With all the discussion in the business world about a “new normal,” for supply chain leaders that’s not enough. They need to be thinking about how they’ll handle the normal that comes next. In this episode of Connected & Ready, host Gemma Milne talks with IDC’s Frank Della Rosa and Simon Ellis about their definition of a resilient supply chain, the difference between supply chain and demand disruption, the benefits of implementing a digital twin for visibility and agility, and how disrupting your own organization from within can help you prepare for the future. Microsoft Dynamics 365 Supply Chain Management helps businesses build agile, connected, and resilient supply chains to effectively meet changing customer demand and ensure business continuity. Using predictive insights powered by AI and IoT, Dynamics 365 helps streamline operations to maximize efficiency, product quality, and profitability. Request a live demo today: https://aka.ms/AA8l720 Thank you for listening to Connected & Ready! Do you have ideas of how we can improve the show? Want to recommend a guest for us to interview? We value your partnership and participation. Please drop us a note at firstname.lastname@example.org. We would love to hear from you.
Gemma Milne talks with supply chain experts Frank Della Rosa and Simon Ellis about critical concepts such as digital twins and the supply chain control tower, the essential ingredients for shifting mindset and culture toward resiliency, and the imperfect science of evaluating risks and opportunities from a supply chain perspective.
About Frank Della Rosa
Frank Della Rosa leads the IDC SaaS and Cloud Software practice. In this role, Mr. Della Rosa is responsible for the practice research agenda, client relationships, and consulting engagements for IDC. Mr. Della Rosa was recognized by ARInsights for his industry influence and speaks on a wide variety of topics, including the journey to the cloud, platform strategy and economics, a new generation of SaaS, cloud marketplaces, and digital ecosystems.
Prior to IDC, Mr. Della Rosa worked in technology sales, business development, and consulting for prominent technology firms and boutique consultancies, including Edge Strategies. He holds an MSM in International Management from the Hult International Business School.
About Simon Ellis
Simon Ellis currently leads the Global Supply Chain Strategies practices at IDC Manufacturing Insights, specializing in advising clients on supply chain digital transformation, network and ecosystem design, supply chain planning, global sourcing, transportation, and logistics. With almost 35 years of experience in manufacturing, working across all major areas of the supply chain, Simon previously was the Supply Chain Strategy Director for Unilever North America.
Topics of discussion
Using predictive insights powered by AI and IoT, Microsoft Dynamics 365 Supply Chain Management streamlines operations to maximize efficiency, product quality, and profitability. Request a live demo today:
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Gemma [00:00:05] Hello and welcome. You're listening to Connected and Ready an ongoing conversation about innovation, resilience, and our capacity to succeed brought to you by Microsoft. I'm Gemma Milne. I'm a technology journalist and author. And I'm going to be exploring trends around how companies are adapting to a disrupted world and preparing for tomorrow. We're going to speak to the innovators who are bringing products, operations, and people together in new ways.
Gemma [00:00:30] On today's episode, I'm chatting with Frank Della Rosa, research director for IDC, SaaS and Cloud Software Practice, and Simon Ellis, program vice president at IDC and lead for the Supply Chain Strategies Practices at IDC Manufacturing Insights. We explore the supply chain disruptions of the past year and what gaps and potential future risks it’s highlighted for companies. We unpack supply chain resiliency, uncovering the central role of digital twins and control towers play. And we also discuss what the next normal might look like and what it takes for businesses to be better prepared for future disruptions.
Gemma [00:01:03] Before we start, I want to take a second to thank all of you listeners out there, whether you've been with us for every episode or this is your first, we're really glad you're here. If there's a topic that you'd want us to cover or maybe there's someone you'd like us to interview, please send us an email at ConnectedAndReady@Microsoft.com. We'd love to hear from you. Thanks again. And now on with the episode.
Gemma [00:01:29] Frank, Simon, thank you so much for joining us on the show. Let's start with a couple of rounds of introductions and who you are, where you work and what you're currently working on. Frank, let's start with you.
Frank [00:01:39] Thanks, Gemma. It's really great to be with you here today. So, Frank Della Rosa, I direct IDC's, SaaS and cloud software practice and priorities for us now are continuing with digital transformation and the impact that organizations are dealing with in terms of the disruption that we've experienced last year and how that's impacted their move to digitize operations.
Simon [00:02:05] Pleasure to be with you also. Simon Ellis, I basically have governance for the supply chain programs here at IDC. So as a practicing analyst, I focus on supply chain planning and overall supply chain transformation and networks. But I do have governance for all of the supply chain programs. Been with IDC for 14 years, with industry for 22 before that. So I've been screwing up supply chains now for 35 years.
