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 welcome your comments. Now to today's episode. Welcome to today's episode of The Rebound from supply chain to redesign to resilience, five questions for Lynn Torrel. I'm Bob Trebilcock.
Abe Eshkenazi: I'm Abe Eshkenazi.
Bob: Joining us today is Lynn Torrel. Lynn is the chief procurement and supply chain officer at Flex, one of the world's largest manufacturing partners. She joined Flex in 2019 after a leadership role at Avnet, most recently as the president of Avnet United and Velocity. In that role, she was responsible for maintaining and growing the company's largest and most strategic customers and managing global supply chain programs. Lynn, welcome.
Lynn Torrel: Thank you, Bob. It's pleasure to be here today.
Bob: Well, we're excited to have you. Now, frequently Abe and I have a theme to explore with our guests. We're going to spend the episode talking about blockchain or robotics or what's happening with global trade, but if you think about it, a firm like Flex and a supply chain leader like Lynn has a unique view of our world. For one, Flex is a manufacturing partner and supply chain manager for some of the largest firms across the globe. What's more, the firm has relationships across a number of vertical industries spanning automotive to healthcare to consumer devices. Instead of exploring one topic, we thought we'd pose five questions to Lynn and get a broad reading on what's happening in the supply chain today. Let's get started. Lynn, briefly, why don't you tell us a little bit about your background and your role at Flex?
Lynn: All right. Well, thank you, Bob. As you said, I spent 25 years at Avnet where I had a variety of positions: customer-facing, supplier-facing, and supply chain, with my last role as president of Avnet United and Velocity. In that role, I looked after the world's largest EMS and OEM customers, as well as our global supply chain initiatives. Flex was actually one of the customers that I have responsibility for. I was contacted by Flex about an opportunity for their chief procurement and supply chain role. I thought what a great opportunity to join one of the world's largest and most sophisticated global supply chain and manufacturing organizations, and I also thought it would bring a lot of my experience and expertise in a positive way in the organization.
I joined Flex in October of 2019. My responsibilities include our direct and indirect procurement, freight and logistics, our strategic supply chain programs with our customers, our supply chain innovation, as well as operations and inventory management. Across the organization, I'm responsible for about a $21 billion spend and our global supply chain programs. Of course, joining in October of 2019, I did not necessarily, of course, realize at the time that four months later we would be faced with a global pandemic and managing through the very challenging times that the last two years have brought us.
Abe: Lynn, extraordinary responsibilities. I think it speaks to the broad nature of supply chain professionals. Let's pull back a little bit and talk about the trends and more important strategies for supply chain professionals coming into and leaving organizations. Historically, we've come out of the supply chain professionals, either finance or engineering, qualitatively based more on a financial background. We're seeing now the technical skills are critical for supply chain professionals, but we're also seeing collaboration, communication, and coordination, a lot of the responsibilities to senior management. How do we get supply chain professionals to understand the role beyond the technical side that you've taken on, on the leadership side? What's it going to take?
Lynn: Well, I think the past two years has certainly brought supply chain to the forefront of many organizations. Previously, it was expected to work seamlessly in the background and deliver year-on-year productivity savings, but if the past two years have taught us anything, it's the fact that how products are delivered in the supply chain that's support that is just as important as the design and marketing of products. I think that as we see going forward, you'll see supply chain taking more of a forefront in a company's ability when they're looking at how they'll deliver their financial results, how they'll bring new products to market, how they'll support their customers. Supply chain has always played a critical role, but as we've seen over the last two years, it's come more into the forefront of many organizations the need to design a resilient and agile supply chain to meet the changing needs of the world.
Bob: Lynn, until you gave us a little about your background, even though I looked you up, I didn't make the connection between joining Flex in 2019 and COVID hitting in 2020. It's almost like being given the reins of the Titanic before you head into the North Sea. You had a front-row seat to what changed, coming on right before the pandemic and then operating through it. Last year Abe and I had Yossi Sheffi on the podcast, and one of the things Yossi said that has struck with me, and I've repeated it over and over again, is that all evidence to the contrary supply chains didn't fail.
Yossi says they operated exactly as they were designed, and then what we need is a supply-chain redesign and new business processes, new business models. At Flex, given all the customers you're working with, are you thinking about a supply chain redesign, and if so, what does that mean? For instance, if you used to operate lean, are you no longer operating lean? Are you doing just-in-case versus just-in-time? How are you approaching that?
Lynn: I agree with Yossi's comment as well. Historically our supply chains have been built on low cost and efficiency, and they work brilliantly when all players across the ecosystem are performing well and able to meet their requirements. Over the past decades, the industry leaned out the supply chain, focusing on improving working capital, but it did make it more brittle so that any minor disruption cause shockwaves throughout the system. That's really what we've seen. Even before the pandemic, we saw changes in the global supply chain.
