Marcia said something that really strikes home with me. It's the collaboration and the communication. We tried to do everything we could with internal stakeholders. My group services, our sales force, we tried to do everything we could to inform them of anything we knew about a container coming in or date coming in on a container that was coming in. Even if it was a day later, we were trying to inform internal stakeholders and, in turn, trying to inform our customers. I think that's one of the things that's really helped us.
As lead times changed, we try to reach out to our customers through countless emails and conversations with them about how the dynamics of the business are changing and how they need to put orders out a little bit further into horizon. There was collaboration everywhere. And I think the biggest thing that's been the challenge for me has been visibility. I can't see everything I want to see. I want that really sentient supply chain.
I want eyes on, ears on, I want to be touching the supply chain every single day. I think the technology basis that we live in just isn't there yet to provide that at this point in time.
Marcia: I would build off that, Pat, because it doesn't-- you can't just decide during a pandemic or during any crisis that you have in supply chain that you can just make the communication better, you can make that partnership better. I would really stress that you have to have the culture within your company and you have to have the relationships, not only with your customers but with partners like our logistics partners, for example, Chris. It really is critical all of a sudden when you have your standard work and what worked yesterday doesn't work today and you have to change it.
You don't know what you're going to change to. (You’ve) Got to have that collaboration if you're going to move fast and you're going to meet everybody's needs when everything is changing around you.
Chris: We definitely felt a lot of progress. There were those typical solids between buyer and seller who even direct competitor with direct competitor. It's no longer about that. It's how do we get your containers termed faster, how do we leverage the available production capacity of that GE plant to get stuff moving to maximum potential, regardless of who gets what land and what load, let's figure it out.
Pat: It's fine because one of the things that I did was-- I'm like every other consumer, I think I'm a consumer exemplar. I'm no different than the average American consumer. I started looking around my house and said, "What can I do to improve my house, my working environment, I'm working from home, I like to cook?" I decided to redo my kitchen. Here's my first mention of GE Profile, Marcia. We're going to start counting now. I ordered a GE Profile refrigerator, a Viking stove, and some other maker for a dishwasher because I wanted to renovate my kitchen.
I have to tell you all the other makers gave me delays. In GE, except to their credit, they kept, informed me and they've held the date on it, but I have waited now, four and a half months for a dishwasher. It's amazing. I'm just curious whether GE Appliances has done any market research on nesting behaviors. Help me understand. I see it from a consumer perspective. I get it from a supply chain perspective, but what are you seeing inside of GE?
Marcia: It's a great question and it definitely informs the supply chain. Are we in a bubble? Is this going to pop or is it something that's going to sustain? I do wish we knew, Pat. We are talking to our customers and consumers quite a bit. What you described, I think, is typical of many people they have money to spend. They couldn't spend it in their normal everyday lives. You can go out to restaurants like you normally do, you couldn't go out so you're home.
All of a sudden, you're looking around at your four walls, much more with that critical eye than you had before and you're like, "Gosh if I have to live here, I want to make it nice." Some people picked up new hobbies cooking, other hobby to pick up during the pandemic. That is what caused definitely an increase in demand.
Like I said, we've been here over a hundred years and so we feel like we had a good demand profile for our product, but right now, we're in a situation where in the United States, the demand is outstripping the supply for an area of our consumerism that has pretty much been saturated. We actually see new competitors coming into the space. What we're trying to do is absolutely understand the consumer side of it from our house of brands. You mentioned Profile. Thank you, Pat, for doing that. [chuckles] I feel like I owe you one.
We do have different rates and different consumers want different things and it's the supply chain. We have to understand, not just the demand profile, but that profile by brand, and who is buying and where do we think that continued volume is going to be and making sure that we have the buy, where we actually are producing 25% more volume now than we did this time last year. We have plans to continue to grow it and it's not enough. Waiting four months for dishwasher is not acceptable, and something that we continue to work on.
In the meantime, what we can do is be great at executing to the date I promise. If I have to give you three or four months to deliver that, my gosh, I'm going to hit it and what can we do to be able to shrink those delivery times? A lot of work we're continuing to go on and understanding consumer demand, but at the same time, not getting hung up on forecast, but working what's in front of you and making sure that you deliver for the demand that you have now.
Abe: Marcia, how do you avoid the bullwhip effect? We're seeing it in a variety of different commodities as well, products and services, and that we're seeing this irrational surge of demand to your point that you were making before about data drives the decision for the organization and you've got a hundred years of data. I'm not sure how relevant it is, even five years from now.
