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.
Bob: Hello, and welcome to today's episode of The Rebound. Let's say goodbye to 2023. I'm Bob Trebilcock.
Abe Eshkenazi: And I'm Abe Eshkenazi.
Bob: Yes, Abe, we're coming to the end of the year, and in a few months, we're going to mark the fourth anniversary of The Rebound. Not bad for a couple of guys who were just looking for something to do during the pandemic lockdown when supply chain was in the news.
Abe: Really, Bob, it's been a great opportunity to discuss a lot of cutting-edge topics, as well as the importance and the impact that supply chain has had on almost every aspect of our lives. I think we can both agree that the awareness of supply chain has never been higher. Maybe the understanding isn't there, but the awareness sure is.
Bob: That's a great segway to what I wanted to start with, Abe. Like last year, I thought we'd take a look back at what caught our attention during the year. I was going to actually kick this off with a discussion on AI, and I will go to that in a moment. This morning, I was listening to Andrew Ross Sorkin on CNBC talk about the impact of the Houthi rebels on shipping via the Red Sea.
Now it's already leading to talk in the media of supply chain disruptions, higher prices, the Grinch that stole Christmas. Going back to supply chain is in the news, maybe not completely understood, but people now know that these kinds of things may disrupt their lives. To me, it was something different. It was a reminder of something a recent guest said to us about the impact geopolitics is now having on supply chain management. It's a completely new lens for us, isn't it?
Abe: Yes, absolutely. I think as we start to open up the aperture on supply chain and the impact that it's having, I think not only the geopolitical side, but the interconnected side of how supply chain connects everything across the globe and the decisions that we're making in the US and in EU are having an impact, collateral impact across the networks. I think this is among the challenges that we have is getting our arms around and understanding the complexity of supply chains and how inter-dependent they are to each other.
Bob: Yossi (Sheffi), at your conference, and certainly in conversations he's had with you and I, has said that global logistics isn't going away. It just makes too much sense. At the same time, I think something Arun Kochar said the other day is people are rethinking what a global supply chain means. It's the make where you sell, buy where you make; where they may operate globally, but they're not trying to ship 5,000 miles across the ocean. They're trying to set up manufacturing near where their global customers are and then buy from local sources. I think that's been an ongoing thing, maybe since the tariffs in 2016, but I think when you look at things like the Red Sea closure, it's really going to drive that home.
Abe: Yes, absolutely. I think we started to see that with China Plus One Strategy a couple of years ago, where organizations, specifically multinationals, are taking a look at their footprint. To your point, where do you source from? Where do you manufacture? Where do you deliver? Where do you store? I think we're taking a look at a much different landscape than we had in the past, where it was almost a foregone conclusion you're going to manufacture in China, you're going to get it shipped overseas. I think there's been quite a bit of evaluation of what that footprint looks like, not only in terms of efficiency, but as a sustainability issue as well, which is, on the horizon, a very looming issue for a lot of supply chains.
Bob: Abe, let me just stick on this for one more moment since a big part of ASCM is certification and education. Do you think that is going to require new skills that supply chain managers haven't typically had? This is no longer about how do I make it and ship it at the lowest cost.
Abe: No, I totally agree with you, Bob. I think the role and responsibility and the accountabilities have changed significantly over the past three to five years. We had expected supply chain professionals to be in a leadership position. Let's face it, they are engaged in almost every aspect of the organization, so we fully expected them to be leaders in their organization. I think the pandemic accelerated that focus on that supply chain professional and what they bring to the table, specifically the C-suite, and the competencies necessary to sit at that table are significantly different than the subject-matter expertise or the functional expertise that used to be sufficient. Now focus on collaboration, communication, coordination across enterprises, across time zones, across cultures; a very different environment today for a lot of supply chain professionals.
Bob: Again, so now I'm going to go back to our regularly scheduled programming. I didn't mean to start that, but sometimes the news drives the conversation, including in supply chain. Let's look beyond geopolitics. I think the biggest development is the one that is reaching far beyond supply chain, and that's AI. It's sparking labor unrest, it's consternation in government, corporate upheaval and an employee revolt at OpenAI most recently.
