Supply Change

Here are a few highlights from the episode. If higher education is a supply chain, what is the end consumer product delivered? In this altruistic field of higher ed, we often don't like to talk about students in marketing terms because students aren’t simply products or consumers. But on the other hand, there's no doubt that this consumer mentality has seeped into higher education especially given the huge exorbitant cost of tuition. I can't blame students and families for thinking of higher ed this way. So certainly to answer your original question, there's a lot of ways to think about supply chains in higher ed. How vital is transparency in admissions to ensure we have an equitable supply chain of higher education?If you're looking to engage in the college admissions process, you first need to know it's even there, and that it's something that could help you and help your future. The thing is, college admissions may seem transparent to some families and students and opaque to others. But a lot of people who could benefit greatly by attending our colleges and universities either don't know how to engage with the process, or are more likely turned away by the prohibitive costs of attendance. It's not like a lot of these families haven’t heard of college, it's more like a huge number of American households are working paycheck to paycheck and can’t even fathom taking on tens or even hundreds of thousands of dollars in debt or loans. It just seems like an impossible thing to justify. From figuring out how to fill out FAFSAs, getting bogus information from “net price calculators” on college websites, dealing with short-staffed high school counseling departments, to navigating standardized testing, there are myriad roadblocks for families to try to overcome. Who does the supply chain of higher education leave out?Educational attainment is associated with economic prosperity, earnings, quality of life and job satisfaction with ever-increasing levels of degree attainment, and on the whole, people live longer and earn more. The problem is that higher ed has been too slow to broaden its reach to those who could really benefit from participating in it like underrepresented minority populations: Native Americans, Latino, Chicano, or Latinx, Black or African Americans, and then Asian Americans. But once your family or community begins to reap the benefits of exposure to higher ed, those benefits can really be enduring, which is why many institutions are rightfully prioritizing and emphasizing bringing more first-generation students into the fold. That's an expensive thing. This is important because the US Census estimates that white Americans are actually going to be a minority in the United States by the year 2050. You know, higher ed has been historically very efficient at educating white students from middle and upper-class backgrounds. But we have to get better and adjust equitability to change these demographics. Otherwise, who's going to fill these jobs that the economy will need in the future? So higher ed is becoming more and more difficult for some families to access in large part because it's becoming more and more expensive. Back in the day, the UC system was free for all Californians and a lot of public universities used to be this way. But state appropriations for higher ed dwindle more and more every year. Some of this is because of the projected cost of Medicaid, some because of prisons and other public services. And when state budgets get tight, as increasingly they do, governors tell chancellors to just raise their tuition. And that's what's been playing out for decades. We also have public institutions that are spending sometimes hundreds of millions of taxpayer and tuition dollars to build state of the art facilities, while also paying million-dollar salaries to football coaches and presidents at public universities just to compete with other elite institutions. So you need more administrators and more staff for these almost university mini-cities. And all of this compounds to raise tuition more and more and the cost of going to college. I keep coming back to that family who may have talented college-age students who've never been a part of this system before, but believe correctly that this is perhaps a ticket to a career and prosperity. But they may be seeing this rising price tag, and they decide they’re unable to afford it. So higher ed has always been efficient, but only for certain segments of our population.Download Supply Change on your favorite podcast player to stay up to date on every new episode.

How unstable is global trade right now? Is it the most tumultuous it's ever been? We’ve experienced a very long cycle of growth since the global financial crisis. In fact, if you look at the statistics, it's one of the longest periods of continuous expansion in history. Now, all of that isn’t going to last forever and it’s starting to unwind. we saw a peak in growth and now we're starting to see a synchronized decline in activity. So it's easy to assume that a lot of the Asian countries will feel the squeeze a little bit more than they did in the past. And whenever things are going down, all of the negative aspects of the economy, of fragilities, all of the political vulnerabilities tend to show as well. This expression of volatility and vulnerability is a bit more pronounced in Asia than in other parts of the world, because the region has become a lot more exposed to global trading supply chains.Did this all start with Trump, or is there something larger afoot? Is this a pattern that you’ve seen over time?Trump epitomizes this trend very clearly, but it's something that started before him. So even under the Obama administration, we did see an increase in the number of protectionist measures that were put in place. The Obama administration was maybe not so vocal about advertising these measures, but the US Department of Commerce was definitely very active in China at the time. It's just that instead of tariffs, they tended to prefer other tools. Tariffs are a little bit convenient because the President can utilize them or deploy them right away. But they're a little bit out of the 70s or 80s trade book. But we also see similar things taking place in other parts of the region, like the disputes between Japan and Korea, Indonesia and the Philippines, India and Kashmir, and even Brexit in Europe. And it reflects a global trend of higher protectionism and higher uncertainty following a very long period of unprecedented expansion.Do you have winners and losers in that space in a global trade environment like we're in today?I think there are no winners in any trade war. But there are companies that are better positioned to react than others. The true losers in this entire debacle are the intermediaries. So, typically, any company that is involved in the distribution of either components upstream or sort of electronic products downstream, between the manufacturer and the retailer, their profit margins tend to be a little bit narrower than the manufacturers themselves. So if you are a distributor that is focusing on the Chinese market and a lot of your demand shifts to Vietnam, you are going to experience significant pressure on an already very tight profit margin. Anyone that is exposed to disruption in terms of distribution and supply would have to be very worried at this juncture.Do the protests in Hong Kong pose any unique finance problems for businesses operating in the region?So it does pose a set of problems. We