While many organisations across Central and South America continue to grapple with their newly digitised supply chain makeups, they have looked to a company that foresaw many of these trends decades before the impact of COVID-19.
SAP has long championed the need for a connected, data-driven, agile and resilient supply chain built around one key tenet: mitigating risk. Now, with businesses coming to the same realisation and ramping up their urgency levels, SAP’s Head of Digital Supply Chain for Latin America, Jeb Insley, shares the strategies and solutions that can guide them along the way.
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Hi Jeb. Most people will of course be aware of the SAP brand, but please do begin by introducing yourself, and your specific remit within the SAP family in Latin America…
SAP has been around for more than 50 years now, focused primarily on transforming the way enterprises engage with, and leverage technology to run their businesses. SAP has many functional lines of business that align to organisational operations such as customer relations management, human resources, finance, technology and the supply chain.
I’m specifically responsible for that latter element and the digital supply chain line of business. This involves driving customer success across the digital supply chain throughout the Latin American region, which comprises South America, Central America, the Caribbean and Mexico. While I’m based in Los Angeles, I head up a group of teams focused on ensuring customer success pertaining to technology alignment and long-term value for the customer.
Just like the supply chain itself, it’s all about end-to-end engagement.
Much has been made about how the past few years have impacted the supply chain, or perhaps accelerated transformations that were already happening. Could you please allude to quite how much the landscape has changed throughout COVID and its immediate aftermath?
The key word is ‘disruption’. Maybe people are tired of talking about it, but the reality of the past few years, and even now, is that disruption went beyond empty shelves. Entire supply chains were impacted, and businesses found themselves in jeopardy of survival. Everyone around the globe scrambled to pivot their businesses to be more agile and resilient. But they didn’t address the main reasons why supply chains – for the most part – remained exposed to risk.
It’s not like they didn’t know these were big buzzwords before – they had just not gone deep enough in their overhauls of the status quo, and suddenly were exposed to a level of risk they hadn’t bargained on. In that respect, they were suddenly faced with the task of reversing 20 years of pretty rigid supply chain strategy, in 20 months.
For decades before, supply chains were focused on a consideration of costs and profits, which may have led to lower-cost suppliers or manufacturers, or led them offshore to reduce working capital or optimise shipping costs. But now we realise how vulnerable that made some businesses as a result – how fragile they were in the face of disruption.
It’s not just COVID either – look at materials shortages, the Suez Canal blockage, conflicts, political uncertainties, no fly zones, etc. Businesses have come to realise that supply chain management is no longer about day-to-day profits. It’s about alleviating risk from the unknown and the unforeseen.
So, as a technology specialist looking into the world of the supply chain, what kinds of conversations were you having with businesses to convince them of this required mindset shift, rather than specifically diving into technology investments straight off the bat?
A lot of the strategy isn’t new – the notion of communicating, collaborating, being nearer suppliers, being part of global networks, alleviating risk – but it is the mindset that needed sharpening around those elements.
There was a cool study by The Economist which showed that 3,000 of the largest companies have increased their inventory holdings by 1% of GDP, which is huge! And that tells me that they’re most likely redistributing and repositioning inventory across the network to better buffer risk and create other means of supply in cases of disruption.
Similarly, a McKinsey study found that 80% of those surveyed said they now had policies where they have at least two raw material suppliers for every component – a 50% increase on pre-pandemic figures.
These are some of the physical things that have shifted already, which reflect the mindset and strategy element of the conversation. With this, we’re also seeing some companies going back to vertical integration and producing their own key components.
From SAP’s perspective we then bring in mindset or strategic shifts around three key areas.
The first is to connect every process and supply chain activity, end-to-end. This eliminates data disconnects, process silos, and demand and inventory issues, so you can innovate faster; and ultimately get revenue through the door faster, too.
The second is to contextualise every decision. Companies are getting a lot of data thrown at them but a lot of it is after the fact, so we encourage a conversation around real-time data leveraging, in addition to also being more predictive through the use of AI and machine learning. We also encourage embedding sustainability into day-to-day operations and processes, to deliver clear transparency that guides decisions while proactively managing goals and regulatory requirements.
Finally, we encourage a rethink of the entire ecosystem. We mentioned connecting processes, but this is more about how all requisite partners are also brought on the company’s journey in a conjoined way. This is especially important in addressing metrics that all involved businesses will be judged on – namely, sustainability. Connecting the ecosystem ensures everyone is singing from the same hymn sheet and working together towards shared goals.
Just to emphasise the timing element of these conversations, how many discussions of this type were taking place before recent disruptions? Digital transformation is hardly a new term, but has its complexion and significance changed?
You’re right – this is nothing new as a general thought process. Businesses have encountered challenges – climactic, economic, social – over the years, but they didn’t trigger an acceleration of trends like we’re seeing now.
Before, I would say the biggest disruptions were more enterprise based. Here, I would point to the ‘Amazon effect’ for example, which forced companies to rethink the company experience and different consumer models.
The problem is, efforts were made to address each disruption, but they were made in isolation, case by case. So, rather than address all facets of their business to connect the entire operation in a show of resilience against any future disruptions, it was more a case of enacting incremental transformations to counter that one specific challenge.
