Supply chain management is like juggling a hundred balls at once. From considering where your raw materials are coming from to how that new smartphone is ending up in your pocket, it’s enough to make even the most experienced supply chain professional’s head spin.

But today, hosts Scott Luton and Greg White welcome expert guests from Boston Consulting Group (BCG), Laura Juliano, Dustin Burke, and Paul Goydan, to help us make sense of this chaos.

Listen in to this episode to learn all about the promise of AI, and how it’s not just a buzzword, it’s a game changer for global supply chain. But we’re not just talking about algorithms and robots here. We’re also discussing sustainability, cost, new technologies, leadership, and so much more. Join us as we take an optimistic look at the future of supply chains, and discover exactly what is needed to ensure great supply chain success.

Intro/Outro (00:03):

Welcome to Supply Chain Now, the voice of global supply chain. Supply Chain Now focuses on the best in the business for our worldwide audience, the people, the technologies, the best practices, and today’s critical issues, the challenges and opportunities. Stay tuned to hear from those making global business happen right here on Supply Chain Now.

Scott Luton (00:33):

Hey. Hey. Good morning, good afternoon, good evening wherever you are. Scott Luton and Greg White with you here on Supply Chain Now. Welcome to today’s show. Greg, how are we doing today?

Greg White (00:40):

I’m doing even better now that I know how to put Do Not Disturb on my Mac. Yeah. Great.

Scott Luton (00:45):

It’s amazing. I’m looking forward to this. It’s amazing what we learned end of pre-show prior to the live.

Greg White (00:51):

It is.

Scott Luton (00:52):

All right. So, folks, we’ve got a big, big show teed up here today. We’ve got several business leaders, a couple of them, in particular, back by popular demand, and those two have brought back up. We’re going to be diving into a variety of supply chain topics ranging from some of the macro factors in play today, how things are changing, and especially how organizations and business leaders are successfully navigating through it all. And, Greg, we’re going to take a brief trip back to the future, so stay tuned, folks. Greg, it should be a good one, huh?

Greg White (01:22):

Always with the ’80s reference. Yeah, I’m looking forward to it. I mean, seriously, there is one particular topic I may have looked ahead at a couple of questions. There’s one particular topic that’s very near and dear to my heart, so I can’t wait to talk about that.

Scott Luton (01:36):

I can’t wait either. And, Greg, you read the future like nobody else’s business so we’re ready to dive in. Let’s go ahead and welcome in our trio of featured guests here today. Laura Juliano, Managing Director and Senior Partner with Boston Consulting Group. Laura, how are you doing?

Laura Juliano (01:52):

I’m excellent. Thanks for having me here today.

Scott Luton (01:54):

You bet. Great to have you back. Had a lot of fun last time. Dustin Burke, also Managing Director and Senior Partner with BCG. Dustin, how are you doing?

Dustin Burke (02:03):

I’m doing well. Thanks, Scott.

Scott Luton (02:04):

Welcome back. Welcome, welcome. And hey, as I mentioned, y’all brought back up here today, Paul Goydan, Managing Director and Senior Partner also with BCG. Paul, how are you doing?

Paul Goydan (02:15):

I’m great. Glad to be here.

Scott Luton (02:16):

Wonderful, wonderful. So, Greg, we have got one heck of a trio, right?

Greg White (02:20):

Yeah. Welcome aboard, gang.

Scott Luton (02:22):

All right. So, let’s do this. We’re going to get to know y’all better on the personal side, but I want to kind of establish a couple things for our audience that may have missed Dustin and Laura on the last show, and, of course, may be new to Paul. So, to our audience, you should know that between our three guests, we’ve got decades of practitioner experience. Greg, I’m trying not to break the 20 year rule, but we’re going to have to here.

Greg White (02:44):

Thank you. Never confess to more than two decades, that’s my rule.

Scott Luton (02:48):

That’s right and we try to honor that. But this trio had been doing big things across the industry for some of the most recognizable companies for years in a variety of sectors and functional areas, from operations to technology, sustainability to procurement, to industry 4.0, and the list is on and on. I want to share just a couple of their roles, again, to level set to help you kind of understand who you’re hearing from. So, Laura, you served as North America Leader for the Operations Practice Area for BCG, is that right?

Laura Juliano (03:17):

That’s right.

Scott Luton (03:18):

Wonderful. And, Dustin, you served as BCG’s Global Leader for Supply Chain AI as well as the Co-Leader for the Manufacturing and Supply Chain Practice, is that right?

Dustin Burke (03:27):

That’s right, Scott.

Scott Luton (03:28):

Wonderful. Love the manufacturing area in particular. And, Paul, you lead BCG’s Global Cost Team, and some may refer to you as the cost emperor, is that right?

Paul Goydan (03:39):

I’ve been fishing for that title. It’s not official yet.

Scott Luton (03:43):

All right. Paul, you’re going to be a great addition here. Greg, again, quite a cast of characters. And one of our favorite aspects of this is rubbing elbows and sharing expertise from folks that have been there and done it, executive practitioners. Greg, is that right?

Greg White (03:59):

Yeah. I love hearing from the folks that are meeting with tons of companies that are doing business with companies that are doing business a dozen different ways. It’s an incredible way to cross-multiply, populate, whatever, the knowledge that they can gain from different companies and different industries sharing with one another.

