|0:20||Radu||Hello everybody, and welcome to episode number 6 of Leaders in Supply Chain Podcast. My name is Radu Palamariu, and I’m the Global Head of the Supply Chain and Logistics for practice of Morgan Philips Executive Search.
We are delighted to have together with us today Bjorn Vang Jensen, Global Head of Logistics at Electrolux. Bjorn is a global industry figure, studied his career as a graduate of the Maersk Shipping School, and subsequently worked for the Maersk Group, then on the 3PL side for Exel and TNT, and last 13 years as a proud leader of the Electrolux supply chain team. All in all, Bjorn has lived in Asia for the past 30 years, across Thailand, Hong Kong, Japan, Malaysia, Philippines and Singapore. Bjorn, welcome and thank you for joining us.
|1:05||Bjorn||Thank you, Radu.|
|1:06||Radu||So for today we’ll have our normal series of questions coming from our audience and ourselves, broadly supply chain-related questions, talent and career development questions, as well as personal advice that Bjorn can share with our audience.
So without further ado, Bjorn, let’s start on the industry and supply chain side. Tell us a little bit about your success story in Electrolux. I mean, you’ve been with the company for roughly 13 years now—first as APAC Vice President, now as Global Logistics leader.
Let’s say what have been two of your major breakthroughs in your supply chain over these years, and maybe share some insights for our audience in terms of what was the main learnings from it.
|1:42||Bjorn||It’s been a major journey, Radu. It’s been a great privilege, I think, to be part of the Asian logistics and supply chain landscape for all those many years across all those countries, and across all the modes in both the supply side and the buy side.
The supply chain landscape in Asia has changed beyond recognition in those 30 years. I was privileged to work in both developing countries in their period of very rapid development in Southeast Asia in the late 80s early 90s, in contrast, that we were working on a highly developed country like Japan for almost five years, very different kind of supply chain, then back again by now very developed countries in Southeast Asia that were where the supply chain was changing from a very transactional to a more strategic and planned network type of activity. And then finally ending up here on the buy side. 13 years ago with Electrolux was maybe the biggest shift of them all. I think when you come from the supply side, and you fancy yourself a bit of a student of supply chain practices, you can’t wait to get over on the buy side and teach them everything about supply chain.
There was that humbling experience coming into a manufacturing company knowing well enough much about supply chain to defend myself on that score, but really having to learn a whole new world and how people in manufacturing companies think about supply chain and how when you work on the supply side, there’s so many aspects of the supply chain in a manufacturing company that you simply have never been exposed to. There really are not very many easy solutions. But you learn over the years, you adapt, and this is an exciting world, and of course having the supply side background as well, I was able to tie the two together.
Successes… two major breakthroughs in our supply chain. Changes—rather than breakthroughs—changes is of course globalization. When I joined Electrolux, yes, we certainly had a global footprint. That global footprint was much more skewed towards having our own factories in local and regional markets. And with component suppliers who were very close to those factories, they can locate regionally, and of course, they go all the way back through that very rapid globalization from 2004 to 2009. There was a big shift to manufacturing to sourcing components far away in low-cost countries to looking very closely in our own manufacturing footprint, which have been dramatically reduced in terms of numbers. Factories are much more regionalized over all those years. If I have been a part of that success, it’s been in enabling that globalization by helping together with my team and a lot of dedicated players in the company and a lot of 3PLs and couriers—enabling that globalization by creating a strong global logistics network, while at the same time doing that with the team that’s literally spread all over the world. We don’t sit here in a big supply chain bunker in Singapore.
My team of 22 logisticians are literally spread all over the world in all continent. That’s been personally very rewarding for me to see that team grow. Vast majority of the team has been with me from Day 1, and so we have a huge base of experience now on. Frankly there are few things that can surprise us. And very few things I can’t deal with, I’d say while knocking on wood.
So, insights that other supply chain leaders can work from: it’s all about the team that you build, and the trust that you place in the team, and the autonomy you place on the team. You cannot run a globally responsible and globally based team unless you give serious autonomy levels to your team members. And, of course, it goes without saying that that means you need to staff your team from Day 1 with people who are worthy of that autonomy and whom you have a great deal of trust without having to manage them on a day to day basis.
