Bob Tebilcock: 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.

Bob: Hello and welcome to today's episode of The Rebound, say goodbye to 2022. I'm Bob Trebilcock.

Abe Ashkenazi: I'm Abe Ashkenazi.

Bob: Abe, I don't know if you realize this, but by my count, this is the 49th episode we've recorded since we launched The Rebound in the summer of 2020. We are almost to the big 50, and I wish I could say that about my birthday coming up. I was looking back over some of the episodes, and we've had such a great variety of guests from Katty Kay, the BBC journalist, the Yossi Sheffi, one of our industry’s, real thought leaders to any number of supply chain officers. It's been a great run so far and I, for one, am looking forward to 2023.

Abe: I couldn't agree with you more, Bob. We've been hearing and seeing so many changes within the supply chain industry, not only for the professionals but for the consumers and the industry alike. It's been quite a ride to see how companies and our guests have navigated the past couple of years. Seems like supply chain is everybody's business these days.

Bob: I remember launching this. The whole idea was there's all kinds of things going on in the supply chain right now. The supply chain has really come to the fore and let's focus on the good things going on, because of course in 2020 we were in the news for like all the bad reasons. I think we've come through that. Let's do what we did in 2020 and 2021 and look back at what happened in the last year. I made a list of four or five trends that I'd like to bounce off of you. The first, when it comes to operating the supply chain.

That was the thing that took the first big hit in 2020 when we shut down, we couldn't get people all of that. The making things, transporting things, storing things. My impression is we're back to normal. Manufacturing and fulfillment execs have all told me, yes, they're going to have a hiccup here and there, or maybe for a shift, but for the most part, it's full steam ahead from them. What are you hearing?

Abe: That's consistent with the feedback that we're getting. While there may be spot shortages, it appears that we're on the backside of the bullwhip effect and all of our supply chain professionals clearly understand the challenges that we've had with the beginning of the pandemic. With the demand surges and the demand shifts and US manufacturing, I think we've experienced a significant rebound. We've caught up to the demand that identified early in the pandemic.

However, I think what we're seeing now is that perhaps on the backside of the bullwhip effect and maybe some excess inventories that buffer some of the challenges or the disruptions that we encoutered. We're seeing companies now adding workers and the high consumer demand for products. I think collectively manufacturers are remaking their supply chains to take advantage of the next disruption. I don't think anybody has predicted that we're out of the disruption phase right now, especially with China and the challenges that we're seeing there.

Supply chain challenges are still acute and unfolding. There's no mistaking that manufacturers phase disruptions globally, but they appear to have at least addressed the manufacturing side, in terms of identifying the supply and addressing demand, but what is real demand right now? I think that's everybody's holy grail.

Bob: Operations people have pretty consistently said to me, "We figured this out." Of course, we're going to come to that in a minute. They're going to be subject to a plan. You give them a plan, they're going to make it whether the plan's right or wrong, that's a whole different thing. I do think they figured out how to operate and they're still struggling with-- we're going to talk about talent a little bit, but I know they're still struggling with labor shortages. I'm seeing a lot of innovative things even down at the floor level in terms of how to address the labor shortage or how to prepare manufacturing for a labor-constrained environment.

That's pretty exciting. You just hit on the next point I wanted to go to, because I don't think the same can be said for planning and procurement. What struck me about that when I first started editing Supply Chain Management Review 10 years ago, planning and procurement were supply chain management. That was the foundation. I think we've heard from many of our guests that when it comes to those two functions, organizations are still trying to get it right. As an example, I want to start with planning. You mentioned true demand and we had Lynn Torrel from Flex, what used to be Flextronics on.

Lynn had said to me in a separate interview that she's trying to start a consortium of high-tech electronics manufacturers who can bring their orders into a nonprofit, non-biased. So that they can all try and get some idea of what everybody's going to make to figure out whether their suppliers can make it. I think everybody is struggling with that. What are you hearing from planning?

Abe: I think you've hit upon it. I think this is among the biggest challenges that supply chain professionals are facing right now. Organizations have made significant investments in visibility and transparency to address the gap that we experienced in the beginning part of the pandemic. We did not have sufficient visibility into the extended supply chains, and that created significant challenges for their tier-one suppliers beyond where they probably had a much better relationship versus their tier-two and tier-three suppliers where they probably had less visibility and understanding as to what was impacting them.