Gemma [00:02:30] Well, let's stick with you then, Simon, for this first question then, because I feel like you've been working in supply chain or as you say, screwing up supply chain for 35 years. I think for a lot of people who don't work in this area, this year of all years has been a year where supply chain and how it works really has come to the fore in the mainstream media. You know, we've been hearing about whether it's toilet paper being out of stock or not getting things delivered for a really long time or whatever it may be. It's certainly been front of minds. Can you tell us a little bit about this. I mean, are these supply chain disruptions or is it demand disruptions? Is there a difference between these?
Simon [00:03:05] Well, I think it's all of the above. I found myself making the observation that when country leaders talk about the supply chain is generally not a good thing. Right? It means that something's gone terribly wrong. I do think Frank talked about disruption. You know, I do think about at least what's happened over the last year as not necessarily one big disruption, but hundreds of thousands of smaller ones. Right? We saw, you know, factory closures early in 2020, which impacted the supply and automotive industries and then some food industries. We saw demand disruptions as well. Right? Movie theaters are closed. People are not going through airports. So if you're in the candy or confectionery business, your impulse buy opportunities have reduced significantly. So I think it's both. I think it's been the supply side. It's also been the demand side. You know, supply chains got a lot of criticism. Certainly some of it justified, some of it perhaps not. I find myself actually quite proud of the way the supply chain responded because most of the supply disruptions we got past fairly quickly. It's the demand stuff that's problematic, right? You know, the fact that the movie industry has changed dramatically. Right? Movie theaters have been closed for months in many parts of the world. And so does that demand come back? You talked about toilet paper and paper products. I mean, those were largely a function of hoarding behaviors. Right? And so from a supply chain perspective, how do we start to understand demand that is unlikely to be sustainable? It simply is that people bought it up because they heard there was a shortage. So we had this kind of hoarding behavior and then we didn't have any demand for it for three months after that. So demand has been in some ways the bigger problem. I think we got past the supply stuff fairly early on.
Frank [00:04:47] I think what Simon pointed out on the demand side is critical. It's just what's been amazing to me is, is the acceleration of panic buying. And so it's been difficult in the past during normal situations for businesses to receive these demand signals in a timely manner. But when you have this kind of accelerated panic buying those demand signals just do not get transmitted quickly enough so that you can optimize manufacturing floors and sourcing departments. And so what we've seen, I think, is the failure of these kind of small scope efforts to optimize and strengthen supply networks falling short of where they need to be under unusual conditions, which probably will linger for quite some time.
Gemma [00:05:33] Yeah, so let's build on that a little bit. Frank, what do you think it is? What's the gap from an organizational perspective? The means that I guess information about demand is perhaps not being translated. Whether it's not being translated at all or it's too slow, is it about, you know, IT systems is it about collaboration with suppliers, is it about digital competencies. I mean, tell us a little bit about where there's perhaps those gaps that resulted in this. Not just the reaction and what's happened over the past year. Perhaps those gaps that are going to be triggering problems for companies as we move forward into the future as well.
Frank [00:06:05] Yeah, Gemma I'm going to borrow from Simon and say it's all of the above. You know, we live in a world now where the ability to sense and respond to change quickly is absolutely paramount to survival. There just isn't much time between disruption and response. So organizations have to have an architecture in place to be able to plan to run what-if scenarios and be prepared to make these changes. So what we're talking about here is the application of analytics and insights to understand the customers more deeply and be able to predict behavior. Reaction doesn't even come close anymore because businesses can't respond quickly enough. So it is an issue of digital maturity. What we saw during the recent disruption, organizations increasing their spending to close gaps in digital transformation, not necessarily accelerating transformation, but it exposed these vulnerabilities not just in supply chain, but across the organization operationally. So businesses need to become better at assimilating these ongoing waves of new technology and then to be able to leverage those and deploy them at scale. We live in a world now where a lot of what was hoped for 10 years ago has become a reality through technology. So being a more adaptive, innovative company means being able to create this kind of sustainable advantage at scale. And then, of course, Simon will talk more about resilience as we go forward. But, you know, for me, we are talking about data, insights, and analytics at the core.
