Patrick Daly:

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 have a look at several specific sectors to see how they have been reacting to the succession of external shocks over recent years, and how they’re looking to the future and facing up to the challenges so that they can adapt and thrive into the future.

Patrick Daly:

So the sectors we’re going to be looking at broadly are manufacturing, construction, and distribution, and logistic services. So to discuss these topics, 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, Lisa Anderson, president of LMA Consulting Group from the Los Angeles metro area. Welcome, Lisa.

Lisa Anderson:

Great, glad to be here.

Patrick Daly:

Very welcome. And Karen Wilson-Starks, president and CEO Of Transleadership, Incorporated from Colorado Springs, also in the US. Welcome, Karen.

Karen Wilson-Starks:

Great to be here, Patrick.

Patrick Daly:

So Lisa, I’ll go to you first. What are you seeing in terms of the top two or three challenges currently being experienced in the manufacturing sector in 2022 in the wake, say, of COVID unfolding consequences of this war in Ukraine and the prospect of more inflation and higher interest rates ahead? So what are you seeing as the major challenges?

Lisa Anderson:

Well, one is definitely inflation. There’s been a spike in the cost of the materials and components and depends on which manufacturing industry, but basically they’ve had significant amount of inflation happening, which certainly has driven costs up and made them a concern. A second key problem is labor. They still have issues with labor. They cannot find enough people to produce all the product that they should in order to meet their upcoming demand. So they’re having to prioritize which customers get the product, or they are extending lead times or they’re looking at their customer profitability and choosing. They’re doing all sorts of things, but in essence, labor is another critical shortage just trying to find… Typically speaking, I mean, across the board, but definitely when it comes to the people who needed to run the lines, high-skilled resources to run the lines is they’re really in short supply.

Lisa Anderson:

And then I would say the third issue that’s coming up more recently is that because they’re getting concerned about deflationary pressures as well, now they’re starting to panic about having too much inventory. Or if they have too much inventory because, well, they placed orders. Manufacturing went from ordering just in time, although they weren’t really doing the just in time the way that I would recommend it, but they were literally trying to do just in time. And then they went to just in case. And now they’re just worried, I guess, you could say, because they don’t know what to do with inventory, and they’re just concerned about having too much for the cash flow needs because they have to… Well, it’s obvious that they need cash to continue to grow and navigate these volatile times.

Patrick Daly:

Yeah. So we’ve got too much [inaudible 00:03:43] work in capital tied up in inventory. Is that their concern?

Lisa Anderson:

Well, that’s their concern. I mean, they don’t always have too much. I mean, I guess too much in quotes. Right? Because what’s too much? But from my perspective, sometimes they have more than they should and other times I think they’re just panicking. But they’re concerned that they have too much and they could be right. It depends of course on what cash flow they have planned and how many loans they have in place and those kinds of things.

Patrick Daly:

Yeah. I’ve seen the unfortunate situation where they have too much of what they don’t need and not enough of what they do need, which is-

Lisa Anderson:

Well, that they definitely have, because I mean, if you could think about it, they… I mean, without the right people on board, they don’t necessarily order the right supplies. You don’t necessarily have a SIOP program in place. You don’t necessarily know what to order in the first place. So there’s a lot of reasons why they could have the wrong inventory. But they definitely, largely speaking, have not… Not the ideal amount of inventory of what they need where they need it.

Patrick Daly:

Yeah. And does this driving a lot of pressure on warehousing in your area? And pressure-

Lisa Anderson:

The warehouses are full. We’re maxed out in terms of warehouse capacity and that’s an issue because there’s very little room for folks to expand their storage capacity. And in some cases they need to, and it depends on who has what storage space. But it’s definitely causing problems in terms of warehouse storage or lack thereof, really.

Patrick Daly:

Okay. So this is both in-house and with logistic service providers all around?

Lisa Anderson:

Well, I was thinking about outside warehousing. So logistics providers or outside of their facility in one way or another. With that said, within the facility, yes. Actually several of my clients are having challenges fitting within their facilities as well. It became actually like a big conflict because we were trying to figure out… We needed to purchase, or I should say we needed to produce certain product in order to meet the sales forecast and then we couldn’t do that because of the lack of warehouse space. So it was a constant battle.

Patrick Daly:

Gotcha. What’s the pipeline for bringing on more warehouse space? The developer is saying, oh, there’s more opportunity here. Let’s build warehouses.

Lisa Anderson:

Well, it’s certainly in California, Inland, Southern California. It’s not that easy. It takes a lot of time to bring on any sort of building. So that part, no, not necessarily. They’ve been moving further east, I guess you could say from the ports. I really see people moving out of California as well because we just have so many business unfriendly policies. But nevertheless here, it’s just that we’re full. But in other places like I have a client that was completely full in their Atlanta area facility and they found additional space, but it’s always this way. It’s more expensive.

Lisa Anderson:

And then they were saying, “Well, I don’t think that would be really be worth it. I’m not sure that having the extra space is worth the loss in margins.” So then they were negotiating and they did actually work out something eventually so that they could get the space, but it took months where we were producing to the space, not producing to what our customers needed. We were producing to the space and then prioritizing based on customers.

Patrick Daly:

What’s going on with the labor shortage. Have the people disappeared, thrown in the towel, gone to different industries or not enough young people coming through or what’s what’s going on there?

Lisa Anderson:

Well, like probably all of the above, but generally speaking, there’s been a significant that the great resignation has been proven true in manufacturing circles. So really a lot of people are retiring. I mean, it, generally speaking, is probably an older workforce, regardless. I don’t have the stats, but generally speaking, that’s true. People are retiring early. They’re also moving to other careers and just generally speaking, there’s a lot of people leaving.

Lisa Anderson:

However, in addition to that, it’s just challenging because in this area in California, the minimum wage is pretty high. So you don’t have to do manufacturing, you could just work anywhere with a lot less commitment and you could make the same amount of money or whatever. It depends on the manufacturer, but there’s fewer people wanting to fill the roles. But then again, there’s just fewer people out there. So it’s just… I don’t know. It appears to be a variety of factors between retirements, people changing careers, less people coming into the profession and it’s just the wages continue to go up and so…

Patrick Daly:

Yeah, which is feeding into the inflation. Again, it’s another [inaudible 00:08:58] of the inflation.

Lisa Anderson:

Yeah, exactly. And there’s certain skills you need for these types of manufacturers because most of my manufacturing clients are throughout the US and global actually. Even though I’m familiar with the challenges here and I’m familiar with what’s happening where they are, but I would say, because between Kansas city, they actually… Outside of Kansas City, they actually decided to, just to outsource certain products instead of increase their production because they couldn’t do it. They just can’t find enough people even if they were to move them in. And then in North Carolina, another client, they literally just have been prioritizing customers because they can’t find the people.

Patrick Daly:

Yeah. It’s interesting-

Lisa Anderson:

It has something to do with what you pay as well. But they both pay. They don’t pay badly either. One of them is just compared to what I guess.

Patrick Daly:

It seems to be a generalized problem. We’re seeing it here as well. And I noticed lots of projects with client companies that need to be done and they’re not getting done because they don’t have the people to lead the projects. And so it’s not a lack of funds or a lack of opportunity or lack of intent. You just don’t have the people to do it.

Lisa Anderson:

Right. That’s true. How about you Patrick? Or go ahead.

Patrick Daly:

Yeah. I was going to go to Karen and then maybe you can ask me about okay distribution. So Karen, in terms of areas of concern in the industry that you tend to provide a lot of your leadership input to the construction sector, what kind of challenges are you seeing after these shocks that we’ve been experiencing over recent times?

Karen Wilson-Starks:

Yes. Patrick, let me talk about the personnel shortage because that’s really what’s affecting construction significantly. Most of my clients still have work to do. They’re still getting orders for new builds or for remodels. And particularly this is on the commercial side. My clients are commercial providers in construction. However, the personnel shortages are getting worse and they are continuing.

Karen Wilson-Starks:

So I want to talk a little bit about what’s the impact from a leadership point of view of the personnel shortages and then maybe I’ll talk also a little… Just make a brief comment about warehousing too since that came up, Lisa, when you were talking, and I’ll mention something about that. So on the personnel end, when there aren’t enough people at the various levels in an organization, several things get hit.

Karen Wilson-Starks:

One is just the bandwidth to do the long-term strategic thinking and planning in the organization. So the people who should be doing the strategic thinking that at the executive level very often are caught up in some firefighting and the day to day operations, because you need all hands on deck to get everything done.

Karen Wilson-Starks:

So when this is happening, it’s a problem because as things may be changing in the landscape, when you think about supply chain issues and so on, you really need the time to attend to how do you address those changes? How do you walk through that landscape and plan for the future? But if your head is down too far to the ground, you’re seeing things from a tunnel vision perspective or a myopic perspective and aren’t able to do that long range planning.

Karen Wilson-Starks:

So I think that’s one of the things that certainly affects the executive level as far as leadership. I also think that when organizations are understaffed at the operational level, especially it’s very difficult to pivot and to do something different. And so even though they can see that there’s a change and it may require a new or different response, they don’t have time to get off the hamster wheel in order to craft a new response and figure out how to move forward because there’s not enough support for the day to day operations.

Karen Wilson-Starks:

So they end up hanging by their fingernails and kind of doing what they know to do from the past, which may not be what’s best or what fits for now. And then that leads to another piece of the leadership equation, which is delegation. Usually it’s great to delegate in a way that you delegate and you stay in touch so that you can follow up and know what’s going on. And instead of that… When you got personnel crunches, two things happen. You’re either going to abdicate instead of delegate. So you’re not in touch because you don’t have time to be in touch and follow up and figure out what’s going on.

Karen Wilson-Starks:

Or some of the upper levels will try to retain too much of the decision-making authority and create bottlenecks in the organization, so they get stuck, they get stymied and they can’t move forward. And that becomes a problem.

Karen Wilson-Starks:

So those are some of the big things I’m seeing on the leadership end. I would also say that as far as day to day operations, including the supply chain issues, you need people who’ve got relationships with those key partners. And if personnel are coming and going and you’re losing institutional knowledge because of people leaving, the new people coming in may not have the relationships. They may not have been introduced properly to the people to even be able to do the future planning or figure out what’s the best way to navigate and to move forward. So I think that is also an issue.

