Sudy B: 0:04

So to work with our suppliers to enable our business to scale means I have to enable my suppliers to scale. And that just doesn't mean throwing purchase orders at them. That means working with them on innovation, working with them on design, working with them on sales forecasts, making sure they understand the potential as product. The hard part is who makes the investment.

Tom Raftery: 0:29

Good morning. Good afternoon or good evening where ever you are in the world. This is the Digital Supply chain podcast. The number one podcast focussing on the digitisation of Supply chain. And I'm your host Global vice president of SAP. Tom Raftery. Hi, everyone. Welcome to the Digital Supply chain podcast. My name is Tom Raftery with SAP, and my guest in the show today is Sudy. Sudy, would you like to introduce yourself?

Sudy B: 0:55

Hi, good morning and good afternoon, Tom. Thanks for having me. Yeah, my name is Sudy and the last name is Bharadwaj. Usually I just go by my first name Sudy and I'm responsible for working with some of our strategic engagements with large clients usually focussed on high tech.

Tom Raftery: 1:11

Okay, we're in the middle of a pandemic. As we've noted many times in this podcast, and that has changed a lot of things about Supply chain. But high tech companies are probably less impacted than, say, manufacturing companies. I want to think, particularly the high tech companies that are doing software because, you know, they're not reliant on getting parts, for example, generally. Is that I mean, that's that's my guess. But tell me tell me your experience from living in that world.

Sudy B: 1:40

Oh, it's actually very different. So let's just talk software companies that SAP we have concur. And right now, not a lot of people are travelling. Very true. So, so, so. So that would be impacted. But if you're creating a innovation on the next great travel engine, obviously that's got an issue in the U.S. alone because a lot of students have returned to school in the last month. There is a short shortage of five million laptops. So in one way they're impacted, not in a negative way, but in a demand has spike in some areas, large attack, possibly. What we're talking to this podcast on and when we see each other with microphones and cameras has a huge shortage as well. In fact, if you go online, it takes a while to find a camera that you can actually get shipped to your house. So while some components are in short supply due to supply issues, we're seeing a lot of demand issues as well.

Tom Raftery: 2:41

Interesting. Yeah, it's funny, I. Before the pandemic, I was doing quite a bit of travelling to your point about concur and No. Zero travelling. So yeah, I haven't gone near concur in six months.

Sudy B: 2:55

Yeah. It's kind of funny. My wife has come to me and says, hey, you haven't done an expense report. Know what I'm thinking. Yeah, I haven't. And yeah. And it is different. But then we have to think differently on how to react, you know, how do we look on Zoom. I've seen people who have just unfortunately, you know, with the remote nature of their work, their, their appearance has as unfortunately gone in a negative direction. Yeah. He and I have dark complexion and I have to I find I have to shave more often because on these very high risk cameras. Boy, the skin and the whiskers poke out even more and make me look dirty. But yeah, we have to, we have to just think so differently about all ways of doing business now, whether it's with our suppliers, with our family, things like that. So it's it's just a different world. And we have to approach things very differently.

Tom Raftery: 3:50

You should take my approach and grow a beard. It makes things so much easier.

Sudy B: 3:54

Yeah. Yeah. I like your beard.

Tom Raftery: 3:58

So to bring it back to Supply chain and away from personal grooming. If companies are, you know, every company I think has to be impacted to some degree by this. But we're in a phase now where some companies are heading towards recovery or maybe not. Might be, you know, waves as we get more shutdowns and things like that. But how should companies start thinking about recovery or, you know, maybe recoveries as we get lockdown's and recovery and lockdown and recovery? And then eventually we get to the vaccine and then we go for long, longer term recovery. But what kind of strategies should companies be thinking about?