Marcia: I don't think it is. [chuckles]
Abe: Give me a sense of your use of data in your forecasting, as well as your demand planning.
Marcia: What came to mind when you started to ask that question is hoarding. I think in supply chain-- I used to run a factory and I certainly have an appreciation. If you want to have a good day, you have all your parts to be able to run what's you're going to make. There's a tendency to want to, I'll say, hoard. It's probably just in normal consumerism. That's why toilet paper flies off the shelf. Sometimes people panic and they think they can't get what they're going to need in the future so they buy as much as they can now.
As supply chain people, we need to be really careful not to fall into that trap. It creates a ton of waste as everybody knows. You study Six Sigma or lean, it creates more opportunities for defects you can't see. It's actually going to make your production output worse by going that route. What's important for me is to make sure what I make we are selling. When we see that discrepancy, that's when we need to jump in and problem solve. By the way, it goes both ways. It's not just problem-solving within supply chain, it's problem-solving within commercial as well.
I think that's something that we're really stressing is this is a collaborative effort at GE Appliances to improve our positioning in the environment we're in. One could say you're in a crisis and we're trying to work our way and survive the crisis. I don't see it that way. I think we're working to make ourselves better because of the crisis or this event that's happening and that our supply chain will be stronger. Our communication at work with commercial to ensure that what we make, they can sell. What they're selling, we're aware of, and that we have that plan.
We will be better for this as we come out the other end of this pandemic to be able to have a more responsive supply chain. That's what we're after.
Chris: I think that commentary on demand planning is huge. Every time I see the clip of the however many container ships are anchored off Long Beach right now, the countdown's been continuing, but how early do you have to place that order for that merchandise, just to get it to that point in time for holiday season. Maybe it used to be a three-month lead time, you placed it six months ahead to get ahead of disruptions at Vietnam.
Aside from the hoarding or the shadow orders or the overage, how likely are you to have gotten that demand signal right? By the time that stuff gets off these containers, deep into the supply chain, make sure to reach out, what's the likelihood, how much will you have gotten right? It's going to be less than most of you.
Pat: That's, of course, our lead times have literally doubled. They went from 40 to 45 days out of Asia to almost a hundred days now for any product that we're trying to source out of Asia. There is an interesting commentary on hoarding in general and having hoarding not really affect either your personal life or your professional life. I violated both of those rules.
I'm on Facebook and I'm looking around on social media and I'm seeing that there's a run on pasta. I need my pasta every Wednesday. I grew up as a Prince Spaghetti guy so I have to have my pasta on Wednesday. I bought a case of pasta on Amazon. I actually felt bad after I did it. I'm like I'm the least food-challenged person in the world I think and yet I bought a case. I started thinking about. I brought that into work. I brought that hoarding, I want to protect. I want to protect my base.
Inside the consumer good company I worked for, I told my planners order up. Pad the schedule. I told them to build some extra component and raw material stock. I went through all of those behaviors that I exhibited personally. Like I say, I feel bad, but I helped protect the organization and the asset base of the company by doing that. Then I flip over and I go from the consumer goods side, where we were buying chemicals and OTC pharma intermediates and then I flipp over to the chemical side and I look at the demand patterns.
I remember when I issued those buy orders and then I look on the chemical side and they're coincident with each other. The company I work for now was not a vendor of the company I came from. Completely independent sources of data, you are able to see the hoarding effect.
Chris: The same base human instinct.
Pat: In planning organization saying, "I need more."
Bob: Let me ask a question here since all of you have been talking about customer experience. If you read the Gartner Top 25, something called CX has been creeping in more and more and more to their top 25 analysis, where it's a metric, they're starting to measure the top 25 supply chains by. You're all in different industries, but you all have customers, whether they're consumers like Marcia or probably B2B like Pat. Chris, I'm presuming you're in the B2B space as well.
How was customer experience A disrupted? I think we've talked a little bit about that, but B, how are you rethinking what you do in your supply chains to either enhance or address the customer experience?
Chris: One thing we encountered early on and became a great, I want to say, teaching moment theme of just the importance of empathy in these human interactions and just remembering how much strain everyone is under, regardless of where they sit the supply chains from a business performance and uncertainty or risk, you let go home the whole healthcare aspect of the whole thing. They really reinforce that sense of communicating with empathy. Leading with empathy.
