David Maloney, Editorial Director, CSCMP’s Supply Chain Quarterly 00:02
The Covid-19 pandemic showed us just how vulnerable supply chains are. Today we face many threats: shipping delays; a lack of workers; failing infrastructure; transportation rates that are out of control; cybersecurity threats; and of course, a worldwide pandemic that is still very much with us. But with each of these threats comes opportunities. Welcome to this limited podcast series from CSCMP’s Supply Chain Quarterly, the Top 10 Supply Chain Threats.
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Today, we focus on the threat posed by failing to digitize supply chains. Here's your moderator for this segment, Supply Chain Quarterly’s managing editor, Diane Rand.
Diane Rand, Managing Editor, CSCMP’s Supply Chain Quarterly 01:45
Thank you for joining us for the latest edition of Supply Chain Quarterly’s podcast series on the top 10 threats to supply chains. Today, we will take a look at the risks of digitization—more specifically, the risks involved in not implementing digital technologies into your supply chain and the risks involved in implementing technology but maybe not doing it correctly. We are joined today by Dale Rogers of Arizona State University where he is the director of the Frontier Economics Logistics Lab; co-director of the Internet Edge Supply Chain Lab; and executive director of CARISCA, which stands for the Center for Applied Research and Innovation in Supply Chain-Africa. Dale, thank you so much for joining us. One of the many research programs that you're involved with is the Internet Edge Supply Chain Lab at Arizona State University. What sort of risks do companies face as they implement new technologies, such as those that you study on the Internet Edge?
Dale Rogers, Professor of Business, Supply Chain Management Department, Arizona State University 02:40
You know, it's interesting, I think. I think this is the time of greatest change in my whole career. There's incredible technological changes—and I'm old, by the way, so I've been around for a long time—and I can't believe how much stuff is happening, and I think companies don't really have a choice. You get left behind very quickly, and truthfully, adopting, I think, autonomous—which involves AI—autonomous digitization, or digitalization, of the supply chain, I think that's pretty important, actually, because the way that you buy software, the way that you implement systems, all of that stuff is changing pretty quickly.
Diane Rand, Managing Editor, CSCMP’s Supply Chain Quarterly 03:35
So is digitization the one good way to mitigate some of those, you know, risks?
Dale Rogers, Professor of Business, Supply Chain Management Department, Arizona State University 03:42
Well, the idea really is that you're going to do new, modern types of systems, some utilizing nonstandard data, unstructured data; better statistics, which really comes through the AI. You're using lots of different tools that are sort of above and beyond the old ERP systems, and, you know, special, what we used to call point systems that sit outside your main system and do all sorts of things, like, for example, reverse logistics, or, you know, different types of supply chain planning, or managing the shelf and using sort of advanced tools that have greater statistical power and are really empowered by greater computing power. All of that stuff is really transforming how we manage supply chains. You can do a lot a lot more sort of automatically. So, I think a good kind of analogy to it is, you know, for 100 years, when you would drive, you would get a paper map, and then for about what, 15, maybe, you would automate it by using Siri and Google Maps and, you know, those kinds of things, and now, very quickly, we're moving to autonomous vehicles. And I live in the Phoenix area, and Google has a division called Waymo, and Waymo has autonomous cars. And a really weird thing that happened to me the other day: I pulled up next to a Waymo vehicle, and there was no driver. So, they were just driving. I didn't know we were doing that. But so...
Diane Rand, Managing Editor, CSCMP’s Supply Chain Quarterly 06:03
So what can be done to mitigate implementation risks for those companies looking to...
Dale Rogers, Professor of Business, Supply Chain Management Department, Arizona State University 06:09
You know, it's not so much big investments. A lot of moving, digitizing your supply chain management is actually not nearly as costly as those giant ERP projects were back in the late '90s, early 2000s. So, it's way different than putting in an ERP, and there's a lot of affordable solutions. But you got to be aware of it, you got to understand it, and, you know, one of the things a lot of firms are doing—I'm sure you're aware of this—is putting in place a CDO—a chief data officer. So, in addition to the CIO—maybe they report to the CIO—but you have a chief data officer that actually is in charge of all the different places where data is. Another big issue around sort of new systems is cybersecurity as well.