Scott Luton (04:19):

Well said, my friend. All right. So, everybody buckle up, a lot to get through here today. All right. Before we get into the business topics and supply chain topics, again, we want to give y’all a chance to get to know Laura, Paul, and Dustin a little bit better. And, Laura, I want to start with this, so in your previous appearance with us, we already found out about your legendary race car driving skills. But I want to ask you about this today, because a little birdie told me you’ve always wanted to learn more about true crafts like carpentry and metalworking and the like. And if you ever hang it up from a BCG standpoint, maybe that’s what you jump into. Where does that interest stem from?

Laura Juliano (04:58):

You know, it’s a great question. Growing up I was always the kid who wanted to take things apart, put them back together the same way, a different way, get into the arts and crafts. I also loved the show How It’s Made and could sit there all day watching toothbrushes come off the manufacturing line. And so, just the tangibility of those crafts have always been fascinating to me. The combination of creating something and needing to be precise with also the free flowing creativity is really a space that – I mean, I’d like to say I do that in my life when I create a beautiful deck to go present to the client, I get a little bit of that itch scratched. But one day I hope to take a little time and dive into the crafts a bit more.

Scott Luton (05:41):

I love that and I bet you have got lots of ways to improve the operations and processes of making stuff. We’ll circle back on that later, perhaps. Switching over to Paul, now, Paul, Greg and I are a bit intrigued here because we understand you began your career in show business. Tell us a little bit more.

Paul Goydan (05:58):

Yeah. I mean, you look at this face and you say, “Gosh. What movie did he star in? Check IMDB.” It’s actually got a supply chain angle, and I didn’t make this up. My first paid job was racing, duplicating, and mailing video tapes to broadcast television stations to distribute T.V. shows, particularly home improvement T.V. shows. So, Laura and I have a lot in common here, I learned everything about home improvement by watching the show I was duplicating at 1X over and over and over again for minimum wage. And that’s how we used to get T.V. to you, we’d mail it out and someone would broadcast it over the air. Though they kept me in a closet as a startup employee. But that’s my short stint in show business.

Scott Luton (06:38):

Paul, I love that. Greg, you having a little show business background as a prior DJ, does that resonate with you, Greg?

Greg White (06:46):

Well, you know what resonates with me is when I was a very small kid, there was a T.V. station very near us and we used to go dumpster diving for their videos, for the actual tapes that the shows came on. And I was astounded because I didn’t know they came on tape. I thought just magic occurred like on the walk in the chocolate factory.

Scott Luton (07:06):

I love it. I love it. We’re uncovering some blind spots here today.

Greg White (07:11):

Well, that was an overshare, wasn’t it?

Scott Luton (07:13):

Not at all. All right. So, moving right along, I really wish we had a couple extra hours here, but we got a lot to fit in. Dustin, now this is intriguing. This didn’t come up in your Buzz appearance, you’re a former Jeopardy contestant. You got to tell us about that experience. And did you meet Alex Trebek?

Dustin Burke (07:30):

Yes, I did meet Alex Trebek, which was probably the highlight because I did not win on Jeopardy, to be clear. It was just something I always wanted to do. People told me I should give it a shot, and I got some email, I must’ve been signed up that I could come to New York and try out. So, you go and you spend a day at a big hotel in New York Times Square, in this case, kind of doing tests and go subsequent rounds, and then you’re on some list and they say they might call you. They did and I made it work to go out to LA for my 22 minutes – to be exact – of fame. And I will say it was tough, but it was fun. Timing is the trickiest part, the timing of that buzzer. So, if anybody listening gets a shot, practice your time.

Scott Luton (08:14):

All right. So, we’re learning a lot here today just from the frontend. And by the way, the late great Alex Trebek, man, doing it his own way for a long time. What a loss. All right. So, thank you, Paul, Dustin, and Laura.

Scott Luton (08:27):

Now that we’ve kind of gotten a little bit of your personal journeys out there, Greg, I want to dive into the topics at hand. And, Laura, I want to start with you. You know, when we survey global supply chain management, the whole landscape today, you got – I don’t have to tell anyone here – inflation, geopolitical challenges, the talent issues and scarcity, and all other sorts of macro factors that are in play. In your view, how have supply chains changed today, Laura?

Laura Juliano (08:54):

I mean, we are coming out of a period of nearly unprecedented volatility across supply chains, all of the factors that you just mentioned. And finally over the last year, there’s been a little bit of a breath that could be taken, although we’re still in a state of uncertainty, it certainly does not stack up to the volatility of a few years ago. And so, what we’re starting to see is that companies are taking a look, a good hard look at their supply chains and determining what bad habits were created and where inefficiencies exist. And we’re seeing companies start to move towards more cost-effective supply chains that are more digitally enabled, have higher sustainability, at least potential in the future, if not putting in place today, and are doing that with a more diverse and happier workforce behind them. Those are the major changes that we’re seeing. It stems from the need to be better prepared for the next set of risks that are coming down the line, need to take advantage of new technologies to remain competitive in the market, and also the need to manage costs so that they can fund some of the larger strategic goals that companies are setting for the future.

