Leaders in Supply Chain and Logistics Podcast
Leaders in Supply Chain and Logistics Podcast is one of our projects focused on bringing some of the best thought leaders in the industry, pick their brains and share it with as many interested listeners as possible.
We want to connect you with global experts, thought leaders, and executives in all things value chain. We talk about Supply Chain's leading-edge technologies, leadership stories, and personal success habits.
Leaders in Supply Chain and Logistics Podcast
#43: Kris Kosmala Director of Royal HaskoningDHV
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Kris Kosmala is Royal HaskoningDHV’s newly appointed Smart Ports Digital Services Director. Previously General Manager Asia Pacific at Quintiq, Kris is a recognized expert in transportation and logistics. His work focusses on business transformation alignment on a global scale for collaboration on land and sea.
Discover more details here.
Some of the highlights from the episode:
- How RPA and Automation impact the industry and how humans need to be there to handle exceptions.
- How can companies get out of just running pilot after pilot and actually implement the changes?
- Alibaba working together with Tencent and using Wechat payment system for one goal – Eliminate suffering for the consumer!
- Which is better: top-down digital transformation strategies or local initiatives?
- Change management – how a CEO went through 3 CTOs in 6 years with no clear results
- “One of the big issues that we’re trying to resolve in shipping lines is essentially an imbalance in full containers and empty containers around the world. “
- Digital Freight Forwarder vs Traditional Freight Forwarder – the difference is in how they use data.
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Hello and welcome to the leaders in supply chain podcast. I am your host roundup on Lamar. You End. It is my pleasure to have with us today. Chris Kosmala. Chris brings with him many years of extensive global experiences of business operations executive in the services and technology industries in his career. He worked on both sides of the information technology, buying and implementing complex technology solutions as well as designing and selling solutions to software of software vendors addressing complex supply chain optimization problems. Chris regularly contributes to major publications catering to supply chain and logistics professional and writes a regular column on split two four seven.call in additional to his annual contribution to forward with tall and port technology international. In his own words, he enjoys the challenge of employing information technology as an accelerated business growth of all the business operations. You find supply chains provide the most fertile ground for creative rethinking and transformative change. And also he finds that frequently new technology is not aligned with the company's business strategy. And so that is one of his passions in terms of addressing this critical issue, ensuring the right technology is harnessed. And used correctly to advance their organizations and their bills and turn technology into true competitive advantage. Chris, uh, thank you for taking the time and, uh, and the joining us today.
Speaker 2Thank you. I'm happy to contribute to your podcasts.
Speaker 1Super. So let's start with the, the beginning and with a little bit of background on yourself and how did you end up in this field of technology and supply chain? Um, transformation is going supplying chain. Tell listeners a bit about your story.
Speaker 2I started essentially in, in business, um, uh, working for, uh, for a few industrials. Uh, then moved to technology field to, uh, to into software, a software development, uh, trying to, uh, address, uh, a complex issues with technologies, which at a, at the time when I started wearing probably a really up to par with the, even then developing complexities of the supply chains. And this is, we're talking way before, uh, before the wave of globalization. Uh, over time I kept bouncing between, uh, between the two sites, um, which helped me both to understand how companies actually managed to implement and deploy a complex technologies, helping them solving supply chain issues and appreciating the fact that, you know, we, we have to change the way how we sell it, but also not only how we sell it, but how software companies should really explain the issues and exploring possible solutions. So, uh, it's, it was really interesting journey. Um, I have to say that's, um, uh, it's a hard peg on which side you want to be because in both sides, the challenges or, uh, or, uh, very interesting and, um, incredibly challenging for, for your brains and for your creativity. So here I am,
Speaker 1and I know you come from a background of is it Mathematica, you're a mathematician or profession or what did you,
Speaker 2it's actually applied mathematics. So yes, it's a, another, uh, another arena which essentially brings you into a practical applications in mathematics rather than a theoretical knowledge of it.
Speaker 1[inaudible]. So first it is, there's some, you know, there's some very logical and practical approach to, um, to your career and, um, um, and, and obviously supply chain has been kind of the, the common thread across the things that you have done. And if I'm to kind of bring our conversation to, um, to what is happening right now in the world and that you've also lived in and worked for many, many years in, um, in Asia Pacific. Um, and, uh, the mall, when there's one of the biggest projects, uh, there's being done in the world are really one belt, one road by the Chinese government, basically the route that links stripe boards in Europe with major Chinese cities and, uh, and then all the different Asian economies that they're also trying to link with China. Um, I wanted to ask you a little bit also, how do you see this, this opposite impact in terms of specifically Southeast Asian economies and, um, and, and how, you know, countries like Malaysia, Singapore, Thailand, Vietnam, may or may not be affected by this?
