Inside the Supply Chain

In this episode, we wanted to know, “How can supply chain innovation deliver serious value?” To get best practices, Innovation Leader’s Kaitlin Milliken sat down with Aisha Nabiyeva, a supply chain research and development specialist at Retail Business Services which provides a logistics services company for Ahold Delhaize US. Additional guests include, Gerry Collins of J&J and Josué Velázquez Martínez of MIT’s Center for Transportation and Logistics. Read the transcript and see additional information below.

Additional Resources: 

• Read about how Georgia Pacific unites innovators to tackle supply chain challenges.
• Learn about how Land O’Lakes accelerator seeks supply chain solutions.
• Find out more about MIT’s Center for Transportation and Logistics.

Transcript

[SPONSOR MESSAGE]

This episode is brought to you by Innosight. Innosight helps forward thinking companies navigate disruptive change and own the future. Their team can help your company develop new growth strategies and build innovation capabilities. Find out more at innosight.com where you can also read their new Harvard Business Review article, “Breaking Down the Barriers to Innovation.”

[MUSIC]

Josué Velázquez Martínez: So everytime there is a new innovation out there in the world. It’s all up to supply chain management to make their dreams come true.

Aisha Nabiyeva: Now it’s becoming a value proposition with all of this ecommerce development.

Gerry Collins: We see it as actually probably one of the most exciting times in supply chain from an innovation perspective

Kaitlin Milliken: Hey! You’re listening to Innovation Answered, the podcast for corporate innovators. I’m Kaitlin Milliken from Innovation Leader.

Today’s central question: How can supply chain innovation deliver serious value?

The supply chain encompasses a lot. Everything from creating new products to getting them into the customers’ hands. That includes sourcing raw materials, making things in factories, and shipping products to distribution centers. The whole process is complex. Products can travel over thousands of miles and pass through many hands before they hit the shelves.

The supply chain can sometimes be regarded as a behind the scenes world — maybe lacking glamour — a function far removed from what happens at the gleaming corporate headquarters. However, its an essential part of most businesses, and it offers a massive opportunity for innovation to create new value. Gerry Collins of Johnson & Johnson explains.

Gerry Collins: When you consider that we touch around a billion people’s lives every day with one of our products somewhere in the world, supply chain makes up around 50 plus percent of the employees in J&J, getting the products to the people that need them wherever they are in the world. … And when we listen to our customers, and we look at the work that they have to do, we realize that we need to manage our supply chain with a lot of consistency across our different businesses to ensure that we’re providing the best possible service to our customers who in turn service our patients for whom the products were designed in the first place.

Kaitlin Milliken: Gerry is the VP of strategy and services in the J&J Enterprise supply chain organization. According to Gerry, this group at J&J seeks to transform the supply chain across the company’s different segments. Their team keeps an eye on potential disruptors to prepare for the future. During the conversation, Gerry mentioned a few trends that he has on his mind.

Gerry Collins: Those kinds of changes that we see coming in healthcare are things like personalization of products, on demand access in very short delivery windows… How do we manage the personalized supply chain end to end for individual patients? And that involves new technologies. That involves new ways of ordering products, new ways of delivering products. Digital is a big part of it in terms of having the visibility of the supply chain end to end so we can guarantee that a personalized medicine gets to the person that it’s been personalized for.

Keeping up with the ever shifting digital landscape can be challenging. But don’t worry, Gerry shared two tips that can help guide teams as they innovate in the complex world of the supply chain.

Gerry Collins: Being able to put ourselves in the shoes of the stakeholders who we work with, to really understand what their needs are and then understand how we are best meeting those needs. That would be one area. The other area would be looking at adjacent industries, looking at other industries to see how they’re innovating what they do in their supply chains and then running their business. We’ve learned a ton from the automotive industry, the airline industry, the power industry, you name it. So I would say in the last probably three to five years, we have opened our eyes to what a lot of other businesses are doing in terms of meeting their customer needs and understanding their customers better and understanding from the data that they have from customer insights and how to determine a true customer insight that’s trying to make a difference…

Learning from other companies and listening to end users can guide teams as they design the future of their supply chains. To see these tips in action, we sat down with Aisha Nabiyeva from Retail Business Services — a logistics provider for brands including Stop and Shop. We’ll be back with Aisha after this break.