That’s been huge success, and that would be my advice to all the global leaders.
|6:48||Radu||Yeah, thank you for that.
We have a very good question from Abdullah who was talking a little bit about the huge volumes that Electrolux obviously has. So he was saying of course you have significant bargaining power to maintain direct carrier context, but would you say, Bjorn, moving forward there are opportunities also for freight forwarders to add value to the Electrolux supply chain?
|7:11||Bjorn||It’s a great question, and the answer of course is YES.
Let me backtrack a little bit and talk about these volumes because it is true that we do control an enormous amount of volumes especially in terms of container tray. In the last 13 years, if you look at the Electrolux topline, it varies depending on exchange rate and global financial climate—somewhere between 15 and 18 billion dollars a year. It’s a pretty straight line depending on how you scale the y axis, but if you superimpose on that topline, the development in containers that we have moved over the same period. We started 13 years ago with let’s say 12/13,000 tu. This year for the first time we will almost certainly break 200,000 tu. That’s a very interesting two lines to look at, right? Because what it’s really saying is that the topline, it changes a little bit here and there, but there is almost exponential growth in the volumes, and how is that? Well that’s globalization in two lines on a chart, right? And I’m quite sure there are many companies that see a very similar trend. It is quite mind-blowing when you see that chart.
What that means when you get up to this kind of volume, Abdullah is absolutely right. Of course, we have great leverage, and there is more cents for us in using carrier-direct contract, no doubt about it.
The point here is that’s necessarily just whether you can use a forwarder or not, it’s not a function of your volume—it’s a function of your needs, and it’s a function of your sensitivity to price. With the average value of our containers being quite low, we are extremely sensitive to shipping rates—there’s no doubt about it. That would be different from for example shoe manufacturing or electronics manufacturing—not nearly price sensitive because their products are smaller, they’re higher value and so they could carry a higher freight cost. And what we found when we tried to engage freight forwarders in purely moving our containers is that none of them can get anywhere near by hundred and hundreds of dollars per tu. The prices we can get from carriers when we go carrier-direct.
And so, it is very difficult given our price sensitivity to make the case for using a freight forward. In our case, we have also chosen as a company to have a significant in-house capability on the supply chain management side, especially in Asia. What that means is that the scope for freight forwarders is pure FCL—finished products to come in and provide those services to us is quite limited, as many have discovered. And it’s not for lack of trying that they found that Having said that, there are value-added services that freight forwarders provide that we avail ourselves of. We use freight forwarders, 3PLs—call them what you want. For things like consolidation services, consolidation in China, of course, Yusen for customs brokerage, we of course use freight forwarders for air freight. Normally for the expedited freight, we use the big courier companies.
And so, I would say for Electrolux, that’s kind of what the scope is for freight forwarding company. But other companies may be very different.
|11:08||Radu||Yeah. And probably for the contract logistics side, yeah?|
|11:15||Bjorn||Yeah. Oh yeah, of course. Absolutely.
We are mixed, I would say. Significantly by region, we’re a mixture of in-house operations of our distribution centers and outsourced operations. But there are multiple opportunities there, especially in the multi-user space and also on the transport side, let’s touch on that.
If you really look at the global Electrolux spend on logistics as nearest as we can tell—because sometimes it’s difficult to gauge—but we are right there where most modern industrial companies are, so somewhere around 10% of the topline, right? So that would make it probably around 1.5 billion dollars a year. I would venture a guess that 80% of that is road and rail transport, and warehousing—regionally and domestically in single countries, right? So there are huge opportunities there as well for NVOs and freight forwarders to address.
|12:17||Radu||Yeah. And I mean I guess that’s also what we’re seeing in terms of the industry—in general, the three billion industry—more or less all of them or some of them are trying to be more of a solution provider, and freight is a commodity.|
|12:30||Bjorn||Freight is a commodity, and I think you know when I have conversations with freight forwarders around the ocean freight, most of them would say today that it’s not actually the arbitrage on the freight that they made money on, it’s the surcharges and the auxiliary services and the origin charges and the destination charges—it’s not the freight arbitrage.|
|12:50||Bjorn||Because I think if you’re a freight forwarding company today, and you are basing your business model on ocean freight arbitrage, then I don’t think you’ll have a long happy life.|
|13:00||Radu||No. Stormy waters ahead, yeah?
