Graham Scott: 0:03

We're basically pricing a million part numbers every quarter. And from that perspective, we get a good sense of where pricing is trending. We've got a great history. We've, we've got over 20 years worth of pricing intelligence if we need to go back in it, you know I think the relevancy of that obviously changes over time, but you know, even if you just consider the last three years, where we've seen a ton of volatility in pricing. We're starting to see really good price trends emerging and we've got a good sense of where it's gonna head

Tom Raftery: 0:34

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, Tom Raftery. Hi everyone and welcome to episode 355 of the Digital Supply Chain Podcast. My name is Tom Raftery and I'm excited to be here with you today sharing the latest insights and trends in supply chain. Before we kick off today's show I want to take a moment to express my gratitude to all of our amazing supporters. Your support has been instrumental in keeping this podcast going and I'm truly grateful for each and every one of you. If you're not already a supporter, I'd like to encourage you to consider joining our community of like minded individuals who are passionate about supply chain. Supporting the podcast is easy and affordable with options starting as low as just 3 euros or dollars a month. That's less than the cost of a cup of coffee. And your support will make a huge difference in keeping this show going strong. To become a supporter, simply click on the support link in the show notes of this or any episode, or visit tinyurl. com slash dscpod. Now, without further ado, I'd like to introduce my special guest today, Graham. Graham, welcome to the podcast. Would you like to introduce yourself?

Graham Scott: 1:56

Yeah, thanks Tom. My name's Graham Scott. I'm responsible for direct procurement at Jabil. Been with Jabil now for close to 20 years, based in Florida, as you can probably tell by the accent. Started off in the UK moved over to Florida in 2007, had a five year sabbatical in, in Singapore and, and now I'm back here in, in, in the US, so glad to be here, direct procurement for Jabil or global procurement really that entails multiple functions. I'm responsible for the Global Commodity Management team, our Supplier Relationship Management team, our Centralized Procurement team, and our Centralized Quotes team, as well as any digital requirements that we have, i.e. platform solutions, applications, et cetera, across the breadth of the team.

Tom Raftery: 2:45

Okay. And for people who might be unaware, Graham, give us a few words about Jabil. Who are, what are Jabil? What kind of size, scale, markets, you know, industries, et cetera.

Graham Scott: 2:55

Yeah, of course. So Jabil, Jabil's a really large company. You know, we, we're really the brand behind the brand. We are close to, we finished last fiscal year, just around 33 billion dollars. We have quarter of a million employees around the world. We have a hundred manufacturing locations across 30 countries. When we think about markets, we probably cover just about every market sector that has any type of electronic content in it. And you know, from a customer perspective we, we're fortunate enough to have 400 of the world's largest brands as our customers. So, you know, from anything from a handheld product to some of the largest pieces of industrial equipment or healthcare equipment that you would see in your everyday life. So. Very, very broad.

Tom Raftery: 3:46

Okay. And your role then, I mean, we touched on it just briefly at the start, but can you give us a little more in depth about what it is you and your organisation do for Jabil?

