|0:02||Radu||Hello and welcome to the Leaders in Supply Chain Podcast. I am your host
Radu Palamariu global logistics and supply chain practice head for Morgan Philips executive search, and my job is to connect you with global experts taught leaders and executive in all things supply chain and this is episode 8 and it is my pleasure to have as guest Matthias Heutger.
He is the Senior Vice President, strategy marketing and innovation of DHL. In his role, he leads the commercial development and innovation area of DHL cross-divisional unit, called CSI (Customs Solutions Innovation) and he drives the development of sectors strategies for DHL across five focus sectors: Automotive Energy, Engineering and Manufacturing, Life Sciences and Health Care, and Technology. In addition, he also leads marketing and sales, stirring and development for DHL’s top 100 accounts next to the customer centric innovations activities across the DHL divisions. Also part of his customer centric innovation approach, Matthias is coordinating closely the activity of the two DHL innovations centers in Germany and in Singapore which does mean that they get to experiment with the latest technologies available.
Moreover, Matthias’s team is also responsible for the logistics strength radar which is one of the most well documented and informative papers in the industry on the latest trends and technologies. He is also member of the council of Supply Chain Management Professionals and is highly engaged with our industry bodies and best practices associations like SAMA and others as well as member of the supervisory board of GS-1 Germany. Matthias welcome, and it is a pleasure to have you with us today.
|01:21||Matthias||Thank You. Radu.
|1.22||Radu||So let’s deep dive into some of the industry questions that I prepared for you today, and since you are very close to technologies and newest technologies, let me ask you. What technology trend in logistics do you think is likely to make the most impact by 2020?|
|1:38||Matthias||As you know, we published our Trend Radar on a regular basis to actually try and get an answer to that question. So we looked at in a lot of trends in order to know this. My personal belief is right now biggest innovation is having a robotics and automation driven by all the advancement in center technologies, computing technology.
But also related to that every single round, in and out of things in data analytics which I think for me is kind of always has to be looked at jointly. So those two I believe are probably the ones that would have the biggest impact in the short run as we see already right now progressing. Looking ahead, they’re probably others coming up. Everybody talks about blockchain these days which I think there’s still a lot to learn about actually how can we apply blockchain in logistics because it’s a bit different than in the financial institutions, because you have the physical and the digital world. You need to figure out how you marry those two and then take advantage of blockchain which I think is something that we are also kind of looking into.
So what does it mean when everybody talks about it so we need to be able to have an opinion on it but also I think as an exaggeration of analytics, I think it’s really every single round cognitive computing and artificial intelligence which we see there’s a lot of advancement, I would say outside logistics when you think about Amazon, Google, as what we are trying to use the data now into a more intelligent ray in order to predict certain things and also predict certain behaviors, and I think there’s a lot to do when it comes particularly on improving the customers experience by using artificial intelligence. But that is also as indulge to blockchains and artificial intelligence are the two focused topics we will kind of publish over Pod on latest this year or early next year.
|3:32||Radu||Differently, I think blockchain and artificial intelligence are probably the most used buzz words today, but getting in to the more pragmatic side which indeed for now let’s say that the applications of blockchains and artificial intelligence are still developing. So, you did mention about automation and robotics.
Actually, you have recently written an article I think on LinkedIn that was quite well liked and shared and published further about the warehouse of the future and they are still testing a lot about robotics and how they can be used in a warehouse. So, they are practically– how do you see this being more and more implemented and in good case, tactics to share from your clients.
|4:12||Matthias||Yeah. If you look at it traditionally, in most, 80% of the warehouses globally are still completely manual and only 5% are truly automated which was mostly due to the fact that it was in the past very inflexible and radically expensive to automate and in logistics you talk about fulfillment you need to have a certain flexibility if product changes, if sizes changes, if you have certain activities going on, that you need to have certain flexibility that cater for the customer requirement and customer needs. So that’s why automation only worked in very fast-moving environments with very standardized products.