The other night I was at a friend's house for dinner, and one of the guests was from Colorado and talked about how they were using AI to redo, by the way, their marijuana policies. I was asking him, do you see this as a panacea or a threat to mankind? His answer was, a little bit of both. When I talk to supply chain managers, we're at very early days, and the early applications all seem innocent enough. My question to you is, you had a number of presentations on AI at ASCM CONNECT, including your fireside chat with Yossi Sheffi; what's your take on what's going on here?
Abe: Yes, really interesting development in the industry, Bob. I think like a lot of technology, there's been a tremendous amount of hype and concern, to your point, about the use of AI. If we take a look at the significant technology changes that have occurred over time, whether we're talking about blockchain, or whether we're talking about AI and machine learning and the rest, I think there's a couple of takeaways.
First, we tend to overestimate the impact in the short term. We tend to see that this is very disruptive and it's going to have significant impact on almost every aspect of our technology and our supply chains, and so we tend to overestimate that. I think we tend to underestimate the impact in the long term. That is, what will happen over time as we become much more accustomed to the use of AI within the organization and at almost every level?
I think what's interesting with this technology is that it's focused on knowledge management, content creation, curation. Traditionally, functions that we saw with technology improvement tended to focus on much more of the blue-collar, the efficiency, the effectiveness, or reduced cost. This is focused on advanced degree or professionals. Historically, technology affected the blue-collar. This is affecting those knowledge workers. I think that's what's different about this technology, is that I think it could be much more disruptive at a much higher level within an organization as opposed to just the efficiency side of a technology solution.
Bob: Do you think that, in part, has led to a lot of consternation about AI? I'm going to give you a long example. I followed RFID back when Walmart, in 2003 or 2004, had the RFID mandate. The example I've used is I went to RFID Journal LIVE back in the midst of that. The head of the RFID initiative for Walmart was at the podium, and he said, I predict that in the future, the insights we're getting from RFID are going to lead to a cure for cancer and an end to world hunger. My punchline is a year later, they dropped the initiative. So much for world hunger, right?
During the actors' strike, I was in my car driving somewhere, and I was listening to MSNBC, and Bill Maher was on. They asked him, since AI was a big part of the writers' strike, he said-- "What do you think of AI?" He said, "Well, I can say that it's both amazing and frightening. I predict in 10 years, the insights from AI are going to lead to a cure for cancer and the end to world hunger." Part of me was a little bit jocose, like in a year from now, we're going to drop the initiative. At the same time, I've wondered if a lot of the consternation is right to the point you just made, which is that this one potentially has an impact on people like you and me, and people like you and me, people in white-collar positions, are also the ones who are writing and speaking about it. Maybe we're raising the alarm where the blue-collar workers, potentially affected by RFID, didn't have a voice.
Abe: Couldn't agree with you more, Bob. I think this is among the issues that we're dealing with AI. I don't think we fully appreciate the impact that had. Not too dissimilar from blockchain. I think we had a very similar discussion about blockchain, about six or seven years ago, about how disruptive it was going to be, and now we're seeing it much more commonplace for organizations to use.
I think we're going to see sort of that crawl into the technology with AI. I don't think it's going to be a sweeping change.
Supply chains don't act like that. I think we're very risk-averse into the new technologies, specifically that could be this disruptive, so I think you're going to see it start to be implemented at a tertiary basis. I don't know about a holistic implementation with organizations. We haven't seen that just yet, but I think as we start to understand the capabilities and the benefits of using AI, I think we can reduce the concern and the hyperbole and get to much more impactful and useful use of that technology.
Bob: You and I both put on conferences this year. When we put together content or when we curate our presenters, it's often a reflection of what's on the minds of our attendees and what's going on in supply chain. Think about what you saw and heard at ASCM CONNECT, and then maybe feedback you received from attendees. What's your takeaway about the state of supply chain management today? Was there something that stood out or said, this is really what matters to my attendees and my presenters?