Diane Rand, Managing Editor, CSCMP’s Supply Chain Quarterly 07:11
A whole a different topic that we could delve into, for sure. What sort of risks do companies face by not implementing new digital technologies into their supply chain operations?
Dale Rogers, Professor of Business, Supply Chain Management Department, Arizona State University 07:22
Well, so, so digital technologies really transformed the cost. So, there's a lot of things you can do, and you don't need those expensive, clunky, really heavy systems. You can do things in a light fashion. Just think about AWS, or, you know, Microsoft Du Jour, or the IBM Cloud or Google Cloud, and how those revolutionized the cost, because all of a sudden, you can buy it by the drink, and it's really cheap to get a sliver of a server, and you can use different types of software. It's a whole way of operating. So, for example, 10 years ago, if you were starting up a company, you'd have a pretty big chunk of your budget, maybe up to 40%, around the IT costs. Well, today, your IT costs would be expected to be no more than 15% because of, sort of, these advanced digital tools that allow you to get up and running at a very low cost. So, a private equity firm can fund three companies where they used to be able to fund one, because systems are different than they used to be.
Diane Rand, Managing Editor, CSCMP’s Supply Chain Quarterly 08:52
So, how can companies go about balancing those, you know, two risks, you know: the risk of implementing new technology, and it going horribly wrong, and the risk of not implementing the new technologies and falling behind competitors?
Dale Rogers, Professor of Business, Supply Chain Management Department, Arizona State University 09:05
Well, you know, I think part of it is, I don't I don't think you want to implement huge, big systems. I don't think you should be doing that anymore. I think these are smaller, smaller-size systems, you know.? It's kind of like the difference between a car and a 747. You know, I think you can just take a little drink of water, and the risk is lower, but it also is a[n] easier to manage project, generally, because it's smaller
Diane Rand, Managing Editor, CSCMP’s Supply Chain Quarterly 09:42
Have these risks around implementing digital technologies changed in the last 18 months since the beginning of the pandemic?
Dale Rogers, Professor of Business, Supply Chain Management Department, Arizona State University 09:49
Well, there's a lot more remote and mobile. There's a you know, we manage things via Zoom or Teams or something, and so, absolutely, we're using technology in different ways, and we've seen a lot of shifts happen at the same time. So, this shift to e-commerce, which really was big this past year. We see a shift of working remotely. We see incredible sort of constipation of the logistics systems, you know, lots of ships docked outside of the Port of L.A., and difficulty getting trucks, and all these kinds of things that sort of, together, are shifting how we manage supply chains.
Diane Rand, Managing Editor, CSCMP’s Supply Chain Quarterly 10:45
It's really incredible how much has changed in just such a short amount of time.
Dale Rogers, Professor of Business, Supply Chain Management Department, Arizona State University 10:49
I think we're going to see a lot more change. You know, you can really see whether we like it or not, a decoupling from China. So, you know, there was this mass move in the '90s, 2000s, "Let's let's source everything from Asia, particularly China," and we're seeing that really change. Some of it's political reasons, both here and also in in China, but a lot of it is just logistics difficulty. So, you know, I think in the last couple of weeks, container costs, coming into the Port of L.A. from Shanghai, like 20 grand, well, if the stuff in the container's only worth 50, you can't afford to do that.
Diane Rand, Managing Editor, CSCMP’s Supply Chain Quarterly 11:35
It's definitely challenging times for the supply chain industry, but also exciting in a sense that a lot of new things are going to come about because of it. Well, Dale, thank you so much for your time today, and we really appreciate having you.
Dale Rogers, Professor of Business, Supply Chain Management Department, Arizona State University 11:53
Thank you. Nice to be with you.
David Maloney, Editorial Director, CSCMP’s Supply Chain Quarterly 11:56
Thank you for joining us for this podcast from CSCMP’s Supply Chain Quarterly, the Top 10 Supply Chain Threats. We encourage you to subscribe wherever you get your podcasts.