Bernard Hor: 0:03

digital transformation in this space supply chain and logistics in Southeast Asia is happening at a breakneck speed. It is brick and mortar retail is just falling into e commerce. Without even without even knowing that Ah, now there are many commerce, how to fulfill my orders.

Tom Raftery: 0:26

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 of SAP. Tom Raftery. Hey everyone. Welcome to the digital supply chain podcast. My name is Tom Raftery with SAP and with me on the podcast today I have my special guest, Bernard. Bernard, would you like to introduce yourself?

Bernard Hor: 0:51

Hi, Tom. Thanks for having me on a podcast today. I'm a co founder of Hatio. Hatio is basically a technology company in the supply chain and logistics space. We're basically based out in Seoul in South Korea, were founded in 2012. After we after Samsung acquired our last company in the manufacturing execution system space. So we were we were in a manufacturing space. And then we started in 2012. And we went into the warehouse as our core. So we were doing a lot of Wales technologies around Wales controls Wales execution systems. We were We were powering up Lazarus mega centers, donations and optimizing or the consolidation center. And then in late 2018, we decided the leadership decided to leave careers playing field, a lot of leave, I mean, just to expand, so we expanded our market footprint into a new region called Southeast Asia. So it was a very natural progression because I was always asian guy, right. So so. So we expanded into Southeast Asia since 2018. Currently, we're about we're about close to three years now. And I think, what more an exciting time to be in Southeast Asia is this whole lockdown. Right? And you see the you see the whole shift? Yeah. So that's a little bit about me, and and Hatio

Tom Raftery: 2:18

okay, and what parts of Southeast Asia are you covering?

Bernard Hor: 2:22

We're currently based out in Malaysia in Kuala Lumpur. And we do cover Singapore on Vietnam, Indonesia, Philippines, and also Thailand. Yeah. Okay. That's basically the key markets that we're in right now.

Tom Raftery: 2:37

Super urban, who are typical customers? Oh, yeah.

Bernard Hor: 2:41

So basically, the mandate, the mandate of harthill in our Southeast Asian business unit is very simple. Actually, Tom, we were basically out here to help the local SMEs digitize right. Our target customers are and we work with people like the third party logistics, warehouse operators, retailers, and distributors, of course, worth mentioning is that currently, the e commerce retailers, you know, it's really a growing market for us, right. In fact, I think eight out of 10 of our retail clients are all going to eat turning themselves into ecommerce retailers. So yeah, ecommerce retailers is a growing growing market for us in this region. So we help these guys. Typically, we help them transform, or move from a human decisions and manual labor into a system guided operations. Yeah, with our cloud supply chain platform. So this basically guys that we work with.

Tom Raftery: 3:48

Yeah, okay. And they being I think you said, typically, SMEs are your main customers. You know, what, what has been traditionally barriers for them digitizing and how are you solving that for them?