Scott Luton (10:05):

Well said. We’re going to dive more into the cost factor in just a second. And I love the happier workforce mentioned, because – Greg, we talk about this a lot and I’m going to come to you in a second – as leaders are embracing these new technologies that allow their teams and their workforces to find more success and easier days, that’s a big part of the name of the game as supply chains are changing and evolving today. Dustin, same question, what do you see in terms of how supply chains continue to evolve?

Dustin Burke (10:32):

Yeah, good question. I think definitely the return to cost discipline, as Laura mentioned, is important. And in many ways that’s kind of back to what supply chain has always been about. And we had a few years where that focus was lost, sometimes out of necessity. So, that’s kind of back to where we’ve always been but how we get there is all new. And that’s largely because, traditionally, when we look to reduce costs, we’re looking at who do we not need anymore in the plant, in the D.C., in the offices, and that’s very tough to do now. Unemployment is low. It’s hard to get and retain the best people. And so, there’s a maniacal focus on taking out wastes through digital technologies and just improving processes. Rather than focusing on getting rid of people, we get rid of wastes. I think that’s really important and that’s new. And then, the one other twist maybe, which is increasing in prominence versus prior years, is a heightened focus on geopolitical risks and thinking through different scenarios of how that could play out and would impact our supply chains.

Scott Luton (11:33):

Well said, Dustin. All right. Greg, based on what Laura and Dustin shared there, your thoughts?

Greg White (11:39):

Yeah. I think it’s a really delicate balance. Some companies went overboard. Peloton bankrupted themselves with excessive costs to reach unrealistic and unsustainable speeds. And other companies have done similarly but not with the same damage necessarily. And I think one of the things we have to recognize is that there is a key balance here. There are other factors than costs in supply chain. And I think because we recognize that one of the key factors during the disruption, that Laura described, is the fragility that we know is out there, we just don’t know where it is. So, we have to, as Dustin said, be very careful about where we cut costs and wastes, particularly in the CPG brands and manufacturing industries that’s out there because they have not advanced their processes because they haven’t had to until recently. With all of the awareness that consumers have of the supply chain now, there’s no place to hide. I’m not going to pick a brand, but Brand X can’t blame Target for being out of stock – like they used to when I worked at Target – and because now the consumer knows that everyone in some way is at fault, so since there’s nowhere to hide, everyone has to be much, much more aware of carving excess costs and not cutting into costs that creates additional risk.

Scott Luton (13:01):

Well said. And that waste thing, to our listeners, we should really be thinking, most of y’all know this, but there’s all sorts of different types of wastes. We’re not just talking about tangible wastes in factories, all sorts of different types from over processing to how we under utilize talent, you name it. So, what a great call out on the frontend, folks.

Scott Luton (13:19):

Paul, I want to switch over to you. So, with all of these factors, just the few that we’ve already named, because there’s plenty others that are shaping the global industry, how can supply chain leaders in your view effectively take that cost out when they need to while maintaining that balance, continue to drive and balance these priorities like digitization, sustainability, resilience, you name it? Cost Emperor, tell us more.

Paul Goydan (13:43):

Yeah. Thanks, Scott. And I’ve got to start by saying there’s actually two new players on the field and they’re going to relate to not just opportunities, but some challenges. We’ve got a real focus on sustainability and climate, and that’s leading to things like possible carbon border adjustments. But we also find companies that really go into their Scope 1 and 2, by managing the sustainability of their products, they actually take cost up. It forces you to take a hard look at energy usage, energy cost, how you source your energy, and then total waste in product design just to name a few. And so, that new player on the field is highly disruptive, but forcing us to take a hard look at some things that maybe we hadn’t looked at before.

Paul Goydan (14:25):

And then, we have another real challenging player on the field, and that’s industrial policy. And none of us have grown up in an era with industrial policy. It’s been out of fashion for generations. We focused on free trade. And now we have governments telling us where to make things, and what tax rates, and what subsidies, and what incentives are available, and who you can trade with for items and components and raw materials, and that raises your cost. And so, I think the other unique thing, supply chain executives have to get into policy and they have to be calling the D.C. office more than ever and saying, If I get this raw material from this country and do this to it, what happens from a policy perspective and does that raise or lower my cost?

Paul Goydan (15:06):

And so, we have all the classic levers, but I think if you really look at sustainability, our research shows there’s a 15, 20 percent opportunity that doesn’t just make your products more sustainable, lower carbon footprint, but can actually drive cost out. And then, we have to look at policy as both an opportunity, but as a challenge now that we actually have the EU, Asian countries, the United States that have industrial policies from microchips to energy components.

Scott Luton (15:29):

Paul, well said. And, Greg, I’m coming to you here. We’ve talked on previous shows about how compliance is your friend and they can be such a great resource for some of the same issues that Paul is bringing out but, Greg, what’d you hear there and what would you like to share?

Greg White (15:43):

Well, I mean, that is important, compliance, industrial policy, whatever you want to call it, it’s all a set of ground rules, guidelines that determine who you will interact with. And as if supply chain isn’t complex enough, I’m going to whip out my buddy Jack Freeman’s favorite term combinatorial analytics. There are literally millions of conditions that you have to consider with every single interaction in the supply chain. And when you add the constraint of compliance to it, then that further complexifies – let’s say that, Scott.

Scott Luton (16:21):

Sounds good.

Greg White (16:23):

Well, we can invent words here.

Scott Luton (16:24):

All the time.