Karen Wilson-Starks:

Lisa also mentioned this whole thing about warehousing. Now, my clients tend to use their own facilities or to lease something real close by for warehousing purposes. And as they got concerned about the lag times and ordering materials and whether things would be there at the right time, they were considering things like, “Well, should we lease this space?” And what I think what they were concerned about in construction is if we lease this space and incur all this extra cost, what if down the road, we don’t have the orders and now we’ve got all of this extra expense?

Karen Wilson-Starks:

Because it’s still a very volatile economy. And though it hasn’t quite decreased and gone away yet, people aren’t sure that it’s really secure. So I think that’s an issue. So some of my clients have opted not to lease the space, which means that therefore they have to be even more conscious of what they really are ordering and are they ordering the right thing at the right time. And again, if you lose your institutional wisdom and talent, the new people may not know what to order and how to order in a way that’s beneficial to the business. So it’s a daily recalibration and adjustment, and very hard when you have personnel shortages.

Patrick Daly:

Are they having to communicate to their clients, to their customers and disappoint them by saying things like our construction lead times are now instead of 20 weeks, it’s 40 weeks or the price we quoted last month is now not valid. Is that kind of thing happening in the construction industry?

Karen Wilson-Starks:

Well, what’s really happening is the lead times certainly are moving and changing. And some of it is not because of my clients, but in construction you have many partners who are doing different pieces of the work. And sometimes the people I work with, they can’t get in to do their part until some other groups have done their part first. And if those groups are behind, it pushes the schedule. So it’s not always the client’s fault, it’s something that could be going on at the GC level, the general contractor and with all the other players that are involved in construction.

Karen Wilson-Starks:

Here’s what I could say about that. It’s hard because if you miss dates, the contracts are written now in a more, I would say difficult way for the smaller player. Back in the day, there was a bit more flexibility and collaboration.

Karen Wilson-Starks:

Now, if one of my clients is running late, even if it’s not their fault, there are clauses in there such that they have to pay damages, liquidated damages and all this sort of thing. And that’s a real, real issue. And these companies in certain areas of construction have slim margins. They can’t afford to pay those liquidated damages. And so it becomes quite a dance to figure out how do they get all this done and with less people? And they often are having to work seven days a week and long hours in order to make it happen. So that part is hard. Now, you had a part two to your question. What was the part two?

Patrick Daly:

Price inflation. Having to renegotiate the prices?

Karen Wilson-Starks:

Well, actually a lot of my clients, they don’t get to renegotiate the prices once the contract is out, unless the client that they’re working for does something that causes the price to change. And if that doesn’t happen, even if they’re running late on their own and even if they incur extra cost, they cannot charge it back to the client.

Speaker 4:

93.9, Dublin South FM.

Patrick Daly:

So I imagine then we’re going to see… And I’ve experienced this and in the middle of it, actually at the moment. The negotiations for contracts of supply, whether for say, automated equipment for warehouse operations or for the building itself are becoming then a bit more fraught and a bit more contentious, and therefore taking longer. I’m in a situation at the moment where the supplier is saying, “Listen, we need to get the contract signed off. So we need to get the legal people working on this, because otherwise we can’t hold the prices and we can’t confirm the prices until the contract is signed.”

Patrick Daly:

And that’s becoming a problem. So the contractors wanting to take longer because they want to make sure they’re not going to get caught out. And at the same time the prices are rising and if they don’t get the contract done, the price is going to be a different price. So we have all of that going on at the moment.

Karen Wilson-Starks:

Let me add one thing in on that, Patrick. The contentious part, that’s definitely happening. I’m definitely seeing that in the past where customer and client might have been more collaborative. It almost seems like some people are taking advantage of this current climate to stick it to the ones who have been their partners in the past, which is quite unfortunate. So it becomes a harder way to work.

Patrick Daly:

The ranker and the resentment for past slights is coming out, huh?

Karen Wilson-Starks:

Well, I’m not even sure that’s true. I just think that some people… Because I have clients, for example, that have excellent reputation in the business. They have worked well with clients in the past. It’s not really about having poor service, poor performance or even poor relationships. It’s just that, “Oh, it’s almost like what we’ve discussed before about, let’s say, those companies that ship containers or whatever, or store containers or whatever at ports, they can charge more. So they do. It’s almost more like taking advantage in that sense.

Patrick Daly:

Maybe I’ll go back around with you and maybe start with Karen this time. In terms of what people are doing about some of the issues that you highlighted, so what kind of developments are you seeing that they’re putting in place to adapt to overcome or even to seek advantage in some of the challenges that they’re facing?

Karen Wilson-Starks:

Well, let me say what I’ll recommend that they do.

Patrick Daly:

Okay. Whether they do it or not, it’s another thing.

Karen Wilson-Starks:

Yeah. Some are stepping into that faster than other people are. I think it’s important when you’re in a personnel shortage situation to do several things. One, you’ve got to relentlessly focus on developing your people even if you feel like you don’t have time because you’ve got to build a capacity within the organization for those who are in there to do what they can do. And sometimes to also operate a bit more in a redundancy area. Maybe something that’s not their primary task, but maybe it’s the secondary task or you have more than one person or persons or groups of people doing something.

Karen Wilson-Starks:

So that’s important, which also relates to another function feature, which I would say pushing decision making down. In other words, if the people aren’t prepared, they can’t make the proper decisions, but you need them making the decisions because everything cannot come from the top. Everything can’t come from the bosses. The people on the down on the ground level have got to be able to operate and decide day to day. That has to be a priority if you want to have success going forward. And then the third thing I would add, would be this. Be willing to bring in even short term help in areas that are more administrative or supportive in nature, not necessarily in the skilled labor, because that’s a harder thing to do in the skilled labor area, which a lot of my clients are dealing with.

Karen Wilson-Starks:

The lead time to train somebody up to get them… So you want people who are going to stay for a while. But some companies running lean on even something as simple as administrative support. They might need to crank that up because people do not have time to do a whole lot of unnecessary paperwork that somebody else could do for them.,And this could even be done remotely.

Karen Wilson-Starks:

Some functions in HR could be outsourced and done remotely. So I think they need to think more about how to bring in resources to support the operation that way.

Patrick Daly:

Interesting. Yeah. The evolution of decision-making, I think is really important and very culturally difficult for some companies and some regions, some parts of the world, if you like, are more suited to that than others it seems. And some companies also within those parts of the world. It’s interesting that redundancy is kind of an element of resilience. So people like talking about resilience, but you don’t particularly like talking about having the redundancy to provide the resilience. Particularly the accountants don’t like talking about redundancy because it means capital investment in something or money tied up in something that they think could be used more productively.

Patrick Daly:

So likewise for you, Lisa, what are you seeing in terms of remedies to some of these challenges that people are facing?

Lisa Anderson:

Well, I definitely would say… I agree with Karen, first of all, because clients are looking at how they can best support their people because they have so few of them. So I definitely would agree with everything that Karen said, including they need to bring in additional support for their people. In addition to that, they’re looking at reshoring. So they’re definitely bringing production back to where… You could say back home, but it’s really not that. It’s closer to their customers.

Lisa Anderson:

So reshoring, nearshoring, whatever you want to call it. In the US, they’re bringing production back to the US and they’re bringing it to Mexico and Latin America. My clients that are in Europe, Patrick, I don’t know if you’re seeing the same, but they’re bringing them closer to where their customers are in Europe.

Lisa Anderson:

So basically reshoring is definitely on the rise because they’ve realized they need to take better control over their supply chain because they cannot control their future currently. And then in addition to reshoring, they’re also looking at implementing sales and operations planning or some also called sales inventory operations planning.

Lisa Anderson:

That’s really been proven effective to being able to get a better handle on what’s happening in the future. So you’re predicting your customer demand and then figuring out how you can best… What types of manufacturing capabilities do you need? What people do you need? How do you get those pieces in place ahead of time? So you can be successful and in delivering what your customers need, but in a profitable way with the least amount of inventory tied up unnecessarily.

Lisa Anderson:

So SIOP is another piece. And then the last thing I would say is technology. So automation and technology, they need fewer people if they can automate tasks and it’s… They still need people. They’re there’s still a shortage of people, but they need fewer people who can do redundant tasks, if they can automate it. Unfortunately, they still need several high skilled people and they’re very hard to find. But nevertheless, they are still looking at technology because it’s not just about automating, it’s also about how do you deliver what the customer needs.

Lisa Anderson:

Same thing that you’re seeing in distribution, Patrick. There’s quite a bit of new options from a technology standpoint that will help to handle eCommerce both in terms of taking orders and then how do you fulfill those orders? There’s 3D and additive manufacturing, 3D printing. So there’s a lot of pieces of technology that they’re looking at in addition to just how do we upgrade to have an ERP system that supports their growth and allows them to find ways to be more profitable. So just simply upgrading their ERP system is another priority in terms of technology.

Patrick Daly:

Yeah. So it’s interesting. This automation equation is taking shape. So for example, I’m involved in a project where they’re automating a large part of their order picking, which is both picking for high street stores and also picking for eCommerce business to consumer. And there’ll be an automated order picking system at the heart of the new distribution center, which is run by a WCS, a warehouse control system, which integrates with their WMS, warehouse management system, which in turn integrates with their ERP system.

Patrick Daly:

So they have that integration along the line. And they’ll probably end up investing something in the ballpark of four and a half million dollars in the new solution. But their labor requirement will drop from about 55 to 25. So that’s the payback. And that’s the kind of thing that people are biting the bullet on that I’m beginning to see that they were reticent about in the past.

Patrick Daly:

Another point is that these systems are never going to be probably affordable as they are now because the prices are rising, right? So if if you have the funds and you can get that investment done now, probably better to go sooner rather than later. And also the solutions providers have a bottleneck of demand as well because lots of companies are thinking the same thing and making decisions to go automated. So therefore the suppliers of the cranes and the shuttle systems and the conveyors and the robots and so on, their order books are quite full.

Patrick Daly:

So the lead times are beginning to go out. The prices are going up. So I’d be encouraging people if they’re thinking about it to move sooner rather than later. So as always, my friends were beaten by the clock. We have to bring things to a close. So it’s been a pleasure as always. Thank you very much to both of you. I wish you continued success personally and professionally, and hopefully we’ll be back here next month talking about some other aspects of supply chain and whatever’s hot at that time. So thanks again.

Karen Wilson-Starks:

Thank you, Patrick.

Lisa Anderson:

Yeah. No, I enjoyed it. And I think we’ll have many topics to come. It’s been very volatile lately in the supply chain.