Bernard Hor: 4:05

Absolutely. This is a very interesting question. So if you look at the Southeast Asian region, right, there's a lot of I mean, it's primarily made up of 80 to 85% of local SMEs. So So from the Southeast Asian point of view, or even Asia point of view is that, you know, the, the economy is primarily really driven by the local SMEs play us, right. So I remember when we when we expanded our market footprint into in in early 2018. We spent four months traveling Southeast Asia, the key markers in South Asia, I remember we were in Bangkok, we were in Manila. We spend a lot of time in Kuala Lumpur, even in Singapore as well and Vietnam, and we were basically meeting and we were having lots of meaningful conversations with third party logistics players, you know, distributors And he told me in a in a market like Southeast Asia, this, this segment of customers are not like, you know, three years or five years old, right? They're basically like 30 years or 40 years, I remember speaking to one of our 70s conversation, my very, very early conversation was three PL that is 60 years old, they were celebrating their 60th anniversary that year, in 2018. Yeah, so? Well, I mean, typically, the question is, how do you sell? How do you sell a cloud software solution to a 60 year old company? Right? It was really true, those meaningful conversations, you know, and I truly learned this one thing, right? Is that, you know, with, with a market like Southeast Asia, it is not about walking in there and bringing your software with you, and then telling them all about cloud. And as you know, it's not about that, right. It's really about on the first number one, understanding their operations. Number two, understanding their pain points, you know, and believe it or not, most of the time, what is critical in their pain point is not so much of like out of stock, you know, dimension venturi, because for 16 years in the business, right, out of stock has become the new norm, right? It's like the new black. You know, it's like, yeah, we're cool with our stock every year, we've probably make it make a loss of love, you know, and again, a loss of our million bucks there, but it's fine. Right. But you see adopted adopting. So now the whole idea was to how do you help these guys get on a digital bandwagon? Right. Now, what happened is that over the last 18 months, I you know, as you know, the whole COVID-19, you know, affects you just took us by took us by surprise, right? Nobody, no one was prepared for it, you know, yes, up ended economies, if he has up and the education and all that. And if you look at the entire economy of many, many parts of the world, in fact, throughout different different economies, from right, from Europe, to Asia, to today, to the united to the American region, if there's one thing that continues to move is actually logistics and supply chain. Right. And, you know, it's like, things are changing at a breakneck speed, right. People have to like, how do we adapt? You know, so one of the things that we learned, and you will live in a very fast paced manner is that the key thing is that the challenge, the main key challenge here of the SMEs, the local SMEs in Southeast Asia is the fear of, you know, it's like, I do not know what I do not know. Right. So there's, there's a lot of fear that they're not driven by empowerment. They're driven by the fear. So you know, it's like, they they're driven, they're driven to change. They're driven to adopt technology, but they're not driven by empowerment. They're driven by fear, they'll driven by limitations, right? So the questions that they're asking is, what happens after I install a software? How do I buy it? Right? How's my guys, you know, my, my, my 20 men in a warehouse? Or, you know, in the manufacturing plan? How are these guys going to adopt this new technology? Right, it used to be pen and paper, and right now everything is on on the on the on device, you know, the scan, and you know, when you digitize the process? What happened to the jobs, you know, if my guys cannot detect that they're going to go out, and you know, they're going to be fired, they can lose their job, right? Because some machines is taking over. What are you gonna do? You know, Mr. Reid says is, he right is very, very driven by fear limitations, and not driven by impairment, then, and I think, and I think the whole main reason that they're not driven by impairment is because they were not informed. They, they couldn't, they, they were not at the space and position to make informed decisions. So there was a lot of like, Oh, you know, the disruptive mindset. And, and, and so, so what we were particularly doing, you know, over the last 24 months, in Southeast Asia was really we ran down, we were not selling software's. And what what we typically do, I will find a way I find myself doing a lot of times is looking for a whiteboard, looking for a whiteboard marker, draw the anti sec operations, show them where the pain points are, you know, and really understanding the operations understanding the feeling of this guy so so I think the main key challenges in the Southeast Asian space right now is the is that you know, these a lot of this local SME markets needs. I will say that they will need to establish the need to establish a trust trusted point where trusted point of contact and say, Yep, this guy, you know, is like, this is not the guy that says here by my software and does it right, it is the guy that says, He saw like, truly cares for operations, right and say, Okay, I understand we're going through, you know, and we're gonna slowly bring you to the other side of the game. All right. Yeah. So, so I think the main key challenges in this opposition context is that the fear of the unknown The fear of the unknown. Yeah.

Tom Raftery: 10:02

Okay. And becoming a trusted advisors? Is your strategy for getting over that?

Bernard Hor: 10:09

Yeah, absolutely. Absolutely. And I find and I find that works very, very well, you really do not need to hard sell anything. I mean, there's so many solutions out there. Right. And, you know, of course, from the business point of view, we will always try our best to be competitive, you know, to be our competitive advantage, and, and all that, you know, by being in a cloud making into SAS model, and all that, but but I think truly is the conversations, right? It's about having the human conversations with this guys. Right. And and, Tom, let me tell you this right, the more conversations I have with this segment of customers of market, actually, I think I learned more I would like to say that I learned more from them than dumb from me. Because I mean, if they run if they run a for example, right, a logistic company, right? A distribution network, right? If they already have been running for 60 years, and they're still here and around and you know, they just growing in size, some women have done something right, right. Of course, they're not they're not power, the sophisticated technologies, IoT, agvs, and robotics and all that. But there must be something right that they're doing is that these, these processes have not been kind of hard coded by some genius developers, right? That's what it's up to, we're learning so much. And I think the more we do this, it becomes like a co creation, it becomes like, we are basically co creating the story with them, right? So so so you know, right? When you want to buy a product, you know, when it's kind of like a direct to consumer, you really want to understand the backstory of this product. And if you're part of the backstory, it becomes more effective.

