Hello, Hello. This is Smart Talks with IBM, a podcast from Pushkin Industries, our our radio and IBM about what it means to look at today's most challenging problems in a new way. I'm Malcolm Gladwell. For our final episode, I bring you an ode to the holiday shopping season. Well not just a holiday shopping season. This episode is for all of you who waited six months or longer for your new couch to arrive, and those of you still struggling to buy a car because of the chip shortage. It's all about what's going on with the supply chain, and we're gonna look at how the supply chain has evolved since the late nineteen and why we've seen so many hiccups and interruptions over the last two years. No one knows the current struggles of the supply chain better than Jonathan Wright. Jonathan is the global Managing Partner for Supply Chain Consulting at IBM, and I think now what we're going to see is uh strategic supply chains, strategic relationships which are brought together through technology, and that that vertical integration which once was through ownership, will now be through technology integration. Together, we'll look at the evolution of our modern day supply chain and explore how today's demand has created something called a bull whip effect. Jonathan and I will get into what all of this means and the ways technology can be used to help address current supply chain shortages. Let's dive in. Hi, Jonathan, it's a pleasure to meet you. It's a big moment for me, Malcolm. It's is an honor and it's great to be spending some time chatting to you about supply chain. Yeah, so this we have chosen a topic that is very much of the moment. I am dying for you to explain just what is going on right now. So I'm I feel like you're one of the few people who can actually tell me the big picture. I hope we can. I hope we can break that down and get into some detail. But it's certainly an exciting time to be working in supply chain. Is so much going on, and we've got to unpack some some issues to to get to the root. Cause I think, yeah, well, let's start with you know, three years ago, no one like me ever thought about a word about the state of the supply chain. Um, now people like me, do we hear it all the time. Tell me what has happened in the last say two years two to drive this disruption? Well, again, I often say to people, it's like welcome to literally we we've accelerated UM the kind of thoughts and the innovation around supply chain by ten years. And the pandemic has driven that. For sure, UM necessity is the driver of invention or innovation in this case. And and you can't avoid that COVID period because it really did challenge It put a shock into the supply chain, a shock on the supply side UM when Wuhan went into lockdown, and then a shock on the demand side when people started buying fundamentally different things than they had been doing. And and I think you know that's probably the biggest shock UM to the supply chaine since the war. In reality, is a supply chain system, right that has been disrupted. Can you be a little more specific on what you mean by disrupted? So you mentioned people started buying different things and certain parts of the world were no longer as capable of producing or moving products as did before. But can you could have drilled down on the on all of the sources here, Yeah, for sure, I mean, you know, we were running out of of people, We didn't have of toilet paper, all of the classic things and um, and we went into survival mode and and I think, you know, people roll their sleeves up, and we're tenacious, and they figured out how to solve some of those supply chain issues and keep society running and healthy. And then we went into resourceful mode, where we started to think about, hey, well we could repurpose some facilities and make more ppe, and we could take some fashion retailers and start creating new products. So this system, which has been very stable and just incrementally growing, now we're starting to repurpose things. And then of course we've had a rapid recovery. The world has started moving faster and coming back, and that recovery has put demand onto the supply chain at a time where the supply base is not robust because people are still in flex and so you know, really we're in a in a situation where we've got this very complex supply chain which is started to be out of balance, and it's going to take some work to get it rebalanced. Really, I was playing next, you know, in doing this series with IBM. One of the things that consistently been surprised about. Is the things IBM now thinks about that I wouldn't have thought they thought about ten years ago. Did IBM have people who thought about supply chain management? You know, we have or always kind of worked in supply chain, We have our own supply chain, but I think now it is just way more important than ever before. And this is at the time where we're seeing convergent technology having a real role to play, whether that's kind of blockchain, IoT AI and Watson, which will help us with really understanding the demand signal and the supply signal. So I think technology has got a real role to play, and we did see that through COVID. We saw those that we had invested ahead of the curve coming out faster, being able to respond quicker, being able to understand the supply base quicker, and the and the exposures and the risk that they had. UM So I think, you know, this is a bit of a golden age that we're facing now. At what point do we come to conceive of supply chain management and splashing problems as as explicitly technological and data problems as opposed to what you're talking about earlier relationships, you know, practical kind of bricks and mortary kind of questions. When does this transition to this notion of it, Oh, it's just another complicated data problem. And I sort of said, welcome to twenty that was a bit of the point, you know, I think this has been a huge acceleration, a huge jump forward, and the the interest now of corporations to invest in technology to solve some of these problems. If you go back to the early early supply chains, we had vertical integration right where companies forward rouge, you know, kind of they had on site, they made their own steel, they had the whole integrated supply chain, and that's the way that they built trust and collaborate action and security into the supply chains. And I think now what we're going to see is uh strategic supply chains, strategic relationships which are brought together through technology, and that that vertical integration, which once was through ownership, will now be through technology integration. A couple of questions, super interesting when you said welcome to did you mean that we are doing things because of this crisis and especially today that we might not have otherwise done until is exactly what I say, exactly give me, give me an example, a really concrete example. One of my one of my clients was I saying it would take them maybe a month to onboard a supplier. But if you if I got a new supplier, by time I've worked with them, I've done due diligence, I've figured out their systems and my systems have integrated them. Maybe it takes a month or longer, could take even three months. And through the pandemic, um there was this necessity to bring in the supply straight away. And guess what if you really break down some of those orthodoxes of the past and