Patrick Daly:

It certainly has. So thanks also to our listeners for tuning in. And you can find the Interlinks Podcast on iTunes, on Spotify, Acast and most other podcast platforms. Any comments or questions, just drop me a line on PDALY, P-D-A-L-Y at Alba Logistics. That’s A-L-B-Alogistics.com. So thank you very much. And in the meantime, keep well and stay safe. Until next time.

Patrick Daly:                     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 developments have had in our life, our work and our travel over recent times.

                                           Today, I’m joined by three colleagues of mine [00:00:30] from the supply chain special interest group of the Society for the Advancement of Consulting. So we have David Ogilvie, principal of David Ogilvie Associates in Brisbane, Australia. Welcome David.

David Ogilvie:                   Patrick, it’s easy for you to say.

Patrick Daly:                     Diane Garcia, principal of Lorraine Consulting, Portland, Oregon, soon to be in Phoenix, Arizona I think. Is that right, Diane?

Diane Garcia:                   That is right. [00:01:00] Yep.

Patrick Daly:                     Okay. And Elizabeth Warren joining us from Los Angeles, California, and she is CEO of Dialed In Consultants. Welcome Elizabeth.

Elizabeth Warre…:         Thank you, Patrick. Good to see everyone.

Patrick Daly:                     I was struck today, we have family phone calls here, so we’re an international family here at home. My wife comes from Spain and she has an uncle who lives in France, who [00:01:30] emigrated to France many, many years ago. And for the last three years, maybe three and a half years, we’ve been trying to get together and we haven’t been able to for one reason or another.

                                           So one year it was family illness and then it was COVID and then it was, well, we have the war now. So we’ve made plans to go to France to see them this summer, but we’re kind of tentative and we’re saying, “Well, hopefully everything will work out and we get to see each [00:02:00] other.” And we were talking to him this evening, the uncle in France, and he was saying just some years ago, you could easily make plans for next year or for the year after, maybe a couple of years out. And it seems that today you can’t make plans even for 10 days in the future. So every plan is tentative at this time.

                                           But it also struck me that when things are so turbulent and so [00:02:30] unstable, there’s always a lot of opportunity. And I think there’s a lot of opportunity in the current situation. And on recent episodes, we’ve spoken a lot about problems and we’ve spoken about the threats and what companies are doing and so on, but what are the opportunities? I see there’s two very big countries are embroiled in this big time. So we have Russia that’s embroiled itself in [00:03:00] a war and we have China that has taken an approach to COVID, the zero COVID approach, that is leading to lockdowns, continuous lockdowns. And even now two years after the start of COVID, we have large parts of the Chinese economy shut down.

                                           I’m interested to know what you think about what opportunities does that present. In terms of your own areas of specialization, [00:03:30] so roughly speaking, Diane, in terms of manufacturing, Lisa, maybe in terms of shipping and ports and logistics and David in terms of technology. If I go to you first, David, and maybe talk about China, which is perhaps closer to where you are in Australia, this approach of China to COVID, what kind of opportunities do you see that opening up [00:04:00] in your part of the world and other parts of the world?

David Ogilvie:                   Well, Patrick, they’ve obviously are no longer the reliable supplier that they have been for a long time. Obviously reliability is very important to all of the manufacturers and distributors in the country. I think the opportunity really sits in the country being able to rebuild our manufacturing capability, bring some of those processes back [00:04:30] home and become a more self-reliant country, so to speak.

                                           I think that’s probably the biggest opportunity that’s available. Obviously that opportunity comes with a significant number of challenges that need to be overcome in order for it to be realized. But I think that’s probably our biggest opportunity.

Patrick Daly:                     So Australia over the years as [00:05:00] a commodities’ producer, do you think there’s been a complacency in Australia to focus on that aspect as against maybe being a manufacturing economy? Or does it still have that manufacturing capability that it’s probably going to need now to recover if it doesn’t have it?

David Ogilvie:                   Well, we don’t have it now. We’ve lost a lot of skills over the time and that started particularly when we lost our own [00:05:30] vehicle manufacturing in the country. But yes, we are basically a big quarry in many respects and we don’t do any value added activities around the commodities that we’ve got. With the markets being so strong at the moment, particularly in grain commodities, those sorts of things, there are lots of companies that are doing very well, a lot of the mining companies are doing well. The wheat growers and so forth are getting good money [00:06:00] for their harvest. I can’t see that changing any time soon because both Russia and Ukraine are big wheat producers and so forth.

                                           So we’re really in a box seat in many ways in Australia. They call us the lucky country for a reason. I think we are extraordinarily fortunate in so many ways, but yes, I do believe that it’s built a complacency to some extent in the manufacturing space. We do have [00:06:30] a lot of work to catch up.

Patrick Daly:                     Okay. Diana then opportunity, so you’re west coast US, which is Pacific rim. So you’re very much looking at Asia across the Pacific Ocean and China now has become, as David highlighted, maybe not as reliable as people used to think it was going to be and going to continue to be. What kind of opportunities do you see arising from [00:07:00] this turbulence and instability?

Diane Garcia:                   Well, I think innovation and continued innovation. I see that, like you were mentioning, we can’t even plan out 10 days I think was the timeframe that you were dealing with. And yeah, we’re seeing the same thing here in the US and with my manufacturing clients trying to plan their operations and rely on labor that perhaps it’s no longer the same. Perhaps [00:07:30] you thought you would have a full crew for the week or the month and plans continuously change.

                                           I think it’s innovating, new ways of doing things, and how do we work with this new landscape that kind of has unfolded very, very quickly in front of us. But I would say that’s probably the biggest opportunity that I’m seeing. And like David mentioned, opportunity to bring manufacturing suppliers closer to customers. So here in North America, [00:08:00] we have lots and lots of customer demand here, so I see opportunity for bringing in supply chains to support that.

Patrick Daly:                     Okay. Does that mean we’ll start to see things that are manufactured in Asia actually being manufactured in the United States, maybe with automation or what?

Diane Garcia:                   I was going to say, I think when you combine that with other actions [00:08:30] here, so it’s not just as simple as saying bring it back. It has to be combined with automation and innovation and new ways of doing things. But yeah, I see that potential and I also see potential for not within the US, but perhaps Mexico, things that are closer and given prices that have increased along the supply chain, it’s starting to make more sense to bring that closer.

Patrick Daly:                     Yeah, it was interesting, I saw an article recently in McKinsey and they were [00:09:00] talking about the apparel supply chain and the possibility of there being a kind of reconfiguration of an apparel supply chain to supply North America, but from Latin America. And they were talking about countries such as Honduras and El Salvador as being places where garment manufacturer might repatriate itself from Asia. So that’s an interesting [00:09:30] development. Have you-

David Ogilvie:                   Those countries need to invest in infrastructure and those sorts of things then Patrick, because that’s generally the biggest hurdle to that happening.

Patrick Daly:                     It’s true. Also I guess the security situation in some of those countries. I know my own son traveled to Central America a couple of years ago and some of the countries are more stable than others. He went from Mexico, [00:10:00] Honduras, El Salvador, Guatemala, Nicaragua, and some of those countries are quite unstable and not particularly safe. I guess that’s another aspect they need to work on

Speaker 5:                        93.9 Dublin South FM.

Patrick Daly:                     You guys in California, what are you seeing in that respect with regard to Latin America and US trade? Is that something that’s [00:10:30] increasing, that business people are looking at more carefully now?

Elizabeth Warre…:         I can’t speak about the Latin American trade market at this time, but you asked about the opportunities and some of the opportunities that I see coming up are developing platforms for data sharing, because that is something that we have struggled with in the supply chain industry is to [00:11:00] find ways to share that data in a way that all the partners trust each other in a way that the different parties are willing to put information out there and not develop their own internal proprietary systems. I think that having a platform developed, it’s going to be long term. We don’t see anything like this [00:11:30] happening immediately, although there are a few platforms out there currently being used. I’ve spoken about the port of Los Angeles’s platform on previous podcasts, but there are others that are in the works. And certainly other regions are considering that as well.

                                           So data sharing is in order to have further collaboration is important. And I think that developing talent [00:12:00] is something that we desperately need to do here in the US. We have a lot of vacancies in employment. We have a lot of labor shortages that throughout different segments of the supply chain. I think that developing that talent is an opportunity for us as well. One of the things I’m a little more bearish on versus bullish is manufacturing coming back to the US, [00:12:30] only for the reason of the energy and the environmental components of that. I’ve worked for the past few decades on collaborations with the environmental groups versus the industry, and trying to find that common ground is it kind of comes and goes.

                                           So right now, our administration has a supply chain resilience [00:13:00] initiative, and trying to find ways to bring that domestic production. However, we don’t have enough energy and we are not finding enough energy sources to replace fossil fuels in a reliable manner. And then as David said, we need to build the infrastructure to support that. One of the challenges that we’ve [00:13:30] had with the war in Ukraine is that they are one of the major suppliers of nickel, which is used in batteries. And we’ve had a lot of manufacturing hiccups with cars and the automotive and other technical industries because of the shortage of batteries and nickel and other precious metals like [00:14:00] that. If we can find a way to replace those, if we can find a way to get more energy and we can get that talent, then I think there’s a lot of opportunities out there.

David Ogilvie:                   I would add one other thing too there Patrick is the cost of that energy, not only the availability, but the cost of that energy. I think that’s probably the biggest impediment to any near shoring or reshoring.

Patrick Daly:                     Yeah, it’s a strange thing. This energy [00:14:30] crunch is really being felt here in Europe at the moment because as you know, certain countries, particularly Germany, Italy, to a certain extent Hungary, and some of the Eastern European countries are very, very reliant on Russian oil and gas. And there are moves of thought now to impose an embargo on Russian oil and Russian gas.

                                           So [00:15:00] in some ways the energy transition may be threatened by that because that will drive people to put their hand on easily accessible, other sources of fossil fuels, maybe out of the US and Canada with shale oil and so on and gas. But on the other hand, it may accelerate the transition to renewables. So what would be your own thoughts on whether [00:15:30] that’s an opportunity or a threat to the economy? Has it kind of thrown a spanner in the works of the energy transition, or is it going to be an actual catalyst for the energy transition? What do you think Diane, what’s your opinion?