What that evolved into is a bit of rethinking words. You weren't really in the transportation business, yeah are sure we are, but it's not just about trying to find the lowest way to get that four-pallet shipment from point A to point B. It's how do we enable things like shorter transit times? If we can compress transit times, what does that allow a supply chain plan to do? They can postpone somewhere else up through the supply chain. They can figure out a way to reduce the incidents of damage in transit. What does that do?
Yes, it saves money for sure, but it also protects super scarce inventory. These days, the potential downside impact of if you've done everything right to produce that good, you've sourced the opponents, and you've built the thing, you've got to tailor the components to the customer, then unload the truck, and then there's been damaged. It's not just a claim and an unhappy customer. It's you. That could be in some cases catastrophic.
How do we rethink the things that we offer in the marketplace whether it's a technology capability, whether it's just a process improvement, and really trying to, again, lead with empathy and put ourselves in the shoes of the folks that we're solutioning for such that what we're out in the market offering is something that immediately resonates and it makes each of these supply chains better.
Pat: I have to tell you there's a lot of that in what we tried to do as well. Certainly, internal empathy with our stakeholders and external, we understand what people need and why they're asking us to do things with expediency. We work against those objectives, but I think Marcia brought up a really interesting point about how we come out of this COVID experience. For us, we're doing everything we can to come out of this better. I think leading teams inside of our company so that common goal of coming out of this better, I think has really made a difference. It's leading with positivity and improvements.
I look at some of the things that we've done from improving our workflows to consolidating our distribution networks, to six acquisitions, six acquisitions during COVID. It's hiring new personnel to putting people through a CLTD training. I can go on and on. We're at the broad expanse of all the things you'd want to do to set yourself up well for the future, we're doing right now. I think Marcia talked about GE Appliances doing that. We are certainly doing that. It sets a tone of optimism coming out of something that the times could actually feel a little bit dark.
It moves you forward. I think it's been tremendously instructive. I got to praise my leadership that is for leading us in that direction.
Marcia: I think anytime you're in a crisis, you can bury your head and try to survive or you can figure out how this is going to make you stronger and it's going to make you better, Pat. I think at GE Appliances, when you talk about customer experience, I think what you really have to be careful, especially for companies who've been around for a while is not to get too married to the metrics that you use to say, "Am I not successful or am I not successful?"
Because I can tell you right now, if we were to use the metrics that we had in the past, we probably would have failed initially because we lost all of our inventory separately to stock business, but we would have more patted ourselves on the back and say, "Look, we're not good. We're not good. You're the consumer, we're here waiting four months for a dishwasher. That's not good." I think it's really important to constantly be in touch the way Chris said, Pat said. You got to be listening to your customers.
You got to understand what do they need from you now, what makes sense, and how can we find the right way to measure ourselves that's reflective that we will win in your eyes? We have to constantly challenge ourselves to do that. In our supply chain then, to be able to be responsive to those metrics, we have to constantly think about how we can create flexibility and supply chain, and how we can really shrink supply chain where it makes sense. I will say fortunately before the pandemic, we were on this journey but during the pandemic, we also have been reshoring suppliers.
Over the past five years, we have 50% more US suppliers than we did previously. That has allowed us to have more flexibility in terms of where inventory is coming from, not being so dependent on ports and longer lead times. I think also having a technology team, like right now, everyone is dealing with shortages of chips or plastics or-- you name it. It's a new flavor of that we fixed one and something else pops up. Again, you could get frustrated in that that it keeps piling up or you can do something about it.
Our technology team, our engineers are constantly working on dual sourcing, finding other options, designing new chips, designing new-- that we do, where do we have suppliers who can make product now and how can we change the design? It's almost the supplier driving the design versus traditionally, you have a design, and supply chain has got to go out and find the best way to make the design, but we've created some of that flexibility in that mindset. In fact, I would say our technology team doesn't feel frustrated. They feel empowered.
They're helping our customers be successful because they act, they can take action where if we'd stuck with our traditional buckets of work, we would never be there.
Abe: You're bringing up a really interesting point. Let me go back to a couple of points that you're all making. Number one, about your response to the disruption. The interesting study we did with The Economist in terms of how organizations at a strategic level responded. We found out two major directions. Number one, get me back to where I was before the pandemic or the disruption.
Just get me back to what I considered my normal operating organization. What I'm hearing from all of you is that you took this opportunity to fundamentally change the way that you worked, understanding that the changes in your, not only the supply chain, but your relationships with your vendors, it's going to change. We saw a number of organizations, predominantly larger organizations moving into a new frontier and saying to your point, Marcia, "We're no longer make-the-stock. We're make-the-order."