were amongst the first to highlight the possibility that Hong Kong might enter a technical recession in Q3, and that was a result of predominantly some downside pressure on the external front. Meaning that exports contracted quite steeply in the first half of the year. Hong Kong is not a big manufacturing hub, but it's a big sort of offshore center and re-exporting center for a lot of companies that are based out of China. We did see a very steep downturn in activity as a result of the global trade war. And that downturn activity did not factor in the impact of protests because they started in about July, that's where the situation really deteriorated. So for Hong Kong, we were witnessing a decline in activity and then going forward. Protests impacting the main commercial arteries of the city, were for sure going to have negative spillovers of domestic demand, which is another big part of the GDP in Hong Kong. We currently expect GDP to contract in the third quarter following a contraction in sequential terms in the second quarter which, of course, is the definition of a technical recession and going forward into the fourth quarter and into 2020.If you're a CEO or a CFO right now what are the things they should be thinking about to “disruption-proof,” their supply chain to withstand some of the trade pressure that's underway today?Surprisingly, a lot of CEOs in Asia do not actively manage risk. When we ask them whether they purchase any sort of trade credit insurance or other type of credit risk tools, their overwhelming response is no. So more than 50% of respondents throughout the Asian supply chain do not currently have any sort of tool in place to protect themselves against the risk of non-payment. Asia is a very special market in the sense that relationships have been traditionally very important but it’s just not enough going forward to protect themselves. Moving away from that mindset where you're assuming a lot of things based on the nature of the transaction and towards a more professionally focused view of the supply chain is vital for companies to pursue. And moving towards a more market-based approach, where you have tools at your disposal to manage your cash flow risks, will definitely help companies in this coming period of higher uncertainty, because in the worst-case scenario, they are covered. And they will be able to have access to working capital while they figure out what to do with their supply chain. So the most important thing is to shift gears on traditional views of risk in Asia. The old way of thinking about things is no longer applicable to a modern market integrated into the global supply chain. They will have to be more professional in managing risks in the region. I think that's what's going to help CEOs navigate risks the best.Download Supply Change on your favorite podcast player to stay up to date on every new episode.

We started out by discussing Barry’s illustrious career and what design thinking really means. So why Silicon Valley? Why did design thinking evolve in Silicon Valley, and how did it start? In 1979 there were only nine design firms in the Bay Area. And today we have the largest concentration of designers in the world. All the major consultancies are based here. And world-famous corporate design groups, most famously Apple. What I discovered is that there was some design activity before Apple in the 70s. And I researched further and found some more activity in the 60s. And I kept digging until I got back to August 4, 1951, which is the date in which Hewlett Packard hired the first professionally trained designer to work in what is now Silicon Valley. So Apple really came at exactly the midpoint and was a fulcrum that pivoted everything. How did Apple’s view of design as much more than just sleek products influence others in Silicon Valley?Steve Jobs said "design is not the way it looks, design is the way it works." He wanted to move us away from thinking that you can take technology and put it in an attractive box and call it design. Instead he moved us toward a more comprehensive idea that design is not something separate from the actual product. Design thinking has almost nothing to do with the appearance of products and everything to do with a strategy for creating innovative experiences. It's not the aesthetic skin, or the radius, or the fonts or the color. It's the entire experience of using a product, and it's delivering that experience. So in Apple, and subsequent generations of designers in Silicon Valley, they really began to work around that idea, and we saw a real shift in thinking. I learned from IDEO that design thinking can help develop business processes, not just products. Was IDEO first at thinking of design as more than just products? IDEO was a real pioneer in exploring the margins, exploring the perimeter around what we can call design. So at one point IDEO introduced the concept of Human Centered Design, and began to guarantee that everything that went out the door would not just look good and work well. But it would have gone through a rigorous Human Factors Analysis by very highly trained Human Factors professionals. And this really opens the door to a much wider range of ideas that feed into the design process. Do you work with a lot of companies to do organizational design work as opposed to service, or product, or experience design work?That is an increasingly important part of the practice at IDEO. It can, in some respects, be traced to a recurrent experience that many of our clients had, which is that we'd present them with something and then something internal to the culture would kill an otherwise good idea. Or cause it to go through so many reductions that by the end of it, it was not an exciting product any longer. So you've probably heard many of the standard cliches about how organizations can develop antibodies to kill off exciting new ideas. And why? Because of threats to people's positions, because of uncertainties as to where this will lead, a fear of risk, which I think is a very dangerous thing for individuals as well as organizations. So we began to look not just at the product that we were being asked to work on, or the solution we were asked to find, but also at finding a hospitable home within the client organization for that product. How do organizations design for success? I certainly don't have the answer to that beyond saying that it's imperative that you do so and that you create an effective means or modality for doing exactly that.We’re working on another project for the Los Angeles County voting district, the largest and one of probably the most diverse voting districts in the United States. They're using a voting machine that was developed in the 1960s. So they initially asked us to redesign the voting machine. And we preferred again to take it to the next largest context. So really, we’re looking at how to design for democracy. And the process included thinking not just of the person who goes to a neighborhood polling station on election day to vote, but also the guys who drive the trucks that deliver the machine to those 4,200 polling stations, the retired school teachers who assemble the machines, the volunteers working in the polling stations, and the attendant to the blind person who is voting. So gathering and solving for the greatest diversity of stakeholders is no guarantee of success, but leaving them out is a guarantee of failure.Subscribe to Supply Change on your favorite podcast player to hear more great conversations. 

