Overcoming Barriers to Growth in the Face of Supply Chain Disruption with Lisa Anderson and David Ogilvie

Patrick Daly (00:09):

Hello, this is Patrick Daly and welcome to Interlinks. Interlinks is a program about connections, international business, supply chains, and globalization and the effects these have had on our life, our work and our travel over recent times. Today on Interlinks, we’re going to be taking a look at how businesses can overcome some of the barriers to growth and to scale and to face of the succession of supply chain challenges that have emerged over the last couple of years, and continue to emerge as a geopolitical uncertainty reigns at a global level. So to discuss this topic, I’m delighted to be joined by two of my colleagues from the supply chain special interest group at the society for the advancement of consulting. So we have Lisa Anderson, president of LMA Consulting Group from the Los Angeles Metro area. Welcome Lisa.

Lisa Anderson (01:00):

Great, glad to be here.

Patrick Daly (01:02):

And David Ogilvie, principal consultant at David Ogilvie Consulting from Brisbane in Queensland Australia. Welcome David.

David Ogilvie  (01:09):

Thanks Patrick. Thanks for having us.

Patrick Daly (01:12):

Very welcome. I think maybe before we get into things, I think maybe we should just first send our thoughts and wishes to the so many innocent people being killed, injured, and exiled due to the war in Ukraine and hope that the mayhem there can be brought to a stop soon. And I guess it also reminds us of other conflicts causing pain and suffering around the world. Some of which tend to be kind of forgotten, but there are things going on in Syria, in Yemen where I was actually born, in Afghanistan, in Ethiopia, Somalia, Myanmar, Mozambique, and many more. So guys, how is this war being processed where you are, by people in general and by businesses and their supply chains? And what’s the reaction there in Brisbane, David?

David Ogilvie  (01:58):

Well, firstly, I’m very grateful that I live in a peaceful country like Australia. I’m extraordinarily fortunate to have been born where I was born and that thought never leaves my mind when you have events like this. I just cannot imagine what it would be like to be living there in any of those sorts of places at the moment. So personally, I find it extraordinary that people have to live through those sorts of events. It is not getting… Well, obviously the press are covering it very heavily, but again, they’re focusing on all the destruction and there is plenty obviously, and the despair, as the media does, but that’s really all we’re getting. We’re not getting anything under the covers or an understanding of what’s motivating Putin or any of that sort of stuff. And it’s certainly getting a lot of coverage.

Patrick Daly (02:50):

Yeah. Yeah. And Lisa in California, west coast, what are people talking about in relation to this? And is it turning up in business in any way, in the supply chain?

Lisa Anderson (03:00):

Well, definitely people are talking about it and of course it’s horrible. With that said, it is starting to affect… There’s conversations about how it’s going to affect the supply chain. Certainly, one of my clients uses nickel and if anything is supplied by Russia or the Ukraine, they’re in jeopardy. So from that point of view, any commodity based… There’s a lot of commodities supplied by Russia and Ukraine, and there’s a bunch of agricultural products, not generally to the US, but there’s concerns about price increases because there’s going to be less for the overall world. So corn, wheat, and other agricultural products. So definitely so far, it’s just leading to concerns about further increased inflation. I mean, aside from obviously the horrible things related to war, but from a supply chain point of view, that’s largely what’s coming across so far.

Patrick Daly (04:07):

Yeah. I guess here in Ireland, Europe, and in general, we’re seeing a spike in fuel prices, which is affecting…

Lisa Anderson (04:19):

Oh, well that too. Yes.

Patrick Daly (04:19):

Most consumers and the logistics industry, especially in the transport industry. So I actually paid two euros and 3 cents for a liter petrol in my last fill. So I don’t know what that turns into in dollars per gallon, but it’s probably something like $8 or something. So what would you pay for a gallon of petrol in the US?

Lisa Anderson (04:45):

Lord, it keeps changing, it depends where you are, but $5. There’s some places that are $7 a gallon and even higher. So it’s skyrocketed, not just because of the war, it was skyrocketing anyway, because of the energy policies we have, but now it’s gone up like crazy since the war started as well.

Patrick Daly (05:06):

Yeah. So we’ve, we’ve begun to see government intervention. So they actually reduce the taxes on fuel in an emergency measure, brought them down by 20 cent a liter, which is quite extraordinary. And then we’ve seen the government urging our farmers, because it’s planting season now, to plant more grain because there’s going to be a grain shortage after the next harvest because in Ukraine and Russia, well, particularly in Ukraine, they’re not planting grain when usually they would be at this time of year. And I guess what we’re seeing on the ground as well is Ukrainian people are coming here. So we expect to receive maybe a hundred thousand or so, here in Ireland. Basically they’re being brought into the European union with full EU citizen rights for three years, so they can live and work and they will be moving into the different countries as a proportion of population.