[AD JINGLE]

In today’s show, we take a deep dive into the supply chain. But not every case study on this topic made it into this episode. Last year, we visited Georgia Pacific’s Point A in Atlanta. This innovation center focuses on supply chain and connects thought leaders from different companies in the ecosystem. During that trip, we sat down with a member of Point A to forecast the future of the supply chain. We also took a deep dive into their collaboration process — because challenges in supply chain are too complex to be tackled alone. You can read that story and all of our other articles on our website: innovationleader.com. Already used up all your free articles? You can sign up for a membership on our join page and get unlimited access. Now, back to the show.

[MUSIC]

And we’re back with Aisha Nabiyeva. Aisha is a supply chain research and development specialist at Retail Business Services, a logistics services company for Ahold Delhaize US. Ahold Delhaize is an international food retailer based in the Netherlands. Their US stores include Stop and Shop and Peapod, the online grocery ordering service. Prior to this role, Aisha worked in supply chain at Rolls Royce and Converse.

Kaitlin Milliken: So you work in supply chain R&D. Can you tell us a little bit about what that role entails?

Aisha Nabiyeva: Okay, I’ve been a supply chain person. So I see it like as the most important part of any business. But if you think about it as you sell a product, like how has it been delivered? so it covers logistics, it covers the production and covers the planning around how you going to make this work to come to your location. How do you store it? How do you procure it, all of the sourcing, demand planning, supply planning, all of that comes under the supply chain.

It used to be a part of just the cost structure on like, how can we delivered at the least amount of cost, but now it’s becoming a value proposition with all of this ecommerce development. In supply chain innovation team is specifically exploring the new innovative ideas for the next five to 10 years, looking into the technological solutions as well as different concepts and starting with pilots and testing.

Kaitlin Milliken: So I actually want to touch on some of the experience that you’ve had. I know you’ve been at Converse and Rolls Royce doing supply chain related research and working on initiatives there. What challenges are prevalent across industries in the supply chain.

Aisha Nabiyeva: So this businesses are different and they nature. So Rolls Royce was more B2B business because it made jet engines for several large, several small and defense parts. So I worked in IRA area/ The challenges there, and just generically for the B2Bs I see AC is the complication of it. Like the technological developments are driving a lot of great innovations in the product offering, but therefore, it creates it more difficult to source the product all over the world. So you have to make really smart decisions on where you’re placing manufacturing plants and how you’re delivering it. And also you have a large competition for the same amount of logistics providers.

Kaitlin Milliken: And you mentioned customers, can you talk about how their expectations have shifted?

Aisha Nabiyeva: So being faster, without having so much waste in the whole supply chain while being lean and fast is very difficult. From my previous experience, I’ve worked in Converse, as a sourcing and supply planning manager, where we saw a lot of change was like in the Instagram world, people could get exposed to new products very fast. Therefore there is an expectation of very fast delivery. And that has a drastic changes into supply chain and like how could we pre stock the material? How could we deliver the product within like a day or two, which is very difficult and constraining to the supply chain and requires a lot of thinking behind it.

Kaitlin Milliken: You’re currently at retail business services, which is a part of Ahold Delhaze, which works in food retail, but are there any other challenges specific to that industry that you think are worth highlighting?

Aisha Nabiyeva: So in grocery there, our industry is rapidly evolving Customer expectations are changing freshness of the product is very important for us too. That’s has effects on the how we manage the capacity at the warehouses and on our transportation level as well. Because now people go to the stores to purchase more of a fresh product.

The huge growth of the SQs, basically different type of products and units. So you have cereal, you don’t only have like one type of cereal, but you have like 10 different types. People preferences are grow so much that like we’re constantly growing the number of units that we sell, and that also has a huge impact on the capacities across the whole of the supply chain.

Kaitlin Milliken: So at Ahold Delhaize, you have things like stop and shop where you go in and you physically buy things you check out at the line and then you’ve loaded up to your car and go home. But there’s also PeaPod, which is the whole online delivery experience. How has that changed the way that you’re looking at supply chain and what demands or pressures does that area face that the other more traditional retail experience doesn’t have?

Aisha Nabiyeva: Oh, that has a lot of transition. That’s something some of the projects that we’re looking into is on how do we count the inventory. So you’re not only forecasting for just in-store sales, but also into home sales. So you would need to be collecting data on the preferences of the customer and incorporating that as part of your forecasting as well. And that also has its own effects on how we store and deliver the product and how we prioritize it. And how do we place the orders back to the back end of the upstream to our producers and everything. So it’s it has a huge repercussions. It’s, it’s great, it’s very innovative and interesting for us. And it also affects how we plan our network of warehouses and causing it to become Closer to the customer, which has not been a case before because you only stock the stores.