If you had probably suggested that two to three years ago, you probably would have been laughed out of the office. Give me a sense how purposeful was the decision to say, "Okay, we're not going back to where we were, we're moving forward," as opposed to, "We're learning, we're adapting, and we need to do something different." Give me a sense within your strategic discussion, how purposeful was it to say, "We're not going back, we're moving forward?"
Marcia: GE Appliances is incredibly purposeful, right from the beginning. I'll tell you if you remember back in 2020, when everything started to shut down around February-March timeframe, we actually saw a decline in sales. Our leadership team got together and said, "Okay, what are we going to do to cost out, to manage this down?" Then literally, it was within four to six weeks, a totally-- You went from 180 degree. Here's the plan we thought we were going to do. Now, look here's what's happening.
It was immediate to say, "This is our chance to grow. We are going to be bullish in this. We are going to find a way to make this work. We're going to think out of the box and we're not going to run the rule, the playbook we did before. We're all going to pull together and we're going to figure out how." Even from the beginning, we were deemed a business essential company. We were allowed to continue to operate our factory. The people who had more office jobs were working from home, but our factories really didn't stop.
We had to find a way to be able to support our employees, stay true to your core business that we take care of our people first and we did. Then you find ways how we going to run the lines? How are we going to produce? Anyway, for all the problems that have come up and continue, where's the opportunity for us to grow and to strengthen our company? I'll tell you, that's a lot more fun to work honestly than to panic and to wish it's going to go back.
I think, again, and it goes to culture and you can't start that culture in the middle of a crisis. You've got to embed that culture before, so that you can trigger it when you need it.
Abe: That's a good point, but before I throw the pin, Chris, so you can respond. Give me a sense of your vendors. How did you bring them into the conversation because what Marcia's describing is a systemic change not within just the four walls of GE, obviously? You can't change one component without understanding input/outputs. If you would add on the challenge with bringing your partners along as well.
Chris: One thing that I think most folks would say about non-asset-based transportation in general, it's always been inherently volatile. It's a model that we're out there to wrap our arms around this ugly volatility on behalf of our shipping customers and absorb these shocks. Certainly, you have never absorbed a shock like the one we're still absorbing. I think that culture that purposeful sense of the role-playing the marketplace was always there.
I think that wasn't necessarily true across our entire vendor base, which are tens of thousands of typically small trucking companies that you have the same resources as a Flock or a GE Appliances, where there's a different level of fear and are we going to survive this thing, especially during the depths of February, March, April, 2020. In a lot about just being completely reasonable and think big payment terms, what can we do to accelerate some of the stuff? We might not have done before.
It might not make the right sense short term financially, but we think it's the right thing to do. You write long-term. How do we flex and then make Flock easier to work with during these unforeseen times, really take this as an opportunity to build, extend these branches and build long-term partnerships? I think one thing that's also interesting and hearing Marcia's comments, didn't mention the intro, but back in the early 2000s, I did my thesis research at MIT under Dr. Yossi Sheffi and the topic was supply chain resiliency.
It was on the back end of 9/11 and suddenly US borders were shut down, aircraft was grounded, everything was stalled, and created tons of supply chain disruptions as you might imagine. We surveyed tons of different competitors, a bunch of different industries there's a good deal given this, what are you going to do differently to invest in resiliency? It means investing, either building inventory buffers or redundant sources. Things that create short-term expense not necessarily short-term gain.
How do you justify these investments? The answer was people weren't doing anything. They didn't know how to calculate the ROI. How do you justify insurance for the thing that hasn't happened yet and if something bad does happen, again, that we think all of our competitors will be harmed in the same way? That doesn't make sense for us to step out and do things differently, but hearing Marcia's commentary and plenty of other forward-thinking supply chains, you talk about let no crisis go to waste by being forced to reckon with this.
I think you create a huge opportunity, again, for forward-thinking organizations going to go through that process and radically re-think how you're at the market. It's a big difference to make the stock to make the order. I think my hope is as we get-- hopefully, no, knock on wood, further behind this that those lessons, those stances, those learnings aren't laid to waste to fall back into the easier way of doing things.