Speaker 2Well, it's a, it, it really depends, right? So, um, first, uh, I remember how it all started. It started as a, as a way of having another, uh, channel, another way of transporting goods, uh, between, uh, between China, that time factory of the world. And, uh, uh, one of the big demand markets for the products. We just Europe, I, it was only natural that, uh, after shipping all of the containers via ports, somebody is going to look at it and saying, well, it's, we're connected over the land mass. So, uh, why don't we try to do something with railways? I thought it was a, it was a great idea. It only then, uh, you know, we devolve into something that nobody, uh, nobody really, I guess I imagine it will involve, right. Evolve in additional port, in a investments. It's a, it started spreading a railway links all over the continent, over Asia. And, um, uh, it looked like actually we will get not only China to Europe connectivity, but also China to all other countries in the region that are connected over the land mass. Right. So it's like exclude the island nations. Um, only know very interesting because a, if I'm in the supply chain, I suddenly I get this another channel which I would like to plan. I would like to map it into my solutions. It's a, it's slightly more costly than shipping oversee, uh, but less expensive than shipping over air. Um, I can now figure out exactly which parts of my supply are going to travel via container. If you have 45 to 50 days, I'm on the ship versus over 14, 15 days, uh, of the train. Right? So it, it gave, um, I thought it gave very, very interesting option. I mean if, if you, if you look at it, it was the, it is the right project and it's going to ultimately benefit a lot of economies. We have not seen by industries, imagination, we have not seen the video yet. So if, if I'm, if I'm still working in that distributed manufacturing, uh, um, uh, area and my responsibilities to fulfill demand globally, um, this is one of the great initiatives, um, of this, uh, of the century
Speaker 1for sure. And sometimes that that can also has raised a lot of eyebrows because the sheer complexity and scale it in many ways is daunting. So, um, uh, and there's been a couple of, not a couple, but many, many challenges that they faced with implementing this huge infrastructure projects. But at the same time, I think they've, they've made some significant progress and they've, they've managed to link quite some huge pieces of, of a plan so far. Um, so yeah, it remains to be seen how exactly it's going to, how exactly it's going to progress. Um, but that kind of also feeds into the whole thing with, uh, you know, with digitalization and with the, with the transformer, the overall, I mean, digital per embassy, but the whole transformation in industry. And everybody's talking a lot about digital transformation, right? So, um, how can, how can companies, ports or, or airlines or airports or all the different manufacturers a embark on this journey of, of digital transformation and, and watch, and they do. And what are they currently doing? Um, and I know you've talked a lot about, um, and I was reading your article over the weekend, you talk a lot about automation and the impact specifically for automation, uh, made the, and you know, we have a Rio Tinto, anything there they're doing or they're trying to do the first mine, uh, without, uh, without people in it. So they tried to make it completely automated. Um, and then you were talking about automation imports and I think the port authority of Singapore and reporting and Singapore is having the term. In other words, there's a, there's a lot of automation being deployed, but maybe let's, let's open also this, this discussion in terms of where do you see the role of, you know, humans versus versus machines I guess, or robots. Was the, was the right proportion, can they work together? Does it mean to be, you know, does it need to be, uh, you know, they, people are totally replaced or how do you see this type of proportion in the future?
Speaker 2Um, well put a proportion, it said that that would be a wild guess. So I don't want to do that. Know, this is my mathematics background speaking. Yes. I need to be careful with the words I chose. Yes. Um, but you know, it is going to progress, right? So, so we are automating and so for us there was this basic automation, right? Machine producing or assembling goods, uh, that we need to, we didn't do, do quickly, efficiently, um, uh, possibly in a controlled sterile conditions and as precisely as possible between unit, a unit to be unit, you need the right. Um, so for those ones though, those jobs, uh, they were under pressure for a long time and there was probably very little room for humans and there was no, no way really to stop that automation when the precision comes into play. Um, if humans are just simply they tire out, they need breaks, they need to step out from the workstation, need to come back. Machine just doesn't tire. Right. Seven by 24, it can repeat the same thing at the process. Now that's a different story, right? Because that that is, as long as we're shipping goods around the world, you are looking at the process of, um, not only producing them, but actually getting them out. Um, clearing them to the, um, uh, export, um, uh, organization's facilities, rules, procedures and so on. Um, then there is the peaceful moment of, of uh, of travel, right. And then, uh, we entered number for the processes on the importing and of the goods were advocates have to be very severe, assessed, a looked at, tested and so on. Um, and there were subject to number of controls or a number of regulations as well that needs to be observed. Now here digitalization, uh, has uh, very slowly encroached on human tasks. So you're looking at robotic process automation, RPA, that is, uh, that is probably where we can repeat the administrative tasks of handling the export side than the import side of transferring goods between a one economy and another, uh, that is, that is probably going to be subject to automation. Now here therefore arises this question that I raised in my last article, which is, um, we are going to always have exceptions. Not, maybe not too many. Uh, although somebody in a, in a, in a court or a terminal, a competitive terminar would argue that everything pretty much is exception. So why bother with automation? But a, but let's say we got to be working towards removing those because really there was no way to handle everything with exceptions. Right? So, so, so that means that the human is there and it's handling the exceptions. And when you think about this, the science of, uh, of mathematics is progressing. It's not like we're still stuck in a, in a, in a 20th century, right? So every year there's some, some new innovation. There was some new thinking, there was some new theory, um, or some of which are actually correct. And therefore we're using those innovations in improving mathematics to help us make the right decisions. Um, and that means that the complexity of the problems that become exceptions is actually quite high. And that means that now we have the team we just sitting at and, or, or, or together with the robotic processing, um, of documentation of decisions and has to make on the spot decisions whenever exception has been thrown out. That is a very difficult task. And, um, I, I would love to say that there is a training, there was a class that somebody working in supply chain can tag. Um, but really there isn't. Right. And, and, and you can imagine that these complexities are so high that even at some point, human imagination, it has to, has to pause and you have to think about, well, how am I going to solve this without stopping the whole process? Right? I mean, you cannot, you cannot arrest the process. So you'd like to, you'd like to help the machine now to the side. And I, and I think that this is going to be the biggest challenge of this century. It's figuring out, oh, with the onset of these robotic process automation, with a artificial intelligent, trying to barge in on a number of other, more complex decisions that the humans tradition make inhuman supply chain. I'm sorry, in, in a product supply chain. Um, and we, we have to figure out how to retrain people for that new reality. And I, and I think that this is going to be the biggest, the vexing problem for, for human resources or human capital, uh, people in the companies, uh, for recruiters. Um, and, and also for the workforce itself, right? Because a employee now has to decide really how are they going to coexist in this? If they cannot stop it, they cannot arrest it. You got to participate in it and it's in, it's fine. But, uh, but there was also quite a bit of responsibility and Embry part the thing, well, how am I going to sit in this process? How am I going to keep in mind value to the company, into the process? Chi, and how am I going to deal with the fact that now robots are making a lot of decisions, which when they send me an exception, I might be actually asked stand as they are, right?