Sudy B: 4:40

Yeah. Well, a lot of people think, hey, this is the first time it's happened when we've seen we've seen disruption. You know, my joke example is that we had a disruption 65 million years ago when the dinosaurs became extinct. They had a disruption in their food supply. So I always say in order to understand recovery, we need to understand what our business is and what our business isn't. So there are just a funny example and not even in high tech. We have Chinese restaurants here in the states who are who are restricting their menu. So one example, hot and sour soup. Some places aren't offering it anymore. And I had a long supply chain discussion with that with the manager, and she was very engaging it. One day we needed to simplify their supply chain. They could charge they couldn't spend 3x more to get that supply, but decided not to. So so one thing to think about is who's your real customer and who's your real product? What is your key driver of your business? And you may have to shift based on supply and or demand constraints in their. It's a supply constraint. We think of the logistics of the world and it's a demand issue. They're just they can't make cameras fast enough. So first and foremost, we have to frame up what is the business and how are we going to manage it? If I'm supply constraint, then I need to maybe propagate that to my customer side to make sure they know what I'm offering. And there's certainty in my offer. The key thing about disruption is to offer, you know, certainty and to minimise. You never can eliminate but to reduce, mitigate volatility then it for long. And that's really for longer term recovery. So there is a quick recovery. I'll say there's three things you want to do any time there's a bad thing. First thing is recover quickly. OK. Second is learn what happened. Third, which is this framing it up is how do we make sure it doesn't happen again or the damage isn't as bad next time. And that's why we want to understand. I look at three things you mentioned. Dig DIG there's duration, impact and Glocality. So the key thing is how long will this disruption occur? So simple example, if a truck on its way to your factory rolls over and destroys your supply, whatever it is. How do we handle that? OK. You may have extra supply if it's a daily delivery. If it's a weekly. You might just say, yep, we're out of bananas that day. Now, for a that's for a retailer, for a large manufacturing plant saying hi tech, you don't want to be shutting down your plant because you're out of one component. That the hardest problem is you have to have your strength is really at you're as strong as your weakest link. And it could be a five cent component that rolled over in the parking lot and they're destroyed. And now you you're down for the day. So to understand how long it takes for that disruption and then you want to look at impact and triggers, what's the financial impact of that? OK, if it's a one day impact, yes, you might have to shut down a plant for a day. Not good. You may not ship product for a day. Not good, but the next day you may be back up and running. And so do you really take investment to you actually plan on doing something different next time? Your answer is maybe we just weather that storm or maybe we carry a little more excess inventory. So funny example in your neck of the woods is Braggs it? We had a lot of companies prepare for Brexit early. One good thing about that disruption is it was known and planned. The problem was the date. And we had companies that had to increase inventory by 25 percent to hedge against that because when the UK would leave. That's a new country inbound supply into the island, the UK would have been subject to customs. And it's going to be held up and delayed. They didn't want to do that. They don't want to manage that. So they so they increase inventory by a good amount. However, the exit when Brexit took an effect was delayed, delayed and delayed, which means that extra inventory kept on going high. So that's the hard part is how do you plan for that? I think they did the right thing. And a lot of the earnings calls when they said we have excess inventory due to Brexit, they weren't as penalised by the financial markets as you would normally think. Right. So you might say, let's hedge and we're going to get hurt. But in this case, there was a hedging, but it didn't hurt their stock price didn't get impacted as much by the increase in working capital, the increase in inventory.

Tom Raftery: 9:32

And did that did that increase in inventory help when the lockdown came?

Sudy B: 9:38

Yes. Where were that really helped, in fact? The funny one on that is I'll flip it again is there was Chinese New Year and at the end of the year, early this year. And so because of the shutdown, anticipation, people, people pumped up some inventory. So there was a little more supply in the supply chain coming out of China before China was locked down. Everybody knows the name one, and that was ground zero. That is really a central area for packaging core getting resin based products. But because of a potential the planned new year, we knew about that inventory went up. So it actually helped. But again, what none of us knew is how long the Covid disruption would be. And we're still living it. So that that benefit quickly wore off within a few months. Interesting.

Tom Raftery: 10:31

Interesting. How. How do suppliers participate in the recovery?