Diane Garcia:                   Well, I think either way prices will remain high no matter how we go through the next year, two years, three years, 10 years, we’ll see prices remain high. And [00:16:00] especially if we have the US having to dip in or share as countries, like you said, try to change course here. But I think that it will somewhat become a catalyst for change. I think there’s a lot of hurdles like Elizabeth was listing out labor and talent and infrastructure, we have a lot of things that would have to align and take place. I think it’s easier said than done, [00:16:30] but I think it will help push it in that direction. It takes the innovation, it takes the motivation for it to move forward.

Patrick Daly:                     Yeah. But what I’m often struck by, and perhaps you guys see this with clients as well, is how much inefficiency there actually is. And when you’re working with a client, obviously you have to focus on what the particular issue at hand is, but [00:17:00] there’s lots of other things going on around the place. I wonder whether this expensive energy may be an opportunity in driving some of the inefficiencies out of business that people have been overlooking because they’re kind of going “Well, it’s not really a big issue right now.” Do you think there’s something in that David?

David Ogilvie:                   Yes and no, Patrick. [00:17:30] Often I’ve said on our podcasts that sometimes I think the principles of business 101 apply, and there are a lot of companies around who don’t even do the basics correctly. And if there hasn’t been an incentive for them to fix that before, what is going to change to make them do that now? There’s been a lot of talk about the zombie companies being protected over COVID because the governments have put forward all of this money to help businesses [00:18:00] stay afloat and keep people employed and all that sort of businesses, when in fact from a very harsh economic point of view, potentially they should have failed. I just don’t know that the motivation is there to be quite frank.

Patrick Daly:                     Okay. Yeah. Another aspect of this and an interesting article I read recently, again in McKinsey, they are forecasting that there’s going to be the mother of all capital [00:18:30] investment tsunamis coming at us. And part of that is to do with the energy transition that the global economy is going to go through. They’re talking about an investment wave of something in the order of $130 trillion over the next number of years. That’s massive. I don’t know, the US GDP is something like, I don’t know, is it [00:19:00] some 14, 15, $16 trillion per annum, imagine an investment wave of $130 trillion. What do you think of the opportunities and threats associated with a development like that? What do you think Elizabeth, the ports need some upgrading, right?

Elizabeth Warre…:         Well, certainly that is an issue that we’ve been dealing with here in California for quite some time. And [00:19:30] recently our Governor Gavin Newsom had an executive order that said in California by 2035, all vehicles sold will be zero emission vehicles. And when you look at the population of California, I don’t have the number of new vehicles that are bought in California each year, but we have well over 30 million residents. So there’s [00:20:00] quite a large number of cars in California. When you look at by 2035, that’s only 13 years from now. In order to have all of the vehicles in California to be zero emission, plus the infrastructure in place and the energy to power all of those cars, that is a very steep hill to climb. [00:20:30] I think it will be doable, but certainly the investment is going to be huge.

                                           And also the technology to ramp up to that level is going to have to be huge as well. Some of the other issues that we are looking at is how to electrify our ports. And that is something that we’ve been discussing also for probably more than 15 years. [00:21:00] And when you look at the power grid that’s needed for that, it’s massive. We’re already having brownouts around the country in the US, so now when you start adding that level of energy requirement and electricity requirement on top of that, where is it going to come from? How is it going to be reliable? And where is that cost going to come from? And who’s going to pay for [00:21:30] it? We’re all going to pay for it, the end user. But that just means more and more cost. Prices will keep going up. There’s a lot of opportunities, but then there’s also a lot of challenges.

Patrick Daly:                     Yeah, yeah. It is an unusual time. Some people compare and some of us are old enough to remember the 1970s, which was a terrible time as I remember it, where we had high inflation, high unemployment, [00:22:00] high costs, and it seemed we were stuck in a vicious circle that we couldn’t get out of. And now we have high inflation again, but we have all of this technology that makes it much more flexible and we have all of these things to get done, but it seems that the problem that’s driving the inflation is perhaps the shortage of resources. So we don’t have the skills to get it done, we maybe [00:22:30] don’t yet have the technology to get it done. It’s a kind of a strange period, and it’s not quite clear whether it’s a period of great opportunity or a period of great threat or the two things at the one time. What’s your perspective on it, Diane?

Diane Garcia:                   Well, I read about the 1970s and my history book, so.

Patrick Daly:                     You’re young not to remember.

Diane Garcia:                   No, it’s an interesting question. I do think [00:23:00] Patrick you’re right. What is the real cause? And do we see hope in a short period since this came on so quickly or things have just been layered on top of each other in the last two years, two and a half years it seems like. I think it’s probably here to stay for a while. We’re going to be dealing with this turbulence. I think there’s more turbulence to come, which unfortunately we’re, as supply [00:23:30] chain professionals, we all have been using the word disruption over and over and over recently. I think there’s still more disruption here to come. And like you mentioned, the skills gap, that’s a huge, huge gap to overcome. And I don’t think that companies are still doing enough to help fill that gap. I think we’re going to continue to see this problem.

Patrick Daly:                     Yeah, it’s a strange one because my recollection of the 1970s was massive unemployment [00:24:00] here in Ireland. And we had a wave of immigration where young people would go to college and literally leave the country the day They graduated. But today it’s different. Everybody’s got signs up, everybody’s hiring, everybody’s looking for people. So it’s a different challenge this time around. David, we’re coming to the end now so I’ll leave the last word with you. How do you think this period of inflation we’re [00:24:30] in compares to the period in the 1970s and what opportunities do you see now that didn’t exist back then?

David Ogilvie:                   Patrick, I’m upset that you think that I was old enough to remember the 1970s.

Patrick Daly:                     I think we’re maybe of a, I don’t know, maybe a slightly younger vintage, but there’s not much in [inaudible 00:24:52].

David Ogilvie:                   So obviously my background comes from family business and my folks were in a business [00:25:00] back in the 70s. And I do recall one of the benefits that my dad got from the inflation of the 70s was repaying his loan with inflated money.

Patrick Daly:                     I remember that, yeah.

David Ogilvie:                   Yeah. And that was a huge, and it’s actually something that he used either cleverly or by default. But he used that to his advantage. And I still think there are opportunities there in an inflationary environments. I think you’re a hundred [00:25:30] percent right, there’s a lot of talk that we may be in for some stagflation like we had in the 70s, but I just think the mechanics or the ingredients are different. You quite rightly say the demand is there. This is a supply driven inflationary period.

                                           If we didn’t have COVID and we didn’t have factories closing down and we didn’t have ports that were closed, we would’ve been continuing. So you’re right. I think [00:26:00] the fundamentals are different this time around. Looking into my crystal ball, that’s something I’m not really prepared to do. I really honestly can’t make an assessment about what’s going to happen.

Patrick Daly:                     Yeah. Yeah, it is a kind of time for keeping your investments open, keeping yourself agile and able to kind of turn on a dime as [00:26:30] the situation changes. But I guess as you say, and you say it again and again, the fundamentals of business don’t change.

David Ogilvie:                   Correct. Correct. Hundred percent. It’s just the outside, it’s like a sailor, I guess, the wind changes and you got to use your boat and your sail in different ways to navigate the different winds that are blowing. And running a business is no different in many respects. It just gives us again, Elizabeth [00:27:00] mentioned it before, great opportunities to get digital platforms and systems working together to help improve the velocity and the visibility of information. If we can improve how visible information is and the speed at which it travels through the supply chain, we are significantly better off than we were if that wasn’t occurring.

Patrick Daly:                     Yeah. It’s a good analogy, maybe the one of the navigator of the sail ship, you have to be looking at everything [00:27:30] that’s going on minute to minute and making your decisions in response to that. You may have a strategy and that you’re going to a certain port, but on your way to that port, you’re going to have to use different tactics all along the way to get there.

David Ogilvie:                   Let me ask you this, Patrick, when was the last time any of your clients did a cost of serve analysis on their customers?

Patrick Daly:                     Yeah. Maybe never in many cases, maybe never.

David Ogilvie:                   And I think in this current environment, that’s going to become critical, understanding who your profitable [00:28:00] companies are.

Patrick Daly:                     Yeah. Yeah. Good point. Good point. So guys, we could, as always, we could go on and on forever and ever, but the clock has beaten us yet again. So thank you all for being here. Thank you, David. Thank you, Diane.

David Ogilvie:                   Thank you, Patrick.

Patrick Daly:                     Thank you, Elizabeth. It’s been a pleasure and look forward to speaking to you all again soon next time.

                                           Thanks also to our listeners for tuning in and any comments [00:28:30] or questions, just drop me a line on pdaly, P-D-A-L-Y@albalogistics.com. So keep well and stay safe until next time.

Patrick Daly:

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 developments have had on our life, our work, and our travel over recent times. Today, we will be talking to Art Schick, founder of Alpha Sierra Global, a consultancy practice based in Massachusetts in the US, specializing in strategy and operational consulting to firms to focus on consumer products, flavor compounding, and ingredients, including startups. Art is a former vice president of purchasing with PepsiCo, and in this interview, Art and I will be discussing the topic of trade secrets, what they are, why companies often overlook their value, and how to identify and protect them. So, Art, delighted to have you with us here today. You’re very welcome.

Art Schick:

Patrick, it’s a pleasure to spend some time with you.

Patrick Daly:

Likewise. So, Art, to kick off, could you tell me an overview a little bit about your background and your career to date?

Art Schick:

Sure thing. Well, I was educated as a chemical engineer and then later completed an MBA in finance, and interesting, the reason for the finance degree is I was always interested in leveraging technology more to build the business than just for technology’s sake, but my entire career was in consumer products. I started with Procter & Gamble Company in research and development and specifically product and process development, and spent a handful of years there, and then moved over to PepsiCo in some very similar roles. I worked for PepsiCo for about 35 years. As I mentioned, I started in R and D, and also had an opportunity to do some financial planning and analysis work for them, but spent the better part of my 35 years with them in positions of increasing responsibility in procurement, manufacturing, and supply chain, and I spent nearly the last 20 years of my career working in their global beverage division and managing all of their proprietary flavor ingredients and proprietary flavor formulations for beverages, and this taught me a great deal about intellectual property, trade secrets, and most importantly, how to protect those trade secrets operationally.

Patrick Daly:

And at Alpha Sierra Global, your consultancy practice, what are the services that you provide, and typically who are your clients, and how are they better off after having worked with you?