there's some of those practices, and you ask why, why why you can do it in three days straight away? And you can figure out with some technology and with some new processes, you can do that in three days. Because of that necessity is driving that innovation in the process. On the demand side. You know, basically, supply chains have always grown up thinking about what happened last yesterday, last week, last month, last year, will happen next month, next week? Right? And and now what we see is, um, that's not not the case. You know, the last two years are not a good proxy for what's going to happen in the next two years, We've got to really start thinking about what are the drivers that impact demand. The drivers could be a people working from home or not. You know, have I got another spike happening at school? Is open? Are? You know? Where are we maybe even hospitalizations in people movement, Whether all of these different aspects come into play to really understand at a zip code level, at a skew level, at a product level, you know, what is the demand and and so now we can use AI and analyze the data, refine the data that we have from new sources, not just from within my four walls of what did I sell yesterday, last month, last last quarter. I can now start thinking about all the external data. I can look at social media, I can look at you know, kind of data from the state and from local authorities and use that to actually inform what's happening on the ground and what people's behaviors are and what will that mean for demand. Those kinds of much more sophisticated forecasting models. Three years ago, we could have built them, but we didn't see the need. Correct, And what you're saying is all of a sudden, we now see the need and so we're building. The capability was there but not but not a motivation? Is that what you're saying, Absolutely, when you invest in technology, you want to make sure that there's a return on that investment, right, that you can actually drive real value and pre pandemic. From a forecasting perspective, it was less less important. Let's go back to two years ago as a as A for example, was three years ago? What have you? How many people would have had a deep map of their supply chain back then? Very few of the fortune the top two did not have the picture and the map that they needed. And what percentage now and have the picture of the map I needed? I say, it's a good question. I don't know certainly. All of the clients that I work with, there's a top priority for them, particularly now as many of them have got exposures to semiconductors and the like, so they're now having to go at much much more detailed analysis of their supply chain. So I think they've really had to, you know, kind of up the game. Ye, your phone must have been bringing off the hook for the last two years. How crazy has your life been? I mean, I'm fortunate that I work in supply chain and This has absolutely the most exciting time to work in supply chain, and whether it's you know, supporting clients with vaccine distribution and working through the issues of transparency and making sure that we understand how how to do that through too just supply issues and um and and helping clients navigate this volatile PERIODI is certainly one of the one of the positives that I think will come out of this is is more interesting supply chain and therefore us being able to attract new talent because one thing that we have got to do to solve these complex issues is have diverse talent. And I I personally believe that and we bring in more diverse talent cognitive, ethnic, gender diversity, we're much better able to solve for the world's most complex issues, and we'll see a much richer ability to solve for the future. How long does it take to build one of these maps. Let's say I come to you unfortunate for one reason another though I have simply neglected, I have the the most kind of plain vanilla supply chain map, and I'm freaking out, and I call you up and I say I want to go gold standard as fast as possible. I'm a company with sales of I don't know, fifty billion dollars. Okay, let's assume complex international, you know, like not an easy kisse. Um, how tell me how long? Tell me how many people would work on this problem? Tell me tell me how you would start? Yeah, it's actually, um, it's a bit of a trick question, right, because it's a lot easier than you think. And the reason it's a lot easier than you think is because many of the suppliers out there are already supplying other companies who already have mapped their supply chain. So we work with platform companies that are able to accelerate this journey towards critical risk modeling. We map the tier one suppliers, we prioritize the supply base, and in weeks, yes, weeks, we're able to get onboarded companies a view, a view of their deep supply chain, that's of their key suppliers in their supply chain. People are willing to share that kind of data. Yes, absolutely, that's the business model for these platform providers. You know, we partner with them. They make sure that we have the visibility, and that visibility is permissioned and restricted. Um, we use that in our own supply chain, and it's an incredibly powerful tool for getting into the deep supply chain. And then over time we can continue to build out and the richness of that data and the modeling, and then you have to start looking at how am I organized so I can use that data um and use that much more effectively. So what are my internal processes? And that's actually where the potentially the harder piece comes, which is reorganizing and getting people to to use data in a different way. I have a view that we should all have a virtual assistant by the side of our desks. In the same way that you you have a virtual as system at home, we should all have one in the supply chain. We can interact with natural language and we can ask what's and hey, you know, tell me what happens if if there's an issue at Malaysia Airport, what are my suppliers are going to be affected? Guess what? We internally already have that for our own supply chain system. But my vision is that every supply chain professional will have that virtual assistant and that they can access the data. But that acquires a different way of working. But if we get that right to me, he can have a cool, cool environment. We can attract more talent because instead of doing mundane, dull tasks transactional task, they can actually be doing value adding tasks. Do you walk me through this? You mentioned this little bit about what you do with the information. So I'm I'm the same company with this large, complex business. You've not given me this much more detailed, accurate map of what my supply him looks like. And we see a problem one of my suppliers, suppliers, supplier deep somewhere on the other side of the world. Who this is one of my critical components. And I see, Oh, it's supposed to come next week. I don't think it's going to come for two months. What what do I do with that information? How do I react to it? Well, that back in the year two thousand not here and Ericsson, if you remember, they were market leaders in mobile phones UM before before the world changed. They had two two very different strategies here around supplier management and UM. And actually Ericsson failed big time when there was a fire in Albuquerque, in New Mexico at a Philip's chip manufacturing