Which particularly now is e-commerce and fulfillment. That is not the case anymore. It’s all like small batches, small picks. So, we have very flexible. But now as new technologies have been coming up and what we call collaborative robots, it’s different because in that case, it’s not either automated or manual, now it’s kind of you can complement the human work with robotics technology. So, we have been testing quite successfully like collaborative piece picking, co-picking, like for example robots like Sawyer and Baxter from Rethink Robotics very successfully so that it sound like we area already rolling out in a quite number of sites now as a support for co-picking activities. The next iteration for me now when you talk about picking is really like self-driving robots that assists in auto picking in different ways, so either it’s like a robot that goes into the different alleys like we work with Local robotics to see how can we reduce, for example, increase efficiency but also reduce the kilometers that people have to walk, which kind of put strain on them as well, so we are testing some robots.
I think the first test we had was the robot did about 30 km a day in the warehouse which is normally people have to walk. So that’s a lot in terms of making the life easier for the employees, but also being able to cope with the additional volumes that we are expecting particularly from e-commerce businesses.
|6:35||Matthias||It also generate some efficiency gains for the supply chain as well.|
|6:43||Radu||Very good utilization and indeed you do have to walk a lot in the warehouse and if that can be improve and save time.|
|6:55||Matthias||The next thing we are kind of looking into is what they put in the market is the mobile piece picking when you think about the next thing is really right now you have like a self-driving robot and you have a picker who puts the pieces from the shelf into the cage of a robot.
The big challenge is really can robots be able to pick themselves which is much harder because simulating the human hand was the most complex thing to do particularly when you have different shapes, different weights, different textures of products. So that’s also part of [our] this year’s innovation challenge on robotics that we put on the market to find start-ups institutions academics to come forward with ideas how can we do that. Because for me the next iteration in order to support the picking process is to have that part of the process supported as well. It’s possible but it’s either too slow or it only work to very few or very specific type of products or jobs.
|8:02||Radu||And again, you need big volumes.|
|8:06||Matthias||But to speed up the development is amazing. The number of startups you see in that space and entering is quite encouraging too.|
|8:13||Radu||Let’s talk a little about 3D printing ‘coz I think that’s another area that has some potential to disrupt segment of supply chain as well. What do you think about that? Any case that is anything you have done around that as well?|
|8:28||Matthias||I think that’s interesting topic. We did publish something on that just recently and we did something again a few years back already and I think there’s a bit of a controversial discussion and I think that everybody saw this will completely disrupts the logistics which I don’t believe it will.
I think it has a potential to disrupt certain industries, but if you think about aviation, aerospace, there’s a lot of spare parts, but in logistics as such I don’t see that. At least not right now, in the next 3-5 years neither. I think there will be some parts, like spare parts certainly that will have big impact and a lot advantages and there’s also a role of logistics provider that could change from shipping around spare parts but rather facilitating the spare parts supply chain by either hosting the 3D printers and can print on demand and then just ship the last mile.
I think that’s probably changing in the spare parts and really high value parts that are not that fast moving, but most of these standard mass produce items are still much more efficient to be produced in a traditional way and they still have to be transported. I think they are still changing in some parts of the supply chain. You see them in some industries and subsectors, but it will not have that massive immediate impact on logistics. I think some people might be predicative few years back. But it is the technology we are looking into and we are experimenting with because it will have an impact in certain parts of our business and it will probably have a bigger impact at some point but I think it’s still more in the future.
|10:07||Radu||And if we are going to jump a little bit back to the artificial intelligence question because it is more and more of a hot topic and I think you’ll have partnerships with Rethink Robotics and they are using it for their collaborative robots. The IBM have Watson. Does this initial case in the supply chain Siemens and Danone. Tell me a little bit about what you guys are doing in the future?|
|10:40||Matthias||As I said, it is also a question where does artificial intelligence start, how does it react to machine learning and undertakes us. We see there is a lot where you can do predictive analytics but then for me the more advance version will be artificial intelligence if you build the model, but for example, some of the Chinese which you typically see as our customer is, how can I better predict demand. So we think about a certain market and in order to be able to optimize my inventory, optimize my supply chain, the better I know, like if I think about car spare parts for example. If I have all the data that I can get my hands on, I could probe, predict in certain areas because the roads are worse elsewhere. I need more bumpers or more spare parts for bumpers and I used at other areas. So there’s a lot of data I can bring in. It is just one part where I think we can look into predictive, analytic, and machine learning to build motors that help us to help our customers in optimizing their demands and subsequently the supply chain.
