“When you think about empowering people, whether it be on the shop floor or in the field doing service, or what have you, what you’re really trying to do is enable them to make the right decisions based on real time content.”

Robert Merlo, Vice President of Digital Supply Chain Solution Marketing, SAP

“This is not the time to panic. In, in chaos, there’s opportunity.”

Mike Lackey, Global Head of Solution Management – Digital Manufacturing, SAP

No one would deny that supply chains have always been complex, but they have grown steadily in strategic importance over the last few decades, contributing as much to brand value, customer retention, and corporate reputation as any other part of the business. 2020 has presented many challenges (and we’re not even going to mention toilet paper again…), and yet the greatest opportunity/challenge is still before us: Industry 4.0.

Robert Merlo is the Vice President of Digital Supply Chain Solution Marketing at SAP, responsible for marketing the SAP Digital Supply Chain solutions globally. Mike Lackey is SAP’s Global Head of Solution Management for Digital Manufacturing.

In this conversation, Mike and Robert share their thoughts on a number of topics with Supply Chain Now Co-hosts Greg White and Scott Luton:

· How industry 4.0 is broadening the scope of each production facility beyond its physical walls out into the supply ecosystem

· Why we can’t just be focused on collecting ‘big data,’ we need to be focused on collecting the right data and putting it into the hands of the people who can use it

· Some of the positive trends and amazing innovations they are seeing in companies today

Intro (00:05):

It’s time for supply chain. Now broadcasting live from the supply chain capital of the country. Atlanta, Georgia heard around the world, supply chain. Now spotlights the best in all things, supply chain, the people, the technologies, the best practices and the critical issues of the day. And now here are your hosts.

Scott Luton (00:28):

Hey, good afternoon, Scott and Greg white with you here own supply chain now welcome to today’s show. And so they show Greg, we’re going to be talking with business leaders that are fueling industry 4.0, and they’re going to be sharing a lot of their key takeaways from a wide variety of initiatives right here with our audience. This should be a great show. Don’t you think?

Greg White (00:48):

I guarantee it, first of all, both really talented cats and, and great personalities. So I know you’re going to get to hear what they think. I agree in doubtedly.

Scott Luton (00:59):

and you get a Greg white guarantee. So we’ll see a money back guarantee, but Hey, we’re going to be working really hard to increase your supply chain IQ. You here right here at supply chain now. So more to come on that just in a moment, but Hey, quick programming note. If you enjoyed this episode, be sure to find us and subscribe wherever you get your podcasts from.

Scott Luton (01:17):

You don’t want to miss conversations like this. All right. So Greg, with no further ado, let’s bring in our two esteemed featured guests here. We’ve got Mike Lackey, global vice president of solution management, uh, digital manufacturing with SAP and his colleague Robert Merlow, vice president digital supply chain marketing with SAP Mike, Bob. Good afternoon. Good afternoon. Thanks for having board. Yeah, thanks for having us. Definitely. You know, we really enjoyed our prep conversation the week or two back love to hear all the different conversations and initiatives. I’ve been a part of with a wide variety of business leaders across sectors. And I think that’s where our audience is really gonna see a lot of value in today’s conversation. So y’all ready to get started. Yeah, let’s go. Let’s go. So before we get into work, Greg, we want to get to know Mike and Bob a little bit better so that our listeners can enjoy, um, you know, their background like, like we have.

Scott Luton (02:15):

So for starters and Mike, we’re gonna start with you tell us, okay. Tell us where you’re from and give us, you know, give us an anecdote about your upbringing.

Mike Lackey (02:23):

It’s pretty basic. Yeah. I grew up in a suburb of Atlanta out in Lawrenceville, Georgia. I’m fortunate to, uh, go to Georgia tech and got the education I wanted to here locally and, um, you know, married a local girl. So, uh, you know, Georgia born and bred, um, you know, the, the education at Georgia tech opened a lot of doors for me. And, um, my, my biggest fear in life was I would always be stuck, you know, in Georgia, you know, in Lawrenceville. So I’ve been very fortunate to travel the world, meet with companies, you know, on a global basis and, uh, really expanded my horizon. So, uh, yeah, I’ve been pretty fortunate to have good roots

Mike Lackey (03:00):

And being able to take advantage of Delta airlines and all the good things that Atlanta offers to be here. Love it,

Scott Luton (03:06):

Including, uh, most of the time the world’s busiest airport that can put you anywhere in a short amount of time, anywhere in the world, you can pretty well get direct,

Mike Lackey (03:16):

You know, driving up well in rush hour, about two hours in the morning, I get there about 40 minutes.

Scott Luton (03:23):

Well, I appreciate you sharing that and let’s switch gears for a minute. Uh, Bob, tell us where are you from? And, you know, give us the same thing. Give us a good story from your upbringing.