Abe: Yes, I think there were a couple of things that I recognized. First, the sense of common purpose, common issues for the-- it seemed like there was a much higher sense of the supply chain professionals finally being recognized for their contributions. We're not having to explain to our friends and our families what supply chain professionals do. We may have to defend it sometimes today, but we're no longer having to explain what they do. There was that sense of camaraderie that we're now finally starting to see these individuals recognized for their contributions.
I think, secondly, it's clear that supply chain professionals finally have a seat at the C-suite. We've been talking about this. You and I just referred to this a little bit before, that we had anticipated that supply chain professionals, given their role, their responsibility and the span of knowledge within the organization, that they would be excellent candidates for the C-suite. I think we're starting to see these individuals now have a seat at the table.
A couple of takeaways. First, they now need to use their voice at the table. This is not something that we've prepared these individuals for, to sit at the C-suite with the CFOs, with compliance officers, with sustainability officers, and designing appropriate supply chains, sustainable supply chains for their organizations. That is a key aspect, and now their competency and that capability now needs to be upskilled.
That leads me to my final point. As we talked before, it used to be that functional expertise or you being a subject-matter expert was sufficient for this field. Now that's the price of entry. Expectations now include collaboration across the enterprise and across your vendors, coordinating, orchestrating the supply chain, balancing supply and demand, communicating across the organization. These are all what we considered in the past, what we called soft skills, but as, Bob, you and I know, there's nothing soft about these skills. These are significant competencies that individuals bring to the organization to enable them to not only withstand the shocks that we're experiencing to the system, but to move the organization along, take advantage of these opportunities.
With the supply chain professionals now having that understanding of their commitment and their role, I think we're starting to see that these people really fulfill their manifest destiny of a supply chain professional.
Bob: When I think of my NextGen Conference, something that really stood out to me was both a presentation and then the follow-up feedback I got about it. The presentation was from a very well-known candy company that presented on SKU rationalization. The challenge they had was that during the pandemic, they couldn't get enough ingredients to make every product in their catalog. They had to best allocate ingredients that were in short supply, and then allocate them to finished product that was also in short supply to customers. Now it was one of the best received presentations when we got the scores later.
Meanwhile, on my advisory board is the director of planning at a very, very large CPG company and also always in the top 25 on Gartner. He said to me, he said, "I heard all kinds of people talking about that presentation, and the only thing I could think of was, well, we've been doing that for a decade." What it reminded me is there is a gap between the very best supply chains and even the very good, and that we should never assume, when we hear what the best are doing, that everyone is already doing it. There's a lot of aspiration out there, but people who are still at the early stages of advancing their supply chain.
Abe: No, I couldn't agree with you more, Bob. I think as we take a look at the diversity that's within the supply chain and the things that organizations are trying, to your point, some of it seems to be like back to basics, while others seem to be moving at warp speed as AI for their organizations. The focus still is on efficiency and effectiveness.
You talked a little bit about Yossi and our conversations with him. One of the things that Yossi and I talk about all the time is just-in-time. Is just-in-time dead? From his and my perspective, absolutely not. I think we're still in the just-in-case environment, dealing with the disruptions, whether it be the Suez Canal today or whatever it may be. I think still a focus on just-in-time, that efficiency, that effectiveness, and what you're describing in terms of how these organizations respond, are that foundational stuff that organizations are doing on SKU rationalization.
This isn't new, to your point, and to the organizations. This is something that these people have been doing forever. Now I think there's much greater urgency to rebalance that supply and demand and that data indicators and that technology having a significant impact on supply chains today. How do we marry that technology with the knowledge worker so that we can rebalance and meet consumers and patients' needs alike? I think that's-- again, I cannot think of a higher calling than that challenge.
Bob: I want to ask you a couple of things about this year's top 10 supply chain trends, because I think they're really relevant to what's going to happen in 2024. When I was looking at the top 10, the thing that struck me at the time when I was at ASCM CONNECT is the top 10 was really a couple of buckets, and one of them was digital. When I say just a couple of buckets; under the top 10, you had big data and analytics, AI and ML, smart logistics, which are all part of digital supply chains, and digital supply chain was number two on the list. At least 5 of the top 10 were all about digital.