Greg White (16:25):

I mean, it really does add to the complexity of the scenario. So, as Paul was talking about, you have to watch the cost, but you also have to watch your compliance. Because Scope 1 and 2, that’s N3 and N4 coming, all of those are SEC regulations for any company over a $100 million or $74 million in revenue or that is a public company. They have to know who every player in their supply chain is and most of them don’t. About 90 percent of them don’t know who 90 percent of their trading partners are because they’re two, three, four, seven tiers down in the supply chain, so that creates an incredible level of complexity and yet they are accountable for those parties.

Greg White (17:10):

And it’s about more than sustainability, as these guys can tell us. I know because countries like Germany and Europe in general are getting heavy on the S of ESG, social governance. And, of course, the U.S., the CBP just put in place about a year ago this notion of rejecting containers that are from Xinjiang province, let’s say, if you cannot prove that no slave labor was used to produce those goods, and they retained 130,000 containers over the last year. So, the impact, the cost, and the risk that’s impacted by all of that is unbelievably complex. I hope everybody is as confused as I wanted them to be by discussing it that way, but that’s sort of the point, isn’t it? I mean, that this is a very, very complex scenario.

Scott Luton (17:59):

That’s why you got to lean on experts as resources. Paul, I saw you kind of nodding your head for a second, one last comment before we move forward.

Paul Goydan (18:07):

Yeah. The other thing that really comes to mind that we came out of this period where it was get your product, get your product, get your product. And then, all of a sudden, we see Brand X having Christmas decorations for St. Patrick’s Day because they didn’t quite get it right. The other topic I hear coming up a lot, and it goes back to waste but it also drives cost, is quality. We’re getting a lot more questions. We’ve rewired, we’ve changed, but now we have to get back to the fundamentals of driving quality and doing it without a high degree of waste. And so, I think quality management as a discipline is also coming back. And the last couple years it would just get it done and now we got to step back and say, Are we meeting specs? And we’ve seen some big settlements where manufacturing and supply chain didn’t quite get it right and companies have had to pay some pretty big fines. I don’t want to make it a compliance thing because you want to give your customers quality product every time, but we came out of two years where we just give your customers product full stop and they’re happy.

Scott Luton (19:01):

Right. Just get it out. Excellent point. Hey, Laura, I’m going to get to you before I move to Dustin. We’re going to take a look at the future a couple times in this conversation. I saw you nodding your head a lot as we walked through that last question, your quick thoughts, Laura.

Laura Juliano (19:13):

Yeah. Just one fact that I heard recently that really stuck in my head when it comes to sustainability and cost and the connection between the two is the fact that, typically, the first 40 percent of the benefit in reduction in carbon footprint can come for a company at cost neutral or reduced costs. And I think that is such an important point to make because even if you only get to 40 percent reduction in your first wave, you can do that without needing to invest additional dollars. And I think that concept is still fresh and needs to get circulated.

Scott Luton (19:48):

Excellent point. Excellent point, Laura. Okay. We’re going to be moving fast, folks. We got a lot to get into. Dustin, before I ask the question about more future looking, any quick comment on that last part, especially about industrial policy and whatnot?

Dustin Burke (20:04):

Yeah. I think we put a lot out there that people need to think about. And in particular, Greg, you’re right, the combination of scenarios people could look at is overwhelming, but I think that’s also a good connection to a little bit of a conversation about how we use AI and supply chain because it actually is literally beyond the capabilities of any individual’s brain to figure out all of the different scenarios and what it means.

Scott Luton (20:29):

Well said. We just had a deep dive conversation yesterday, Dustin, Paul, Laura, and Greg. We look forward to to sharing more on that.

Scott Luton (20:39):

All right. So, Dustin, let’s get our shades on, our sunglasses on and look at the future. I want to press fast forward for just a second. Yes, Greg, I live perhaps too much in the ’80s and ’90s but, hey —

Greg White (20:51):

I don’t think that’s possible, Scott, honestly.

Scott Luton (20:53):

I’m with you. So, Dustin, you were just mentioning AI, it’s a great segue, what will be different about supply chains in the future, especially in the wake of AI, automation, and many other advancements we’re seeing and using?

Dustin Burke (21:05):

Yeah. So, I’m going to stay on that AI theme. When it comes to using technology, software, what we might call digital in supply chain, we see a lot of momentum. Most companies are doing something. There are a lot of use cases across the supply chain and our data shows that most have done something particularly on demand planning and forecasting. Now, companies are kind of struggling on how to scale that, get the value that they need, but everybody’s on the journey and they’re looking at other use cases. True AI, though, is at an earlier stage. About 70 percent of companies think that using AI will help them make better supply chain decisions, but only fewer than 20 percent already are. And so, I think that shift from the rest of that, maybe, 50, 60 percent of companies who think it’ll be valuable and aren’t yet getting them on board and having them figure out how to make better decisions with supply chain, that’s kind of what’s going to be new in the future. And we’re going to experience that, you know, for the next 5, 10, 15 years as this plays out in operations.

Scott Luton (22:09):

Well said, Dustin. All right. Greg, I’m dying to hear your take on what Dustin just shared there.

