Podcast: Rob Handfield on Suppliers, Data, Tech, and Talent

Highlights from the Conversation

What Are the Main Differences Between the Thinking in Supply Chain in the 1990s and the 2020s?

• In the 1990s, purchasing managers were focusing on how to beat up their suppliers in order to buy cheaper. Meanwhile, salespeople for suppliers were trying to work around procurement.
• 20 years later, at least until COVID-19, people were still doing the same thing.
• Years ago, I knew that information sharing and the whole supplier-purchaser relationship is one of the most important things in supply chain (I talked about it in Introduction to Supply Chain Management in 1999). But even today a lot of people don’t get that.
• With the looming threat of supplier bankruptcies, we’re starting to realize that saving nickels and dimes don’t mean much in the long run if our suppliers disappear. If we want our key suppliers to be around when we really need them, we need to build relationships with them.

Making the Most of Technology at Flex

• Tom Linton was Chief Supply Chain Officer of Flex, and arranged for me to visit to their operations centre around 2016.
• Flex is the biggest company you’ve never heard of—with over 120 factories worldwide, they are contract manufacturers to companies like Nike, GE, Intel, and Apple. Basically, Flex runs supply chains.
• Tom took me into a room called “the Pulse” that was full of television screens. On every screen there were moving graphical visualizations of material inventory. You could touch the screens and drill down to see what was going on. Tom had literally put his inventory on these control towers, and it was all updating in real time.
• It was a partial digital twin, because you could do “what if scenarios”.
• The information went beyond the executives—their entire team could see it all on their mobile phones.

The Digital Twin is Closer than You Think

• Flex had put their control tower together for less than half a million dollars in less than six months.
• To do something similar, it’s really about changing the mindset, because you don’t necessarily need all the data. Just start with a question: what data do you need to put in front of the right people in order to make the right decisions in real time? This will enable the collaboration and problem solving that’s needed, because as we know, there’s always something going wrong in supply chain.
• The next step is to look at the data. The problem in most organizations is that their data sucks, both in quality and timeliness.
• We do an annual data governance survey with IBM every year, and according to the responses it takes the average manager a couple of hours every day to find the data they need just to do their job. When they get it, they have to put it in Excel and clean it, and then put it in a PowerPoint so they can show it to people.

Insights from The LIVING Supply Chain Book

• The LIVING acronym stands for live, integrated, velocity, intelligent, networked, and good.
• If you have the ability to see what’s happening in real time, you can act more quickly. You need the visibility to have the velocity, because you can’t manage what you can’t see.
• Once you can see what’s happening in your supply chain, that increases the velocity of decision making, which increases the velocity of material.
• A lot of the principles we were talking about were aligned with the patterns of nature described in The Serengeti Rules.
• As you have increased visibility, you can start to see the flow and even predict what is going to happen and react more quickly.

In the Three or Four Years Before COVID-19, What Were You Seeing Starting to Happen in Supply Chain in Your Consulting Work and Your Educational Curriculum?

• Almost all the student projects were related to analytics. Analytics is key.
• The data tells the story. But it’s not just about throwing it into a BI file and creating graphs, it’s about knowing what you’re looking for. It’s an iterative process that involves critical thinking. We teach students how to look at the data and how to develop a hypothesis to figure out what you need to be looking for. If you have good data, you can build a good strategy.
• There’s a lot of discussion around AI and machine learning, and we’ve done projects about this
  with PhD students and they take a lot of time. You have to know what keywords you’re looking for and set up the problem in such a way that you can start to look for the information. Once you set it up the right way, the machines can do all the data collection and analysis, but ultimately humans have to pull the trigger and make the decision as to what to do with the information. We’re really in the early, early stages of the machine-human interaction.

What Kind of Impact Has COVID-19 Had on Supply Chain?