What is the impact that you think digital is having on the future of supply chain management today, and how far along do you think we are?
Abe: Yes, that's a really great point, Bob. I think if you talk to any organization right now; if digital transformation isn't the number one priority in their organization, it probably is number two. The pandemic exposed significant gaps in our supply chains, three, specifically: visibility, transparency, and traceability. These were gaps that occurred at almost every level, but more importantly, at the Tier 2, Tier 3 levels within the organization. Among the opportunities that we have or solutions that we have is the digital transformation to address these gaps. Organizations have worked really hard to identify all the players in their supply chain to ensure that future disruptions are either mitigated or avoided.
We tended to focus specifically on filling those gaps on visibility and transparency. Good news, bad news. In filling those gaps, we now know all the players in our supply chain. We are no longer surprised by who's in our supply chain. The bad news is that we now know everybody in our supply chain, and we found out that there are maybe some actors or maybe some practices that are not consistent with our expectations or our policies. This has created a very dynamic environment for organizations, specifically on the compliance side. You now know everybody in your supply chain, and that indicates that you now know where you have challenges with perhaps labor issues, or conflict materials, or sustainability issues. We can no longer say we don't know. That is no longer acceptable for a supply chain professional to say they do not know what's in their supply chain.
We've worked over the past couple of years in terms of identifying how to enable and to prepare supply chain professionals for these activities. Our new certification, certified transformation in supply chain, helps individuals understand what it's like to transform an organization through digital transformation, but I think we also need to understand that it's not just digital transformation. There's the employee side of the- talent side on this. Make no mistake about it. When we take a look at the trends, the top three trends are all focused on digital transformation, MI or AI, as we were talking before.
Bob: It's interesting you talk about the people side of it. You and I had Alison Seward from GE Appliances on recently. I thought, to me, she had a really inspiring presentation on some of the things that they were doing around digital, including really doing digital twins in an effective way that was helping, for instance, get new factories approved quicker because they could walk people who had to make the approvals through the digital factory. She also made the point that it was also about upskilling the workforce and improving the jobs of the workforce and listening to the workforce. Yes, it was digital, but at least with GE Appliances, they recognized the importance of the human input.
I want to ask you-- when I mentioned that-- I broke your top 10 list into two buckets. The second bucket, and it goes back to the conversation about the Red Sea, was risk management. Because on the top 10 trends, you had risk management and resilience, data security, and logistics vulnerability. Those to me are all risk management. It reminded me, I had a conversation with Kathy Wengel, who is J&J's supply chain leader, recently. She said to me that one of the takeaways from the pandemic for her is that J&J now has a crisis management team at every site around the world with identified leaders who, like FEMA, can be stood up in the course of an hour. I thought that was pretty impressive, but the other reminder to me was J&J is number four on Gartner's top 25 list. They're the kind of company that has the resources to do this on a global basis.
How pervasive do you think risk management is today, outside of industry leaders like J&J, and P&G, and Google and whomever else?
Abe: Yes, that is a really great point. I think a lot of questions and a lot of discussions are happening at those organizations right now on how to mitigate their extended supply chain so that they are not surprised. It's not surprising on the crisis management teams, given the types of disruptions, the frequency, severity and the duration of the disruptions that we faced over the past three years. I think we would be foolish to say that we've solved- that we know how to respond.
Well, we don't know what the next disruption is going to be, and I think that's part of the challenge here. A tremendous amount of focus on resiliency, to your point, and that's the ability to withstand the shocks to the system. We don't know what the next shock is, obviously. We always try to prepare, but more often than not, we're fixing the last problem as opposed to preparing for the next challenge that we face. Quite a bit of focus on resiliency and risk management. I think historically, risk management has been there, but I think it's taken on significant urgency, obviously, given the disruptions that we faced.
I think we need to take a look at the other side of resiliency, and that's agility. That is not only the ability to withstand the shock, but to take advantage of the situation, to your point. I think these leading organizations are looking at this as an advantage opportunity. That if there's going to be a disruption, how do we take advantage of it? How do we position our organization to ensure that not only could we withstand it, but we take a market share, that we are much more responsive? I think that's where a lot of the discussion is; not only withstanding it, but taking advantage of it.