Devyn Heimbeck asked a technology question, of course. Technologies—we talk about it every day nowadays. Technologies for logistics and supply chain. As technology for logistics and supply chain develops, what are the top three benefits you see coming from technology?
|13:21||Bjorn||So again, it is a question that is impossible to answer. That’s a broad answer that holds true for everyone, right? That is impossible.
For me, I think the three benefits from technology that we’re seeing in global logistics is that visibility is getting better and better. There are more and more players out there that are providing visibility on a very granular level for much less money than it used to cost to get that visibility. The problem with visibility of course is that it’s garbage in, garbage out, right? So, if you don’t have the input, the messages from your service providers and your suppliers and your own people—if they are not sent timely or they are wrong, well you know it doesn’t really matter how granular your visibility is, right?
And here I think there are still many challenges particularly on the carrier side. It’s not a problem to get the initial visibility. The problem is as things change, as goods move through the supply chain and something goes wrong, the speed with which service providers update and adjust your visibility to vary greatly. Carriers are—ocean carriers are generally quite terrible at it. 3PLs are generally much better at it.
Yeah, you can go back to the previous question, and say there is maybe a case for using of NVOs and freight forwarders because they do that for them. So that’s number 1: visibility has come such a long way.
And number 2—it dovetails with visibility—it’s risk management, right? Because what we’re doing, what we have been doing—not just Electrolux but all companies that have gone through rapid globalization of course—we’ve done to our supply chain what no supply chain textbook would ever recommend that you do, right? The fundamental tenet of supply chain management is that the closer that you can have to your point of consumption, or the further you can delay the customization before the point of consumption, the more robust and predictable and inventory-light is your supply chain. Of course, what we’ve all done is the exact opposite, right? We’ve exploded our supply chain in the far reaches of the world in search of low-cost or other scale benefits. And with that comes some very significant risk. Your lead times get longer, your pipelines get longer, your smaller accidents at the farthest reaches of your supply chain is amplified beyond all comprehension by the time the consequences has reached the point of consumption.
And so visibility and risk management go hand in hand, but it’s not just about knowing where my stuff is, it’s also managing for example your portfolio of service providers. Again let me go back to ocean freight—obviously near and dear to my heart. The alliances that we’ve seen spring up now that we have reduced choice for people like us, it’s not just about reducing pricing options–it’s also about reducing choice and reducing risk, and you can now sort of cinch yourself that you have actually chosen three different suppliers, but it turns out they are all using the same ship.
And so, risk management—and we’re seeing a plethora of risk management software coming out now as well that aims to help with that. Some of those solutions are better than others. Some are more relevant to some industries than others. But certainly risk management. Let’s just say without these technologies we have now, it wouldn’t be very much fun to try and manage our US supply chain in the wake of Hurricane Irma and Hurricane Holly. But because we have the technology, these things get easier—they don’t get easy, they get easier.
And the third—and I’m a huge advocate of this—the third exciting technology that took ‘em out really is blockchain. Blockchain is in everyone’s mind right now and for very good reason. Supply chain management and logistics are incredibly documentation-heavy undertakings. And any opportunity we can take to go paperless or to move on to a distributed database technology like blockchain—think of the potential to eliminate written purchase orders, think of the potential to eliminate the bill of lading, the seaway bill—all these archaic documents that we really ought to fix a long time ago. I think blockchain holds a real promise. I’m telling everyone who will listen and my own team as well, if you don’t make it your business to learn about blockchain, I will actually question your commitment to developing yourself within the team because it’s coming. It’s going to be big.
|18:31||Radu||Yeah, and that brings me to the point because I think blockchain is going to be a leeway for the next question.
Blockchain is on a lot of people’s lips. A lot of people talk about it. Some people are doing things about it. I think IBM is leading the way. They have announced a couple of significant case studies with Maersk, with Walmart, I saw. So it’s coming, it’s coming faster I think than some people realize, like you said. Let’s talk about briefly more about what—you’ve spoken a little bit about the impact—but what else do you think will change and we’ll see by 2020 in terms of blockchain implications.
|19:17||Bjorn||In terms of blockchain, I think much will depend on where we choose to apply this technology first, right? Like within the other potentially disruptive technology, it’s all about whether it hits the sweet spot from Day 1, and then it spreads like rings in the sand.