Around the U.S., in more and more states, entrepreneuring farmers, scientists, and retailers are building supply chains to cash in on an untapped and lucrative market. It’s a once-in-a-lifetime opportunity to build an entirely new industry. There are just a few problems. It’s cash only, there’s no infrastructure, and it’s federally illegal. We’re talking, of course, of the legal marijuana trade. Ron Volpe, Chief Supply Chain Evangelist and Global Vice President Apps Business Development at Tradeshift, met with Steve Albarran, co-founder and CEO of Confident Cannabis at the National Cannabis Industry Association trade show in San Jose to talk about the complicated case of the cannabis supply chain. Here’s what he had to say. Ron Volpe: What challenges are unique to the cannabis industry? Steve Albarran: A lot of the rules are being written in real-time. The foundation for how this industry operates is new. Everything from processes and the default ways of doing business is new. And there's very little infrastructure right now. And it’s born in an era of technology. So we get to use new technology to build it from the ground up, unlike almost every other tangible product industry. It's really exciting for companies to think strategically about the best way to do things. It's also a highly diverse industry. Since Interstate marijuana commerce in the US is illegal, every state has its own regulations and structure. That represents both an opportunity and a challenge for companies like Confident Cannabis. Ron Volpe: What about the banking problem? How do you manage a business that can’t open a bank account? Steve Albarran: This is one of the toughest problems that the industry faces. Literally every stakeholder in the country wants to transition to banks. But because of legacy laws, it isn’t changing any time soon. So the way businesses are dealing without credit and banks is by using credit unions. Maybe 70 percent of operators in legal states use a credit union within that state. The problem starts when consumers at retail locations aren't able to use credit cards. This is because the credit card payment processors move money across state lines, which isn’t allowed for something federally illegal. Sometimes they're able to use debit cards. But most of the time they're obliged to pay for their products with cash. And that means that cash is accumulating at a retail store. This creates all sorts of difficulties for the retailer. It makes it more challenging to pay employees and vendors, it means armored cars are doing pickups at least once a week, and it makes it more challenging to get cash out of the store into a secure account. There’s also a lot of penalties to holding cash. Credit unions and banks don't like huge cash deposits because it creates a huge compliance burden for them. Similarly, the IRS charges a 10 percent penalty if you pay taxes in cash. So nobody wants cash. But there's really no other way to get paid at the moment. Ron Volpe: Tell us about the network of labs and how you manage quality control of marijuana? Steve Albarran: Every batch of cannabis, whether it's flower, concentrated, or edible, is highly variable from one batch to the other and highly variable from one vendor to the other. We need to know the potency in the purity of every batch. Labs have to test for compliance, and that creates a lot of data. So we needed to have a data pipeline from these labs. All of the vendors in the supply chain have Confident Cannabis accounts to test their inventory before they sell it. hat allows us to show the buyers in the market 100 percent of the inventory in any state in real-time, with all the live data they would need to assess the quality and therefore the price. Ron Volpe: What will the industry look like in three years? Steve Albarran: When the current United States administration changes, we’ll see a lot of change. It's unlikely that we'll see federal legalization in the current administration. But once federal legalization happens in the US, it'll be a game-changer. That's when all of the big companies will be able to come into the industry. So the game will instantly level up. It will be harder, stronger, tougher competition for the incumbents. But there will also be more opportunities for the incumbents because they’ll have a much larger market. Everybody in the industry today is moving the chess pieces around so that when it is legalized federally, they’ll be well-positioned. Ron Volpe: How does supply chain technology differ in the cannabis industry? Steve Albarran: We really pay attention to flexibility as a feature. This industry changes very quickly. What you think might be something that works for California today might not work six months from now. And what works for California today doesn't work for Oregon. So everything from database architecture, to product roadmap, to user interface must be flexible. Secondly, our industry is populated by SMEs. The way these companies make purchasing decisions is very different from other businesses. There's no real procurement process. So the user interface has to look and feel a lot more like a consumer app, the advertising has to look and feel a lot more like consumer advertising. A lot of the large stuffy enterprise businesses have had a hard time coming into this industry because the great people in this industry really don't want that kind of stodgy language. Steve Albarran is the co-founder and CEO of Confident Cannabis. This has been another Supply Change episode. Join us next time when we talk with Barry Katz, author, professor, and the first IDEO fellow. Download Supply Change and listen in on your favorite podcast player.