Pat: Our organization was, at some point, in time just absolutely brilliantly purposeful. We actually brought manufacturing. Some of those acquisitions were manufacturing assets. We brought them on short because we're that second or third-tier provider. We want to be able to provide that better customer experience in doing so. It was brilliantly strategical and purposeful at the same point in time. Intro to myself, I draw upon Sun Tzu - Inside of chaos and confusion, there's opportunity. I've seen this as an opportunity to expand and change how we do business.
I think one of the biggest questions I had for someone like Marcia in the type of organ she has that is much closer to the consumer is how do you change that model on the fly so quick? I think it's really hard to do. I don't think it's something that's obvious. I'm just curious how GE Appliances pivoted so quickly.
Marcia: Sure. I can tell you that our goal is not to be a make-to-order company. You don't have to wait four months, but what I will say is, these are ideas that we had played with and we were trying some things. The pandemic, this crisis has accelerated the thinking and so I couldn't be more happy. I had to be honest because I would not have wished all of our inventory to drain away. I don't want to disappoint our customers and not be able to do it. What it has shown is that there is an opportunity for SKU segmentation that we can think in a different way.
We can say, "Hey, you want this SKU tomorrow? These are our Make-to-Stock SKUs. These are deploy-to-order SKUs. These are make-to-order SKUs." It has actually done a lot from acceptance across our company. I think even from believing our customers will accept something like that. Don't get me wrong. Our supply chain is still not balanced and we are still working through this. It's a matter of working with what you have - the supply chain you have in front of you. If your supply chain immediately goes to make-to-order, you see more problems than you ever really realize were there.
You drain the inventory, you see the issues. We're working through that and we're trying now to determine to reset our strategy for inventory efficiency. What do we need to be and how do we need to work? That's what we're doing right now is to understand now and as we move forward, what will that SKU stocking strategy be, and then how would we set our supply chain or the commercial ordering expectations up around that?
Pat: Are you going guys change your metrics? We had at a sidebar conversation at one point in time about OEE and whether-- and the traditional measures of manufacturing are as appropriate in today's world where we want to become more resilient. How do you feel about that and are you changing any of your metrics?
Marcia: Yes, I am a huge believer in evolving and transforming. I think metrics should evolve. You have revenue margin and cash. Maybe those should stay the same, but the way we measure for the world around us, you have to evolve. When I was running my factory, before the pandemic, at that time, I was plant manager. It was actually well before the pandemic and OEE was a critical metric. It was a how efficient are you with your equipment that you have to be able to produce the most amount that you possibly have.
Now, when you think about make-to-order, when you think about the change that our commercial team wants to have in our SKUs, I talked about GE Appliances being a house of brands. Our commercial team has a strategy, where they want to introduce new product at a faster rate. In supply chain, your first reaction is, "Please don't do that. We want consistency. I got my OEE running on this piece. Please don't make it change. I got it all settled." I can't think like that anymore and we can't have our plant managers now thinking that OEE is the way they measure success for, and it's not.
The way we measure success is can we fulfill what our customers are asking for on time, in full for whatever design. If they want to bring out new product all the time because that's what it means to grow, then that's what we need to do. It's about flexibility. It's about ensuring some pieces of equipment might have lower OEE on purpose because I'm not investing the time and energy because I need to make so much, but though the waste or the defects that come out of it, I'm only going to have that piece of equipment for a year or less.
I might take that versus trying to put a lot of upfront engineering into something to make it perfect when it's not going to be a 10-year platform anymore. It's not going to last like it used to. I think it's really important for us to have that understanding with our commercial team of what do we need where in the product. I might have another piece of the product like-- you talked about the dishwasher, your sub pump area. You want that to run reliably all the time with awesome quality. My feedback to the commercial team is: don't change that part of it. We need it to be consistent and reliable. You want to change the door handle or the dishwasher cup or the rocks piece, "I'm there, I will make that work for you." That's how you get consistency that we can work in supply chain and I can deliver what we want for our commercial team, but changing that mindset of what success looks like in supply chain is critical.
Pat: It's funny. One of the very first things I did when I came to Aceto was build an OTIF platform and power BI so I can slice and dice every type of wrinkle carriers, warehouses, customers. I'd be able to slice and dice my data because I felt that was the most pivotable measure inside my supply chain. I guess I wonder Chris and Marcia, this is a group of colleagues talking here, do you feel we took things like OEE and lean too far that led to some of the fragility in the supply chain?