point. And so this was all to do with internal processes. How you handle the information. The information came through that there was a fire, a lot of the chips had got you know, soaked and saturated and smoked damage, and UM and a mid manager at Ericson had had kind of got in contact with Phillips and had taken a risk assessment that the place was going to be up and running quite soon and there was no major action required, no major disruption. Nokia, on the other hand, had much more collaborative approach and they said, no, this, this could be a real issue here. I don't trust that information. I'm not going to be too complacent and and literally flew over, went down, did the risk assessment, said no, this, this is not going to be up and running in any near term. Um and went and triggered some other contracts they had and basically soaked up all of the supply of those chips. Long story short, Ericsson were unable to supply the market and ultimately failed and the company who were no longer making mobile phones and Nokia went from strength to strength until another technology evolution took place. But the processes and the strategies around how to handle the supply signal will handled very differently, and so so you had both of them had the same quantitative information. One of them though added a qualitative layer on top of that where they went and made an assessment of whether the the supplier was was being trustworthy in their assessment of how to interesting to work correct. And this is this is where the organization design and the skills and the capability will always be super important. And I think, yes, we've got to make sure that we have the right um that the number of suppliers and we've got kind of the balance of de risking a suppliers by having a number of contracts in place, and we haven't got sort of an exposure of one supplier. But then have I got the right skills and capability and a culture that that listens to risk and risk management and and is is absorbing that versus a culture of maybe complacency and trust which could lead to some failure. M hmm. I think, I think, I think you do get some are hard moments. I do think, you know, particularly when you start to look into um as you say, the deep supply chain map, you start to realize where those bottom necks are and they're not obvious. They're not obvious because when you start to model out and you start to see where those flows are. You might say, hey, I've got I've got too much risk here because of your one one location. So I think it's when you do that modeling of the supply chain um both in terms of physical flows, network modeling and the deep network, that you you start to see those vulnerabilities and nobody. The way that organizations are set up, you you tend to have people focusing on one category or one product line. You don't necessarily have people looking all the way across. What is the hardest problem to solve on this? In these kinds of you said one part of it you already said, well, it can be surprisingly easy if your suppliers have maps themselves. What's the hard part? I think that there's there's to the two hardest parts. M One is is the cleanliness of data. Right, It's it's very it's very typical in large organizations for the data to be dirty. And like oil, right, if you've get dirty oil, it's a problem. Right, if you get nice refined oil, it's valuable. I think the same for data. When you refine it and you clean it and you use it in the right way, it's very valuable. But if it's dirty UM. Then it's a problem I have. You know, a client, a retailer couldn't understand why they couldn't UM have on shelf availability. They couldn't they couldn't replenish the shelf quick enough. And the reason was that in the system it was recorded as the shelf was recorded as ten centimeters not not a meter. So who you know, when I send one product, I fill the shelf up I need because the system thinks that the shelf is this big. Actually the shelf is this big. So you you why how long had that error existed in? There have been going on for a while for a while, and and then they have sort of manual workarounds. But but you know, if you lose that tribal knowledge, you use that manual work around, then you start to realize, you know, what's actually happening, and then to find the systemic solution. How how long into COVID before you realized that your world was going to explode? Well, actually, pretty early on some of the leaders were coming to us saying we need help. It was one consumer products company. I remember literally in in that March April time, we had a project running where we were doing this data driven demand forecasting, and we created a dashboard for them. Within a month, they could see all of their products, all of their customers retailers at a zip code level, and we had a map of where we thought the demand would go. In Minneapolis. They were not going to be a significant drop off of buying single chocolates on the way to work as a snack because there's nobody going to work. Instead, they would be their family packs were going to go up by because people would be would be gorging on them at home. So that signal was super important for that consumer products company, um of Food Food Company to to then repurpose their manufacturing lines to move from singles to family packs. And if they could get that signal ahead of the retailers giving them that signal, they could get the ground truth. Then they could they could proactively sort out that was happening in April time. But it was new technology and new new analysis, and within a month they had that new analysis. It was it was an incredible piece of work. Well, so within a month they had they had reconfigured their manufacturing lines to do more family packs than singles, absolutely and with and within a month they had the data and the facts behind it to to help them, you know, um, get them to get the balance right, to stay with that example that over the last let's just say six months, they would be monitors and gradually readjusting their mix as people start going back to work. Well, and then and then we come back to this this problem which is the bullwhip effect, right, and the bull whip effect is a real problem that we have at the moment um. What is the bullwhip effect? The bullwhip effect says that I can see a demand signal for maybe extra five units, so I forecast I'm gonna sell an extra five units. But my distributor says, oh, they're going to sell an extra five units, but they typically get it wrong. So I'm going to say an extra ten units. So they put that back onto their supply and say, hey, you know this company is now gone, is gone extra ten years. They say, oh, we'll make that twenty and then their supplies says, oh, they typically, you know, I don't want to go short here, so we'll make it fifty. Before you know it, my five units of demand further down the supply chain is fifty units. Now this happens where you have a lack of trust in the demand signal, because if you don't really trust that demand signal, you always inflated a little bit um. And so what's happening at the moment, We've got problems on both sides. As I said, when with that, that demand signal is hard to understand because we don't really know what what the new sort of behavior is. And the supply signal, we know is disruptive because we've got this repurposing going on and rebalancing in the