Bob Merlo (03:33):

Well, as Mike knows, um, I was born in st. Louis and I’m a very diehard st. Louis Cardinal fan, um, have been for a very, very long time. My dad actually played with both Joe Garagiola and Yogi Berra. Wow. I’m very proud of that. And, uh, I actually played a little minor league ball myself, but never quite made it to the bigs, but Hey, that’s okay. Um, spent a lot of time in Colorado. I grew up in Colorado and skied and a lot of winter sports. I’ve been all over the place. I mean, in terms of where I’ve lived, I’ve moved about, let’s see, seven times, I think. Um, this is my second stint in Dallas, Texas, and I love it here. And I’m not going back to the snow. I’ll tell you that.

Scott Luton (04:20):

So one quick follow up question before Greg dives in deep to your professional background, Bob, what position did you play? You know, as you’re in the minors?

Bob Merlo (04:29):

Well, believe it or not, I used to be pretty fast. So I played center field wow.

Scott Luton (04:36):

In our field. All right, man. We’re going to all right. So we’ve got, we’ve got some sports programming on the tap. We’re gonna have to bring Bob back around for that. Greg.

Greg White (04:44):

Immediately went there. All right. So I guess we could count minor league ball as part of your professional background, but let’s leap ahead just a little bit and talk about how, how each of you and Bob let’s have you go first, but how each of you landed here, um, with the positions that you have in kind of shaping, uh, the solutions that we’re, we’re looking at.

Bob Merlo (05:07):

Well, I did quite a number of different startups, but I’ve also been at Autodesk for example, and I ran their PLM environment from a marketing perspective for several years. But the thing that really brought me to SAP was the acquisition of a company called right hemisphere, who I worked for and helped co-found. And it was a really interesting 3d sort of modeling tool solution that we use for engineering, but also for engineering to utilize, um, those models downstream. So we had a lot of assembly operations as Mike, very well knows that you could do three D visualizations of and even maintenance and repair operations. So once SAP bought the company, I, whenever I was with a startup, I usually left right after somebody would do something like either we’d get acquired or we’d sell off the technology or what have you. But I stayed at SAP now, 11 years, unbelievably, um, because I really love the culture here. And I really love what we’re able to do in helping our customers really improve their operations.

Greg White (06:13):

Very cool. So as you’ve gone through your journey, Bob, other than I have to keep going back to baseball, Scott, but as you’ve gone through your journey, give us kind of a pivotal epiphanal or aha moment that you’ve had

Mike Lackey (06:27):

You mean Greg, when he got to the big leads SAP, how the modern,

Greg White (06:33):

Before you hit the big leagues. Yeah.

Bob Merlo (06:37):

Um, I’ll tell you, it’s interesting. A pivotal moment for me in my life was when I realized I actually wasn’t good enough to play professional baseball and I had to take another route. Um, and it was hard for me to swallow, but it did sort of shape myself. I mean, when you were playing with a team and it’s interesting in the minor leagues, because most of the time you think of teams as you know, being supportive of each other, when you’re in the minor leagues, everybody’s trying to get to the major leagues. So there are no longer so supportive. They kind of hope you strike out or you drop the fly ball or whatever, because they’re in competition with you. But it really helped shape the sort of drive and competitiveness that I have always carried with me throughout my career.

Greg White (07:26):

So centerfielder is also have a very distinct psyche. Every ball is theirs until somebody else proves It’s not so like,

Bob Merlo (07:35):

just like a shortstop.

Greg White (07:36):

Right. So, um, so Mike, how often does Bob take your work off your plate? I’m just getting, tell us a little bit about your dad.

Mike Lackey (07:48):

Yeah. He used to be faster when he was fast or he took a lot more work, you’re going to find out, you know, mine’s real simple, right? My dad was engineer and he was, he probably influenced me so much just the way he thought and attacked things. We, I grew up on a farm, so we were mending fence all the time and he always had a way to make it, make it simple. So, you know, I went to Georgia tech, I got industrial engineering degree. And then I spent my first 12 years in a factory as a manufacturing engineer. So I learned from the ground up. And then I got the opportunity to go to a startup that wrote software, matter of fact, engineering software that automated what I used to do, you know, time studies and things like that. And, uh, you know, and then that company kept growing.

Mike Lackey (08:36):

And next thing I know we’re a part of SAP and, and, you know, I’m just one of these lucky guys that, uh, I’m still doing what I went to college to do and make an impact. And, you know, I have street cred because I grew up in a factory and, um, that’s why I love what I do and the impact that you know, that Bob and I get to make every day is we’ve been there, done it, and now we’re innovating at a level to help the next generation, you know, achieve that success with that digital transformation and, you know, for the next five, 10, 15 years.