Speaker 1Yes. I mean, truth be told, we as human beings, typically almost all of us don't like change. Um, and that's a little bit of a kids tended to,
Speaker 2I would say we'd done like change, right? But when, when they automated coffeemaker, right? Uh, you know, suddenly, uh, people like that change, right? Then a espresso machine arrive where you just simply press the button and by the way convene to, you don't have to touch the coffee, right? Because it comes in a little capsule and the sales of that to cough for so, so actually we are actually comfortable with a, with a technological change. Um, about, like I said, you know, supply chain is not as simple as, as process of making coffee in the morning. Right now I have to figure out, well, when I press the button, there was a lot of other things that will happen in a supply chain upon me pressing that button. And I, it's um, you know, before the final result is known, uh, 40 days labor in a production cycle, uh, 50, uh, 50 to 80 days later in the shipping cycle. And eventually when this stuff ends up somewhere on the shelf or at the distance, uh, destination, um, there was a lot of time that's going to pass between the moment of pressing the button and seeing the result. And I think that that's what we are not comfortable with because we really don't see what happens in number of those black boxes between um, uh, day one and day. Let's say 100, right. When we, when we make a decision in supply chain, this is a, this is convoluted process and it will attach a lot of people and we'll touch a lot of, a lot of places, locations and so on. So I think that's maybe for supply chain professional that's maybe the comfort level is lower, but you have to accept the technology is moving in on a number of areas. So might as well just figure out how to use it the best. Just like you figure out how to use automated coffee maker where the coffee comes in a capsule and you just press a button.
Speaker 1I mean, what I'm seeing since we are in this area of search and recruitment, what I'm seeing is a, and it's a very good example that you mentioned within this person. I think definitely we are all for convenience as human beings as well. So change as long as it makes our life more convenient is okay. Um, however, when, when we kind of feel threatened that our job may not exist as okay. And the, and what I'm seeing from, from where I sit is that a lot of people are apprehensive in terms of, um, yes, let's, let's automate parts of the process, but will this eventually take my, my job and, and if it does take my joke and I can I get enough scope to do something else or not? So I think that's, that is the question I did well and there's been some initiatives actually just today I was reading that, um, and I think it's to be, is to be saluted that Henkel, the global a FMCG company basically launched a global initiatives to digitally train their staff in terms of picking up new skills and being kind of taking on almost like a flexible mindset. And, and I think it's one of the first programs that I see rolled out or that global global level. But I think that that's the direction probably that we will, we will need the more and more companies, if not all of them will need to be taking. Because you know, that's just the reality of today with multi progressing.
Speaker 2So let me address this because you, you raised two topics. So the first one is let's get out this a training mode, right? Because, um, uh, the digital distribution of the training, uh, that has been known, right? We have that. What I was trying to imply earlier is what do you train people in to make better decisions? So in mathematics you go, go through logic, right? So there were, you know, their classes night in logic, which would you use it essentially, um, a complex context tool explained to the student how to study a decision making and how to arrive to the right decision, right? So you can, you can essentially optimize doing this manually or you can implement an algorithm which is actually repeating your thinking process and, and optimizes this using computing problem. Right? Um, so I think that that challenge, so it's good with Henkel was doing, but, but what I'm trying to say is the jury is still out. What is it that we need to train people in, right. Um, independent of how we gonna deploy it digitally or not. Right. Um, but the second thing is I want to own a, come back to that earlier comment that you made about, uh, we're comfortable, sorry. We're not comfortable with automation. Therefore, what do we try to do is we're trying to constrain the areas where we are going to implement it. And that goes back to the heart of what really, um, uh, sometimes stops us in our tracks, in the industrialization tracks. They're the pilots, the countless pilots, uh, the companies when they are not so comfortable, they, they, um, uh, reduce the size of the implementation to a pilot or they call it proof of concept and they attempt to test the technology on a small subset of things, trying to kind of say, okay, this technology works without them understanding that they are affecting the process and once the process actually gets automated of things are not going to look exactly like the pilot. Right. And sometimes those pilots keep going forever and ever because the company's still uncertain. And the reason why it's uncertain is because it originally thought in concept of small area, which is not going to be affected by anything else and it's not going to affect anything else. So that the lack of imagination of how to set up a test of, um, of technology against the process. Um, it's probably undoing a lot of projects. You know, sometimes they are optimistic, very optimistic. After the pilot, they go into the next stage which is deployment. And here they make another mistake. And this is a, this is cold. Um, I think is another three letter acronyms. Because in musicology, we love those things and this is the minimum value product, right? So you're looking or um, um, you're looking at this MVP things and this is where we deploy technology cautiously. Now in real life following the pilot, assuming we managed to exit the pilot. And uh, and here we were setting ourselves for another problem, right? We are not seeing the forest, we're just seeing the trees and we are trying to minimize this because we're so concerned that the impact would be too big or, or where we'll sneak out of control of humans. And, and essentially we very often that arrived at the situations where the business process has not really changed dramatically. The human actions evolved around the technology and we have not managed to take out any human effort out of those implementations. And let's, uh, let's say, let's say that the software is going to be or, or, or ideas based on softwares and machine machines, um, is going to survive, but it's not going to survive with the same impact that we originally envisioned. And in the meantime, people change the original sponsors the part, and you have this piece of technology, which eventually either dies, gets disconnected or just simply just continues to chugging along. And you know, nobody's much concern other than the CIO who has to pay the maintenance fees every, every year on that software. And it has to provide for the support of that. So, so I think, you know, that's said that that issue, we need to, we need to really rethink how we implementing this. And that means that not only approach, um, has to change on the employee being affected by automation, but also by the organization itself. How it's implementing this technology. Because, because I tell you this at this moment, uh, everybody's talking about the disruption, but when you look into a, a standard typical business in the supply chain, in logistics, in shipping, we have not really dramatically changed that process for a, uh, for, for a long time. Okay. So that we have to rethink that area. But then a guy, I mean, that's a, that's a huge subject, right? It's, it's, it's probably just enough to mention this on this call.