Let’s take for example something that excited people to no end 12, 13, 14 years ago, RFID right? RFID was the new black. Everything was going to have an RFID. Every bottle of shampoo in the supermarket shelf was going to have an RFID chip on it. We won’t even have to do anything other than smile at the cashier as we rolled our shopping trolleys out of the supermarket because everything will have already been read and our credit card would have been charged, right? That didn’t really happen, right? What did happen—what ultimately drove the success of RFID were few big players that insisted that their supplies used RFID. Walmart I think led that charge back then. But even so, cost held it back. RFIDs have lived a little bit of a back-water existence compared to its initial huge promise simply because cost held it back. The cost of the chips, the cost of the scanners, the difficulty of implementation.
Blockchain is a little bit different in that there really isn’t a lot of cost and difficulty in implementation. This is not a physical thing where you have to make sure they’re all packaging has now got to be redesigned, to contain RFID chips and all of that stuff. This is about finding that sweet spot. I think it’s all about freight documentation. And if we can start with freight documentation, that is exactly what IBM and Maersk are doing together. They’re trying to attack.
|21:09||Radu||The most painful, the most bureaucratic and painful…|
|21:14||Bjorn||The most painful, the most bureaucratic but also the most slam-dunk application whatsoever. Get rid of documentation because that documentation frequently gets lost today, and let me tell you what—if you lose a bill of lading or if you lose a waybill, the repercussion can be huge and expensive, right?|
|21:28||Radu||It’s a serious problem, yeah.|
|21:31||Bjorn||And it ought to be easy to make that go away. Those who really want to move blockchain forward, two things: first of all, find the sweet spot—a pain point—where blockchain is the obvious solution, and then don’t try and attack the whole world and change the world overnight because it’s not going to happen. Find the—you know, what a famous politician once called—the “coalition of the willing.” Make it happen, and then it’ll spread like rings in the water.|
|21:59||Radu||Yeah, yeah, and I think we are beginning to see it, and of course, as always and with change in general, we humans are creatures of habit, so we don’t like to change. Plus there are some deep political implications, administration implications. There are jobs on the line of course. These people that push these papers around, so they wouldn’t be very happy and supportive.|
|22:18||Bjorn||No, absolutely. That’s also why, I was at a conference once maybe a year ago where Maersk was—they had an example—“we’ve investigated how much paper is involved in moving a shipment of cocoa from Nigeria to Rotterdam,” and they pull out this stack of paper and said, “There is about 37 centimeter tall stack of paper that is ultimately involved from the seller has started selling until the buyer has the cocoa.” And that was a very interesting example.
I don’t know whether there were 300 pages of documents, something like that. But to me it was, yes, that was interesting, and for a wow factor, it’s cool, but that’s not why you’re going to start your implementation then is it, right? Because as you correctly say those 300 pieces of paper, especially in economies in developing countries, you’re right—there is a lot of money, and there are a lot of jobs attached to these pieces of paper. What you need to find is—in my opinion and we need to start implementing it—is from developed countries to other developed countries—countries that probably already have it active between them for themselves a significant liberalization of requirements. So I could see from China to the US, I can see from Europe to the US, US to Europe—let’s start it there.
|23:52||Radu||I think Singapore—|
|23:54||Bjorn||And I think rather than trying to find the biggest beast in the jungle and attack that because they’ll never do it.|
|23:57||Radu||Start small. Singapore I think will be a very important part of that.|
|24:03||Radu||Yeah, you’re right. I mean, we just get a few of these success stories out. Start small, but start, and then it will roll on. Super.