If you go back to the trade wars and the tariffs and the challenges that were taking place with that with some changes within the supply chain, you added COVID and the drastic challenges that were faced with Flex, we shut down and reopened every one of our manufacturing facilities worldwide, implementing PPE standards and social distancing, our customers and our suppliers did the same. I characterize 2020 as more of a lack of visibility than a lack of supply, but it was a tremendously disruptive situation as we went through all those challenges, and COVID impacted the entire world in every industry.
As we saw, in this year, we saw a number of disruptions coming in from semiconductor supplier shortages that were further impacted by severe weather in Texas and the fire at the Renaissance facility in Japan, the Suez Canal, COVID disruptions in Southeast Asia, and freight and logistics challenges at the port for a variety of reasons. All of those shocks to the system of this complex global supply chain have had a dramatic impact on companies around the world. What we're really seeing is there is that need to look at how we can redesign our global supply chains to be more resilient, to be more agile.
It's certainly possible to do so, but there's challenges with that, there's costs associated with that. I think that we need to look at how we redesign our supply chains to look at those factors that will continue. We'll always be faced with severe weather events. I think that the past 18 months has been a perfect storm of supply chain impacts, but going forward, I think there is a need to redesign our supply chains. There's a need to have more collaboration and transparency throughout the supply chain so that companies are able to forecast better and be able to use the data that we have.
We're rich with data but we don't use it collaboratively to really understand how we can get to a more resilient supply chain. We also see semiconductor usage being spread across so many more product categories, products that did not typically have electronics in them previously, if you think of coffee makers, vacuum cleaners, mattresses, you're having this incredible spread of more electronic content across more industries. That's going to require better forecasting across the ecosystem from all of the players and better transparency so we can get to a more robust supply chain in the future.
Abe: Lynn, you're bringing up a really key point here, and that is that, back to Yossi's point, supply chains were very effective prior to the pandemic. Consumers and patients expected high variety, low cost, rapid delivery. That was the hallmark of supply chain as part of the pandemic. I don't think those expectations have changed, but to your point, how do we respond to the changes of, on-demand, the surges that we've seen and the various disruptions? I don't think we're going to see a reduction on expectations from consumers and patients.
E-commerce has started down a path that we can't go back on. There's higher expectations right now. You talked a little bit before about the cost of resiliency, who picks that up? Public? Private? Combination? How do we ensure that we're capable not only on just-in-time but also on just-in-case with all the disruptions that you just described?
Lynn: Yes, it's a great point because there is a cost associated with driving a more resilient supply chain. The low-cost efficient supply chains of the past work beautifully. In fact, even with all of the disruptions that I mentioned that have taken place over the last 18 months, supply chains have continued to deliver. There have absolutely been challenges and shortages, and we're working through that. From my point of view, one of the most glaring issues in the electronic supply chain that we need to reconcile is forecasting of demand, both horizontally and vertically.
We get mixed signals in the semiconductor and component market that creates confusion and a lack of transparency concerning the demand for these products. It makes it very challenging because right now we're seeing tremendous demand across all sectors. I've been through a number of cycles before that you have increasing demand that results in shortages, then extra capacity is put in place, supply becomes more free, and then there's typically oversupply, excess, that needs to work through the system. That usually takes a few quarters.
As challenging as supply shortages are, it's also challenging in different ways when we lead to excess inventory in the channel. We really need to think, how do we build trust within and across the ecosystem? We need to have better ways in which we're forecasting our demand and working collaboratively together, and we need to ensure that we're appropriating the risk across the ecosystem so that it's more equitable because one of the challenging concerns, and you hear about it today, of all the investments that are being made into the semiconductor market and the electronics manufacturing market.
We need to look at all of the data available to us to understand how we can make the best utilization of those investments to ensure we get the right capacity going forward and try and avoid the bullwhip effect and still look towards driving an efficient model. You mentioned just-in-time, just-in-case type of solutions. I'm sincerely hoping that when we emerge from the supply chain crisis we're in today, we're able to look at the forecasting that we use, utilizing the tools we have available to us, artificial intelligence to help work through some of the noise and the demand signals and get to a point where we're able to drive still an effective and efficient supply chain but mitigate the disruptions that we've experienced in the past.
Bob: Lynn, I'm going to ask you a question about digital transformation here in a second, but you just raised something that sparked another Yossi quote. I had a chance to interview him about his recent book. When we were done talking about the development of a virus, he said to me, one of the things he was concerned about coming out of this was the bullwhip effect. You mentioned the bullwhip effect a moment ago, and his concern was that so many people are doing just-in-case and ordering more than they think they're going to need because they're not sure they're even going to get what they need.