I think we need to go back to the foundation of planning and procurement. This is the foundation of just-in-time. That if you plan appropriately and you source appropriately, you should be able to reduce your operational costs and address your demand and a qualified plan appropriately. I think this is where a lot of organizations right now are facing significant challenges in terms of their planning horizons. How far out can you plan for your sales and operations planning? I think collectively what we've heard is that they've shortened it to provide greater agility and resiliency to whatever pandemic or whatever disruption.

Whether it be geopolitical, or environmental that they face in the future. Going back to the core of this planning and procurement, obviously were at the core of just-in-time. We had just a recent episode on Is Just In Time dead? and I think we all collectively agreed, no, it's not, but I think you have to marry that with the, just in case. How do you respond to future demand surges and disruptions in the supply chain? I think this is what's creating a significant amount of anxiety for supply chain professionals. What does real demand look like for what your planning horizons are?

Obviously, a planning horizon for a plane is significantly different than for a toaster or an iron. Collectively what we've seen is that planning horizons have shrunk with a much greater emphasis on agility and resiliency to address whatever disruptions occur into the future. Again, this is core to supply chains in addressing and responding to the demand in the consumer or the patient's marketplace.

Bob: You just mentioned just-in-time and I was going to ask you, do you think just-in-time is dead? I know in a conversation with Yossi, he had said to me everybody says just-in-time is dead. It just works too well, just-in-time isn't going to be dead. And he said, everybody's talking about the global supply chain is over. It's not, it just works too well. What I've wondered is everything I read with regard to the transportation side, which is so crucial to doing just-in-time. Yeah, your suppliers have to make it, but you still got to be able to get it there just in time.

Everything I read about transportation and I'm not a transportation expert is the shortages. We've gone almost in reverse where the cost of a container went from $4,000 to $28,000, it's back to $4,000. The shipping guys are saying, "We don't have enough capacity to fill out our ships." I'm reading about trucking companies saying, "Well, we don't have enough volume." Do you think that the slowdown that's hitting transportation actually frees us up to go back to just-in-time because those assets that you need to make just-in-time work might now be available?

Abe: It's an interesting point. We've been taking a look at this in a couple of different ways relative to just-in-time and the entire supply chain. Let's go back to where we couldn't get any of the ships into the ports and we had a lot of congestion. Again, I think the government, in their infinite wisdom, identified we need to open up the ports 24/7, get and reduce this backlog of ships. We've sent some to the East Coast. I think what is occurring is that the disruption bubble is moving down the system. We identified before that manufacturing has caught up.

Now how do we get the product to market and what does market look like today? Whether it's in the distribution center or retail outlet, or dark store, I think we've pushed the disruption bubble down the line a little bit away from the manufacturing and now into logistics. The warehousing and distribution problems are now popping up right now, especially as we're dealing with excess inventories all along the supply chain.

When we take a look at logistics, I think we've got to have a much better, relationship, not only in terms of data where the product is and how do we get it from point A to point B. I'm hesitant to say that there's a holy grail on data. We've seen it with the flow initiative with the federal government, that they're expecting manufacturers and distributors to let them know where their inventory is and what their production plans are. I think collectively, I think we all recognize that's a fairly, ambitious initiative.

We saw this also with FMC, for the maritime, that what they're requesting is that all the shippers identify where their containers are and what's in the containers. Again, a really ambitious initiative. I don't know how many private enterprises are willing to give you the data on this. I think we're still in a period of development and disruption within the logistics industry that's been pushed down from the manufacturing and the planning side. Right now, I don't think we've seen the end of the logistics challenges or opportunities for improvement in logistics.

Different ways to respond to the logistics, specifically in last mile.

Bob: Well, to your last point in terms of the giving that information about where are your containers and what's in the containers. Put aside willing, I don't know how many shippers today are able and are willing to invest in-- There are technologies out there that will enable that. I know of companies Stanley Black & Decker did a thing like that where they could tell you where on the ship a particular container was located and what was in that container so that they could prioritize how they were going to unload the ship according to what they needed, right.

You don't know how many companies have invested in that, and I think in this arena, different but drives the point home. Maersk just shut down their trade lens blockchain initiative. Now whether it was going to give you, item level in a container in a ship, I don't know. The point was they couldn't get buy-in and investment on the part of their trading partners to participate. It sounds great to say, well, give me all that information. Most companies don't have that information, I don't think. That's a way off.

Abe: The availability and the quality of information really becomes a challenge for a lot of these organizations. I think we saw that in the beginning of the pandemic -transparency and visibility. We didn't have visibility into the information and we didn't have accurate information from tier-two and three, traditionally small and medium-sized organizations. The capability to the point that you're driving home in terms of how accurate and how available is the data, then we have to take a look at the capability of the partners to be able to aggregate and input that information.