Gemma [00:07:49] Yeah. And you've jumped straight on to my next question there, Frank, about resilience, because that, of course, is something that we've been hearing a lot about this year. And it's been a topic that's come up in many of our podcasts that we've been recording. So, Simon, tell us a little bit about resilient supply chains. How do you define resilient supply chains? What is it about? Is about visibility, is about the ability to adapt. And also tell us a little bit about, I guess, maybe differences between industries. Does that matter in terms of resilience?
Simon [00:08:16] So Frank made a couple of important points. One is, if you think about the supply chain? There are certain things that we know or should know, and then there are certain things that actually we don't know and aren't ever going to know. So in terms of the things that we know, we should know where inventory is. We should know what capacity is available to manufacture something. We should know the state to the status of our suppliers. Right? And so visibility into those kinds of things is really important because in a way that kind of defines the current set of capabilities. So as we talk about supply chain resiliency, or resilience, that visibility piece is critical. You’ve got to know what's happening. And ideally, you would know what's happening in real time or near real time. The second piece, though, is and, you know, back to the toilet paper example again, right. I mean, there's reason to assume that what you saw was hoarding behavior. You know, I understand where the inventory was. I understand what my factory capacity is and the availability of the degree to which I could make stuff. What I don't know, is I don't know what consumers are going to do next month and the month after that, and the month after that. Frank talked about responsiveness, and that's the other piece of resiliency. Right? It's not just enough to see what's happening. You have to be able to respond to it. Right? And so if I believe that my consumers were hoarding and that demand is going to be low now for the next couple of months. But what if it's not right? What if actually they continue to hoard and so I have to be able to be responsive. I have to be agile to what's happening in the marketplace. I made the point many years ago in some of my supply chain research that I felt that manufacturers were too forecasting centric. They spent too much time worrying about the forecast and not enough time about being able to respond to things that happened that you didn't expect. Right? And so I think as we talk about resiliency and I have a fairly simple formula that I use. You know resiliency is basically visibility plus agility. See what's happening and respond to it. I had clients early last year who are very good at visibility, but not so good at agility. Right? So they became kind of a spectator to an unfolding disaster, but they couldn't do anything about it. So to me, resiliency is really those two things. It's being able to see what's happening in real time, but then respond to it. Now, look, I mean, there are going to be things that happen that you can't respond to and you just sort of have to say, OK, fine, I'll do my best. But I would say, you know, 90 percent of the things that happen, if you have a resilient supply chain, you can respond to maybe the 10 percent of the things you just can't and say OK, fine. You know, I didn't see that coming. And I just have to do the best that I can.
Gemma [00:11:00] And what about different industries? Because in my mind, I'm thinking things like toilet paper, fast moving consumer goods. You can imagine that's probably, I would assume, harder to be resilient versus perhaps something that's slightly longer. But then, of course, the whole supply chain has been changed with things like travel restrictions and so on and so forth. So I wonder if you could talk a little bit about - is there differences between how you think about supply chain resiliency across different industries and specifically this year? Have you seen any of those shifts in differences?
Simon [00:11:29] So I don't think conceptually it's different, I think in practical terms, it may be. Right? I mean, you've got consumer packaged goods are for you guys on the other side of the Atlantic, the fast-moving consumer goods industry. Right? I mean, they are relatively short lead time categories. It doesn't take all that long to make a bag of dog food or a package of toilet paper. And so the notion of resiliency is compressed in many ways. But those categories also tend to be make-to-inventory in a large regard as well. So inventory acts as a buffer to some degree. Other industries, you know, heavy equipment, automotive. electronics, you know, longer lead times, more kind of make or configure to order. So, you know, resiliency is probably a little easier in that sense that, you know, when you're making to order, you can pivot, you know, a little more easily. So, yeah, I mean, it does the timelines, the durations do vary. But I don't know, at the end of the day that those dual notions of visibility and agility are necessarily different. Some industries, you know, in the CPG industry, a lot of the manufacturers still make stuff themselves in their own factories, in high tech and electronics a lot of that stuff is done through external contract manufacturers. So that adds a layer of complexity, certainly. But fundamentally, I think the concepts hold.
Gemma [00:12:53] Frank, is anything you want to add on these questions?
Frank [00:12:54] Only to say I agree with Simon completely. We've been on this path toward personalization at scale for quite some time. So Simon makes a great point that regardless of what we're talking about for product, customer needs are changing so rapidly, they are still the greatest source of disruption. And so businesses need to be able to, in order to retain these customers and continue to grow that relationship, sense and respond to the changes in customer demand and make adjustments accordingly. In the past, that was sort of aspirational. Today that can be operationalized.
