Supply Chain Now Episode 482
“The state of the art is consistently changing, so experience is important but so is pushing the envelope.”
Jonathon Karelse, CEO of NorthFind Management
It is one thing to look at a supply chain, diagnose the problems with it and recommend a solution. It is another thing to see that solution put into practice. That is what Jonathon Karelse, CEO of NorthFind Management, learned over many years as a consultant. In his experience, 40% of solving a problem is diagnosis, but 60% of it is “cultural enablement and understanding your audience.”
That remains true today, when companies are trying to stay in operation without the benefit of applicable historical models and data. No operational change is going to take place without an understanding of behaviors and the factors that drive them.
In this conversation, Jonathon provides his point of view to Supply Chain Now Host Scott Luton on the following topics:
· The elements that must be in place for an organization to successfully undergo cultural change
· Why it is so important to have people push and challenge us, no matter where we are in the organization or in our professional journey
· The advantages being realized by companies who made serious investments in risk management and business continuity long before the COVID-19 pandemic hit
Intro / Outro (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 morning, Scott Luton on supply chain. Now. Welcome to today’s show. We’ve got a great one in store. We’re talking with a business leader from a company that is driving operational transformation globally. So we’re gonna be working hard to increase your supply chain IQ on today’s show more to come on that in just a second, but equip programming. If you enjoyed this podcast here today, be sure to find us and subscribe wherever you get your podcasts from. So you don’t miss conversations just like this. All right. With no further. Or do you want to bring in our featured guests here today? Jonathan Corel, Suh CEO at North fond management. Jonathan. Good, good afternoon. How are you doing really good Scott, happy to be here. I’ve enjoyed our, our appreciate conversation as much as, as, um, as any, we should have been recording that and releasing that one.
Jonathon Karelse (01:17):
I agree. Cause I feel now that we’re rolling, uh, there’s not a lot left to say. I do not believe that for a skinny second. So looking forward to diving into your insights and perspective, but for starters, let’s get a sense of let’s get to know you better. Let’s get there Jonathan better. So tell us where are you from and give us an anecdote or two about your upbringing. Sounds good. Um, so I didn’t, uh, I didn’t come to supply chain by a very traditional route. Um, like we were talking about before the show has started, um, the, the, the global pandemic has allowed as one of its silver linings for a lot of us who wouldn’t otherwise have time to be doing as many conferences and, and podcasts as we now can to get to meet a lot of other people. And one of the, uh, one of the pedals I did last week, we were, uh, there were four or five of us and they asked the same question to start, you know?
Jonathon Karelse (02:10):
Well, similar question, talk to us about your supply chain journey. How did you get into supply chain? And I promise you like for the other four people in the pedal, like they were born to a, a forklift driver and got to know the, the warehouse manager and they went to, they went to supply chain high school. I mean, like they were destined for it. I, on the other hand, uh, spent most of my upbringing and even teens, certain that I was going to be a theoretical physicist. Oh, wow. I got Stephen. Hawking’s a brief history of time for my 12th birthday. Your viewers are probably already surmising lived in a rural place. So there wasn’t a lot of other things going on. I used to read, uh, uh, star charts at night. Um, I was, I was certain through my, my, uh, early years and early teens that I was going to be a theoretical physicist.
Jonathon Karelse (03:04):
Uh, then I got to physics, um, which I loved, but, uh, I was a kid without a lot of patience. So they actually skipped me through grade six. And, uh, yeah, and I was on track to graduate in three years. And in grade nine I wanted to do grade 12 physics. And the professor said, you don’t want to do that. Which, I mean, I think this is a challenge. Okay. Like, let’s go, I’m definitely doing it now. He said, no, listen, you’re a smart kid. You don’t have the math that you’re going to need to do this. And I’m going to like nonsense. I’m really good at math. Watch me. So we get into physics, we get into kinematics and dynamics and you have to create vector diagrams. And here I am in grade nine with really good Mark in grade nine, math, no idea what trigonometry is yet.