Tom Raftery: 11:49

Very good. Very good. And what kind of processes are you digitizing for your customers?

Bernard Hor: 11:56

So in the beginning, basically, in the beginning, what we saw, so our capabilities in that we do with in Korea with the guys from CJ logistics, or lazada, I have calm. It's a lot of automation stuff right now in this part of the world, in this region in Southeast Asia. I remember in 2018, when we first started, and it was really about, you know, the whole difference about digitization and digitalization, right. And I think a lot of people get mixed up with this, too, is like, it's the same thing. What are you talking about? Right? No, no, no. digitization is just digitize the process, you know, putting all this pen and paper into some system, right? recording it recording data, right? digitalization. That's where the real transformation is. Right? That's where the pain is. Right? If you think that, if you think that, you know, digitalization, he says to cure your pain, you're so wrong. Why? Because digitalization means you're gonna have more pain before the pain subsides. And then, you know, so what we first did was digitization. We help, you know, all we wanted to do was just to help. And we were so so focused in warehouse. So So the way we looked at it, the way it looks at the table here is that, you know, if you if you look at the whole supply chain, from end to end, right, right, from the manufacturers, all the way to, you know, transshipment cargo distribution, you know, and what would you call the warehousing, and then all the way into the the last mile delivery marketplaces, and then finally to the consumers. So we find that we kind of saw our theory, our ideology was our belief was this, the core of this whole supply chain is the warehouse. So if you want to solve the supply chain problem, where do you start, right? So you start from the corner? Because if if you if you solve last mile, and you still have some shade, right, so you say, okay, garbage in, garbage out. So why does all this inventory fluctuations and notice that your mess happened, is all in a warehouse, right? When they pick the wrong stuffs and the wrong stuff, you know, and inbound and outbound? So second, let's start from the core. And of course, we came from the core, right? I mean, we were doing our own rails controls and execution stuffs, okay, let's start on the call. Let's help this local SMEs in Southeast Asia in this region to digitize their core first, because when they digitize their core, immediately Tommen. And I think you notice very well, right, the moment you digitize your core, immediately, you know the first quick one impact that you can see is Ah, now I have visibility. Now I have transparency. I can see this flow of goods from point A to point P. Okay, I know where you got lost, sort of thing. Right. So that was what you wanted to do. Right? And that was how we first helped them digitizing the warehouse. As we start doing that, now the ecosystem starts to come in. Right. And again, thanks to COVID-19 you know, when we Thanks, but no thanks. But because of what was happening, e commerce has taken a break. You know, it's like I read somewhere that you know, ecommerce progress you know, ecommerce has progressed like five years faster than it's already expected to be right. You know, over the last 12 months, 14 million users in Southeast Asia alone, jump on the bandwagon of digital buying and digital behaviors and basically, moving that Digital Lifestyle, right? 40 million users went on ecommerce shopping spree, nobody goes to retail anymore, right? So so all these things start to happen, thanks to all these things. Now the ecosystem comes into play, right? So we were sort of like at one point in time says, Oh, hey, now the looks like we got to connect to the marketplace, right? lazada shoppies, other Rakuten Amazon's. And we're like, Okay, let's do that. Right. And then I sped through that. And then here comes the piece of the most important part, which is inventory. We were like, Oh, shit, now we need a proper inventory, Master module as a law student. Right. So now we have the warehouse, we have the orders, we have the inventory in one unified technology, right. And just, it was just a couple of months back, we just released and launch a marketplace management and intelligence, right, which will tell you the customer data and a competitive analysis as well. And then of course, you have to integrate all the way to last mile delivery. And the one thing that we're doing right now is also we are doing a research and development on basically how does direct to consumer works from manufacturer, direct to customers. So we're getting a lot of inquiries right now from the manufacturers who have stopped us from the manufacturers as well. But it's not the manufacturer saying, I don't think this distributors, actually this third party guys, right? Because consumers are basically buying from me. So they're basically customizing the experience as the manufacturer, manufacturer, for the direct to consumer market as well. And, you know, one of the experiences that I had, just recently, two months ago was that the manufacturer were actually even changing, we're even improving the CNC machines and all that, because now they're gonna produce faster and with more precision, that's the thermal distributor, right? And they want to show you how the whole idea is that they want to show and, and, and kind of like kind of like, visualize, you know, help help their customers visualize how this product is being made. So sorry, basically improved on all. So it's kind of interesting how, how, yeah, how the last 18 months has taken us to new, different new perception of things. Yeah.