Graham Scott: 3:58

Yes. So, from a procurement perspective we're part of the supply chain organization, but just purely thinking about procurement, global commodity management you know, that team is responsible for every component that goes on to a PCB that then becomes part of a PCBA that's used in any of those products that I mentioned before. So we have, four dedicated teams, one that manages PCBs, one that manages semiconductors, one on passive components including connectors, switches and relays and a distribution team as well to help manage probably close to 15 billion dollars of, of spend you know, their primary focus is on component costs try to understand what's going on in the markets. So thinking about supply chain resiliency, et cetera negotiating contracts the usual stuff that you associate with a commodity management team. To compliment that team few years ago, we developed a supplier relationship management team. The core purpose of that organization was to get us closer to, you know, a hundred or so key suppliers within our ecosystem. Those suppliers, again, go across PCBs, distribution, semiconductors, passive components, etc. And we've got six individuals that do nothing but develop and maintain the relationships we have with those core suppliers. The selection of those suppliers is based on the markets, the customers, the applications, the technology that either they're selling to us or we can incorporate into customer products. We're trying to look at that relationship a little bit differently as well. Look out a bit further, rather than thinking about what's happening in the next 90 days, what's happening in the next three years? Where are you going to make your investments? Where potentially are you looking to sell off part of your company? Shrink your portfolio, etc. So really trying to get more in tune with that supplier strategy and work with them to develop what we call a co developed account plan that's going to steer us forward. Again, not just the next 90 days, but thinking three years, five years out. So it's a little bit of a differentiator, I think especially in the EMS type market or as we like to call ourselves a manufacturing solutions provider. The other couple of functions, the centralized quotes team there to support you know, a lot of the, the requirements that we have from a, procurement perspective, we think about pricing, lead times, all of that information has to be refreshed every 90 days you know, as we go into negotiations, or as we try and understand what's happening as far as supply, you know, we could start to see some trends happening where, lead times are starting to creep up. That could be an early indication that there's, there's an allocation kind of mode coming into effect. And you know, using that data to help drive the outputs that we need from, from that supply base. And then the the procurement team, centralized procurement team, this was something that we put together really to make the complexity of dealing with Jabil a little simpler. You know, we have a hundred manufacturing locations, like I said. We're in 30 different countries. And... for some suppliers, that's just a complexity, it's very difficult to deal with. And we created a centralized organization where the suppliers would receive purchase orders from one location, they would ship to one location, and we would pay them from one location. And it took a ton of the complexity out. It enabled us to scale a lot of suppliers, especially in Asia way quicker than it would if we had to onboard them across, you know, those hundred different locations. So it's, it's, there is an efficiency gain, but it's, it's one of these models that over the years is just growing and growing. And the suppliers who are in that model really truly appreciate it. And, it will continue to grow over the forthcoming years.

Tom Raftery: 7:55

I can imagine that they're loving it, yeah. Getting rid of complexity. What kind of pain points are you coming across, Graham, in your organisation and, you know, how are you addressing them?

Graham Scott: 8:10

Yeah, I mean, it's been a, it's been difficult couple of years. You know, we've, we've obviously had the challenges of the semiconductor market. It's not just been semiconductors. But you know, the, the headlines have been about semiconductors. You know, even going into a car dealership in the last couple of years and talking to them about vehicles for sale and, you know, I start to get lectured on, well, I can't get semiconductors and therefore we can't sell cars and, know, it's became a, it's became something that's been very easy over the last couple of years to to talk to because it was, it was so damaging know, and everybody was feeling the effect of it. But right now, you know, the biggest challenge we have is the, is the complexity, you know, we've got, we're facing unprecedented complexity when we think about the market in the supply components and in one hand where, you know, we're still chasing shortages, we still have parts that we can't get. And on the other hand, we have excess of components that we now don't really need. We see suppliers making massive bets and investment in capacity and we see other suppliers now starting to pull back. You know, so it, it, the complexity that we face today is, is, is, you know, like I said, it's, it's a little bit unprecedented you know, it's difficult for procurement organizations like the one that I'm fortunate to manage to, to really strike that balance and make sure that they're ticking all the boxes that's required from that function you know, how do you have a conversation with a supplier about pricing and cost when at the same time you're carrying too much material and you're trying cancel orders? Know, becomes a difficult situation. So there's all this balancing that's having to go on in the conversations. And, know, what we find is that, you know, the more information, the more data that we have to, to, you know, arm our practitioners that the more informed we are, the easier those conversations become. And you know, that that's something that, you know, I think Jabil as an organization we are we have a right to play in this kind of market intelligence field. We deal with 400 of the biggest brands in the world. Like I mentioned, we cross 10 or 11 different market sectors. You know, we are quoting a million part numbers a quarter. We have a lot, we have a lot of information. We have a lot of data. We have experts in the commodities and categories that they manage. So, you know, going to market, explaining what's going on through commodity intelligence, category intelligence, or even market sector intelligence. You know, it's a, it's an area where we feel that we definitely have a right play.