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Gemma [00:14:04] Let's move on to talking a little bit about digital twins, because I know this is something that you both think a lot about and there's a lot of buzz around this, I guess the concept or the idea of digital twins and supply chain control tower assignment, is it worth the hype, these concepts? Tell us a little bit about it.
Simon [00:14:21] So Frank made an interesting point about aspirational versus reality. Right? You know, so many of the things, at least in the supply chain that we've talked about for years were kind of aspirational. Wouldn't it be great if, wouldn't it be awesome if? You know, I could do so much better if I knew that at that point, in that way. And so I think what technology has allowed us to do is to take a lot of those things that were aspirational and actually make them a reality. Right? And so one of those things is the supply chain is an enormously complex, functional area. It connects to suppliers and it builds on sales and marketing plans. It connects to customers and consumers. And we've struggled over the years to coordinate all of those things. Right? To connect all of those things in a in a real time kind of productive way.
Simon [00:15:14] I tend to think of it more through this notion of supply chain orchestration. How do I step back? How do I look at the breadth of the supply chain and how do I make sure that all those pieces are working in concert as efficiently and as effectively as they can? And how do I kind of model what's happening or what's going to happen? And so the how do I model part is kind of the digital twin, right? We've seen digital trends in complex supply chains like automotive, for example, you know, where they've used visualization technologies to imagine what a virtual jet engine would look like versus the real thing, and it helps them in the design process. We've kind of expanded that concept to the supply chain and said, OK, if this happens, what's the model of the supply chain and what's the likely eventuality? And I connect that then back to the control tower through this notion of supply chain orchestration. So for me, I think about supply chain orchestration as kind of the overarching layer that looks at the supply chain that occurs in the real world, as well as the digital analog or the digital twin. So, you know, is it hype? You look, I mean, everything's hype on some level, right? But I think the things that we've talked about in terms of supply chain orchestration make an awful lot of sense in a world where we have more data and more information and we have shorter decision cycles. Right? We have to make decisions and take actions more quickly, I think, in that kind of world. You know, Frank talked about customer and consumer expectations in a world where, you know, I start to personalize, and it isn't just the products that I'm personalizing. Maybe it's how people buy the product, or maybe it's how they use the product. That notion of supply chain orchestration, that notion of control tower, I think, in many ways becomes a necessity if we're going to manage the supply chain well.
Gemma [00:17:02] And just for anyone who doesn't actually know what a digital twin is or has come across this idea of control tower, despite you not liking the term, Simon. So let's go into that a little bit. What exactly is it and what does it do? You're talking about literally creating a digital twin, so a digital copy of your supply chain. So is it just there for checking different scenarios or is it got a little bit more to it, am I oversimplifying? Give us a little bit of examples of how they're used?
Simon [00:17:29] No, no. I mean, I think it is essentially a virtual digital analog of the actual supply chain. Right? I know my suppliers. I know their suppliers’ suppliers. I know where inventory is. I know shipping lanes and shipping durations. I know factories, factories, schedules. I put that all into a digital model and I can start to look and see how the supply chain operates. It can be used for scenario planning. Certainly, you know what if this happens, what's the likely result? We see a lot of those kinds of tools using artificial intelligence and machine learning capabilities. The supplier’s factory just got flooded and we're not going to have any aerosol cans for two weeks. What are my alternatives? What's my recovery from that? Right? How do I do that quickly?
Gemma [00:18:16] So it sort of plays out, I guess, more quickly than how it would in real life.
Simon [00:18:21] Yes.
Gemma [00:18:22] OK.
Simon [00:18:23] Yes. Rather than just sort of, you know, covering your eyes and pinning the tail on the donkey, you know, I'm going to do that. You know, I can at least have some sense as to what the ramifications of it are and ultimately make better decisions.
Gemma [00:18:33] And, Frank, let's talk a little bit about how you can actually realize this dream, because, as you say, you were talking about what would be great to have. Well, this does sound like a great idea. How do we get there? What technologies or systems do companies need to have in place to really be able to get the potential of this control tower and this digital twin and what does it really, I guess, do for organizations supply chain resiliency once you get it operational? I'd love to hear some examples.
Frank [00:19:01] Sure. I think for me, one of the most exciting areas, is this convergence of extended reality or mixed reality, artificial intelligence, AI enabled automation, and of course, cloud as that hyperscale platform to be able to really process these millions of transactions that are occurring in real time virtually every minute. We're coming off a period where companies had different systems of record, different enterprise resource planning systems, data just wasn't rationalized and it existed in silos across the business. So what we're seeing all the major suppliers do now is coming together on a single cloud based platform to have the ability to better execute across these global resources, you know, businesses have outgrown legacy systems. It just can't keep up with the changes that are occurring today.