This meant that, a lot of the time, those decisions weren’t contextualised based on real-time information, but in reaction to historic trends they’d now seen creep up and overtake them. You can see examples of this everywhere – people still using spreadsheets or decisions made without operationalising the impact on sustainability. They finally make an effort, but it’s not really robust or long-term; rather an overdue, kneejerk reaction to keep up.
I’d like to think that mindset has changed now.
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As companies had this epiphany more recently, what was SAPs role in facilitating such fast-paced pivots? Presumably, unlike many companies out there, your prospective solutions were already up to speed with the pace of change?
For us, we absolutely don’t think our approach from a digital supply chain perspective needed to change during the past two-and-a-half years. We’ve been banging the drum of connectivity, connected ecosystems and real-time data leveraging for the past 10 years, and have developed our solutions with this in mind.
Our overarching goal has always been to mitigate risk by making companies more agile and resilient. It’s just taken businesses a while to equate those buzzwords to the same course of action.
I think this is a good time to properly bring sustainability into that equation too, as the next drum we’re trying to beat, that companies are still adjusting to and beginning to listen to. For a while now, we’ve embedded sustainability into analytical and transactional applications, to help corporations optimise their resources across the entire value chain.
It’s a prime example of how SAP is evolving constantly, with sustainability very much at the forefront of that drive now. We’re at an intersection of innovation and adoption, and new partners can learn a lot from our use cases of earlier adopters, who have invited us to run their new cloud platforms and to use our own technology to drive their own levels of performance and sustainability.
A lot of people still attribute supply chain activity to a physical process, and I find it so interesting watching companies learn how data centres, the cloud, AI, big data, mobility, in-memory computing and connected digital suites can unlock so much new capacity, performance and sustainability across their supply chain operations.
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To that end, simply, has the sustainability penny dropped within the context of the supply chain?
I think in Europe and North America that penny has dropped. When I was in China three years ago, it wasn’t really even on the horizon, but now it is beginning to. In Latin America, I’d say improvements have been accelerated by governmental missions around carbon emissions.
Now, penalties aren’t just there for companies found to be in severe breach of sustainability requirements. Now, entire lines of business and segments of industry are expected to engage in sustainable conversations and practices, as a staple part of their operations, day to day. It has to be part of a company’s culture and – thankfully – many have realised how important a role the supply chain can play in realising those sustainability targets.
The supply chain is absolutely one of the most important aspects of being sustainable, and SAP can help not only with the ecosystem element of overall distribution and carbon footprints, but with ethical sourcing, material use, people safety, compliance and regulations, waste minimisation, energy management and the whole sustainability picture; by bringing connected visibility to those elements.
Our sustainability solution helps to operationalise the idea of sustainability, which has traditionally been the biggest challenge.
In terms of bringing the entire ecosystem together for the sake of sustainability, has that process now become more strategic and significant, too? And to what degrees of success?
Unfortunately, we’re entering a tough time to be proactive with investments and big transformations. We all know about the looming risk of recessions, and we can all feel it too. There will be challenges ahead, which might cause companies to pause current digital transformation and broader sustainability initiatives.
What we’re trying to say is that standing still, in the long-term, will cost you more than taking those steps to become more resilient, connected, contextualised and data-driven, now. We have to work with executives to develop a more refined approach and strategy, which still needs to be translated to operational reality. Investments need to be executed to make those pivots a tangible thing.
This is the whole point really, taking lessons from the past few years. The synchronisation of technologies and data, supported by heightened automation, can not only tick boxes around sustainability. These are business benefits that automatically alleviate risk through providing improved visibility and agility. These are core advantages to have, especially in tougher times.
So, coming back to the initial question – if you also go another step further and connect those improved ways of operating to all partners and suppliers, then the network as a whole will be more resilient to whatever challenges are coming up.
Is this focus on continued investment, now, your rallying cry when companies talk about slowing down transformation initiatives, then?
I would say so, but there are also three little letters that are important to bring to the table in every discussion: ROI.
You can talk to an organisation for a long time about strategic plans, resiliency, innovation, etc. But when it’s framed as a business decision and from a perspective of futureproofing financially, then the conversation itself pivots slightly.
That being said, it’s never just a sales pitch. We still approach the subject from all of those metrics mentioned. We just have to emphasise that all of the connected information and groups of benefits that can be generated through a truly digitised supply chain, ultimately ensure a business’s future trajectory and security.
Building on that, is there a ‘supply chain best practice’ vision for the future that you then depict to companies, or that you could describe for us?
We’ve talked about all of the elements of supply chain strategy that need to be digitised, and – simply – companies who leverage SAP’s supply chain solutions and our end-to-end capabilities are better able to optimise those elements. Moreover, they’re better able to handle disruptions, pivot faster, make decisions based on connected insight from within and their surrounding ecosystem, and to be more sustainable.
Our solutions aren’t focused on one area – they span entire operations, and we can augment and upgrade on a bespoke basis, according to each company’s needed. The suite we offer is best in class, modular, can be managed on-prem or in the cloud, and lend themselves to seamless interoperability.
The result is an accelerated move towards a truly digitised supply chain.
That already sounds like a perfect message to end on, but how would you conclude SAP’s strengths in the modern supply chain world?
The bottom line is that partnering with SAP enables companies to build strategies that mitigate risk and champion sustainability. It sounds simple, but given the ongoing stream of challenges to hit businesses in recent years, what could be more important?