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Chloe Taylor (00:05):

Hey, welcome to The Future of Supply Chain, a two part EY podcast that takes a deep dive into, well, everything supply chain. I'm your host, Chloe Taylor.

Chloe Taylor (00:19):

We know that increasingly across the board, the future is digital and autonomous with automated forecasting, autonomous trucks on the highway, drones dropping packages off at the doorstep, driverless trucks and forklifts in the factory, lights out warehousing, robotic process automation. So where will humans fit in? Will their jobs change? Will they still have jobs? What will their new roles entail? Let's talk to two EY supply chain digital transformation leaders, Dheera Anand and Al Mendoza, to understand what the future supply chain looks like and what it means for supply chain leaders. Hi Dheera. Hi Al.

Dheera Anand (00:59):

Hi Chloe.

Al Mendoza (01:00):

Thanks Chloe.

Chloe Taylor (01:01):

So there's recognition at the board level that the supply chain is a key part of a company's strategy for growth. Customer expectations are increasing in terms of product availability and same day delivery. And demand patterns for goods and services are constantly up and down. It's the perfect storm for the digitally networked supply chain, right?

Dheera Anand (01:22):

Yeah, it's an absolutely exhilarating time to be a supply chain professional. Changing political climates, natural disasters, trade wars, and evolving customer expectations. You name a macro turn and it exists. Consumers are used to full track and trace, getting the product in hours, not days. They also want to know where their products were made and that they are sustainable. Some want to see the journey of their products from farm to fork, for example. They care about diversity and inclusiveness and societal impacts.

Dheera Anand (01:55):

Additionally, the world is operating at supersonic speeds, faster than ever. With unprecedented pace of change, supply chains must be able to turn on a dime to match fast changing customer preferences. Today, customers no longer expect their suppliers to simply react to their needs, but to anticipate them. This means that for businesses, demand signals need to be captured and actioned in real time for the supply chain to respond to events as they occur. For this to fully activate, enterprises need visibility up and down the supply chain to make changes on the fly and respond to those changes to stay relevant in the market.

Chloe Taylor (02:40):

Thanks Dheera. So what do companies need to do to transform their supply chain from planning to the manufacturing floor, to the warehouse, to the transportation network?

Al Mendoza (02:52):

We look at this at EY that there is a journey that companies need to go through to go from a linear supply chain to a autonomous supply chain. And there really are three phases of that. So the linear phase is really about how do you optimize your functions within your company to how do you operate in a network supply chain with multiple actors and other companies to ultimately, how do you drive to an autonomous supply chain in which the supply chain manages itself.

Al Mendoza (03:28):

To get to that, companies really need to think about, are they digitally enabling their supply chain? How are they connecting with their suppliers? What advanced analytic capability are they building? Where and when? As we look at companies and talk to our clients, important capabilities, such as visibility and advanced technologies, such as simulation, control tower and digital twin are part of the ingredients to really transform your company from linear to autonomous. We are finding that these technologies are really important to drive companies to start to once again, meet the expectations of their customers.

Chloe Taylor (04:13):

Great. Thanks Al. I'm really appreciating learning here. In terms of technology adoption for the autonomous supply chain, what are you seeing? When are we going to see some of these futuristic technologies become commonplace?

Dheera Anand (04:29):

So these technologies can be applied in different parts across the supply chain, from planning to the shop floor, to distribution and delivery. Several enablers, such as cloud, RPA, IoT, big data analytics, mobile tablets enable better collaboration, faster analysis, and quicker reaction time to realtime events. Some are also experimenting with 3D printing, blockchain and physical robots.

Dheera Anand (04:57):

Also, in terms of facilitating collaboration, global visibility, I mean, think about it. Everybody's working remotely, all the supply chains are global in nature, it is so important that these technologies enable every stakeholder participant to exactly see what's happening, where, and what's ahead. What do you think, Al?

Al Mendoza (05:16):

Thank you, Dheera. One thing to call out is simply utilizing digital technologies does not equate to creating a digitized or autonomous supply chain. Companies really need to connect their technologies to their business processes, particularly around planning, procurement, manufacturing, and logistics. There's a large difference between doing digital and being digital. I really see the big differences between talking and planning to be a digital company and actually executing a plan to enable that.

Al Mendoza (05:52):

When we think of digital and we think of this journey, we think of autonomous. And so terms such as lights out, hands free, self-driving are the type of terms that companies are striving to do. And it's really important that they create and harmonize their business processes with their technologies in order to have predictive, decision making capabilities. One example that we're seeing is demand sensing, where companies are using these advanced technologies to really understand changes in demand patterns in real time, using data available to them, such as point of sales information. This is having a real impact into the satisfaction and on time and full performance of many companies. Supply chain is really at the heart of being viewed as an engine of growth versus historically, a concept that they were a cost center.

Chloe Taylor (06:53):

Great. So I'm really appreciating these in depth answers. I'm hoping we can back up for just a second. EY did a study two years ago where only 26% of companies in the Americas were digitally networked. That seems low. Could you go into a little more depth about what this means and why a digitally networked ecosystem is so important?

