Interview with my colleagues from the supply chain interest group, Lisa Anderson of LMA Consulting Group and Dr. Karen Y. Wilson-Starks of Transleadership Inc. discussing the challenges and remedies that leaders are encountering across sectors in supply chain as they adapt to a never-normal world post-COVID.

In this episode of Interlinks, I am joined by my colleagues from the Supply Chain Special Interest Group at the Society for the Advancement of Consulting:

  • Lisa Anderson, President of LMA Consulting Group Inc. in the Los Angeles metro area in California
  • Dr. Karen Y. Wilson-Starks, President and CEO of Transleadership Inc, in Colorado Springs

In this discussion we explore some of the challenges and remedies that companies across the sectors are encountering as they face into the post-COVID future and the challenge of a never normal world with ongoing supply chain disruptions, geopolitical tensions, and climate change.

We explore what the current situation is across sectors, including manufacturing, construction, distribution and logistics services with particular focus on some of the leadership and strategy aspects that companies are wrestling with as they adapt to a never normal business environment.

Click here to read transcript

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.

Interview with my colleagues from the SAC Supply Chain Special Interest Group, David Ogilvie from Brisbane, Australia, Diane Garcia from Portland, Oregon and Elizabeth Warren from San Pedro, California, discussing the opportunities that lie within the adversity of supply chain disruptions.

Delighted to discuss the opportunities that lie embedded within the turbulence and instability currently impacting supply chains around the world with my colleagues from the Supply Chain Special Interest Group of the Society for the Advancement of Consulting (SAC).

My guests are:

  • David Ogilvie of David Ogilvie & Associates, in Brisbane, Queensland, Australia
  • Diane Garcia of Lorraine Consulting, in Portland, Oregon, USA
  • Elizabeth Warren of DialedIn Consultants, in San Pedro, California, USA

We are all facing challenges in planning our future in these times of turbulence and instability with pandemic, war and climate change. Yet always in times of adversity there is opportunity and that is what we are going to explore in this discussion.

Click here to read transcript

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.

Interview with Art Schick, founder and principal of Alpha Sierra Global, discussing the importance and value of identifying, codifying and protecting your valuable trade secrets in businesses of all sizes.

In this episode of Interlinks we talk to Art Schick, founder of Alpha Sierra Global, a consultancy practice based in Massachusetts in the US.

At Alpha Sierra Global, Art specializes 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 discuss the topic of trade secrets, what they are, why companies often overlook their value, and how to identify and protect them. 

Click here to read transcript

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.

Interview with Nigel Healy, Director of Industrial at Jones Lang LaSalle (JLL), real estate services provider based in Dublin, Ireland, discussing the challenges faced by manufacturers, distributors and logistics services providers seeking quality warehouse facilities to operate their businesses.

In this episode of Interlinks we talk to Nigel Healy Director at estate agents Jones Land Lasalle (JLL) based in Dublin, Ireland and specialising in the industrial property side of the business. JLL is a full service real estate services provider covering industrial, commercial, retail, residential and hotel real estate.

For some years now in Ireland, in common with many other countries, we have been experiencing many of challenges on the supply side of warehousing property for the manufacturing, distribution, and logistics services sectors.

Prices have been rising and lead times for the delivery of new stock have been pushed out by supply chain disruption arising from the COVID pandemic and the war in Ukraine.

Today, Nigel is going to help us make some sense of what is going on right now, how we got here, and what we can expect in the sector over the next couple of years and beyond.

Click here to read transcript

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.

Interview with Conor Molloy, adviser, trainer, auditor and principal at Authentic Energy Management Services.

In this episode of Interlinks we talk to the independent energy management advisor, trainer, and auditor, Conor Molloy.

Conor specializes in transport energy management, and sits on the Global Logistics Emissions Council (GLEC)) panel of experts and he also works with the National Standards Authority of Ireland on standardization in the field of energy management and energy savings including the ISO/TC301 standard on net zero.

Through his company Authentic Energy Management Services (AEMS), Conor works with over 120 transport fleets in Ireland and abroad through the ECOfleet service operating under the EEOS or Energy Efficiency Operating Scheme.

Conor is also a member of Chartered Institute of Transport and Logistics in Ireland, the Freight Transport Association of Ireland, the Association of Energy Engineers, and an experienced Certified Measurement and Verification Professional.

Given the Irish government’s publication of their climate action plan 2021 to halve emissions by 2030 and reach net zero by 2050 and Ireland’s geographical reality of being an island off an island, transport emissions and how best to manage them from now on is a matter of urgent attention for every business operating here and so I am delighted to have had Conor with us to discuss the challenges ahead of us.

Click here to read transcript

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 and work and our travel over recent times.

                                           Today on the show, we’ll be talking to the independent energy management advisor, trainer, and auditor, Conor Molloy. Conor specializes in transport energy management and sits on the Global Logistics Emissions Council panel of experts. And he also works with the National Standards Authority of Ireland on standardization in the field of energy management and energy savings, including the ISO/TC 301 standard on net zero. Through his company Authentic Energy Management Services, AEMS, Conor is working with over 120 transport fleets in Ireland and abroad through the ECOfleet Service operating under the EEOS, or Energy Efficiency Operating Scheme. Conor is also member of the Chartered Institute of Transport and Logistics in Ireland, the Freight Transport Association of Ireland, The Association of Energy Engineers and he’s an experienced Certified Measurement and Verification professional.

                                           So given the Irish government’s publication of their Climate Action Plan 2021, to halve emissions by 2030 and reach net zero by 2050. And given Ireland’s geographical reality of being an island off an island. And transport emissions and how best to manage them from now on. It’s a matter of some urgent attention for every business operating here. And so I’m delighted to have Conor with us to discuss the challenges ahead of us.

                                           So thank you very much, Conor, for joining us today. You’re very welcome.

Conor Molloy:                 

I’m delighted Patrick, thanks to the opportunity and the elongated intro. I should shorten that bio, yeah? [inaudible 00:01:46].

Patrick Daly:                    

Yeah. Well, I’m saying how do you find time for all of this? But there you go.

                                           So I think you Connor, like myself, you’ve been kind of knocking around since the head of the late eighties or so. So I’d be interested just to get an idea from you, an overview, about your career to date and how you evolved from… I think you were a marketing graduate initially. To being an authority on transport emissions.

Conor Molloy:                 

That’s a very… That’s a great question. Yeah, the… So I started off in the print industry. Moved into Kodak, but… You know, big yellow box people know. I was never really on the Kodak that people knew. I was on the… What we call the business side of things. So very much dealing with IT, banks. You know, heavy, heavy stuff really. And imaging. And then that took me into the IT industry. And from there we set up a distribution company for a couple of years off the back of Kodak’s transition into digital. So that kind of gave me a taste for literally, physically vans on the road. Stuff moving around. Warehousing, et cetera.

                                           Moved into a large software company as it was at the time called Corel. And we would’ve been a kind of internet version one. So we would’ve run out of Dublin… Oh, I’ve forgotten how many websites it was, but I think I remember 22 different languages. And we basically did everywhere outside of North America for them. But one of the challenges was how do you download like a CD’s worth of material if you’re on a narrow band connection? So we ended up getting involved in making CDs, distribution. So again. Back into distribution supply chain again.

                                           Got invited then to get involved in supply chain consultancy. Ended up going back into the internet again. And one of the projects I was involved in with a small Irish company, which is now part of Verizon but it was a small startup at the time, was we did a project which… We didn’t know it at the time, but it was the largest telematics project in Europe, if not the world. It was… I think it was 6500 vehicles or something. And this little known bunch of developers. I was only one of the commercial people putting together the software to do it and make that work. So that particular project… From memory, they said it saved a million pounds during a month in fuel. That’s what it was. It was that big a project.

                                           Now I… The fuel caught my ear. And the guys who owned the company thought more about labor and productivity. And as a result, we parted company and I set this business up in 2005. So 17 years at it now, helping fleets save fuel and emissions. That’s kind of the potted history. Yeah.

Patrick Daly:                    

Okay. So this business. AEMS. Authentic, I think the A stands for authentic.

Conor Molloy:                 

Just AEMS, for short. It’s a lot easier to say, yeah?

Patrick Daly:                    

AEMS, yeah. So what then are the range of services typically? Who are the client companies? And how are they better off when they’ve worked with you?

Conor Molloy:                 

Right. So for the vast majority of them they improve their liters per 100 kilometers, right? That they’re… Within the cohort of 120, we’ve probably got about 10 of them have good enough data to be able to talk about improving their performance in CO2 per ton kilometer, which is what we all want to get to. But the vast majority of them are still on liters per 100 kilometers because they don’t have the weights. So that’s the key performance metric. That’s what we focus in on. That’s what we help them with.

                                           For the most part it’s mentoring, as you and I would understand it. In the last two years, partly due to COVID, partly just due to demand. You know, so many people looking for services and support and education. We’re doing an awful lot more training. So 10, 20, 30 people in a virtual room these days, I suppose. Doing… Getting trained rather than one-on-one.

                                           So that’s been the biggest change we’ve seen in the last couple of years. But broadly speaking, still focused on the liters per 100 kilometers. Because we can measure liters, we can measure the kilometers. For the most part on the tonnage it’s kind of… It’s divorced. We’re… If you’d like, the job over the next 10 years is to bring those three numbers together. Into a liters or CO2 per ton kilometer. That’s the key performance metric that we’re working towards.

                                           So we… I suppose your traditional consultancy services. Advice, training, audit, measurement and verification, which is a particular role in the energy sector which gets you funding. We also do a bit of work for the government with SEAI as well, in helping out on various things.

                                           But you know, your traditional small consultancy business, I suppose, but my background in IT. What’s made it a little bit different and a little bit more scalable is that with the ECOfleet product, which was originally when it was first set up was a training product. It won an award from Dun Laoghaire–Rathdown. County Enterprise Board I think they were called back in the day.

                                           Now this, we’re talking a decade and a half ago now. But that was a traditional training product. It got adopted by SEAI, and now it’s a software platform that allows the… It basically automates the reporting mechanism, so that’s what the ECOfleet platform does. The training is still very much one-on-one or in classroom scenarios, but we’ve automated the data collection reporting side of things. I suppose that makes us a little bit different from your normal consultancies that’s out there.

Patrick Daly:                    

And what exactly is the issue then, in people getting from measuring by liters to measuring tons of CO2 equivalent?

Conor Molloy:                 

Right. So there’s… Thanks for that question because that wasn’t quite the tons I meant. It’s the tons of payload is what we were talking about.

Patrick Daly:                    

Yeah.

Conor Molloy:                 

So you’ll have a planning system that tells you how many tons you’re carrying, but the person who’s burning the fuel doesn’t necessarily know how many tons it actually is. So there’s a gap there. So you either have a scenario where the customer, one, knows how many tons over a planned distance. Or you have the haulier or carrier knows within a reasonable but not the exact amount what they’re carrying over the actual distance and the actual fuel burn.

                                           At the moment the two don’t meet. So if you like the big job internationally is to try and marry those two data sets in a coherent way. And there’s a lot of work going on around that all over the world in terms of standard setting and people putting their heads together about how to do it. Yeah.

Patrick Daly:                    

Okay. And you have this mantra or philosophy that I’ve heard you repeat quite a lot. Avoid, shift, improve.

Conor Molloy:                 

Yeah.

Patrick Daly:                    

Can you just set out with us what kind of strategy that encapsulates and how would that manifest in a typical transport business?

Conor Molloy:                 

Very good. Yeah. Again, great question. So I think the first thing to say is avoid, shift, improve is not mine. I would say pretty much all of the… Well, the relatively small number of transport consultants that I’ve met, who operate in this space, we all do avoid, shift, improve. It’s kind of our standard language. And it was… 1999 I think is when it was eventually put out. And you’ll have to forgive me and I’ll have to send you on the references to give it a proper citation for it. But 1999. It’s since been adopted by the IPCC, the UN, The International Transport Federation, and pretty much every consultant I’ve met in this space. So I think that’s the first thing to say. It’s not… We don’t own it. It’s not copyrighted. Everyone’s more than welcome to adopt the language.

                                           What does it mean?

                                           Avoid means avoiding travel or the need for travel in the first place. So if you can take, as an example, a shipment and you can shrink it or you can effectively… You know, in fact you and I are doing it here right now. If you look at ordinarily we would’ve gone to a studio. I think you said it was in Dundrum. We’re here doing it virtually. So we’re moving electrons now, not humans. We’re not moving molecules to meet each other. We’re just moving electrons. That’s what we’re doing. So that’s an avoid example.

                                           Shift means shifting mode. So the classic in the Irish conversation is moving from roads to rail. But I would also give the example, a lot of S&Es, particularly in Dun Laoghaire–Rathdown at the moment are moving from vans to cargo bikes. So that’s another mode shift. Likewise, you might move… You see someone like Maersk at a very… At a global level. They’re a shipping line based out of Denmark. One of the biggest on the planet with some of the biggest ships on the planet and they’re moving to rail. So they’re now moving goods… I think it’s a daily service now from China to Duisburg in Germany. So that’s shifting mode.

                                           Improvement is where most of us like to talk. It’s improving the performance of the supply chain, the vehicle, whatever it is we’re talking about. So for Joe Public. If you’re listening to us here now and you wonder what does he mean by that? You know, the first thing that jumps into most people’s mind is actually improve by buying an electric car, but that’s not actually what the improved piece meant in its original.

                                           There was an actual F at the end. So ASIf. And the small F at the end stood for change in your fuel.

                                           So effectively… Just to go back to improve. It would mean for most of us driving a vehicle today, a car, slow down. Save fuel, improve the performance of the vehicle on that journey and slow down. Okay? So it’s just a simple example. You know, if you want to know how much you save, it’ll be written on the dashboard, right? You don’t need a calculator or anything like that.

                                           And then the last. That small F is the fuel. That’s when you would switch from an internal combustion engine to a diesel. Or in the case of say a ship you might switch from heavy fuel oil to methanol I think is the current flavor of the month.

                                           The ASI and the small F at the end is a way of structuring your approach to make sure that you have covered all of the potential opportunities for savings in the supply chain, the project, or the fleet that you’re dealing with. That’s the idea behind it.

Patrick Daly:                    

You mentioned along the way the ECOfleet software. Either application or platform, I’m not sure which. So how does that work? What are the benefits of using it? And how do companies get involved if they want to use?

Conor Molloy:                 

Very good. So I suppose I’ll answer the last part of the question first. You could sign up with one of the partners. So that would be the Freight Transport Association, Smart Driving, Irish Exporters Association. And we have a couple of other smaller partners, including… Come in the UK where they have their own particular niches that they’re going after. So sign up through your partner. That’s the first thing.

                                           Once you do, then what you’re undertaking to do is you’re making a commitment to deliver on your own plans. So it’s a planning tool. It’s, if you like, a corporate memory tool. So if you look at your telematic system or your fuel management system or indeed your planning system, it might only hold six, 12 months worth of data. Sometimes even less than that but hopefully more than 12 months anyway. But what we’re looking for is continuous improvement year on year, every year over a decade, right? That’s the energy efficiency obligation scheme, the EEOS. That’s how it works. It’s sustained long term savings. So we’re feeding into that and effectively the ECOfleet platform, if you like, provides that corporate memory for that longevity. That year on year performance improvement.