Speaker 1Yeah, it's fascinating that you mentioned it. I mean, that was one of the key questions that we got from the audience and I think we got it from several peace people and basically that it was more or less along the lines of just a, of just what you, what you shared in terms of uh, you know, pilot after pilot. But, uh, also, uh, sometimes that, um, um, that doesn't deal actually with the underlying issues that, that go towards data quality. Sometimes it's missing. Uh, EDI is maybe there's a poor for Erp implementation somewhere and that was done and, and basically there's a couple of fundamentals that typically organizations don't look at. They don't look at process, they don't look at [inaudible] exchange as well, but they keep running these pilots and basically, yeah, you end up sometimes with a, with a piece of software that dented does not useful. So I would say, how would you do it better? Right? I mean, if you were to, and you, you are consultant the Tart, if you've consulted many companies across the,
Speaker 3what would be your advice? If, if a CEO comes to, let's say that you're talking to the CEO or to the c level of the organization and say, okay, look, we want to transform digital transformation. I have a bus pass word there and then let's say that it's around x, right? So there's a certain process or a certain objective that they have and there's certain steps that you would take. What, what would you do to make sure that it's a successful type of, uh, uh, type of a project?
Speaker 2Okay. Well, I mean, in supply chain it's all about precision, right? When you think about this and all about detail, when something is missing, you have to go back. You have to go back to the original source documents, you have to contact other people, um, or you have to run your machine to inquire with another machine. Actually what happened, right? So it's that, it's that missing detail a day, just wrong. A volume is wrong, some certificate information is wrong. So you have to figure out really, uh, which part of your process of your business process is killed by a lack of precision. And what I mean by killed is being Sushi delayed or has hiccups where you actually have to implement a tiger teams to solve the situation, solved the problem, right? So, so I would say first let's look at the area where the lack of precision, uh, is hindering you. Um, and let's look at, let's imagine how we could solve it better. Now the thing is you cannot go exactly where, where I think you mentioned we cannot define the ways of doing better by technology, vendors, acronyms, Erp, SCM, Otm, ots, this, that, that, um, that has a terrible approach, right? You have to have that crosses thinking or the systems thinking to the overall holistic picture. Um, how are you going to improve the precision or, or, or, uh, remove, remove, um, the issues that cause you, the lack of precision, the gaps in precision. Uh, once you have that set, then let's look at the technologies. And the thing is that sometimes we compromise, right? So the budget it budget is set up in the annual cycle. So here it is, we're going to make a selection and we make a quick selection just to squeeze into the budget cycle. And what do we do in that process is the it department and the procurement departments we compromise. So we go in and we say, okay, well let's buy for the sake of argument, let's say Erp, right? So Enterprise Resource Planning, uh, let's buy Erp because that looks like it can, uh, address our problem of precision. And uh, it doesn't cover completely our process, but we'll somehow either customize it, amended, change it, or we'll just live with the fact that it only does a part of that process. So let's even significant, so let's say 80%, this is a, this is where the, the, the whole tragic, tragic dilemma starts, right? Because you, you come in and eventually say, no, I'm not going to use this system that you selected. So, but I will use it if you customize it. And then we go into this long customization cycle. If you look at every shipping line in this business, they went in for the traditional Erp and today send themselves a two year target for the implementation of one your target for the implementation. And you look at them seven, eight years later, they are still, they're implementing the dumb Erp, you know, just, just trying to mold it into the way the business is done. You go and do logistics companies, three pls, same story, right? So I think that compromise is undoing us and we really need to, we need to really think how, how to avoid that compromise and why is it that our thinking, our budgeting process are our internal decision making about how we gonna go about digitalization and what pieces of technology we're gonna use, um, are, are going to be set so they can help us rather than just set in because we have a budget and we have to spend the money now and we have to study implementation now and see the results in a few years. And Yeah, if nobody likes it, well, tough luck, right? Um, so that, that, that approach has to change. And I, and I have to say is that the attitude, that attitude is persisting there because, because like I said, the organizational decisions that are driving us to then follow up with decisions about how we select the technology to support what it is that we want to achieve. Um, I think that the, until that changes, um, you're gonna look at these endless pilots. You're gonna look at implementations and vision for a year going for, for many, many years and very often for a, for outcomes that were not expected. And, and on the outside of that, you're going to see people defaulting to excel spreadsheets because they will say, okay, I cannot wait for this, uh, for this thing to be deployed. I'm going to do something on my own, right? And I say the least is a excel spreadsheet. But let's imagine now you've got the little bit of a training in python. What'd you going to do? You're going to go out there and code your own little solution, decision support solution, right? So it's a step above excel. They're going to do a little bit and, and suddenly suddenly you create this new universe, which, which defeats the original purpose of why we wanted to discuss in the first place. You know, by finding where we lack the precision, where we lack the data, uh, where we like the, uh, automation that, that actually issues the precision throughout the process. And, and, and what do you see today is that we have not really managed that significantly to increase the velocity and the supply chains. Our cost of logistics as a percentage of sales still remain kind of fixed, stable, right? They haven't changed dramatically. You use no major step check. Um, and, and we're just living with it, right? Because, well, eventually whoever buys the something from us, a service or product is prepared to pay. So we say, well, as long as there was a market for us, we're going to persist.