Patrick Daly (05:59):

So we reckon in Ireland, given that 2.7 million have left Ukraine and entered the EU, we reckon about a hundred thousand here. So that means schools and housing and all the services that have to be provided. So it’s going to be a challenge. So our topic today is scaling up. So in essence, talking about what are the obstacles that are currently in the way of businesses, maybe that have opportunity, have demand and maybe even have the wherewithal to scale up, to grow their businesses as we come out of COVID and economies recover, and now we’re met with the war and the risk of escalation and everything else that’s going on, inflation, potential interest rate hikes, and so on. So very uncertain environment. So Lisa, what kind of obstacles are being encountered by your clients in the west coast, US, in terms of the growth that they would wish to take advantage of and what are they doing about those obstacles?

Lisa Anderson (06:58):

Well, so first of all, I’ve been working with clients throughout US and actually they have operations in Europe too. So I can speak more to that really than even just the west coast. But from that point of view, they’re still suffering in terms of getting enough materials. So there’s shortages, extended lead times, they’re still suffering with admin, by all means suffering with high prices. So they’re having a lot of issues from that point of view. And I would say that there’s… Just thinking about that. Something else, but when I remember it, I’ll tell you, but basically the extended lead times and high prices has really caused some challenges. I would say- oh, that’s what I was going to tell you. From the demand side of things, one of my clients has lower demand right now, but it’s mainly because their customers can’t get the commodities they need, which is copper in their case to be able to produce. So they still expect the same amount of demand, but it’s delayed.

Patrick Daly (08:08):

Okay. So what kind of things are they doing about it?

Lisa Anderson (08:14):

So really, they’re just having to wait because their customer’s getting copper from before. So what we’re having to do is produce ahead because we just don’t have the capacity to produce their entire amount that they would like, when the copper finally arrives. So we’re having to produce ahead, which is actually causing havoc. I forget, should have mentioned this because we don’t have enough space and there’s not enough space throughout the US. And if you can find the space, they were able to find some space, but it was really expensive. So they said it wasn’t actually worth it to get the business if they had to buy the space, that was that expensive. So it’s a catch 22.

Lisa Anderson (08:53):

So now we’re trying to expand space. We’re trying to prioritize customers and figure out where we’re going to store things for when the business does come to fruition. It’s not all because of copper, but on the other side, there is some additional volume they’re expecting that’s over our ability to produce. And in that case, the problem is finding people. So we can’t find enough people to run the lines. And so we’re having to at least produce the timing of the orders and when they come in versus when we have people, which is… Well have what we have. So basically we’re needing to produce in advance because we certainly can’t get more people when we need them. So anyway, it’s just causing space problems as well.

Patrick Daly (09:44):

Yeah. That’s a topic that’s hot here at the moment as well, and has been for quite a while. The shortage of space, particularly quality warehouse space, because here in Ireland, we have a lot of pharmaceutical and med tech, medical devices and so on and food production obviously, and you need kind of high grade warehousing facilities for that. And there’s been a lot of pressure coming from all sorts of developments. So Brexit put of pressure on that. COVID put pressure on that. The removal of milk quotas here in 2015, put pressure on it. We have very strong economic growth from 2014 forward, put a lot of pressure on warehousing space. And now, I anticipate that the disruption with the war in Ukraine is going to pile more pressure on there. So it’s one of the common things that I’m encountering with businesses all around, not enough space and not enough quality of space.

Patrick Daly (10:49):

And some of the things I’m seeing coming out of that is companies now being more open to investing in storage solutions that are not just your run of the mill bulk standard pallet racking, but they’re looking at high density storage systems. And often, in order to make use of the space, they sacrifice the aisles and they have dense storage, but in order to get the selectivity, to be able to get the products out or to get the pallets out or get the boxes out, they need quite a lot of automation to do that. So we’re seeing both more sophisticated storage systems and more automation in warehousing. And there is quite a bit of ambition in investment, in warehousing that we’re seeing now that will come through over the next two to three years, which is kind of maybe a change from five or six years ago. So what kind of obstacles are you seeing David? [crosstalk 00:11:50]

David Ogilvie  (11:50):

Very similar Patrick. Yeah, very similar. I’ve got clients at the moment who are extraordinarily constrained with where they can get their product from. One client in particular just cannot get the chassis they need from the manufacturers and that’s constraining their ability to build anything. It’s creating a lot of noise in their business in the sense that they go constantly re-plan because of whatever chassis they can get. So it’s creating a lot of additional work in the business that really shouldn’t be there. So we’re working on trying to come up with resolutions for that. That piece on warehousing is the same. Trying to… Even personally, I was looking to buy some warehousing a little while ago and the price of warehouses have just skyrocketed because of the demand that’s out there at the moment.