The competitive imperative of change In a fast-changing world, how are jobs changing? Who will be impacted by new technology? And how fast will it all change? In this episode, Ron and Roy explore the impact technologies like artificial intelligence, automation, and platforms will have on the people within supply chains today. The rate of change is getting faster and faster. When Roy was at Raytheon in the 80s they implemented electronic data interchange, all of a sudden that technology eliminated lots of transactional activity, which freed up work for many employees. But unfortunately, there wasn’t any additional work to allow those people to find new positions. Roy says, “it opened up my eyes that whenever you put in a new technology that is going to disrupt the process flow and eliminate transactional work, you also have to have in place a training program to be able to give people the opportunity to expand their activities and skill-sets for the new workload going forward.” What he learned is the concept of a transitional “soft landing.” Giving affected employees advance notice, explaining how the new technology will do a significant portion of the job they're doing today, and help them see the vision of the new organization—and what the new skills they need are. **The responsibility of re-training—does it belong with the company or the individual? ** Ron argues that both individuals and the company have a role in preparing for change. Individuals need to understand that the roles that are going to be available to them in the future are going to require a completely different skill set than they have. And in the case of the individual’s responsibility, he says that the “individual has to take the impetus to increasingly train and learn new skill-sets.” Ron explains that companies need to realize that they have to continually train their workers to be able to get to that new level. That they need to realize that it’s easier “to keep a worker and train them than to find a new worker.” And no matter what, it’s in your best interest to take advantage of all the training available to you so that when new responsibilities show up, you're there with the right skills. There are companies out there now taking these concepts to a new level. It starts with utilizing this new vast stream of data provided by new technologies. As you streamline the supply chain and eliminate stockpiles of wasted material, you can start to drive more value. Some companies are incorporating reducing their carbon footprint into their RFP in terms of driving innovative new ideas in their manufacturing process, their delivery process, their bills of material, and their indirect costs so that there's less carbon and more efficiencies. The problems and the opportunities are immense, but through new technology that lets companies understand how data can deliver results in the supply chain, Roy sees us “being able to make a significant difference in all of our world’s problems by thinking about this as holistic supply chain change management.” Competitive imperative: training for the future The need for being creative and innovative goes all the way through elementary school, high school and beyond. Ron argues that we need to nurture minds that are open to new ideas. And then that will drive a supply chain filled with new ideas. A connected supply chain will dramatically change how we as humans work within the supply chain. The world is changing quickly and so are the skill sets required to thrive. Ron says “it's a competitive imperative for organizations to understand the implications that technology has” in their business and supply chain. And it's not just about making your supply chain better, it’s not just about improving for the sake of the supply chain—but improving it because it really is the bellwether for whether your organization runs well. Roy reminds us that everyone from the individual to the employee—the manager, the HR rep, the visionaries in the company—everyone must realize that they're going to need well-trained, skillful staff able to deliver on changing requirements. The entire organization has to see that as an imperative to make it work.