• Number one, it has escalated supply chain to the front of the news, and it’s now a political issue. One of the problems was that there was not a good response. I wrote a research paper for IBM in 2011 on how the federal government should prepare for the next pandemic, and I’m pretty sure it just gathered dust.
• We were already pulling away from globalization and towards localization with the new tariffs and trade war. COVID just pushed it to happen a lot sooner than everyone thought. Tom Linton and I will be talking more about this in our next book, due in 2021, called The Physics of Supply Chain.
• Everything is changing. We’re going to be talking about a pre-COVID and a post-COVID world. The post-COVID world is going to be completely different from a supply chain perspective.
• In the pre-COVID world, we thought about landed costs. For example, if we’re manufacturing something in China there are labour costs, the costs to ship, plus tariffs. Now we know that in an emergency, governments across the ocean can stop things from moving.
• In the post-COVID world, suppliers in the US, Mexico, and Canada will become much more integrated. But that won’t happen overnight; there’s equipment, technology and know-how involved. For example, the four companies who collectively manufacture 80% of the world’s brake pads are located in one province in China.
• It’s not about nationalizing everything. Globalization won’t go away, we’ll always have a global supply chain, but we have to rethink our relationships and how we understand costs and the position of inventory in supply chain.
• A lot of people are saying that this situation will be the death of Lean. I disagree. I see everything that’s happening as being absolutely consistent with what we need to be doing in our supply chains. A supplier in China with 16-week lead times is NOT Lean! Lean is about visibility, about information sharing, alignment, relationship building, communication, and flow.

What Should Businesses Be Doing?

• Now is the time to secure your relationships with your suppliers and find creative ways to help preserve them as supply chain partners. If you want to step on the gas in six months to take advantage of the recovery, but your suppliers are all bankrupt, then you’ve got a real problem.
• A lot of businesses are going to rethink work, because they’re learning people can be productive at home.
• We may not see air travel recover to the levels we had before. We may continue to have more virtual meetings and communications. If that’s the case we’re going to need more people who can process data and collaborate virtually.

What is Your Thinking on Sustainability and the Circular Economy?

• The “G” in our LIVING acronym stands for “good”. What we mean by good is good for the environment and good for people working in our supply chains. For example, forced labour is at a peak, especially in the apparel sector. A lot of it is happening in the “invisible supply chain”, our tier 2 and tier 3 suppliers.
• To solve problems like this, we must drive the transparency and the visibility down to those tier 2 and tier 3 suppliers so we can see the working conditions and decide not to support them.
• The biggest barrier for the bio-based materials is cost. But they must meet that cost threshold or it’s not going to work.

What Do You See Coming in Tech Innovation for Supply Chain?

• There’s a lot of really interesting platforms for analytics. For example, there are around 200 startups for procurement analytics.
• They’re making some great tools, but I think what’s lacking to be a successful startup in that market is to address a need. To do that, you have to get out and talk to the people in the industry.
• The technology itself is not that expensive. It’s about what you do with it, the application that’s really going to be key to drive innovation going forward.

What Changes Are You Seeing in Your Academic Work, and with the Students Who Are Enrolling?

• NC State is fundamentally a technical school. But we’re seeing students in engineering looking at the business side at the Poole College of Management and at the SCRC and learning about supply chain. They like that it’s dealing with people, and with complicated problems—that appeals to a lot of kids. Young people that I meet are pumped—they like working with real world data and helping to solve real problems.
• COVID has had a big impact on students. Some are doing online internships. But I feel bad for kids who are graduating and trying to find a job right now, because companies have had to rescind offers. For companies it’s a huge opportunity for talent acquisition.
• What makes our program unique is our 15-week projects. The class is the project. We pair the students with supply chain executives who are faced with real problems to solve. The student gets the data, and has to make sense of it and make a coherent recommendation. Along the way they learn a lot of the skills you need in the workplace.

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More About Rob Handfield

A math major as an undergraduate, Rob is one many supply chain professionals who fell into the field. While pursuing operations research for his PhD, he found he was much more attracted to what was going on in supply chain, especially purchasing. When he moved to Michigan State, he learned more about what was going on in the industry by hanging out with executives at Bob Moczka’s industry workshops in the 1990s.

Inspired by this experience, he started the Supply Chain Resource Cooperative (SCRC) at North Carolina (NC) State University. The SCRC is the first partnership of its kind, pairing MBA students with industry executives (including Fortune 500 executives) to solve real-world problems.

Rob’s writing credits include several books, including The LIVING Supply Chain, Supply Chain Re-Design and Introduction to Supply Chain Management. He has co-authored textbooks for undergraduate and MBA classes, and has published over 120 peer-reviewed articles. He is the editor emeritus of the Journal of Operations Management.

Rob has consulted with over 25 Fortune 500 companies and has served as an advisor to the US General Services Administration, the Department of Defense, Veterans Affairs and other federal agencies.