His concern was we're all of a sudden going to have this buildup and overstock of inventory. Do you see that happening? Is it a concern of yours?
Lynn: It is definitely a concern of mine. It's also a discussion that I've had with Yossi myself. Yes, you see the incredible demand that we're seeing across all of the industries. I do think there is some-- That buying a little bit more than a customer needs or forecasting more because they're seeing that tremendous growth. You'll have a number of strong players in a specific segment that are seeing the growth projections for their particular industry. They all forecast for that growth that could potentially come, in addition to trying to maybe get a little bit more market share.
A lot of times, they're using similar technologies, and in many cases, it's the older technologies, the ones that we're really experiencing the significant shortages on today. At some point, that demand will adjust a little bit. I am worried that we'll get into a position of excess inventory because of the significant demand that we're seeing today. I think part of that is also still related to COVID; consumers are buying more products as opposed to goods and services. Today, it's a PlayStation, where a few months from now it's going to be dinner and a movie.
Consumer buying habits have changed because of COVID and the lockdown, people are very focused on learning from home, working from home, home maintenance, but I think the consumer buying habits are likely to change as we emerge from the pandemic, and then we'll see an adjustment in some of those forecasts and those buying habits. Certainly, having excess inventory, I think, is a concern for everybody in the supply chain, if that results.
Bob: Thank you. Back to digital transformation, a couple of years ago at an ISM conference, a couple of members of the Flex team did a really great presentation on digital transformation at your company. The presentation was on that global visibility that you've been able to achieve. I think you were early to the party on digitalization. As a supply chain leader, how do you identify the areas of your organization where digital strategy can deliver value, and then the technologies that will enable it?
Lynn: Yes, in fact, as a supplier to Flex, I visited our Flex Pulse Center. That's the name of our digitalization tool. It was started in 2015, and we've been investing and innovating in Pulse ever since then. We really use it to run all aspects of our business. It provides real-time visibility, and it identifies risks associated with our supply chain, and we're able to accelerate our responsiveness based upon the tools and services we have.
I remember visiting the Flex Pulse Center and I had data envy. I know that after joining Flex and utilizing Pulse running our day-to-day business, but even more importantly, during a time of crisis, having that real-time visibility, everybody having the same access to the same real-time data has been tremendously beneficial. Use our digital information to evaluate, manage our supply chain, and make informed decisions on the shifting landscape that we have, and it helps us mitigate, identify it as well as unknown potential customer risks.
We leverage a lot of tools and services, a lot of homegrown tools but some partnerships that we have as well, to manage through that.
I believe we're in a very strong position because we started our digital journey in 2015. It has been tremendously beneficial. Today you hear a lot of companies talking about wanting to invest in digitalization tools. Again, I find it tremendously valuable to manage the Flex global supply chain with the digital tools that are available to us.
Abe: Lynn, last question, and you brought up these points and a couple of the other descriptions that you were providing on visibility and transparency. As Flex sits in between your suppliers and your suppliers’ supplier, as well as trying to forecast demand from your customer and your customer's customer, you talked about the value of trust. Can you share a little bit more about the criticality of trust as you build visibility and transparency in your supply chain?
Lynn: It's a very interesting position you mentioned where Flex sits in the supply chain between our customers and suppliers. I believe that honest communication is the foundation of trust in any type of relationship. At Flex, we really have very direct conversations with all of our customers about the strengths and weaknesses of our engagements and of the supply chain, and especially during these times of shortages those really honest communications about the true demand that they have and how we can manage that working with the suppliers, who are constrained with their output.
I think that that transparency that we have and we're really driving, it's part of our culture, but it's also a vital component to building that trust. Between the premium brands that we support, the suppliers that we work with, and our manufacturing partners, supply chain is very dynamic, and certainly what we've seen recently is it also can be very chaotic. It's vital for global brands and their partners to see the world through a common lens. I view trust as a vital component of our day-to-day operations, working very closely, again, with our customers and suppliers.
I think all supply chain professionals can build trust with suppliers through fundamental and vital things like delivering timely forecasts that work with manufacturing lead times and bringing that all together in that honest dialogue that you have with the partners so that you're able to work together to achieve the common goals.
Abe: Lynn, thank you very much. Just extraordinary work and interest in the work that Flex is doing and we'll continue to follow you and the work that you're doing over there. Special thanks to Lynn Torrel. Finally, a special thanks to all of you for joining us for this episode of The Rebound. We hope you'll be back for our next episode. For The Rebound, I'm Abe Eshkenazi.
Bob: I'm Bob Trebilcock.
Abe: All the best. Have a great day. Thank you.
Lynn: Thank you.
Bob: 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.