Tom Raftery: 11:23

Okay. And all this data that you're collecting, do you have some kind of a internal platform that you've generated yourselves to collate this data and to then give you, I don't know, analytics, you know, or intelligence based on it?

Graham Scott: 11:42

Yeah. So, so we developed a number of years ago, a platform called our Procurement Intelligence Platform or PIP for short. And That's been a platform that I've been a part of since, since day one. I'm extremely proud of the platform. know, I was a commodity manager myself. So, you know, I knew all the pain points when I was negotiating with suppliers, you know, trying to create stories around why they should look after you know, the commodity that I'm managing, that the spend that I'm managing, why would the supplier give me something that they wouldn't give somebody else? You know, I'm trying to help build out that story. So, you know, internally, we developed this platform. We had so many, honestly, we had so many disparate systems, it was really hard to get everything onto one page. And we really wanted to create know, a 360 degree view of every part, every supplier, every manufacturer that we have within our ecosystem. Give those practitioners the information that they require to, to really create an effective negotiation. And it's been a labor of love managing all that data is, is difficult as, as I'm sure many of your, followers know, if you don't manage that data initially from day one, it doesn't really matter how good the solution is that you've developed and, you know, we're fortunate enough within Jabil that we're, you know, we're on a single instance of ERP. We manage our data extremely well. We have commodity classifications, hierarchies created. It just makes things like spend analytics, for example, extremely simple to do.

Tom Raftery: 13:18

Yeah, yeah. A single instance of an ERP across a hundred manufacturing locations. That's impressive.

Graham Scott: 13:24

Yes, it's definitely helped the growth of the company over the last 50 plus years. You know, having that single instance, giving us a view into each of the different manufacturing locations. Even if we think about the last two years, Tom, you know, where we could have inventory setting in a site

Tom Raftery: 13:41

Mm hmm.

Graham Scott: 13:42

that is required in another site, and, you know, we have visibility to that, and you know, it makes, makes things a bit easier when we're thinking about smoothing out demand but when, when you don't, you're then reliant on picking up the phone or checking another solution, and, you know, that, that's something that, we've been very disciplined with over the last number of decades and it will continue to help us as we, as we go forward because, you know, everybody knows that, data is going to be highly valuable and, in fact, more valuable than it is today in in the future, especially as we think about some of the advancements in AI, et cetera.

Tom Raftery: 14:18

So, Graham, what kind of trends are you seeing in the industry at the moment, you know, with commodities, et cetera, they, you know, yeah, just, just that, what kind of trends are you seeing at the moment in the industry?

Graham Scott: 14:30

Yeah, I mean, again, thinking about the, the kind of major categories on the PCB side of thing, we're seeing an abundance of supply, there's excess capacity out there. There's a lot of conversation around you know, China plus one type strategies. How do we find a supply base that's perhaps not as reliant on China? I think from memory, 95% of all PCBs come from China. So there's a big push for other locations in Southeast Asia and primarily Southeast Asia, in order to support that kind of China plus one strategy. So that's that's definitely a trend on the PCB side. Semiconductors, that's the difficult one. You know, we're, we're, we're certainly seeing a kind of pullback a little bit on the, the longer term investments that were promised over the last couple of years when we had all these shortages, everybody was starting to talk about, well, we're making fabs in the US, we're, we're talking about fabs in Europe, and starting to see people just tap the brakes a little bit there. There are exceptions to that rule. You know, there's, there's a couple of US based semiconductor manufacturers that are continuing with their fab expansion plans. And, you know, I think they're going to be in a, a really good spot in a couple of years when we think about the momentum that we will obviously see with electronics. Content's only going to grow, EV requirements is going to grow, ADAS, et cetera, et cetera. There is going to be no let up in semiconductor demand, but right now we're seeing that tapping of the brakes, which is a, it's a little bit disappointing you know, maybe some of the CFOs are starting to, you know, start to ring the bell and say, Hey guys, if we don't have the orders coming in, if we're not, we don't have the throughput, then, you know, let's tap the brakes. So that, that's a little concerning because any kind of uptick in demand is going to create you know, the same volatility that we saw over the last couple of years,

Tom Raftery: 16:30

Kind of a bullwhip effect. Yeah, because

Graham Scott: 16:32

yeah, for sure.