Speaker 1Yes. But I don't know, just, I mean, just curious from the perspective of there's been some projects I'm sure then, and actually we got this specific question. Um, maybe if you can think of, and a project, uh, let's take an example, the two that worked, that, that may be also impressed you in the, in the, in the sense of, you know, okay, this is something that was implemented well, it worked, it went beyond pilot and, and it showed some substantial ROI in this realm of supply chain and can be anything. It can be ecommerce in the shipping lanes. Gave me logistics, is there saying come to my examples are there. Right. So, so I, I don't know,
Speaker 2uh, he was a good example. I'm fascinated by what the Alibaba did with the, uh, with the retail when they deployed the grocery grocery retail in China. And I still remember going to their first ever, hi, my store. Um, which I think by now they probably have about a hundred of them deployed, deployed around China. That's a store which essentially has very little product on the shelf because some has said has demonstration product. Uh, you can, uh, end the small quantities, like really small quantities. It's nothing like, like, uh, to supermarket and a big space. And, uh, you have a choice. So either picking it up from the shelf, uh, like a traditional supermarket or just simply scanning the code and saying to the basket, right? Um, so this is not the innovation of the process, right? So when you, when you look at the same, well we, we had this for awhile, but guess what? So now you are actually going to set a window for that product or partially or fully be delivered to your house. You're not going to receive it twice a day. Now you can pick up essentially f five minute increment. Um, um, and the delivery just happens there. You know, we're, we'll all raving about the two hour delivery, these guys, what they do in Shanghai. I recall being with friends and having a FEMA order place. It was essentially like practically showing up on the doorstep before we finish the conversation with, uh, with the applications on the, on the phone. When you go to the register though, so let's say you decided to pick up something off the shelf and you decided to, to pay for it, uh, no credit card and no cash, right? It's all done through WeChat and application that does not belong to Alibaba. It belongs to the competitor to 10 cents, but it's considered a payment system. And here is Alibaba incorporating that casually. Okay. Without trying to protect, uh, like certain American companies, I'm trying to protect their payment systems, right? Because this is where they make, uh, make some money and it's accepting the payment, right? So it goes from [inaudible] and even here at the cash register, you can still say, okay, those bags, like I would like to have them deliver. Right? So you didn't select, you brought them to the cash register. All good to the company does not make you suffer as a consumer, right? Because it has the processes integrated, which allow essentially for any behavior of the consumer and still a positive, rewarding action by, by the retailer in this particular case. Right. Um, and of course not withstanding the fact that, um, you know, you can just sit at home and go to the Alibaba, Alibaba store online and do the same purchases without actually viewing anything in the real physical store. Um, but it's, it's interesting how that concept of physical retail and digital retail good connected how the physical logistics and digital logistics got connected and how the physical payment and a logical or digital payment has been connected and it made, made essentially transparent. So it's, it's a happy experience to go and shop at that store or just repeat the same process on line from like from a consumer perspective. That's brilliant. Right? And we can, uh, we can already have about other companies in the, in the United States, I have to say Alibaba has moved ahead and they are not talking about themselves as the, you know, the drone company and lending drones and the on the roofs of their stores. They are not talking about some, some other meaningful delivery of Robert's rolling on the sidewalks. Now these guys just simply keep going, implementing, experimenting, abandoning quickly if something is not accepted by the customer. And that's it. That's it. There's a huge difference. Right? It's not internal acceptance, acceptance by the customer and they have no qualms about the bundling. Something quickly, uh, very much like Amazon, amazon.com. Right. They also launched hundreds of projects and, and let some of them die a natural death. But, but here are, these guys are really, really attuned. Alibaba is really attuned to how consumer shops, how consumer reacts, how can spur orders, how consumer receives the delivery and actually then they were interested actually what you're doing with it, right? Which is also important because that drives the whole recommendation engine for your next visit to the physical store as well as the next visit to your electronic store. So that's, that's a great example. Another example in a, in a, in shipping and logistics, you know, we, we forever ship containers around the world, right? When one of the big issues, um, that we're trying to resolve is essentially a imbalance in Latin containers and empty containers around the world. Right? When you look at around us, you could go to any shipping line. One of the big discussions will be, oh, how am I going to do an empty repositioning? That's a classic example that I have to say is I cannot believe that we're still talking about this. We only talking about this because the process has not changed, right? So loud than containers or earnings by people responsible for a lot than shipments, but the empty containers are around for shipment back to the destinations where the demand is building by operations people who theoretically should observe they information coming from the sales side because that tells you actually how the demand will be building up at the origin and therefore they can, uh, they can ship those containers in that in such a fashion that they will, they will minimize the cost of utilizing the vessel and minimize the cost of the storage of these empty containers while they were waiting for the load to the origin. The origin to be everything would have tags is say, I'm sorry. Why do I have two organizations dealing with the same metal box regardless whether it's loaded or empty? Why I don't have a one universal organization would use as one integrated process to observe the demand, to stimulate the demand, to move the empty containers in preparation for that demand to arrange the best possible routing for that container for the cheapest possible way of getting from Loudon, from, from origin to the destination. And just have that cycle going continuously. So there was never any imbalance of the containers. Right? But why do you accept this? Just because you accepted how your organization works? Well, maybe it's time to rethink their organization. So I have another example where that has rethought completely, um, they're, the old approaches have been abandoned and it actually resulted in dramatic improvement in, uh, in margin net margin contribution just just skyrocketed. And in that business where you are losing money for forever and you think there was no way out and you suddenly start making money. I, you know, there is no other way to explain this, but you know, here, here's the, here's the way how it was rethought and the technology is selected for, it was to meet the thought, not to meet the limitations of the vendor, of the, of the technology and the, and the outcome was actually very good for the company. Right. And obviously for the, for the customers of the company because they have not lost anybody in a process while they were doing that.