I don't think we're there yet collectively in the global supply chain.

Bob: I don't think so either. We talked about planning the other, foundational process and I think that along with planning has really been rocked is procurement. I always think of procurement-- I go to a lot of conferences and the procurement guys are always like the Rodney Dangerfield of the supply chain, right? They don't get no respect and they're just always forced on, get it to me, cheaper, cheaper, cheaper. What did you do for me later?

Given the challenges I think that everybody experienced in 2021, it does appear as if companies are recognizing A, that risk management is a deal, is a big thing. That that's going to start with procurement because procurement is the one dealing with their suppliers and their suppliers' suppliers. I think we're going to have, in 2023, Len DeCandia who recently retired as the Global CPO for J&J. His thesis is supply was so reliable and transportation was so reliable that for 20 years we invested in the customer, right?

Everything was customer-facing. He calls it CRM, but says everything was customer-facing. We didn't invest in the supplier or SRM. He said, the company that's going to win in the future is the company that's got stuff on the shelf. That's going to be procurement, that's going to be supplier. Long preamble. What are you hearing since you're now doing procurement as part of ASCM?

Abe: Yes, interesting question. I, and let's dial the clock back a little bit. I think you and I both remember when if you were the CPO, you are the top of the food chain within the organization and supply chain. If you wanted to get into, or part of their vendor management system, it was the CPO that you had to go to. Let's take a look at what's occurred over the past 15 to 20 years with AI, machine learning, automated procurement, committed contracts with your vendors. I don't think that the CPO role has diminished.

It's just that the leadership in terms of actual human interaction has reduced. We're seeing much more on technology taking a much bigger role in procurement. However, purchasing managers continue to report complications, they're high demand, rising material cost, freight, slow deliveries. These are all part of the dynamic. Let's go back to the discussion that we had before about the types of relationships that organizations are maintaining, specifically the tier-one versus tier-two and tier-three.

Most of the disruptions, as we discussed before, occurred at tier-two and tier-three, where organizations did not have early warning systems or information about the challenges that they were facing. Most of the organizations have extraordinary commitments from their tier-one suppliers. Obviously with committed, agreements, but we don't have the same level of visibility or trust in the extended supply chain. I'm going to double down on the term trust.

In order to get the information accurately and relevant on a timely basis, you need to be able to trust your partners that you can give them information and that they can give you the information. Well, first, I don't think that the-tier two and tier-three have invested in digital transformation the same way that, major corporations have invested in it right now. Secondly, I think we're seeing a little bit more in vertical integration, controlling a little bit more on their vendors and saying, "Okay, I need to insure my supply, so I'm going to invest a little bit more right on my vendors beyond my tier ones."

I think the digital transformation has taken on a significant bite out of procurement in terms of human interaction in it. In today's environment, in terms of, marry the concept of shorter planning horizons disruptions in almost every aspect of procurement or raw materials. You're starting to see quite a bit more attention now paid to the procurement side and in human involvement, where we were moving away from it for a number of years into committed contracts. I think we're now back where procurement function is taking a much more human or a much more involved talent side.

In terms of identifying what and who you partner with and holding them accountable for your extended supply chain. I think that we're seeing some indications of that. Especially given the disruptions that we're facing right now and the lack of the sales and operations planning for what was normal planning horizons, much shorter planning horizons today.

Bob: I want to come to that human in just one second, but I wanted to go back to one point you made in terms of the visibility into the tier-two and tier-three. You and I just had Skyler Covington from Sonoco on a week or so ago. One of the points that he made is that Sonoco is investing in the tier twos, and they're doing that in order to get information to their tier-ones about what their tier ones’ tier-twos are doing. Right. It was interesting to hear Skyler talk about the investments that Sonoco is making to get visibility into the tier-two and tier-three because it's going to impact Sonoco's tier-one.

To the point you made, I think Skyler drove that home in part of what they're doing there. I'm glad you brought up the human part because for the last-- even before the pandemic, I think, for three or four years, every conference I went to, what you heard was digital transformation and technology was the focus of all those conferences. I think that one of the things that the pandemic drove home is if you can't get people, you can't run a supply chain.

Gartner came out with this term it's almost sociological, but human-centric digital automation with the idea that you're not going to get away from people, we're not going to lights out just yet. Has the pandemic, in your view, really brought the spotlight back on people? Just how do you see this playing out now in supply chain since we're all-- every industry, battling for people?