David Ogilvie  (12:41):

So it’s very difficult to find a reasonably priced warehouse that’s providing a decent yield at the moment and there doesn’t seem to be an appetite to be building them just yet. So maybe the commercial pressure will change that. And high quality people. We’ve had our borders locked for a long time. So we are very much an immigrant nation in many ways. And most of our skills come in from overseas. Our birth rate is extraordinarily low, naturally here. So we are extraordinary highly dependent on immigration. And with our borders being shut, the price of some people has just gone through the roof. Consultants in the ERP space, for example, are pulling extraordinary salaries at the moment. So that’s putting the price of all of this sort of stuff up, not to mention the energy prices, as Lisa mentioned before. And you did, with our petrol price here has gone through the roof.

David Ogilvie  (13:43):

However, I suppose some of those shortages that you’re talking about provides opportunities for Australia, at least because we are a commodity nation. So we are the second biggest producer of wheat in the world, so the fact that Ukraine and Russia aren’t exporting wheat means that there’s an opportunity for us. Whether we can grow anymore is another kettle of fish, because I’m pretty sure the wheat board nearly sells [crosstalk 00:14:10].

Patrick Daly (14:10):

I would imagine David, that your wheat season now is…

David Ogilvie  (14:15):

Counter cycle.

Patrick Daly (14:16):

Well advanced. So what you’re going to have for this season is already planted, right?

David Ogilvie  (14:21):

Correct.

Patrick Daly (14:21):

So it’ll be the next cycle, I guess, where there might be an opportunity.

David Ogilvie  (14:25):

And Lisa was talking about copper before. Well, obviously we’re a big copper exporter. So from a national level, I think these things are creating some opportunities for us, but getting back to the topic in the sense about what’s constraining growth, all of these things stop businesses growing and create roadblocks and impediments that are difficult to get around. If you’ve got good people, then you should be maximizing that. And that’ll give you a great opportunity in the marketplace.

Patrick Daly (14:59):

Yeah. I’m seeing as well people beginning to use their connections and relationships in more creative ways and investing maybe more in their relationships, their business relationships, whether it’s online, which we can do now much better because we’re accustomed to it. We know how to do it. It’s not the same, we know, but it’s a lot better than not being with people. And also, the face to face has started again. So in terms of getting access to, whether it’s skills or space or assets that you need, say for example, containers to export. So that is a major problem that we have here in this country. And we also have an imbalance within the country because most of our imports tend to come in one port. And a lot of our exports are generated in another region of the country. And they’re always looking for empty containers, which are in the wrong place. So there’s a kind of a business there in moving empty containers around the country. [crosstalk 00:16:08].

Lisa Anderson (16:07):

We have a big problem with that.

Patrick Daly (16:10):

Yeah. Sorry, Lisa, you were saying?

Lisa Anderson (16:12):

Sorry. I was just going to say we have a huge problem with empty containers. So we have that issue as well, to be sure.

Speaker 4 (16:19):

93.9 Dublin South FM.

Patrick Daly (16:22):

So, and David, you mentioned also earlier that resilience in the supply chain, which is a little bit kind of related to what I was talking about in terms of looking after those relationships, is something that you feel is important ingredient in helping people work around these challenges.

David Ogilvie  (16:41):

Hundred percent. And as in dual sourcing. Now, whether that’s dual sourcing from multiple companies or whether it’s sourcing from the same company with different manufacturing locations or whatever it happens to be, I think you need a second source of supply for your key components. So taking that chassis example, if we can’t get a chassis from Mercedes, well, then we build something on a Renault or we build something on a Fiat. So it’s that balancing act and having that at least gives you the alternative, so while that’s creating more work to re-plan and those sorts of things and make sure our MRP is running properly and we have the right material in the right place at the right time. That’s additional work that potentially shouldn’t need to be there. It at least allows you to stay in business.