supply. So what happens now is I'm going, Hey, I'm going to order ten, not five. I'm gonna attend because you know, I'm worried about my supply in fact and my order the whole season's worth in one go. I'm instead of having weekly orders, I might put monthly orders in all quarterly order. And so then you get this bumper bullwhip effect where oh, they put in a whole quarter of wow demands picking up. I'm gonna double that. I'm going to triple that. So I'm worried about this amplitude effect that's happening as people start to say I'm gonna put bigger supply points in because they don't trust my supply base, and people say, you don't really know your demand, so actually we're going to continue to inflate um. And so that has problems obviously because there's going to be some winners and some losers with that scenario. So it could be the case I'm in a competitive marketplace. I might trust my own data, but I don't trust you trust your data, right, So I behave strategically and say, well, I don't know what Jonathan is doing. He could be he could be holding this thing. So even though I only need five units, I'm going to return. Yeah, exactly, But how do you restore trust systemically? Then? Yeah, you you have to build trust I think through technology, because you have to find those suppliers and those strategic supply points, and you have to start sharing data and actually proving that that five is real, right, and that you shouldn't be inflating it. And I also need to know that you, Malcolm, is my supplier, right, that that you have got the capacity that I need, Because if I'm worried that you might allocate your capacity to somewhere else, then I'm going to double my demand onto you so that you give me some if I give you, if I order thirty, maybe I'll get the five that I wanted. So you start to worry a little bit about classic hoarding problem really because I'm not sure I fully understand. So I can see how on an individual company level, technology can allow me to get to create a far more accurate assessment of what my true demand for something is. But but everyone has to have trust in our own estimates in order for the system to work again and for hoarding to be prevented. So I don't how do you get how do you go from individual act or trust two everyone in the marketplace trusting everyone else's estimates. I I think you have to do it pace pace by pace, and I think you have you get your own demand signal clear. UM. You have to build the relationships with your suppliers, make sure you build trust with them, and you put technology in place to share information with them. And over time you have to you have to just start working working through that UM and hopefully we we will start to see the supply base rebalancing UM and settling, the vibrations calming down a bit, the bullwidth perfect calming down a bit, and we'll have a more secure supply of products. And then we'll be able to trust the demand signal. The holiday season is a big, big effect at the moment, right. You know, some of the analysis that we've seen says that the shoppers are more likely, as you would expect, to start shopping earlier right than they have in the past, and one in four global consumers have already started shopping, so you're starting to see this early consumer demand picking up now. At the same time, where what we're seeing in analysis is that they're unlikely to spend more this year than they did last year. So it's interesting or only marginally more. So they're shopping earlier, but they're not going to shop shop more. So one of the interesting things here is again is understanding the behavior is does that mean I pick up that signal earlier, that demand is increasing, that I've got a big, big economic bounds, or does it mean that people are just buying earlier because they're worried about the supply point those two forecasts is huge. One is bumper crop, the other is the same crap but very very different demands on your manufacturing distribution correct, and that's where this more sophisticated driver based analysis of demand becomes really important. And then building that type relationship with my supply base, so I'm keeping them up to speed as to what we're seeing because any sort of drop up off means, hey, we're not seeing the massive recovery that we might have been. So I have to have that transparency with my key suppliers to make sure that I don't have the bullwhip effect continuing to amplify. So, now that we have some incident into the holiday season, what should consumers do and what should suppliers and ants do? The tough one on on customers because you know, I think, you know, the natural statement from MA would be, you know, please don't go out there and buy too early. Don't don't think there's a rush. Right, But then you say that and then natural thing is people are going to go out and rush and buy things early. So, you know, any any communication wherein the consumer is a tough message. You know. I think the best thing is that the retailers and the suppliers that they stay really close to each other, that they are communicating regularly to make sure that they can have a trusted supply. As long as there's a trusted supply and that product is available, then we will make sure that we avoid any kind of surge hoarding happening from from a customer perspective. So I think for me, I put the reliance onto the onto the retailers and the suppliers to just work really closely together, to really collaborate and make sure they're listening and watching the supply signal at a increased level so that they can really understand where you know, where the where the demand is going, um, and that they respond as quickly as possible to that, and then you know, hopefully there'll be enough product and we won't have any hoarding and everyone will have the right turkey at the right time and the right gifts for their family and friends. Jon has been so much fun. Um, I really appreciate you taking the time, and I disregard what you say and rush from this interview in order everything I care in the next fifteen minutes because now I'm petrified exactly. But maybe by next Christmas your magic will have transformed the marketplace. Really really enjoyed the conversation, Malcolm, and you know, just wonderful to spend time with you. So thank you for your time. Thank you again to Jonathan. Right as I think back to all the conversations I've had here on smart Talks. I'm filled with a renewed sense of promise, from supply chains and quantum computing to five G and empathetic AI. IBM and its partners are truly on the cutting edge of technology that will shape the way we live and work. Who knows what industry they will revolutionize next. Smart Talks with IBM is produced by Emily Rostak and Molly Sosha, with Carli Migliori and Katherine Gurrodo. Edited by Karen shakerge engineering by Mauran Gonzales and Unamrera, mixed and mastered by Jason Gambrel. Music by Granmascope. Special thanks also to Kathy Callaghan and Kelly me LaBelle, Jacob Briceburg, Heather Fane, Eric Sandler, Maggie Taylor and the team's at eight Bar and IBM. Smart Talks with IBM is a production of Pushkin Industries and I Heart Radio. This is a paid advertisement from IBM. You can find more episodes at IBM dot com slash smart Talks. You'll find more Pushkin podcasts on the I Heart Radio app, Apple Podcasts, or wherever you like to listen. I'm Malcolm Gladwell, see you next time.