Sudy B: 10:36

Oh, that's the hard part. And that's where I know we don't want to push product. But what we have to do is we have to have much greater intimacy with our suppliers. In the old days, a supplier many times where arm's length. We just sent them orders and said, give me product. And we beat them with a baseball bat or another car of the where we beat them with whatever sticks we use for our sports and to get prices down. Now, some of our some customers are so dependent on suppliers. And when you think of innovation and we see it in high tech, you think about an apple, a gilli and, you know, GSK who are innovating with with new drug therapies, with new products, autonomous cars, they need to innovate and scale, which means their suppliers have to scale those innovations. So asking a supplier tomorrow for 10 million new iPhone screens is not going to go over very well. And that's an obvious that's an obvious one. But the key. Thing is, how do we prepare our suppliers for volumes? How do we know what they can handle? How do we survey them and understand? Is their workforce not able to come to work that day? Or are the plant workers who are working on daily production? They're allowed to come in and continue while other workers who are working on more longer term issues are going to stay home. So what we have to understand is what are our suppliers capabilities? What are their current capabilities, their future capabilities to wind up weighing down, to bring in new workers to quickly ramp up? And maybe not even quickly, but four years down the road. You know, what is the next generation three dimensional camera for our smartphones? What type of device will they have? We talk about autonomous cars is a great example, but those devices are going into our everyday cars in terms of collision avoidance or parking assistance. So those are the early innovations that are now evolving for autonomous cars. That's not easy to ramp up. That's hard technology. And that I just going back to cars in colder weather, what happens if a sensor is covered by snow? So how do we handle that and how do we handle that for 10 million cars? So to work with our suppliers to enable our business to scale means I have to enable my suppliers to scale. And that just doesn't mean throwing purchase orders out. That means working with them on innovation, working with them on design, working with them on sales forecasts, making sure they understand the potential as product. The hard part is who makes the investment. If I tell a supplier, hey, I'm going to sell 10 million of my innovation units, I'll just use that term in four years. Do they invest? Do we invest? That's the challenge. Right. So if there's a co way to share the risk and share in the reward. So the innovation partnership then has to really take hold in terms of a business and financial partnership as well.

Tom Raftery: 13:52

Yeah, I was gonna say you need to have a very, very close relationship in that scenario because you're asking to kind of, you know, to use the expression, you're asking them to open the kimono so that you can see, you know, to your earlier point how well they can scale up. Will they be able to get the employees to come in and do those extra shifts or scale up the number of employees? And, you know, you you there has to be massive amount of trust there in that, you know. Yes. You have to take them at their word if they say they can do it. And, you know, because your business depends on their being able to do it.

Sudy B: 14:26

Yeah. I mean, so simplest example is when a supplier says, I'm shipping to you the term used as an ASN advance shipment notice sometimes you see they I said happens, but its product still does not. Come, the day is supposed to come. So and we all know your cheque is in the post, one of them. Exactly. Exactly. And we all know the metric on time and full to many industries. They think of ontime in full as shipping to my customer. And some of our customers use C on time and full customer. But then there's also so TIFF s on time and fall supplier because in order to commit to my customer, I better know what my supplier. So I need to know. And you know, they report. We like to look at is A-S and compliance. They said it was going to show up on March 10th. Did it show up on March 10th? Physically at the right quality, at the right packaging, you know, at the right quantity and so on. So that trust needs to be there and then that's where we need to rely on them. We also need to know examples like lead time. How quickly once I know I need something in my manufacturing. When will I get it? And how long does it take? Is it two years? So example in innovation in the food industry, there are I don't know if they have to play internationally. It's a very popular fast food Mexican restaurant chain.

Tom Raftery: 15:54

I've heard the name.

Sudy B: 15:55

You're familia. OK, and one.

Tom Raftery: 15:57

We don't have one here in Spain that I'm aware of.