Good question from Nabil. E-commerce is growing, it’s growing everywhere all over the world. What is Electrolux doing in terms of reaching your customers in ecommerce channels?
|24:27||Bjorn||Well, Amazon is being mentioned here, and we are a proud business partner of Amazon in many parts of the world, predominantly in Europe and North America. I think if you’re in Electrolux, you’ll find yourself—or in a similar industry as ours—you’ll find yourself in an interesting… it’s a little bit like a rock and a hard place. It’s very clear that developing an Amazon-like distribution network on your own is a fool’s errand, right? Its costs are astronomical, we don’t have the volume, we don’t have this pure scale game of ecommerce. And so, it’s going to be more of a question of which sources do you bet on? We so far bet on Amazon and on Alibaba.
But the other hard place to draw up against this, we of course remain a big box retailer supplier in a very big way. Our 20 largest customers are all the big retailers in the world, right? Whether it’s IKEA, it’s Lowes, it’s Sears, it’s Walmart, it’s a whole host out here in Asia—Harvey Norman and The Good Guys. There’s a tension in the air because of course we have to be very careful that we don’t anger the retailers by shifting too much products in the ecommerce channel. On the other hand, we have to leverage scale in ecommerce. So there’s a balancing act there, I’m not sure we’re finished calibrating.
But at the root of this question, does Electrolux believe that e-commerce is coming? And I can tell, yeah, we believe ecommerce is coming. We did the utilization at ecommerce, and not just ecommerce in terms of the sales transaction, and obviously ecommerce in terms of the logistics transaction—the physical deliver and the installation—it’s not just about that. Ecommerce has a whole different promise in terms of tying the consumer to you in what we call the 360-consumer journey. If you imagine an infinity loop, somewhere in any given point on that loop, you can put the sale, but after that comes the onboarding, the ongoing experience, the servicing, the addition of services and accessories…
|27:05||Radu||Reverse logistics, returns…|
|27:07||Bjorn||Returns, and ultimately of course hopefully the consumer continues along that infinity loop and comes back to where the next sale occurs. Ecommerce holds tremendous promise for us to develop that even further.
We’ve also made a couple of e-commerce acquisitions, of course. Last year, we bought a small company called Anova. Anova makes suvee cookers based out of San Francisco, and Anova is nearly 100% bid to see under their own steam, and that’s been a tremendous learning for us, working with these people and it’s quite interesting that this small company with 27 employees.
|27:53||Bjorn||27 employees. I know, I know, there are bunch of contractors of course. But 27 or something like that fixed employees. It’s actually they’re almost single-handedly transforming the way people across Electrolux are thinking about how we communicate, how we manage e-commerce… It’s been such a revelation.|
|28:11||Radu||Whoa, that is impressive.|
|28:12||Bjorn||Yeah, very impressive. That is also a very impressive company. Also a very impressive product which you should of course purchase in AnovaCulinary.com.|
|28:21||Radu||Two-second commercial. No, I mean that is incredible actually. What a story.|
|28:29||Bjorn||It is a great story.
|28:30||Radu||We had also Charles Brewer, the CEO of DHL e-commerce in one of our previous podcast, and because you said that ecommerce is coming. Actually, probably ecommerce is already here, and it’s just going to grow. And Charles was saying that the train has left the station. I mean, now you better get on the train or get hit by the train, and there’s no two ways around it.|
|28:48||Bjorn||You’ll be left on the station.|
|28:50||Radu||Yeah, you’ll be left on the station. I mean, there’s this whole deserted street in the US of empty shops. It’s happening at a large scale across the world.|
|0:20||Bjorn||Oh, absolutely. I just spent a couple of months ago in the US actually on a combined holiday and business during which we rented a couple of houses—almost never visited a shop during the time we were there. Half the time, we would order something on Amazon in the morning, and by 1PM there’d be a guy around with a package for Bjorn Vang Jensen. Ok yeah, right.|
|29:27||Radu||U.S. is a great story, but also China, what with Alibaba—I mean the capability of the logistics they have is just phenomenal.
Brita has an interesting question as well. So did you already at Electrolux consider using the empty space in washing machine to fill it with other shipped items?
|29:50||Bjorn||Yes, we did. Yes, it’s a good question, Brita. It’s a creative question. It’s a question we ask actually many years ago. We looked at it 10 years ago whether we could, for example, put smaller appliances inside larger appliances in order to utilize the empty space because it is very true that when you ship 200,000 containers, yeah, you’re shipping a ridiculous amount of air, right?