The history lesson Let's do a quick supply chain technology history lesson. The first digital solution was electronic data interchange in the 1980s. Though very rigid and limited, it allowed a mainframe computer to be able to go through a translator and send forms and data streams off to suppliers. It was like a request for proposal, but for very simplistic one-line requirements for things like part numbers. You could also send out purchase orders in that format, and suppliers could send back invoices and advanced shipping notices. But it was rigid and difficult to add additional information, and certainly had no option for discrepancies. Then companies moved to something called material resources planning (MRP) to gain more accurate inventory management so they could tie inventory to the production line. That gave them a more accurate production line inventory level ordering process on the direct material. In the mid-90s procure-to-pay came along. These were the e-procurement tools and invoicing tools that allowed for a more robust sourcing engine that allowed for data flows outside the limits of a bill of material. So there were significant impacts on how work was done and how accurate the data was. Impact of artificial intelligence on the supply chain Over the last two years, more data has been created in the world than in all of history. Our supply chain organizations were never built to accommodate that level of data. AI, by automating things like repetitive tasks, allows us to use that data, draw insights from it, and then run a better business and a better supply chain. AI is what we've been waiting for for some time now because many organizations are data rich and insight poor. AI allows you to operate an insight and outcome driven supply chain, which is much more valuable to the enterprise.and better for your end consumers. How the “internet of things” will shape the supply chain The Internet of Things allows an enterprise to get an even better grasp on demand. Laundry detergent companies, for example, are able to measure detergent usage within a particular consumer’s washing machine and feed that data back up the supply chain. Instead of managing based on when a truck leaves a warehouse to when it arrives at a store, they’re managing production scheduling based on when a consumer uses up laundry detergent. It’s changing the way we manage all kinds of manufacturing by letting companies create and manufacture products far closer to the specifications of what their end consumers want. The data point becomes not just a way for you to manage a supply chain better, but by using the Internet of Things it allows you to know more about what consumers want as an end product. Blockchain and the supply chain One of the challenges of managing a supply chain is that you've got multiple players—it’s not just a linear supply chain. But the challenge of managing and synchronizing supply chains is not necessarily the technology, but the level of trust that exists within that supply chain. And that’s the potential of blockchain, the level of trust that blockchain brings to those relationships is potentially far greater than what we have now. Blockchain could make hiding data on one side or the other of that relationship impossible. Potentially, the shared data will be entirely transparent and everyone will be able to look at the same blocks of it. That's going to change supply chain management forever. Right now companies actually hire third-party consultants to be in the middle, cleansing data to make sure that the data is transparent. Blockchain eliminates the need for that person in the middle because transparency is built-in. Transparency in the supply chain Supply chain transparency is the dream that every supply chain organization has. For instance, it's never been more critical than it's become over the last few years to make sure that the products that you buy don’t involve slave labor, and all of these technologies bring us closer to that dream. Blockchain brings the trust, AI brings the power, and IoT brings the voice of the user to the customer.

Supply Change episode 5: an interview with Justin Dillon, founder and CEO of FRDM Welcome to another edition of supply change. We’re excited to host our first guest, Justin Dillon, the founder and CEO of FRDM. FRDM is a business platform used by Fortune 500 companies to measure and mitigate the risk of forced labor in supply chains. On how FRDM got started Years ago, before I even got into activism, I was in the entertainment industry and the music industry, and making a living by writing and performing songs on record labels. I grew up believing that you're supposed to leave the world in a better place than you found it and you're supposed to use whatever you've been given to make the world a better place. I learned about human trafficking and modern-day slavery through newspaper articles and books. And I decided I needed to make a contribution to ending it. I wanted to bring what I was good at—which at the time was music, and eventually film—to the table. I just started walking into this space saying, “how can I be helpful?” So I started going to all of the musicians that I was working with or knew from Moby to Natasha Bedingfield to the Cold War Kids. I asked them to be in a film to help drive awareness. And then I got celebrities like Ashley Judd and Cornel West. We all just got together and created this film that ended up going into theaters. I thought that was going to be the end of my journey into this, I thought “I'll make a film, I'll get back out. I've been helpful, I did my job.” What ended up happening was the film kind of took off. And it took me with it. I found myself being an accidental spokesperson for this movement. Then more and more opportunities came my way to be helpful, which led to me working with the State Department, the Obama administration, Google, and the United Nations. So that was the journey that led me to enterprise software. On seeing firsthand the appalling problems in the supply chain What I've seen in the last 10 years of working in this space is that you can get the government involved, civil societies involved and media involved in fighting the problem, but the marketplace has probably the best chance to impact change. And so for me, the journey to building the best software in the world was understanding how to connect the dots for companies by going to the source and understanding what the problems look like. I’ve done raids with police into textile mills, documented child labor in the sparkle mines of India, and documented kids getting rescued on boats in Lake Volta in Ghana. One story in particular that resonates was when I went with an undercover group into some textile mills outside of Delhi. I posed as an American buyer of textiles and walked into these mills that had four or five-year-old children working in them. And then we worked with the police the next day to go and get these kids out of these mills who were working there 16 hours a day and then sleeping underneath the tables. When we can allow children to be in charge of their destiny, they will do amazing things and change the world. People talk about disruption, scale, changing the world, and transparency. If we can connect the world's purchases, and actually start to disrupt the people that would enslave somebody, we can change the world and we can change our businesses at scale. On building enterprise software that inspires action I built enterprise software the same way I've built songs, movies, documentaries, and movement campaigns. Everything is built with the same device, which is, we're not the hero. FRDM is just here to give you the tools to be not only heroic, but successful in your business. The big lie is that people think they