Kaitlin Milliken: So you mentioned a bunch of different challenges in terms of there’s so many options, people expect things faster, more sustainably, fresh in stores. What projects is your team working on that tackle some of these issues?

Aisha Nabiyeva: Some of the projects I can talk about is that we’ve recently been working on having an end to end forecasting and replenishment system. The forecasting is you…there are many different ways of forecasting like how much product would we need to have in a store. So like all of us go shopping, right like you’ve been to supermarket. So you come there, you buy strawberries, and you really want them to be there. But to make sure that they are there and that we just don’t run out of them. At any given time you come. We need to forecast it several weeks ahead just to make sure we place that order in back up to the forum and have enough product.

Right now, there are many ways that you can do it manually through looking into the historical data. But also you could be looking into all the different factors that influence that forecast, like weather like games, like party seasons, holidays, and everything. So all of that affects your forecast. And with sophistication of technologies that’s becoming more and more, we’re becoming more and more precise and forecasting how much exactly product is going to be bought at any given time. So that’s forecasting, and replenishment is basically as as soon as we ran out of the product without having a human just to go and like send a notification to a manufacturer saying we need the product, it just automatically sends that signal.

Other things that are happening as well as we’re looking into automating the back room of the stores, basically having a sense of automatic moving Roberts that’s identify which product to pick and to deliver it to picker, that he could take it and take the and replenish it at the store or replenish it for the final consumer delivery. So we’ve recently implemented that was one of our stores. It’s it’s still in the proof of concept, but that’s something we see it’s going to be really helpful in making the product come to this stores faster.

Kaitlin Milliken: Great. So a lot of the challenges like transparency sustainability that affects multiple companies, also multiple companies along the supply chain. Have you ever partnered with another corporate or business to pursue these innovation projects?

Aisha Nabiyeva: Oh yes, we definitely do. So, as I said earlier, we work on the traceability. So there’s huge conglomerates that have to work all together to make sure as I said, like it starts from the manufacturer and ends with the final customer. So you have to touch all the traceability with your suppliers as well. So we do get into that kind of partnerships with our suppliers, as well as we work with research centers as well, who are working on a product development and that hasn’t been proven as something that works in industry and we provide them our warehouses, our workers, our technologies to test their product as well. So we’ll kind of do a product development together, which I find very exciting myself.

Kaitlin Milliken: Are there any other pieces of advice that you have for innovators working in supply chain?

Aisha Nabiyeva: In large for…large corporates, I see the collaboration is the key piece of the innovation. So you would really need to have a forum or a way to connect with all the different functions within your organization like that’s the number one way of driving the change, is innovation comes with a change management. And that’s probably the hardest piece in a large corporate where people are used to doing things they’ve been doing for years and years. So collaboration and communication to each other is key.

When tackling challenges in supply chain, companies need to work collaboratively. Finding the right partners across your ecosystem is key.

We heard about supply chain in the grocery business from Aisha, but we wanted to find out about trends across industries. To find out, we went to MIT to speak with Josué Velázquez. Josué is a research scientist at the university’s Center for Transportation and Logistics. He has done research across the domains of supply chain management with an emphasis on sustainable supply chains.

Kaitlin Milliken: So to get started, could you tell me a little bit about your work and what you’re what you’re researching when it comes to supply chain.

Josué Velázquez Martínez: I do research in all the domains of supply chain management, specifically what is related to sustainable supply chains. So, we work mainly with companies that are trying to improve their supply chain operations, but we use also different focuses of trying to improve the environmental impacts of elemental calls for the logistics operations.

Kaitlin Milliken: A lot of companies are starting to think about supply chain. Why has this become such a hot topic that companies are thinking about?

Josué Velázquez Martínez: So in general, there are more educated consumers. There is also a huge strain on technologies, on the accessibility that people have now to order products through different channels, you know, using smartphones using iPads using TVs going to the store, using computers. So, this creates a huge complexity in the supply chain operations. So, how companies now are going to serve customers that are located in different parts of the world, placing orders everywhere in the world, and also having products coming from different parts of the world. So, all the match between supply and demand becomes very complex. And at the same time, consumers are now demanding to have more visibility, where the products are coming from mainly because now there’s also push on sustainability, social responsibility, trying to make companies more accountable for their products, their procurement processes and all these different activities that are happening.

Kaitlin Milliken: So you mentioned complexity and with complexity, there comes an added level of difficulty and some roadblocks along the way. What are some of the challenges that companies face across industries when it comes to the supply chain?