Art Schick:

Yeah, Patrick, when I retired in mid-2020, I wanted to form my own consulting company and to keep active, but also, quite honestly, to give back to small and medium size companies who could leverage my knowledge and expertise. My first project was developing a US based warehousing facility for an international food ingredient supplier who previously had no physical presence in the United States. It was a very interesting project because it taught something that you well know, warehouse space across the globe is quite limited. This particular company was looking in the greater New York area so it was quite a challenge, but after several attempts, we did find a very solid third-party warehouse which the supplier is now successfully using.

Art Schick:

I’ve also provided advice to a few product startup based companies, specifically in the area of product development, formulation, and commercialization, and more recently, I’ve been focusing more in the area of intellectual property protection, and specifically how to protect trade secrets operationally within a company. I’m currently working with a technology product company, and I found that many years of my experience at PepsiCo in beverages and how to protect those trade secrets are definitely translatable to their technology products.

Patrick Daly:

And what is it that is or what is it that constitutes intellectual property?

Art Schick:

Good question, Patrick. Look, many corporations have all sorts of type of information. There is public information, and then there’s kind of private and confidential information of which intellectual property is part. I think most people understand public information is information that the corporation actually public or freely shares with society, and confidential information could be things like employee records, could be organizational charts, financial results, or any information that’s, let’s say, not ready to be made public. That also includes intellectual property, and there’s really four main types of intellectual property. There’s trademarks, there’s copyrights, there’s patents, then of course, there’s trade secrets.

Patrick Daly:

What are the key features of and distinctions between trademark, copyrights, patents, and trade secrets, those four types that you mentioned, and in particular, what constitutes a trade secret?

Art Schick:

Well, I have to tell you, Patrick, it’s a big area. I mean, we could spend hours on those four topics alone, but I’ll try to simplify as best I can. Look, trademarks and copyrights are used to market your product or service. Trademarks are registered with the nation in which you plan to use that trademark, and they’re really used to describe the product or service. So, think about the brand name Pepsi, would be a trademark brand name, and in the United States, you would know that something is trademarked because there’d be a circle R or a capital TM symbol next to the brand name on printed material. Copyrights are exclusive rights to express your idea, whether they be written words like a book, visual pictures, or symbols, or even music, like an advertising jingle. I oftentimes think of the AT&T commercials where they just have a few sound beeps which identify it as an AT&T commercial, and these of course can also be registered in the country of use.

Art Schick:

Now, patents, I think most people know patents, and these deal with novel, unique inventions that are pretty much fully disclosed in the patent documents, and these patents are legally registered with the specific countries across the globe, and they generally provide the patent owner 20 years of exclusive use of that technology in the registered country, and the patent owner can certainly prevent a competitor from using that technology in that registered country. So, it’s really a very powerful legal protection of your competitive advantage and your technology.

Art Schick:

However, patents do have some downsides. They can certainly be expensive to maintain on a global basis because you have to register them in all these different countries. They are limited in life. Now, most people would think 20 years is a long time, but I think most companies would like to leverage their technical and competitive advantage for much longer than 20 years, and also in the patents, their novel technology and invention is mostly described. So, if there are nations out there that don’t follow international patent rules and regulations, you could have a rogue supplier or competitor in that particular country and they could leverage that technology freely.

Art Schick:

Trade secrets on the other hand is really anything that drives value and a competitive advantage for a company, and can include things like processes or methods of assembly, design systems, algorithms, formulas, et cetera. They could be novel, but they don’t need to be novel, and I think that’s an important distinction versus patents. Patents must be novel and unique, and so long as the trade secret holder can keep those trade secrets secret, they last forever. So, you can have that competitive advantage forever which is definitely very, very powerful. Now, there are some disadvantages with trade secrets, and the key disadvantage is you have to keep them secret. So, they can be very, very fragile.

Patrick Daly:

And so, why do some companies actually overlook their trade secrets or not have the awareness that they possess IP that could constitute a trade secret, and what are the undesirable consequences of that lack of awareness or that having overlooked the trade secrets or the value of it?

Art Schick:

Well, the consequences can be substantial, and let me explain. So, I think every company wants to market a product or service, and so clearly their marketing organizations are quite familiar with trademarks and copyrights, as would be their law department in registering those marks in various countries across the globe, and most people have heard of patents, and companies can hire lawyers to write them and register them across the globe. I feel trade secrets sometimes are just less obvious to most people. As I mentioned, they can be, but don’t need to be novel. As an example, it’s common for a manufacturing company to go through lots of pain getting a manufacturing process to work efficiently with a high level of product quality or a low cost and through months or sometimes years of work to get the process right to develop all sorts of special ways to achieve those objectives, and they never really sit back and think about, “Hmm, all these things that I’ve developed, are they special or not? Do they drive significant value? Are these things that a competitor would love to know? These are truly trade secrets.”

Art Schick:

So, unless there is conscious work to identify these trade secrets, the company could actually end up losing those trade secrets to a competitor and therefore losing their competitive advantage. Let me give you a couple of examples. So, social media can be the bane of trade secrets. I always used the example of let’s say a young engineer who solves a significant bottleneck issue in a manufacturing process, and then he rapidly goes out and posts his solution on social media to brag and share with his friends. Bang, instantaneously, a trade secret can be lost or worse, he’s now sharing prior art which would invalidate future patent application. Another great example is your marketing team wants to demonstrate to an enormous potential customer the manufacturing prowess of the company, and they make a promotional video of your manufacturing technology, and before you know it, trade secrets are lost or exposed in this marketing material that gets sent out. So, those two examples, I think, give a great example of the fragility of these trade secrets and what you have to avoid.

Patrick Daly:

Yes, it’s almost naivety and vanity and just a lack of awareness really, isn’t it?

Art Schick:

It is absolutely, Patrick, absolutely.

Patrick Daly:

How do you advise companies now to go about identifying, codifying, and protecting their trade secrets?

Art Schick:

Well, look, like most things in life, it really needs to be a deliberate process that’s taken across the organization. You know, when you think about technology or trade secrets, most people think about the R and D and the manufacturing functions, but in reality, it’s all functions across the organization. It could include information technology, procurement, quality control, finance, marketing, and you really need to work within the company to identify what are the key value drivers that are creating the competitive advantage. So, I always say that if someone can take your product and bring it over to their lab bench and reverse engineer it, anything that they can see and reverse engineer is probably technology that’s best protected by a patent. However, if you have unique technology that’s behind the scenes that a competitor can’t see in reverse engineering the product on their lab bench, that’s definitely trade secret information and the material that you want to treat as a trade secret.

Art Schick:

Now, I have found a consultant like myself can be very helpful in this area, and Patrick, the reason why is because most companies have been doing things their way for a long time period, and they don’t necessarily think that maybe this process or method of assembly, system, formula, algorithm is particularly unique because they’ve been doing it for such a long time period, and I personally believe that every company has trade secrets. They just may not realize it. Okay. So, specifically, what would someone like myself do? I’ve generally found that where to get started is to interview various functional staff within the organization. Certainly, that can include manufacturing, and R and D, and reviewing their facilities, but also procurement, QC, and information technology, and I found also after those interviews that sometimes you can then have a cross-functional brainstorming session, and you can pretty quickly begin to identify what are the core value drivers within the organization, and therefore, what are some of the key trade secrets.

Patrick Daly:

And what are some of the best practices then that some of the better companies adopt to protect their secrets?

Art Schick:

Well, the way to protect trade secrets legally is to make sure that you have in place what’s called reasonable measures to protect them. Now, remember, we said that in order to maintain a trade secret, you have to keep it secret, and trade secret laws require that durable, reasonable measures be in place. The big challenge here, of course, is that in most laws, these reasonable measures are not truly codified. However, these reasonable measures do need to be proportional to the overall value of a trade secret. So, if there’s a trade secret of relatively low value, maybe it’s on hard copy or an information system, maybe that gets locked into a file cabinet and there’s limited employee access. But let’s say if you have a trade secret of exceptionally high value. In that case, you may only want two or three employees in the organization to really have access to that full information and the ability to leverage that full information. So, these durable measures really reduce the fragility of the trade secret.

Art Schick:

And so, as I mentioned, if someone were to have stolen a trade secret, the owner of the trade secret would have to demonstrate in a court that they consider this to be a trade secret, and they did have durable measures in place, and if an employee, let’s say, stole it, they used some sort of extraordinary methods of, let’s say, stealing that trade secret, otherwise they would lose in a court of law. So, let’s talk a little more about best practices. So, the best practices are really driven out of this entire concept of reasonable measures. So, really, the most important place to start is really dealing with the culture of the organization. There has to be a culture formed early in the organization that trade secrets are important, and there’s certain correct ways of managing those trade secrets.

Art Schick:

Apple, I think is a great example of a company that has a tremendous trade secret culture. I mean, think about it. Any time anyone hears that there’s a new technology that’s being developed in Apple or a potential product that’s going to be launched, every magazine and newspaper in the world is trying to get the first picture or the first information of what that product is going to do or what it’s going to look like, and that generally doesn’t happen until Apple is fully ready to disclose that invention, and this is because they live and breathe secrecy, and they have extensive reasonable measures in place to prevent early disclosure of inventions and products, and they do that by making sure that their employees are really well trained on how to protect trade secrets.

Art Schick:

And so, really, best from a best practice perspective, culture and training is really the first place to start within an organization, and when we talk about training, we could also spend a large amount of time on that, Patrick, but as I go through some of the other best practices, I think you’ll see these are also some of the elements that your employees need to be trained on. So, it’s an unfortunate fact that 90% of trade secrets are lost or stolen by employees. So, I mentioned about the unintentional loss through the social media disclosure earlier, but really, most other employee theft is really intentional, and yes, industrial espionage is real, but it’s factually much smaller portion of trade secret theft.

Speaker 3:

93.9, Dublin South FM.

Art Schick:

Now to get started, any company must have strong employment agreements that need to be signed when they’re hiring on people within the organization, and these agreements should contain confidentiality provisions, should explain to the employee that they are dealing with or may see confidential information or trade secret information during their employment, and they also have to have strong invention assignment clauses to the company. I think the one aspect that’s also very, very important related to these employment agreements that I think a lot of companies skip is when an employee is leaving your organization, it’s absolutely essential to remind them of those confidentiality provisions and their requirement to keep any of the corporate trade secrets secret.