Greg White (09:06):

So, same question for you extracting the baseball question, give us an idea of, of your pivotal or epiphanal or life, even life changing moment. I mean, what really helped kind of shape your worldview or, or how you have attacked your role in business today?

Mike Lackey (09:26):

Yeah, it was, it was when I left manufacturing and moved into the soft software side, you know, with that startup the speed at which we weren’t trying to solve a problem for my, for that one plan or, or for that one company, you know, we were looking at solutions that cross multiple industries, multiple customers, and I got exposed to so much, you know, innovation and technology. And this is challenges that it really, you know, brought a much bigger thinking that I then I had when I was just in the factory, right in the factory, you’re like three to 5%, you know, efficiency gains and you’d had a good year. And now we’re trying to, you know, talk about jump steps here, double digit enhancements across the four companies and, uh, to deal with companies that have 400 plants. Wow. You know, it’s a, I really love the backing that SAP can provide with the resources when we get into those customers that have serious and in business problems that we need to solve. So yeah, making that jump from, Hey guys, I want to pay you for that knowledge you have on the shop floor. And by the way, we’re a startup and we have a release out, here’s your sleeping bag. Nobody’s going home tonight. So yeah, it was a big change for me.

Greg White (10:39):

So you’re going home every night. Well, and you touched on this and this, I think this is, this is something we, we’ve all we all want to ask. And YouTube both have a really macro view of the marketplace. So Mike, let me start with you and say, give us your bird’s eye view of some of the macro things that have happened this year. Obviously COVID, um, trade, trade challenges, um, Brexit, other things that have impacted the marketplace and just kind of give us a macro view of the dynamics that you’ve seen.

Mike Lackey (11:14):

Greg. I think you, you know, you started that path here, right? I mean, what, two, three years ago, Brexit, did anybody see that, that come on? And then as soon as you got through Brexit here came the trade wars and you know, in Paris and they’re not going away, guys. I mean, you know, they’re a way of doing business. We’ve got to prepare for, then the pandemic hit. You thought you had control. Now, if you look the last 10 years, everybody’s been really been investing in streamlining driving costs of the supply chain. So what happened when these pandemics happen? You know, you’ve got a single threat, um, and it wasn’t bringing the workers back safely that, that shut down the plants, it was the plants run out of material. You didn’t have the materials to manufacture. So know that changed. That changed a lot. Um, the conversation that I’ve had Mike before, COVID-19 80% of my business was a book.

Mike Lackey (12:09):

I sold the restaurants. You know, I I’ve manufactured in bulk. I showed the bulk. I, you know, my processes were based on, you know, large fulfillment and today 70% of my business is consumer the grocery store. You know, I had, I have to think that, well, that’s simple. No, you’re, you’re packaging the smaller, your, your distribution channels, two totally different, you know, the way they did business six months ago, isn’t cutting it today. So the speed at which we must move, let’s take, let’s take bicycles. You know, last December you went to the store, get a bicycle where you a bicycle, no problem stores full of, try to bicycle buy a bicycle lately. These guys are trying to figure out is this a hockey stick, and it’s going to continue, or I’m just on a spike and it’s going to come down. How do I invest?

Mike Lackey (12:59):

Where do I invest? Um, right. What are the large, um, you know, uh, home health, uh, treadmill company, their biggest competitor bought their manufacturer cause their third party and everything, their supply chain got turned upside down. So, you know, these are challenges that are happening in during this time. And companies are looking at, uh, the best example that I’ll turn it over to Bob, you know, in January, I mean, I’m talking with the customer just a month ago. They said in January I had 900 retail stores. By the end of this year, I’ll be down to a hundred. Okay. When you go to online, you don’t have as long, a lead time and visibility, your demand, it changes faster. They can cancel orders really quickly. Um, so when I had 10 to 14 days to fulfill, I got two to four today. So how you’re able to have agility and resilience into your manufacturing operations to respond to that is huge. And it’s not just to keep number one in my market. It’s about survival today. And I think that’s the biggest change. This mindset about, you know, my business changing in the boardroom. My process has got to change to support it. And Bob and I have this conversation and written a lot of blogs and white papers on that. But that’s the big thing,

Greg White (14:20):

That’s a really, that’s a really stark and impressive and accurate, uh, analysis is it’s not even about, Oh, outreaching the market these days. It’s about survival. Right? And, um, we’ve seen, we’ve seen, we have hundreds of the hundreds of these discussions. So we’ve seen that frequently. So Bob, tell us a little bit about what you’re seeing, give us some insights that maybe Mike didn’t cause I know you’re not competitive in any way. So

Bob Merlo (14:55):

Well, first of all, my kid on very many really good points, um, no doubt about it. What I would add to that is that this affects the entire enterprise. It’s not, even though supply chain. People think about supply chain is having goods on the shelves at a grocery store or to Mike’s point having a bicycle that I can buy. It’s far greater than that. The reach is far broader than that. Um, you are impacting all of your business and all of your suppliers and the ability to get things through your process and out to the marketplace has been just in incredibly straining. And people have had to make some very tough decisions about where they’re going to invest in their business. And it’s hard to be seeing your business in a sense, going down in revenues and perhaps even up in costs and saying, well, I actually need to invest.