Hello, Hello. This is Smart Talks with IBM, a podcast from Pushkin Industries, our our radio and IBM about what it means to look at today's most challenging problems in a new way. I'm Malcolm Gladwell. For our final episode, I bring you an ode to the holiday shopping season. Well not just a holiday shopping season. This episode is for all of you who waited six months or longer for your new couch to arrive, and those of you still struggling to buy a car because of the chip shortage. It's all about what's going on with the supply chain, and we're gonna look at how the supply chain has evolved since the late nineteen and why we've seen so many hiccups and interruptions over the last two years. No one knows the current struggles of the supply chain better than Jonathan Wright. Jonathan is the global Managing Partner for Supply Chain Consulting at IBM, and I think now what we're going to see is uh strategic supply chains, strategic relationships which are brought together through technology, and that that vertical integration which once was through ownership, will now be through technology integration. Together, we'll look at the evolution of our modern day supply chain and explore how today's demand has created something called a bull whip effect. Jonathan and I will get into what all of this means and the ways technology can be used to help address current supply chain shortages. Let's dive in. Hi, Jonathan, it's a pleasure to meet you. It's a big moment for me, Malcolm. It's is an honor and it's great to be spending some time chatting to you about supply chain. Yeah, so this we have chosen a topic that is very much of the moment. I am dying for you to explain just what is going on right now. So I'm I feel like you're one of the few people who can actually tell me the big picture. I hope we can. I hope we can break that down and get into some detail. But it's certainly an exciting time to be working in supply chain. Is so much going on, and we've got to unpack some some issues to to get to the root. Cause I think, yeah, well, let's start with you know, three years ago, no one like me ever thought about a word about the state of the supply chain. Um, now people like me, do we hear it all the time. Tell me what has happened in the last say two years two to drive this disruption? Well, again, I often say to people, it's like welcome to literally we we've accelerated UM the kind of thoughts and the innovation around supply chain by ten years. And the pandemic has driven that. For sure, UM necessity is the driver of invention or innovation in this case. And and you can't avoid that COVID period because it really did challenge It put a shock into the supply chain, a shock on the supply side UM when Wuhan went into lockdown, and then a shock on the demand side when people started buying fundamentally different things than they had been doing. And and I think you know that's probably the biggest shock UM to the supply chaine since the war. In reality, is a supply chain system, right that has been disrupted. Can you be a little more specific on what you mean by disrupted? So you mentioned people started buying different things and certain parts of the world were no longer as capable of producing or moving products as did before. But can you could have drilled down on the on all of the sources here, Yeah, for sure, I mean, you know, we were running out of of people, We didn't have of toilet paper, all of the classic things and um, and we went into survival mode and and I think, you know, people roll their sleeves up, and we're tenacious, and they figured out how to solve some of those supply chain issues and keep society running and healthy. And then we went into resourceful mode, where we started to think about, hey, well we could repurpose some facilities and make more ppe, and we could take some fashion retailers and start creating new products. So this system, which has been very stable and just incrementally growing, now we're starting to repurpose things. And then of course we've had a rapid recovery. The world has started moving faster and coming back, and that recovery has put demand onto the supply chain at a time where the supply base is not robust because people are still in flex and so you know, really we're in a in a situation where we've got this very complex supply chain which is started to be out of balance, and it's going to take some work to get it rebalanced. Really, I was playing next, you know, in doing this series with IBM. One of the things that consistently been surprised about. Is the things IBM now thinks about that I wouldn't have thought they thought about ten years ago. Did IBM have people who thought about supply chain management? You know, we have or always kind of worked in supply chain, We have our own supply chain, but I think now it is just way more important than ever before. And this is at the time where we're seeing convergent technology having a real role to play, whether that's kind of blockchain, IoT AI and Watson, which will help us with really understanding the demand signal and the supply signal. So I think technology has got a real role to play, and we did see that through COVID. We saw those that we had invested ahead of the curve coming out faster, being able to respond quicker, being able to understand the supply base quicker, and the and the exposures and the risk that they had. UM So I think, you know, this is a bit of a golden age that we're facing now. At what point do we come to conceive of supply chain management and splashing problems as as explicitly technological and data problems as opposed to what you're talking about earlier relationships, you know, practical kind of bricks and mortary kind of questions. When does this transition to this notion of it, Oh, it's just another complicated data problem. And I sort of said, welcome to twenty that was a bit of the point, you know, I think this has been a huge acceleration, a huge jump forward, and the the interest now of corporations to invest in technology to solve some of these problems. If you go back to the early early supply chains, we had vertical integration right where companies forward rouge, you know, kind of they had on site, they made their own steel, they had the whole integrated supply chain, and that's the way that they built trust and collaborate action and security into the supply chains. And I think now what we're going to see is uh strategic supply chains, strategic relationships which are brought together through technology, and that that vertical integration, which once was through ownership, will now be through technology integration. A couple of questions, super interesting when you said welcome to did you mean that we are doing things because of this crisis and especially today that we might not have otherwise done until is exactly what I say, exactly give me, give me an example, a really concrete example. One of my one of my clients was I saying it would take them maybe a month to onboard a supplier. But if you if I got a new supplier, by time I've worked with them, I've done due diligence, I've figured out their systems and my systems have integrated them. Maybe it takes a month or longer, could take even three months. And through the pandemic, um there was this necessity to bring in the supply straight away. And guess what if you really break down some of those orthodoxes of the past and