Al Mendoza (07:16):

I think the critical thing here to identify is that going forward, companies are not going to compete as individual entities, but really as a collective package of value chain. And it's going to be your value chain against someone else's value chain to see who is going to really be able to be the leader of that industry or that particular product. And so, while it is surprising that such a small amount of companies are taking this challenge on two years ago, a lot of it is because it was difficult, and it meant really collaborating with your suppliers. And as we talked about before, this recognition of supply chain not being a cost center, but a growth engine, has really changed that. And so the flow of goods and what's going on around the world has never been more important than now. And people are seeing the benefits of companies that really are able to manage their entire network from end to end.

Al Mendoza (08:19):

This is a complicated relationship because in some places, someone is an ally and an important supplier to you and your value chain. And for many multinational companies, that same entity can then be your competitor somewhere else. And so you need to have a really pointed strategy to really be able to do this. You need to identify what are those relationships that bring the most value, and then you need to tie this together with technology. And therefore, this is a journey that is difficult to start for some companies, but one that is absolutely necessary in order to be a leading supply chain company and to meet the expectations of your customers.

Chloe Taylor (09:04):

So this speaks to the anticipation of customer needs, which means we're now talking about data analytics and integrating all kinds of data, including weather and social media.

Dheera Anand (09:16):

Absolutely. Let's take an example that we all are familiar with from recent times, unfortunately. Think of a consumer products company that makes toilet paper. They will have a lot of insights gathered from their own information, their sales numbers, stock movements, but they also incorporate demographics, psychographic research on its customer base. But ultimately, it's a local store that has the point of sale data. They know what unique customers walk into the store, by what products, in what quantity and when.

Dheera Anand (09:48):

So ultimately, to have a complete demand forecast, organizations need to find a way to blend both sets of data. Their internal data with quantities of product shipped, their ordering history, point of sale data, but also incorporating external data sources and signals such as social media, web traffic, and even weather. It is in fact possible with today's technology to tap into the information as people were searching in a frenzy for toilet paper, to be able to tap into that information, to alert both your internal supply chain, your plants, your distribution centers, but also ultimately your suppliers.

Chloe Taylor (10:27):

And then overlay that with increased customer demand for customization, such as sneakers made just for you or even personalized medicines.

Al Mendoza (10:38):

That is definitely happening in the marketplace. And you gave some good examples in terms of customization that are happening in things such as shoes, t-shirts, even automobiles. And there has been a real shift in customers in what they're willing to accept. Your experience now at a local car dealership is much different than it was in the past. And the odds are those shifts are going to stay there for a while. You'll see automobile makers now shift to having some common cars on the lot. But if you want those premium cars, the likelihood is that you're going to have to custom order those going forward.

Al Mendoza (11:17):

So we are seeing permanent shifts or at least sizable shifts due to COVID-19. And you see supply chains segment much more than before and tie that together with their strategies in order to optimize service levels and provide the correct order methods, understand the right cancellation policies for each of their customer segments. And really providing a tailored experience based upon the segmentation of their products and their customers.

Al Mendoza (11:49):

Another thing that we're seeing is even personalized medicine, EY has a solution in life science supporting the delivery of individualized cancer treatments to patients that are as personal as the treatments themselves. For this to happen, you must have an operating model and supply chain in place that can improve how each individual cancer treatment is designed, manufactured and delivered.

Chloe Taylor (12:14):

Okay, great things for companies to move toward. What else? Increasing autonomous elements?

Dheera Anand (12:20):

We expect companies to look at their internal metrics, where they're trying to go from a strategy perspective, in their mind, how to get there. Starting with the control tower, to know what is going on, move to a digital twin, and then move to autonomous. Ultimately, it's indeed a journey that companies will embark upon to go from prescriptive, to predictive, to autonomous. For example, one of the leading companies was about at 35% for being autonomously forecasted prior to COVID-19. Now they're already starting to see some completely autonomous elements beyond just forecasting.

Dheera Anand (12:58):

But companies should expect another perfect storm ahead. The future of work and the changes that talent will drive. Fewer people want to work at factories or distribution centers. So more automation will be needed. That will require more data and accurate data because there will not be as many people on hand to make real time directions. In an office or home setting, people may not want to punch a keyboard or work on a line of code. So a lot of thought will lead to going into getting people into more strategic roles and keeping them engaged in this remote working environment.

Chloe Taylor (13:32):

How about timing? When can we expect to see a fully autonomous supply chain?

Dheera Anand (13:37):

For some, it's already here. A small number of enterprises either have planning functions automated with technology, such as RPA and machine learning, or are now using robots to fulfill orders. For those companies, driverless trucks and forklifts are next. The reality is not if companies will have an autonomous supply chain, but when. When asked about timing more than 50% of supply chain SVP and EVP said they expect mostly autonomous supply chains by 2025. These results were mostly fueled by automotive, industrial products, retailers, and consumer product firms.

Dheera Anand (14:13):

As digital rolls forward and technology disrupts markets, change becomes the true constant. Now is really the time for leadership to embrace this change as an opportunity and a catalyst for future growth. This is the age of transformation and supply chains are no exception. Company and supply chain leaders should consider these topics as they grapple with what an autonomous future involves.