I also see in airfreight business that I would be able to better predict certain delays in shipment because of certain data that is related to shipping volumes, congestions at airports, weather and other things. Again, it would help me to better manage my supply chain and pre-alert or maybe to put on different routings, alternative routings, to make sure certain critical parts or shipments make it in time. This is kind of intricate things we are kind of looking in to. I think the next thing for me also in artificial intelligence is when it comes to customer’s experience in shopping. So can I better predict where and what customer would shop where so I can better predict my volumes, but also one thing we are looking into is dynamic routing.
So if you think about it today, we have multiple delivery routes planned in the morning. But then if certain volumes come up, what if we were able to do a real-time relocation and may be having a certain advance meet and exchange parcels in order to optimize routing or pick it up elsewhere, which is already a bit complicated algorithm to develop, but this is something we are also looking into. Can we actually create something like that in routing to optimize customer experience and also optimization of the network?
|13:06||Radu||But that would be fantastic. I think, again coming back to the point where artificial intelligence for now is a big buzz word actually. People are struggling trying to make sense in how do we actually use it, and the key point of artificial intelligence is data. Is your data valuable?|
|13:24||Matthias||The first thing is always whenever we see people, everybody talks about it, but everybody realized that the first step is to get good data which is making logistic is a big challenge because it is still traditionally a very paper-based business in many cases. When you think about customs and other kind of paperwork that goes along, that is why many companies are working on first to digitalize that flow of information because that would be the requirement to do anything intelligent use of data.|
|Radu||And real-time. I mean it is two things that go hand in hand.
And you have written also about the sharing economy, like these little body talks about Uber, AirBnB type of models because they change basically fundamentally the way we operate as a society. There is a challenge also existing in logistics that industries tend to be as heavy and key to profitability is also how much do you use your assets and increasing utilization. Do you see a potential for this kind of sharing platforms in a way to be used in logistics?
|Matthias||Yeah. The next article I share about public in LinkedIn is also about that exact topic because I believe we have a publisher report about it just recently. It is not a question of if but how fine, how fast it is going to go.
What I mean is that there are multiple application you can think about. First is the warehousing space. So how can you really truly share warehousing, which again is more about data. If it is visibility about my capacity and empty space across the globe, then it is relatively easy to put it on a platform and see how we do that. In the past, it was always simply warehousing was always fixed pay for fixed time period which for many smaller businesses does not really work, so I think that is why having a more flexible warehouse space and will be kind of experimenting with this role which I think is one way of sharing that more flexibly.
But for other thing, they have already startup. They are looking into how can we achieve use of space within cities better as well. Some people who live downtown, like think about the metropolitan area like Singapore, New York, you don’t have a lot of space in your apartment because it is very expensive. Right? So you need to have some space to start so there might be other people who live maybe elsewhere or may be in offices actually or also in some areas that have space that they could rent out. It is more like matching those two, very similar like what Uber does. Like drivers in demand for taxi ride. You could do the same with warehousing. And they are all I think is like the startup like one is MakeSpace. There are a couple of them already out there that try to match those residence in order to make use of that space that is available better and help those who do not have the space. I think you can easily kind of see how that could work for business in the same way. What we said earlier like small spare parts and some other things where you don’t need massive warehouses but you need small warehouses for a period of time.