there's some of those practices, and you ask why, why why you can do it in three days straight away? And you can figure out with some technology and with some new processes, you can do that in three days. Because of that necessity is driving that innovation in the process. On the demand side. You know, basically, supply chains have always grown up thinking about what happened last yesterday, last week, last month, last year, will happen next month, next week? Right? And and now what we see is, um, that's not not the case. You know, the last two years are not a good proxy for what's going to happen in the next two years, We've got to really start thinking about what are the drivers that impact demand. The drivers could be a people working from home or not. You know, have I got another spike happening at school? Is open? Are? You know? Where are we maybe even hospitalizations in people movement, Whether all of these different aspects come into play to really understand at a zip code level, at a skew level, at a product level, you know, what is the demand and and so now we can use AI and analyze the data, refine the data that we have from new sources, not just from within my four walls of what did I sell yesterday, last month, last last quarter. I can now start thinking about all the external data. I can look at social media, I can look at you know, kind of data from the state and from local authorities and use that to actually inform what's happening on the ground and what people's behaviors are and what will that mean for demand. Those kinds of much more sophisticated forecasting models. Three years ago, we could have built them, but we didn't see the need. Correct, And what you're saying is all of a sudden, we now see the need and so we're building. The capability was there but not but not a motivation? Is that what you're saying, Absolutely, when you invest in technology, you want to make sure that there's a return on that investment, right, that you can actually drive real value and pre pandemic. From a forecasting perspective, it was less less important. Let's go back to two years ago as a as A for example, was three years ago? What have you? How many people would have had a deep map of their supply chain back then? Very few of the fortune the top two did not have the picture and the map that they needed. And what percentage now and have the picture of the map I needed? I say, it's a good question. I don't know certainly. All of the clients that I work with, there's a top priority for them, particularly now as many of them have got exposures to semiconductors and the like, so they're now having to go at much much more detailed analysis of their supply chain. So I think they've really had to, you know, kind of up the game. Ye, your phone must have been bringing off the hook for the last two years. How crazy has your life been? I mean, I'm fortunate that I work in supply chain and This has absolutely the most exciting time to work in supply chain, and whether it's you know, supporting clients with vaccine distribution and working through the issues of transparency and making sure that we understand how how to do that through too just supply issues and um and and helping clients navigate this volatile PERIODI is certainly one of the one of the positives that I think will come out of this is is more interesting supply chain and therefore us being able to attract new talent because one thing that we have got to do to solve these complex issues is have diverse talent. And I I personally believe that and we bring in more diverse talent cognitive, ethnic, gender diversity, we're much better able to solve for the world's most complex issues, and we'll see a much richer ability to solve for the future. How long does it take to build one of these maps. Let's say I come to you unfortunate for one reason another though I have simply neglected, I have the the most kind of plain vanilla supply chain map, and I'm freaking out, and I call you up and I say I want to go gold standard as fast as possible. I'm a company with sales of I don't know, fifty billion dollars. Okay, let's assume complex international, you know, like not an easy kisse. Um, how tell me how long? Tell me how many people would work on this problem? Tell me tell me how you would start? Yeah, it's actually, um, it's a bit of a trick question, right, because it's a lot easier than you think. And the reason it's a lot easier than you think is because many of the suppliers out there are already supplying other companies who already have mapped their supply chain. So we work with platform companies that are able to accelerate this journey towards critical risk modeling. We map the tier one suppliers, we prioritize the supply base, and in weeks, yes, weeks, we're able to get onboarded companies a view, a view of their deep supply chain, that's of their key suppliers in their supply chain. People are willing to share that kind of data. Yes, absolutely, that's the business model for these platform providers. You know, we partner with them. They make sure that we have the visibility, and that visibility is permissioned and restricted. Um, we use that in our own supply chain, and it's an incredibly powerful tool for getting into the deep supply chain. And then over time we can continue to build out and the richness of that data and the modeling, and then you have to start looking at how am I organized so I can use that data um and use that much more effectively. So what are my internal processes? And that's actually where the potentially the harder piece comes, which is reorganizing and getting people to to use data in a different way. I have a view that we should all have a virtual assistant by the side of our desks. In the same way that you you have a virtual as system at home, we should all have one in the supply chain. We can interact with natural language and we can ask what's and hey, you know, tell me what happens if if there's an issue at Malaysia Airport, what are my suppliers are going to be affected? Guess what? We internally already have that for our own supply chain system. But my vision is that every supply chain professional will have that virtual assistant and that they can access the data. But that acquires a different way of working. But if we get that right to me, he can have a cool, cool environment. We can attract more talent because instead of doing mundane, dull tasks transactional task, they can actually be doing value adding tasks. Do you walk me through this? You mentioned this little bit about what you do with the information. So I'm I'm the same company with this large, complex business. You've not given me this much more detailed, accurate map of what my supply him looks like. And we see a problem one of my suppliers, suppliers, supplier deep somewhere on the other side of the world. Who this is one of my critical components. And I see, Oh, it's supposed to come next week. I don't think it's going to come for two months. What what do I do with that information? How do I react to it? Well, that back in the year two thousand not here and Ericsson, if you remember, they were market leaders in mobile phones UM before before the world changed. They had two two very different strategies here around supplier management and UM. And actually Ericsson failed big time when there was a fire in Albuquerque, in New Mexico at a Philip's chip manufacturing