Greg White (22:14):

I think about a statistic that we’ve heard often, which is, despite how much people spend on technology for supply chain, still over 90 percent of them use Excel to solve problems in the supply chain. So, if we could just train AI to use Excel, that would be huge. No, of course, there’s a huge opportunity out there. You know, AI’s really smart. It learns all the time, literally all the time. While we’re sleeping and resting, it’s still learning, right? And its abilities are incredible. It was ten years ago now that Facebook and Google had to shut down two of their AI technologies because they were communicating on ad sales, they created their own language that their creators could not understand.

Greg White (23:01):

So, to give you an idea of the ability of AI, it is significant. And when you pair that with the complexity that we were talking about, Dustin, it makes so much sense for something that is unemotional, never forgets, is always learning. Never has a bad day, runs like it’s on four cups of coffee, day, night, and weekend, Dustin. And can consistently solve the problems that are a challenge for the human to maintain a level of consistency with, so I think that’s where the power really comes from.

Dustin Burke (23:35):

Yeah. I think that’s right. Just one thing on that, Greg, is, it’s not going to get to the point I think anytime soon where we’re pushing a button and turning our supply chain management jobs over to the kind of master AI, just as we’re all trying to use software and digital to do things we do in supply chain better, but we have to interpret it, I think that’s an error or that one doesn’t make sense. I know that’s the number on the report. We still have to use our brains, our judgment, our experience, talk to our teams, get out there in the field, on the floor, and see if it’s right. We’re going to have to develop a new skillset on judging and interpreting results, let’s say, of prediction engines, for example, from AI, because that’s a new skillset. It won’t all be right.

Scott Luton (24:18):

Well said, Dustin. All right. Paul, I’m going to come to you in a second for cost, but Laura, again, I think there’s a lot of thoughts running through your mind when we think about AI and what the future of supply chains look like. And by the way, I don’t know if we have any Office fans in this panel here, but, folks, if you haven’t seen the episode where it’s Dwight versus the online computer selling paper as part of the office, you got to check that out, it’s so funny. And, really, it’s a little bit of a snapshot of where we all are now in 2023. All right. So, Laura, your quick thought in terms of the future of supply chains in light of all these technologies.

Laura Juliano (24:53):

Yeah. I’m actually even more excited today about where we’re going with AI technology than three, four years ago. And let me explain why, tell a little story. So, I have the pleasure of sitting on the board for the Houston Food Bank, which is the largest food bank by distribution in the country. And by the way, if anybody wants to give their kids or friend a crash course in supply chain, take them with you to go volunteer at your local food bank. I mean, it is such a microcosm of distribution and warehousing and also you can help people. So, that’s my little plug.

Laura Juliano (25:28):

But four years ago, we invested a project with the food bank to look at their digital and automation roadmap. And the results of it were that the vast majority of use cases were not going to work for a nonprofit where the investment and the timeline to get the benefit out of that investment, the case didn’t close. And so, aside from some of the data use cases, we sort of put it on the shelf. Now, currently, we’re re-engaging to look at generative AI and the potential use cases that it can bring to an environment that has a low investment threshold, but also heavily manual processes, very dedicated workforce, a young workforce ready to learn, and the possibilities are endless.

Laura Juliano (26:15):

This new wave of generative AI, the ability to bring down the upfront investment, the ability to create tools that are very bite-sized and against very specific use cases that can actually reduce that waste – that Dustin was talking about quickly – and make people enjoy their jobs more and be more productive, and then for a business like that, at the end of it all, help more people and distribute more food. So, I get very excited with this latest wave of the AI technology that actually makes it more accessible to a wider range of uses.

Scott Luton (26:51):

Laura, I’m so glad you brought that up. I think that’s one of the things I’m excited about – Greg, we’ve talked about this before – is all the great missions, noble missions and nonprofits and how they can leverage these technologies and help more folks, which is just a beautiful story in my mind. All right. So, moving right along, we’re jam packing a lot in this hour here today. Paul, come back to you and back to cost, really. Costs, Paul.

Paul Goydan (27:15):

I got to hook into Laura’s conversation on food, and then I’m going to come back to cost.

Scott Luton (27:21):

We can always talk food here, Paul. You’re always welcome to talk.

Paul Goydan (27:23):

But I was at a CEO dinner in D.C. last week and there’s also a large charity that did a lot of food distribution, food accumulation, but they were also dependent on government grants. And we had a really interesting pop of the house executive conversation. AI was enabling her employees very lean organization to write more grants and better grants to go get funding from the government. But then, I was in D.C., you have to talk to the government, they said we’re starting to see grant volume go up, so now we need to use AI to re-grant. And we had this very interesting thought exercise of what happens when the AI generates something that the AI reads, do we get better outcomes? And that is where, I think, the role of the employee will change, the role of the workforce will change, but it’s going to be so much more important. And that was just one little thought example we did, a bunch of CEOs, over a glass of wine and a nice dinner saying there are going to be unexpected and unintended consequences of all this.

Paul Goydan (28:22):

And I’m going to bring it back to cost, Scott.

Scott Luton (28:24):

Paul, hang on one second, I got to throw this in. I love that story, by the way. I love that story. Greg, we had Mike Griswold with Gardner on a previous episode a while back, and he got a lot of attention when we talked about bots will be our customers – I think he probably said it a little bit more eloquent than that. That’s what Paul’s story kind of reminds me of. Greg, your quick comment before I get back to cost and Paul.