                                           It asks for data once a quarter, so it’s not particularly onerous in terms of data collection. What it is onerous in is that you have to say what you did to save fuel. So you have to have a plan. You have to be able to look back and say, “Did we do what we said we were going to do?” And generally speaking you don’t. Because you know, the first… The last… No plan survives contact with reality. So it has to… Things won’t work. Some will, some won’t. Et cetera. Things won’t turn out quite the way you expect. That’s all perfectly okay. Just record all that along with your data and your evidence pack. So you’ve got to upload an evidence pack with it as well.

                                           And effectively, if I was to put… For those who are from a corporate background who were thinking about what does that sound like? You know it’s effectively ISO 50001, the International Energy Management Standard shrunk if you like. Resize or simplified down to a typical SME fleet operator. So that they can log in, do the basic bits that they need to do. See how they’re progressing year on year. Are they making or losing money in terms of their performance? And then also there’s a whole sort of self audit that they can do to just remind themselves of the kind of things they should be doing to save fuel.

Patrick Daly:                    

And is there a subscription or investment for using it?

Conor Molloy:                 

There is. It is a chargeable item outside of Ireland, but in the Republic of Ireland it is for the most part, like 99.9% of the time, it is funded by the oil industry as part of their obligations under the EEOS. And the oil industry brand name, you may hear of them every now and again is Enprova. E N P R O V A. It’s owned by what was known as the IPIA, the Irish Petroleum Industry Association, but is now known as Fuels For Ireland. And it’s run by an organization called R E I L, Retrofit Energy Ireland Limited, who are the… If not the biggest, one of the biggest retro fitters in the country that they… They would do a lot of funding.

                                           So the EEOS program is very large scale in terms of its results around the country, but you don’t necessarily see it as being a big project per se. Because all you see are the bits. Maybe you might hear an ad on the radio to get your boiler serviced. That might be one aspect in the background quietly. We’re working on the fuel performance element. The energy efficiency element of transport is what we’re working on.

                                           So for the vast majority of people that we work with. They’re buses, trucks, they’re heavy vehicles. Big, big fleet users. Some very large van fleets are also involved. As I say there, it’s a continuous improvement. They have to improve their liters per 100 kilometers to get paid, effectively. But it’s paid for by the oil industry as part of their obligations under the energy efficiency obligations scheme. EEOS is what it’s known as. You’ll want to key that Google. You’ll see the SEAI.ie page comes up and you’ll see all the contact names. It’s all very open, very transparent. It’s audited. It’s checked every year.

Patrick Daly:                    

So the businesses that are involved, what kind of benefits are they getting out of it?

Conor Molloy:                 

So it’s interesting. I think I’d probably pick some older ones. So some of the people that we’ve been dealing with since 2012. If you chat to someone who’s relatively new to it, they’ll say, “Oh, we got paid.” Because they get paid for their fuel savings, which… And so one of the phrases you’ll see on the smart driving website is “Save fuel, get paid.”

Patrick Daly:                    

You save on fuel and you get paid?

Conor Molloy:                 

You get a bonus, yeah.

Patrick Daly:                    

Yeah, you get [crosstalk 00:14:05].

Conor Molloy:                  E

xactly. Yeah. That’s exactly correct. So if you were to go back to some of the customers that were there over the years. I was looking at one there recently. They were just at… Change of contact, new user, just getting them onto the system. And I think cumulatively over the period of time, they had avoided using 250,000 liters worth of fuel. And you’ve got to remember, they only avoided that once but they’ve avoided it continuously. So they’re doing… They’re still growing as a business. They’re improving the way they operate across the board in terms of just general business efficiencies and profitability. But they can see in ECOfleet how much fuel they’ve avoided using. So like as a one off without counting the cumulative effect, they are, if you like, 250,000 Euro to the good on their bottom line.

                                           Now if you chatted to them, they’ll say, “Yeah, we can feel it but in the accounts where exactly is it?” It’s always difficult to see it because you probably spent some of it somewhere else along the way as well. So they get a check in [inaudible 00:14:59], a bonus payment that really confirms that’s what they saved. Now they obviously… Quarter of a million didn’t happen overnight. They would’ve got that in increments over say a period of two or three years, but cumulatively that’s what they would be ahead by. And that’s a sort of medium size truck fleet. That wouldn’t be a massive fleet by any means.

Patrick Daly:                    

So they reduce emissions, they save on fuel and potentially they get paid as well. So thinking, why would any transport company not get involved? So what are the challenges or obstacles that they face that maybe [crosstalk 00:15:24]?

Conor Molloy:                 

So I think the number one thing is they don’t want to share data. Right? So one of the key things that’s happening in the industry across the world is that carriers and buyers, the shippers, are having to share data. So that brings us back to where we started there to bridging the gap between one data set and another data set. Making sure that everyone’s using common units, language, et cetera. So that’s a journey that the whole transport industry is on. That’s what the Global Logistics Missions Council is doing effectively. It’s not just helping people report their CO2 but making sure everyone’s using common units, common languages, et cetera.

                                           So if any of the listeners are on the CDP, the Carbon Disclosure Project. That uses the GLEC, the G L E C language and numbers and nomenclature, et cetera, to make sure we’re talking a common language.

                                           Bring that back to a small haulier outbreaking here in Ireland. You know, they’re struggling. They’ve got the price of fuel to deal with, they have a driver shortage, not to mention the traffic, the weather, and all the usual day to day things that happen to them. And then on top of that someone like me is coming along and saying, “Look, we’d like you to send us in your data once a quarter for you to get paid.” So there is… The company needs, if you like, a moment of… To press pause and have a chance to sort of reassess how they’re operating their business. Assess us to make sure they trust us. Who are we? Answer all those kind of questions as well. So if you’re really busy, it’s difficult. And a lot of them are really, really busy. So I think that’s probably the number one barrier.

                                           The second thing then is that it does take effort to save fuel. You have to put time and management effort into it. For the most part, the areas that they’re saving fuel in is the low hanging fruit. You know they… When we first started out it would be things like air kits, right? It would be idling shut… Auto idling shut down. All these kind of basic items that they should be doing and they know they should be doing but they’ve probably forgotten. Or they haven’t checked recently that when the vehicle came back from its services it’s still set up the way that they wanted it set up. That kind of thing.

                                           Nowadays, certainly with the cohort that we deal with, most of that low-hanging fruit is gone and we’re now into that… Into the…

                                           I’m sorry, when I say it’s gone, it’s now fixed. It’s sustained. Like they have their air kits. They’ve taken off all of their spot lamps and their air horns. And they’ve maybe given it a new paint job or whatever. And now they’re into the harder stuff like tire pressures.

                                           And the truck technology is beginning to help them out there now with automated tire pressure monitoring systems. The tire suppliers are beginning to get good at giving them reports on the state of their trucks. There are people offering them automated ways to check on the tire pressure. So people often look at me and go tire pressures. Are you kidding that can’t be worth that much? But if I go back to the person who was saving a quarter of a million liters, that was a 10% improvement of performance over a number of years. So, you know, they didn’t change the world. It was an incremental change. And people would look at tire pressure and say, “Sure, but what can that be worth?”

                                           And you know, maybe 1.5%, 2% if it’s just the tire pressure alone. But actually there’s two or three other elements. There’s not only the tire pressure, which has to be maintained week in week out and correctly. They also have to choose the most energy efficient tire. Now I’m not a salesman for the tire industry. They can do this themselves. But the key point is that your choice of tire in terms of fuel efficiency, and it is labeled. That’s just like your fridge or your TV when you’re buying it. There’s a label there. Then maintaining the tire pressure. That will do a couple of things. It will, number one, improve your fuel performance. You will see. Over a period of time you’ll get anything up to a 5% fuel saving from those two actions.

                                           Now if you were to list the manufacturers and indeed the EU commission they’d be telling you it’s maybe 10% or more, but in the real world we’ll call it around 5%. But on top of that, what the operators will tell us is that by maintaining tire pressures and looking after the tires and managing them, and actually actively managing them, they get much, much longer life. So you’ll see people who are on 110,000 kilometers on a single tire now getting 180,000 kilometers on a tire. And they’re kind of going, “Hang on a second. I didn’t buy another tire as soon as I expected to.” And that’s a chunk of change that they notice.

                                           So it is… To a large extent you’re always measuring but you can’t measure the absence of something. You’re kind of… You’re calculating the absence of something.

Patrick Daly:                    

When you see protests like we’ve seen. Sometimes you see it coming through the media or sometimes you see actual protests in the streets. I think we’ve had two in the last number of months and there may be more coming. Do you think to yourself, “You know, there’s a lot of low hanging fruit that these guys have not gone after yet.” And do you feel critical of them? Or how do you… What kind… Does it generate kind of mixed feelings with you when you see that happening?

Conor Molloy:                 

I think a certain amount of frustration to be honest, Patrick. And the reason for that is if you have a contract that doesn’t allow you to increase your rates in line with the price of fuel, there’s a problem with your buyer as much as there is with you as a businessman. You need… If your costs go up you should be putting up your price. Now obviously there’s always a lag. You know, we would probably all of us say, “There’s no lag when it comes to the price of fuel.” It goes up a lot quicker than it comes down, et cetera. But the reality is we know the trajectory of the carbon tax. The carbon tax is only a small component of a liter of diesel compared to the excise taxing example. The vat. And then the underlying costs of the diesel that’s coming through.

                                           So I think for me, I can absolutely get it that they’re too busy. They’re too stressed. They’re too small an operator. It’s very frustrating for them that the price of… That they can’t pass on the price of fuel. But really they’re going to have to start passing on the price of fuel costs in their contracts and their rates. And it’s going to go up and it’s going to go down and it’s part of what they’re going to have to do.

                                           And you’ll notice with some of the more sophisticated buyers in the country, they do include price. Diesel price escalation clauses. They do allow for this because they see it. They know it at a strategic level. Like we know what the trajectory is in carbon tax. We don’t know what’s going to happen with diesel. It’s gone up. It’ll probably sure as hell go back down again. Probably not as much as we’d all like it to, but it probably will go down again once this current crisis is over.

                                           So it’s very difficult when you’re a small business to be able to take it into account. So I can absolutely understand them venting their frustration, but absolutely protest is the wrong way to go. You’re basically creating the wrong image for the industry. The image… The industry built up a fantastic reputation for itself during COVID in terms of putting the food on the shelves, getting the supply chain. People really realized how vital trucks were for a change. They really were in the limelight in the right place. And now that. The protests are taking away from that.

                                           So I think while I understand the frustrations, I would absolutely, and I… Find me on Twitter saying something similar that, “Look, lads. This is going to be the reality from here on end. Diesel is going to keep on going up. You shouldn’t be entering into contracts that don’t allow you to escalate in line with some evidential means.” Like you… We all know the price of diesel is going up. You can find that out online as quick as you can off your invoice or whatever the case may be. So you should be able to pass that cost on. And in turn all the way on onto us consumers because that’s part and parcel of how the whole thing is operating, yeah?

Patrick Daly:                    

We’re moving up a level maybe to the country level. So what are the… And I mentioned kind of in the intro about having to have our emissions by 2030 and get to net zero by 2050. So what are the key milestones and targets that Ireland has to hit along the way? And where are you on the optimistic to pessimistic spectrum regarding our chances of doing so?

Conor Molloy:                 

Yeah. Okay. So I think we’re scratching the surface, right? Me and my business, my 120 odd customers, cumulatively avoided 89,000, 89,500 tons of CO2. That’s the figure, right? Which sounds huge. It’s a drop in the ocean. Sorry to say that, but that’s the reality of it. That’s a lot of hard work by a lot of people.

                                           If you actually look at what happened with COVID last year, and then you look at the figures. People look at trucks and say, “They’re big fuel users.” They are. A typical truck. When you see it go past you, is using as much fuel in energy terms as a small factory. Right? So just think about that. They are serious machines. They’re doing an awful lot of work. Right? Now, that’s fine. What can we do to make them more efficient?

                                           And I’ve heard various politicians say, “We’ll replace them with electric vans.” Okay, hang on a second, lads. That’s 10 vans, 10 drivers for one truck. That doesn’t make any sense from a road safety point of view, as much as from an energy efficiency or emissions point of view.

                                           So we need to get real about what the significant challenges and opportunities are. And the biggest single challenge in the Republic of Ireland is us in our cars driving. 40% of transport emissions in Ireland are from cars. That’s us. All of us, myself included right? Now, if you stop and look at that and go, “Okay, how optimistic am I?” If you’d asked me a year or two ago, I’d say, “Yeah, no. It’s a big ask.” But if you look at what COVID has done. COVID reduced… Let me see here. I have it written down for you somewhere. But COVID reduced petrol sales by something like 25% and diesel sales by 13%.

                                           And the overall impact in terms of energy. With some… Energy reduction and energy emissions for everything. That’s aviation… You know, the works. Was minus 6%. We need to do minus 7% in emissions per year every year to 2030. That’s across the board. That includes agriculture, right? And agriculture is the biggest emitter by far. It’s 37%. Whereas transport as a whole, as of last year, is 17% or something like that. And within that trucks are about 20 odd percent, right?

                                           So trucks are big. They’re big, big users. But the one thing about a truck is it doesn’t move unless it’s making money. At least it shouldn’t move unless it’s making money. Whereas us in our cars, for the most part, you’ve got a four, five seat. One and a ton, two ton vehicle. That’s basically moving usually one person. On average one and a half people.

                                           And in Ireland we often complain about the cost of transport. You know, the EU publishes figures. You can Google them as quick as I can. The percentage of household income that goes on transport. And it always shocks me how often and how little people realize or how little people think about how much they spend. But if you look at the CSO household budget survey from 2016. It says that we spent more on transport than we did on food. The average household at all income levels. Now that’s nuts. I… For me, food’s more important than transport. You know, I like my food. I like my car. I like driving. But you know, really, we shouldn’t be doing that. Now we’re about mid-range when it comes to Europe, in terms of that spend. Right? We’re not the worst, but we’re certainly not the best. And we need to stop and think about where our priorities lie.

                                           And so when people say to me, “Oh, but you can’t be saying this.” And all the rest. All the usual kind of things come back at you. But okay, fine. An average Irish car in 2020, which is the year of COVID, traveled over 16,000 kilometers. All right? The average in Europe was 11,000. So our cars traveled 45% further than the European average. Now that’s our money. And we’re… It’s only going one place and that’s off the island. It’s going over to Russia, which is where we get the majority of our diesel and the Middle East where we [inaudible 00:25:17] where we get the majority of our petrol.

                                           Now there’s other experts and other people out there will be more expert about this than I am. But in terms of optimism, COVID has shown me that we can change. We can make a difference and people have felt it in their pockets and they’re going to try and hang onto that money. And I think that’s what gives me optimism in terms of the overall carbon footprint from transport.

                                           But fundamentally, and this is something that a lot of us miss in conversation, we live on an island. This idea of flying. That we can’t fly. Well, it’s very difficult when 90% of the foot… Of the passenger traffic gets on and off the island by aircraft to say that we can’t fly. It’s a completely different thing when you’re in Europe. I’ll happily use train line and the tickets and run around Europe on rail line. But it’s difficult to do. To get on and off the island in the first place, so… And we need those aircraft for transporting cargo, like our exports. They go in the belly. So we’ve got to… It’s got to be a balance there to some extent about what we choose to go after.