Tom Raftery: 17:17

Okay. Interesting, the whole shift of, you know, manufacturer direct to consumer, because that has got to mean that you're, as a manufacturer, you're going into direct competition with your distributors or your retail outlets. And how is that being viewed by the distributors and the retail outlets in Southeast Asia?

Bernard Hor: 17:42

I think it's, it doesn't apply to all kind of products, right? Because ultimately, it used to depend on a distributor, right? I mean, I'm not sure how relevant it is. But you know, the case Case in point here is that, you know, the one of the I, I recall, one of the conversations that I was, I was on just last week, the questions that we asked ourselves in that forum was really China. Right? And is China's still the world's factory? You know, it has always been that way. Right? So it's China's through the walls, walls factory, in essence, right. So China is always a central role in global supply chain, right? I mean, the competitive advantage, right? lies not only in is cheaper labor costs and higher productivity, right. And, and, of course, if you look at China has over the decades, they have built a comprehensive supply chain ecosystem. Right. And it's not surprising, you know, that China currently accounts for a quarter of the world's manufacturing value, right. So so it's China's to the world's factory. Right. And, and I and I read recently, a reason call even analysts right, which I've heard is that, you know, even like Tim Cook, from Apple, right, Apple CEO, Tim Cook actually actually remarked that, you know, he mentioned something about the speed at which China's supply chain recover from the whole COVID-19. You know, it's like, ruin seems to be like the ground zero, right. But the speed at which China's supply chain recovered from this disruption, you know, I think it truly only proof and showcase the durability and the resilience of China as a manufacturing market. So, so at the end of the day, I post you realize, you know, on China for their final assembly of of many of his key products anyway, right. Although markets like Vietnam, Taiwan, India, you know, could could is also gaining the importance. So, so I think this direct to consumer question, how does it affect the distributor? I would say I would, in my personal opinion, I would say that perhaps the newer products are perhaps the, the newer manufacturers, who have who, who could adopt a more agile production, you know, a more agile production process and strategy will be the ones that Back on the direct to consumers. And while while the the existing, you know, existing key products, manufacturers will still definitely be relying on their distributors and retailers across the different different key markets that they're in as well. Yeah. So I'm not too sure. But I will say that maybe you will take a couple more years. Before, you know, we're all towards the direct to consumer,

Tom Raftery: 20:28

I'm not sure. Yeah. And I mean, you're based primarily, as you say, in Southeast Asia, how do you see that market as being different from the set the European market or the North American market or any of the other markets?