can't change the world and do well in business. But we have this hidden power with procurement that allows us to shape the way that the world works, where we can bring our values of freedom, diversity, and sustainability to the marketplace. It's almost like a forgotten tool for companies. FRDM helps them use it to achieve their values in the supply chain. We’re able to bring companies supply chain visibility, so they can tell their suppliers, “this is what we believe. And we want the companies we buy from, to share our same beliefs, and we're bringing the power of our procurement to the deal.” That's the most incentivizing way of creating change that I've ever seen, because everyone from your first tier suppliers to the guy that was controlling that mill has to change. On the FRDM tool and how it works It’s a predictive analytics tool that can give you a 360 view of where any kind of risk, whether environmental, social governance, human trafficking, etc. is entering your supply chain, and roughly where it enters. Most companies with their first-tier suppliers have a sense of who they're doing business with, how much they're spending on that supplier, what industry that supplier’s in, the location of that supplier, and also what products or services they sell. And bonus points if they know if it's tied to the US PSC taxonomy. With those five data points, we’re able to build or offer our customers access to a platform that can give them a view of where risk might be entering. There are all kinds of reports that are out there that are just disparate and all over the place. And they're very hard to read and synthesize. It’s hard to know where and if they impact your supply chain. So we do all of that, including anything that we might be seeing in the world. And we give you an easy way to look at all that data to measure your supply chain and see where the heat maps are for risk. You can see which companies or verticals you need to push further, which may just be classic due diligence, any type of audit reports, and anything that you might have on those particular suppliers that allow you to either investigate or push a little bit further to get that information. On vertical and business hotspots We call ourselves social tech: we're here to solve both social and financial problems in the world. Our biggest customers are financial services, healthcare, and aerospace — almost all indirect spend. These are companies that need to look at these kinds of challenges that never had a target on their back before because consumers weren't really asking for it. And what we find is some of the greatest impacts happens when you start getting the financial services companies of the world asking their suppliers these questions. But the industries that have the most problems in their supply chain are pharmaceuticals, mining, apparel, and electronics have had challenges for a while. And anything with palm oil, which is in something like 60% of the products you buy in a grocery store. So these are all things that you don't really think about when you're buying either as a business or as an individual. They have these deep back stories that would make every human want to stop them and avoid their products. So that's why we built an enterprise software company: to be able to help companies and help those people. Want to stay up-to-date on all our exciting guests and episodes? Subscribe to our podcast on your favorite podcast platform.

Apps: the secret sauce to digitization Apps are the secret sauce for supply chain innovation. The ability to digitize transactions and activities is critical to the future of supply chain procurement. As the Harvard Business Review said: “over the next five to 10 years, supply chains will change dramatically...Those who move quickly to digitize their supply chain will gain efficiencies, develop new business models and revenue streams, and create competitive advantages.” The particular power of apps B2B apps can have an incredible impact on the status quo. One app that we’re particularly fond of right now is called FRDM, an app that identifies slave and child labor in your supply chain. That’s the definition of a good business app: it solves existing problems. We have to make sure we're designing and working with app partners that are solving real problems in the market. Apps can also serve niche areas that drive activity at the center of the supply chain, element by element. So when procurement has criteria for things that matter, not just about price or quality of service, we can actually bid things out that are going to change the world. Your digitization on-ramp Companies can’t digitize their supply chain on their own terms overnight, they need a place to start. Apps are a good first step towards digitization. Hundreds of apps offer different niche opportunities to digitize a particular process for a particular company. So instead of spending a year trying to figure out your digitization strategy, just get apps. If you don't like a particular app, you can pull it out and put another one in that does a better job. You can constantly, dynamically, build your app suite to allow your users to do their jobs faster, more accurately, and more completely. Solving real problems There are a million cool consumer apps out there, but the reality is we've got to make sure the ones we’re using in the B2B world address real challenges. Consider food waste. Over a third of everything produced gets thrown away in the European market. We have enormous food shortage problems and we're throwing away a third of the perfectly good food because we don't have a way of bringing it to those in need. What if an app could create marketplaces that would help find, reprocess, resell, and transport that food? Today, in the traditional procurement space, these things are all very high touch big implementation efforts, almost impossible to leave once you get in them, and you're stuck with the same tool. But these types of app solutions are going to make it easier for a CPO to buy the products and services they need. With an app ecosystem on a platform, you're going to be able to interchange applications, build out new applications, add new marketplaces to deliver on solutions, and be dynamic, fast and digital. Supply Chain Transparency Supply chains have always struggled around visibility and transparency. Increasingly, the ability to deliver a transparency solution has become critical. Right now it requires too many tools for companies to invest in. This is one area where there's been immense innovation over the last couple of years where we could really deliver value with apps. Where will the apps space be in five years? For one, you're going to see supply chain organizations moving towards becoming “supply chain control towers,” where they're managing data, not processes. The apps ecosystem and apps will help manage processes. Secondly, from a people perspective, there will be fewer people working in traditional supply chains and more people working in the data space. Data available in the supply chain is going to be much more about monitoring processes and leveraging technology than it has been in the past. Thirdly, apps will be doing all the transactional work going forward The chief procurement officer and the chief supply chain officer will be driving so much innovation and value that they're going to have to have the skill sets to be able to work hand in hand with the CFO and the CEO on strategy. Supply chains will individually become much more valuable, and those that have the skills to deliver on innovation won't have to worry about the transactional work anymore. Subscribe to our podcast to hear more about the challenges and innovations in the supply chain. Find us on your favorite podcast service.