                                           And certainly for me. Anyone who watches me on Twitter will know I’ve a bee in my bonnet over SUVs. But you can have your car. You can use your car. But just stop and think about it. Go back to what I said earlier to you about avoid, shift, and improve. Many, many journeys that we make in our cars are very short. They’re less than two kilometers. You’ll be healthier, fitter, if you walk or you cycle the same thing. You might even be quicker. Certainly in the case of Dublin City you’d be quicker. And Galwick and Galway. So that avoid piece, you can apply that to your car.

                                           Shifting mode. Get the bike. Get the electric bike. Whatever it is. Electric bike sales, I believe are 10 to one to electric vehicles. So if you said to me, “Cause for optimism?” Electric bikes is the cause for optimism. Will we have whatever the figure was, 800,000, 900,000, electric cars on the road by 2030? Which I think is the target. If we keep going the way we’re going, which is doubling the sales of electric vehicles every year. Yes, the math is simple. That’s what’ll happen. It’s compound interest. That’s how it’ll work. But you know, a lot…

                                           We tend to spend all our time talking about improving the car we have. Switching to electric, et cetera. Really we have to get out of those cars. That’s really the key thing. That’s the fundamental. And when we do that as a society, we’ll feel it in our pockets. We’ll be spending less money on fuel, less money on transport. And more money, hopefully, on the things that matter to us.

                                           Long-winded answer, Patrick, but I hope it helps you out.

Patrick Daly:                    

Thanks. Yeah. Well, yeah. Interesting answers. You’re kind of… It’s kind of a mixed picture, isn’t it?

Conor Molloy:                 

Mm-hmm (affirmative).

Patrick Daly:                    

And where can people find out more about you, about your work, and how they contact you?

Conor Molloy:                 

Oh, thanks very much. I think professionally, I would send you to AEMS.ie. With my Al Gore climate reality hat on I would say go to Twitter and you’ll find me at Conor Molloy. Gets a little bit heated at times as it does on Twitter. There’s a bit of argy bargy going on about flights versus SUVs at the moment, but it’s good fun. And you’ll find me on LinkedIn.

                                           But I think if any fleet is listening, an SME or otherwise that wants to be… Partake in the EEOS program that was mentioned earlier and took up a fair bit of the airtime, Patrick. Just go to FTAI.ie/ECOfleet or to smartdriving.ie and you’ll see the save fuel, get paid button in the top right.

                                           So those are the quick buttons you can click on to access the… What we were [inaudible 00:28:14] talking about, if I can put it that way. But yeah, key Conor Molloy. I’m not the only person on Google, but I should pop up there if you pop my name in there in relation to a AEMS or Twitter.

Patrick Daly:                    

Thanks, Conor. It’s been an absolute pleasure. And I wish you the very best for the future.

Conor Molloy:                 

Thank you very much indeed, Patrick. And I wish everyone who is listening the best with their climate action this year because this is certainly the year for.

Patrick Daly:                    

Thanks also to our listeners for tuning in. And any comments or questions just drop me a line on P D A L Y. That’s pdaly@albalogistics.com. So keep well and stay safe. Until next time.

Interview with Dr. Edward Sweeney, Professor of Supply Chain Management at the Centre for Logistics and Sustainability at Heriot-Watt University in Edinburgh, Scotland.

In this episode we talk Dr Edward Sweeney, Professor of Supply Chain Management, at the Centre for Logistics and Sustainability at Heriot-Watt University, in Edinburgh, Scotland.

On this show, we have been talking with guests from around the world about the importance of international supply chains since long before the COVID pandemic. Right now however, and because of the supply chain crisis, the supply chain suddenly appears to be of huge interest to everyone including politicians, the mass media and the average person in the street. All are concerned about shortages, rising prices and what the future might hold.

Edward joins us on the show in this episode for the second time and I have asked him back precisely because of this new and heightened profile of international supply chains so that he can help us to understand what exactly is going on and what might be coming next.

Click here to read transcript

Patrick Daly:

Hello, this is Patrick Daly and welcome to Interlinks. Interlinks is a program about supply chains, connections, international business, and globalization, and the effects these developments have had on our life, our work, and our travel over recent times. In today’s program, we will be talking to Dr. Edward Sweeney, a professor of supply chain management based in the Centre for Logistics and Sustainability at Heriot-Watt University in Edinburgh, Scotland. Ed is one of our own man of the County of Wexford.

Patrick Daly:

So on the show, we’ve been talking a lot about the importance of international supply chains since long before the COVID pandemic, and now it seems that supply chains and so-called supply chain crisis are a huge interest to everyone, including politicians, the mass media, and the average person in the street concerned about supply shortages and rising prices. So this is the second time that Ed has joined us on the show, and I’ve asked him back precisely because of the new high profile international supply chains, and to try to let him help us to understand what exactly is going on, and what the future might hold. So welcome, Ed, and thank you very much for being here with us again today.

Dr. Ed Sweeney:

Thank you, Patrick. It’s good to be back. It’s we’ve been through a hell of a lot since we last spoke on this program, haven’t we?

Patrick Daly:

We have indeed. We have. Yeah, we’ve just been chatting offline. It’s been an experience to say the least.

Dr. Ed Sweeney:

Yeah.

Patrick Daly:

So to kick off, Ed, today, maybe help us on understand something fundamental. So as I was saying there, kind of outside of certain professional spheres, most people had no real idea what the supply chain was, and now we have politicians, and we have journalists, and even radio presenters all talking about supply chains. So what are supply chains? How do they relate to this other word, logistics, and why are both so crucial to our modern economy today?

Dr. Ed Sweeney:

Well, look, it’s that there are two sides to this I think, Patrick. First of all, everyone has become an expert suddenly in supply chain management and logistics, and, of course, you are being modest, because you are actually an expert in this subject, but many people in the political realm and in the media have become experts overnight in this, and that’s interesting. And on a more positive note, and I think this has been something we’ve seen over a number of years, it’s not just a COVID related issue. It’s not just an issue related to the current sort of supply chain challenges that we see in Ireland, and in the UK, and elsewhere. I think we can trace a lot of this media interest and political interest in supply chains probably back to the Brexit debate.

Dr. Ed Sweeney:

So probably back to sort of 2015, 2016, because if we go back and think about that debate here in the UK, much of it really was about trade flows, much of it was about the friction that Brexit would introduce in terms of trade flows, and, of course, we’ve seen particularly on the island of Ireland we’ve seen some of the repercussions from that, but just going back to your fundamental question, look, I think what we have to remember is that every product, and I mean every product, will reach its final user through a chain of companies. So the phrase sense in which we use the phrase supply chain is it’s a chain of companies, and a chain of companies will typically comprise manufacturers, and retailers, and distribution organizations, and so on, but it’s a complex chain of companies.

Dr. Ed Sweeney:

And we often talk about this as a chain to acknowledge the fact that the chain is only as strong as its weakest link. So a weak link anywhere in the supply chain will have a negative impact overall, and that might sound like an obvious thing to say, but actually, it’s very profound from the perspective of developing strategy and implementing strategy in individual businesses, because what it means is my business, irrespective of how strong I am, and irrespective of how good I am in relation to the activity that happens within my four walls. I mean, I can never really achieve my true competitive potential unless I’ve got the right partners to work with upstream and downstream in the supply chain of which I’m part, so the right suppliers, the right distribution links into my final customers, and so on. And that’s quite a sobering thought, because really what it means is that your success depends on things which happen within the four wall of perhaps hundreds of other organizations. So that has implications for the way in which we think about our strategic capability.

Dr. Ed Sweeney:

It has massive implications, I think in particular in terms of this whole business of relationships, and I know that’s something that you have a particular interest in and a particular expertise in, because I think, ultimately, if I’m an organization, it’s unlikely I can control what happens, and I probably wouldn’t want to in terms of what happens in other organizations, but the one thing I can influence very strongly is the kind of relationship that exists between my organization and those organizations with which I interact. So I think contemporary supply chain management thinking is about relationships. It recognizes that to be successful, and to sort of eliminate waste, and to do things more cost effectively, and in a way which meets customer requirements in a consistent way, we’ve got to kind of shift away from the fragmentation, which was often a characteristic of traditionally managed supply chains, towards an approach which is characterized much more by integration.

Dr. Ed Sweeney:

And that sounds nice in theory, but it’s not just a theoretical concept, because we know through anecdotal evidence and through research, which has been undertaken into this over a long period of time, that a lot of the waste, a lot of the non-value adding activity in supply chains happens as a direct result of fragmented structures. So often what we have is different parts of the supply chain being measured and therefore managed in isolation from each other, and because we do that we end up with fragmentation. That directly creates waste, and really the central tenant to me of contemporary supply chain management thinking is a about shifting towards integration, and we can only really do that by having a very sharp focus on the way in which we create and manage relationships between different organizations up and down the supply chain.

Patrick Daly:

It’s interesting you mention about the weakest link. So in the early days of COVID in China, since then, late 2019, almost two years ago now, and almost right through to quite recently, apart from kind of a few scares about toilet rolls and so on, the supply chain pretty much stood up and performed, but now and recently we’re seeing in many parts of the world almost simultaneously we begin to see problems with the availability of all sorts of things that go into cars, or toys, or fuel, even food stuff. So what’s going on now, and why now precisely?

Dr. Ed Sweeney:

That’s a very good question. And it’s interesting because it’s a question which has been asked of me by media commentators quite a bit, as you can imagine over the last few weeks. Now, it’s interesting. I spoke to a journalist from the Financial Times I think it was, and his sort of starting point was, and this is really looking at the UK context, because, of course, we’ve seen a lot in recent days and weeks about the fuel shortage in particular, and the narrative around is that this is all caused by the shortage of HGV drivers, right? So we here in the UK, we have the Road Haulage Association, [Breckens 00:08:36], we’re short of about a 100,000 drivers. There are all kinds of reasons for that, some are Brexit related, because a lot of European, Eastern European drivers in particular return to their home countries post Brexit.

Dr. Ed Sweeney:

COVID has had an impact, because for example, we’ve a big backlog of testing for HGV drivers. We simply weren’t able to do the testing we needed to do because of social distancing rules. So there were all kinds of reasons, but the point I was trying to make to this journalist was you’ve got to look at every product and its supply chain to really figure out what the reasons are for the shortages. It’s not as simple as saying, “HGV driver shortage is the problem, and if we somehow solve that problem, every everything will be fine.” I mean, for example, we work very closely with the automotive industry here in the UK. We have a very well documented global shortage of chips. That has slowed down production of automobiles. That in turn happens for a whole variety of reasons.

Dr. Ed Sweeney:

So those of us like you and I, Patrick, who have of this interesting in kind of systems thinking have to really go back and keep asking why, the sort of five whys type logic, and if we do that for different products, we begin to see a whole bunch of different types of factors emerging. I mean, another one I came across just in the last couple of weeks is a serious supply shortage in relation to coffee. So Starbucks, for example, I think it was documented a couple of weeks back we’re really struggling with the supply of coffee beans, and some of that we can track back to a particularly difficult winter in Brazil, and we can trace that back we think to sort of climate change factors. So I think what we have to do is we have to look at sort of every supply chain and its dynamics as an individual entity.

Dr. Ed Sweeney:

And what we find when we do that is we have different reasons for the supply challenges with different products and in different geographies. Now, having said that, there is at least one common theme, which we can see across most of them, and that is after the lockdown we’ve seen this sort of gradual unlocking, and it’s happened at different speeds in different parts of the world, and it’s created a lot of predictability in terms of demand for product. So if I’m a supply chain director, the thing which drives everything I do is the expected level of demand for my product range in the different markets in which those products are sold. And that has just been a scenario which is characterized by a massive amount of unpredictability.

Dr. Ed Sweeney:

So we’re trying to forecast what will demand for product X be in Southeast Asia? What will demand for product Y be in the Middle East and Africa? What will demand for product Z in North America? And it’s very, very difficult to do that because of the different speeds at which different parts of the world are bouncing back. So on the sort of demand side, we’ve got this unpredictability, and I think there’s a sense in the supply profession that we’re going through this sort of very volatile period, and it will kind of resolve itself to an extent as time marches on. Now, I mean, there are other very specific problems on the demand side, and they tend to be quite product specific, but in terms of as you very well know in terms of global freight transportation, we’ve had particular problems in relation to…

Dr. Ed Sweeney:

I said to one journalist last week, in relation to shortage of containers, but it’s not shortage of containers, of course, we’ve got plenty of containers, but many of them are just in the wrong place at the wrong time, and that’s caused some bottlenecks. That turn has pushed up freight chipping costs, and that has affected most businesses really where the supply chain is global. And, of course, we know that supply chains have become much more international, in some cases, genuinely global in really over the last 20 years or more as a result of this process, which is often referred to as globalization.

Speaker 1:

93.9 Dublin South FM.

Patrick Daly:

Now, there are problems everywhere. We know there are problems in China. There are problems in the US, in European Union, here in Ireland, but things seem to be particularly acute in the UK where you live and work now. So what conditions aspecific to the UK do you think are conspiring to make the supply chain challenges there so much more acute than some of the other places?

Dr. Ed Sweeney:

That’s a really excellent question, and the first thing I would like to say by way of a response is that the premise underpinning your question I think is right. That’s certainly the anecdotal evidence I have, and the more concrete evidence that’s beginning to trickle through would suggest that the premise of your question is absolutely right. I think there probably are a few different things. The easy answer to this is Brexit. We can blame Brexit for all kinds of things which have happened over the last number of years, but I think there are Brexit factors at play here, because the reality is Brexit has created friction in trade terms in relation to the UK’s trade with its nearest neighbors, including ourselves, of course, in Ireland, and we see a lot in the media at the moment about the Northern Ireland protocol and so on, but there are other kind of Brexit related factors beyond sort of trade friction.

Dr. Ed Sweeney:

We talked previously about the shortage of HGV drivers. We had a serious dependence on the Eastern European HGV drivers in the UK more than in other countries. Another interesting factor if we just stay on the HGV driver shortage for a moment is, and people often forget this, I mean, the UK has quite a rapidly aging population now. So if you look at the average population age in the UK compared to Ireland, for example, we see quite a big gap. If you look at the HGV driver profession, again, the Road Haulage Association estimates that the average age of drivers is about mid fifties. So we see a lot of drivers kind of coming towards the end of their working lives, and that’s a situation which is more acute in the UK than in some other countries with a different profile.

Dr. Ed Sweeney:

I think also the fact that the UK is an island economy, is a trading economy. I think in some ways it has become… I’m just trying to be careful in how I word this. It’s become a little bit the victim of its own success in that. I think we had become pretty good in many sectors over the last decade or so in terms of putting a lot of our kind of supply chain lean thinking principles, and just in time type principles into practice, and we needed to do that because of the sort of cost pressures on the industries which dominate, and simply because of hyper competition in a lot of the global markets that UK companies compete in, and not just British owned companies, of course, but internationally owned companies with a strong presence in the UK, for example, in the car industry.