Patrick Daly (17:34):

Yeah. Yeah. I was reading an article the other day in one of the UK newspapers and the guy was talking about the succession over the last hundred years of different periods of instability, upheaval, and then kind of quiet periods. And there’s been several of them going right back to maybe 1900. And I guess in our lifetime, he was talking about the period of upheaval that started with the oil crisis in 1973, that lasted until about the fall of the Berlin wall or when the Soviet Union collapsed around 1990, 1991. And then we went into this period of kind of stability and growth. And so on that lasted maybe from 1990 up until the financial crash in what, 2007, 2008. And now we’ve been in this period and it seems like this just one thing after another. So you remember we had the credit crunch and the property bubble, and then we had geopolitical tensions.

Patrick Daly (18:37):

We had the election of Trump, here in Europe, we had Brexit and we had COVID, we’ve had the war. So it’s almost like businesses need to be adapting and adapting and adapting all the time. Because I have one client and during COVID his supply, so he brings in furniture and homeware to the market here and distributes. And a lot of his supply was coming from China and Southeast Asia. They’re wood products made from wood and he was having problems during COVID. So he actually stopped bringing certain products from that part of the world. And he shifted, he thought he was very clever and he was very clever and he shifted. And where did he shift to? He shifted to Russia. Okay. So now he was bringing this stuff out of Kaliningrad and into Ireland, and now we’ve got this war and we’ve got the embargo and…

David Ogilvie  (19:29):

But that’s the point though, Patrick, did he shift all of it or did he shift…

Patrick Daly (19:33):

No, no, no. He shifted part of it, but I’m just making the point, that businesses have to be ready to change and change again and change again and change again. So now he’s going to have to do something else. So have you seen any examples like that?

David Ogilvie  (19:48):

Well, not so much examples like that, but what comes to mind when you talk about that to me, is, are you a student of Ray Dalio? Cause he’s an interesting character.

Patrick Daly (19:57):

Yeah. I actually have his book here.

David Ogilvie  (19:59):

Yeah. And he talks about these long cycles. Right. And when you look at history after that’s the…

Patrick Daly (20:08):

[crosstalk 00:20:08]

David Ogilvie  (20:10):

After every pandemic, there is a massive social upheaval follows each of the pandemics and it creates a lot of social unrest. And I don’t think we’re seeing anything different than what has happened in the long cycles in the past millennia ago. So if you go back far enough, so this seems to me to be just part of the cycle. Now, obviously you and I, our memories don’t go back far enough to know those. So you need to be a bit of a student of history. That’s the one thing I’ve learned from him around that is you need to be a student of long history. And if you had been that, this is potentially foreseeable or events like it are potentially foreseeable.

Patrick Daly (20:56):

Yeah. I guess one ingredient of the current situation is the role played by technology and the way it affects the speed with which things happen. So Lisa, maybe as we come to the end, maybe comment from you just on that kind of idea of having to continuously adapt and how maybe technology is kind of the special ingredient today that makes it maybe different from before.

Lisa Anderson (21:24):

Yeah. Well, I definitely am seeing that my clients are continually adapting. And so one of the things that I’m seeing is really important, is folks who are looking at sales, inventory, operations, planning processes, because it’s a good way to keep in touch with all the changing conditions. And it forces you to at least look at it on a monthly basis, if not more so that’s critical. With that said you’re absolutely right, Patrick, that technology can help. And what I’m actually seeing is some of the simple things are really the things that work today. Or they might be considered basic even. So ERP upgrades to a modern ERP system is critical in today’s environment because the modern ERP systems generally speaking, will cover things like eCommerce. And they’ll…

Patrick Daly (22:14):

Automation, for example.

Lisa Anderson (22:15):

They’ll work with IOT, in terms of your machines and those kinds of things. So a modern ERP system. And the other thing that’s critical is looking at your data. Every client that I’m working with, especially if you’re looking at cy-op which is, like I said, critical for staying on top of this, is no client’s data is perfect and it doesn’t even need to be perfect. Just needs to be directionally correct. But that alone is difficult to get out of their system in a way that they can make decisions. Like, should I offload, should I outsource, should I bring on a new supplier? How do I figure out how much additional nickel to bring in so I can avoid price increases or whatever. And so looking at data integrity, and also a BI tool, business intelligence for getting data out of the system. Predictive analytics is more of a progressive concept, but those types of things are key today.

Lisa Anderson (23:09):

So to some degree, stick with the basics and expand upon them with some of these tools is what I’m seeing. I mean, that’s aside from of course robotics and AI is incorporated in the modern ERP systems. But those kinds of things are popular today too, but it’s more about offsetting the lack of people, whereas the modern ERP systems and related data systems are more about how do you function? How do you meet customer requirements? How do you get ahead of all this stuff? And it can help you too with needing less people.