Art Schick:

Then there’s some simple things. Site security, do you have a fence around your facilities? Do you have maybe a welcoming receptionist to make sure that there’s not people just walking willy-nilly through your offices? Do your employees have badge access to get into the facility, and certainly for a super-duper, really sensitive manufacturing areas and research and development areas, do you have specific badge entry access for employees and only for employees that have a real need to know to get into those specific areas? I mean, that’s really one excellent practice that a company can have.

Art Schick:

Now, interestingly trade secret information, you now know of it, but it also has to be marked as such. So, think about it, whether it’s a hard copy document or electronic document, it’s probably best to have a big red stamp, restricted and confidential on it so that the employees know this is restricted information and should only shared on a need-to-know basis. Now, many times in corporations, they may need to share some portion of a trade secret with a third party. I think sometimes a great example if you’re trying to improve, let’s say the performance of a particular part in your product, but you know that there’s third-party supplier out there that may have technology which can help you. What you definitely want to make sure you do is you have in place a legally reviewed nondisclosure agreement with that third-party supplier, and importantly, have that agreement signed and in place before any trade secret information is shared or any part samples et cetera are shared with that organization.

Art Schick:

Another area is information technology. As you know, IT systems nowadays hold a tremendous amount of corporate information, whether it’s designs, assembly procedures, formulas, algorithms, et cetera, and we all know that cybersecurity is a high area in many companies and that’s going to continue to be the case for many, many years. I would recommend that if you really have important trade secrets that they should be maintained in highly secure IT systems, and those trade secrets should really not stored in your general ERP system, particularly an ERP system that has wide company access because that certainly already breaks the reasonable measure where you only want people to have access to information on a need-to-know basis.

Art Schick:

And then lastly, on the IT system area because I’m far from an IT expert, but any IT system should also go through annual penetration testing with a reputable external firm that specializes in that area, and of course, you want to make sure as an organization that you’re implementing any of the recommendations that they come up with. Now, in some-

Patrick Daly:

[crosstalk 00:18:43].

Art Schick:

Sorry, Patrick.

Patrick Daly:

No, go ahead, go ahead.

Art Schick:

I was also going to say that in some cases, some trade secret information needs to be on hard documents, sometimes shared in meetings and such, and certainly, anytime you have hard copy trade secret information, it should be stored in locked file cabinets or file safes, and again, you want to make sure that people that have access to that information is highly limited and also only to people that have a specific need to know.

Patrick Daly:

Yeah, it’s a fascinating and kind of complex area when you get into it, and I think one that’s relevant to many, many companies, but to many companies who don’t actually realize yet that it’s relevant to them, and given the world we live in with social media and with cyber threats, it really is an area I think ripe for development. Would you agree?

Art Schick:

Oh, I would agree a hundred percent, and as we’ve been a discussing, it’s truly an area where companies have to make conscious efforts to improve and support within their organization, or they’re at risk in losing a significant competitive advantage.

Art Schick:

And then finally, Patrick, I think the other critically important best practice is you want the corporation to develop what I call an intellectual property committee within the organization, and what would this be. This would be a cross-functional team made up of a select group of employees who either develop or have to leverage IP in their daily use, but this committee would be relatively small compared to the overall organization. I mean, I’m thinking like 5% of your employee base or less, and this committee would also be run by, let’s say, three to five senior executives within the corporation, and when I’m speaking about senior executives, I’m talking about possibly even the CEO, but probably more commonly, senior executives reporting into the CEO, and this gets back to the whole culture piece. If this is not important area for the senior management team, it’s not going to happen, and it really takes senior management leadership to make sure that the right policies, procedures, and reasonable measures are put in place to be successful in this area.

Art Schick:

Okay. So, you form this committee. What is this committee going to do? Well, it can do several things. So, as an example, as new technologies are being developed within the organization, this committee can actually help to make a decision. Is this the technology I want to patent because someone reverse engineering my product could see it, or is this something that I want to maintain as a trade secret? If it is going to be maintained as a trade secret, who has a need to know, and how are we going to protect that trade secret? Are there risks coming down against our trade secrets or against our patents? Do we have gaps in our trade secret protection particularly if, let’s say, the IT infrastructure changes over time? What programs are we going to put in place to further strengthen the protection of our trade secrets? So, this committee is exceptionally important. I think for not only the program and protecting of the trade secrets, but also legally because it’s a way for these companies to demonstrate they have ongoing programs in place and durable, reasonable measures in place to legally protect their trade secrets.

Patrick Daly:

Okay. We might just change tack now, Art. There’s a question that I like to ask everybody who comes on the show, and you’re a great person, I think, to ask this question because you have worked with one of those multinational corporations that really are a manifestation of the globalization that we’ve all lived through basically since 1970 and particularly since 1990, after the Berlin Wall came down and the Soviet Union collapsed. But it seems that in recent years with COVID and with Brexit and now with the war in Europe as if globalization maybe is stalling or even going backwards. So, what’s your own view on where we are with this whole process of economic globalization at this juncture in 2022?

Art Schick:

Patrick, you’re being kind because as someone who’s been involved in supply chain for a long time period, I’ve got a lot of scars on my back. But as you point out, the world is very, very quickly changing, and like yourself, I hear a lot about reshoring and local sourcing, and I believe some of that is occurring and some of that will occur in the world. However, economically, I think full reshoring is just not advantageous and may not be economically possible for all organizations. I truly believe the real answer is developing a supply chain strategy based upon the concept of resiliency.

Art Schick:

Now, I know resiliency is many things and this is a topic that has been talked about by a lot of different people, but let me share with you a couple of my examples of what I mean by resiliency. So, first of all, you really need to understand your supply chain for all of your raw materials, and I mean going back into the third tier or earlier in your supply chain. You really want to be sure that you understand how diversified your supply chain is, and is it coming from multiple geographies, multiple countries, multiple manufacturing sites because the more locations you have, in some cases, you’re better protected than otherwise.

Art Schick:

Now, where multiple sources of supply cannot be achieved, then you really need to start to look at what are the supply risks that I’m absorbing. Are they geopolitical? Certainly, at PepsiCo, I work with a lot of agriculture products, and so you’re really dealing with weather patterns and crop yields, and you need to really think about where I have, let’s say, limited sources of supply, what’s an appropriate inventory strategy for that particular key raw material.

Art Schick:

I think another area of resiliency is really what’s the level of manufacturing redundancy that you have and do you have that across different geographies in different countries, and so if one operation would fail and couldn’t produce, you have capacity somewhere else to make up for that shortfall. Another area is standardizing parts across your products as best you can. This way, if there were shortage of parts in general, you could at least move the parts that you do have to your higher margin products. Patrick, you’re well aware that part standardization has been part of the automobile industry for quite some time, and certainly, the recent semiconductor shortage has just brought this to fore, and the automobile manufacturers are doing all they can to create more redundancy in their semiconductor world. So, resiliency will cost more, but I don’t think it’s going to be as much as it would be to completely reshore or have local sourcing, and I do feel that, over time, we’ll be developing more technology and capability in this area.

Patrick Daly:

Mm-hmm (affirmative). Now, there’s certainly lots of changes underway at the moment. So, yeah, we’re seeing these concepts of redundancy. We’re seeing a lot of automation to bring manufacturing back perhaps to countries where the labor is more expensive, and I think we’re going to see quite a lot of change over coming to 3, 4, 5 years.

Art Schick:

I would agree with you.

Patrick Daly:

Yeah. So, just as we come into the last couple of minutes, Art, we maybe change tack slightly again, and maybe that’s a key to what you’re going to answer, changing tack. So, what do you like to do in your spare time?

Art Schick:

I appreciate you asking. Well, I’ve always enjoyed the ocean, and I’ve always loved boating, and I’m becoming more of an active fisherman, and of course, retiring in Massachusetts in a beach community has helped with those passions. I’m also trying to reintroduce myself to golf which as most people know can be quite a challenge in many ways, quite frustrating.

Patrick Daly:

Well, you know Ireland is a golfer’s paradise. Have you played here?

Art Schick:

I have many times. I’m sure there’s a few broken windows.

Patrick Daly:

Are you reading anything at the moment or listening to anything, podcast or ebook, that you would recommend that particularly inspires you?

Art Schick:

Yeah, Patrick, my interests really are pretty wide, and of course, having some free time in retirement, it gives me the opportunity to, let’s say, go outside of my traditional supply chain background. Obviously, with my hobbies, I do read a fair amount of boating and fishing magazines, and I’ve recently completed two books on how to improve my golf game. Now, I only wish that physically making those changes would be as easy as reading the books about them.

Patrick Daly:

Not that [crosstalk 00:27:00].

Art Schick:

Yeah. I have completed two books recently on global warming, and I have found those topics to be quite interesting, and actually, they were somewhat encouraging because they did demonstrate that there could be some solutions, but unfortunately, they’re likely decades away. The one book I liked the most was titled Enlightenment Now by Steven Pinker, and it talked about how society indeed has improved all over the centuries, and it was a bit of an uplifting book. And then more recently, I just finished a book on how the VC world works, and that was quite interesting and fascinating because it’s something I wasn’t very familiar with at all.

Patrick Daly:

Yeah. Yeah, Pinker’s good because he tends to be quite optimistic about the world and where we are, and he bases it on data rather than on feeling. So, I think he’s quite uplifting sometimes.

Art Schick:

Well, and I would say his book was as someone who’s been educated as an engineer, he does present a lot of facts and data, and I found that quite refreshing.

Patrick Daly:

Exactly, exactly. So, to finish then, Art, where can people find out more about you, your current work and how can they contact you?

Art Schick:

Well, that’s very simple, Pat. I mean, they can certainly reach me through my LinkedIn profile. It’s Art Schick, or certainly, Pat, through yourself and would love to help anybody with their trade secret requirements.

Patrick Daly:

Excellent. It’s been an absolute pleasure, Art, talking to you today. Wish you the very best for the future, both personally and professionally.

Art Schick:

Patrick, thank you for this opportunity.

Patrick Daly:

Very welcome, Art. Thanks also to our listeners for tuning in. Any comments and questions, just drop me a line on P-D-A-L-Y, that’s pdaly@albalogistics.com. Keep well and stay safe until next time.

Patrick Daly:

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 developments have had in our life, our work and our travel over recent times.

Patrick Daly:

Today in the show, we will be talking to Nigel Healy, Director at estate agents, Jones Lang LaSalle here in Ireland, specializing in the industrial property side of the business. For some years now in Ireland, we have been experiencing lots of challenges on the supply side in relation to warehousing property in particular for the manufacturing, distribution and logistic services sectors. And prices have been rising and lead times for the delivery of new stock have been pushed out by supply chain disruptions arising from COVID and the war in Ukraine.