Bob Merlo (15:58):

I need to invest in my manufacturing operations. I need to automate it. I need to make it more digital. I need to invest in my logistics networks. I need to invest in the intelligence of my products. All of that is a real challenge to do when you’re in the downside of an economy or in the, um, in your business. But if you don’t do that, when it does come back and it will, then you’re going to be faced with a different challenge. How do I meet that demand? How do I meet all of the requirements that customers now need and expect to have very quickly and with high quality

Scott Luton (16:36):

And the risks as both of you are speaking to are huge. It’s one thing to make these decisions when you’re not facing survival. Um, like you’re both, you’re both speaking to, but let me ask you, um, you know, as, as Greg alluded to, we have tons of these conversations, they’re all fascinating. We’ve certainly picked up on a, a much heightened sense of urgency when it comes to industry 4.0 and acting on the very real opportunity that these business leaders and organizations have. What, and Mike, let’s start with you. What, what do you see behind this quick move to embrace industry 4.0, perhaps like never before

Mike Lackey (17:14):

We know industry 4.0 has been around since about 2014, it was an academics study. You know, SAP was there in those days. We, we, we help with the use cases. What was driving it right now is the customer demand is changing so fast. Right. And you have so many options. I mean, do you really look at the brand or do you look, Oh, that thing, that brand got five thumbs up, I’ll give it a try. Right? So how do you, how do you keep that customer for a lifetime it’s really changed? So, um, you’ve gotta be faster to respond. Lot of sizes are getting smaller. I mean, you used to do, okay, I’m going to do mass production and I’m going to have, you know, a few options you can change, right? Not today, you know, customers want what they want, how they want it, and they want it when they want it.

Mike Lackey (18:02):

And if you can deliver someone else will. So, um, you know, this whole digital transformation, that industry 4.0 driving is a new level of automation to the shop floor. Um, work, I hear it over and over. I can’t find workers. I was down in South Georgia, kind of in the middle of nowhere. And with a big plant, I go, you probably have plenty of work, cause this is no, nobody wants to work the midnight shift. They’d rather work at the convenience store, you know, so they can be at home all the time. And so when I look at their warehouse was what they did fulfillment and replenishment at night, totally automated AGVs robots everywhere. So how do you maintain that? So, um, that’s the big pride we’re seeing it. So you can’t, as your business changes, you can be more responsive and responsive to that customer.

Mike Lackey (18:57):

I had, I had a customer tell me that advanced signal last about 72 hours. Then after 72 hours, he goes to, okay, I don’t care where you get it from, and then it’s gone. So it’s not like I’ve got two weeks to respond. I’ve got about 72 hours to deliver. You know, I have capacity of 20,000 units per month. I got exactly 72 hours to build 5,000 or I’m going to lose 60% of that order. That’s why you just got to seize the opportunity. Exactly. Carpe Diem. You gotta, you gotta seize it. That’s right. And I think that’s driving a lot of

Scott Luton (19:39):

Mike, uh, Bob, same questions. Give us some, give us some insights along those lines. Why now, why is the sense of urgency? So strong beyond what Mike has shared,

Bob Merlo (19:49):

As Mike mentioned, you know, the market is changing and you see manufacturing companies being challenged by, like Mike said, mass production to individualize production. And that’s a very difficult transition to make, and it doesn’t occur in all industries, but it occurs in a lot. Um, when you go to a automobile website and you start to look at all the options that you can put on your order, it’s incredible. And you take that order and now you have to run that through the whole manufacturing operations. And that’s a very challenging thing to do. But as I mentioned earlier, I think the challenge goes far beyond just the product design, the product configuration. Um, as you do that, and you start to see these different product designs going through and different individualized products coming into the play, think about that as a manufacturing shop floor guy, it’s like, these are all different, everything that comes through a different kind of product.

Bob Merlo (20:50):

And then the expectation that you have to have it delivered logistically in a highly sustainable way. I mean, at times, have you heard people talking about zero carbon footprint, you know, and that’s something that’s really important to the economy. So when you think about Amazon becoming carbon neutral, that’s an incredible initiative to do that really fundamentally changes their business. And then you’ve got things on the other side where people are saying, well, I don’t really want to own this product. I just want to rent it and buy it from you from a service perspective. And that had to has changed a lot of business models that we didn’t see previously. I mean, I think I look at my son he’s 17 and, um, you know, he has his own car, thanks to dad. But, um, eventually I don’t think the millennials are gonna want to own a car. They’ll want the insurance. They don’t want the gas expense. They don’t want all these things. They’re just going to use an Uber or they’re going to use some kind of a part time kind of use of, of automobile assets. Right. And that fundamentally changes business in terms of how you generate revenue and how you operate.