Dr. Ed Sweeney:

So I think it’s interesting, because you will remember pre pandemic we would often talk about kind of just in case type approaches as opposed to just in time, and that phrase, “Just in case,” was often used in quite a pejorative sense. Look at that company. It’s not performing very well. It’s got lots of just in case inventory. Now, and I think many of the UK companies had really gotten the lean just in time model down to a fine art form really, and needed to because of the island economy and all the pressures that come with that. So I think many of the companies in the UK were probably badly positioned when resilience and the need for just in case inventory became obvious, and so it’s a bit like it’s something we’ve talked about for a long time, that if you go down this lean sort of track almost to too great an extent it’s kind of the danger is we throw the baby out with the bathwater [crosstalk 00:17:50].

Patrick Daly:

Yeah. I guess if you apply it across the board as a one size fits all rather than strategically to certain things and not necessarily to other things, depending on what they are, you run that risk don’t you of hitting the [crosstalk 00:18:05] quickly?

Dr. Ed Sweeney:

Yeah. Look, I mean, a good example really is around the supply chains feeding into sort of the supermarket, the growth grocery business. I mean, when we go back to March of last year when we all went into lockdown suddenly, you remember we saw the panic buying that happened here in the UK? There was one particular weekend when we reckoned that UK citizens, UK residents collectively were carrying something like a billion pounds worth of stock of food in fridges and cupboards up and down the country. I mean, a billion pounds worth. So we as consumers became the biggest stock holding point in the whole supply chain.

Dr. Ed Sweeney:

Now, that put massive stress on the supply chain, but I think as you alluded to earlier on, apart from the odd issue we had with toilet rolls, or dried foods, and things, the supply chains bounce back very, very quickly, and I think proved that they were quite resilient in their own way, and certainly that they were quite agile to use the phraseology. They could quickly respond to kind of very, very sharp changes in the demand patterns in the marketplace, and I think those of us who work in the supply chain profession we’re quite proud of the way in which we responded to that particular challenge.

Patrick Daly:

Now, I know predicting the future is fraught at the best of times, Ed, but I’m going to ask you none the less. So assuming there’s no major setbacks from the public health front worldwide in relation to COVID, how do you see supply chains responding say tactically over the next 12 to 18 months, or maybe more strategically in the longer term to deal with what’s upon us now? Where are we going do you think?

Dr. Ed Sweeney:

I think I may have said this to you last time we spoke. I mean, my sense is that we have learned a huge amount during the sort of pandemic, and it’s interesting that some elements of sort of good practice, particularly in terms of collaborative working between companies, even sometimes collaborative working between companies that were competitors, that became much more commonplace a year or so ago when we began to sort of grapple with some of these challenges, and to me, one of the really encouraging things is that some of those kind of elements of good working practice, particularly in terms of collaborative working between organizations, they seem to have bedded in quite well.

Dr. Ed Sweeney:

I think you and I had a discussion in the past where we sort of agreed that at the end of the pandemic, but do these things ever really end? But I had a strong sense I think that we would have a relatively narrow window of opportunity to bed in some of these learnings from the pandemic period. Now, having said all of that, I think this whole thing has gone on much, much longer than any of us had envisaged. If we turn the clock back 18 months, I don’t think any of us. I mean, when we had the first lockdown, I was quite depressed thinking about “Oh, bugger, we’re going to have six weeks of this.” You know?

Patrick Daly:

Yeah, yeah.

Dr. Ed Sweeney:

And here we are kind of 18 months later. So I think we’ve adjusted quite well. I think all across supply chains there are elements of what will become recognized as good practice, which are bedding down in supply chains, and I think a lot tactically at least in terms how we go forward, I think that’s going to be really important. The second thing is I think this is a bit more long term, and there’s a massive opportunity for us here, and it really goes back to the first question you asked me. Look, our profession is front and center of political debate and of media discourse, and I think that represents a massive opportunity. Just one example of this is in recruitment into university specialist degree courses and postgraduate programs in the field of logistics and supply chain management.

Dr. Ed Sweeney:

We’ve had a bumper year, so we’re recruiting more and more good quality new talent into our profession, and any of us who worked the profession for a long time recognize that was a major, major issue for us, and professional bodies in the field. Universities and other key stakeholders have been working really hard to try to address this, and I think sometimes the almost notoriety that comes from some of the things which have happened, we can turn it into an opportunity, and we can begin to really address the challenge of skills, and knowledge, and competency development, because for a long time I’ve been strongly of the view if we really want to move forward to the next stage of our development, we need to… All of that depends on having the right talent, and it’s about redeveloping existing talent and upskilling existing staff right across the supply chain, but more than ever, it’s about bringing new, fresh talent into profession in general and into the logistics industry in particular.

Dr. Ed Sweeney:

And I think we have an opportunity to do that, because the next few years will be very challenging in terms of technology continues to develop at a rapid pace, just staying on top of that potential and that capability is important. We have a massive job of working in front of us in terms of the sustainability, the environmental sustainability agenda. We know that supply chains do damage to the natural environment, particularly in freight transportation and logistics. We still remain very heavily dependent, for example, here in the UK on road transportation, which in turn remains stubbornly dependent on the burning of fossil fuels. So we’ve got to grapple with that.

Dr. Ed Sweeney:

Ahead of COP26, we’ve all got incredibly challenging targets that we need to be meeting, and in addition to that, we’ve got this sort of uncertainty in the international marketplace, but perhaps more importantly, an element of uncertainty and volatility in the international economic and political environment, which we need to grapple with when think about what’s been happening in China in recent years, what’s been happening in Russia in recent years, what’s been happening in some parts of south America, and so on. So I think we’re going to need a huge amount of kind of knowledge and skill as a supply chain profession to grapple with that myriad challenges, and the fact that we are now bringing a great new talent into our profession I think is really encouraging.

Patrick Daly:

Augurs well. So you recently edited the eighth edition of the book, Global Logistics: New Directions in Supply Chain Management, I think it’s a subtype title of this edition that was published earlier this year by Kogan Page and both in Great Britain and in United States. So what’s the premise of the book, to whom is it directed, and why did you decide to embark on the new edition in 2020, which I think was probably something like six years after the seventh edition, which came out in 2014, I think?

Dr. Ed Sweeney:

Yeah, I think it’s interesting because in that intervening six years a lot had happened. I would point to two areas in particular. I mean, one is, and we mentioned them already in passing, one is the kind of digitalization agenda has become much more developed during that period, and the kind of environmental sustainability piece also has become more important, but I also think that more fundamental in that is this sort of sense, and it’s interesting in the book, the very last chapter in the book quite deliberately is about the subject of so-called de-globalization, because we’ve begun to hear a lot about trade wars between China and when Trump was in the White House and all the rest of it. We see Brexit. I mean, isn’t that a bit of a kind of return to some kind of economic nationalism?

Dr. Ed Sweeney:

So there’s a sort of feeling around I think that somehow this trend that we had seen over 20, or 30, or 40 years, where we’d seen barriers to the movement of products, and people, and knowledge, and everything else across international borders. We’d seen those barriers reduce over a period of time, and I think there was a sense that we’d come to the end of the line with that in some quarters. Now, that was a theory I never really bought into, because I often say to people that when I began my supply chain career, and I left university 35 years ago this year, so I’m getting old now, but I mean, the supply chains within which I worked in the 1980s and even into the nineties were largely quite local in complexion, and in some cases perhaps regional in complexion, but to me, the biggest single change I’ve seen in my kind of supply chain career is that those supply chains have become much more international in complexion, and in some cases, genuinely global in terms of how they look and feel.

Dr. Ed Sweeney:

And that hasn’t happened by accident. As you very well know, it’s happened as a direct result of fundamental structural change, which has happened in the international economic, and business, and political environment. Now, I think those long term trends are not going to disappear. So I think international supply chains will be with us. I think I can’t see any reason why they won’t be. They will change. We always have changed. We hear a lot about reshoring, and near-shoring, and all the rest of it, but I think by and large, that sort of trend towards removing barriers to international trade, international [crosstalk 00:28:31].

Patrick Daly:

It’s more a change of form rather than an unraveling.

Dr. Ed Sweeney:

Yeah, it’s change of form rather than a complete change of direction. It’s not a kind of U-turn where suddenly we’re going to wake up and every product will be manufactured and distributed locally. I think that’s not going to happen. So in a sense I was keen to in the eighth edition of global logistics to acknowledge the fact that there is a reasonable debate happening on this, and to deliberately include a final chapter, which was in a sense an antidote to everything that preceded it, but to recognize that this process, which has resulted in the creation of these complex international supply chains, that’s a wake up call for all of us, because that kind of internationalization of business under supply chains I think just requires us as managers to adopt a different kind of strategic outlook.

Dr. Ed Sweeney:

We can’t just kind of do what we did 20 years ago when the world was different and hope that we get a good result. So it’s ensuring that strategic development processes and the implementation of kind of plans in business do take into account the way in which these international trade trends particularly have impacted on the supply chains for particular products, and indeed for particular services, because you look at it in our Irish context now, it’s internationally traded services play a huge role. It’s not just about products and product supply chains. We’re turning our attention a lot more now to service supply chains, and indeed supply chains which are a mixture of the physical and the service element, which is really interesting and challenging in its own right.

Patrick Daly:

I’m going to have to get you back on, because there were more questions I had here for you, but as we come to an end, I just wanted to ask you how can people find out more about your work, about your research, and the courses that are available? And if you’re looking for PhD students and so on, what kind of areas are of interest, and how should they contact you there at Heriot-Watt?

Dr. Ed Sweeney:

The best thing to do I think is to just consult the Heriot-Watt University website. So we’re at www.hw.ac.uk, and if you have a look there, and take a look in particular at the work being done in the Centre for Logistics and Sustainability, that’s the center in which I’m based, and its title probably gives the game away in a sense, because a lot of our work really is driven by the need to do things in a much more sustainable way, and it’s about environmental sustainability, yes, but also about social sustainability. And I guess the latter piece, the kind of people dimension of the supply chain is something we could devote a complete conversation to, but we have a particular interest I think, and a particular expertise in the role of sort of technology and the role of digitalization in achieving some of our supply chain sustainability goals.

Dr. Ed Sweeney:

So it’s kind of bringing together the technology deployment piece on the one hand and the sustainability, particularly but not exclusively the environmental sustainability piece on the other hand, so that in a way is what drives what we do, and as an engineer by background myself, that technology deployment as an enabler of better integrated supply chains, but more sustainable supply chains continues to be a key focus.

Patrick Daly:

Okay. Well, thanks again. It’s been a pleasure, an absolute pleasure as always, so wish you continued success personally and professionally with your new role in Heriot-Watt in Scotland.

Dr. Ed Sweeney:

Thank you, Patrick. Good to speak to you again.

Patrick Daly:

Thank you, and thanks also to our listeners for tuning in. Any comments or questions, just drop me a line on Pdaly@albalogistics.com. That’s P-D-A-L-Y@Alba, A-L-B-A, Logistics, all one word, .com. So keep well and stay safe until next time. (silence)

Interview with Inigo Camara, Manager of Combilift, the Irish materials handling equipment manufacturer for Spain, Portugal and Latin America.

In this episode of Interlinks we talk to Inigo Camara, Manager of the region encompassing Spain, Portugal and Latin America for the Irish materials handling equipment manufacturer, Combilift.

Combilift, based in Monaghan, Ireland, is one of the most innovative materials handling equipment companies in the world and now has over 60.000 units operational in some 90 countries. The company prides itself on its innovation philosophy based on simplicity and practicality and the desire to bring tailored materials handling solutions to customers for the most diverse applications.

In this interview, Inigo provides us with a perspective on the field of of logistics and supply chain from the Spanish-speaking world, the differences in business cultures between Europe and Latin America, and how the supply chain crisis is affecting the logistics operations of businesses across all sectors.

Click to read transcript

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 have on our life, our work and our travel in today’s world.

Patrick Daly:

Today on the show we will be talking to Inigo Camara, manager for the region encompassing Spain, Portugal and Latin America for the Irish materials handling equipment manufacturer Combilift. Combilift is based in Monaghan, here in Ireland, and is one of the most innovative materials handling equipment companies in the world. And there was over 60,000 units operational in some 90 countries.

Patrick Daly:

So delighted to have Inigo here with us today to talk about the world of logistics and supply chain from the point of view of the Spanish speaking world. So very welcome Inigo. Thanks for being here with us today.

Inigo Camara:

Thank you very much for this opportunity, Patrick. Thank you.

Patrick Daly:

You’re very welcome. You’re very welcome. So could you tell me a little bit about your career to date and how you came to be working for an Irish company? I understand you’re originally from Northern Spain, but maybe you’ll tell us a little bit about that. But how did you come to be work for an Irish company and representing that company in Spain, Portugal and Latin America?

Inigo Camara:

Yeah, well, it is funny because it was the company who was working for me initially. Now it’s me who’s working for the company. I used to be a customer, a Combilift customer and this is the reason.

Inigo Camara:

So I met Combilift when I needed for a family business, which was a timber and building materials warehouses in the north of Spain. So I met Combilift on an exhibition that was early 2001 when I was designing new warehouses. So I started convincing my partners about the need of Combilift for this business, and the success was incredible.

Inigo Camara:

Now after that, because that’s when I already met this Combilift family, they told me one day that they were looking for some help for the Spanish to cover the Spanish-speaking markets. And I thought it was a great opportunity because of the mentality of Combilift. So yeah, it is funny. I started working for Combilift where Combilift was working for me. Yeah. But delighted, I have to say at this point.

Patrick Daly:

I have to say, Inigo, there’s a distinct Irish accent there in your English. Where did that come from?

Inigo Camara:

Yeah, well that’s a bit of my mother’s fault, I should say. Yeah. But she’s Irish. So half of my family is Irish. Actually they’re from Dublin. So that’s where it would come from. Yeah. Yeah. Correct.

Patrick Daly:

So Spanish mother, sorry excuse me. Irish mother, Spanish father.

Inigo Camara:

Yeah. That is correct. Yeah. That is correct. Yeah. [crosstalk 00:03:03] Exactly.

Patrick Daly:

Interesting. Interesting. So what are the products and services that Combilift provides in the markets, in Spain and Portugal and Latin America? Because I know it’s a very innovative company, so what are the stand out products?

Inigo Camara:

Oh, it’s a nice question because it’s more the philosophy than the products on their own. And what I mean by that is that when you ask me about the products, I’ll say there are no limits. I mean, I can visit any type of customer and I will not go with brochure to know what I’m going to sell to this customer. We always go with an open mind to see what the customer does. And that is what has brought us up to date. Where we have so many different models for so many different applications. And this comes from this mentality.

Inigo Camara:

So it’s not that much about this model or this other model. It’s about the mentality of going to a customer, listen to the customer and leave that customer without a solution sometimes to get angry. And they said, “I thought you were coming to show me something.” And I said, “No, no. I came to understand what you were doing.”

Inigo Camara:

“But what are you going to show?”

Inigo Camara:

“I don’t know. Give me a couple of days and we’ll think about it and we’ll come back to you.” So customers are used to a salesman appeal, showing a brochure, showing a model and giving the price. And the mentality of Combilift is totally different. I mean, we do want to give each customer the time that each customer requires. And this is the big difference. It’s not that much about models, that not other [inaudible 00:04:49] brand has the big brand that we will have, that all the models that we have, but it is the philosophy, I think. Open mind.