point. And so this was all to do with internal processes. How you handle the information. The information came through that there was a fire, a lot of the chips had got you know, soaked and saturated and smoked damage, and UM and a mid manager at Ericson had had kind of got in contact with Phillips and had taken a risk assessment that the place was going to be up and running quite soon and there was no major action required, no major disruption. Nokia, on the other hand, had much more collaborative approach and they said, no, this, this could be a real issue here. I don't trust that information. I'm not going to be too complacent and and literally flew over, went down, did the risk assessment, said no, this, this is not going to be up and running in any near term. Um and went and triggered some other contracts they had and basically soaked up all of the supply of those chips. Long story short, Ericsson were unable to supply the market and ultimately failed and the company who were no longer making mobile phones and Nokia went from strength to strength until another technology evolution took place. But the processes and the strategies around how to handle the supply signal will handled very differently, and so so you had both of them had the same quantitative information. One of them though added a qualitative layer on top of that where they went and made an assessment of whether the the supplier was was being trustworthy in their assessment of how to interesting to work correct. And this is this is where the organization design and the skills and the capability will always be super important. And I think, yes, we've got to make sure that we have the right um that the number of suppliers and we've got kind of the balance of de risking a suppliers by having a number of contracts in place, and we haven't got sort of an exposure of one supplier. But then have I got the right skills and capability and a culture that that listens to risk and risk management and and is is absorbing that versus a culture of maybe complacency and trust which could lead to some failure. M hmm. I think, I think, I think you do get some are hard moments. I do think, you know, particularly when you start to look into um as you say, the deep supply chain map, you start to realize where those bottom necks are and they're not obvious. They're not obvious because when you start to model out and you start to see where those flows are. You might say, hey, I've got I've got too much risk here because of your one one location. So I think it's when you do that modeling of the supply chain um both in terms of physical flows, network modeling and the deep network, that you you start to see those vulnerabilities and nobody. The way that organizations are set up, you you tend to have people focusing on one category or one product line. You don't necessarily have people looking all the way across. What is the hardest problem to solve on this? In these kinds of you said one part of it you already said, well, it can be surprisingly easy if your suppliers have maps themselves. What's the hard part? I think that there's there's to the two hardest parts. M One is is the cleanliness of data. Right, It's it's very it's very typical in large organizations for the data to be dirty. And like oil, right, if you've get dirty oil, it's a problem. Right, if you get nice refined oil, it's valuable. I think the same for data. When you refine it and you clean it and you use it in the right way, it's very valuable. But if it's dirty UM. Then it's a problem I have. You know, a client, a retailer couldn't understand why they couldn't UM have on shelf availability. They couldn't they couldn't replenish the shelf quick enough. And the reason was that in the system it was recorded as the shelf was recorded as ten centimeters not not a meter. So who you know, when I send one product, I fill the shelf up I need because the system thinks that the shelf is this big. Actually the shelf is this big. So you you why how long had that error existed in? There have been going on for a while for a while, and and then they have sort of manual workarounds. But but you know, if you lose that tribal knowledge, you use that manual work around, then you start to realize, you know, what's actually happening, and then to find the systemic solution. How how long into COVID before you realized that your world was going to explode? Well, actually, pretty early on some of the leaders were coming to us saying we need help. It was one consumer products company. I remember literally in in that March April time, we had a project running where we were doing this data driven demand forecasting, and we created a dashboard for them. Within a month, they could see all of their products, all of their customers retailers at a zip code level, and we had a map of where we thought the demand would go. In Minneapolis. They were not going to be a significant drop off of buying single chocolates on the way to work as a snack because there's nobody going to work. Instead, they would be their family packs were going to go up by because people would be would be gorging on them at home. So that signal was super important for that consumer products company, um of Food Food Company to to then repurpose their manufacturing lines to move from singles to family packs. And if they could get that signal ahead of the retailers giving them that signal, they could get the ground truth. Then they could they could proactively sort out that was happening in April time. But it was new technology and new new analysis, and within a month they had that new analysis. It was it was an incredible piece of work. Well, so within a month they had they had reconfigured their manufacturing lines to do more family packs than singles, absolutely and with and within a month they had the data and the facts behind it to to help them, you know, um, get them to get the balance right, to stay with that example that over the last let's just say six months, they would be monitors and gradually readjusting their mix as people start going back to work. Well, and then and then we come back to this this problem which is the bullwhip effect, right, and the bull whip effect is a real problem that we have at the moment um. What is the bullwhip effect? The bullwhip effect says that I can see a demand signal for maybe extra five units, so I forecast I'm gonna sell an extra five units. But my distributor says, oh, they're going to sell an extra five units, but they typically get it wrong. So I'm going to say an extra ten units. So they put that back onto their supply and say, hey, you know this company is now gone, is gone extra ten years. They say, oh, we'll make that twenty and then their supplies says, oh, they typically, you know, I don't want to go short here, so we'll make it fifty. Before you know it, my five units of demand further down the supply chain is fifty units. Now this happens where you have a lack of trust in the demand signal, because if you don't really trust that demand signal, you always inflated a little bit um. And so what's happening at the moment, We've got problems on both sides. As I said, when with that, that demand signal is hard to understand because we don't really know what what the new sort of behavior is. And the supply signal, we know is disruptive because we've got this repurposing going on and rebalancing in the