Imagine chest freezers or whatever, it’s almost—a ratio of 1 to 9, product to air—and refrigerators are the same. Perhaps washers and dryers, not so much, but definitely it was something we looked at. We found it to be impractical.
A) because well maybe this is Electrolux-specific, but the products we had that could fit inside a larger appliance belong to a different division which has—had and still has—a very different supply chain footprint from major appliance, which meant that we will then have to start introducing deep consolidation sensors, redistribution, double triple or quadruple handling. And when you do the trade-off calculation on that versus the shipping cost that you could have saved, turns out that it’s not, it’s a non-stata? And the other thing of course is that when you do stuff like that, the damage—and we actually made some trial runs—the damage rate goes up through the roof, right? Because you know you can’t have stuff that’s rattling around inside a refrigerator. Damage in the refrigerator and potentially also on the product. And it just wasn’t practical.
But yes, absolutely. Good question. Didn’t work for us, might work for others, but for us it turned out not to work for all kinds of reasons.
|31:47||Radu||So Brita, if you’re thinking of trying it, tread with care. Do the case study.|
|Bjorn||Tread carefully. Every time—this is a creative proposal, but at it raises stuff that’s already big in people’s minds which is the question of consolidation. There’s nothing wrong with consolidation. It can save you a ton of money, but you do need to—when you look at consolidation—you have to look at the additional logistics costs that you are introducing to the process, and is there really trade-off there, right? In our case, there wasn’t.|
|32:26||Radu||Matthew Gallagher is asking—back to the freight forwarders. A very straight question, Bjorn. Do you think that freight forwarders are dead men walking? And with all the tech talk, who will pay for the investment before we see the returns?|
|32:42||Bjorn||No, I don’t think freight forwarders are dead men walking. It is a little bit of a similar question we had very early on about, is there room for freight forwarders in the supply chain. There’s absolutely room for freight forwarders. I don’t see—first of all, just because there are large customers who have developed in-house capability doesn’t mean there aren’t a whole lot of SMEs and medium-sized and small customers that don’t have the need for freight forwarding services. We also have need for freight forwarding services. The question is which services do the freight forwarders base their business model on.
Again if they base it on pure freight arbitrage, then they probably are a dead man walking. But I don’t know any freight forwarders today that’s basing business model on freight arbitrage, right? Which kind of brings you to the second question, second part of Matthew’s question, right? With all the tech talk, who would pay for all the investment before we see the return? So Matthew kind of answers his own question. Tech is—technology and providing technology—is the price of entry today for freight forward.
Who will pay for the investment? The freight forwarder. Yeah it’s—look, I’ve been on the supply side. I know that exactly what Matthew is talking about. These solutions are costly, and it is very difficult to create a business case for them because fundamentally the business case rests on building it then they will come, or we hope they will come, right?
|34:22||Radu||Which is a risky—which is a risky thought process…
|34:24||Bjorn||Yeah, but on the other hand, that’s—yes that’s risk that a freight forwarder has to take, but that’s a risk that any business will have to take. It’s a risk that a shipping line takes when they go out and order 11 new ships for a new thing. They certainly hope that there will be a demand. That’s a risk we take when we build a factory, or when we make an investment into a new tool or new technologies.
So if what Matthew is really asking is how can we pay for it upfront? The answer is we can. This is a business risk that you have to take just like any other business. Certain technologies are absolutely the price of entry, I think, no matter who you want to business with. Other more advanced technology, I would be careful with investing in, especially when you get it onto the risk management side of things. I’d invest in that alongside with a customer because there are too many solutions out there. We have not yet seen the market distilled.