Bernard Hor: 21:14

I think that the supply chain market in Southeast Asia and is, you know, it's a rising is a rising market with booming consumer demands, many global businesses are capitalizing, you know, on the growth of Southeast Asia's developing markets, right is 600 million market, you know, it's a very unique market throughout all the eight or nine, nine Southeast Asian countries, right? It's very obvious and apparent that the supply chain challenges in this part of the wall in this region in Southeast Asia have kind of like reached a turning point right reached a turning point, you know, and I think this is very much owing to the to the you know, to the scarcity of supply chain professionals, fragmented supply chains and increase in consumer diversity as well. So so just take Malaysia for example. Right? When you when you look at the the the supply chain professionals, right, a lot of supply chain professionals that is out there right now in this local market like Malaysia, they're not Do not you don't you don't see many local Malaysians as supply chain professionals, right. So So we still very much dependent on the global talents as well. I think that digitalization is also is a good, it's also playing a very, very important part in this. And if you look at, for example, in us in the US market, there's this company called Stuart right. And basically they're they're they're like a cloud supply chain platform as well. But they're also moving into the vertical of services, right, providing and building up the whole entire network distribution. The other company worth mentioning here is doc stores, right? bookstores work really, really well in the US. And over the last 18 months, we there's so much so many news about micro fulfillment center for groceries, Walmart says going into it you know so that's where the differences in Asia right because I think in this part of the wall because it's so geographically challenged as well right? geographically is kind of challenged and and also different kind of buying behaviors even in one or even in the same market, different province people people be behaves and acts differently. Right. So So I think the the the current challenge of how supply chains planning in Southeast Asia and Asia is happening right now is basically I know there are a lot of key challenges around it as well. Many companies and brands embrace that we spoke to are also figuring out, you know, what is the best way to bring their products closer to the consumers. So I think in in Southeast Asia in this region, a lot of people is a lot of companies are experiment experimenting and trying out different different strategies, supply chain strategies to reach the consumers in a in a faster and more cost effective manner as well.

Tom Raftery: 24:17

Okay, super. And you know, where to from here, we're hopefully starting to get rid of COVID. Slowly, slowly, slowly, you know, it's going to be around for a while yet, but things are starting to open up a bit as the vaccination progress progresses as the vaccination progresses. And as you said, the whole digitization has happened at a pace, which has been incredible in the last year and a half. various people have said that five years worth of digitization to your point has happened in a single year. I've heard that metric thrown around a lot as well. Where to from here, what's what what's, what's the supply chain in Southeast Asia of the next five years is going to look like

Bernard Hor: 25:09

interesting question top Southeast Asia has is an incredibly attractive region, right with rapidly growing markers and low cost of operations, cheap laborers, right. I guess the challenge here really is how do we address the fractured supply chains and the shortage of the supply chain skills. You know, I would say that the next five years three to four fears in Southeast Asia. The trends with number one, digitization will be trend number one, in my opinion, right? It's definitely gonna be trend number one, right is, you know, it's like, it's like I, if if a local SME in Southeast Asia, if you haven't gone fully digital, you know, right now and you still delaying it is only going to get more and more challenging. Right. So So it's about finding the right, the right fit of technology that meet the, you know, the business needs, right, implement proper implementation, right. And, you know, and this whole customization thing, right. And I will say very strongly that a, a business organization right now in Southeast Asia, especially in the supply chain industry, can not afford to not digitize, right, this is already here, right. COVID, or no COVID, you know, is, is the next normal already, you know, we're not going back to the normal side, I don't think we're ever going to go back there. So, so at present, you know, it's only going to become more and more important to be in a supply chain that is inclusive. So, so and that's where digitization plays a very important role. So number one is digitization for Southeast Asia. Right, there's, there's, there's, there's a huge addressable market out there for digitization. That's number one, number two, with digitization, then we talk about increased visibility, right. I think I think for supply chain, you know, one of them, one of the very few key important things in supply chain management is always visibility and transparency, right? You know, increased visibility just helps you understand, you know, the state of a supply chain as a whole, you know, each and every single touch point on supply chain from manufacturer to your whole cargo distribution last mile, how how your flow of goods, and how your inventory is basically being managed at the marketplaces. Right? So, so, you know, today's COVID-19, right? We weren't prepared for it, and we will not know if it's gonna be COVID 20, or, or some other, you know, there's so many Delta vegans and all that. So, so as we thought that, okay, you know, we are all vaccinated, we are finally getting our words, there's light at the end of the tunnel, you know, we will never know that maybe, perhaps, you know, there's, there's gonna be another another she is going to hit a ceiling fan. Right. And, and also, what happens then. Alright, so I think it's about future proofing your supply chain. And the one, the key thing about future proofing your supply chain is to have increased visibility to have a total visibility. And that's where digitization comes in. Right? And this is highly achievable. So it's about identifying the right technology solutions, right. And I guess that the other thing that I was also looking at, and we're also observing is basically the Internet of Things. You know, interestingly enough, the bigger boys, the bigger boys of the, in the supply chain, value chain, the bigger boys are starting to also adopt, you know, starting to look at and adopt the Internet of Things. Right. A lot of RFID sensor based device, you know, we do have more and more inquiries, you know, even within our business, we do have more and more inquiries on pick to light stuff, right? Pick the light to light a lot of digital assaulting systems, you know. So, we do see that companies that especially the medium to the bigger boys, enterprises are basically picking up on the radar of internet of things right. And I will say that this will definitely help propel and even make the supply chain in this region more visible, more transparent. You know, this, this will be the tree top key things that I would look at in the next three to five years down this line for the Southeast Asian region regional market among the local SMEs. Yeah.