Frank [00:20:04] So at the core of this, Gemma, is really looking at how platforms enable this common data service so that information can be fed into the platform in real time to be able to process all of this signal and information, to be able to then apply that as insight and distribute that to workers. And what we saw through disruption in the past year, this is a distributed enterprise now. So which means these resources have to be deployed where the work is being done and the work is now being done outside that central environment. It's being done at the edge. So we're seeing systems now coming together in these well connected cloud architectures, which are being designed for agility, which means that they're being designed to accommodate changes that are occurring. The technology is no longer the gating factor. The gating factor is mindset, culture, and behavior. And so it's highly disruptive to business models, but organizations have to have the fortitude and the courage to be able to accept that if they don't disrupt their own business model, it'll be disrupted for them. So it's not just applying these technologies or installing these technologies. It's about understanding how to optimize process without the constraints that legacy technologies used to impose. And it is about process and experience first. So I like to say this has to be led with a process and people approach. Technology is the enabler.
Gemma [00:21:49] So, Simon with the digital twin and the control tower and this idea I guess of disrupting your own organization and which we touched on as well, what does it mean for a company to not have these modeling or orchestrating layers? You know, is this - what does that look like for a company to simply not bother or simply not have this capability?
Simon [00:22:13] So there's a continuum of competence, right? I mean, in terms of the supply chain. Right? And we've historically, I think in the supply chain, done a very good job of optimizing individual pillars. Right? We're really good at transportation. We've, you know, we've done everything we need to do to optimize transportation or in inventory, warehouse inventory or manufacturing capacity. You know, the flow, the factories running, it's, you know, 99.5 operational efficiency. Right? So we've done those pieces well. What I think we haven't done quite so well is to connect all of those things, right? To think about if I make choices in my logistics operation, what's the effect on the factory? What's the effect on the supplier? What's the effect on the supplier's supplier? If I optimize my purchase price of something by constraining capacities or constraining order quantities, what does that mean for the factory? So not having an orchestration layer control tower, digital twin, the business doesn't fail tomorrow, but I think companies who do it, it just ends up being a little bit better than, they end up I mean, I get asked all the time about what do I think drives the, you know, the better supply chains of the future. And I always answer it's the supply chains that use data better, but it's using data across the business. Right? And so that's where the digital twin comes in. Given the data I have available, you know, what's the best decision for me to make that point in time, given the data available in logistics and transportation and warehousing and factory. You know, how do I optimize the whole? And I think that's the point for me around using a digital twin, using a control tower slash orchestration layer, it allows me to be just a little bit better at those things, which, you know, can make the difference between being successful and not successful. Like I said, I'm not suggesting that companies that don't do it are going out of business tomorrow, but I think they will gradually underperform the companies that do adopt these approaches.
Gemma [00:24:08] What do you sort of advise? Companies are going, OK, we'll, go away and we'll sort out our data and I'm sure we'll be able to install one of these things and they're not looking at people. How do you even begin to think about shifting mindset when perhaps you don't already have these? You know, you use the word disruptive, in a good way, mindset in a company already existing?
Frank [00:24:28] Yeah, great question. It relates to a lot of the traditional change management issues that have stymied some businesses from being better performing entities. What we're seeing is that we're seeing the suppliers, especially the major platform suppliers, instantiate some of that change into software, right? So algorithms, baked in processes, so that it takes some of that guesswork out, removes or relieves at least some of the burden. But it starts at the top of the organization. Executives have to have the will to change and not just in words, but in actions. It needs to be visibly supported throughout the organization, in the actions and activities that executives take and where they're willing to invest resources. So, so much of this is based on better communication with supply chains. It's not only about looking at your organization inside its four walls, but it's about understanding that you have to share this knowledge, share this experience with your suppliers. So you have to have this level of transparency outside the organization because most of the value now is created outside the business through its ecosystem and supply chains. So it's this cultural openness to say, well, we know the only way we're going to succeed is if we are forthcoming with information throughout our supply chain. And we have as a company, we recognize that we're now going to move to a process and fact-based model. No longer making decisions on gut, but making them on data. And so I think we're seeing activities on both sides of this equation. Businesses are adapting. And in some cases, when I talk to leaders, they'll say, well, we really didn't see a change in the organization until we saw a change in leadership. Sometimes that's just the way it has to be. But we're also seeing suppliers make the effort to use software and automation to make that a reality for many businesses.