|16:36||Radu||It is more about the network than it is about assets.|
|16:39||Matthias||Yeah, exactly. It is also assets. I mean we start with logistics, but is also I think if you think about construction which is already happening to some extent. With agriculture we have seen it already that there a lot of this time of sharing the ideas, the tractors, and everything else because it is expensive equipment that is idle most of the time as if they don’t need it. Construction is similar in how you can better utilize the asset in terms of trucks and vans when they are not used, during whatever nights or during days. In many cases, we have tools during the night, but then this stuff is idle during the day. So how can you better utilize that by sharing with other parties in the ecosystem.|
|17:27||Radu||I think there is also this startup called Flexe in the US. They are doing for the warehousing piece. They are trying to be like that sharing.|
|17:36||Matthias||Like the AirBnB for warehousing.|
|Matthias||Yeah. There are few out there. And I think we would see more and more of that. It is not huge yet. But I think it will increase. And the other thing which I think is common now is more like it is transport capacity and we started our own platform Saloodo which is also like nothing else in the market place to match capacity in terms of world freight. But again, I think that will be a major disruption in the industry when it comes to also forwarding. How can we better match demand and supply in terms of capacity which again artificial intelligence and all the stuff we talked about before is unable to follow that, that you are able to really probably match an automated matching which has been tried already in the past and I think the boundary was when it comes in the national transportation like customs and other regulations and paperwork. Again, that is a lot of works to be done. But there is a lot of potential in doing that.|
|18:36||Radu||Yeah absolutely, and the trend is clear. I think digitalization is happening across the board, across all the industries. If in any industry, you are not thinking about that as one of the chief executive officers, you’re wrong actually. You‘re missing the boat. What is going to happen as you said it takes time and that all these different pieces of the puzzle will come together.|
|18:59||Matthias||I think that is a lot of acceptance. It is a lot of change in management I think is the cry too. Just like AirBnB. At some point, people really have to feel comfortable with letting strangers in your home. In case of boundary, the warehouse is a little bit lower but still you have to have that confidence that whoever is doing that matching, make sure that they all behave well, and it is kind of working and people are being paid. There is a lot of data as well in terms of the acceptance of that new model which I have been managed quite well. But I think that thing is also supported. I think that is something we figure out how can we create that acceptance in the market as well for some of the other assets.|
|19:47||Radu||Mindset change typically is one of the hardest changes in technology. People’s mindset can take longer to change. Since we are in that topic and actually I think it is linked to our next question. What do you see as the biggest challenges that logistics companies in general, DHL in particular, is being faced right now with implementing all these new technologies that are coming through? If you have any specifics?|
|20:15||Matthias||We looked at it and said, can everybody talk about industry 4.0 in Germany of or different names in different areas but I think it is all about, particularly the traditional industries. But companies like us, like GE, like Siemens, like big multinational companies which traditionally are already around quite a while and have very diverse businesses. This whole digitalization topic is a big challenge. How do we make sure that we are ready for that and how do we support our customers on their journey for digitalization? How do we do it ourselves?
Because I think some of the newer companies there was a slight advantage because they started off as digital. Where in our case, we have to transform towards becoming truly digital. It is not just about a bit of technology and data, but the majority is about change management and mindset to really make sure people embrace that change and don’t see it as a threat to them.
Like I said, robotics. It is always debated if it is threat to the employees or not what is interesting where we deployed some of the Sawyers and people loved it. They said well, A because they are quite cute in their face and everything else. People started to take selfies with them. But they also said, “Hey, we were really working for an innovative company,” and if you gave them more security for their job than working for company who doesn’t embrace change. I think it is all about that kind of making people understand that actually this kind of enhanced technologies, it is all about productivity gains of course, but typically always productivity gains came with more wealth for people as well as more jobs. I think it is this whole making people embracing the changes post a big challenge for any company as well as for ours. I think some of them will say the more, homework will we be able to do in terms of fragmented landscapes typically like companies that have grown over years in data. The big thing for me is we get to change the mindset.