Chris: Yes, I would say no doubt. Just the rise of globalization and for a long time, transportation was cheap and it was all about capturing labor arbitrage in markets and I think that that worked for a while, and that became the basis of competition as the world went around and you get so used to that Black Swan thing not happening. What possibly could go wrong and here we are. Yes, I would absolutely concur with what that idea of, you potentially-- it's not going away. The slow, this concept is still relevant.
I think there's the fragility piece, but my sense is this, you have deterioration of just the age of mass production. Just in terms of how consumption patterns work and how quickly human consumer tastes evolve and just trying to peg where that demands were going to come from and what channels of ecom is it brick and mortar? Just seems like it's part of life that are getting shorter and shorter. They used to be much more of an issue with high-tech electronics, but even things like flavored water.
What's the next flavor of flavored water? Where's the demand going to be? How do I source that? It flies in the face of it to your point around metrics of all this classical. Just in time, right, lean metrics of efficiency, efficiency, efficieny, it works with you until it doesn't work. What is the right balance of strike? Again, the idea is not to shift everything from a make-to-order to Marcia's point but what is the right level of flexibility and just your natural agility people build on their supply chains? How do you build the right set of metrics to support them?
Abe: There's two areas that I want to dig in, and I'm going to turn it over to Bob in a second to ask the first question about technology, and then I'm going to follow up with the talent side because what you're describing requires a very different technological platform as well as a labor resource for your organization, so Bob, why don't you kick us off on the technology side?
Bob: Yes so we have one technologist here with Chris, and certainly, I'm sure that Pat and Marcia are using technology. If you read all the emails that I get on a daily basis, you would think that, one, first of all, everybody's already got robots, AI, machine learning, blockchain, and whatever else we can think of, and that two somehow, or another technology is going to create more warehouse workers, truck drivers, train cars, and things like that.
From the three of you, Chris, maybe you can start because you were in the technology side, but how are you viewing the role of technology and where are you investing? When you look at your organization, where do you think you can get the most bang for your buck and the most value out of the technologies out there?
Chris: Yes, it's interesting. I think it's like everyone's favorite strategy is we need more data science. I'm not sure what the problems are, but hire some smart data scientists who implant them and then give them a bunch of data to go through and they'll tell us what to do and that tends to be the easy button for a lot of folks and it almost never works. When we look at technology as an enabler and we talked about collaboration, massive stuff, a lot of the heart, and your response during the pandemic and to the crisis was an enhanced level of collaboration across trading partners.
Now, we look at the technology as an enabler to that and then we look at-- first, how to partners connect, how do you establish basic connectivity, and how does that drive transparency? If there's more transparency, that allows you to create more trust. If you have more trust, that's what ultimately drives the end state of that collaboration and you can't get there without good technology to stitch these fragmented supply chains together. I think the other side of that, where we see your great application is there's no shortage of data, there's plenty of data out there.
We don't need necessarily help finding more data. You've got sensors that are proliferating, your ELD modules, mountains of long timestamp, your tracking data points that are huge stacking upright somewhere, the challenge is how do we best mine that? What we all have to look at as you what are your one creative ways to aggregate different kinds of data, especially on structured data, but how do we bring in the right skill sets to help us?
You just think you have that critical reasoning, systems thinking of natural, your curiosity to help connect some of those patterns that we can take these mountains of data and actually derive meaningful information, so then you can pull into the decision making process of all the human beings that this technology is ultimately supporting. One is your connectivity, your transparency to build trust, but then how to bring all these data points together to help us make better decisions faster with often incomplete information.
Bob: Marcia, Pat, where are you investing and why?
Marcia: Yes, for us, I think it's in two key areas. One is in data, not-- Chris is exactly right. We have more data than we know what to do with, so that's not the issue. The problem that we're trying to solve is, how do we make problems visible and how do you-- I think Pat said it earlier, how do you make sure you have image--? You can see what imagery you have at each node in the supply chain, and that you can identify gaps of-- in my case, so I'm talking distribution specifically.
The gaps to inventory issues that are going to manifest themselves later on because if the customers want to tell me I have a problem, then I have a bigger problem because I didn't see that further down the stream to take action. The second is it has to be real time data information. I can't be pulling spreadsheets and having people going in and manipulating tables and so forth. I need real-time information. I want my human brain to be spending time on taking action with the data, not manipulating data.
When we spend too much time with that, the data becomes old and it's not relevant. The third is to make the work easier. I think there's two aspects to that. One is certainly in terms of information flow, things we can trust systems to do and take action, I think we are too slow to assume a human has to check and balance everything to make an exception. We need to use more artificial intelligence to be able to take actions and move on some of the basic when you have standard work defined on how to respond to something.