Sudy B: 15:59

Actually they they should, obviously, because the language is pretty similar. So there is a Carne asada offer that they had last year and they did really well. They actually increased the price and margins were great. Now they're out. That was a one time opportunity for carne asada. So now they're saying, our supply chain teams are working with our suppliers frantically to get this software back. But what does that mean? I have to raise cattle. I have to grow supply. That's a two to four year process. I have to have land. I have to actually feed them. I have to make sure they're healthy. I have to grow them to a certain specification. In order to meet the supply. So so you think of innovation and scaling, it just doesn't have to be a smartphone. An autonomous car. It could be food that we all eat. You just want to make sure that, you know, when there's an innovative product. My supply can get there. And that's the partnership, because at least here in the states, some of these are more local farmers and they create a network of farms. So these are small family owned businesses that might contribute one percent to Chipotle's supply. OK. So I need hundreds of them to get to the right scale, but they're going to be taking a big risk. So how do we balance that? So back to opening the kimono and making sure they see what my history was prior and now what I'm expecting to do so that I want you the supply base to be able to meet my needs. OK. Or else we all fail. I can I can advertise a great promotion. And not have it. And then you just disappoint customers and it happens with products across a whole spectrum, even even, you know, Covid vaccines, right? People are yep. We're gonna have one up. We're not going to have one. And daily stock markets change based on, hey, we had a good trial. Whoops. We didn't. We can't scale. We can't scale. So that becomes a challenge.

Tom Raftery: 17:56

So much is about managing expectations, isn't it? Because I find when it depends very much from from company to company. But we're buying more stuff now online. And you see that you when you place the order, you typically get a an estimated time of arrival. And some companies, you know, they say, OK, it'll arrive next Tuesday and it arrives Tuesday or Wednesday or, you know, some time around then other companies, are they aimed to do what I think is under promise and over deliver. So they say it'll come next. It could come by next Wednesday, which means you'll get it on Monday or Tuesday. And that's right. I funds that the different approaches that people take, that organisations take the different approaches. Change very much your perception of the companies.

Sudy B: 19:29

Yeah. And just a great real life example. I went on a family trip. My daughter is interviewing two grad schools. And I took my and she was going to use my home office was my amazing Logitech camera course. I took it with me on work on my vacation because I knew I was going to work on vacation. She's like, I don't have a camera. I mean, she had her laptop camera. But it's not as good as my Logitech. Well, for about two hours, driving through the southern states of America, maybe took about four hours. My wife was frantically online looking for a camera. It took her four hours to find one. Finally, and here's the amazing thing. Amazon was one of the early places we locked him and it wasn't available. She went back to Amazon and found one and it came. I think we ordered it at

Sudy B: about 3: 20:15

00 p.m.

Sudy B: 20:16

and it showed up at eight p.m. in five hours. Wow. Yes. Where is it? And then they have it's for some products and they have agility and flexibility because while cameras are real popular now, so we're gonna make sure we carry those in a large distribution model distributed. So inventory locations spread all across the world and release the world areas that they service. And they can give you the time. We could see the product on the map. OK. Leaving a distribution centre and then. Oh, it's moving. You could look at your phone. And because I'm a supply chain guy, sometimes I obsess over the map and I'm looking at it. And it moved. It moved. And I'm telling my daughter, OK, GTA 20 minutes, it's at the door. And then of course I'm taking a nap and I'm like, oh, I'll go get it. But but yeah. So it was amazing. So real life supply chain.

Tom Raftery: 21:09

Yeah. That's an impressive amount of transparency that Amazon are exposing stateside. That's not available here in Europe. As far as I know. It's certainly not available here in Spain. But I don't think anyone you're if you get same day delivery. Even when you are already getting deliveries, you know that it's going to come today some time. But beyond that, I presume that's down to in our case here and in Europe were primarily Amazon or primarily using third party delivery people. Whereas probably in the US it's Amazon branded delivery. So they're Amazon owned logistics.