|22:34||Radu||Good points that you’ve shared and I think also there is a problem because if you open the media and social channels these days you will always automation. Will robots take your jobs? It is always in that negative framework of robots are coming after your jobs. Are you ready? It’s not exactly like that. It is more about the robots doing the boring part of your job because typically it is the repetitive part of it and then helping you to do the more critical part and you got to do more.|
|23:08||Matthias||I think we should not neglect that there might be change in job profile. Like in the industrial revolution, the same thing. The job profiles might change so there might be different type of jobs that are increasing. Like when computers came along, everybody was kind of scared, probably most people work in IT. So I think it opens up new opportunities at a higher rate than a change to traditional jobs. But it is change at the end.|
|23:45||Radu||If you were an investor, what type of technology startup will you invest in? Which technology do you think will bring the most? It is kind of coming back to the first question. Where will you bet your money on?|
|23:59||Matthias||I think I will bet it on robotics and artificial intelligence.|
|24:01||Radu||Combination of the two.|
|24:05||Matthias||Yeah or maybe one. It depends. Robotics I’m sure will come, just the question which company will make the raise or which technology exactly, but I think that is one area arising our watch. I think also artificial intelligence because there is so much potential there and they are all startup as well, so you need to pick the right one. But I would say those two are the probably the ones. So if I have to pick two, I would pick those two areas.|
|24:40||Radu||In moving to the people segment, because we are in headhunting ourselves and we do need people and artificial intelligence, robots, and all of that side, we will still need very good people. Is the leader of the DHL Innovation Team, obviously you are the forefront of developing new technologies, all done through people of course, so in terms of finding the right skills to take DHL to the next level, where do you feel there is a skill gap at the moment? What is the hardest for you to find?|
|Matthias||Not any more I think. But if you ask the hardest was the logistics was not known as the most innovative and most exciting industry compared to us. So we are really getting the right picking here, so we are ready for young team that needs to, and I think the key here is process. We need to be able to match people that you know, may be artificial intelligence, but there is no robot logistics, so you have to be able to reflect to harbor and deploy this technology in the logistics processes and requirements. I think that is the key thing to have both. That is why in our case, it is hard to find both to be honest. But what we are trying to do is to have teams set up that we have both skill sin there in different people.
So we are hiring people from the market who really bring this technology knowledge and a bit younger and kind of really knowledgeable in some of the technologies like artificial intelligence and things like that, but then kind of have them work together with people in our operations, that is why we called this like our Customer Center of Innovation Approach who really bring that together and tested in the live environment.
So we always need both. We need to be able to figure out, can we have a technology like robotics here. How could I deploy it in the logistics environment? To have those two together is probably the most critical one. Typically, because We were not the most sexy industry in the past. It was really hard to get that talent from the outside because they are much more interested in joining companies in Silicon Valley or elsewhere. That is why when we started doing this whole Logistics Trend Radar and also creating more position to have a lot to gain also some potential from those talents. So it is getting better now. It is still probably harder for us and for other companies to get that talent. We see that the perception of the market is changing. It is also easier to get the talent but still we are still looking for more talents.
|27:27||Radu||It is also about the quality as well as the presence of stories around interesting innovations and technologies and stuff in general, case studies in general. And I think e-commerce has also helped transform that in getting more people aware of logistics. The heart of e-commerce actually is logistics, 90% of it is logistics, 10% is marketing. It is slowly transforming also the perception. It is an interesting place to go. Also, the reality is that there is shortage of supply chain worldwide. We see this in Asia. There is also a gap in Europe, North America. Now, there is always this debate also in terms of should companies trying to develop their in-house talent. Is there some education changes that need to be done? How do we address this?|
|28:36||Matthias||We have 500,000 employees, so we need to make sure that not just we hire new people, we have to make sure that those 500k actually trained at the latest standards and everything else. That is why a few years back, we created this certified program where we train people on certain elements that we feel are important, depending on which area they are rocking in, so they all go through very intensive training which is as much content as it is mindset training on understanding what the customer need, what is the good customer experience, and how do we deliver that customer experience to them, and also then add on new opportunities like what we do here. For example, we have one of those trainings, we try to do it always at the Innovation Center as well. So, we expose people to the technologies and the new development as well, and also we have a very extensive internal Certified Training Program across all the divisions that will help us to make sure that the people kind of stay on top of all the new things that are happening and still deliver that customer experience that we want them to deliver. But I think we have to combine it by also bringing in some talents from the outside and have that healthy mix of both.|
|29:55||Radu||You did speak about mindset and training in raising both the skills as well as the mindset which is crucial. What do you think is the critical mindset that people and logistics company should have in order to lead companies to success in coming years?|
|30:13||Matthias||I think it is changing or it has been changing a thing in the past, probably if we were thinking about seeing logistics, people most of them, the case key was in engineering or logistics experience, which is critical to have in our business because we have to run networks, we have to run operation, but I think increasingly more important becomes this probability to change, and embrace the change, and also lead your people through that change process which probably becomes more critical than the pure technical skill. This is my belief. So I think you need to understand the business of course, but critical really will be to guide through that change and make sure you don’t lose the people by doing that.|
|30:59||Radu||Also, when people go through that fundamentally has changed or shifted in industry that is more and more and especially with startups, there is actually more and more people coming from consulting. The making of the words is slipping into different startups. Finance people are also coming in, and back to the point where if they marry or if they manage to have a team with strong logisticians that we will understand how the networks and design and everything works on the ground. They will tend to make very good combination and it’s the best combination and then they move things forward. So very are interesting to see what would happen next.