Josué Velázquez Martínez: There are so many. So in general, there is a very well known problem that is called the Bullwhip Effect. So this happens when companies start working independently make their own decisions they have forecasting production planning or decision also in how they order to their suppliers. When they start working in an independent way, this creates a lot of inefficiencies. They create this inefficiency of not moving at the same time mainly because they don’t have communication, they don’t have collaboration. So they this this creates more inefficiencies creates inventories in terms of time wasted in terms of products that need to be there to create more general responsiveness. So all these challenges are typically almost in any supply chain, regardless of the sector or of the type of industry.

Of course, there are now all the type of challenges as I was saying before related to serving the customers extremely fast, changing products extremely fast. So how you can create the new products, new services and then put them immediately the market without having to wait for one or two years in this design the processes that were in the last 10, 20 years right. So all these Things are now part of what becomes the key in the in the way that companies should operate their supply chains is that understanding that they’re part of a bigger picture, and how they can collaborate to make it more efficient and therefore also more profitable.

Kaitlin Milliken: So are we seeing increased collaboration as a trend as a result of this common challenge of there not being enough communication between companies?

Josué Velázquez Martínez: More companies now have started to collaborate. And there were interesting examples, for instance, with Walmart and P&G, when they define one of the first vendor managed inventory than later CPFar — we call it collaborative planning, forecasting and replenishment. So joint effort from both companies to try to blend together in order to serve the customer better and also, you know, lower the cost and the inefficiencies.

These efforts usually happen within two companies. And sometimes you try to extend this but the complexity becomes even higher because now companies have different objectives. They have also multiple products or multiple services that mean that also reflects in different supply chains that they need to serve and align and define different strategies. So when you have all these challenges, you know, it becomes difficult. However, companies now at this stage, they are very much aware of the importance of collaboration, at least in this what we call vertical collaboration. The next stage is what we call horizontal collaboration, which means, how you can collaborate now with competitors as well in different supply chain.

So, let me give you an example. One of the biggest challenges we were discussing these related to the last mile operations, so companies need to serve customers very fast. So, just imagine did you place an order through Amazon and did you receive the next day delivery today delivery, right? So usually when you have regions that are not necessarily very dense, that means trucks are going to go with 20 percent of utilization, right? But what happens if, if at the end stroke actually serves also all the other products, right? So you can actually have in one truck, not just products or for instance, Coca Cola, but also put products of PepsiCo or maybe products of of Dannon. You know, use economies of scale reduce the variable costs. So this brings a lot of different advantages for different companies. Now to assess this brings, again a different challenge, which is to what extent you should collaborate with your competitor, what how you’re gonna share the gains that you get out of this collaboration, and also if the systems exist to allow companies to do this type of initiatives.

Kaitlin Milliken: The initiative that you just mentioned, has a lot to do with efficiency. Do you have any examples of companies or initiatives that are tackling challenges in sustainability and transparency in the supply chain?

Josué Velázquez Martínez: Tesco UK was one of the first companies in having eco labels. So having information of the of the carbon emissions of the product, like the product footprint, so that consumer school see and also make a comparison if it makes sense to buy this product or not.

It’s a little bit challenging, right? It’s not that intuitive for the customer. What is the meaning of buying a product that has, I don’t know, 400 kilograms of CO2, is that good or bad?

We try also to study how we can better provide environmental information to consumer that could drive their behavior to make more environmentally friendly decisions, right? So for instance, imagine that when you are ordering again, I’m going to go to the example of Amazon, you order through commerce, and then you have the option to receive your package in one or two days. But then immediately, you have a display that says, “Well, your decision of fast shipping is equivalent to killing 300 trees, right, because of the energy that is required to serve you in that speed. But if you’re willing to wait seven, eight days, I’m gonna kill 10 trees. And by the way, because I’m going to save money, I’m going to be able to plant 20. Would you be willing to wait?”

So understanding those drivers for consumer and also making companies more efficient from an environmental perspective, but also from the cost perspective, we believe is also part of what the expected in the future.

Kaitlin Milliken: So with a lot of supply chain, new technology plays a role. How are companies and the folks at MIT pairing supply chain innovation with new technology and testing in that space?

Josué Velázquez Martínez: They’re trying to implement better service and infrastructure of computers to process a large amount of data. Particularly in logistics providers, a lot of these companies are now using a lot of the GPS traces to use machine learning algorithms to make better decisions. There are also the type of information that is gathered by understanding the consumer for instance again in ecommerce websites to provide better services for them. There’s also information related to the whole supply chain in terms of the demand at the point of sale or also different transactions.