Chloe Taylor (14:40):

Got it. What if a company doesn't want to move forward toward a networked ecosystem model? What if it doesn't end up making the leap?

Al Mendoza (14:50):

It's always hard to predict the future, but honestly, I don't see it as a choice. The historical models just don't work anymore the way they did. It's really driven that our normal isn't our old normal anymore. The pandemic really brought that to life to us and showed how interconnected supply chains really are. The extreme weather in Texas that we experienced, affected me here in Minnesota where I live. At the grocery store, products weren't on the shelves. And even on my way out, the normal bags that I'm used to, weren't there because of what happened in Texas. The events that the Suez Canal while felt isolated, are still affecting the ports in Long Beach and Los Angeles even today. And this holiday season is going to be affected by the semiconductor imbalances we have in the supply chain.

Al Mendoza (15:44):

The thing that needs to happen here is we need to stop looking at just this as a physical goods problem, but really how do we share information and how do we optimize and orchestrate value chains together. It is much easier to send bytes and data than it is physical goods. That's the journey that's ahead of us. That's the digitalization that needs to happen. That's the coordination that these companies and their suppliers and partners need to do to really be able to address the needs of the future. And that's a new challenge to them that's going to require a new approach.

Chloe Taylor (16:24):

Okay. So let's talk about digital transformation and what the future supply chain talent looks like. Are people going to automate themselves right out of their jobs?

Dheera Anand (16:34):

Oh no, it's quite the opposite. I don't think talent has ever been this important and it's going to be more important going forward. There will always be a need for humans at the center of all of this, working alongside, guiding technology, contributing to the accomplishment of their organization's goals. Bottom line, the importance of acquiring skilled talent will always be critical, from planning, to the shop floor, to distribution, to last mile delivery. It's just, the skills will look a little bit different.

Chloe Taylor (17:03):

But let's be real, the nature of work is changing and how talent is sourced and developed will change too, right?

Dheera Anand (17:12):

Oh, you're absolutely right, Chloe, and that is such an important topic for companies to focus on. There are so many factors influencing the availability of talent in the market and what it's going to look like in the future. Technology, geopolitics, economic changes and other disruptors are really changing the game. Companies will really have to put a lot of thought into their strategy around talent acquisition, development, and retention strategies to compete for top talent. It is indeed a war for talent out there.

Dheera Anand (17:45):

Strategies will need to include increased automation, extensive retraining, continued flexibility, including work from home options and investments in data science. Manufacturers are now pitted against technology companies in a struggle for attracting, developing and supporting talent. Retaining and re-skilling the workforce is now a top priority for supply chain executives.

Dheera Anand (18:09):

There's a new generation of talent coming out of college that wants to be challenged and technologically involved. Fundamentally, the future lies in the humans at the center of transformation while deploying technology at speed and innovation at scale. We need to market the supply chain in a different way. It is now enabled by technology, leverages predictive analytics and allows you to utilize all the bells and whistles. This is essential in helping organizations attract and retain skills, talent, enhance long-term resilience in their supply chains and realize workforce agility.

Chloe Taylor (18:49):

Okay. So I imagine getting everybody aligned on the path toward a digital and automated supply chain within your organization and across functions is akin to wrangling cats. What can companies do to accelerate that alignment?

Al Mendoza (19:06):

That's a good question. We will suggest a three prong strategy to do that. And interestingly enough, we won't use the word digital in this strategy. The first itself is really talking about alignment. Redesigning your operating model, not just to capture cost savings, but really infuse it with agility and resiliency and allow companies to really orchestrate end to end their value chain. So what would this mean? This means that companies really need to enable themselves to begin to generate useful data that will be the fuel for this transformation. They really need to align their strategy with the way of working and the way of executing to empower this transformation.

Al Mendoza (19:56):

The second is empowerment itself. People need to grow in the roles. They need to be able to adopt new technologies. They really need to up-skill and re-skill themselves. Companies need to address, as a long term capability, not just a point in time training. People really need to have the will and the skill to embrace the future.

Al Mendoza (20:21):

And lastly, it comes down to culture. How are people motivated? The word important has never been less important. It's so overused. But how do companies explain and model the future? How do they create a culture that embraces change? Because that is the only thing that's going to be constant. How to align incentives and rewards. How to highlight examples of transformation. As much as we try to make this a digital transformation, this is a story about vision, people, and connecting things together that have never been connected before and taking advantage of that as operating as a collective entity company value chain. That's the challenge we all need to embrace in the future.

Chloe Taylor (21:12):

That's fantastic. Thank you so much, Dheera and Al. This has been a really great discussion.

Dheera Anand (21:18):

Our pleasure. Thank you.

Al Mendoza (21:19):

Thank you very much.

Chloe Taylor (21:21):

So, there you have it. The future of supply chain is digital and automated, with humans at the center. If you haven't heard part one of this two part podcast where we talk about getting to net zero carbon emissions and the opportunity that opens up for businesses, check it out. You can find it at ey.com and on Spotify. I'm Chloe Taylor. Thanks for listening.

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