Gemma [00:26:39] So, Frank, you touched a little bit there on openness, transparency, making sure there is information sharing with the suppliers and making sure, I guess, the company approach is about being open and then building that trust. But there's another party here that we haven't touched on yet, which is, of course, the customer. So where or how does customer confidence fit into all this? You know, if your business experiences major supply chain disruptions, how do you improve that customer relationship after the fact? And, you know, is there anything you can do to minimize potential negative impact moving forward?
Frank [00:27:10] You raise an interesting point in that the lines between end customers and partners is starting to blur. So while there's a much greater focus on customer success now than in the past, really, it's about engaging the customer in acts of co-creation and acts of real transparency to be able to say, look, we are struggling through this period, but we're going to keep you informed at every step of the way. We're going to let you know what we're doing and what we're working on. So having that type of open, honest dialog with customers is really absolutely critical during periods of huge disruption. You know, we see customer loyalty now being impacted by logistics more than ever, on time delivery - so critical. So companies just need to be very transparent. And it's as simple as keeping people informed on where their order is in the process. And when people do call to get information, having someone there who can genuinely portray confidence and address the customer in a way that the customer leaves feeling satisfied, even though they may be waiting an extra week to get their product. Simon, how do you see that?
Simon [00:28:28] You know, I spent some years of my career working in customer service. Right? And the two cardinal rules for customer service, one is your customer shouldn't be the one to tell you there was a problem. You should know the problem happened and tell them proactively. The other one is, you know, it's no longer acceptable to say, I didn't know, right in the supply chain, you have to know what's happening and kind of be proactive. I go back, I think, in some ways to the point from earlier around data. Right? I don't know who originally said it, but, you know, in God we trust, all others bring data. So, you know, it's got to be data driven, right? If I'm the supply chain, you know, be data driven. And if the data is saying that my supply chain is outdated and I need to be doing things differently, then, you know, build that into the work plan, build that into the evolution of the supply chain. If I'm in a business that, you know, is clearly dying, I forget. I forget who said this as well. But, you know, the Stone Age didn't end because humans ran out of stones. The Stone Age ended because something better came along. Right? And I think we're in that sort of something better place for many businesses and for many supply chains. And so I think you need to be open and you need to be data informed and data driven so that you at least give yourself a better chance to move in the correct direction. Frank talked about personalization. You know, when I worked in industry before I joined IDC and I worked for a very large consumer goods company, and we used to talk about mass personalization and then laugh about it because, of course, mass personalization is an oxymoron. Right? But the question was profound because, you know, how do you go from a supply chain that has historically been designed to provide to a mass supply chain? Right? Full pallets on full trucks from one big building to another big building. And you're transitioning to a model where it's individual items on UPS, FedEx, DHL, you know, pick your carrier of choice, to somebody's house. And so that supply chain transition, it's been happening for a while. But in some ways, you know what happened last year and what's continuing to happen to the supply chain, I think is accelerating that, right? We're seeing many more e-commerce grow. I mean, e-commerce was growing already, right? I mean, we're seeing physical retail struggling in many sectors.
Simon [00:30:51] You know, Covid has simply accelerated that. It's accelerated a number of these trends. And so from a supply chain perspective, I can't live in a full pallet, full truckload, big building to big building world. I've got to start thinking about what it means for my business and my categories to, you know, I'm not suggesting that as a manufacturer, I bypass retail, but at least I'm looking at drop ships potentially, or I'm looking at configuring my products for consumption at home rather than consumption elsewhere. So but broadly, I think Frank's exactly right.
Frank [00:31:23] Just a quick comment. So a basic experience, right? I use a touchless system to order food and I go pick up the food and I get there and I stand in front of the window for 20 minutes because no one comes to the window to address me. Right? So I go back to behavior. And if you think about just the behavioral aspect of this, it's probably one of the biggest barriers to change and something that organizations need to address. When we ask customers, we ask end customers why they move to the cloud. In most cases, they had to address operational challenges. Something broke down wasn't because they had an aspiration to be a better enterprise, it was because something broke. And oh, by the way, what can we do differently? You know, the approach should be how do we reinvent ourselves and address the operational challenges? So that shift in thinking, I think, is very important, Gemma.
