In this week's episode of the Digital Supply Chain podcast, I talk to Throughput CEO Ali Raza.
We had a really interesting chat covering what operations does when disasters throw off planning systems, the gap operations people need to be filled by IT, and thoughts about some of the solutions on the market
It was a fascinating conversation. I learned loads. I hope you do too.
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The best solutions in the market that I'm seeing are giving you a ground reality check, allowing, you do some sort of scenario planning, but more importantly they're creating this bridge between the actual operations and the financial owners, to communicate that this is what we need to keep our end customers happy and profitable and keep the business and people intactTom Raftery:
Good morning, good afternoon, or good evening, wherever you are in the world. This is the digital supply chain podcast. The number one podcast, focusing on the digitization of supply chain. And I'm your host global vice-president at SAP Tom Raftery. Hi everyone. Welcome to the digital supply chain podcast. My name is Tom Raftery with SAP. And with me on the show today, I have my special guest Ali, Ali. Welcome to the podcast. Would you like to introduce yourself?Ali Raza:
Hi, Tom. Thanks for hosting us in Throughput on the podcast. My name is Ali Raza. I am the CEO and founder of Throughput. At throughput. we optimize end-to-end supply chains by sensing demand changes early enough to move and make what actually sells and have developed a concept around predictive replenishment.Tom Raftery:
Okay. So what is predictive replenishment would be the first question that would come to mind. Cause it's not an expression I've heard before?Ali Raza:
Yeah. So most of the AI technologies these days are focused on computer vision defect, predictive maintenance. Predictive replenishment, the way we term it is, figuring out based off of how lead times actually impact your stocking levels and based off of the changes in demand. How to predict what to deliver on time in full down to the nth location. So we've basically termed that as predictive replenishment.Tom Raftery:
Okay, very good. we're living through kind of weird times at the moment. Ali, I mean we've had a lot of disruptions to supply chain in the last couple of years. If I were to list a few of them off, I would start with Brexit. For example, here in Europe was a big one for us. And then after that, we'd get into COVID, we get into, the whole semiconductor thing that's going on, the ports issue, containers the war now that's happening in Ukraine with Russia invading. you've got a bit of a history of working in disruptive supply chain environments. Do you want to tell us a bit about that?Ali Raza:
Yeah, absolutely. So my career actually didn't start on the it side, or it may have started doing some aspects, hoops, simulations around bottleneck detection, but I worked in the oil field services side for many years, managing and doing work across eight countries. One of my last role was, was running, operations for Pakistan and Yemen during the Saudi invasion. And at that time, we sort of had the opposite situation where oil was going from $150 to $60 a barrel and creating all sorts of stress, uh, in terms of, know, keeping workers on and so forth and, uh, making sure that the business was profitable. So, supply chain disruptions, like I'd never seen at the time, I think it was 27, 28. And, uh, I started realizing that a lot of the data that we had, uh, wasn't making a lot of sense. So we started looking. Demand signals looking at capacity management and inventory management from a new perspective and by doing so, it gave us, enough of a, alert early enough to, you know, get rid of stuff that we didn't need evacuate people weeks before anyone else did. So it is, challenging times for many people, but in pockets, around the world, there have been such incidents. And so that's sort of my background in how we've been dealing with supply chain issues. We were actually in Italy when the pandemic broke out. And, uh, taking care of operations there, working with customers. And so we've seen the wave. We followed the wave. We sort of follow these supply chain disruptions from ports to ports and locations to locations. Was in Yokohama when the ship was on standby. Right. So it's almost like we'd been chasing fires and also chasing opportunities like booms and the building materials industry, like cement semiconductor, as you mentioned, uh, we might be starting to work there soon. So, there's an infinite amount of supply chain problems, as you know right now,Tom Raftery:
And what's your takeaway from having lived through the experience in Yemen, for example?Ali Raza:
Yeah. I, I mean, uh, you know, once you go through it, it's all very, uh, you know, it's a first time when you look at it and you may feel that there's not a lot of planning involved, but when you look back at it, it's very systematic, right. Supply chains react as they're designed. So if you start thinking in terms of models, right. Understanding what you're really capable of from a capacity perspective, from your equipment or just, uh, personnel and how you can actually still operate profitably and deliver on time. There are opportunities to be successful, in these sorts of environments and keep a calm head and continue moving forward. Right? And a lot of that is enabled by data that can give you the confidence to say, even though there might be an infinite amount of things that are happening today, I know that ground realities is this is what I'm capable of doing. So a lot of that preparation comes, came from understanding the data, understanding what we're really capable of. And that also simplified the problem in terms of deliverables. So I think it's not new, I think these are very cyclical events, right? Each industry, unfortunately, some countries have to go through this, but there's a lot of planning that can be done today that can help with the execution side of things.Tom Raftery:
And is that what Throughput is working on?Ali Raza:
Absolutely. I think we're trying to bridge the gap, right? Typically if you look at operations, operations, don't leverage enough IT, in terms of understanding their data, maybe they'll pull a report every quarter or some customers you work with once a year. But once you start, being a little bit more proactive, understanding your sales, understanding your operations planning, and, uh, being more iterative about it, you can start picking up on patterns, right? But most, most importantly, you understand your capabilities of your people, how to leverage them, how to do more with them and, uh, to be successful. So I think the problem we're solving is okay. There's. There's a lot of operational supply chain problems. And, there's a lot of, data in certain spots in the supply chain like downstream and retail, you can find lots of data and then there's data. That's not so relevant or actually super relevant, but not as available. I say up in the tier one or tier two, or even like the raw material side of things, right. Where stuff is being blown up at the quarries and the rocks are being moved to the cement factory. And so we're trying to bridge that end to end gap to understand, okay. How does the supply chain for say cement work or a supply chain for supermarket work, or how does the supply chain for an automotive company work? Right. So that's where most of our work is the ability to map it using existing data that exists in any sort of ERP system and being able to take that map and understand how it changes over time. And communicate the value in terms of improvement in working capital, even earnings per share the CEO of a fortune 500 company to say, if we improve our supply chain using the existing data, and what we predict will be the next big things that are about to happen. This is how we can get through some of these disruptions, right? So that's really what we're working on. Taking that data up to the C-suite and, talking about how the material flow actually is tied to the free cashflow of the company.Tom Raftery:
Okay. And can you speak to any examples of problems that customers have had that you've managed to resolve for them?Ali Raza:
Yeah, absolutely. So we just sat down with, the CIO of Progressive Cement and, uh, the head of Microsoft's worldwide, uh, he's the director of supply chain retail, on the Azure cloud. Right. And so, as you know, the biggest problem right now in supply chains is not really the bottlenecks the way we see it, the big problem is that products that don't sell predictably result in a lot of stockpiling and additional costs on the supply chain side. But the even bigger problem is if you're an industry that's going through a boom, like maritime or cement or semiconductor, right. The bigger problem is that in order to move products that are in demand, CFOs end up spending money on capital expenditures, like trucks, like injection molding machines, like new warehousing. And so, the problem, on that side is sometimes you can't get that equipment in countries. Even if you have a big boom in your side of the business or industry. Uh, if you can't get the machine to make it, you're not going to fulfill it. So we ran into this challenge with this company and, they were looking to buy, a large amount of trucks, to move more cement from, uh, all the way down their supply chain. And so we basically came in and said, well, okay, you want to buy trucks, but there's a backup of a year or two from these truck suppliers. Right. Because you can't get trucks right now. And so what is the best opportunity here for, for you guys to, deliver and make more contribution margin might be to look at your sales and purchase order data and figure out what you're actually selling. Versus, just trying to push, and it's making contribution margins and helping your business rather than just buying all these trucks. Right? So by doing that, we significantly improve their profitability. We got rid of dozens of trucks purchases, right. And we sped up the supply chain because they ended up moving what is actually selling and making money versus just moving their entire product line. So those are sort of the problems that we've been working on. Right. We've been showing customers that if you can send the actual demand. And what products are actually needed at that endpoint, uh, using data and, be more selective about what you're allowing to go through your supply chain at the right time of the year. You don't have to buy trucks and new factories and all that. You already have the right amount of capacity. You just have a lot of waste in the system. And cement, coincidentally is the third largest source of emissions behind the United States and China. So it's a big, ESG, CO2 play as well.Tom Raftery:
Right. And how native do you think people are these days with the concept of data? a lot of people talk about the importance of data, but you know, down in the, trenches of supply chain, how many people are familiar with working with data?Ali Raza:
I think that's a culture thing in cor big corporations. So if you think about the top one or 2% of supply chains, right. They got there because they leveraged data very effectively. So whether you think about the big Amazons and the Dells of the world, like they've a very very meticulous. Even the two of us right. They were very meticulous about their process. Unfortunately on the operation side, there isn't much adoption elsewhere. So, while the IT world I've been fortunate enough to live in the it world, OT, OT, world operations world, and uh, in the financial world. Right. what I've noticed is on operations, they know that the data exists, but they see it as something that supply chain and procurement take care of, right. It's not their problem. They just expect to get their parts on time to keep going. So not a lot of adoption on the operation side, on the IT side, it seems like the world is run on data. But that's just the IT bubble. And on the financials side the, uh, the data that they're looking for is all financially related, so the concern is not as much as what's going on at the ground level. It just like, how are the numbers working out at the end of the day? So I think it's still pockets and perceptions. That's how I like to look at it. But in operations, It's not a lot of adoption. I think they, operations decision-makers would like more data now to understand that holistic picture of what's going on in the supply chain. Right. I think we've moved beyond the self centric part of saying, Hey, as long as I get my stuff, I'm okay. Who cares? And pretty much hyper-connected supply chain globally now this is, uh, something new, right? That people are realizing that I have to care about. The two steps before me, and I need to understand, through a report or some sort of data, what my lead times could be, what the quality might be looking like, or if it's blocked somewhere.Tom Raftery:
Okay. And in terms of the supply chain in general, what kind of level of preparedness are supply chains at in terms of innovation?Ali Raza:
Planning and preparedness is one of those things, right? Where it, uh, you have all the scenarios planned out and then that one, that one scenario happens that you never thought of, like all the plan goes out the window. Right. So I think it's been different. So if you operate in operations, like where I used to operate, like Pakistan and, Yemen, right, We used to build out very elaborate crisis management plans. Right. We would think about every scenario that could get wrong and then we would manage the risk. Right now we knew the risk of operating in those environments required that because it had people on the line besides the business and so forth. So it's very serious. I think it's been a mix, I think in the certain countries have been very, very reactive. Right. And now they're looking at saying hey uh, let's be more prepared. So for example, I met MODEX this week, right in Atlanta. So I'm seeing a lot more. People now, there are a lot of people, of course, but a lot more robotics plays a lot more automation plays. I'm looking at companies and vendors and they're looking to collaborate to say, okay, we need to be prepared for the next one around. But in terms of what happened, there weren't that many companies that were prepared for it, but keep in mind their systems are their systems, right? If someone had run simulations or had said, Hey, if this happens, what do we do? They would have been prepared for it. So that's, I think the big takeaway that many people had never saw this coming and, you know, you cannot blame them, because, this is, something that happens maybe one every 100 years. Right. But, there's always the people who did spend the time to come up with contingency plans and operate. I think they did okay during the pandemic.Tom Raftery:
And there are going to be more of these kinds of shocks to the system, aren't there? Because even if we just look at some of the repercussions of the current war, the lack of neon, because 90% of industrial grade neon comes from Ukraine, and neon is used in the manufacture of semiconductors. So the semiconductor issue is going to probably get worse. Food is another one food security because Russia and Ukraine are responsible for large amounts of the grain crops that feed a lot of north Africa, for example, and the middle east. So I can see civil unrest, potential civil wars happening in that region in the next 12 months. And, climate change is another huge one that's going to, I mean, we saw floods in Europe last year, we saw, droughts, we saw wildfires, all these kinds of things are going to have impacts as well. So the requirement for planning and contingencies is only increasing,no?Ali Raza:
Yeah, absolutely. Uh, So this is the whole concept of supply chain resiliency, right. I think many people are looking for their, what I call plan B systems. Right? Cause the planning systems are the plan A systems where everything is sort of baked in. And, what we are seeing more of is companies are not looking at different scenario planning, systems. Right. I talked to a lot of companies and, regardless of what we provide at Throughput, often it defaults back to, well, can you do scenario planning? Right? So, there's an infinite amount of scenarios where we get the customer to realize is that look based off of your capabilities, even if that happened, you're not going to be able to fulfill it. Right. So if you've never done it before, it's just, you're not prepared for it. Right? So there's nothing you can do from that perspective. So we, we are seeing more of that. But we are communicating to our customers, that you have to understand your own drawn realities first, right. That this is what you have to be content with in terms of, if it happened. It was outside of your norm to begin with there's nothing you could've done. I think that brings a lot of confidence or just assurance right? Saying that look, we, we have enough plans in place to execute to what we we are capable of, but it's going to continue, right? The best we can do right now is look at some of the data and predict how frequently an event like that might occur. We won't know what the event is, but like you said, because these are happening more frequently, the data is now starting to show that, okay, we