Tom Raftery: 16:32

it's not like you can stand up a semiconductor fabrication facility, a fab. You can't stand one of those up in, you know, six to eight weeks. It's what, three, three, four years at least to put one in place.

Graham Scott: 16:43

Yeah, I mean, I think with the complexity involved now, you're, you're probably looking at four and a half to five years. We actually met with one of the, the key suppliers yesterday and I had actually made the same point as you and they quickly corrected me and said, our existing experience tells us it's closer to four and a half to five years. So again, that's a little alarming when we think out and we look at the investments that are being made and we think about where the demand is going to come from, we know it's going to happen. But the capacity is just not going to be there, so it's it's certainly a huge question mark over the future of the semiconductor supply in the coming years.

Tom Raftery: 17:18

Yeah, and to your point, the demand is only going to increase because if I, if I look around the room here now, if I look at the two lights I have pointed at me, they're Wi Fi enabled LED lights, so I can control them from the computer. So they have semiconductors in them. My phone, obviously. The overhead fan, same kind of thing. The, obviously, the laptop, the soundboard, the microphone, the screen. Everything around me. I have a Bluetooth keyboard over there. You know, literally everything. Our toaster in the kitchen is going on the blink the moment because it's a, it's a so called smart toaster. It's not very smart, but you know, it's not, it's not one of these old mechanical ones where you have the timer that you, you know, you dialed it across to in time for your toaster. No, it's, it's a slightly more smart one. And of course, what that means now is because that's breaking down, there's no repair for that. So we're going to have, you know, it's,

Graham Scott: 18:15

You're gonna have to go and buy another one.

Tom Raftery: 18:17

exactly. So, yeah, we're getting into rights to repair and that's a whole other story. But, but yeah, no, the, the, everything is becoming smart. The price of smarts and connectivity is falling every single day. So everything is becoming smarter. Everything is having, you know, semiconductors built in. So the demand is only going one direction. So a pause in the development of these fabs, given the four and a half to five year timescale to roll one out is going to be problematic in three, four years no?.

Graham Scott: 18:46

Yeah, no, for sure. And, that's a great part about working for a company like Jabil, you know, we're fortunate enough to deal with the 400 biggest brands or 400 of the biggest brands in the world. And, know, we have access to a lot of their roadmaps, try to understand where the development is being made, you know, what are products going to look like in the future. We also get involved in designing some of those products. And you just look at the content and the content of semiconductors, even on, you know, existing products is only going to grow. You've got new products that are using semiconductors, you've got existing products that the content is increasing in those products, and just looking out, you know, if the, the industry grows at 3 or 4 percent CAGR, some of these semiconductor requirements in some of these end markets are going to grow by 10 and 12 and 15 and 20 percent CAGR, and I just, I don't know that we're going to be in a spot in two or three years where we can all sit back and say we can get the parts we need, there's not going to be any automotive issues, lot issues, you know, there's going to be enough cars there that we can sell. it's just not going to happen like that unless these, these companies start to look at the longer term and perhaps maybe even from a procurement or supply chain perspective, you know, we think a bit longer term. The human element starts to come into play a lot when you're in allocation type situations, you know. You need 100 parts, you order 200 so that you can get 50 percent of what, 50 percent of what is due to you, you get what you actually need. And, you know, we're, we're, I guess there's a lot of companies right now that are experienced the flip side of that, where they're perhaps ordered more in order to get what they need. And they now have excess inventory, they now have non cancellable orders, and it becomes a massive drain on, on free cash flow.

Tom Raftery: 20:40

Yeah. Yeah. And given the amount of data that you have, is that something that you're sharing with others in order to help them?