Jonathon Karelse (03:55):
And the trigonometry is a prerequisite to do vector diagrams. So I’m here doing lung hands, like with a protractor and a ruler and a pencil mapping out these vector diagrams and having to measure them and having them like perfect for me to get even close enough to happen, having the right answer. Obviously it doesn’t work. You run out of time on tests. This should be a story of perseverance. It’s not, I pivoted and I decided to hell with physics. I want to be a lawyer now because, uh, I I’m doing really well in debating. So, uh, to sort of appease my parents who were certainly wanting to have a scientist son, I studied the most scientific of the arts and studied, uh, economics as my undergrad. Yeah. From there went to law school, um, and decided by halfway through, uh, that this, the beautiful idea of law protecting the underprivileged and setting rungs right. Is absolutely not what it’s about. Um, so decided that wasn’t what I was going to do either. I ended up then going into a corporate job after that. What ultimately led am I getting too far ahead of the question now it’s supposed to be on the upbringing. I want to talk about,
Scott Luton (05:08):
We’ll talk about your professional journey here in just a moment.
Jonathon Karelse (05:11):
Scott Luton (05:13):
Theoretical physicist. And, and how much of a fast burner and advanced learner that you were, what where’d you get that from? Did you get that from, from your parents, from your mom, your dad, what did you read a lot early, early at an early age?
Jonathon Karelse (05:29):
Well, in case they’re in case they’re listening, I’m going to say, yeah, they probably gave it to me. Um, I don’t know. It’s like, it’s that question of nurture versus nature? Right. I mean, I don’t think I had a whole lot to do with the toolbox that I was born with. Uh, I think the fact that I grew up in rural Northern Ontario and literally had a, I’m trying to convert to miles like a three and a half kilometer walk to the next closest friend. That’s about two miles. Um, you know, there’s not a lot to do then other than read and write and imagine a, so that probably has something to do with it. Right. Um, but definitely my parents, uh, put a lot of focus on education.
Scott Luton (06:07):
So I really love the story because to me, um, it illustrates the, how we can attract a very diverse POV into supply chain. I love these stories where it’s not, you know, they weren’t born into an industry. They, they weren’t aware of the industry at an early age because of a family members being in it. But your story that it’s such a great story. We need a lot more stories like that because that’s how we’re going to be tackling some of the challenges of our day. And I agree. Um, all right. So let’s talk about, give us one more thing about your upbringing. So, so we set a rule Ontario. Yep. So clearly read a lot. What else really sticks out?
Jonathon Karelse (06:51):
Well, uh, again with, with long distances between where people lived, um, you spend a lot of time either, uh, hoofing it on foot in the winter when it’s too slippery to ride a bicycle or spending time on a bike. So I ended up, uh, being a competitive cyclist late in high school and during my undergrad. Um, and I think that’s in part due to the fact that I needed to ride a bike to get anywhere. And most of those places were far apart. Um, you know, at the time, uh, at the time I didn’t love that. You know, a lot of my friends lived close together and could do stuff after school. And I had in high school, uh, about an hour and a half commute each way to get there with my dad, because my dad had to drop me off before he got to the office. It meant, you know, I’m, I’m deposited at a quarter after seven and picked up at four 30. So not a lot of time to do anything other than just study. Um, but you know, in retrospect when I change it, uh, probably not, I don’t know. I mean, it worked out pretty well.
Scott Luton (07:53):
Sure, sure. Um, okay. One more story. Before we get into your professional journey or one of the questions we get into your professional journey, um, you know, information good, reliable data-driven, uh, timely information is what we’re all after perhaps, perhaps unlike ever before in this day and age where change has been, comes out so rapidly and in an settler accelerated manner, what, what are some of your go tos for good information?
Jonathon Karelse (08:21):
Yeah, that’s so good information where, uh, where supply chain is concerned. I like supply chain, brain. I think they do a really good job of casting, a broad net and getting a lot of different perspectives. Um, we were just talking in the pre show, but Laura says, Siri, I really like Laura because, uh, she knows it she’s lived. It she’s been a practitioner, but, uh, she also hasn’t become beholden to advertisers and I’m not going to name any, any other names. There’s some big ones out there that have good information and studies and they have magic quadrants and things, this, but the reality is you talk to a person like Laura, and you can tell this as a person who’s actually used the software, use the different tools and, and is giving you a no nonsense insight into what their actual effectiveness and applicability is. You can’t say that about some of the other pieces of information that are out there.