Moving to the final segment of the podcast, a little bit about your personal sharing. What’s the best piece of advice that you received through your career. You’re in a senior position in DHL. You have done well for yourself, but what something that you did methodically at the initial stage of your career.
|31:55||Matthias||I think initial state, it is really picking area where you can learn a lot. When I started in consulting as well like in our DHL Consulting Unit which I think was very new experience, a lot of different projects in different areas, so I think it is important to have a readily broad experience across different topics, across different geographies as well. I wasn’t very fixed on “I wanna be here in five years.” It just happened. So if you kind of worked that and you worked on the right topics, but I think it is also important to develop the right relationships with people that can help in your career. Actually, It is as critical as delivering on your objectives and I think stay cool on your career just happens if you do that. So I think if some people really have that, “I want to be executive like this,” and they put themselves on a lot of pressure which I don’t think is needed.|
|32:58||Radu||Typically, things do fall into place and flows sort of.|
|33:04||Radu||Yeah. If you follow a certain printout, it is important to have a certain network and I think it is important to work with the right people. Of course, it is important to have to deliver results and it is kind of a hygiene effect so as to say. You have to do that, but I think if you say open and flexible, that for me was quite critical. Yeah. I just wanna make this one because I think there a lot of people who need to hear it as well and it is the combination of the two, so definitely, you cannot do it without results, but definitely also you cannot do it without network, and I think a lot of people in general kind of missed the networking part which is extremely important because you need to be visible and you need to get your work seen by other people. That’s the method.|
|33:51||Radu||Can you also share with us any kind of supply chain resources, anything that you use to take or to get your information to keep yourself up to date.|
|34:02||Matthias||The only thing you really need of course is our Logistics Trend Radar. Everything is in there. Yes, that is a good publication. I’m not using that one publication. There are multiples. You can use our business reviews that have sometimes very good articles, but also just certain company websites, while exploring, particularly if you are like looking at startups. But I’m more trying it, I’m reading a little bit in it but not too much because I really try also to experience and talk to the people. So again, we have a lot of indirect startup and other companies to really talk to them, favor what they really do. You can read it but you need to meet the people to really understand what is truly going on.|
|34:52||Radu||It is this way that the DHL innovations, sometimes you do organize a lot of events and you’re very actively planting to the communities. Because this is where the ideas flourish and come up.
Final question. If you could give just one advice to a 23-year-old graduating from a university and wanting to achieve a great career in supply chain what would it be?
|35:25||Matthias||I think it is probably more exciting than it ever was, but the question was in very broad terms. I think it could be in production, it could be in logistics, but if you think about more like logistics and supply chain management, I think then pick something that you have a broad learning experience at the beginning, so not settling on that one role right away, but like consulting is one option or in many companies like ours have good training programs where you can experience multiple functions before you have to settle in on one. There are a lot of startups these days as well working in logistics, that is another route to go and then say think about how can we disrupt the logistic industry or come up as the logistic service, leveraging all what is out there and what I said earlier. Of course, joining our innovation team. I think that is a nice mix up if you‘re doing some cool projects and technologies but stay very close to the operation. I just won’t set it too fast on the, “I wanna have that one fixed role,” but rather find something that is a bit broader that gives you a broader learning experience.|
|36:35||Radu||And more exposure to get a sense of different things.
Matthias, thank you very much for your time today. Thank you for the sharing.
|36:43||Matthias||Thanks for having me.|
|36:45||Radu||For the case studies that you presented as well as for the good stories and we will catch you soon. Good luck and I look forward to the next DHL Radar.