Simon [00:32:23] And sometimes you just have to have a bit of dumb luck, right? I mean, I, I mean, I always think about Netflix, right? I mean, their business model was shipping DVDs to your mailbox. And I always used to think to myself, well, you know, how is that better than going to Blockbuster? But what they were also doing, they were also dabbling with streaming. Right? And what turned out and I don't know that they knew this at the time, but that DVDs to mailboxes was simply an intermediary model to move to streaming and streaming has revolutionized. I mean, I have two teenage boys and, you know, they're like, Dad what is that funny silver disk that you put it? You know, they don't use physical media at all. And so in a sense, from a supply chain perspective, I talk about this with my clients all the time. You need to put yourself in a position where you could take advantage of dumb luck, right. Dumb luck is just dumb luck. It's also it's also be prepared to be lucky. Right? Be prepared to take advantage of these things and explore different kinds of scenarios. You don't know for sure which one's going to be the transformative part for your business. But if you're at least looking at all of them, you're in a better position to take advantage of dumb luck.
Gemma [00:33:30] Well, I want to build a little bit on that and maybe get you guys to explain a little bit deeper, because it makes sense what you're talking about in the sense of Netflix, you know, looking back at Blockbuster's effect and all that sort of thing. But it's quite difficult to think about how it is that you actually think to the future and try and predict what's going on and manufacture dumb luck, as you say, or at least get into the position for it, I’m thinking about, you know, there's the concept of there's opportunities that you can take advantage of moving forward, but there's also about avoidance of risk and trying to work out perhaps what's going to come ahead in the future. And of course, that's the sort of central point of supply chain planning. Right? It's about being able to try and be resilient to these shifts. So what does it actually mean to evaluate these potential risks or opportunities and then take advantage of that in practice?
Simon [00:34:18] Well, I mean, it's an imperfect science, of course, right? I mean, if you go back 20 years, you look at the S&P 500, half the companies are gone. If we fast forward 20 years from now, you know will half the companies be gone again? I mean, I don't know the answer to that, but it's not an unreasonable assumption based on history. So, you know, looking at risk and taking advantage of opportunities is not a perfect science. There's a book that was written many years ago called The Innovator's Dilemma. And the central premise of the book basically was if you're an established player and an established market and that market is a cash cow for you, it's very difficult to put yourself in a position to disrupt yourself. One, because where you are is generating enormous returns and revenues and profits, but also because the future is uncertain, right? I mean, you know, you don't know for sure that's you know, that's the right path versus another. I just and there is no answer to that. None of us know for sure what the future will hold. I just think it's incumbent on the supply chains. Digital transformation, you know, for some companies is about efficiency and effectiveness today. For many others, it's about the avoidance of future disruption, it's putting my supply chain in a position where I can be flexible and agile so that if something changes that I don't expect, I can adapt to that quickly. Right? You know, Frank talked about technology not being the gate anymore. The process of people is, are the gates. You know, I do agree with that. And that, I think, is where the supply chain has to be. It's like, OK, I've got these technologies, you know, how does that now allow me to if something changes that it's not a holy cow, it's going to take me two years to adapt. It's OK, awesome, I could do that in a month or two months. It gets back to the forecast versus the responsiveness, right? Hard to forecast where the market's going to go, but if I put myself in a position where my supply chain’s responsive and something happens that I didn't expect, I could adapt quickly and I can move quickly.
Gemma [00:36:17] So, Frank, we spoke a little bit about quick response and being resilient, specifically with the kind of technologies and approaches to supply chain that we've already discussed, such as digital twin and control towers. But what other technologies, I'm thinking automation or perhaps low codes can kind of help with this push to response quick and be resilient? And tell us a little bit about what this toolkit of approaches or different technologies could look like.
