Supply Chain Innovation, Transformation, and Sustainability

Michael Krigsman: We're discussing supply chain innovation and transformation and sustainability with Jon Chorley of Oracle and Tony Nash of Complete Intelligence. Jon, tell us about your role at Oracle.

Jon Chorley: I run the supply chain management strategy group at Oracle, responsible for our overall investment priorities and directions for our supply chain solutions. I also have the chief sustainability officer role at Oracle where I help coordinate all of our sustainability policies and practices for the Oracle Corporation and help drive some of those ideas and thoughts into the products and services we deliver to the market.

Michael Krigsman: Tony Nash, tell us about the focus of your work.

Tony Nash: Complete Intelligence, we're a globally integrated and fully automated artificial intelligence platform for cost and revenue planning. We do forecasting for enterprises and markets in areas like continuous cost budgeting, continuous revenue budgeting, automation of certain, say, forecasting tasks.

We measure our error rates, so that's important that someone is planning, especially around supply chain. We're trying to help people reduce the risks around their future costs.

Supply chains are very complex: time, cost, quality, all sorts of considerations. Our focus is on the cost element of it, and there are many other things and why we're working with Oracle. They have so many other things to bring to the table that try to complement them on that side.

Michael Krigsman: You met Jon through the Oracle startup program. Just briefly tell us about that.

Tony Nash: Oracle for Startups program is a fantastic way for early-stage companies to integrate with the Oracle ecosystem. There is the Oracle technology product side of it, but there is also meeting people like Jon, meeting people like his colleagues, and the Oracle marketing team, Salesforce, and product teams. Amazing opportunities to understand how an organization like Oracle works and how a company like Complete Intelligence can come alongside them and enhance Oracle's end customer experience for the better.

How did supply chains function during the disruptions of 2020?

Michael Krigsman: Jon, during the last year, supply chain became a household topic for pretty much everyone.

Jon Chorley: Yes.

Michael Krigsman: What did the last year tell us about the nature and the reality of supply chains?

Jon Chorley: Well, that they're central to everything that makes the modern world. When you see an empty shelf and realize it's an issue with the supply chain. Or you see a run on a product as some shortage or some challenge in some way. People now understand that the complicated infrastructure that brings those products to them is the supply chain.

As we've gotten into the more recent months where we're looking at the vaccine distribution, people understand that yes, it's a technical problem to produce the vaccine, but it's also a supply chain problem to get it in people's arms.

All of those things, I think, have helped take the supply chain from the back office, from the folks like Tony and I who work in it day-to-day, into the board room, which I think is very important. But also into the dining room. People now understand the importance and centrality to efficient supply chains.

Michael Krigsman: Jon, give us some insight into the kinds of weaknesses that this last year exposed in how we handle supply chains.

Jon Chorley: I think that there are a couple of areas there that I'd point out. One is we had a very uncharacteristic demand shock. There was a real change in short-term demand.

Some of that was upside. A lot of charcoal sold to power the grill. A lot of toilet paper.

Some of it was downside. Restaurants challenged, hospitality, and so on.

Those demand shocks forced people to look at different ways to look at their traditional forecasts. That is supportable by the kind of technology Tony and I can help deliver, but it does require people to look carefully at how they're forecasting their demands. That's one angle.

Another angle, I would say, is the overall concern about resiliency. A lot of folks looked at ways of single sourcing, for example. Maybe relying on goods out of Western China, for example.

All of those things had a lot of challenges, and that forced people to look at, was the single-sourcing strategy driven by cost only the right answer? Did they need to look at A) maybe simplifying their product lines a little bit, so they had more flexibility, and B) looking at alternate sources of supply? I think resiliency came a lot more to the fore.

Tony Nash: We've had even companies like semiconductor companies (who have been based in Asia) start to build facilities in the U.S. so that they can regionalize some of those supply chains and de-risk the downturn impacts of future shocks like this. Electronics manufacturers, other people who are assembling goods, or even some primary goods, are regionalizing their supply chains so that they don't see huge impacts or any future issues like COVID or other shocks.

There's at least a little bit of a buffer by region, which saves. It's greener in terms of saving on the sea freight fuel and that sort of thing, but it also helps cushion any shocks on the supply side so consumers can get what they need when they need it.

Challenges associated with overseas manufacturing operations

Michael Krigsman: Jon, I've heard you talk in the past about the inherent challenge of manufacturing goods overseas (in China, for example) and the timeliness of getting them here in the U.S.

Jon Chorley: It has a lot of advantages in terms of costs, scale, and so on. But it does bake into your supply chain a certain fixed amount of time. That is fine if you have predictable demand. But if you have variable demand, it becomes a lot trickier to manage.

The same is true really of the innovation cycles. The speed with which you may want to innovate can be constrained by working those things from points of consumption (let's say Europe, North America) and points of production (let's say the East, China, Vietnam, and so on). Those are factors folks are considering.

I think, in some areas, certainly advances in things like automation and technologies like 3D printing, rapid prototyping, those things are changing the equation a little bit in terms of what constitutes the most cost-effective or the most efficient, or the most responsive approach to manufacturing. I think you're going to see those factors gradually have more and more of a play as people develop new ways to balance those equations.

Tony Nash: Michael, that's interesting because, as we look at how the history of supply chains have evolved from keeping POs on 3x5 notecards 30 years ago to the digitization of that, it started with EDI (electronic data interchange) from, say, the ocean lines and the airfreight firms so that you knew where your package was, all the way down to today where you have everything kept, let's say, in a bill of material within an ERP system or a supply chain system.