Abe: Yes, Bob, I think you're bringing out a point that was an issue. Prior to the pandemic, as you indicated, a Department of Labor study indicated that for six openings, we had one qualified candidate. Those were on career-oriented functions within supply chain. I think what we're seeing now is the talent gap at almost every level from entry-level to warehouse workers to logisticians. Every aspect of supply chain now is in a talent gap right now. As I indicated before, companies are hiring right now. That's a very positive sign.

Now, do we have the availability of the individuals in the marketplace? I think that's part of the challenge is that we don't. We're seeing a lot of interest in supply chain from colleges and universities - that's exploded over the past 10 to 15 years, but we still have a gap within the talent side. That's first. Secondly, the investment in data and analytics, the past two years has risen to the top in terms of our trends that has not diminished.

Especially when you take a look at early warning systems and the availability and the relevancy and the timeliness of data necessary for organizations to forecast or to be able to predict what they need to produce, where they need to produce it. I think it's not surprising that digital transformation has risen and continues to rise to the top in terms of priorities. However, do we have the right individuals to understand the data? A number of studies indicate that the graduates coming out of school right now do not have the real-world experience or have the ability to discern what the data is telling them.

It's a really dangerous combination when you're overweighted on technology, in terms of the capability of all the technology systems, and then we have individuals that may not understand the inputs or the outputs of that data. That's a concern. On the other side, let's go back to the beginning here in terms of the talent gap. We have a DE&I challenge within supply chain. We have it at the leadership level, we have it at the operational level, and we have it at the promotion or the mentoring level.

Historically, leaders within the supply chain have come out of finance and engineering, predominantly white-male industries in the '80s and '90s. Yet when we take a look at the diversity coming into the workforce today, it is as broad as you can ever imagine, in terms of the types and the capabilities of the individuals. We don't have the role models, we don't have the mentors within the system right now that can provide that resource for individuals coming into the workforce.

The people side, which is key to us as an organization, we've got approximately 45,000 to 50,000 members within the supply chain community, and it's at every level from career-oriented all the way to tertiary functions within the marketplace right now. This talent gap is a key determinant in terms of the future for a lot of organizations having the right individuals to be able to discern what the data is telling them. All the investment in digital technologies and transformation need to be supported by capable, competent individuals.

Again, there's very few organizations that can't get investments right now for digital transformation. Are they able to get that same type of investment for their workforce? Again, I'm going to go back to a question that I ask almost every audience when I talk. I ask them, what's your number one asset in your company? I think almost every company will tell you their employees. If you're doing asset rationalization, what do you invest in in your best and worst of times - your least-performing asset or your best-performing asset? I think most would tell you that their best-performing asset.

This is what we'd like to see is that organizations commit to what they believe is their number one asset and that's the people side of the business.

Bob: I want to stay on that theme for a minute. To me it's the big story in 2022. I really can't explain it, but is the number of conversations I've had with senior executives that start around sustainability and diversity. It has hit the supply chain and whether it's sustainable, to use a bad word or not, I don't know, but it certainly seems to be top of mind route. Now, let's stay on the diversity part of it first because you just did a research project with Gartner on diversity and inclusion. Before we talk about sustainability, what were your takeaways from the survey that you and Gartner did?

Abe: We have some positive news and then we still have some systemic gaps within our marketplace. First, there is a much greater focus on DE&I, specifically for large and public companies. Not surprisingly, they have to report out, they’re held to a much higher standard obviously with the availability of the information that they have to report on to the marketplace. Not surprising, large public organizations are reporting publicly on their efforts. I think that's positive. What's a challenge is that we don't have consistency in terms of reporting or accountability.

What one organization reports on is not the same as another company, even in the same industry. We don't have consistency or comparability in terms of data, that's first. Secondly, I think that as organizations focus more on diversity and inclusion, I think they need to go beyond attracting individuals. I think this is one of the results that we saw out of our salary survey that we did is that women under the age of 40 right now are out-earning their male counterparts. That's a very positive indication that we're attracting more women or we're willing to pay more.

However, that pay gap inverts the longer they stay within the industry - that men start to out-earn the women, the longer they stay within the job. Obviously, there is a challenge relative to promotions or availability of different job role responsibilities within the marketplace that may not be afforded to women or people of color. I think we're making some good steps in attracting. I think we need to do a much better job in retaining and providing leadership opportunities for the individuals, that's first.

Secondly, as we indicated before, large and public organizations are much more willing to share the information not consistent with the small and medium-sized organizations, which if we identify as part of your supply chain, how are you doing relative to supporting your vendors in either sustainability or the DE&I initiatives? Right now we're seeing some organizations take that step in terms of assisting their suppliers to be much more compliant with DE&I as well as sustainability metrics.