Scott Luton (22:03):

Well put, I love that car example.

Mike Lackey (22:05):

Hey, Greg, let’s fill this right here. Let’s think about this before. COVID-19 absolutely. I, uh, it was, it was, it was Uber. It was, you know, share rides is this right? And then I think automotive, you were heading in a direction, then COVID comes up and I don’t know how clean that car is. And now you’re seeing a move back, to buying cars, and we’re talking in a seven month period, you know, I mean, it’s like, you’re right. I mean, my daughter has, has, you know, has her car. He goes, dad, why do I have to make a car payment every night? When I, you know, every month we only drive this car about two hours a day. Well, that’s how you own a car now, you know, she’s the one of the lucky ones because she has a car and everybody’s afraid to do, to do these share rides because of the COVID-19 how quickly that changed.

Scott Luton (23:04):

I know you’re right. And, and, you know, we, we, we’ve talked a lot about how the rules have changed so much so that, uh, Greg and I really enjoyed this recent analogy we’ve uncovered and shared one minute, you’re playing chutes and ladders the very next minute you’re playing monopoly and maybe 3d monopoly. Um, because of all these factors, both of you are speaking to. So, um, I want to help our listeners with something. Cause if they’re at they’re folks like me, I’m not an industry 4.0 expert. They may want to really dive into what the different components that make up industry 4.0, and that’s where I want to go next. So, Mike, I want to keep driving with you here. So when you think about industry 4.0 and the solutions that really are comprised in that space, what are the four elements there that come to mind

Mike Lackey (23:52):

To me, industry 4.0 Really started, you know, focusing on manufacturing, but it’s much bigger than that. You know, if you’re not, if you’re not planning correctly in getting your demand signal as soon as possible and to get that, and then understanding, I used to think it was get the order in the manufacturer. Now it’s getting the customer’s requirements. So you’ve got to have a method to collect exactly what that customer wants. Then you got to know in real time that I can build it in that timeframe at the cost they’re willing to pay. Then you’ve got, you know, assets that are in that manufacturing force, so how you manage those assets and keep their utilization because it goes down and you’re, you know, you’re at full capacity, you’re not going to deliver. Um, and then you’ve got the logistics is not enough the manufacturer and then have a sit on your dock for two days.

Mike Lackey (24:40):

You want to, matter of fact, as it comes off, that drone picks it up, you know, um, uh, it goes on a ship, it goes on a truck, but it’s in transit automatically to you. I mean, let’s talk about, remember when you know what I remember back in the day, if I could get something ordered in 72 hours, I was happy. Then they went to 48, 24, six hour delivery, you know, Amazon and Alibaba and, and in China now in some cities two hours, right? I mean the expectation of how quick is changing. So I think you can not look at manufacturing as a key component, but you have to look at how you are delivering innovation in products, how you’re capturing that plan, that optimization, then, you know, you have a logistics, the materials, and then maintaining those assets. So I think it’s, you know, you have to look at the whole picture, not just one piece, if you’re going to be successful, because if you, if you innovate in a silo, it’s going to affect other components. So I think you have to really dream big and look at the whole, the whole ability of what it takes to be in the supply chain.

Scott Luton (25:45):

Yeah. We’ll put so many different elements. That’s what you gotta turn the experts that know it. Especially if you know, big enterprise wide transformation effort, you gotta rely on the folks, know. Bob speaks to it a little bit, speak to the different elements that Mike was speaking to. And I know that one thing that we’re all kindred spirits around is how technology is empowering people. And that message doesn’t get enough airplay.

Bob Merlo (26:06):

No, it really doesn’t. And it’s more than ever, probably important than it ever has been. So when you think about empowering people, whether it be on the shop floor or in the field doing service, or what have you, what you’re really trying to do is enable them to make the right decisions, the smart decisions based on real time content. So they are getting information that they need in real time to make really solid decisions. And that doesn’t, as Mike mentioned, it’s not just manufacturing. It goes well beyond that. You know, when you think about the supply chain and how complex the supply chain is, and I don’t think anybody actually even thought about it until COVID hit, when all of a sudden you couldn’t get toilet paper or paper towels or whatever, people realized that the supply chain is an extremely important facet of our economy. They didn’t know that,

Greg White (27:01):

They didn’t even know what supply chain meant before. Right? Right. This is right.