Speaker 1Yeah. Listen, I'll ask you just, just one more question about that because I find that fascinating in the, not to take any credit away from the ecommerce world than the Alibaba and youngest son and all of that is just probably, we're so used to them coming up with all these new things and instead of the technologies that sometimes maybe we, we kind of, yeah, basically just get your students, but it's not as common and as frequent in the logistics and shipping industry. So I'd love to take the second example more of a and dwell a little bit more on it. And, um, and if you were to, so there were some veterans that you have that made it successful, right? But also in terms of, I don't know, senior management or in terms of the way they've rolled it down in the organization, they interacted with the clients, are there any other patterns of success that you think could be duplicated by somebody listening to this podcast or this, some other, I don't know, insightful pieces of, of sharing?
Speaker 2Listen, I mean, if there's anything where I can, where I can point out success in my past is we'll do it as a holistic thinking where, where people in the organization came together and they really made a joint commitment to actually implement the change and enforce that change. Okay. Uh, whenever, whenever the project was attempted by single department, uh, by, uh, even under the auspices of the head of that department, a very senior person, uh, without that holistic thinking, uh, the impacts were not nearly as good. And what, what it means it, it led eventually to disappointment, questioning of return on investment and so on. So I think what we, you know, our organizations are divided along functional silos and we enforce the thinking along the functional silos. And I think that what we would benefit from is, eh, or whenever, whenever we, um, we would like to benefit, we really need to say either is the more holistic picture, a more complete picture or we're not doing this. If there's a style initiative, yeah, it can improve the silo and which is going to take it because while it's a, it's a benefit. So might as well include the silo. I think that as a, as a executive, if you can say no, uh, we got to be, we've got to be looking at cross and we need to improve the system and then we need to improve the process. And what I mean by system, I don't mean it system, I mean the system by which our company operates, you know, every, everybody you go out there talks about technology as affecting the business model. But whenever, whenever we go in and implement the technology, the business model magically, it does not change the company has not really thought out is could the model will be different. And the business model is essentially how we make money. Right? That's, that's, that's really how, how business perceives the business model. And, and that, that thinking sometimes it's so simplistic because people really don't imagine all of the mechanisms that go into making money, um, in a company. And I, and I think that we need to give heed to that. And, and this is not the consultant's role, somebody else coming from the outside to tell you that you really have to take it on board internally inside the organization and, and on, and then act. Because a, another thing too that sometimes stops us is fear of touching that is working and fear of, um, experimenting or changing this or, uh, or, or, or, um, affecting, affecting the organization. And therefore then we go into this pilots, you know, the limited releases, a minimum value or minimum valuable products, um, as scenarios and all comes and done. Right. And I think that's, you know, that requires change. I mean, I cannot tell you this is the, this is a change of mentality. Um, part of this comes from training and part of this simply comes from from you yourself changing as a business manager and just abandoning the silo approach. You function, approach, functions centric approach and just can say, no, we got to do it differently.
Speaker 1No, very good. Very good point. And that's, I mean that's kind of a, we've, we've, we've touched upon this topic, your share that for, for a few, a few times as well. And it's also what happens in most of these conferences where typically we are very hyped up about technology, but we miss the bigger picture. And a lot of times in the bigger the organization, the less aligned the, the executives tend to be in terms of what they want to do. And then obviously no matter what fancy technology to try to implement, it kind of ends up in a mess. Um, um, um, are there, I mean from also from your type of, you know, from your type of experience, and I think probably this, this could also work out to be a little bit, um, uh, dependent on case by case. But did you see, is there a pattern? Like, cause the question we went along this lines, do you see more success in top down digital transformations, uh, as in global centralized led by HQ? Or do you see, did you see also some, some local initiatives maybe that that worked really well in a region and maybe then they were kind of implemented at the global level? Or is there no right or wrong? Like it depends.
Speaker 2So let me put it this way. All my experience with global, with Mncs, right? A whenever something originated at the region, a region far removed from the headquarters, it eventually got into the corporate decision process where they went for evaluation at the headquarters and it was terminated. There are the headquarters just simply decided, wow, that's really good for the region. Okay. I will allow you to keep it. You take the cost of running this or doing this, uh, our, our not help, you know, I don't know how, but I will know also not standing away. So, so you, you really looking at, um, at companies still sometimes not accepting the regional innovation and thinking how to redeploy the globally very quickly by the way, very quickly and rapidly. And the reason for this, because well, we would originate in Asia region that it doesn't really fit. The North American region doesn't really fit South American region and it doesn't really fit to Europe. So I'm, you know, I'm not doing this right. Then rethinking isn't saying, okay, that's simplified a lot of things in Asia that reduce this. Let's actually implement this. Let's, let's actually look at what these guys did with the processes again, to improve the precision or remove the costs. Okay. That is actually valuable rather than saying, well, every region is different, therefore, you know, my, you know, not talk about, uh, coping. This initiative coming from above, well, I have to say is supply chains are global. So I cannot see how, uh, major rethinking of logistics and global supply chain and how am I going to run it better, more efficiently. I cannot come from the top and needed to be supported from the top because remember what in one place I produced, the other place will receive, uh, it may even continue with additional assembly of the products that I already see from another location. Right. And this process could repeat and then repeat of course, between the cultures, between the, between the geographic regions. Um, so if you don't have that support at the top, if the initiative does not come from the top, uh, I would say that the pace of change is not going to be rapid. Uh, the acceptance below is not going to be strong enough to, to, to, you know, to, to even deploy it completely. So, so I think it's a combination. So there was a, there was an initiative from about any attention to that initiative, not just simply announcing the initiative and then going off and saying, okay, go regions, go, go figure this out. But actually continuous executive support and a continuous executive interest in the outcome. And then, um, feeling of every region affected by this, um, by this implementation of being a valuable participant, a participant whose feedback will be considered to amend the original idea. As long as it benefits everybody, I met the original idea and still benefit the corporation. Okay. Also, when you, when you look at the deadline of implementing something and, and starting measuring the outcomes or the results, uh, the results from the, from the original decisions, I think that is also responsibility of, um, uh, of the, uh, people at the top of the organization. So even originally it's only at the region, the region may be evaluating itself against its own set of Kpis. Another region may have a slightly unique set of KPIs because it's maybe the importing a region. And I think all of that, all of that needs to be kept in sync. So, so I think it's the time urgency and that again, will come rather from the top rather than from the bottom. Yeah. Because remember what we talk about this at the beginning of this call. Uh, the moment you started implementing improvements and it starts affecting people's jobs, sometimes even the resulting, not just in clean change over the job, I'd actually lost that job of the original job. Um, there is more natural resistance at the bottom if you start from the bottom a bottom up rather than resistance at the top, uh, coming top to bottom.