Graham Scott: 20:47

Yeah. So again, we use it primarily internally, but you know, over the course of the past 12 months, we believe we have a right to play in selling some of that market intelligence, right? You know, we've built a portal that external customers can, sign up for, they can register for that, and they get access to lead time trends, what we see happening with supply generally. We give them pricing information as far as what we see happening relative to the market going up, market coming down. We give that information at a commodity level. We also do it at a category level on the indirect side. So, looking at things like contingent labor, it could be capex, et cetera. So, so we look at it from a both a direct and indirect side. And then we also have a market view as well. You know, what does Jabil see happening in automotive and transportation? What do we see happening in the consumer space? What do we see happening in digital healthcare? And we give that perspective as well, which is maybe less data driven, but it's more insights around how we view those markets.

Tom Raftery: 21:55

Okay. Can, can you give me some kind of examples of where you've been able to use that data to help customers?

Graham Scott: 22:04

Yeah, I mean, we absolutely use that, that data every day with our existing customers. You know, we help them understand where we see potential supply risk. We help them understand where they need to shift from a technology perspective in order to capitalize on one, more availability and and two, it could be a more competitive answer than the solution they're currently using. And it could be either new suppliers. It could be reviewing technology shifting away from an existing source, bringing in a second source, but also looking at, you know, what do they need to do from a footprint perspective? Do they need to change from one type of semiconductor to another? The data helps us with that. We've got, you know, as I mentioned before, we we're basically pricing a million part numbers every quarter. And from that perspective, we get a good sense of where pricing is trending. We've got a great history. We've, we've got over 20 years worth of pricing intelligence if we need to go back in it, you know I think the relevancy of that obviously changes over time, but you know, even if you just consider the last three years, where we've seen a ton of volatility in pricing. We're starting to see really good price trends emerging and we've got a good sense of where it's gonna head. So that, that's helpful to existing customers. I think if we think of new customers who are coming in to look at the market intelligence as a, as a feature for them just getting a sense of, of where we believe supply chain risk is going to occur in the future is, is going to be helpful for them. It will help them with new product design. There's a ton of technology type information in there as well. You know, where we talk a lot about, staying away from legacy type components, unless you choose the right supplier. If you don't choose the right supplier, and we go into that in detail then you're, going to be a customer that perhaps is not a focus customer. It happened a lot in the last couple of years where suppliers were very focused in supporting those customers that were following their technology roadmaps and explaining that to perhaps smaller customers that don't get access to the direct semiconductor manufacturers, the passive manufacturers directly, they're relying on a third party to help support them. Giving them that type of feedback has been, extremely useful over the last couple of years. And I believe that if I think of some of these smaller OEM types, or even small design houses, maybe even some small EMS that's where the the market intelligence that we have currently within, within Jabil could really help them and make sure that they have a more resilient supply chain, they have a more cost effective supply chain.

Tom Raftery: 24:53

Okay. And what has the feedback been from customers from this?

Graham Scott: 24:57

Yeah, the feedback's been good so far. We also offer other different types of supply chain services. So we, we will have commodity managers sit with with customers, talk to them about what we see. Like I mentioned before, we have experts in, these commodities and categories. And you know, that's certainly a service we would offer. We have other types of services as well around procurement services, supply chain services, logistics services. But purely on the market intelligence side, the feedback has been really, really positive around how it's helping them and enabled them create more resilient supply chains. And to be honest, I think if you, did some kind of word cloud over, the internet in the last three years, supply chain resiliency is probably going to be the big one right in the middle, right? So, it's, it's certainly been something that the feedback has been positive on and, and it's going to help them as they build their products moving forward.

Tom Raftery: 25:50

Sure, sure. It's fascinating, Graham, because most organizations, I mean, I'm 350 something episodes into this podcast at this point. And, talk to a lot of supply chain experts and a lot of executives. And this is not a kind of a story I've come across before where people have taken their supply chain knowledge and exposed it to customers and partners. you're turning what a lot of organizations see as a cost center for the business, which is supply chain, and turning it into an actual sales organization, for want of a better term, or into a standalone business of its own. So, what was the genesis behind that thought? You know, what made you think this is a good idea? It's obviously a good idea, but what brought that to your mind? You know, how did you wake up one morning and think this is what we should be doing?