So there is now like a different era in terms of the evolution of the technologies that we are now embracing in the organizations. Now while we are growing in platforms that are capable of really support of this amount of data and also in the algorithms to process these data, there is still like a huge universe unexplored that now researchers and also companies are trying to work. Because at the end, what we see is that in 5,10 years, we envision that the battle to be more competitive now in the supply chain is going to be for those that are having the capabilities to process the large amount of data and then move very fast to create better services, better products and, and also even innovation in terms of how you process all the supply chain operations.

Kaitlin Milliken: If you were giving advice or tips to a team that wanted to begin supply chain innovation at their company, what would you tell them? Where should they start?

Josué Velázquez Martínez: Always start with the customer is the right approach, right? Understanding the customer to co-create with the customer products and services that make sense. So companies may come and say, “Well, this is what I’m envisioning as a business.” Having declarative that business and understanding of the consumer then defining the proper supply chain strategy comes now, as a consequence, right? So, understanding the consumer understanding how supply chain can make use of better data,connect more with the needs, make iterations very fast, connect with the departments, it becomes really like one of the key processes to be competitive in supply chain.

So, understanding if your product is a functional, innovative and how this changes the way that you define indicators for your supply chain should be looking for, I don’t know, volume type of business or more like a tailored type of products and go for the high margins, low margins, all these things are key when you are going to start to move towards this. Now, for companies that are more mature, not just starting is key, also the investment in research, either internally or also through universities like like MIT, so investing in research is a way to help shape the future of the field.

Kaitlin Milliken: That’s really interesting. We’re seeing more of that too. In the stories we’ve covered, we went to Atlanta to check out the Georgia Pacific Point A Center for Supply Chain Innovation, which is a super long title. But it was really interesting to see how they’re connecting leaders from companies like Chick-fil-A, Georgia Pacific, across the Atlanta ecosystem, who may not even necessarily be in the same field to tackle some of these big issues. So that’s definitely something we’re seeing a lot of.

Josué Velázquez Martínez: If you create this type of innovation centers in supply chain is important to have a lot of diversity. So it’s important to have people with different profiles, different companies, including those companies that are also competitors. And this creates, of course, important generation of ideas, engagement and collaboration, you know, between partners that can later lead the way that operations is going to be in the next year’s. So this is key for any initiative on supply chain innovation.

Kaitlin Milliken: So my final question is the big one. What will the supply chain of the future look like, and how far away are we from that future?

Josué Velázquez Martínez: Companies are now providing more than just focusing on a specific product or service even, they are providing an experience. That means huge complexity. So every time that there is a new innovation happening the world the same as it happened with the internet, or what happened with smartphones, you know, it’s always the time for supply chain management to make the dreams come true. So we are like Disneyland in a way. So how we can adapt immediately to really serve the purpose of the corporate strategy. And what we see is that the future is going to demand a lot, right? We are going to have the need of better algorithms, the need for using better and mathematical models to match the supply with the demand to understand better the consumer. The mega trends in new technologies and the challenges that are putting a risk on operations are going to really create a super interesting environment that for us becomes really exciting because we also are growing in the capabilities to cope with this challenge.

So keep an eye on data sources and new technology that can help your team address new challenges in the supply chain.

[ACKNOWLEDGEMENTS]

You’ve been listening to Innovation Answered. This episode was written and produced by me, Kaitlin Milliken. Thanks to Gerry, Aisha, and Josué for sharing their insights. To join the Innovation Leader community, sign up for a membership on our website. You can also listen to all episodes of our show at innovationleader.com/podcast. If you loved this episode, rate and review us on your streaming platform of choice. That helps other innovators find the show. We’ll be taking a break next week for American Thanksgiving. But as always, thanks for listening and see you soon!

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Special thanks to Innosight for sponsoring this podcast. Disruptive change is accelerating and companies today face more ambiguity than ever before. But with ambiguity comes opportunity. Innosight, the strategy and innovation practice at Heron Consulting Group, is the leading expert on disruptive innovation and dual transformation. Co-founded by Harvard Business School’s Professor Clayton Christensen, their team helps Global 2000 companies strengthen today’s business, while creating the new growth engines of tomorrow. Their approach to strategy and innovation consulting is collaborative. Clients say that Innosight has changed the way they think about and see the world, enabling them to do things they could never do before. Learn more at innosight.com.