Patrick Daly:

So today I hope Nigel is going to help us to make some sense of what is going on now and what we can expect in the sector over the next couple of years and beyond. So delighted to have you with us here today, Nigel, very welcome.

Nigel Healy:

Thank you for having me, delighted to be here.

Patrick Daly:

Nigel, could you tell us to kick off maybe an overview about your background and career to date. So how did you become Director at Jones Lang LaSalle on the industrial side of property?

Nigel Healy:

Oh, we’re going back a long time now, Patrick. I suppose I actually started, would you believe, life in this industry on the residential side. Going back when Moses was a young boy. I did that for a number of years. Then I moved onto the commercial side of life. Then I went to the UK for a short while. And I came back to Dublin to work at Jones Lang LaSalle in September, 1989 on the industrial side where I have lived ever since.

Patrick Daly:

Very good. So tell me about that current role then at JLL. What kind of services does JLL provide to industry? Typically who are the clients? And how are they better off after they’ve dealt with you guys?

Nigel Healy:

Well, the firm itself was established in Ireland as a wholly owned Irish partnership in 1965. So, that’s 50 something years ago. It’s obviously a full service delivery firm across all parts of the property market, not just industrial, but through the retail, offices, capital markets and so forth.

Nigel Healy:

In our particular field of it, we’ve a small but completely dedicated team of five people who do nothing but everything around the logistics there. So that would include the standard transactional stuff you’d see in terms of sales, leasing, acquisition advice and so forth. And unusual, like some of the other firms, we do a lot of landlord and tenant work, lease advisory stuff, lease renewals, forward funding and all that type of thing. So, once it’s a shed, we do everything relating to it, short of actually building it.

Patrick Daly:

Okay. So as I said in the intro, for a few years now, we’ve had this shortage of warehousing space in Ireland, showing up with manufacturers, with distributors and logistics service providers, so all across the board. So what are the contributing causes and factors involved here that you can see?

Nigel Healy:

I think there’s a number. The one that jumps out to mind, I suppose, is if we go back to 2006 and ’07, at that stage, there were about 35 individual developers of industrial property in the greater Dublin region. Some big, some medium, some small. And there’s now about seven or eight. Most of those are not what I would call indigenous industrial. I mean, they’re bigger firms or they’d be Irish spinoffs of bigger firms. Although there will be some domestic guys.

Nigel Healy:

So as a result, the industry really hasn’t had the capacity to churn out vast numbers of industrial buildings. Equally and traditionally, developers had tended to build one or two units at a time. When they finished that, then go on the next one. So they drip fed the market very unlike, for example, the housing sector where very large schemes are built on that. The industrial sector is much smaller in terms of developer numbers, and obviously supply is controlled accordingly.

Nigel Healy:

Equally our funding model has changed. So again, you go back to the heady days of the Celtic tiger and development funding was readily available. That’s now not the case. You can’t walk into a high street bank and borrow whatever it is to build developments, it’s just not happening like that anymore. So there are, again, we have foreign based funds coming in, providing some of that funding.

Nigel Healy:

Equally we’re doing things like, when we have our permission, we’ll almost simultaneously line up the tenant and the funder at the same time for the developers. There’s almost three transactions happening at that one time in order to get one. So, that again takes a bit of time. It’s completely different to where it was. And does slow if you like the capacity to turn over the stock as quickly.

Nigel Healy:

There’s no doubt, certainly planning is an issue. It seems to be much slower. And where you have a market that doesn’t have a lot of standing product, the ability to create the product, I mean, it takes a period of time to build a building. And if you’re having to spend 12 months going through a planning process, then suddenly it’s 24 months before a building is available for occupation.

Nigel Healy:

So between the reduction in the number of developers, what appears to be a slowing down of the planning process, and a different funding model, it’s just become a different world to where it was seven/eight/nine years ago.

Patrick Daly:

So how then are the users of warehouse space, manufacturers and distributors, logistic service providers, how are they actually coping? Because our economy, since the financial crash back in, what, 2008 or so, the economy recovered quite strongly from about 2014. And then we had the milk quotas were taken away, and then we had Brexit. Then we had COVID and now we have the war. And all of that seems to be contributing towards more emphasis on security and safety, which means normally holding more inventory and having more warehouses. So how have they all coped in this period over the last number of years?

Nigel Healy:

With difficulty I think in reality. I think you’re right when you say that holding more inventory has become a thing. Certainly that would translate as we would see into requirements for larger warehouses, simply because they’re holding more stock. So we have noticed the trend towards larger warehouses has become more prevalent.

Nigel Healy:

I mean, again, going back to the mid noughties, if we got a requirement for a hundred plus thousand square feet, if we got two of them in a month, you’d be getting excited. There’s now nearly two a week. And in fact, you can see a lot of development around the place heading in that direction.

Nigel Healy:

I think the manufacturers are slightly different, Patrick, insofar as they tend to be larger lead in times. When you’re constructing a manufacturing facility, it’s a bigger asset. I think it’s very obvious within the logistics and the warehousing sector, that it has become a challenge.

Nigel Healy:

And certainly for occupiers coming from outside of the country, there is a perception that, well, look, product can be easily found, and I can set up my warehouse of 20/30/40,000 square feet very quickly. And they’re quite surprised when the availability of that stock is virtually zero.

Nigel Healy:

So it is a huge challenge. And equally try to address it through the 3PL route has been a problem because the 3PLs don’t have the capacity either. So yeah, it’s absolutely a difficulty.

Patrick Daly:

So, is it becoming a problem for the likes of the IDA trying to get people in here for foreign direct investment, is it becoming an issue?

Nigel Healy:

Look, I suppose the IDA will probably answer that better. But my sense of it is, and that’s why I differentiate between the manufacturer and the logistics, they’re swimming in the manufacturing space. And their brief, and they’re particularly good at it, is in terms of directing that degree of investment in probably not necessarily the markets that we will be operating in. And typically they’re bigger scale projects which require in many instances specialty construction.

Nigel Healy:

But where they are looking to adapt existing buildings, they will struggle, and they are going to struggle. And it’s the whole speed of, I mean, you can remember back in the days of the advanced factory, that’s certainly a thing of the past and would’ve been able to address those matters.

Patrick Daly:

So the confluence of all of these factors, and now the supply chain challenges and extended lead times and inflation, what’s happening with prices in terms of building and in terms of renting warehousing facilities?

Nigel Healy:

Well, construction costs, my clients are telling me, are accelerating exponentially. We have seen week on week increases in steel costs, which feed into cladding and so forth. Much longer lead in times in terms of steel. And a lot of these are obviously built with steel. So it is a problem to the extent that, and if you go back to my earlier comments regarding a slowness of planning, if you agree commercial terms to lease a particular facility, and it becomes a subject to planning deal, clearly that planning process is long. The construction process is long. But the contractor can’t order the steel work and get price certainty with a six or a 12 month lead in on the planning. And that then is resulting in many contractors either not being prepared to stand over prices for only a couple of weeks. And that gives greater uncertainty to the occupier market, which naturally means we’re going to be less competitive internationally.

Patrick Daly:

Yeah. In fact, I had a conversation today with somebody about, not so much the warehouse building, but some equipment to go inside the building actually, automated equipment. But the structural part of that, the racking and shelving. And literally saying, when I give you a price today, that’s today’s price. If you ask me tomorrow, it’s a different price. Next week, it’s a different price. Whereas we used to have 90 day validity or whatever on racking and shelving and so on. So, it’s got to that point where it’s almost …

Nigel Healy:

Yeah, it’s a huge challenge. And there isn’t an easy fix. And the other side of the coin of course is how does that impact on rents? But I think rents, they’ve certainly grown, but they’re not quite back to the levels they were in 2006. And I know I reference 2006 regularly, but I think that’s a benchmark in where we were and where we felt and where we’re going to. So, we’re getting there. We’re not quite there.

Nigel Healy:

Construction costs have obviously become considerably more expensive. But fortunately, what hasn’t moved is land values. I mean, land values in certain instances are still probably only a third of what they were. And that’s the one thing that won’t move. Obviously if your construction costs move and your rents aren’t moving at the same pace, the raw land is going to have to remain at a low level.

Nigel Healy:

I think the relatively benign interest rate environment has also helped. That may come under some pressure. But certainly it’s an uncertain time and a difficult time. And I can certainly understand why contractors won’t and can’t stand over prices indefinitely.

Patrick Daly:

You mentioned earlier some of the changes that are happening, that the specifications are coming through for bigger facilities than in times past. So now hundred thousand square foot plus is fairly common. Whereas in the past it was quite rare. So apart from say the size, how else have requirements been changing on the part of occupiers in terms of location, scale, features, quality and so on?

Nigel Healy:

Well, taking quality and features, I suppose, first, I mean, it comes as no surprise that the big one is all on ESG side. Occupiers are now very focused on all things environmental as should be. Obviously so too are investors and investor funds. A lot of investors will say that unless you tick certain boxes around the sustainability sphere, they won’t touch the product.

Nigel Healy:

And all of that has been driven obviously in fairness by regulation, we’ve [inaudible 00:13:27] regulations. And certainly the quality of the buildings now would be far better than the quality of them 10 years ago. No doubt. And I’ve no doubt that the quality of Irish buildings will hold up very well when benchmarked with anything else. So, that’s one very noticeable feature of the market. And it’s here to stay.

Nigel Healy:

I mean, you’ll consistently see things like rainwater harvesting, no fossil fuel heating and stuff like that going into buildings. And that’s where that particular one is. So, that’s a big factor. I think you asked me what other changes were there in the marketplace.

Patrick Daly:

What about heights?

Nigel Healy:

Well, look, height and location. Yeah. Yeah. Look, the buildings have got taller. But the issue when you’re building them speculatively is how high do you go? You’ll be more of an expert. But obviously there comes a tipping point where the cost of the materials handling equipment over a certain optimum level becomes exponentially more expensive.

Nigel Healy:

So most developers will be building them to a standard 12 meter height. With the isolated one above that. But it becomes more costly because you have greater floor tolerances, you have more steel, you have more cladding and so forth. But your rent doesn’t move. So there’s obviously a point at which you’ve got to stop.