Episode 3: Design Thinking — engineering a better supply chain Episode three is all about design thinking. Roy Anderson interviews Ron Volpe to go deep into what design thinking is and how it applies to the supply chain. So, what is “Design Thinking?” And how does it fit in with the supply chain? To understand the role of design thinking in the supply chain, you first have to recognize that in business, “the road is littered with products and services that nobody needs.” And often the reason those products failed is because the creators were designing the products based on what they thought the market wanted, rather than what the people actually wanted to buy. Design thinking is about designing products, services and processes, always with the end-user in mind. When you apply design thinking to the supply chain, you have to think of every stage of the process, from “farm to table.” And your ultimate objective has to be designing it for the end user. Is the process of design thinking a quick exercise or a long term process? Generally, there are three steps for crafting a solution with design thinking: empathy, ideation, and experimentation. So when you apply design thinking to the supply chain, rather than thinking, “well, this is what we think somebody wants, and this is how we think the supply chain would work,” you can do something called “walking the supply chain.” That means going from a manufacturing plant to a distribution center to a store so you can understand the full journey of each product. Understanding that supply chain journey helps build empathy around both what your customers and partners are looking for. And even more importantly, it gives you a better understanding of how your end users are using your product. Another way to gain insights is through analogous observations. That means finding industries that have unique forecasting challenges, visiting a company in that industry, and looking for analogous processes that you could take back into your own organization. One example is with the forecasting challenges on short shelf-life products. So consider the Los Angeles Times. If you think about newspapers, once they make the number of newspapers they’re going to make, that's it, they either sell them or they don't sell them. So understanding how many papers to circulate and where to distribute them is really critical. If you’re in a completely different industry than newspapers, but still have challenges forecasting short shelf-life products, then understanding how the Los Angeles Times manages the challenge in forecasting might be something you’d want to adopt. **How do you apply what you’ve learned from other industries to your own? ** Every workshop should have a challenge statement, and every analogous observation should be built and designed to relate to your particular challenge statement. It forces you to seek out the tools and craft to build a sustainable supply chain rather than just focusing on the product you’re selling. Supply chain people want to learn more about supply chain innovations. And learning from other industries becomes not just a way to learn more, but it becomes a way to develop alliances with other industries and companies. People love the workshops and analogous observations. You get the excitement of learning new ideas and getting inspired by other industry innovations. But the challenge is taking your learnings, developing prototypes, and committing to agree on the things you’re going to do in the next 30 days to pilot your learnings. The hard work is continuing to have your teams together focusing on those changes after the really exciting workshop. One way to do that is to create teams from both companies to keep the relationship alive and manage the creation of those ideas over an entire year. Carrying it forward for a year requires stamina and buy-in and a dedication to see it through. Is it difficult to keep the good ideas in practice without losing momentum? The critical component is getting senior leadership to buy-in. Without senior leadership buy-in from both organizations, you’re not going to get momentum to finish the task. The reality is senior leadership for both organizations need to agree and commit to saying, “I'm in it for the long haul.” Because if they’re not, it’s just a fun exercise to do for two or three days. The greatest buy-in you get is when you’re able to launch new ideas faster than you would in any other way. And the second boost in buy-in is when your solutions that you’re generating are more innovative solutions. So how does someone like a chief supply chain officer really benefit from a design thinking process? One benefit is to develop new ideas, get them launched faster, and drive innovation within the supply chain. The other benefit that comes out of this is that the relationship is infinitely better between the two organizations working together. You should be able to answer: who's the end consumer you’re designing for? Why is it better if that person ends up with a better product and a better process, and how can you work together to make this a deliverable? Start thinking about designing your supply chain as if your supply chain was an end-user product. If you think about designing for your end user, you start thinking differently about your relationship with the supply chain. What’s the biggest concern for people thinking about implementing design thinking? Design thinking has a messy aspect to it, and finance doesn’t want to be messy. It's sometimes a little harder to get the finance team to get outside of the box and be okay with the fact that you’re going to fail fast so you can succeed faster. It's certainly good to recognize that the way a finance team approaches this kind of process might be slightly different, but it's still very valuable to have finance as a part of the process. Subscribe to our podcast to hear more about the challenges and innovations in the supply chain wherever you get listen to podcasts.