pretty much have three to five of these, big events that happen yearly. And in the case that happens how are we planning to deal with at least three to five shocks a year from a personnel perspective, from stuff that we can control. So I think just like data, And, uh, any sort of mathematical modeling there's stuff that you can control and there's stuff that you can't control, right? And you need to focus on stuff. You can control like variable cost, hours of operations, suppliers. Right? So, and one of the sides of our business, and this comes back to predictive replenishment. We are now starting to get into. What is the deadline to get, something airfreighted from this vendor and what is the deadline to switch the vendor, right. To go to vendor B and say that, you know, at this stage 99%, these guys are not getting this copper, right? So who is the other vendor that we can go for? And then of course, a lot of this effort is being translated into reshoring in America, right. Which is okay, are our tier one, tier two was in Taiwan, can we find an equivalent that might not be exactly what we want, but it's just, it's a different sort of material that we can use in the meantime. Right. So I think that's what we're looking at, which is plan B plan C that typically were not looked at before.Tom Raftery:
Right. Okay. Very good. we are coming towards the end of the podcast now, Ali, is there any question I have not asked that you wish I did, or any aspect of this that we've not gone into, that you think it's important for people to think about?Ali Raza:
Yeah, I think, one of the aspects we probably could have gone into is just understanding what's out there in the market, to help, Because, right now anytime what happens is whenever problems arise in any, any business, right. Or any market, there's a plethora of solutions that just flood the market. Right. And so I think maybe some questions around that might, help the audience understand how to pick the right tools, who to go with, right. Uh, what can be done? What can't be done. What's a bit pie in the sky. What actually works. I think that's one of the things that, people in the podcast could benefit from.Tom Raftery:
Do you want to get into some of that now?Ali Raza:
Well, where do I start? I guess, I guess the, there are so many solutions, That are now flooding saying we will solve your supply chain problems. Right. But fundamentally I think the key is to understand what are you selling and what are you providing? And look at your gaps in terms of where you don't see, uh, the bottlenecks in your supply chain or the constraints right. Software that help you realize that from an end to end perspective, understand impact to working capital and build that story at the strategy level and at the organization level to communicate that, Hey, this is who we are as a company or as a supply chain, right from the beginning to the end. And this is what we control and what we don't control are good softwares, right? That give you the big picture. I think the biggest challenge I see in the market is everyone is trying to solve one specific problem in one specific location. Well, I take that back. There are solutions that solve that end to end problem, but most of the market is filled with, Hey, we do AI for retail, or we do planning for manufacturing or, you know, shop, shop optimization. Solutions that customers should be looking for ultimately, need to be able to address the material flow and the cashflow side of the things, because both are very important, especially with inflation and, you know, people are not realizing how expensive fuel is right now, to operate a business until the controllers tell them that, you know, we're not making any margin. So I think the best solutions in the market that I'm seeing are giving you a ground reality check, allowing, you do some sort of scenario planning, but more importantly they're creating this bridge between the actual operations and the financial owners, to communicate that this is what we need to keep our end customers happy and profitable and keep the business and people intact. So if you're looking for solutions that do that, I think you're looking for the right thing in the market. If you're looking to solve a very specific problem to your very specific silo, you're not really helping the overall supply chain, Or you might not be, unless you're increasing throughput by, by doing so at that specific point place. And that place is the actual bottleneck of your supply chain.Tom Raftery:
Very good. Very good. Ali that's been great. If people want to know more about yourself or about Throughput or any of the things we discussed in the conversation today, where would you have me direct them?Ali Raza:
Yep. So you can visit, throughput.ai. If you Google throughput, now we show up on the first page of SEO, right? Thanks to our marketing team. And if you need to reach me, firstname.lastname@example.org, pretty simple, or just find me on LinkedIn. And, again, thank you for hosting us on this podcast today. And we're always available to talk supply chains and help a customer solve their problems.Tom Raftery:
Phenomenal. Great. Ali that's been really interesting. Thanks a million for coming on the podcast today.Ali Raza:
Thank you, Tom.Tom Raftery:
Okay, we've come to the end of the show. Thanks everyone for listening. If you'd like to know more about digital supply chains, head on over to sap.com/digital supply chain, or, or simply drop me an email to Tom dot Raftery @ SAP.com. If you'd like to show, please, don't forget to subscribe to it in your podcast application at choice to get new episodes, as soon as they are published. Also, please don't forget to rate and review the podcast. It really does help new people to find the show. Thanks catch you all next time.