Patrick Daly:

Very good. Very interesting. You mentioned Latin America is part of your remit, if you like. So which Latin American countries are we talking about specifically? And what do you see as the main differences between say the market in Spain, Portugal on the one side and Latin America on the other?

Inigo Camara:

Yes. Well, we’re speaking about Latin America. I cover all Latin America except Brazil. We have our own team only for Brazil because in Brazil they speak their own language. Brazilian-Portuguese. We have Rafael Kessler over there managing that country.

Inigo Camara:

Myself is more involved in all the rest of the countries from Mexico to Chile or south of Argentina, if you like. Except Brazil. So we have right now up to date, I’d say machines in every single country. Latin America, every country. And so I’d say we have already close to 2,000 machines in Latin America.

Inigo Camara:

Differences between Latin America and Europe would be the time decision. The time they need to make a decision and place an order. But regarding the rest, the world has come in the last years more a bit of the same. And what I mean by that is that the problem that I found in Spain with a concrete company 10 years ago or five years ago, it’s exactly the same problem because it’s the same product that they are doing right now. Let’s say like in Peru or in Colombia. So in that way, you do see that global part of the world, how it is right now much more the same as it was. Twenty years ago I would go to any of these countries and I would see a big difference. Right now you land in any country and it’s much more like the same.

Patrick Daly:

So beginning to converge in a universal business culture, that kind of thing.

Inigo Camara:

Correct. Yes. Correct.

Patrick Daly:

So we’ve all heard a lot lately about the ongoing international supply chain crisis. How is this manifesting itself in the markets that you operate in and how is it actually changing the strategies of the businesses you work with in terms of their warehousing materials handling operations?

Inigo Camara:

Well, it has effect on the way that lead times have increased a lot. I mean, we were speaking out, in working with Combilift for 20 years, 12 to 14 weeks lead time. Right now we are in 47, 48 weeks lead time, depending on the models.

Inigo Camara:

And I have to say we would be one of the best lead times in the forklift business because our machines they try to be more simple. So we try to run away from the latest development. So we want to sell … how would we say, simple and robust machines. And this is something that has helped us be. But there is no doubt that that has been a big change in the last three years.

Inigo Camara:

And funny that you would think that this has affect the orders. And it’s just the opposite. It’s not only the lead time, it’s also the pricing has come up a lot. And at the same time, the sales have come higher than ever. Hard to explain but this is where we are right now.

Patrick Daly:

I don’t know, perhaps I’m seeing that most everything that has happened over the last number of years, some of those issues with COVID and here this part of the world with Brexit and with the war in Ukraine now, and the trade wars and so on, that it seems to be driving more demand to hold more inventory closer to the point of use. And that seems to be driving extra warehouse infrastructure. And if you have extra warehouse infrastructure, you need materials handling equipment. So maybe that’s what’s happening.

Inigo Camara:

But there’s another word. Sustainability. And this fights against because people need more warehouses, more space. And at the end of the day it goes one with the other. So that is true. That is a fact that help us, that we are helping our customers to improve and save the space and save times of loading and unloading.

Inigo Camara:

And so yes, maybe that is one of the reasons why we have growth and we are growing so much lately. Because customers are thinking twice. In the past the customer needed a forklift, just get another one. Because they weren’t struggling with this situation. [crosstalk 00:10:05] But right now that they are, I’d say that they are thinking twice what we’re going to buy. And this means an opportunity for us that we give space to our customers.

Patrick Daly:

Okay. So how are all these changes affecting your own thinking about your own strategy for your own business?

Inigo Camara:

Right now, I’m in Mexico today and I have to fly into Mexico because we need to increase our staff considerably. I mean, we need to double our staff here. So this is how it has affected us. As I say, we have grown a lot in the last years. Since we opened, we never stopped growing. That is a fact. But in the last two years it’s been serious. And it is affecting us that we need more people.

Inigo Camara:

I mean, I am one year doing office. I used to be all time traveling. Because of the COVID I haven’t been traveling that much. But I’ve been kidnapped in front of my computer more than ever because it has grown a lot. So how is that affecting us? We’re just growing. So we need to be at the level of what the market requires of us.

Patrick Daly:

Okay. I’ve been seeing as well, I guess partly driven by COVID and problems with finding people to work in warehouses and some changes that were already there in terms of people having maybe other opportunities or the demographics changing and whatnot. So there’s a difficulty in getting people in warehousing, transport and so on.

Patrick Daly:

So we’re seeing more interest, I’m seeing with my clients a lot more interest in automation, in warehousing and materials handling. So do you think we’re looking at a rapid transformation towards automation in this space, or perhaps a more gradual change or maybe no change? What do you think?

Inigo Camara:

I think that the change is there, and the change is there for the last couple of years. Yes, definitely. But it’s not a change on every level. That’s another thing I believe. At this stage, sorry, it’s a change for big companies, not for medium or small companies yet. And it is a change more in Europe than it is in Latin America.

Inigo Camara:

There is automation in Latin America, but I’ve also seen some issues because of automation in Latin America. And this is why it goes slowly. Because the market has been, has to be ready for it. And this is something that maybe we need to improve a bit here in Latin America. But that is a fact. Automation is here. Automation has come to stay. That is a fact. But it is for certain.

Speaker 3:

93.9 Dublin South FM.

Patrick Daly:

I guess as well, and you probably see this a lot, sometimes, particularly in markets like that that aren’t ready, there are lots of other maybe innovative solutions before you get to automation. So if you’ve got one or two good examples, we mentioned earlier how innovative Combilift is, do you have one or two good examples of the type of solutions that you guys have come up with for people [inaudible 00:13:32]?

Inigo Camara:

Well, we do have AGVs. We have developed some AGVs for customers. We are not that much into automation because they are specialized companies to give the full pack on it. But our machines are that simple. And as I said, so that rubbish, that some of them are, I’d say, the right machines for doing this. [crosstalk 00:13:58] So we have developed some units for doing AGVs. Yeah.

Patrick Daly:

And outside of automation, you mentioned to me in another conversation some interesting applications, creative applications, for, I don’t know whether for containers or for moving turbine blades and stuff like- [crosstalk 00:14:21]

Inigo Camara:

Yeah. Not automated, but we do have solutions, specialized solutions, for every single market I’d say. So we do have special machines for windmills. That is something really special to work with. And we have specialized machinery for loading and moving this type of product.

Inigo Camara:

But we also have for concrete, we also have for the oil business, we have specialized machines. We have even for logistics, intralogistics. We do have special machines that go up to 50 meter height and they work on two meter [inaudible 00:15:03], even they work outdoor or indoor. So that is what makes a difference of Combilift. [crosstalk 00:15:08].

Inigo Camara:

We don’t do what there is in the market. We don’t think we are needed for that. So we always need to find a step forward on our products that make our customers to make more profit on their investments. For us, the target is not to get an order, to sell a machine. For us, the target is to help our customers to get the return of investment as soon as possible. And that customer will come back to us.

Patrick Daly:

Yeah. Yeah. That’s an interesting philosophy, and you’ve done very well with it and good for you guys.

Inigo Camara:

And it’s the funny part of it, Patrick. If I had to work with a brochure and a price list, after 20 years I’d be boring, you know?

Patrick Daly:

Yeah, yeah. You’d be boring.

Inigo Camara:

But I go with the mentality of, let’s listen to this man, what he has. And I start to make questions and then you go in the car back home and you think, how can I help this man? And then you speak with engineers.

Inigo Camara:

Now, this is something different. And this is what makes to being Combilift … I say to some colleagues sometimes, for me this is like a PlayStation thing. I mean, we need to always go farther and go farther and you never get bored. So it is very nice. It’s enjoyable, I have to say.

Patrick Daly:

I have a question for you now that I ask most guests that come on the show about globalization. I guess you and I are of an age where we’ve seen the transformation from the world, say back in the 80s, where there was the communist block over there and we were over here and then we lived through all of this economic globalization. Things opened up and international trade grew hugely over the last 30 or 40 years.

Patrick Daly:

And then more recently, say since around 2015, we’ve started to see things like Brexit and international trade wars. Then we had COVID and now we have this war in Ukraine. So what’s your own perspective on globalization? It’s advantages, it’s disadvantages, and where do you think we’re headed with it right now?

Inigo Camara:

I wouldn’t like to say better or worse. It’s just different and we need to get on it. I mean, I am from Spain. I was educated in Spain. So even Spain was, 50 years ago, closed on its own. So at the beginning a Spanish company could be independent on the way that suppliers were Spanish. So everything was more local. And you could get more solutions in front of the problems.

Inigo Camara:

Now, like today, you are more competitive because you buy cheaper, supposed to buy cheaper. But as you say, it is global. So this has made a little change on the way that we are a bit kidnapped today as we weren’t years ago. So there is a positive note and a negative note in everything. On what it was and what it is right now.

Inigo Camara:

In the last years we were hearing listen, everything’s going to this globalization. But lately in the last two years, because of the COVID, I started to hear some companies thinking we should not depend on foreign companies. And this is funny because we thought this was finished. And then suddenly you hear people speaking about it.

Inigo Camara:

So I think, you know what, everything has it’s positive and it’s negative note. And I don’t know, we will see. In the next years, where we get into it will all depend on how all the world we get on with each other. Like you are mentioning now Ukraine. Yes. Well, we are in Europe and this is why Ukraine is hitting us that much. There are other countries in war for many years. And we stop speaking about them. That is another fact. So we need to be realistic on that. So I don’t know. We will see. But we just need to analyze, well the positive and the negative of everything. Not just keep on with what there is. Yeah. Sorry.

Patrick Daly:

And I guess we need to adapt ourselves to the awful [crosstalk 00:19:35] reality, don’t we.

Inigo Camara:

Well, that’s the war. But with an open mind. It doesn’t have to be only this way. It can be also mixed up. And by that I mean that some manufacturers, because of the globalization, they depend on some certain suppliers. We ask Combilift try to have more than one supplier. Because at the end of the day, we don’t want the customer to suffer this. And at the end of the day, if you only have one supplier, it’s the cheaper, it’s the number one. But you know what, it will fail and that will affect the end user, the customers. And in that way, we from Combilift have different suppliers and we try to keep that. Because at the end of the day, our target number one is to attend to the market.

Patrick Daly:

Yeah. Yeah.

Inigo Camara:

And not be kidnapped to the suppliers or certain markets.

Patrick Daly:

That’s interesting. Interesting. So as we come into the last few minutes of the interview, I might just ask you a few questions just about yourself. What do you get up to in your spare time when you’re not working? If you have any spare time, what do you like to do?

Inigo Camara:

Well, that’s a nice point. In the last two years, I’d say it’s been, a I said, very, very busy. But yes, if I have spare time, family is what it is, Patrick. I mean, me as product manager and all the countries and the markets that I need to be responsible of, I’m responsible of, I need to be traveling all the time. So family is what takes the free, the spare time, that you would have. Yeah, definitely. Definitely.

Patrick Daly:

Yeah. Actually you mentioned as well that you’re originally from Spain. You’ve actually moved your family now to Panama because of the amount of travel and I guess the countries that you’re looking after, is that right?

Inigo Camara:

Yeah. Well, actually 10 years ago I moved. I mean, I moved 10 years ago for three years and I thought, hey, I’m going to move for three years. I’m going to settle everything on, and then I’ll come back and I can manage from Spain. But it has never stopped increasing. And this is the reason why I’m still around Panama as a resident, Panamanian resident, because it’s in the middle of every country in Latin America. So it is very helpful.

Inigo Camara:

But it is the only way that I can be more with the family. Jumping from Europe to Latin America, it does affect to the day by day. But now I’m more settled here. Kids have holidays from December to March, and that’s when I go to Europe and I coordinate to markets in Europe. Yes. Yes.

Patrick Daly:

What kind of a place is Panama to live for a European? Well I guess to Spanish speaking, so you have an advantage there. But they do speak a lot of English there also, don’t they?

Inigo Camara:

Great. I mean, Panama for me it’s the best country, no doubt, in this area to be in. Especially with the work I have, as I say. Because I’m four hours away from Mexico, but I’m four hours away from Peru. So I can be more in north, more in south, but it’s very centralized. It’s very … it’s a hub for flying. So it’s very comfortable. Direct flights everywhere. I live 2.5 minutes away from the airport, Patrick. Imagine. [crosstalk 00:22:58].

Inigo Camara:

Every week I get a flight and I’m not stressed with the traffic I’m going to get. And I have to say, it has a nice quality of life. It’s a bit expensive, that is a fact. But you can be in the street with not that sensation of risk that you could have in other countries in Latin America.

Patrick Daly:

Sure. Yeah, yeah.

Inigo Camara:

Or safety. Yeah.

Patrick Daly:

So how can listeners find out more about COmbilift in the markets you operate in, in Spain, Portugal and Latin America? Or indeed Combilift here in Ireland?

Inigo Camara:

Sorry, what was the question, Patrick?

Patrick Daly:

How can listeners find out more about Combilift and where can they find information about Combilift?

Inigo Camara:

Well, lately because of the COVID, we have increased a lot our amount of spaces in social media, like LinkedIn, Twitter, all these social media. Also we go to as much exhibitions, as many exhibitions, as we can. Different applications. But we have our own direct team in every market. And that is important.

Inigo Camara:

Other manufacturers will work with only dealers. We work with dealers in all our markets, but we also have our direct staff who will give a very professional response to every customer that needs anything. So by the internet we have, of course, our webpage. We have, as I say, LinkedIn, Twitter, all this. YouTube. But also we have personal direct people in every market.

Patrick Daly:

Interesting. Interesting. Well, thank you very much, Inigo. It’s been a pleasure talking to you today and I wish you the very best for the future.

Inigo Camara:

Thank you very much for this opportunity, Patrick. [crosstalk 00:24:53] Thank you.

Patrick Daly:

You’re very welcome, Inigo. Thanks also to our listeners for tuning in. Any comments or questions, just drop me a line on Pdaly, P-D-A-L-Y, @Albalogistics, that’s A-L-B-A Logistics, all one word, .com. So keep well and stay safe until next time.

Lively discussion with Lisa Anderson and David Ogilvie, my colleagues from the Society for the Advancement of Consulting (SAC) Supply Chain Special Interest Group about how companies can overcome the barriers to growth arising from supply chain disruptions.

In this episode of Interlinks we take a look at how businesses can overcome some of the barriers to growth and to scale in the face of the supply chain challenges that have emerged over the last couple of years and continue to emerge as geopolitical certainty reigns on a global level.

Recent years have seen a succession of disruptions to international supply chains resulting from international trade tensions, COVID, and the war in Europe between Russia and Ukraine. What challenges to growth and scale do these disruptions present to businesses and what can and should enterprises be doing to overcome these obstacles?

To discuss this topic I am delighted to be joined by two of my colleagues from the Supply Chain Special Interest Group of the Society for the Advancement of Consulting (SAC), Lisa Anderson, President of LMA Consulting Group, in the Los Angeles metro area, and David Ogilvie, Principal consultant at David Ogilvie Consulting, in Brisbane, Australia.