Greg White (28:47):

Yeah. Imagine one AI grading another AI’s report, right?

Paul Goydan (28:54):

Yeah. Something like that.

Greg White (28:56):

You can totally see that coming. But also to Laura’s point earlier and Dustin as well, people have to be involved at these stages, because as we talked about the other day with the folks from Noodle, for instance, ChatGPT only has data up to September 2021. If you ask it what’s going on right now, you need someone from right now to be able to tell you that. And additionally, if there’s no data, new ideas, there’s no data for AI – at least not a large language model – to assess for these kind of things. So, we’ll always be, well, for the foreseeable future, be over the top of these things kind of grading the grading of the other AI’s report making those final decisions.

Greg White (29:41):

But think about the power of that also, because we’re in effectively full employment right now and we’re talking about volunteer organizations that have difficulty getting volunteers, so what a great use for it in a situation where we can’t find people to fill these jobs for AI to take those jobs on anyway. Certainly, technology has always been good for the jobs that are dark, dirty, dull, and dangerous that people either don’t want or shouldn’t have. But in addition to that, the consistency of AI is huge. And then, where there’s not enough data or it’s a brand new idea, that’s when humans intervene and do what we do really, really well.

Scott Luton (30:21):

Well said, Greg. All right. Dustin, as the global leader for supply chain AI, I got to give you the last word here before I move forward with Paul.

Dustin Burke (30:29):

Sure. I think the thing I would emphasize is we’ve talked about skills, we’ve talked about kind of use cases, also it’s going to mean different partnerships, so how do we get things done in supply chain? The option of we’ll solve it ourselves doesn’t necessarily work but also just like taking advice from a traditional software vendor. No. This is like you’ve got to get different viewpoints, bring different things together, and customize a lot of solutions. The good news is AI makes that more possible than before, but I think this is going to be an exciting new space.

Scott Luton (31:02):

I think we all agree on that. Well said, Dustin. All right. So, Paul, I love that story you shared that was worth the price of admission, for sure, you and Laura both. Cost is always needless truth, always important to manage, of course, in global supply chain. But I dunno about y’all, the vibe, it’s becoming even more a priority it seems like in recent times. First off, two point question, Paul. Why is that? Why do you feel there’s a more bigger priority? And how would you suggest business leaders make those trade-offs between cost and things like climate concerns and sustainability initiatives? Your thoughts, Paul.

Paul Goydan (31:40):

To your first question, 2021, we saw an amazing ability to pass price on to consumers. And pricing power, which is typically 1 to 2 percent a year peaked at the end of 2022 at about a 12 percent year over year change. And so, we had a period where costs were going up, but we were able to pass on to consumers. And now, we’ve hit the wall. We’ve hit a cost of living crisis. You see it with strikes, you see it in Europe, we’ve hit a cost of living crisis. The pricing power has actually gone negative. The last quarter, if you look at economic data, pricing power has gone negative, it’s about minus 0.5 percent. And that means we’ve got to really look hard at our cost to serve our cost to produce. And a lot of that’s coming out of supply chain. If I look at China, last time I looked at it, their productivity adjusted labor costs, just one input was going up maybe 17, 18 percent. And you see that replicated in every country, particularly where there’s manufacturing, labor intensive processes, productivity adjusted labor cost, wage growth has exceeded inflation. And so, this combination of complexity, rewiring your supply chain, disruption, and negative pricing power now, we have to be lean. We have to be efficient. Society is expecting it. And that puts a duty on supply chain executives to manage waste, manage distribution, really optimize what you’re doing, not carry too much inventory, but still be able to serve people wanting on the shelf.

Paul Goydan (33:08):

And that, I think is why in the last quarter, two quarters, we see CEOs saying, I need to take a hard look at cost because it’s the lever left. And a lot of those CEOs, when I talk to them, they say, “You know, Paul, we just went through a pandemic, we went through a war, we went through an energy crisis, we went through people working from home, and their list goes on and on, and we haven’t looked at our cost base end to end in about two or three years or more.” And now it’s time, it’s time to step back, it’s time to look at it, and we have to do it.

Scott Luton (33:36):

Massive opportunities, for sure. Greg, your quick comments before I move forward.

Greg White (33:41):

Well, pricing power, that was the great euphemism hall instead of gouging, but it has sort of inverted. Of course, we’ve all seen it. I mean, we’re probably all feeling it individually in this room or we’ve at least seen it around us. But, yeah, I mean certainly times have changed. And as Paul said, when times are good, supply chains got to get more goods. When times are bad, supply chains got to get more goods for less money. And if anything happens to go right, thank goodness for those sales folks. Of course, the pressure always reverts to supply chain even as some of these decisions are arguably merchandising, which I have argued for decades – just over two decades – that merchandising is a supply chain function. Even as a former merchandiser myself, I would argue that. Because the design of products goes into things like their cost and their sustainability, and that has traditionally been a merchandising task. But in any case, we need to look at this problem holistically inside and outside of the enterprise all the way down and through the customer to returns, and quality and things like that, to make sure that we’re optimizing where to take those costs out of. And I keep going back to what Dustin said, it has to be from waste. It has to be from waste.