What people have been doing for the past few years is really bill of material versioning, where you're running scenarios on the same product configuration, of bill of materials for multiple locations, to understand where they should make a certain good. Those considerations are allowing people flexibility. They can make the time and cost tradeoffs to look at when they can have goods in a market, whether it's seasonality or whether it's some disruption or whether it's some demand pop for some reason people may not know. Allowing people to run multiple bills of material or versions of bills of material allows them the flexibility to identify what they should produce where and what it should be made of.

Michael Krigsman: It sounds like this is a data and analytics problem.

Tony Nash: It is, and the way things have been done typically is, as a manufacturer, you sign a longer-term agreement for your raw materials with a vendor. They provide that for you to a certain point. You make it in factory A somewhere and then ship it out. Of course, there is not necessarily a single factory for any large company, but it's a well-worn path.

We've had an atomization of that with mini manufacturing, or regional manufacturing, flexible manufacturing, so people can have localized versions or, like I said, seasonality. These sorts of things. You can only make those types of decisions with data and with automation.

Digital transformation and sustainability in supply chain

Michael Krigsman: You need clarity around the goals and the strategy. You need the right kinds of data. Then you need the cultural willingness to innovate and do things differently. Is that an accurate way of summarizing?

Jon Chorley: I agree. I think you need to have some idea of where you're going. Although, that probably is going to change. But you need to have that idea. You need to have the information, as Tony has discussed, that helps you navigate that path.

Then you need to be able to course-correct because we live in the real world, and nothing quite goes the way you expect it to. You need to be able to constantly course-correct.

Like I say, if you have a great set of headlights, you can see what's coming. You're coming to a cliff. If you have no brakes and no steering wheel, it's a huge problem you'd rather not know.

The ability to course correct is like having brakes and a steering wheel. You need to be able to make those adjustments as things change around you. That means flexible systems, flexible processes, a willingness to look at new ways of doing things, cultural changes. All of those things become important.

Michael Krigsman: Tony, I have to imagine you spend a lot of time thinking about the sources of data as well as the machine learning models and other types of models that you create.

Tony Nash: I get excited about things like data governance, but most people don't. I get excited about it because I understand that it helps to have much better tools to make those decisions.

Yes, we're thinking about the granularity, the frequency, the level of detail people have. Are they using the data that they have to make decisions today because it's not just, let's say, a cultural change of let's rely on automation of things like forward-looking views or forecasting or planning? It could also be a cultural change: are we looking at our data to make our decisions? How much of our data are we looking at? Are we looking at maybe the error rates of the way we plan? Are we looking back on that from time to time?

Although that may seem mundane and small, it's actually very big for things like digital transformation because you have to take inventory of what you're doing today so you can plan where you're going tomorrow. As Jon said, it's never going to go exactly to plan – never. I wish it would, but it never does. You have to understand yourself well today so that you can identify what's possible.

Michael Krigsman: Jon, we've been talking about the complexities of supply chain. Let's shift gears slightly and talk about the complexities of sustainability. How does sustainability intersect supply chain?

Jon Chorley: Most people would agree that supply chains are about making and moving physical goods around the world. That is a huge part of what's impacting the environment. It's a huge impact on sustainability.

The way we design those supply chains, historically, has been what I would call a linear supply chain. Which is we make a product, we sell a product, we forget the product. We then make another product, sell that product, and forget that product. It's a fire and forget mentality, if you like – to some degree.

If we want to be sustainable, we need to think about the full lifecycle of those products and how they get recycled back into the forward supply chain. As we progress into the future and start thinking about these things more — and we're required to by the markets, by regulations (potentially), and by what constitutes good business — we will increasingly move towards adjusting our supply chains to be more circular. That is, looking at the full lifecycle of the product.

That begins with how you design it. That's going to be a fundamental change in the way we think about all supply chains.

Advice on supply chain transformation for business leaders

Michael Krigsman: As we finish up, Tony, can you offer advice to business leaders who are listening to this who say, "Yes, we want to change, transform our supply chain, but where do we even begin? It's such a daunting challenge."

Tony Nash: I would say, really start with the easy stuff. Get some successes. Do a pilot. Then you can accelerate it very quickly.

Data scales very quickly. Technology scales very quickly. But your team may be uncomfortable with digital transformation, especially around supply chains. Help them see some quick wins and then push forward as quickly as possible after that.

Michael Krigsman: Jon, you discussed earlier the cultural dimensions of supply chain transformation. It's really important, so just share some further thoughts on that and advice that you have for folks who are listening.

Jon Chorley: I think any change is at least as much cultural as it is technological, and the people who implement those changes are key to its success. I think part of what's needed is a willingness to understand that the way you did things in the past may not be the way you need to do things in the future.

Quite often companies, for example, feel that they have a certain special way of doing a process that's absolutely required, and they hold onto that even though there is really no business differentiation for them to do it that way. They'll invest a lot of time and energy to duplicate that on a new platform.

We always encourage people to step back a little bit and leave behind some of those preconceptions. Not everything is your secret sauce. Your secret sauce is a little bit on the top. It's not stuff on the bottom.

Leave behind those preconceptions. I think that's probably the single biggest cultural shift.

Then the other point we mentioned earlier is board support. I think that's top-down. Having that support from the upper levels of the business is critical to any large-scale transformation.

I think the great thing, if there is a great thing from 2020, is that boards are aware now of the criticality of supply chains in their business and are probably more open to those kinds of conversations. Those difficult conversations from supply chain professionals with their board. Now is the time. The folks that make the investments now are the folks who are going to benefit from the uptick that we all hope is coming.

Michael Krigsman: Jon Chorley and Tony Nash, thank you both for sharing your expertise with us today.

Jon Chorley: All right.

Tony Nash: Thanks, Michael.

Jon Chorley: Thank you so much. Great talking with you all.

Tony Nash: Thank you.