Click here to read transcript

Patrick Daly (00:09):

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

Lisa Anderson (01:00):

Great, glad to be here.

Patrick Daly (01:02):

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

David Ogilvie  (01:09):

Thanks Patrick. Thanks for having us.

Patrick Daly (01:12):

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

David Ogilvie  (01:58):

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

Patrick Daly (02:50):

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

Lisa Anderson (03:00):

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

Patrick Daly (04:07):

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

Lisa Anderson (04:19):

Oh, well that too. Yes.

Patrick Daly (04:19):

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

Lisa Anderson (04:45):

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

Patrick Daly (05:06):

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

Patrick Daly (05:59):

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

Lisa Anderson (06:58):

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

Patrick Daly (08:08):

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

Lisa Anderson (08:14):

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

Lisa Anderson (08:53):

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

Patrick Daly (09:44):

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

Patrick Daly (10:49):

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

David Ogilvie  (11:50):

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

David Ogilvie  (12:41):

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

David Ogilvie  (13:43):

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

Patrick Daly (14:10):

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

David Ogilvie  (14:15):

Counter cycle.

Patrick Daly (14:16):

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

David Ogilvie  (14:21):

Correct.

Patrick Daly (14:21):

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

David Ogilvie  (14:25):

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

Patrick Daly (14:59):

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

Lisa Anderson (16:07):

We have a big problem with that.

Patrick Daly (16:10):

Yeah. Sorry, Lisa, you were saying?

Lisa Anderson (16:12):

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

Speaker 4 (16:19):

93.9 Dublin South FM.

Patrick Daly (16:22):

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

David Ogilvie  (16:41):

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

Patrick Daly (17:34):

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

Patrick Daly (18:37):

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

David Ogilvie  (19:29):

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

Patrick Daly (19:33):

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

David Ogilvie  (19:48):

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

Patrick Daly (19:57):

Yeah. I actually have his book here.

David Ogilvie  (19:59):

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

Patrick Daly (20:08):

[crosstalk 00:20:08]

David Ogilvie  (20:10):

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

Patrick Daly (20:56):

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

Lisa Anderson (21:24):

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

Patrick Daly (22:14):

Automation, for example.

Lisa Anderson (22:15):

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

Lisa Anderson (23:09):

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

Patrick Daly (23:43):

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

David Ogilvie  (24:45):

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

David Ogilvie  (25:25):

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

Patrick Daly (25:58):

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

Lisa Anderson (26:02):

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

Lisa Anderson (26:35):

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

David Ogilvie  (27:07):

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

Lisa Anderson (27:37):

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

Patrick Daly (27:43):

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

David Ogilvie  (27:59):

The answer is business 101, do your basics properly.

Lisa Anderson (28:03):

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

Patrick Daly (28:14):

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

David Ogilvie  (28:28):

Thank you, Patrick.

Lisa Anderson (28:29):

Yep. Thank you.

Patrick Daly (28:30):

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

Interview with CEO of Hatio, Bernard Hor discussing digital supply chain solutions in warehousing and distribution in Southeast Asia

In this episode we talk to Bernard Hor, Founder and Group CEO of the Hatio Group, who joins us from Kuala Lumpur in Malaysia.

The Hatio Group is a technology business founded in South Korea specialising in digital solutions for warehousing & network distribution management.

Since 2012, Hatio has a proven track record of envisioning and delivering major transformational change, cost reduction and operational improvement programs.

At Hatio, Bernard leads a strong team of software engineers, project managers, and designers on large scale digital transformation projects in the telecommunications, healthcare, supply chain & logistics industry.

In this conversation we chat about Bernard’s career and the founding of a technology start-up providing digital solutions to a traditional sector of the bricks-and-mortar economy, how the business has developed since its inception, what the future holds and what Bernard likes to do when immersed in his work.

Click here to read transcript

Patrick Daly (00:10):

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.

Patrick Daly (00:24):

Today on the show, we will be talking to Bernard Hor, founder and group CEO of the Hatio Group, who joins us from Kuala Lumpur in Malaysia. The Hatio Group is a technology business based originally in South Korea specializing in digital warehousing and network distribution.

Patrick Daly (00:41):

Since 2012, Hatio has a proven track record of envisioning and delivering major transformational change, cost reduction, and operational improvement programs. And at Hatio, Bernard currently leads a strong team of software engineers, project managers, designers on large scale digital transformation projects in the telecommunications, healthcare, supply chain, and logistics industry. So thank you very much, Bernard, for being here with us today. You’re very welcome.

Bernard Hor (01:09):

Thanks, Patrick. Thanks. Thanks for having me on the show. How’s it going for you?

Patrick Daly (01:13):

Very well. Very well. And you’re very welcome. So maybe just to kick off, Bernard, could you tell me in overview about your career today, particularly the international aspect and how did you come to be where you are now as CEO of a technology business?

Bernard Hor (01:31):

Sure, absolutely. So I guess a lot of people ask me how did I come to the technology business and eventually how do I come to the supply chain and logistics space? And my simple answer has always been, very humbly, logistics and supply chain found me.

Bernard Hor (01:53):

I’m a marketer. My base is basically in communications and, in fact, I started as young as when I was 21 in PR and events management. And then, I eventually moved into corporate comms. And we were basically designing corporate communications programs and projects for publicly listed companies.

Bernard Hor (02:21):

And one thing led to another, and I think we were very much pushed by the market changes, and as things got more and more digitalized over at this part of the world, and that’s where the opportunity came by for us to pivot ourselves, our business model, into the digital part in technology. And it was really as simple as [inaudible 00:02:49] development, and then of course, eventually, the whole mobile app thing boomed.

Bernard Hor (02:55):

And it was at that point in time, and I remember at one point in time, we had a problem with talents because, as you know, in Asia, especially in this part of the world, in Southeast Asia, there’s a lot of unicorns, the Grabs and the Lazadas and all that. And they were grabbing, they were paying good money to all the software engineers.

Bernard Hor (03:16):

So it left small, medium SMEs like us, and we were like, “Where do we get these talents?” And that pushes us to our first acquisition in Vietnam. And that’s where we, I remember going, booking a flight ticket, I was telling my partner, as we were scratching our heads, “How do we solve these problems of software engineers, and getting the right talents to work on stuff?”

Bernard Hor (03:40):

So we said, “Hey, let’s book our first ticket out to Vietnam to… ” I remember it was to Saigon to Ho Chi Minh City, and we didn’t even know who to meet there. And it was really going in there, and we Googled, we just Googled “top 10 mobile development companies in Saigon” and there’s these guys, these are the top 10 companies that you should meet.

Bernard Hor (04:01):

And we contacted a couple of them and very quickly. And this is one thing I learned about, and this is one thing I learned and I strongly believe in is it’s all about the relationships, right?

Patrick Daly (04:11):

Mm-hmm (affirmative).

Bernard Hor (04:13):

And it’s all about the culture and how you make relationship matters. So we quickly became very good friends to the Vietnamese. I remember [Gabriel Tuan 00:04:23], and we became really good friends, and it was the following day in day two in Saigon, they’re like, “Hey, come to office, let us host you.” And, yeah, that was a long story short. A couple of months later, we acquired these guys, and we became their co-founders and partners.

Bernard Hor (04:40):

And here you go, all of a sudden we are like, “Hey, I’m a full fledged technology business owner,” and we have a setup down in Vietnam. And then, the projects grew. We were capturing more and more digital transformation. Because, at that time, Southeast Asia, especially where I was in Malaysia, it was really going through a fast pace of change as far as digital is concerned.

Bernard Hor (05:04):

And one thing led to another, and the whole interlink of how we eventually started working on a project with Korea, a Korean company. And that is the thing that led me to my connection with Korea. And there, we started, again, it was all about the relationships, people we meet, companies we connected with.

Bernard Hor (05:28):

And one thing led to another, and it was really in one of those trips that I have with my family in Korea, and of course, through a couple of friends, through a couple of my current friends, and we connected to each other, and that’s where I met my co-founders of Hatio at that time. And that’s how we started.

Bernard Hor (05:49):

And fast track to 2017, 2018, the leadership of Hatio says, “Hey, look, I think it’s time… ” Because we were having good traction. We were having good fun in South Korea with CJ Logistics, with Amorepacific, with iHerb.com, setting up their regional distribution hub. We were even working with Lazada, the Lazada group in Shenzhen, kind of optimizing all their consolidation centers down in Shenzhen.

Bernard Hor (06:22):

And then it was really in 2018, the leadership decided, said, “Hey, you know what? It’s time to get out of the comfort zone, and let’s go into a new region.” So I’m the Southeast Asian kid, very naturally, they’re like, “Let’s go there.” And, at that time, there was a huge push by the software and government to help software businesses expand to Southeast Asia.

Bernard Hor (06:46):

So there I was, which is why I always say logistics found me. I really believe logistics found me. Technology found me first, and then it was connected to logistics and supply chain. And here I am, with very-

Patrick Daly (06:55):

You’re back home in Malaysia, yeah?

Bernard Hor (06:58):

I’m back home. Yeah. I’m back home. In my business card, I have my Korean name. It’s a direct translation from my Chinese name. So I have a Korean name, and it’s worked wonders in terms of a [inaudible 00:07:14].

Bernard Hor (07:14):

And because the way we look, so when we are in Korea, people are, “Oh, Hey, you’re a Southeast Asian guy, right?” And when we come back to Southeast Asia, where I am right now in Kuala Lumpur or Singapore or in Vietnam, and every time I share my business card, and there’s the Korean name called Young-Jae, and they look at me, “You’re Korean,” and it’s a good conversation starter.

Bernard Hor (07:33):

It’s been a good journey. It’s been a good journey, very fun going all over. And really, that’s the one key thing I learned really is it’s really all about the culture and the people you’re connecting.

Patrick Daly (07:45):

What are the cultural differences between you as a Malaysian, you’re a Chinese-Malaysian, right?

Bernard Hor (07:54):

Yeah, yeah, that’s right.

Patrick Daly (07:55):

And then, say, Korean or mainland China. So what are the distinctions that maybe Westerners would not necessarily pick upon?

Bernard Hor (08:03):

We’re very different. Okay, so key factor number one is this, the Chinese in Malaysia, the Malaysian-Chinese, most of the time, or all the time, we are a proud Malaysia, and we don’t really call ourselves Chinese. We are just Malaysian, and Malaysian, it’s multiethnic and multi-race, right?

Patrick Daly (08:25):

Yeah.

Bernard Hor (08:26):

The mainland Chinese is like the super loyal Chinese factor. We’re China, we’re China, all right? They’re China, they’re not Chinese. They’re China, all right? So that’s one. Although I never really had the opportunity to really to immerse myself in the China culture before.

Bernard Hor (08:48):

But I can tell you, however, in Korea, I guess the culture really, where it’s different from, is because number one… And I always love this part of the Korea story, how they got out from the war between the south and the north. They weren’t really advanced nation.

Bernard Hor (09:10):

And if you actually look at the Samsung story, how Samsung started as a mini market, and it’s not even television or mobile phones of what we look at Samsung today, at smartphone and all that. And the motivation, the inspiration behind Samsung story of the reason why they started Samsung and why they grow Samsung is to basically help save a country. And look at where they’ve come from and where they get to today, which is really they’re one of the very few advanced nation in Asia.

Bernard Hor (09:51):

Malaysia probably achieved their independence many years longer than where they are, but look at where they are today with Kia, Hyundai, LG, and the likes that you have. So, really, that’s where I find it really interesting, and that has basically driven the behavior of the people, whether it’s Koreans or whether it’s Malaysians. And that has also…

Bernard Hor (10:17):

I don’t like to say that Korean are more cultured people. I think everybody has their own culture, and we should respect it. But the fact that I have the privilege to leave and immerse in these two different set of cultures, I guess it has sort of, in a lot of ways, made me a very hybrid culture kind of kid.

Bernard Hor (10:38):

Yeah, so even here where we expand in Southeast Asia, the one very interesting thing here is that when we expanded into this region, the one, the first thing, in fact, the first thing that we told ourselves among my co-founders was, “We got to keep and we got to preserve the strong culture that we have brought and put together when we are operating out in South Korea.”

Bernard Hor (11:02):

A lot of hard work, a lot of respect, the respect beat, how to stay respectful, at the same time, stand firm. It’s one of the hardest things [crosstalk 00:11:14]-

Patrick Daly (11:13):

It has broadened your mind.

Bernard Hor (11:16):

Yeah.

Patrick Daly (11:17):

So maybe I’ll ask you about you describe Hatio as a digital supply chain platform. So could you explain to us in simple terms what that is and how it works?

Bernard Hor (11:31):

Sure. It’s basically a cloud… So what would we do is that we run a cloud supply chain platform. Where we started really was… And it’s really thanks to Southeast Asia. In South Korea, we were all about warehouse controls and execution systems, so automation, robotics, IOT, and all those stuff.

Bernard Hor (11:48):

When we came to Southeast Asia, we thought those would work here. But, however, after a quick, a considerable amount of time that we spent studying the market, we kind of learned and realized that the market wasn’t ready for this yet, this level.

Bernard Hor (12:02):

But, however, at the same time, we realized a huge opportunity and a huge addressable market of local SMEs who is in need of digitization. So that’s where we started with a very simple mere warehouse management software, a WMS.

Bernard Hor (12:17):

And, Patrick, let me tell you this, we’ve got our first two customers in Malaysia. The first two customers bought a WMS from us before we even have a WMS proper. So we don’t have a software, and they gave us the contract. And so, we did, we used the capabilities that have from all the work that we’ve been doing with CJ Logistics and all those guys, and we put together a quick WMS, and we delivered.

Bernard Hor (12:41):

And we saw the major transformation. So, from a WMS, and then what happened then very quickly was fast forward to 2020 was COVID and the pandemic lockdown everybody. And I think it has upended the entire global supply chain. And one of the key things that happened in Southeast Asia very actively was eCommerce. So eCommerce took the fastest pace ever, lightning speed. It was moving at a lightning speed.

Bernard Hor (13:06):

And we pivoted very fast from a mere warehouse management software, and here’s how the whole cloud supply, how the whole platform comes together. From a mere WMS, we pivoted the product into connecting with first connecting with the ERPs of the world like Oracle, SAPs, [inaudible 00:13:21] and API ready. We were connecting to all the major marketplaces very quickly.

Bernard Hor (13:26):

Basically, the plan to connect the marketplaces was basically fast tracked two years, 24 months, imagine product timeline, fast tracked 24 months. We connected, and then we connected with the last mile delivery guys. We had our own last mile delivery model. And before we know it, and then we came out with a… We basically developed into our product roadmap, a new product that manages the marketplace. So it was a marketplace management and intelligence.

Bernard Hor (13:52):

So when you put these four, when you look at them and put these four things together, eCommerce marketplace management, orders management, we’re doing B2B and B2C, inventory management, and warehouse management, so these four key modules of the logistics and supply chain world, we unified it in one technology.

Bernard Hor (14:10):

So instead of selling it as four different products, we kind of saw that, hey, the only way to go seamless and the whole cost saving and all of that is to basic unifying these four technologies together and make it look like an orchestra. So that’s what we did.