supply. So what happens now is I'm going, Hey, I'm going to order ten, not five. I'm gonna attend because you know, I'm worried about my supply in fact and my order the whole season's worth in one go. I'm instead of having weekly orders, I might put monthly orders in all quarterly order. And so then you get this bumper bullwhip effect where oh, they put in a whole quarter of wow demands picking up. I'm gonna double that. I'm going to triple that. So I'm worried about this amplitude effect that's happening as people start to say I'm gonna put bigger supply points in because they don't trust my supply base, and people say, you don't really know your demand, so actually we're going to continue to inflate um. And so that has problems obviously because there's going to be some winners and some losers with that scenario. So it could be the case I'm in a competitive marketplace. I might trust my own data, but I don't trust you trust your data, right, So I behave strategically and say, well, I don't know what Jonathan is doing. He could be he could be holding this thing. So even though I only need five units, I'm going to return. Yeah, exactly, But how do you restore trust systemically? Then? Yeah, you you have to build trust I think through technology, because you have to find those suppliers and those strategic supply points, and you have to start sharing data and actually proving that that five is real, right, and that you shouldn't be inflating it. And I also need to know that you, Malcolm, is my supplier, right, that that you have got the capacity that I need, Because if I'm worried that you might allocate your capacity to somewhere else, then I'm going to double my demand onto you so that you give me some if I give you, if I order thirty, maybe I'll get the five that I wanted. So you start to worry a little bit about classic hoarding problem really because I'm not sure I fully understand. So I can see how on an individual company level, technology can allow me to get to create a far more accurate assessment of what my true demand for something is. But but everyone has to have trust in our own estimates in order for the system to work again and for hoarding to be prevented. So I don't how do you get how do you go from individual act or trust two everyone in the marketplace trusting everyone else's estimates. I I think you have to do it pace pace by pace, and I think you have you get your own demand signal clear. UM. You have to build the relationships with your suppliers, make sure you build trust with them, and you put technology in place to share information with them. And over time you have to you have to just start working working through that UM and hopefully we we will start to see the supply base rebalancing UM and settling, the vibrations calming down a bit, the bullwidth perfect calming down a bit, and we'll have a more secure supply of products. And then we'll be able to trust the demand signal. The holiday season is a big, big effect at the moment, right. You know, some of the analysis that we've seen says that the shoppers are more likely, as you would expect, to start shopping earlier right than they have in the past, and one in four global consumers have already started shopping, so you're starting to see this early consumer demand picking up now. At the same time, where what we're seeing in analysis is that they're unlikely to spend more this year than they did last year. So it's interesting or only marginally more. So they're shopping earlier, but they're not going to shop shop more. So one of the interesting things here is again is understanding the behavior is does that mean I pick up that signal earlier, that demand is increasing, that I've got a big, big economic bounds, or does it mean that people are just buying earlier because they're worried about the supply point those two forecasts is huge. One is bumper crop, the other is the same crap but very very different demands on your manufacturing distribution correct, and that's where this more sophisticated driver based analysis of demand becomes really important. And then building that type relationship with my supply base, so I'm keeping them up to speed as to what we're seeing because any sort of drop up off means, hey, we're not seeing the massive recovery that we might have been. So I have to have that transparency with my key suppliers to make sure that I don't have the bullwhip effect continuing to amplify. So, now that we have some incident into the holiday season, what should consumers do and what should suppliers and ants do? The tough one on on customers because you know, I think, you know, the natural statement from MA would be, you know, please don't go out there and buy too early. Don't don't think there's a rush. Right, But then you say that and then natural thing is people are going to go out and rush and buy things early. So, you know, any any communication wherein the consumer is a tough message. You know. I think the best thing is that the retailers and the suppliers that they stay really close to each other, that they are communicating regularly to make sure that they can have a trusted supply. As long as there's a trusted supply and that product is available, then we will make sure that we avoid any kind of surge hoarding happening from from a customer perspective. So I think for me, I put the reliance onto the onto the retailers and the suppliers to just work really closely together, to really collaborate and make sure they're listening and watching the supply signal at a increased level so that they can really understand where you know, where the where the demand is going, um, and that they respond as quickly as possible to that, and then you know, hopefully there'll be enough product and we won't have any hoarding and everyone will have the right turkey at the right time and the right gifts for their family and friends. Jon has been so much fun. Um, I really appreciate you taking the time, and I disregard what you say and rush from this interview in order everything I care in the next fifteen minutes because now I'm petrified exactly. But maybe by next Christmas your magic will have transformed the marketplace. Really really enjoyed the conversation, Malcolm, and you know, just wonderful to spend time with you. So thank you for your time. Thank you again to Jonathan. Right as I think back to all the conversations I've had here on smart Talks. I'm filled with a renewed sense of promise, from supply chains and quantum computing to five G and empathetic AI. IBM and its partners are truly on the cutting edge of technology that will shape the way we live and work. Who knows what industry they will revolutionize next. Smart Talks with IBM is produced by Emily Rostak and Molly Sosha, with Carli Migliori and Katherine Gurrodo. Edited by Karen shakerge engineering by Mauran Gonzales and Unamrera, mixed and mastered by Jason Gambrel. Music by Granmascope. Special thanks also to Kathy Callaghan and Kelly me LaBelle, Jacob Briceburg, Heather Fane, Eric Sandler, Maggie Taylor and the team's at eight Bar and IBM. Smart Talks with IBM is a production of Pushkin Industries and I Heart Radio. This is a paid advertisement from IBM. You can find more episodes at IBM dot com slash smart Talks. You'll find more Pushkin podcasts on the I Heart Radio app, Apple Podcasts, or wherever you like to listen. I'm Malcolm Gladwell, see you next time.