Speaker 3Yeah. And then moving into, I mean, moving a little bit further into the human and then told, we've talked all through all through throughout the call, uh, in, in different aspects, but specifically in terms of, uh, there's two types of skills, right? There's the soft skills and the hard skills and, um, especially at the senior level, right. In terms of the people that are running organizations and, and the executive level, we've seen a, I mean, I'll give you an example of what I mean. We've seen in recent years there's been th e role of chief digital officer that came about the chief transformation officer. Depending on the organization, we call it differently, but basically somebody that's in charge of this kind of process of digitalization. Um, do you see any sort of new skills or new types of one mindset? So there's that. I would maybe there's two point. So on one side is what type of mindset do you see the executives needing to needing to take on board to make sure that they navigate through this time of change and a second other certain hard skills? Um, I don't know whether it's, I don't know, digital native or whatever it would be that are harder to find in this agent time.
Speaker 2Oh Wow. Two transportation transportation, a chief transformation officer, uh, that has been there for awhile and there was somebody with that title or something similar and the chief digital officer that showed up somewhere in the middle, um, I would say of the last, the last decade and it was the solution to it. All right, so let's take some digital native and let's put them in charge of digitizing, um, our data and digitalizing our processes. Right. Um, I have to say the first one didn't work because obviously that digital angle was not really in transformation. Transformation was, was created as a result of saying, okay, let's implement Erp by the way, now let's hire somebody senior to be in charge of the transformation. But the transformation was only aimed to implement the RP and to accept the use of Rp Erp. Right. A terrible mistake because again, there was no system or holistic thinking. It was just that a vendor's software based thinking digital officer, a lot of the companies said, okay, well let's hire somebody who came from a digital business because then can somehow have that digital mindset. Um, I would say all of the companies I've seen where that was experimented in shipping and logistics in supply chain, uh, they pretty much gave up on this idea. Sooner or later, those people just simply, um, uh, were incapable of understanding holistically the problem of supply chain and logistics. You cannot come in from a web development place and pretend that you know how to, how to improve the precision and increase the efficiency of the supply chain. You have no idea. Right. So, so that was, uh, that was the ground of mistakes and unfortunately what it lead, I think it's, um, uh, that CDO idea, I think it fell off the face of earth. Right? I haven't heard about some huge announcements of CDO being hired here. Are there, uh, it's, it's pretty much the companies just, just kind of started going about digitalizing their, their processes just like they were doing before at their own pace and kind of along the software vendor or software package line around then rethinking the whole process from the very beginning. And you will, you'll see this in logistics, uh, in a big way. And you know, a lot of people are talking about what is the digital freight forwarder versus traditional value. You order freight forwarder, right. And, uh, it's a, it's an unfortunate, unfortunate, um, uh, digital freight forward. It's really a freight forwarder, which theoretically uses a data, um, better and more efficiently. And rather than building systems around the people, it says, I'm not hiring the person is going to be a computer in the first place. So you never have to deal actually with this change management issue where you're convincing the person saying, well, this computer will take your job, but don't worry, you will find you another job inside the company. Right. So, so, so, you know, maybe these companies will somehow affect the business of shipping goods, but even freight forwarder, the freight freight forwarding, that's only element of the supply chain. Yeah, that's just one aspect of it. The support, the whole supply chain is very much, much, much, much longer and much, much more complex. Right. When bringing the raw materials, they are the input materials around industry, the production lines, the responding to the demands that are, that are changing and reshaping. And somewhere in between, I have to ship the goods, uh, possibly with the help of somebody else because yeah, there was a number of administrative procedural, uh, political issues, which have to be solved and, you know, potentially I can just outsource it to somebody else. Um, so, so this, this, this moment, um, uh, I think that we really are waiting for somebody with the skills, um, which allowed them to see the whole process. Um, view all of the systems that participate in it and just be a very conscious about how to, how to remove bits and pieces out of the complexity. And sometimes it means removing particular application out of it and sometimes it means removing personal human touch, right? But as long as you don't have, as long as you don't hire those kind of people with that systemic view, that holistic view and not being able only to look at the systems but also convince people to change and change very rapidly. Right? So inject some service sense of urgency, not trying to scare the living daylights out of them but, but actually explaining why the change needs to happen at a faster pace. Okay. With some, some more rational arguments and I'm assuming that every organization is rational and they will listen to that kind of person then then I think this is the level of skill sets in the, how you call it, whether that position is going to be called this or that it doesn't really matter, but you need to hire those kinds of people as the organization. If you want to improve supply chain. Just just, just, just getting yourself a better procurement professional, that it's not enough to improve the supply chain that is not a holistic view of the supply chain. There's no, no expectation of a major change that is this kind of person with this kind of background can, can, uh, can, uh, can inject into the company as a new way of thinking. Right. There was nothing wrong with procurement professionals by the way.