That ties to our previous discussion about the role of responsibility of the supply chain professional and how it's expanded to the most critical aspects of the business right now. I can't think of a more critical time right now than on resiliency within an organization, and the role that supply chain professionals take along with their counterparts in the organization to not only withstand these shocks, but to ensure that they're sustainable moving forward.
Bob: That last point about resilience is really, I think, on point to the Red Sea discussion, by the way. It was one of the things that gave me a little optimism this morning, and that's that they said that $80 billion in freight has already been rerouted away from the Red Sea. Which tells you, there's a crisis management team somewhere that learned something from the port problems we had during the pandemic, when people were trying to figure out how to get a ship into a port and get it unloaded, and are taking the lessons from that to say, "Well, if they're going to disrupt the Red Sea, let's get it on a boat going somewhere else."
Last topic, and I'll start. When you look forward, what do you think is going to be the biggest challenge facing supply chain managers going forward? I'll tell you the one that I'm watching the closest, and it's one that we've had a number of guests on to talk about. That is whether given concerns about the slowing economy and a pretty hostile political climate, are we going to be able to keep moving forward on initiatives around sustainability and diversity? I'm already reading reports in the business sections, The Wall Street Journal and The New York Times, about companies being less willing to advertise what they're doing. They may not be pulling back, but they're trying not to talk about it, and in some instances, they're pulling back. For instance, a number of chief diversity officers have left organizations because they just felt there wasn't support there.
That's what I'm watching and the one that I'm concerned, because I think we've made a lot of steps in our industry towards both diversity and sustainability. What are you watching?
Abe: Yes, I totally agree with you, Bob. I think that regarding sustainability and the circular economy, we're late to the games, not only in terms of setting appropriate metrics, but also reporting responsibilities. As you pointed out, we're seeing quite a bit of pullback; organizations reporting out less that they'd be held accountable to prove what they're reporting out. I think there's been some shading of not only the data, but some greenwashing of organizations' practices.
Unfortunately, most of the focus right now is regulatory or policy. We're now seeing quite a bit on the voluntary side for associations, whether industry associations or the companies themselves, indicating that they are going to take a first step in identifying not only what the appropriate metrics are, but the reporting responsibilities. I think we've let down a little bit on the industry association side, and so not surprisingly, we're seeing it from the regulatory, we're seeing it from the EU, we're seeing it from policy that it is now compliance in terms of holding organizations accountable. Again, I still think we have a window of opportunity here if industries can get together and agree on what appropriate measures are and appropriate reporting metrics.
We've seen this story before, Bob. It's the top of the priority list for every organization, but when we take a look at the investment, it doesn't match the rhetoric. That's a particular concern. It's also the same concern I've got for workforce development, as we just talked. There are few digital initiatives that aren't getting funded today, as we were just referencing. Similar to sustainability, the focus on workforce development is that the organization, are you investing in your talent at the same level as you're investing in your technology? Are you investing in sustainability at the same level that you're investing in your strategy development?
I think this is where we see a divide. That right now, tremendous amount of resources are being spent on digital transformation. Are you improving your workforce? Are you developing knowledge workers so that they could take advantage of the technology that you're implementing? I think that's a winning formula for a lot of organizations, that commitment to ongoing professional development, in addition to the digital transformation that they're making, with a goal towards a sustainable supply chain. I think that's a winning formula.
Bob: Great. Abe, why don't you take us out?
Abe: I appreciate that, Bob. This has been an extraordinary time for us to talk about supply chain and the impact that it has on companies, that it has on economies, and all of our lives. As Bob indicated, we're coming to the end of our fourth year at The Rebound. I want to thank you all for joining us and making this podcast the success that it's become. We hope you'll be back for our next episodes and for the next year.
For The Rebound, I'm Abe Eshkenazi.
Bob: And I'm Bob Trebilcock.
Abe: All the best, everyone.
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 scmr.com. We hope you'll join us again.