Scott Luton (27:06):

This is the reality. And as much as the part of four of us are probably sick and tired of hearing about toilet paper in 2020. However, we’ve got that to thank because one of the silver linings here to your point, Bob and Greg is the consumers are so much more aware of the supply chains behind these products we use every hour, every day, you name it. And that is, in a historically challenging year, like 2020, where there is a ton of bad news in this sphere, that certainly one of the big, great pieces of good news.

Bob Merlo (27:36):

Why don’t we take it? I think we take it for granted sometimes. And that’s the problem. People don’t understand the complexity. And, um, that’s, it really is a complex system. I remember just doing a diagram the other day for somebody, with regard to getting a particular drink that they wanted. And did they know all of the things behind getting that can or bottle in their hands, it’s an incredible complex process.

Scott Luton (28:06):

And for, for that same used aluminum can to get back into the system. I mean, it’s, it’s, it’s fascinating the different elements of the industry. All right. So Greg, but one question rises to the top. What does that?

Greg White (28:21):

Yeah. Well, I mean, and I think also we have to acknowledge the supply chain is more complex than even most supply chain professionals recognize because we left out the critical element of the supply chain and that is the consumer, right? I think a lot of people, I know that a lot of people in supply chain envision the supply chain stopping when it got to the store door or whatever you want to call it. They never thought of the consumer as part of the supply chain. And we learned that in spades when it came to toilet paper, right? So that creates a really, really complex environment. That many even lifelong supply chain professionals aren’t, don’t feel equipped to attack. So when you think about industry 4.0 and, and, and how it can be applied and what it means for it to be applied, a lot of people are asking the question, okay, I’m buying right. I’m with you, Bob, Mike, I agree. How the heck do I get started? So share a little bit, Bob, if you would, about how companies people can, can get the right mindset and get the right actions in place.

Bob Merlo (29:35):

I think it’s something that Mike and I deal with on a daily basis in terms of helping customers understand where do I begin this journey to digitalization? And where do I begin? This journey is industry 4.0. It’s interesting because I’ve said many, many times people can’t come to SAP and say, Hey, can I buy your industry 4.0 software? No, it doesn’t work that way. You go just buy industry 4.0 software. Um, you have to look in my mind at the key points in your internal processes that are causing delay or causing breakage. So if your intent is to streamline that and to do things far more efficiently with lower cost and higher profit margin, you have to look at those bottlenecks that you’re faced with and focus on those areas first. And once you’ve established this as a philosophy, because it is a philosophical change. Once you have established it as that philosophy, then you can take the initial start of what you did be in manufacturing and logistics, wherever, and start to broaden that scope. And the way we see industry 4.0 Is not just broadening the scope in the four walls of your factory, but into the networks of all of your suppliers, all of your manufacturing partners, all of your distribution channel, et cetera. And that’s where you start to gain real value.

Greg White (31:04):

The mindset that you mentioned, right? That mindset shift is the critical recognition to getting started. In my mind. There are so many technical things that you have to do, but that mindset shift is what’s so important. Isn’t it? Cultural recognition and cultural change. Mike, tell us what your perspective is on that.

Mike Lackey (31:24):

So I get that question all the time from customers, right? And it’s like these guys, I said, you got dream big. You go not about collecting data.

Mike Lackey (31:34):

It’s about collecting the right data and getting the right data in the hands of really smart people to make the decisions You’ve got to dream big. What is your business Going to look like next month, two years, five years, 10 years down the road. And if you dream big bill, the processes today Have to change. You have to build more agility into it.

Mike Lackey (31:56):

And, um, but then you’ve got to choose a project that has high visibility and a really good ROI. So now you can get the CFO, the CEO, and everybody behind you. And when you get that thumbs up at political class, it’s a short period of time. You’d better be able to, to act fast, prove it out, get the backing from the boardroom and just accelerate. You’ve got to you. You’ve got to just, um, you know, you got

Greg White (32:37):

Step on the gas and go forward, right. At some point you just gotta go. Um, all right. So, well, thank you. Because I think that, I think that’s really helpful for companies to get started, right? Eat the elephant one bite at a time as people say. But I think what you’ve said, both of you have said is a lot more practical, a lot more informative than just that philosophically. Um, so look, this year has been a challenge for everybody. Um, and everybody had a plan going into this year and to quote the great philosopher, Mike Tyson, everybody has a plan until they get punched in the face, but to give people some hope and in the spirit and in the spirit of Atlanta, Mike Lackey, let’s take Evander Holyfield approach of having a plan before you got punched in the face and a plan after you got punched in the face and somehow beating the great Mike Tyson. So give us some examples of companies that you have seen kind of roll with the punches or overcome a challenge, or even embrace a challenge and, and shift to, to tackle that and see some success in this unbelievably challenging year.

Mike Lackey (33:50):

Yeah. First of all, I think you have to go with, um, you have to have a plan when you have both ears and then when you have a plan when you lose part of your ear, okay, absolutely.