Sudy B: 21:49

It's a mix. I've sometimes seen just normal consumers cars or I see a big Amazon logo. But think about that example. Now you think about it. That was a branded product that wasn't Amazon. Now, what's a relationship with the supplier? Does the supplier get their revenue? When I bought the product, does this and does the supplier have to hold that product at Amazon, buy the product and put it in their warehouse? Some of them go. So consignment. What's the relationship? And one of them means Amazon doesn't hold the inventory, but the supplier Costco up. So when when dealing with these relationships, we have to understand if we want our suppliers to do more, which today we need them to do more. Their costs go up. How do we manage that? Better. So just imagine all the different complexities just for my daughter to have a college interview.

Tom Raftery: 22:45

Wow. Yeah. I mean, I saw it here as well. I decided very early on in the lockdown that I needed to upgrade my own home, set up audio and video, and I did it very quick, very early and ordered all my stuff. And I knew that from looking at forums and things of that very, very quickly after I ordered my stuff. It wasn't available anywhere. Yeah. And it took it took weeks for these supply chains to come back up again. A lot of my audio equipment is made by an Australian company called Rode, R.O.D.E, and for example, their stuff just disappeared and elgato was another one. Their stuff just disappeared and couldn't be got for a while. But, yeah, it it's all. It's all evened out again now, so things that things are getting back to normal and hopefully they'll stay, stay that way for the next until as I said until we get the vaccine right. Sudi we are over the 20 minutes. So this is the portion of the podcast where I kind of tend to to wind things down a bit and ask the question, is there anything that we've not talked about that you think I should have asked you? Is there anything that you think we haven't mentioned that it would be good for people to be aware of?

Sudy B: 23:58

Yes. So, you know, I've been in procurement and supply chain going on almost 30 years and we've seen technology come and go. We've seen organisations, some do well and some don't. So the question I always ask is what limits. Success of very strategic procurement and supply chain initiatives. And to me, it's silos. So, again, I deal a lot with a procurement organisation, but I always challenge how can you help manufacturing? Now you own the relationship with the suppliers, but a lot of times ahead of manufacturing owns the inventory and cost with those suppliers, which means you need to work together. Right. And your metrics may be different than their metrics. If a procurement organisation is trying to get the cost of business, the cost of doing business down, which means reduce the cost of a purchase order, whereas a manufacturing business wants transparency, visibility on time as well as cost. How do you work together and make sure that your senior leadership is aware that you're helping an overall system? So example I said earlier, a manufacturing organisation may say I want my suppliers to hold the inventory. Awesome. You're working. Capital and inventory requirements just dropped. However, your costs went up because the suppliers have to charge you more. They're going to hold on to product longer until you consume or till the agreement. So how do we work together? And the key question is, I always challenge businesses to ask your suppliers three questions. The first question is how do we work together to improve each other's businesses without impacting each other's margin? We had that discussion with your suppliers. The second question is, what are the things we do which make your costs go up? And the third question is, how can we be a better customer to you? As opposed to we started the conversation with a with a wooden object to hit your suppliers with. Instead have a discussion about how do we just work together. Right. What can we do to improve your business?

Tom Raftery: 26:14

Again, it comes down to having a very close, close relationship and being trusting and open and having those tough conversations, I guess.

Sudy B: 26:23

Yep. Yeah. More transparency and visibility are not just technology questions. They're relationship items as well. Those are my three.

Tom Raftery: 26:33

Lovely. Sudy if people want to know more about yourself or about some of the things we talked about today, where would you help me direct them?

Sudy B: 26:44

Yes. So my LinkedIn is pretty easy. You can find me Sudy S.U.D.Y In Dallas, OK. So and my LinkedIn is pretty straightforward, Sudy B. We have a blog which I can send you that link as well. And then Twitter I'm SudyB also.

Tom Raftery: 27:00

Excellent Sudy. That's been fantastic. Thanks a million for coming on the show today.

Sudy B: 27:03

Thank you for having me.

Tom Raftery: 27:04

OK, 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 Slash digital supply chain or, or simply drop me an email to Tom Dot Raftery at SAP dot com. If you like to show, please don't forget to subscribe to it in your podcast application of choice to get new episodes as soon as they're 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.