Speaker 3It depends on your side. You said that have some issues. It comes to buying executive search services. But then again, and then to your point that I believe that that the whole idea, the whole hope is also that the CEO of the organization is one of those people that understand very well and pushes the whole transformation journey of the organization forward. Because nowadays I have a problem with, there's no industry in the world, um, that is, uh, you know, that it's risky in terms of the whole changes that are affecting us all. Um, but, uh, yeah, I liked your sharing in terms of, uh, you're not the number of companies that selected this, this kind of a digital or technology related profiles to come and transform or whether it's shipping line or literally, actually I have this example to share. I was talking to the CEO or shipping line, which I will not name for obvious reasons, but they were saying that, uh, he was saying that basically they've had three CTOs or something like that in the last five to six years and there was very little to show after their departures because basically the theory, the rest of the organization wasn't very open to change and, and the, the, they were actually resistant and also the persons in charge in the end because they didn't have that connection to the industry and they couldn't maybe use the right terms are explaining the rightly you'll get the buy in the right way. They ended up failing. So, um, definitely there's a very fine line in there between being digitally savvy and knowing things as well as getting the buy in, knowing how to convince people and walk the organizations with the change management process, which is, which is a fine art. Um, and I'll, I'll, you know, just kind of drawing the drawing to an end to this, uh, to this very interesting discussion. Chris, I wanted to ask you what would be your advice like in terms of the, you know, the future is still to, nobody knows what's the future, right? But let's say that if you were to give some advice both to, I mean, there's going to be a tough question for you both to executives as versus to somebody that's maybe younger on this journey of, of supply chain, whatever it may be, logistics, shipping, manufacturing. Are there certain, I don't know, skills or, uh, algorithms or I don't know, programming or what should they be learning? What should they be finding out more about? So that a, that they're better prepared for the future, whatever that future may be.
Speaker 2Wow. Um, it's interesting that you mentioned the algorithms and listen I think as the machines and crowed smarter and more into areas of business, a business decision, so it's not the business of production is a business decision, then you somehow have to be capable of thinking how the machines will think. Yeah, so I would say a learning a little bit more about logics, um, mathematics, um, in that area, the decision decision making logic, um, it would really help a lot of professionals, executives, experts in, um, in this field. And I don't mean that you want to become a suddenly an expert in operations research. And this is, this is not about this. What I'm trying to say is when you come in to a meeting or you're the business manager, you come in a meeting with a data scientist, with algorithm experts and you're listening to the conversation, you should not feel lost in that discussion. You say, guys, I understand how that logic is where his word is working. This is not applicable. This should not be this, this is probably not solvable like that. Right? Because you know, one of the big, big issues right now, is it whichever meeting you come to, there's always inevitably a business management meeting. Somebody will, somebody more technically savvy, we'll throw in artificial intelligence and artificial intelligence will do this or of that was you know, improvements since three years ago where the blockchain was actually answer to everything right there at the visual intelligence right thing. Then he must people, um, uh, kind of choke on it. Business people when it's like, oh, you know, that's very complicated way. Maybe there is a artificial intelligence. Well, artificial intelligence itself consists of multiple branches. There are shades of artificial intelligence, um, and the more converse and you are about what makes sense. Even where does it make sense to apply artificial intelligence where it doesn't, what day that will be critical. How would we go about deciding what data will be critical or not? Okay. Which is the discussion with the data scientist. You have to be skilled and versed in this. So outside improve your skills by adding some knowledge of logics and some knowledge of mathematics so you can be informed in the meetings sitting with, with the digital geeks talking, talking about how artificial intelligence will change your business forever. Right? That's a, that's said, that's really the key. So it's not about becoming an expert, but becoming, becoming a savvy in terms of discussions with the people who are very, very intelligent and very skilled, but in their narrow area. Right? And they may not comprehend your whole process. How you see it end to end with a remote factories maybe operated by Roberts. I mean, who knows? But the remote factories in some other places where you're trying to find the demand, not necessarily near those factories, but somewhere else. And you're trying to figure out how to produce on time, in the right quantity to meet that demand. Never create too many, too many supplies in a, in a process, never having sitting in ventures, uh, inventory, sitting around and, and utilize to the maximum the resources that you have. Because those resources are finite. They're limited. Right. And, and then of course somewhere in this process is how you ship it from point a to B from the place where you originate the supply and the place where the demand is waiting for it.
Speaker 3Yes, it's a very useful and valid piece of sharing and definitely artificial intelligence right now is probably the most thrown around buzzword that a very few people understand. And truthfully, we are not there yet with most of the things. They're not, nothing to do with artificial intelligence, but we do like to use that term a lot. And before that it was probably blockchain. There's going to be some on this, uh, along the time. But yeah. Thank you. Thank you Chris for the sharing and definitely letting, I also need to brush up a lot more in terms of what I know and what I understand about all these things. Appreciate all the different examples, case studies and um, and uh, and sharings that you've imparted with us today. And um, and yeah, thanks for the time and thanks for being with us.
Speaker 4Thank you. [inaudible] it was a real pleasure. Thank you for listening to a podcast. If you liked what you heard, be sure to follow us on Rapala mario.com/podcast for all the show notes, links and extra tips covered in the interview. Make sure also to subscribe to our emailing list to get the news in the nick of time. If you're listening through a streaming platform like iTunes or stitcher and you like what we do, please kindly review and give us five stars so we can keep the energy flowing and get more people to find out about our podcast. I'm most active on Linkedin, so do feel free to follow me to stay tuned for our latest articles as well as future guests for the podcast. And if you have any suggestions or any other ideas, please feel free to write to me. I respond to all and also please make sure not to miss our next episode where we will be having a few other c level and top leaders in supply chain joining US stadium.