|35:24||Radu||Actually we are far from that actually. At this moment in time, yeah.|
|35:27||Bjorn||I’m inundated on my LinkedIn profile with people trying to send me all kinds of tech solutions. And correct, I’m grateful to reach out although I do wish they would reach out like in more focused manner. But this tells me there are so many people out there trying to find you know the next great app. The market is not distilled yet at all.|
|35:54||Radu||Yeah. And just to add to your point, I mean I guess it’s also what I know and from what I am also seeing on my side in the industry, the close of the partnership—and there is a few of this I mean successful, very successful partnerships between 3PLs and shippers in the world—the better and the more you can, they can jointly work together. And of course as a 3PL, you can lock the client for a longer time, and of course there should be a trade-off, but that’s the way to do it. And as you rightfully said, you need to have as a 3PL, and increasingly they need to have a strategy around the solution, and design a solution, and bet on it.|
|36:29||Bjorn||If you are in any type of business now—3PL, manufacturing, or anything else—and you are not spending every single day thinking about how to digitalize your operation now, I think you should do your company a favor and retire.|
Also, on the flipside, it’s a good question: OK, we talked about technology, but before even though we invest millions and billions into digital and new tech and all that, what do you believe other fundamentals—the really core fundamentals of a supply chain in today’s environment?
|37:08||Bjorn||In today’s environment—if you take that to mean a globalized supply chain—well, if you keep going back to it, it’s visibility. You have to have that absolute fundamental. You have to have the EDI capability. You must have some kind of visibility platform. I would recommend going with one of the really big ones because I think a lot of the really small ones are going to go away. And a lot of them are start-ups. Start-ups are risky, but there are many other platforms out there that are equally good. That would get your EDI capability up and running, get your visibility up and running.
And then start thinking hard about your ecommerce platform—how can you service that? If you’re a service provider right now—and again we’re still in Matthew’s question—I believe Matthew is with a 3PL, here we really can talk about being left at the station if you don’t invest, right? That’s one of the things that I learned quickly. It’s amazing that I still have lots to learn when I got involved in the integration of the acquisition of Anova into Electrolux. Very often my team are the first boots on the ground when we made an acquisition simply because—
|38:31||Radu||You have to-—it’s key—the backbone, yeah.|
|38:32||Bjorn||Well first of all, generally, very few people, very few companies we acquire have any objections of getting integrated into our logistics network because it tends to save them tons of money, and we’ve turned into a fine art. So, you can do it very quickly, and you get very quick results.
But I was absolutely astonished when I set foot in Anova and sat down and talked to these people about how they’ve managed to ship over a million units a year, individually, usually by courier from four different fulfillment centers in the world, and the technology that they use to do that was all outsourced. Few platforms—I can’t name them, I really don’t want to you know do free advertising—but countless service providers who have really vet fund on being able to manage the entire the process. I’m also talking about the order taking process, I’m not just talking about the fulfillment—I’m talking about the order-taking visibility, the inventory visibility, the ocean freight, the ultimate picking, packing, delivery, and all the technology it takes to manage that.
What was astonishing to me was that not only that these companies had invested in that technology, but they were essentially giving it away. There was no additional charge for using that. That’s built in to whatever handling fees you’re paying, but you know, granted that there is one, a 3PL could come to a client and say, while we can do all these and then by the way cost-plus basis, we also need you to invest upfront 300 or 400,000 dollars in the warehouse management system, right? That was always a hard sell. Trust me, I’ve had to try to make a few cases—they are very difficult to make. Now we’re seeing business models where a service provider’s, “And that includes by the way ..“ We know that’s the price of entry, that is part of a service offering. We will just have to find a way to get paid through our handling fees. So visibility, EDI capability, and if you want to play, you have to go and find yourself an ecommerce platform that you can provide to your customers. Now—five years ago, it’ll be too late.
|40:52||Radu||Yeah, nobody has five years anymore.|
|40:58||Radu||Final question on this segment: If you were an investor, which supply chain technology-related startup would you invest in and why?|
|41:06||Bjorn||Start-up? That’s a good question. I’d rather not name companies. I would say, I almost answered I already answered the question. I would find those that I really believe in who have already gotten traction in integrating ecommerce platforms that they either provide themselves or that they license to service providers or companies. I think that that’s really got legs. That’s what I would invest in, but as to whom I would invest in, I honestly don’t know.|
|41:45||Radu||You touched the point a little bit as well. There’s a lot of different players still. There’s no few obvious ones.|
|41:55||Bjorn||But I would definitely, in terms of which supply chain technology, I would invest on inequitably ecommerce—integrated ecommerce platforms. Farm to table type of solutions.|
|End of Part 1
Make sure to follow us on http://radupalamariu.com and sign in for the newsletter!