I think the second aspect is in the physical world. Like in warehousing, where labor is absolutely a major problem for me and everybody else right now. We can't get enough labor or we're continuing in these wage wars to try to find the labor to run our warehouses. We need to think of how we can use technology. Of course, I love to have the technology in the future, where I just have robots picking appliances and moving things over, but we're not there yet. That doesn't make sense, but there are things we can do with robot assist.
There are things that we can do to help change the work, to attract a different level of mindset of employee who doesn't want to come in and just do physical labor, moving appliances, even with a piece of equipment. They will work with a robot, and they do want to come in and do some high-tech items that are in a warehouse. If we can recreate the work for the technology we have now and invest in the future of being more autonomous, that's what we're doing at GE Appliances with technology.
Bob: Pat, what about you?
Pat: Well, it's funny because Marcia talked about don't change the pump, leave the pump alone on the dishwasher. Well, that pump assembly for our organization is our ERP system, so we're leaving that alone, but on the edge of it, where we implemented a transportation management system, we brought in salesforce.com, where we brought in Power-I to do a whole bunch of analytics that we didn't have prior, especially over the supply chain from purchasing and from purchasing to the execution on the transportation side.
We've created a much more measured supply chain. We have better insights of future demand. I think to one of Marcia's points, we're trying to make our work easier, so any of those little issues that was annoy the heck out of someone, we're trying to resolve, it's a technology solution. I'm sure you've seen countless studies about how people use ERP and APS solutions and it's only 20%, 30%, 40% utilization. Even in best of class companies, we're trying to up the utilization level of the existing application we have to make everyone's job easier, to allow us to process more by exception, to do all the right things that you're supposed to be doing baseline, so I wish I can say that we're bringing in artificial intelligence. I'm not sure artificial intelligence would have helped predict the Black Swan event, and the necessary reactions around it. Anyway, I think there's a step forward here that's for us as better utilization of our assets that we currently have.
Abe: Interesting points that you're making and I think one of the things that we're seeing with almost every organization right now is that you can get funding for technology. Very few organizations say no to your technology investment. What we're not seeing is a commensurate investment in talent development, not only recruitment but retention of these individuals. We spoke for quite a bit about the role and responsibilities that have enhanced or increased the job of supply chain professionals.
Specifically, collaboration, communication, a lot of the soft skills that are not subject matter expertise or functional competencies that we've seen within traditional supply chain roles. Give me a sense, how are you responding to the talent issue? Marcia, let me give you a start.
Marcia: At GE Appliances, we believe that it is our job to take care of our employees and that means growing their skillset and helping them achieve their career ambitions. There's several ways that we do that. Recruiting, we certainly have strong partnerships with our colleges, universities, high school locally or in the areas that we work to support our community and to make sure that people understand what it means to have supply chain jobs. Again, distribution, of course, and in the factories as well.
I think a lot of it starts very early on and helping both parents, teachers, and students understand what those career progressions can look like and how they can have successful jobs. In supply chain, it's our job as a business to step in there. I think when we get employees into our company, it's really important that we communicate with them. You're not just at a job to do a job, it's what competencies can you develop in that role? We have taken an initiative during the pandemic, actually, to address this, to develop what we call competency models for every role in distribution.
This does two things. One for the employee who's in the role to understand what skills they should have, what their strengths and weaknesses are. They can use this as a talking point with their manager or themselves, and then in parallel with that, we have training classes identified. If you feel you're weaker and you have a financial element that you have to do in your job, here's something you could do, or here's a mentor we can pair you with or we can take action right on it to help develop the employee.
The second thing we use the competency model for is for people to see where they can progress next. Sometimes we as a company want to say, "Oh, you're in this job, we want you to go there." In this day and age, we need to make sure employees can have all kinds of different career paths in their head of where they might want to go. By creating and making it very visual, we can help employees be able to see opportunities that they may not have realized.
"I didn't even know, I heard that job and I wasn't sure what it was. I want to learn that skill set, I want to go and do that," and so we can have a more productive conversation and a proactive conversation before employees think, "Well, what I mean next, I need to leave the company to go do somewhere else." "No, look, here are things that we can do." That's what we're trying to do to engage our workforce proactively and be able to help them see career progressions and how we can help them achieve their career dreams, if you will, at GE Appliances.
Abe: Pat.