Greg White (34:04):

I’ll send some people to Google Mike that,

Mike Lackey (34:07):

Yeah, listen, you have, this is not the time to panic, right? In, in chaos, there’s opportunity. And to companies that are going to come out on the other side are looking at their business. There’s a company I was working with and they have multiple, multiple divisions, multiple companies, and they’re in their brand portfolio. And you know, one of them makes containers in there and just pedantic. Their factories are for,eign you know, people, sprints, uh, you know, I’m going to have like sit for the toilet paper up. I don’t know something happened to them, but about food storage and things like that. But then they made discretionary products like candles. Their factories are at 30% capacity. So, you know, where are they doing? He says, I don’t care what the brand is at the top. You’re all in my portfolio. I’m moving production to meet my customer’s demands.

Mike Lackey (34:56):

So you’re not going to be single threaded in a factory. I’m going to make only this. I am now going to expand into other areas and make sure that I, regardless of the factories that I can manufacturer in that any standardized processes that means setting up, you know, different supply chains. So those are the companies that I see that really coming out on the other end that were able to respond fast. That weren’t so rigid, right? I talked to a lot of the automotive companies about how SAP can help them make respirators, you know, the speed at which I walked up, these meetings, I’m going, it’s going to be six months before they make the impact. And what happened? The respirator company. He said, you know what? I just bought the factory next to me, that was vacant. And I’m setting up a new factory.

Mike Lackey (35:47):

I’m moving quick. And well love was the thought of the agility that they had. And I really think that that’s the companies that are gonna make it are the ones that think outside the box and think, you know, and, and reach out to how can I be prepared for the changing demand in, you know, into I’ll give you the best example. And this company has spoken at Sapphire. Hunter Douglas makes window blinds. He says, window blinds, nothing to it. Right? Even before the pandemic, a year before, in eight months, they went from making 50,000 orders to stock, do ship to home Depot and Lowe’s in eight months, it changed to 40,000 Make the order coming directly from the contractors. Wow. And they, we weren’t set up for that. We, you know, we were all about the Maples and that lead time, if the stock was 12 to 14 days when it moved the, he came four to six days.

Mike Lackey (36:50):

So that affected the whole supply chain. And I looked, some of these got us talk and everybody in the audience were just like, unbelievable that here’s a industry you don’t think is very innovative. Yeah, they are. And they, they changed on the dot. They went live with new processes in 14 factories in 18 months, wow. 14 factories in 18 months where all the factories were the same. Everything was standarized. They were able to move production based on demand and what region, what country, it didn’t matter to them. And those guys was so when the pandemic came, who’s in a better position to way to waiver. This is those guys. And I was just one example, but they were one of the most impressive that stood on stage with me when they got through to log while. And this is, this is best practice. This is best of breed. This is innovation at its best.

Scott Luton (37:45):

That is an outstanding example. Talk about a complexity going from making a stock at that scale to made the order. I mean, huge and especially that many factories. So, uh, I appreciate your sharing. Let’s get, you know, Bob, uh, kind of along the lines of Greg’s question here, the good news. So give us, what, what, what good story have you seen out there in this, in this tough year?

Bob Merlo (38:09):

Positive thing that I’ve seen is that companies are really changing the way that they operate. They’re changing to adapt to what the market requirements truly are. And that’s important because this is not going to go away. The thing is about this whole thing, this whole pandemic, what I think it brought to light was that you have to build a supply chain that has insulation from disruption. And it’s not just the pandemic. I mean, it can be trade wars it can be Brexit. It can be hurricanes. It can be flooding who knows all of those things have an effect. And we see companies like index Virg, for example, who are taking their, um, manufacturing and maintenance operations, completely virtual and online. So they’re no longer going on site. They have people in the plant that have taken on the maintenance and operations, um, issues. And they’re helping them do that completely online with step-by-step work instructions, technical support, et cetera, et cetera. So businesses are changing to adapt to the environment. And I’m certainly hopeful that the environment will change based on some of these things that we’re stuck with doing. And I asked my son, for example, how many of these kinds of things that you’ve seen change, whether it be curbside pickup, or what have you, is this a permanent thing? I think it is.

Scott Luton (39:41):

Amazing times we’re living through right now. And, but going want to go back to the point that we were talking about a second ago. So we really want to echo it because Greg and I are big believers in this year is how technology the best apply it to that. That truly empowers our people. And for folks that may out there in our audience that may fear technology or, or what that may mean for their role. Gosh, if you’re willing to learn something new and really step out of your comfort zone and walk through these doors of opportunity, it is going to open up so many, so much opportunity for organizations and for their people. So that’s exciting and a great message.