Bernard Hor (14:27):

And we said, we didn’t know it would look like that, but I guess, what was really interesting was we were co-creating this product called the cloud supply chain platform with the local players in Southeast Asia. So remember, we didn’t build something and sold to them. We sold offers to customers before we even have a product. And we were just downloading notes, “What do you need? Why? How do you do this? How would you like to change this?” And then, we put all these things in and like, “Okay, what do we do from here?”

Patrick Daly (14:55):

What kind of companies are your client companies?

Bernard Hor (15:00):

Yeah. So our primary target companies that we work with are the retailers. And, yes, the last 20 months, the eCommerce retailers has been a fast growing market for us. It’s amazing. That’s the first market. The second market are the distributors. So we are working with the distributors distributing into thousands of points daily on a daily basis. So we are powering up all these guys.

Bernard Hor (15:28):

And then, the third segment that we’re working with, and we are also working with them very closely as partners as part of our network distribution, are the third party logistics players. So we’re powering up a lot of third party logistics warehouse operators.

Bernard Hor (15:40):

And when I say powering up, a lot of times people just thought, “Oh, so you install a software in the warehouse?” I say, “No, it’s not as easy as that.” Installing a software in the warehouse, most of the time, you have more damage than good.” So we’re like, “No, no, it’s not about that.”

Bernard Hor (15:56):

It’s really about powering up. And it’s not only in the software, it’s not only the technology, but also the operations. You know what I’m talking about, right? The whole end-to-end transformation. And people and operations and machines have got to work together.

Bernard Hor (16:09):

I’ve seen a lot of cases here, Patrick, just to share with you, where they are local, the bigger voice, the slightly bigger, medium, the bigger voice, and they deploy automated guided vehicles, the AGVs. So deploy like 10 AGVs in their warehouse, but they don’t use a WMS.

Bernard Hor (16:25):

So how does that work? I mean, ASRS, and they don’t have…. They have whole investment in ASRS, it’s a pharmaceutical company here, whole ASRS investment world for about 10 or 15 million dollars. And their biggest challenge today is they don’t have a visibility on their inventory. How does that work? That doesn’t make sense.

Speaker 3 (16:48):

93.9 Dublin South FM.

Patrick Daly (16:50):

I’ve heard you talking about the supply chain as first mile, middle mile, last mile.

Bernard Hor (16:56):

Last mile, yeah.

Patrick Daly (16:56):

Your slice really is the middle mile, right. These players-

Bernard Hor (16:59):

The middle mile.

Patrick Daly (17:00):

Retailers, distributors, LSPs, they’re in the middle mile, right?

Bernard Hor (17:05):

Yeah, yeah, very much in the middle mile. We do attract the first mile, especially the manufacturers right now. And what is really interesting… Oh, yeah, speaking of which, what is really interesting right now, over the last 12 months that I’ve been having that conversation with the manufacturers… And these are guys that’s looking at D2C, the direct to consumer approach.

Bernard Hor (17:28):

So they’re basically shifting their gears. They’re saying, “Hey, look, we’ve be working with all these distributors and dealers, but because of COVID, because of all these retail lockdowns, we have been forced, we have been forced and pushed to basically look at and consider strategies of how do we get our product closer to our customers, our consumers?”

Bernard Hor (17:48):

So we’ve been getting a lot of conversations around this area. We are actually working on one or two, a couple of projects directly with the manufacturers where they have basically shift… They’re starting to shift gears and their decision is, “Hey, look, moving forward, we don’t know what’s going to happen.” I mean, today we have what? Omicron, right? Maybe next week, there’s now the new variant called Decepticon. But we don’t know what’s going to happen next.

Bernard Hor (18:12):

So they’re really future-proofing there. And it’s very encouraging to see this right now within local SME space where they are looking at really future-proofing their supply chain as a manufacturer. So they’re saying, “How do I deploy a strategy to do a direct to consumer?

Patrick Daly (18:27):

Yeah, yeah.

Bernard Hor (18:27):

And that’s where we’re coming from.

Patrick Daly (18:30):

Okay. And will you or can you provide solutions to companies outside of Southeast Asia?

Bernard Hor (18:37):

Yeah, we do have our customers, of course, in Korea so far. And we are in all the key markets in Southeast Asia, like Vietnam, Singapore, Thailand, Indo-Asia, of course, Malaysia. We are currently studying the visibility of deploying it out of Southeast Asia somewhere in the Canada space. So we are talking.

Bernard Hor (19:01):

Because we are a SaaS model, we could do remote deployment. Also, thanks to the lockdown, the last 20 months, we thought we were going to go out of business, but it has really pushed us to digitalize all our stuff, and we could now do remote deployment. So we’re definitely looking into that.

Patrick Daly (19:18):

Say I’m a retailer and I have a distribution center, and so I’m a middle mile player. And maybe I have several dozen retail outlets, and I’ve experienced a huge surge in eCommerce orders direct to consumer, and I’m kind of struggling with the physical operational challenges of that. How might I use your digital supply chain platform and your services to improve my situation?

Bernard Hor (19:42):

Sure. First things first is basically the visibility to inventory. So it’s a very common case that we have now here and that we’ve been helping and working with a lot of… Most of our clients in this case, where, like what you just mentioned, multiple channels, multiple sales channels, brick and mortar retail’s falling back on eCommerce.

Bernard Hor (20:06):

And when they go on eCommerce, the one thing, Patrick, the one thing very interesting that I observe and realize is when they fall back on eCommerce, first, they always think that’s easy. And then they start having more and more stores in the marketplace, and every marketplace is like a sales opportunity.

Bernard Hor (20:21):

And that’s where the nightmare starts because they will go in overselling, out of stock, and all that. So that’s where we come in and we say, “Hey, look, first it’s basically to streamline.” So sign up to the platform, we’ll set you guys up. First is to streamline all your channels, whether it’s B2B web store, brand.com, multiple marketplaces, or even your retail outlets.

Bernard Hor (20:47):

So you streamline all this and you centralize, so you’re looking at it like a control tower view. So you centralize where all these orders, centralize all these orders into [inaudible 00:20:58], which is a cloud supply chain platform, to the platform. And then, basically these orders get kicked into the fulfillment process.

Bernard Hor (21:04):

So the fulfillment process, one of the things that we have been getting more and more of these cases is where they have multiple distribution points, and it’s also multiple distribution points, we also have multiple distribution points across border, so one in Singapore, one in Malaysia. It’s the same brand. It’s the same retail guy. And he’s saying, “How do I streamline this right now?” All that’s coming from Singapore, the orders goes into the Singapore fulfillment.

Bernard Hor (21:27):

So what we’re doing, we’re doing this right now, we’re helping, I think, I guess the easiest way to put it is we’re helping our partners, our clients on the retail side to basically first streamline the [inaudible 00:21:41] channels, move it all towards consolidating all the orders, centralized it, and then put it in back to their fulfillment based on all their inventories space, and how they pick, pack, and ship it out to their end customers. And all this is done in one single platform, like a control tower view.

Patrick Daly (22:01):

Yeah.

Bernard Hor (22:02):

Yeah, so that’s what we do.

Patrick Daly (22:03):

So that’s the information side of it. In the operations of your clients, are clients moving to automate their fulfillment centers, or are they mostly still conventional, manual order picking and so on?

Bernard Hor (22:19):

It all starts with conventional, manual. So there’s a lot of manual labor. There’s a lot of human decisions.

Patrick Daly (22:29):

[crosstalk 00:22:29] eCommerce, there’s lots of implications for that. It makes it more [crosstalk 00:22:33].

Bernard Hor (22:33):

Yes, yes, huge implications because it comes in so fast that you totally… And thanks to the lockdown as well, because of the lockdown now, we used to only have like 11/11 and [inaudible 00:22:45] as the big sale day, the Lazada days. But today, because of the lockdown, there’s 2/2, 3/3, 4/4, every Monday, people just take opportunity of that. And there’s going to be a… The flat gate of all this is going to open, and it’s going to just come in, and that’s where the nightmare begins.

Bernard Hor (23:02):

So, yes, huge implications. And right now, what I’m observing here is a lot of eCommerce retailers, especially the retailers in eCommerce, a lot of eCommerce retailers are really moving very fast. They’re really moving real fast to ensure that right from the other point and all the way to the ship out point is all streamlined. It’s all streamlined, it’s all controlled, and there is a clear visibility of how the SKU move from point A to point B, and the pick, pack, ship process.

Bernard Hor (23:36):

So we are looking at, I shall call it the first level of automation, if you like, where they moved out from manual labors into a system guided operations. The next level, which we are starting to see also, is where they are now less dependent on human decisions.

Bernard Hor (23:56):

So one of the jokes here is basically always on a daily basis is we always tell the bosses, “You can go play golf now. We don’t need your decisions. The data makes the decisions.” So it’s fine, the system makes a decision. Yeah, so we are seeing the shift from human decisions to making decisions based on data. Because now there’s more and more people looking at data.

Bernard Hor (24:17):

And then, of course, well, hopefully, hopefully I would say that maybe the next two to three years, we will start to see more and more of the automation moving far more towards the side of AGVs, IOT, pick-to-lights, pack-to-lights and all that, yeah.

Bernard Hor (24:32):

But as of now, I guess, of course, the other parameter to consider is basically the volume of orders. If you don’t have a big volume of orders, you can’t make sense of the ROIs of all this investment, yeah.

Patrick Daly (24:46):

Very interesting. So as we come into the last few minutes of the interview, we might just change tack slightly. And I might just ask you a little bit about yourself. So when you’re not thinking about digital platforms and eFulfillment and so on, what kind of things do you like to do in your spare time? Or do you have any spare time, given time [inaudible 00:25:11]?

Bernard Hor (25:11):

Oh, no, no, no, no, no, no, no. Over the last couple of years, as I grow older, over the last couple of years, Patrick, I have two boys. I have two boys, Zachary and Thaddeus. One is seven and the other one is five, five years old. And it was really when my second son was born, and I told myself, “You know what? It’s time to… Not slow down. At my age, there’s no such thing as slow down. But it’s time to make time and intentionally and purposefully make time.”

Bernard Hor (25:41):

The key word there is to be really intentional with things. As much as I’m always intentional in work in my business, there was a point in time when my second son was born, and I say, “Hey, look, it’s really time to be intentional with the family. And this is not just play, play.” It’s like, hey, there’s two boys and a wife. You got to take this seriously, dude. So I make time for the family.

Bernard Hor (26:02):

And, to your question, I’m a triathlete, so I swim, bike, and run. It is only when I’m in a pool doing my two kilometers of laps or on my bike when I’m anchored to the [inaudible 00:26:15], and doing hundred kilometers, that’s where I don’t think about work. That’s the only…

Bernard Hor (26:21):

Okay, apart from cooking, apart from making dinners, that 15 minutes, because I’m a lazy husband, so I make very quick dinners. So apart of cooking, swimming, bike, and run, training for a race is really what takes me off work totally, and I don’t think digital, and I don’t bother whether someone is going out of stock or over sale.

Patrick Daly (26:43):

That’s a good balance. Are you reading anything or listening to anything at the moment that you find particularly inspirational that you might like to share?

Bernard Hor (26:51):

There’s one that I’m reading, which is Start with Why by Simon Sinek, a very simple book. The other one that I am currently reading is Robin Sharma recently published a book, and it’s called The Manifesto of the Everyday Hero. And it’s a very nice, a short chapter, small little nuggets that one day, every reading session, you can pick about three chapters on the go. And it kind of like puts your mindset at a proper… Yeah, so Manifesto of the Everyday Hero by Robin Sharma is really good. Yeah.

Patrick Daly (27:23):

Excellent. And where can people find out more about you and your company and your services?

Bernard Hor (27:30):

Sure. I’m available on LinkedIn, Bernard Hor. You can find me there on LinkedIn. Or you can visit our company’s website at hatio.asia. Yeah, that’s hatio.asia. H-A-T-I-O.

Patrick Daly (27:42):

Hatio is H-A-T-I-O dot Asia.

Bernard Hor (27:44):

That’s right. That’s right. H-A-T-I-O dot Asia. Yeah.

Patrick Daly (27:47):

Excellent. And then, your name on LinkedIn, you’re Bernard. Hor, H-O-R, isn’t that right?

Bernard Hor (27:52):

Okay, wait. On LinkedIn is my Korean surname, which is H-O-R.

Patrick Daly (27:58):

Okay, very good.

Bernard Hor (27:59):

Yeah, okay.

Patrick Daly (28:01):

Well, thank you very much, Bernard, for being here with us today. It was a pleasure, as always. And I wish you the very, very best for the future, both professionally and personally.

Bernard Hor (28:13):

Thank you so much, Patrick, for having me on the show. And I really, really look forward to learning more from you.

Patrick Daly (28:18):

You’re very, very welcome. Thank you also to our listeners for tuning in. And for any comments or questions, just drop me a line on pdaly, that’s P-D-A-L-Y @albalogistics.com. So keep well and stay safe until next time.

Patrick Daly’s Interlinks podcast with Sanchoy Das, Professor of Mechanical and Industrial Engineering at the New Jersey Institute of Technology.

In this episode we talk to to Sanchoy Das, Professor of Mechanical and Industrial Engineering at the New Jersey Institute of Technology in the US and author of the book Fast Fulfillment: The Machine that Changed Retailing.

This is an extremely timely publication, given the way so many businesses around the world have had to embrace online retail to survive and thrive through the period of the COVID pandemic. Indeed, many have made a virtue out of the necessity that has fueled new thinking and new strategies among retailers regarding the place of online retail in their business models as they realise that it is very different in an operation and commercial sense from what they have been accustomed to up to now.

Sanchoy’s book is fascinating and takes a detailed look at the paradigm shift ongoing in retail logistics focusing on the very necessary condition of speed and how this can be achieved through physical and digital innovation. If you want to learn how, in a practical operational way, to build a fast fulfillment machine for your own business, then this book by Sanchoy Das is a must-read for you.