Scott Luton (35:06):

Well said, Greg. Back to the pricing euphemism and gouging all that stuff, I tell you, we got almost a buck off per gallon of gasoline from our local supermarket the other day. And we basically threw a parade. It felt like a holiday. I felt like I hit the lottery or something. It is crazy. All right.

Scott Luton (35:24):

So, back to the future. Cost and future are big themes here today, for sure, amongst other things. Laura, I’ll come back to you here. One big important item we want to keep in front of our audience, our industry, you name it, speak to why the future leans on, depends on diversity of people and leaders to be successful for all, especially amidst all these uncertainties and complexities, the combinatorial complexities – if I’m using that word right – that we’re all talking through here today. Laura, your thoughts.

Laura Juliano (35:56):

Yeah. Diversity has to be part of the answer, not just because we’ve tapped out traditional talent pools and need to diversify where we’re going, not just because the customer base that we’re serving is more diverse than it has ever been, but also because – tying this to our prior conversation – technology is allowing us to remove the manual and labor part of easily replicated, repeatable part of the work that has to get done. And what’s being left over that has to be touched by human beings is the piece that requires different perspectives, different backgrounds, different thoughts and creativity to come into it.

Laura Juliano (36:39):

And if you think about something like writing a bunch of supplier letters or reviewing a set of resumes, in the old world, it was okay that every single person at your company reading and reviewing these sets of resumes had the same background, looked the same, and had the same education because 90 percent of what they were doing was checking the box, looking for keywords, ensuring that they hit a set of requirements in order to be in the talent set. Nowadays, we’re going to have technology to do that 90 percent of the work. And the last bit is going to be about taking individual human being perspectives, bringing them together, coming up with the best answer from diverse and different backgrounds. And it’s really amplifying the need to have that variety in the workforce. Not even to mention the fact that we’re all going to be forced to do it because, as we’ve said a few times, unemployment is extremely low. We have to find and tap into additional talent pools and it’s going to improve the way that our organizations run.

Scott Luton (37:48):

Well said. Wholeheartedly agree, Laura. Greg, I think this is one of the things – well, not I think, I know this is one of the things that’s near and dear to your heart, you referenced on the frontend, our collective hearts, your quick thoughts on the power of diversity and the necessity of diversity in global supply chain.

Greg White (38:03):

Yeah. Well, I mean, let’s take an AI perspective on it, right? If you want better answers from AI, you don’t use a bigger brain, you use more brains, you more use more AI models to give you different perspectives on the problem. This whole notion of GANs, Generative Adversarial Networks, is where they argue to the right answer. I’m not saying we need to argue, but having those different perspectives gets you to the right answer much faster. So, I think that’s critical. Honestly, I think that it’s been a generational problem that I think we’re getting through. I really do feel like we’re getting through it. I think a lot of us, regardless of our background, have suffered that because it’s more of an elite problem than it is any other sort of demographic problem. And we’re starting to break through into and sort of pierce the elite veil and recognize, even get the elites to recognize, the value of varied perspectives is incredible.

Scott Luton (39:01):

Pierce the veil, that sounds like a beautiful poem by Flannery O’Connor or something from —

Greg White (39:07):

I got a legal term, Scott, and you don’t want to hear it.

Scott Luton (39:10):

Okay. All right. We’ll keep driving it. It’ll make any attorneys out there mad. All right. So, before we wrap, Paul or Dustin, I’ll give y’all a chance if y’all want to weigh in on the importance of diversity now and the path ahead. Paul, I see you shaking your head. Do you want to add a quick thought there?

Paul Goydan (39:27):

Laura really put the ball on the team nicely to use a baseball analogy. But I see every day in the teams we have at BCG when we solve client problems, the best ideas come from the most unexpected places. And I think as the world faces more complex problems, more globalization, we’re going to find that the companies that have the best ideas are going to be the companies that win. And they’re going to be the ones with the teams of different backgrounds and experiences coming together. I mean, we’ve even seen it in getting our teams back together physically. I don’t want to open the can of worms and pierce the veil, so to speak, into remote working, but we’ve seen it when we get our teams together. And that diversity, I’ve seen it ring true in a lot of what I’ve done in the last couple of years and I think it’s going to be a powerful force.

Scott Luton (40:12):

Well said, Paul. And finally, Dustin, when we talk about democratization these days the small and nimble can compete against the big and powerful like no other time. And then, also, one of the things we know is that technology is also democratizing and letting folks more and more from all walks of life play in the game and win and succeed. Your final thought on the power and necessity of diversity, Dustin.

Dustin Burke (40:38):

Yeah. I think whenever you’re facing a rapid change, then speed of learning is really how you win. And speed of learning comes from having the best talent. And that best talent, as Laura said, it doesn’t necessarily mean it’s the same people who have the same background, who’ve been working in this one function for a very long time, came from the same schools, look the same as everybody else. It rarely does mean that. We have that shifting demographically in younger generations. And so, we need to find a way to basically win in the war for talent, not only against other companies, but everybody, I think probably listening, works in supply chain or manufacturing or procurement, but you have colleagues down the hall in HR and marketing and sales and finance and you want some of the people they have. And we face the same thing here in BCG, so we have an internal war for talent, too, to make sure people make the right decision and work in operations. And people need to do that in their own companies, too, and that means show them that anybody, regardless of background, if they have the grit, the ability to learn and drive, results can succeed in supply chain and operations.