Frank [00:36:44] You bring up automation, Gemma and I talked earlier about the fact that people are sometimes very reluctant to change and people can be the bottleneck in many cases. Automation allows businesses to take a look at where there are bottlenecks that are caused by humans that could potentially be automated and have humans deployed more toward kind of the design activities because they are aware of the process. They're aware of their role and their job and where that job creates value. So you elevate the role of the person. I think to many times we think about automation replacing people, and it's not about replacing, it's about augmenting. So by looking at where across the processes automation can help you streamline and accelerate and become more resilient because you avoid breakdowns as a result of these human bottlenecks, it's absolutely critical. I think there's a tendency to look at automation as a cure all, but automation has to be looked at in the context of how it augments human performance. And so I think from a manufacturing perspective, only four out of five factories are not fully automated. So there's huge opportunity to improve and enhance performance not just through automation, but through increased productivity with the workers that are now moving into different roles. And so what we're seeing as far as tools are being added, is the suppliers, the companies that design and build software are doing an incredible job at accelerating new features that are, frankly, only available in cloud deployed versions. So businesses have to move to cloud to take advantage of this. But every organization has unique requirements and typically addressing those unique requirements basically was resigned to the developer. The developer had to take the business requirements and then translate them into an architecture that would support the business need, time consuming and in many cases much was lost in the translation. With these low code and no code tools that are embedded into platforms, it really enables the business analyst and the nonprofessional developer to deploy solutions to their own issues with taking more of a business process and business need first approach to that design. So we typically talk about this acceleration of services, right? This developer is trying to meet the need, the increasing speed of demand coming from the business units. Well now, you're basically opening that universe to a greater variety of people that can contribute there. So one of the things that we're seeing is through low code and no code, an acceleration of innovation pipelines, or at least the potential for innovation, never want to lose the fact that it's driven by people and ideas. But at least there is a potential and expanded potential of innovation. And again, we're seeing the suppliers embed these tools into the platforms that businesses are using so that it becomes seamless. And I think that's going to create major opportunities for process improvement that will lead to performance improvement.
Gemma [00:40:13] I want to ask you both one final question. So much we've touched on here, but I want to end and a little future facing note. Even though we've just made it clear that it's really hard to predict the future and all these sorts of things, but we keep hearing this the term, the new normal. But I would love to hear from you both what you think the next normal might look like and perhaps where companies might begin to get there? Frank, let's start with you.
Frank [00:40:33] Such an exciting area. I mean, it's also an area you talked about mitigating operating risk, right? It's the second most attacked industry by cyber criminals - logistics. So mitigating operating risk is absolutely critical. So you ask what the next normal is. And I think most of the time, Gemma when we talk about it, we don't necessarily define what that next normal is. We talk about architecting for a next normal. We talked about putting an architecture in place that allows you to adapt for whatever the next normal might bring. And I think that's more important. We go back to digital twins running these what-if scenarios, because they're very contextualized based on industry, based on region. But, you know, there are so many variables. I do think what we can look forward to is an increase in the velocity of change, whether that's manmade change, whether it's political change or whether it's environmental change. So the next normal is going to be an increase in disruptions.
Simon [00:41:42] Yeah. And I think that's why at IDC we use the term the next normal, right, versus the new normal. You know, maybe it's a distinction without a difference. But to me, next implies that then there's a next after that and the next after that, because, you know, we live in a world of change. Right? We've seen the last year. We live in a disruptive world. Our lives have been disrupted in many different ways. And, you know, will we get back to the world before 2020? You know, eventually in some ways. But it won't be the same. It'll be different. I mean, my 93-year-old neighbor is now an enthusiastic online orderer. And I don't think she placed an order online a single time before that. Right? She she's like, this is awesome. I'm never, never go to the store again, which, you know, I don't think that's a great reaction either. But so I think what the world looks like in the second half of '21, what the world looks like in the first half of '22 you know, we're going to see these massive changes. We're going to see these shifts. I mean, I had somebody asked me the other day about going back to in-person conferences. Right? You know, IDC does a lot of conferences. Microsoft does as well. I mean, all these big companies do lots of conferences. Are we going to go back to in-person conferences? The answer, to a degree is yes. But maybe some of the stuff we discovered over the last year that worked really well virtually becomes part of the mix as well. Right? And so I think to me, if there's a common theme through this discussion, Gemma that we've had with you for the last forty five minutes, it's this idea of be prepared for anything, be open to anything. Understand the world is inherently more volatile, whether it be demand, whether it be supply, whether it be business models, and it is incumbent on the supply chain to be as flexible as possible so that whatever the next business model is, I got a fighting chance to adapt and adopt it. I think to me that's the key underpinning of this idea of the next normal is and the next normal after that.
Gemma [00:43:39] Amazing. Frank, Simon, thank you so much for coming on the show and sharing so many different insights, both at a high level, but also get into the nitty gritty of some of these different technologies and ideas around resilient supply chain. So, yeah, thank you for sharing your candid thoughts and coming and joining us on the podcast.
Frank [00:43:53] My pleasure.
Simon [00:43:55] Thank you.
Gemma [00:43:56] That's it for this week. Thank you so much for tuning in. You can find out more about Frank and Simon's work and indeed some of the broader themes we discussed today in the show notes. If you enjoyed the episode, please do take a few moments to rate and review the podcast. It really helps other people discover the show. And don't forget to hit subscribe and tune in next time to continue our conversation about innovation, resilience, and our capacity to succeed.
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