Tom Raftery: 30:00

Okay, super. We're coming towards the end of the podcast now, Bernard, is there anything that I haven't asked you that you wish I had or any topic we've not, you know, mentioned that you think people should be aware of?

Bernard Hor: 30:14

I've been having a lot of conversation around this topics right on supply chain and logistics. And I've centered my my conversations pretty much around Southeast Asian region, and of course with the local SMEs. So basically, that's where our heart is right? And You know, we can, of course, love to get on a conversation of you know, automation robotics and all that, you know, how you know how manufacturing robotic arms, but I would say you know EMRs are hate, but I will say that at this point in time, I would I would hope to get into those conversations with real success stories of all these local SMEs getting to that to that point in their digitalization journey in the next two to three years, as it is now, as it is now, I think the real mandate and the real work there has got to be done here really is to bring into empower all these local SMEs in this region to at least get to the starting block and no more sitting at a by you know, at a at a stand like okay, let's see how digitization or digitalization is done, how is digital transformation, you know, what happens? Right, I think they have got to experience it. And basically is to find a trusted partner to bring them through that experience. Right. So so i think i think that that will be the first order of the day right now, you know, and Todd, let me tell you, right, right now as you and I are speaking, digital transformation in this space supply chain and logistics in Southeast Asia is happening at a breakneck speed. It is brick and mortar retail is just falling into e commerce. without even thinking without even knowing that Ah, now there are many ecommerce, how to fulfill my orders. Because while I have 10 stores in lazada, 10 stores in Sharpie and Okay, how do I update it? You know, how do I make sure I don't go out of stock? I don't oversell the right. And you know, right now, because of the pandemic, right, because the lockdown is like every month, there's a sale day, right. So Lando, and he used to be on 1111 by lazada, and chop shop. And now of course at the Black Friday, somewhere in between. But right now it's like 112233, every month, over 12 months, there's like 12 sales days, like the whole your whole year true sales, right? So so if you're not, if you're selling on e commerce, you're, you're really losing out, you're probably losing or you're really losing out, right. So all the retail guys are basically falling back on this, right? So so when they fall back on this, that's where that's where the nightmare begins. And that's where the need to resolve this nightmare is the and this is where digital comes in. So it's really really happening at a breakneck speed. I am of the opinion that, you know, we're here for a reason and this season, this season of the time right now. This is the season to basically help all these local SMEs to get up to speed, you know, at this breakneck speed. I don't know how it's done. But yes, so it's really interesting. It's really interesting, Tom, you haven't had the chance. You should come by this power wall. And yeah, experience it as well. Yeah.

Tom Raftery: 33:31

Sounds Sounds interesting. I'd love to Bernard. That's been great. Thanks a million for coming on the podcast. If people want to know more about yourself, Bernard are about how to or about any of the things we discussed today. Where would you have me direct them?

Bernard Hor: 33:46

Sure. You can check it out. Check us out at hotmail dot Asia, that's h a ti o n dot Asia, or you can check me out on LinkedIn. Just find me at Brandon Hall. I'll be more than happy to connect and have more conversations around this space and anything else? Yeah. So thank you very much, Tom for having me. I really enjoyed this conversation.

Tom Raftery: 34:09

Appreciate. Thanks for coming on the show today.

Bernard Hor: 34:11

Thank you.

Tom Raftery: 34:13

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 sa p.com slash digital supply chain or, or simply drop me an email to Tom Raftery sap.com. If you'd like to show, please don't forget to subscribe to it and 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.