Laura Juliano (41:48):

And I think just one other point I’d be remiss not to mention, most of the leadership of our companies in supply chain and operations look like us on this screen right now. And that needs to change, and luckily is moving in that direction. But I think one thing that we as leaders also need to commit to and recognize is that our organizations are not set up for people who don’t look like us to succeed. And there’s a lot of learning and change to our structure that we need to make sure that racial and gender diversity can continue moving in the right direction.

Scott Luton (42:23):

Well said, Laura. Diversity in all of its forms and definitions is so important. All right. I really wish, Greg, we had about, I don’t know, six more hours maybe and a few beers.

Greg White (42:34):

[Inaudible]. Oh. You mean for these folks?

Scott Luton (42:37):

Yes. Next time. Next time. But we want to make sure, as we start to wrap up today’s conversation, our audience, our global audience can connect, knows how to connect with Paul, Dustin, and Laura. And, Laura, let’s start with you. So, Laura Juliano, Managing Director and Senior Partner with BCG, how can folks connect with you, Laura?

Laura Juliano (42:56):

LinkedIn is the easiest way. Follow me there and I look forward to hearing your feedback and connecting with you.

Scott Luton (43:01):

Wonderful. Thank you so much, Laura. Great to have you back, our repeat guest. You, and Dustin, and Paul knocked it out of the park. Dustin Burke, also a Managing Director and Senior Partner with BCG, how can folks connect with you?

Dustin Burke (43:14):

I’ll say the same. So, LinkedIn, find me there and I’m happy to get back to anybody with interest.

Scott Luton (43:19):

Appreciate that, Dustin. And I really enjoyed all of the optimistic view we left the conversation with, it’s so important, the power of a positive mindset that would drive change. And, also Paul Goydan, Managing Director and Senior Partner with BCG, how can folks connect with you, Paul?

Paul Goydan (43:36):

Three for three. I’m on LinkedIn.

Scott Luton (43:39):

Man, Greg, we should have invented LinkedIn. Man, we missed an opportunity there a few years back. Well, Paul, great to meet you. Great to have Laura and Dustin back as repeat guests. We love a repeat guest. Paul, as advertised, we were talking about the pre-show that Laura and Dustin set the bar and they said Paul was going to go somersaulting over that bar and you did. So, we had quite the trio here today.

Scott Luton (44:04):

All right. Greg, based on the conversation here today, I’ve got my 17 pages notes for real today, but if there’s one thing from what Paul, Dustin, Laura, what we all talked about here today, if there’s one thing that you think folks got to keep front and center, what would that be, Greg?

Greg White (44:23):

I all said it very recently that the companies with the best ideas are the ones that are going to win. And the best ideas come from that collection of minds. I mean, whether you’re focused on cost, whether you’re focused on sustainability, the confluence and combination of all of those or the combinatorial analytics of all of the things in the supply chain, the ideas that companies generate and the ones that they can put into action are the ones that are going to help them win.

Greg White (44:52):

Look, we’ve passed the time when companies can stand pat and hope for the old normal back, can hope for normal of any kind back. I think if we’re honest with ourselves, and Dustin as a supply chain professionally, you have to live this your whole life, this notion that disruption of the supply chain is new is false. The supply chain is in constant disruption. The only thing that has really changed, really changed since the pandemic is that people know what supply chain is and they care. I don’t know if Dustin’s noticed this, but I know Scott and I have, when you say you are in supply chain pre-pandemic, people’s eyes glaze over and they walk away and talk to somebody interesting. Per-pandemic, they’re like, “How about that toilet paper shortage?” or “Where are all the containers” or something like that. And now, that awareness cannot be escaped, and that awareness has exposed all of us who wanted a seat at the table, all of us who wanted to be recognized for our exploits, all of us who have great ideas, and all of us who are performing and, unfortunately, in some cases underperforming are open to the minds of every single consumer because they know how supply chain works. And that is what’s really changed. So, those ideas with that thought in mind is that there is no place to hide, there is ubiquitous awareness of the supply chain, those will change the game for companies going forward.

Scott Luton (46:22):

Well said, Greg. And back to one of your earlier points you made there, like the Monkees song, Last Train to Clarksville, the last train to normal has already left the station and ain’t coming back, folks. All right. What a pleasure to have these conversations. Folks, we encourage you to connect with Paul, Dustin, and Laura on LinkedIn as they said. Also, you can check out what Boston Consulting Group is up to at bcg.com. It’s just that easy.

Scott Luton (46:45):

Well, hey, two of our listeners, all of our listeners, hopefully y’all really enjoyed this conversation as much as we have. Hey, the key though is you got to take these truckloads of brilliance that Greg, Paul, Dustin, and Laura all delivered here today. Take something and put it in the use. It’s all about action. Deeds, not words. With that said, as we wrap up here today, Scott Luton challenging all of our listeners on behalf the Supply Chain Now team to do good, to give forward, and to be the change that’s needed. And we’ll see you next time right back here at Supply Chain Now. Thanks everybody.

Intro/Outro (47:17):

Thanks for being a part of our Supply Chain Now community. Check out all of our programming at supplychainnow.com and make sure you subscribe to Supply Chain Now anywhere you listen to podcasts. And follow us on Facebook, LinkedIn, Twitter, and Instagram. See you next time on Supply Chain Now.