Graham Scott: 26:41

Yeah, to be honest, Tom, we've been doing it for 20 plus years and you know, the, the feedback that we that we had from our manufacturing customers was that the intelligence, the insights that we were providing them was, it's, it's an old term, but best in class. Right. I mean, I, I, and, and we thought about that and we thought, okay, you know, obviously we've got our customers that, that, are as I mentioned before, you know, 400 of the biggest brands in the world. And if we're getting that feedback, then it's almost demonstrating that we have a right to play in that market intelligence space or supply chain services, if we think about the umbrella. So, so yeah, it was really the feedback that we had from our existing customers on what we were offering and providing them as part of the overall Jabil service that we thought, okay, this is something that's you know, there's clearly a market for and let's go and develop a strategy around that. Let's see what we can do as far as building out a sales organization and, probably most importantly, and I'm sure if there's any of Jabil's customers listening to this right now, they'll want to hear this, but you know, let's make sure it's not distracting the procurement team from what they actually do. Right? So, you know, as much as we all play a part in the development of the intelligence and the reports, et cetera. We've always done that and we'll always continue to do that. But we're not really out there selling this, right, so we have a separate organisation that helps with that. But, it really comes down to the fact that we've built these programs over the last 20 years. We feel that, you know, a kind of built by practitioner for practitioners approach really does work.

Tom Raftery: 28:21

We're coming towards the end of the podcast now, Graham. Is there any question I haven't asked that you wish I had or any aspect of this we haven't touched on that you think it's important for people to be aware of?

Graham Scott: 28:33

Yeah, maybe one quick one, Tom, you know, if anybody does want to learn a little bit more about what we're doing from a services perspective, supply chain or procurement services, then it is, it's a simple enough a link to find just go to Jabil. com under services, you'll see Supply Chain and Procurement. And, there's a lot more detail there on what we have as an offering. If I move away from the services a second and go back to the market, I just think people have to be cognizant of what's going on out there. There's a lot of short term actions getting taken right now that could have some longer term implications and try and understand what's going on, look at the bigger picture, think about the future, and the future being, two years out, three years out, four years out, not two quarters out. There's a lot of actions that are being taken that I think are very short term. And smaller OEMs, EMS, whoever it may be they need to make sure they're not caught out by... What could be boiling away in the future. So it's listen to what's happening out there, talk to people, talk to suppliers, talk to manufacturers, get a sense of what's going on and try and take that kind of broader perspective on, you know, where the challenges are going to lie in the future.

Tom Raftery: 29:46

Cool, cool. You've kind of preempted my last question, but I'll ask it anyway. If people want to know more about yourself or about any of the things we discussed in the podcast today, where would you have me direct them?

Graham Scott: 29:56

Well I'm, I'm on LinkedIn. So if anybody wants to look me up on LinkedIn, it's just under Graham Scott. If you look under Jabil, you'll, you'll see me there. We've got different blogs out there and videos as well. So, you can see and hear from me there. And, and again, just from a, from a services perspective, Jabil.com is, is where you'll get most of the information about what we offer and what we can do.

Tom Raftery: 30:20

Cool. And I'll put those links in the show notes as well. Graham, that's been fantastic. Really interesting. Thanks a million for coming on the podcast today.

Graham Scott: 30:27

No worries. Thank you.

Tom Raftery: 30:29

Okay, thank you all for tuning in to this episode of the Digital Supply Chain Podcast with me, Tom Raftery. Each week, over 3, 000 supply chain professionals listen to this show. If you or your organization want to connect with this dedicated audience, consider becoming a sponsor. You can opt for exclusive episode branding where you choose our guests or a personalized 30 second mid roll ad. It's a unique opportunity to reach industry experts and influencers. For more details, hit me up on Twitter or LinkedIn or drop me an email to tomraftery at outlook. com. Together, let's shape the future of the digital supply chain. Thanks. Catch you all next time.