Patrick Daly (23:43):

But I’ve noticed as well, kind of a greater level of ambition and in preparedness to actually do things and take decisions. And I don’t know whether that is because during COVID, there were many examples, both quite publicized examples and other smaller examples that people would’ve seen in their personal life or in their work life where things that seemed very difficult to do were done very quickly. And people kind of went actually, when we want to do things, we can do them. And we’re probably still in that cycle. So we haven’t got back to any kind of stability where people have got used to a status quo again, and I’m getting kind of this feeling of people going, “Yes, we can do this, we take this decision we want to automate, or we want to integrate, or we want to build.” And I’m getting that kind sense from clients around the place that they seem to be more willing to take decisions that before they would’ve hesitated more about, have you seen that kind of thing going on?

David Ogilvie  (24:45):

Yeah, Patrick. A hundred percent. So my business, I have a number of pillars to my business. An ERP selection is one of them that Lisa was talking about before, and I’ve never done more selections in the last two years than I’ve done in my whole life. So there was a lot of businesses making the decision that they weren’t getting the data that they needed and all the things that Lisa was talking about. They weren’t getting that properly, so they changed their systems and they quickly made the decision. And there was a flood of people looking to do that. I am finding that starting to tail off now. So whether everybody’s changed, which I doubt. So maybe the preparedness to make those decisions, those that were willing have made them, those who won’t probably won’t, continue not to.

David Ogilvie  (25:25):

I think that might be more the reality, but likewise with the robotics and those sorts of things, because if we’re looking for productivity changes and we’re resourced, as in people constrained because of our borders being shut and people costing more money and all that sort of stuff, they’re starting to make those decisions around robotics. How do we put in automation? How do we put in smarter tools? As Lisa mentioned, can we connect our ERP systems to the internet of things and get better data from our machinery? All of those sorts of decisions are being made.

Patrick Daly (25:58):

Yeah. Okay. Any final thoughts Lisa, before we wrap?

Lisa Anderson (26:02):

Well, since David brought it up, another area, and I know it relates to you, Patrick is one of the pieces that I would consider part of modern ERP and that I’m seeing clients do, especially with the increase in eCommerce is that gets back to warehouse management systems and automated warehouse equipment. So I know you specialize in that area as well, but I’m definitely seeing an increase in that. And also, David it’s interesting you brought this up, but I am seeing a slight slow down also on the ERP selection side. So they still need it. But I think that you’re right, it’s just that the smarter people are getting ahead of the pack.

Lisa Anderson (26:35):

So the other thing I would bring up, Patrick, that I’m seeing is that I think no other time, other than the great depression, which I’m hoping we don’t go through that again, but I’m seeing more opportunities for clients that are strong to get stronger and clients that are weak are going to get absorbed or go out of business basically. So I think, it’s more opportunity right now than ever before, but they have to be resilient and agile and have modern ERP. And it’s a lot of hard work, which is why some of them are choosing not to do it.

David Ogilvie  (27:07):

So Lisa, I think that’s a very good point. Because there was a lot of talk about many zombie companies just prior to COVID and there was going to be sort of an economic clean out of those organizations that happens because they’re just not strong enough to survive and from an economic perspective, but COVID stopped that because there were so many government subsidies to keep businesses alive, keep people going, all that sort of stuff. So COVID has done nothing, but just delayed that inevitability of those businesses actually coming to a realization that they shouldn’t be in business.

Lisa Anderson (27:37):

Yeah. That’s true. So I see more of that happening in the future. I don’t know if you see that as well, Patrick?

Patrick Daly (27:43):

Yeah. It looks like we’re looking at kind of a great reckoning, of sorts so opportunity, but danger and maybe a clear out and maybe more of a kind of a consolidation or concentration.

David Ogilvie  (27:59):

The answer is business 101, do your basics properly.

Lisa Anderson (28:03):

Yeah. It really is, because the clients that are getting ahead of these supply chain disruptions are taking business from the people who aren’t getting ahead. And so it is business 101 in a way.

Patrick Daly (28:14):

Yeah. Yeah. Good lessons there for all. So thanks. Thanks again for being here this evening, guys, it’s been a pleasure. Wish you continued success personally and professionally, and look forward to seeing you back here next month.

David Ogilvie  (28:28):

Thank you, Patrick.

Lisa Anderson (28:29):

Yep. Thank you.

Patrick Daly (28:30):

Thanks also to our listeners for tuning in and you can find Interlink’s podcast on iTunes, Spotify, Acast and other podcast platforms. So for any comments or questions, drop me a line on pdaly@albalogistics.com. And in the meantime, keep well and stay safe until next time.