Bob Merlo (40:18):

I think Mike, um, Mike actually made a point earlier about getting the information. It’s getting the data that you need to be a better worker. And the thing is data for data’s sake is useless. It has to have meaning it has to have context. It has to have relevance to what you’re trying to do to improve your job, your productivity, whatever it might be. And I think that’s the important thing. What is a ton of data out there these days? And that’s great. If you can call it that.

Scott Luton (40:53):

That’s noise here, Bob, a lot of noise out there. You gotta pick for the signals, but that’s a great point to kind of start to wind down the conversation. Greg, I know this kind of tickles our fancy, we’d love to have several hours to talk about industry 4.0 with Mike and Bob we’ll have to have him back on, but, um, you know, before we make sure our audience knows how to connect both with these, these two business leaders, Greg what’s what’s, I know you’re itching to kind of share one of your key takeaways from time. And it’s funny that Bob mentioned culture as a differentiating factor in, in success and a critical factor in success to change during these times. And Mike gave a premium example that at Hunter Douglas, clearly, if, I mean, look, I watch football. So they have blinds to go on commercials on there.

Scott Luton (41:43):

So clearly Hunter Douglas was responding to the fact that you could do that. You could get blinds custom made for your home, right? And so they saw that they saw that change coming. They made it part of their culture. They made it part of their operations. And then when a real catastrophic change came, they were that much more equipped. So that cultural change is as important as any technological or operational process change. And I think that’s something that people need to recognize. And I think it’s a really mature perspective for folks to recognize that cultural and human capital design change that needs to occur before you can undertake digital transformation or industry 4.0 Or any, any kind of automation initiative. Yeah. We’ll put there Mike, you like how we all talk about you as if you’re not in the same room with us, but we really have a pre

Mike Lackey (42:40):

You just connections come down and right. So waited. Yeah. We’re just planning for that.

Scott Luton (42:48):

Hey, we really, uh, both of y’all, we’ve enjoyed the prep conversations and this episode, you know, kind of carried that through. It’s a really enjoyed what you share looking forward to having you back on. Let’s make sure though our listeners know how to connect with two pros when it comes to industry 4.0, Mike, let’s start with you. How can folks connect with you now?

Mike Lackey (43:06):

The best way is just a contact me via email mike dot lackey@sap.com. It’s a, you know, I keep it simple and, uh, and I’d be more than happy to share best practice and talk with what we’re doing at SAP and What are other customers doing? Uh, we’re all in this together. So, um, let’s change the world.

Scott Luton (43:25):

Now I’m ready to run through some walls with you. Mike loved that and we’ll try to make it easy for our listeners. Again, the one-click approach. We’ll, we’ll drop some things in the show notes to really make it as easy as possible for them to connect with Mike and Bob. All right. So Bob, same question. How can folks connect with you?

Bob Merlo (43:41):

Same way, right? Robert Dot Merlo without the T cause my parents forgot that. So it’s just Merlo.com um, at SAP. Um, sorry. Um, so that’s, that’s probably the best way to get ahold of me. I’m pretty active on LinkedIn. So you can just look up my profile there and I do respond to, um, inquiries there and respond to messages there. So I think that’s also another good channel. I’m not a big Twitter guy, so we don’t have to argue with you. That’s true. So, um, but I think the important message here, and I think Mike said it as well, is that, look, if you are looking to improve your operations, if you were looking to improve your business, we believe that we have some ideas on how to do that.

Bob Merlo (44:32):

And so please reach out to us and let us see if we can help your business grow and prosper in these very violent even right. Yes. Thrive. Right. Bob and thrive. That’s going to be online. You handle from here on out. Yeah. Well Greg fascinating conversation, we really enjoyed chatting with Mike Lackey, global vice president of solution management, digital manufacturing with SAP and his colleague, Robert Merlo, vice president digital supply chain marketing with SAP. We’ve gotten, uh, Greg White’s hot takeaway already. We’re ahead of schedule Greg. But you know, we want to really encourage connect with both these leaders, but also if you enjoy conversations like this, you can find a lot more at [inaudible] now.com. Find us wherever you get your podcasts from and subscribe. So you don’t miss more, uh, wisdom from industry leaders like we’ve had in this conversation here today. All right, Greg, in a very small nutshell as we wrap and right before we sign off, give us one key.

Scott Luton (45:34):

If you listen to anything, what are those? Our audience need to really grasp a grasp on to this conversation here.

Greg White (45:42):

2020 is just the start of changes. And it’s just the most stark recognition that the supply chain is always in a state of disruption. Accept it, adapt to it, build your culture and your operations and your technology approach around it and be ready for it.

Scott Luton (46:00):

Outstanding and own that note to our audience. Thanks for tuning in. Hopefully you enjoyed this conversation as much as we did. Hey, challenging our audience. Just like we challenge ourselves. Do good. Give forward, be the change that’s needed. As Mike said, let’s change the world. Love that. We’ll see you next time here on supply chain now.