Transcript

Patrick:
This is Patrick Daly and welcome to Interlinks. Interlinks is a program about connections, international business, and globalization and the effects these developments have had on our life, our work, and our travel over recent decades.
Patrick:
Today on the show, we will be talking to Sanchoy Das, professor of mechanical and industrial engineering at the New Jersey Institute of Technology in the US, and author of the book, Fast Fulfillment: The Machine That Changed Retailing. This, I think, is a timely publication given the way so many businesses around the world have embraced online retail to survive and thrive through the period of the COVID pandemic. That, in many cases, has fueled new thinking and new strategies among retailers regarding the place of online retail in their business models. Welcome, Sanchoy, and thank you for being here with us today.
Sanchoy:
Patrick, I’m so excited to be with you on this talk show. It’s a really an exciting time here.
Patrick:
Excellent. Tell me, Sanchoy, maybe first to get going, about, say, your career to date and your current role and work at the New Jersey Institute of Technology.
Sanchoy:
I’m a professor at the New Jersey Institute of Technology. I’ve been there for a relatively long time. My specialty or expertise, if you will, is in the supply chain area, the logistics areas, the way goods move from across the globe, within countries, et cetera. And those are what I have been teaching and researching for several years.
Sanchoy:
And then a few years ago, I started this particular topic and now I wrote the book, I’ve been teaching it in the class, making presentations. And obviously, when the pandemic hit, this thing just took off like a rocket ship. So it’s really a timely piece, as you said.
Patrick:
So you are a professor of mechanical and industrial engineering, and yet you’re passionate about supply chain. Perhaps, on the face of it, they’re not two fields of expertise that people would naturally associate with each other. How, as an engineer, did you become interested in the supply chain and what do you see as the link or connection between engineering and supply chain?
Sanchoy:
It’s a very good question because a lot of people don’t see that connection. Very frequently, topics like supply chain are taught in a business school. So people who are in a management role, they learn about supply chain and a very common phrase is “supply chain management”. But at the end of the day, these products are moving in a mechanical or industrial world. There are warehouses, there are robots, there are trucks involved, boxes are being packaged, boxes are being opened. So without that engineering, you cannot have the supply chain. And a lot of the technology, including the IT side, is all connected to the supply chain.
Sanchoy:
So if you went to an Amazon, for example, more than half their supply chain, people are actually engineers. They’re not just managers. So a lot of them, people are in the management field, are doing supply chain contracts, they are negotiating price, et cetera. But whatever is happening in the background is engineering. I teach classes which are called supply chain engineering, [inaudible] handling in warehouses. These are all the bits and pieces which make that supply chain click along.
Patrick:
So the book you’ve written, Fast Fulfillment, what is the premise of the book? The title is Fast Fulfillment: The Machine That Changed Retail. What are the key objectives that you wished to achieve by writing it?
Sanchoy:
In the late 1990s, obviously, companies like Amazon are starting to become bigger and bigger and they are building some kind of supply chain. And supply chains have been there for many years. Since the 1980s, Walmart has been a supply chain champion and we are teaching those kinds of supply chains, models, engineering in the classroom.
Sanchoy:
But around 2013, 14, I started to visit some of these facilities with these online retailers and particularly in Amazon. I discovered that something new was going on. These things didn’t look like the ones I was teaching in the class. I was in a kind of shock. What the heck is going on here? Stuff I was teaching in the class, they were doing the opposite kind of things. And that’s when I realized that this new supply chain was forming, including the engineering aspects of it.
Sanchoy:
The most critical part of that was fast. When you click that submit order button sitting in your pajamas at home, some magic starts to occur. Some gears are clicking somewhere so that next afternoon, there is a knock on your door and there is a package. It didn’t occur by magic. Something happened. And that what happened is the machine. That’s the machine which brings you there. So any retailer which assumes that, “Hey, we’ll put up a website, people will put in orders and we’ll take on Amazon.” Ain’t happening. You need that machine. My goal in writing the book was people will start building their own machines so that they can catch up or keep up with these technological giants which are out there.
Patrick:
And who was your principal target audience for the book and how should they use it when they buy it?
Sanchoy:
When I started writing the book, as a professor, you have really two avenues. You can write a textbook so that people are going to use it in the class and it’s going to be taught or you can write a business book that people can buy and read and hey, they get an idea and they go to the office, they go into a project team meeting and they’re innovating using some of the things I’m saying. That’s what I chose. I chose that route and it makes a big difference because this book is only $25, a textbook is $250. So your audience, just the basics, is a completely different audience. That was my goal, to get that message out quickly because you know that a lot of retailers are basically shutting because they can’t compete in that online space.
Patrick:
So you’ve described, Sanchoy, what the fulfillment machine is, but perhaps more importantly, how do you build this machine for your own business, a retailer who wants to really get involved in online fulfillment?
Sanchoy:
Excellent question again, Patrick. What happens is the fulfillment machine includes both a system which interconnects parts and parts. And in many cases, these parts are not the same as the parts from before. So for example, if you entered an Amazon fulfillment center warehouse, it doesn’t look like any other traditional warehouse. There are no large pallets moving around, et cetera. They have already opened the pallets, packages are everywhere and it’s highly IT-driven. It’s very large scale, models and information systems are controlling these warehouses. So companies have to start building similar warehouses. Either that, or they adopt a fulfilled by Amazon or some other company kind of model, one which is building that.
Sanchoy:
One of my fears is that lot of retailers are adopting what I call a store fulfillment strategy, whereas when they get an order, somebody in the store, instead of the customer, walks around, puts some stuff in a box and then they ship it out. That is just not cost effective and neither is it speed effective. Both of those are relatively short term strategies.
Sanchoy:
In the book, I talk about ideas and techniques that they can go about to build their machines. Now, there is a caution there. Some of the machines which the big guys like the Amazons have built are highly capital intensive. Require not only a lot of money, they require also a lot of talent. So you need both of those. And if you don’t have both of those, then you have to find solutions which you can do within your resources. And my hope in the book, some of the innovation pathways that I propose, they could adopt to build a solution for themselves.
Patrick:
Yeah. It’s interesting. I have clients who are retailers who have been looking to build their own machine. And one of the things that they do is they advertise themselves to other local businesses to be their fulfillment partner. Do you see in the future that we may have a number of fulfillment offerings from people who may be retailers themselves, but in effect have transformed almost into logistics service providers or fulfillment partners as a service? Do you see that happening?
Sanchoy:
I see that absolutely happening and that has to happen because the cost and talent is so high. If we can pull together multiple retailers and run some kind of common collaborative venture, that would work out and they’ll be able to distribute the cost and sort of get in with each other. Because as I said, these machines, you cannot just go to any traditional warehouse and make it into a fulfillment center. It has to be reconfigured. So now, if I reconfigure, say, a hundred thousand facilities and like you said, two or three other retailers said, “Okay, you set it up, we’ll come in, we’ll pay you some kind of subscription fee and we’ll take it.” And to put that in perspective, right now, I think it is in 2018, more than 50% of the Amazon merchandise which is sold is actually just a service, a subscription service. That these are other companies who are piggybacking on the Amazon machine. And that threshold crossed in 2015 and that is 18 and that is the year that Jeff Bezos, in the annual report, highlighted that fact.
Patrick:
It’s interesting how people don’t always realize what kind of a change online fulfillment means for their business operationally. I have been looking at the data for a client of mine who got heavily involved in online retailing during the pandemic. It saved them, in a way, but the order profile is totally different. So whereby in the past, they were picking orders to replenish main street shops, the orders were multiline orders and every line in the order had many items. Whereas now, with online retail, every order is one, maybe two lines and every line has only one, maybe two items. So therefore, the labor intensity of picking that kind of profile is totally different. Is that what you see as well?
Sanchoy:
Absolutely. And that is what is causing the huge inefficiency in the traditional systems. The traditional systems are designed for bulk. I make a move in the warehouse, multiple items are booked up, picked up, and I’m aggregating the cost out. Now somebody orders one tube of toothpaste. Okay, that’s a problem. Now I’m going to spend more money to pick that tube of toothpaste than it costs to deliver that toothpaste. That is causing inefficiencies. That’s why I keep saying the traditional warehouses, the traditional supply chains, they just can’t make it in this new online world. We need new systems.
Patrick:
So we’re talking about automation, we’re talking about automatic storage and retrieval, conveyor systems, pick by light systems, those types of things?
Sanchoy:
Not only those type of things, a lot of IT technology.
Patrick:
I see.
Sanchoy:
So when a person is going out to pick, that’s where they do. A lot of people don’t know the history of AWS, which is the Amazon Web Services. That division was created to make all those IT models for the fulfillment machine. They did such a great job that somebody at Amazon said, “Hey, let’s start selling that too.” So they started to sell those web services to other companies. But that is what I call the talent pool. You need that sophistication to pull it out. And coming back to what you very correctly said, if we had pools of retailers together, maybe they could be more competitive because they’re pooling those intellectual and capital resources.
Patrick:
That’s interesting. How do you think the experience of the COVID pandemic over the last two years has affected the way businesses think about the online channel?
Sanchoy:
It’s an excellent question. In the past, people just looked at it as an additional channel, some additional revenue. Now they’ve realized that this is the channel. This is the main one. And if you’re not on it, it’s just going to be go away. So the physical stores are now supporting the online business, whereas in the past, it was the other way around. Without an online plan, it would be very difficult. Unless you are some kind of very special store, it’s going to go out. But even though very special store, the problem is now you are competing with a very special store 600 miles away. Now, the competitive environment is also changed. So you’re selling stuff to all kinds of people.
Patrick:
So in the future, what’s your vision of retail in the future, say in five years or further out? Where will online be and what will be, say, the role of the high street retail outlet? And do you see things being different in America, where you are versus Europe, where I am or perhaps in Asia? Will it be different in the different continents?
Sanchoy:
Obviously, there will be differences across the globe, but in general, every retailer presumably will be doing more than 50% of revenue through some online channel. And even where some of the customer experience is occurring in the store, parts of the customer experience will actually become out of the store. For example, let me just take a very simple business of somebody who is selling cakes. It’s a bakery. So obviously, we go to the bakery to pick up the cake. The first time I visit the bakery, I pick it up. I see their cakes. I taste it, I pick it up. But my sequential transaction will become more and more online. I may go to the store to actually pick up the cake, but I’ll just park in front of it. Somebody will come out, put it in the car, and I’m gone. Even though that touch experience may remain, the online experience is going to become more and more. I’m going to require speed. I’m going to require fast fulfillment. I order the cake at 12 noon, I pull up in the parking lot at two o’clock. I want to be out of there in one minute. That’s all going to affect every kind of businesses. So you have other vendors like Shopify and all, they’re actually trying to help in that part of the experience.
Patrick:
The way you see the differences between the high street shopping area, say, in an American city or a European city, or say, a city in India, they are quite different in the intensity and the busyness and the hustle and the bust is quite different. Do you see Europe and India becoming more like America in the future with those shopping areas, having fewer people and less things going on?
Sanchoy:
I like the phrase you use, “high street shopping.” High street shopping usually assumes that it is an expensive item and it’s an item that I have to try on. You were referring to India, people buy saris. Presumably, I go to the store, they drape the sari on the customer. I have 20 saris and then they select one and buy. That touch experience will remain, but the wide mode is disappearing. Increasingly, virtual tools are coming into place. People are able to get that experience even from wherever they are. Plus, I’m offering you don’t like it, no worries. Ship it back. I’ll send you another one. If you look at companies like Stitch Fix, et cetera, which ship packages of apparel to people. They select the skirts and the blouses that people will wear, the people select three, four of them. They send the rest back. So you see, all of that is occurring. Those are all things that are going to eat out the business of the high street stores. At the end, they will remain, but the online experience is going to expand without doubt.
Patrick:
Okay. Interesting. Maybe we’ll change gears a little bit. There’s a question I always like to ask my interviewees about globalization. This explosion in e-commerce, I think, is one of the manifestations of globalization that we’ve seen. We have infinite choice of high quality, affordable products available anywhere, anytime at the click of mouse without even getting up off the couch. In recent times, over the last five or six years, we’ve seen for various reasons around the world, a kind of a pushback against globalization. We’ve seen natural disasters. We’ve seen human disasters like COVID that have challenged globalization and the efficient supply chains that it depends on. Right now, I guess, we’re living through a supply chain crisis in many parts of the world in US and the UK and Europe and so on. In globalization in general, where do you think we are with the process of globalization? Is it stalled? Are we going backwards? Or maybe is it just a blip before resumption of business as usual or a change in form? What’s your take on it?
Sanchoy:
I think, obviously, globalization will be there and how much further it will grow, probably we are reaching at some kind of capacity. One of the interesting things about online retail fast fulfillment is globalization made it very difficult for local supply chains actually to survive because they were competing with mass-produced stuff, which there was large economies of scale, products being shipped across the globe. Now what happens is a small supplier, who is maybe based literally a hundred miles from where I am, is able to quite efficiently market product to me. They’re able to ship product to me. And so, as a result, they’re able to take on the global suppliers.
Sanchoy:
Again, going back to the bakery example, a small baker is now able to compete better with a larger, more established bakery chain because now they’re able to market their product. They’re able to ship their products within a small zone more efficiently. And then I guess people are also becoming socially conscious of local supply chains. They want to help out the local economy. They’re willing to pay maybe a few percentage points more to get that product. So we may see, and actually we are seeing, a rebirth sort of in a lot of local supply chains.
Patrick:
Maybe we change direction again as we come to the end and maybe just ask you a few questions about yourself. What kind of things do you like to do in your spare time when you’re not working and not writing books about the fulfillment machine?
Sanchoy:
Obviously, I like a lot of stuff. Fine foods and fine wine are sort of my pet peeves. Two years ago, I took a sabbatical. I was in the Lombardi region and I was researching actually artisanal supply chains. And it’s a completely different thing. People who are making cheese and wine. That was the best research project in my life, because not only was I enjoying the product, I was understanding what they were doing. And actually, I was trying to tell those people that there’s a small cheese producer who selling maximum within a 50 mile radius that the internet allows them to take on the Barilla makers and the big pasta makers. That is what I love to do. So those are some of my hobbies that I do in the food and wine industry, both the supply chain and the consumption side.
Patrick:
Apart from your own book, are you reading anything at the moment that is inspiring to you that you would recommend to listeners or any audio books or podcasts that you find inspiring at the moment?
Sanchoy:
Yeah, the book that I completed just a few months ago and I liked. Scott Galloway wrote a book called The Four, in which he talks about Amazon, Google, Facebook, et cetera. And he says how these companies are changing the social and economic behavior and this has become more relevant because nowadays, people are a little worried that some companies have become way too big and they control everything in our lives. He talked both about the social aspects and the technology aspects in that book.
Patrick:
So this is The Four, by Scott Galloway?
Sanchoy:
Scott Galloway. Yeah.
Patrick:
Scott Galloway, thank you very much. How can listeners find you or contact you or find out more about you and your work? And where, importantly, can they purchase your book, Fast Fulfillment and maybe access your blog also?
Sanchoy:
Okay. The book is available in Amazon, obviously. So Fast Fulfillment, if you type it in, it’ll come up. To support the book, I created a website. It’s called fastfulfill.org. That has blogs, it has some articles. I also create templates or spreadsheets that people can use to back up their innovation efforts, et cetera. I can download those kinds of things. And they can always send me an email at sdas@fastfulfill.org and it’ll reach me.
Patrick:
Excellent. And how do you spell “fulfill”? You know there are different ways to spell it?
Sanchoy:
Yeah. Excellent. Because whenever I was writing the book, I used to keep getting different spelling. I spell it F-U-L-F-I-L-L.
Patrick:
Okay. So one L and two Ls.
Sanchoy:
One L and two L, that’s the model. But different dictionaries have it different ways.
Patrick:
That’s right. I think it’s probably different in America as in Europe as in the UK, maybe.
Sanchoy:
Absolutely.
Patrick:
Thank you, Sanchoy. It’s been an absolute pleasure talking to you today, and I wish you every success personally and professionally in the future.
Sanchoy:
And thank you, Patrick. I loved your questions and it’s a great show that you have going. Thank you.
Patrick:
Many thanks, Sanchoy. And thanks to listeners for tuning in. Remember, any comments or questions, just drop me a line on pdaly@albalogistics.com. That’s P-D-A-L-Y at Albalogistics, A-L-B-A logistics, all one word, .com. Keep well and stay safe until next time.


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