Pat: I think everyone knows that supply chain in general as rarely been any 17-year-olds destination professional. You get a lot of non-traditional people running through supply chain. With that in mind, I've been a really big proponent of professional development. Sometimes you have to throw out the rule book a bit. For example, I just hired someone in as an import representative, who's a former filmmaker. I think he worked on the Maury Show or something. We brought him in.
As part of the condition of his employment within X number of months, he has to have a CLTD and he has to go get DOT training and all those necessary type of training to do his job. We're starting him off with getting him professional development right away. You see available organizations like yourself, like ASCM to do that. You have such a wealth of knowledge and a knowledge base, why not leverage that? For me, it's just a little bit of throwing out the old approach to doing things.
I'm not going to be able to hire industrial engineers the way I used to be able to do. Now, I was thinking a little bit different. Because you have to think different on who you hire, you have to think different about how you professionally develop them.
Chris: Yes, would echo a lot of what Pat and Marcia said, especially around just the importance of diversity of backgrounds and experiences and education and bringing people that maybe wouldn't have come from an actual traditional, your pre-supply chain background, you onto the team and create a safe environment for those folks to share those experiences and then level up the entire organization, so it's a diversity is critical. At Flock we’re in a bit of a different stage of our growth trajectory, then I would expect GE to be where--
We are looking to double our organization next year, we're still in the early stages of-- what we think is going to be a rapid couple of years of growth here in this kind of market .and so I think it's a super important for us, we've had a lot of successes. We leave with mission. Our mission is to make supply chains more efficient and more sustainable through tech-enabled, shared truckload transportation. We're upfront with the mission, we're the only certified B Corp transportation, as far as we know.
That becomes a little bit self-selective of you get a lot of current employees bringing colleagues, cohorts into the organization, but we lead with mission and we find that, if we can apply to folks in the line with that mission, it makes everything else a lot easier.
Abe: Now, we've got a few minutes left and let me first say thank you to Pat for a shout out for our certifications obviously. It does make a difference in individuals' careers. I want to go back a point that Marcia was making about the awareness of the opportunities that exist within supply chains at almost every level right now. We used to deal with senior leadership, college graduates. Now, we need to get into the middle schools. Now, we need to create that awareness of the effectiveness and the positive aspect that supply chains bring.
Obviously, we've got a lot of areas that we can clean up to make it much more responsive to consumers and patients alike. More importantly, as you're developing these strategies, I think it's a wonderful statement about the supply chain industry. We are responsive, we are resilient as an industry. We just need a little bit of time to catch up with a lot of the changes that are occurring here. I think most of us do understand that we will come out of this. Maybe in 30 seconds from each one of you, what excites you about the future, Marcia?
Marcia: Definitely, the technology. I think all the problems when we were doing our prep, Pat said his mom knows what he does now because she sees it in the news all the time. I thought that was so funny. I went to talk to my mom. She was like, "Oh, yes, totally." We've had so much visibility of problems. I think we're going to have more people from different industries coming in and helping seed some ideas of what we can do. I think in the next five years, it's going to be exciting to see where technology takes us in supply chains.
Abe: Chris, what are you excited about?
Chris: Supply chain has never been sexier. For good or for worse, you can't go a day without seeing something on the front page of the wall street journal about port congestion or doomsday inventory predictions on CNBC, couple of that, I, myself trying to explain to my eight-year-old, why all these boats are sitting idle right off the coast at Long Beach. I think that spotlight, that visibility is there. That just brings a lot of attention to what used to be an industry full of unsung heroes are now finally getting sung.
I think that level of importance is one inviting a lot of capital, which is driving a lot of tech innovation. I think also inviting a lot of talent. Now, if you kind of leverage that resiliency and all that collaboration that we built during the pandemic, I think the best days are ahead for sure.
Abe: Pat, what excites you?
Pat: I think there's two things. I think now leadership inside of organizations understands how important supply chain is. A lot of work was just done behind the scenes and invisible to leadership. I think leadership across many organizations now values our supply chain function much more than they did prior. To be honest with you now, I can go to a cocktail party. I could talk about my work and people are bored, like, "Wow, we're in a--"
Abe: Supply chain is sexy, supply chain is interesting. With that, I'm going to say thank you to our panelists as well as to our members for joining us today. Have a great day and more importantly, continue sticking with us and let us know how you're doing. All the best, everyone.
Bob: Thanks, Abe.
Pat: Bye now.
Announcer: 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 ascmr.com. We hope you'll join us again.