Nigel Healy:

Location wise, traditionally we would’ve been looking at southwest of the city, north of the city. I think southwest of the city, we’re seeing less available land. I think we’re probably going to see a little bit more pressure and growth in the Naas area. Because if you think a development is right up to the county boundary in Dublin, and there’s not a vast amount of additional zoned land that’s readily available in the marketplace, so your occupier has a choice, north side or further down the Naas road.

Nigel Healy:

And I can certainly see the area of Naas, Newbridge growing. There’s been a couple of big transactions announced recently which I think support that. North side of the city, there’s still a fair chunk of land available, which is well positioned around all the key infrastructural pieces, M50, airport, port, tunnel. So I think there will be sufficient volume of land available in the north of the city to cater for requirements going forward.

Speaker 3:

93.9 Dublin South FM.

Patrick Daly:

The developers are picky about where they want to put these things, isn’t that right? I remember we were involved with some projects that were outside the main Dublin or Cork, and they were doubtful about developing in some other places.

Nigel Healy:

Yes, I think certainly you mentioned Cork, I mean, going back 24 months ago, 36 months ago, investors might have been a bit shy about Cork. But Cork is suffering the same constraint on supply issues that arise in Dublin. And certainly I’ve noticed a willingness on behalf of more and more investors to look at Cork as a growing market.

Nigel Healy:

It equally has a total absence of standing product. And I know certainly I have a number of client requirements in the corporation that just can’t be fulfilled outside of the design and build approach. So there’s the same issues.

Nigel Healy:

The whole Limerick/Shannon area, probably not too far behind. Galway is less of a market. But those locations are, they are locations that have demand, but again can’t be satisfied.

Patrick Daly:

I know it’s unfair to ask people to predict the future, but it doesn’t stop me asking. Although, I guess, if we’re talking about the next 12 to 24 months, it’s really probably not a prediction because of the lead times that are involved here. I think you can probably see what really is going to happen over the next 12 to 24 months. So what do you think in terms of availability and costs, what’s already baked in right now?

Nigel Healy:

Yeah, I think it’s clear, over the next 12, 24 months, Patrick, we’re going to struggle with supply for the reasons you’ve articulated. I don’t think there’s an easy solution.

Nigel Healy:

I think to a certain degree with all that’s going along in the world at the moment, there is a bit of pause for thought. So, whether the day to day demand would be executed on as quickly is a debatable point.

Nigel Healy:

We simply can’t create the product, so that fixes what we have. I think we’ve got to find a way to get through planning a little bit more quickly. No one is for a moment suggesting there should be any compromises in the quality of planning. It’s just the speed with which it’s been turned around is the issue. And that then causes problems around growth of businesses and so forth.

Patrick Daly:

And are refurbs or lifting the height of existing buildings, are those types of things going on, are they a thing?

Nigel Healy:

We haven’t seen it actually happening. We have had several conversations with property owners about doing that. But how do you lift the height of a building? You’re effectively cutting the steel and adding a bit in, and the issues presumably around structure integrity. And actually then you’re back to getting the steel, which is a problem. Then if you lift the height, the floor tolerances if it’s an older building.

Nigel Healy:

If you look where a lot of those older industrial buildings are, a lot of them are knocking on towards 40 years old. So, there’s issues about obsolescence there that are not going to be readily fixed. Also some of them are going get caught in the City Edge project, which is the view that Dublin city and South Dublin County Council have around developing those key locations. That will be residential in future, where there’s a lot of older, industrial buildings.

Nigel Healy:

And indeed even going back a number of years ago, there was a drive on behalf of a lot of the occupiers up in what was Coolock Industrial Estate to have that rezoned for residential use. Now, for that to happen, there has to be space for those occupiers to decant into.

Nigel Healy:

Per my earlier observation. That’s less of a problem on the north side of the city and a much greater problem outside of the city. And you can’t simply say to an occupier, well, I know you’re on the Naas road and I know you’ve been there for 30 years and I know you have all the staff, I’m sorry, you have to go to Ballycoolin with 6% unemployment. That’s a [inaudible 00:20:04] sure way of losing all your staff. So I think in that sense it’s a much bigger question.

Patrick Daly:

So on that then, in a strategic sense over the longer term, what would or what should property development and warehousing ideally look like to provide Ireland Inc, if you like, what it really needs? And what would be the key ingredients, say finance, planning, scale and so on? And who would be the key players, developers, planners, investors in that ideal solution? So you say, where are we going? Well, we wouldn’t start where we are, but where would we like to be, say, in five years or 10 years?

Nigel Healy:

From a location perspective, we’re seeing the opening, not so much the opening, but locations such as Ashbourne, such as [Cooknee 00:20:55] becoming much more acceptable in the marketplace. They would’ve 10 years ago been viewed as somewhat peripheral. I think that’s less of an issue because the road infrastructure to those locations, which in reality are only at the edge of the city, so that’s giving opportunities for additional land. And I mentioned Naas and Newbridge before. So I think we’re going to see a further spread out in those locations which will help.

Nigel Healy:

Again, we’re back to planning. We have to have a system that is fit for purpose in terms of being able to plan our future well. Not necessarily compromise on that. But do it more efficiently. And I think that will certainly help.

Patrick Daly:

Yeah, I think perhaps sometimes logistics activity is seen by the powers that be somehow as not being sexy. So they like to talk about maybe bio, pharma or chemicals, R&D, high tech, all of this type of stuff. But I think what a lot maybe don’t appreciate is that all of those industries need logistics in order to function. So it’s almost like they need to be thinking ahead in terms of almost pre-planning maybe large locations in strategic places around the country to cater for that. So that these industries can come and can develop and their logistics service providers can follow them.

Nigel Healy:

I’d agree. I mean, I think certainly COVID was a real eye opener for people in terms of stuff not getting delivered. We all think that when we go to the supermarket, we can buy whatever’s on the shelf and go away and consume it. No one ever thinks for a moment where it was made, where it came from, how it got there and how quickly can it be replenished. And there’s nothing like an absence of loo roll to focus the mind. And that’s the reality. I mean, all this stuff actually gets on our supermarket shelves because some chap or girl has actually delivered it. It’s vital. And I think you’re right. I think everyone suddenly woke up, gosh, I can’t get X, Y or Z. And how did that happen? Well, it happened. And it could happen again.

Patrick Daly:

Yeah. Yeah. We’re in an even potentially more challenging situation now. So we’ll see how the supply chain repercussions reverberate from this war into the food supply chain and others. So, we’ll see that over the coming months I guess.

Nigel Healy:

Absolutely.

Patrick Daly:

And maybe talking about that in a general question for you. I know you’re a guy who pays attention to the news and what’s going on in the world. So this is not a question about your specialty, but it’s a question I like to ask everybody who comes on here. In terms of the economic globalization that we all grew up with over our professional lives. And has enabled us to have this economy that we have and has enabled us to have free movement in certain countries and has abled us to travel, things we take for granted. So, where do you think we are with the process of globalization? So it grew very quickly, say, from 1990 to 2010. Then it slowed, then it flattened. And I think now, even with this war in Europe, and COVID, it’s probably going backwards. So, where do you think we are? Where do you think we’re headed with this?

Nigel Healy:

Oh, that’s a tough one. It is a bit looking into the future really, isn’t it?

Patrick Daly:

Speculating, yeah.

Nigel Healy:

It is. Yeah. And I think it’s different things to different people. If you are manufacturing a product that can be distributed worldwide, you’re going to want a global logistics supplier. You’re not going to want Patrick Daly one man and a truck to be delivering your product to every corner of Ireland. And there’s lots of reasons for that.

Nigel Healy:

On the other hand, I think a lot of people are going, well, we tried that, did it work? But the human condition is, at one level, when things flatten out, it returns to type. So, my personal sense of it is that it may be slightly different. In a way that we don’t quite understand. But I don’t think the world will get a smaller place and maybe a different place, but I don’t think it will be a smaller place.

Patrick Daly:

Yeah. So more like it’s not so much de-globalization, it’s maybe a different form of globalization we’re heading for?

Nigel Healy:

Yeah, yeah. Will be my sense of it.

Patrick Daly:

Yeah. Okay. So as we come into the last few minutes then, we’ll change tack again, and maybe leave work behind altogether. So when you are not working and thinking about the ways of the world, what do you like to do with your spare time?

Nigel Healy:

Oh, not that I have an awful lot of it. A lot of family time obviously. I get out on the bike quite a bit actually. I don’t play golf. I tried that, I was absolutely rubbish at it. And I decided I’m way too old to go back to try that. I’m very fortunate, I have three kids at various different ages, so they keep me busy doing various different things. So yeah, not a lot of spare time, Patrick, unfortunately. I’m hoping for a bit more over the next couple years to be honest.

Patrick Daly:

And are you reading or listening to anything currently, books, e-books, podcasts or so on that you’d recommend particularly?

Nigel Healy:

I love a good history read. So I currently have beside my bed a book by Max Hastings on the whole first world war, which I suppose given what we’re seeing at the moment is comparing and contrasting, actually horrible stuff hasn’t changed unfortunately. And I certainly wouldn’t be without my Spotify. Absolutely not. I’ll take that to the desert island.

Patrick Daly:

There’s a good history podcast that I listen to called actually The Rest is History, and it’s by John Holland, he’s an English historian. And he’s got a lot of BBC documentaries made and books about Christianity and the Middle Ages and so on. But himself and a buddy of his, whose name escapes me, have this podcast, The Rest is History, and it’s on Spotify. But it’s very good because they do it with a bit of humor.

Nigel Healy:

It will be added to my listening list.

Patrick Daly:

Okay. So to finish up then, Jones Lang LaSalle, where can people find out more about your services and activities and what you can do for them in terms of industrial property and warehousing?

Nigel Healy:

Well, they can certainly contact us in the office, which is in Styne House in Hatch Street in Dublin 02. 673 1600. Or they can contact us via the website, jll.ie. And we will quite happily deal with whatever queries, questions, problems or conundrums are posed. We’ve seen a lot of them.

Patrick Daly:

Excellent. Thanks for very much. Pleasure talking to you today, Nigel. And wish you every success personally and professionally in the future.

Nigel Healy:

And you, Patrick. Thanks for your time, I’ve enjoyed it.

Patrick Daly:

All the best. Thanks to listeners for tuning in. And any comments or questions, just drop me a line on pdaly, P. Daly, @albalogistics, all one word. That’s A-L-B-A logistics.com. And keep well and stay safe until next time.