The burning question: why is it called “procurement” anyway? It used to be called “buying,” then it was called “purchasing,” then “procurement.” For awhile it turned into “supply chain management,” but it’s also been called “strategic sourcing.” Confused yet? There’s no need to be, because whatever you call it, it’s always been about buying what your company needs. And while we’ve been quick to change titles, we’ve unfortunately been slow to adapt to new innovations. Does everyone actually hate procurement? No. What it comes down to is departmental silos and lack of communication. One department might see the results of procurement and be disappointed with them, without understanding the underlying restraints and methodology that go into procurement’s purchases. In other words, everyone’s a procurement professional, but not everyone is in the profession. Think about it like this: when you buy a car, or a refrigerator, or even your groceries, you’re doing the work of a procurement professional. But buying for a company with thousands of people and internal customers vastly increases the complexity of purchasing. The definition of quality Procurement spends a lot of time deciding what is the right product to buy. Sometimes they default by saying, “it’s all about quality,” but that’s a little more complicated than it seems at surface level. For instance, why would one person buy a Honda Civic and another buy a Mercedes Benz 300 series? They’re both quality cars, but their qualities are different. Procurement has to know if the quality of the product is meeting the quality standards of the customer. The definition of quality is always different depending on whom you ask, and it can be very difficult to define depending on your internal customer. Determining what your internal customers’ specifications are for quality is one of procurement’s most important jobs. The paradox of choice Another aspect of procurement is what goes into deciding how many choices to give internal customers. A classic article, “The Paradox of Choice” stipulates that the more choices you give customers, the more likely they are not to purchase anything at all. That can be true with your internal customers as well. Roy Anderson, Tradeshift’s Chief Procurement Officer, uses an example of a company that saw its spend skyrocket on spiral-bound notebooks in August and September—not because their employees needed spiral bound notebooks for work, because their children were going back to school. In this example, what the employees were ordering through procurement was not helping the company in any way. The once and future procurement: one tool vs. apps The old way procurement solved problems was by trying to get a single tool in front of the whole organization, then forcing everyone to use it. The problem with this approach is that employees have diverse and specialized needs so the tool that might work for one department could be wholly inadequate for another. The future of procurement is much more customer-centric: you need a suite of tools that meet the needs of diverse internal customers. The power of an app enabled network is that it lets people use applications that are unique to their requirements. The result is better solutions for your company, your suppliers, and more digital activity to generate data to do analysis on. Free for you: advice from the procurement pros The first piece of advice from Roy is to listen carefully to your internal customers. You can’t understand what they need unless you are willing to devote attention to them. When you do that, you can do a better job of balancing between the needs of the whole organization and the needs of your internal customers. Roy’s second piece of advice is to communicate clearly with your internal customers. They need to understand why changes are happening and why it’s important to streamline processes, add accuracy, and get digital data. Without communicating how that can help deliver better services, it will just cause internal confusion and consternation.

Welcome to Supply Change, the inaugural Tradeshift podcast on the future of the supply chain. The supply chain world is fast evolving with new technologies, approaches, and cultures, and the way your business strategizes supply chain operations is more important to your success than ever. That's why we’re starting a discussion to explore what really matters in today’s supply chain environment. Looking back to look forward Companies and entire industries have tried for years to address persistent problems along the supply chain. Traditionally, buyers and suppliers have a difficult time connecting with each other. Much of the dysfunction comes from company to company miscommunication, and from a procurement perspective, the industry has had a hard time catching up with innovation. So how do we fix this? Two new approaches are emerging: The role of Design Thinking in the supply chain Ron Volpe’s work centers around applying design thinking to supply chain innovation. A Harvard Business Review article featuring Ideo was instrumental in his work, leading to collaborating with Ideo to redesign supply chain processes and creating new ways to help streamline and break down supply chain silos. Procurement’s human touch Roy’s journey took him across the whole world of procurement, from Raytheon to Metlife and Mutual Insurance, to Netscape, MIT Media Labs, Goprocure and Tradeshift. And the most exciting part of all that experience in the procurement space is beyond the “bits and bytes,” it’s the human interaction of the supply chain. When you have a wide variety of customers, you have to be able to explain to them why they should use better, more innovative suppliers, even if that means change. The Grieving Process of Change And, shocker: people don’t like change. Even in the supply chain. Change can trigger the grieving process: you have to work through why something painful is happening to you and what it means for the way it’s going to affect your life. And that holds lessons for your work along the whole supply chain. You have to be more than just a technological solution, you have to be able to help your customers adapt and change and see why moving to something unfamiliar and different will benefit them in the long run, even if it doesn’t feel like it in the short term. The World is Always Changing Keeping things the same for the sake of keeping things the same has never worked, and doesn’t work in the supply chain. Students going in to school today are preparing themselves for jobs that haven’t even been invented yet, and change in the supply chain is no different. There’s going to be new relationships and new suppliers that you’ll have to find and build relationships with that don’t even exist yet in fields that you would have never expected. And that’s the exciting part of working in procurement today. Next week, we’re going to be discussing why people “hate” procurement. Join us as Roy tries to change their mind. Subscribe to our podcast to stay up to date.