That's a key aspect for it because accountability is for the entire supply chain, not within your own four walls of your organizations. We're starting to see that. I am particularly concerned about these two, the sustainability and diversity, for a couple of reasons. Number one, rhetoric right now is much greater than action, specifically on sustainability. Our study with the Economist Intelligence Unit indicated that sustainability is rising to the top in almost every organization's priorities but yet when we take a look at the action, it doesn't match the rhetoric.

By any measure, 60-plus percent of carbon-three emissions are within supply chain. Yet less than 50% of the organizations have either identified metrics or report out on what they're doing about it. I think we've got to hold up a mirror to us as an industry, but I think we also need to give ourselves a break, Bob. We've got a fire burning in almost every room of the house right now between the pandemic in China and what's going to occur within logistics and transportation and hiring.

It's hard to have somebody talk to you about rebuilding your house in a sustainable manner when you're trying to put out a fire in every room of your house. Let me put the fires out first. I think we're seeing, collectively, an awareness of it. I think we'd all like to see a little bit more action. Then lastly, I think we can't let the consumer off the hook here. Consumers still drive supply chain. Whether we're talking about just-in-time or whether we're talking about compliance to human rights or sustainable products.

The consumer ultimately makes the decision about what they're going to buy and where they're going to buy it and how much they're going to pay for it. I think at some point we need to include the consumer's role responsibility within this as well as the organization's responsibility to be, not only sustainable, but to do it in a much more effective and efficient manner.

Bob: A couple of reactions. One, via Modern Materials Handling, we do a diversity and inclusion study, as well. We just did our second one. To your point about customers not driving the supplier diversity amongst their suppliers, 75% of the respondents, in the survey that we just did, said that their customers are not asking them to report on their diversity efforts. Frankly, that surprised me because I would have expected it to be higher, particularly because if you're dealing with publicly-traded corporations or corporations that do business with the government and they've got to hit a supplier diversity target.

I would have expected a much lower percentage than that. That was consistent. The other thing that was consistent with ours is the number of women coming up. Also, when we looked at the senior executive level, I don't remember this year's results, but when we did it last year at the floor level, it was almost 50-50 between white and non-white. However, that was measured. At the executive, it was like 70-30. It was not just white versus non-white, but the biggest demographic was 55 to 65 at the leadership level.

It was male. It was old, white, and male. My picture could have been there, and I don't think it changed appreciably between the 2021 survey and the 2022 survey. The second one just my last point for the day when you talked about the rhetoric versus the action. I think I mentioned when you and I were setting this up, that I had a call with the sustainability leader for Walmart, biggest retailer on the planet. Back in the day, I wrote for Diversity, Inc. and sustainability was one of the things I covered.

I've been talking to Walmart about these issues since 2005. They've been a leader. They were out front, they've been doing stuff. It's not like Walmart is new to this party, but they had just announced a thing called Project Gigaton where they're making renewable energy sources available to their suppliers. They've aggregated it so that their suppliers can take advantage of it. The number he used, and I don't know if this was all suppliers or a certain segment of suppliers, was 4,000 suppliers.

The first step was just offering information and 2000 suppliers requested information. That's only 50% of the 4,000, right? Project Gigaton starts with five suppliers participating in the program. It's a pilot and he says if it works, we can easily replicate it and bring more suppliers on board. The largest retailer in the world, only half the suppliers who were offered information about how to become more sustainable, in terms of your energy consumption, looked for information. That doesn't mean all of them did something. It just means, yes, I'm willing to read a brochure.

Project Gigaton starts with five suppliers. There's a long way to go, I guess is my point.

Abe: Absolutely. Especially when we take a look at the marketplace, in terms of the impact that supply chain has on almost every aspect of our lives. It's hard to get away from the sustainability side of this. This has been systemic. This is not a new issue for supply chain. I think it's not only the awareness now collectively for consumers and patients alike is out there because supply chain is no longer a dark word that nobody understands right now. I think we need to do a much better job in explaining the impact that supply chain has, not only on our economies, but on our lives and the ecology.

Bob: I think that's everything I had for today. Abe, why don't you take us out?

Abe: Thank you very much, Bob, and that is all the time that we have today. As we come to the end of our third year, I want to thank all of you for listening and making this podcast a success. We hope we'll be back for our next episode and for the next year, as well. For The Rebound, I'm Abe Eshkenazi.

Bob: I'm Bob Trebilcock.

Abe: All the best everyone.

Voiceover: 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.