Scott Luton (09:13):
Yeah. We’ll put an and of course I would leave it to the, the potential theoretical physicist to bring up quadrants and vectors and galaxies. I love it. Love it. Um, and you’re right. Laura says Siri, she was on the live stream earlier with us. Um, she was just as advertised and that’s rare in this day and age. Yep. Been there, done it. And it’s able to, uh, much like I’m kind of picking up from you, were you and her able to share positions and unpack issues, not just in, in kind of the right altitude, but in a very succinct manner and, uh, I’m anything but succinct as you’ll learn as we get through.
Jonathon Karelse (09:53):
Well, yeah, thanks for reeling me back on track earlier. Cause I was on the verge of not being succinct either. I credit that. I think in part to a law school, in the summers I spent, uh, working for lawyers, um, the idea of being able to distill an idea down to its core constituents pretty quickly. Um, I had a lawyer that I worked for. He was, he was old school. I won’t share some of the stories because they’re not, uh, they’re not PG, but he used to say that lawyers are the breed of person who doesn’t just appreciate the butter, the, the, the beauty of the butterfly, but once the rip off its winds to understand why it’s beautiful. And, and that’s kind of my approach to, uh, supply chain issues as well. I mean, it’s one thing to recognize the issue, but it takes an inquisitive mind to really dig deep, to understand those core constituents and then ultimately to make some sort of an actionable conclusion about that.
Scott Luton (10:50):
Hmm. I love that Jonathan and also dig deep and truly understand it. So you can explain it in, in very simple terms. Simplicity is such a beautiful and under appreciated thing. Okay. So now let’s dive into your professional journey. I’m really curious to hear, especially with the background, we’ve, we’ve come learn already it, tell us, walk us through your professional journey a bit, especially focusing on, uh, positions or roles that really helped shape your worldview. Jonathan.
Jonathon Karelse (11:16):
Sure. Well, one of my earliest roles, uh, ended up with, uh, a couple of quick promotions with, uh, American express bank of Canada. Um, I worked for the, the credit acquisition group, uh, where our job was research and behavioral analytics. So we wanted to understand, um, how people used the credit they had and, and what people or groups were, were great, um, potential targets for additional credit products. Um, we were really good at what we did as a group.
Scott Luton (11:51):
And what was really exciting to me in
Jonathon Karelse (11:54):
That work was the idea that with a robust enough data set, I could say with a, with a pretty high degree of certainty, what a person was going to do, even if the person insisted they were not a creature of habit, but rather were making choices consistently. Um, that wasn’t a really important insight, but contrarily, uh, I also didn’t love the effect of what we did. Um, we were really good at extending credit to people and, and I’ll leave it at that. Um, and I wanted to, I wanted to have a job where we could have the really cool kind of analytical insights and breakthrough throughs that we had, but be happy about what the end result was producing. Um, the other thing was I’d moved up really quickly. And I think I told you I was a young guy. I skipped a couple of grades in it.
Jonathon Karelse (12:43):
So I was out in the workforce, you know, younger than most. So at 21 or 22, I was managing people who were, you know, a couple of decades older than me. And, you know, one part of me said, Hey, you know, good for me. But on the other hand, I thought like, what business do I have managing people at this point? I’ve never been in the workforce yet. Um, I have ideas of what, how I think it should work, but no one’s ever shown me and I might be leading these people astray. So I kind of course corrected and took a step back and I want, I want it to go to an industry where the result was very tangible. Um, so I ended up with a, uh, automotive supplier called Yokohama rubber Corp. They make Yokohama tires and, and I started there as a forecast analyst.
Jonathon Karelse (13:28):
Um, and again, the idea was I wanted to step back into a purely analytical role, so I could sort of learn the management chops before moving ahead, I got promoted to head of, uh, forecasting and three months and ended up managing sales and marketing. And another year, uh, this time I wasn’t going to step back again. I thought, okay, well, I’m going to learn on the fly, but the, you were asking for a Eureka moment. And I don’t know if it said Eureka so much, as you know, this is really a moment that crystallized what my future trajectory was going to do. Mmm. A lot of people in supply chain like to point a finger at salespeople and say, these guys don’t know what they’re doing there. They’re coming to us with all these BS forecast. The forecast at budget time is sandbagged. And then suddenly they have these like huge over biases because they just want to make sure what their customers are gonna get the product.
Jonathon Karelse (14:27):
I’ll tell you what. I started in supply chain on the customer facing side. Cause I ended up as the business unit director for consumer product in Canada. So I was in front of customers and yeah, I worked for an organization, very traditional in its supply chain and in a particular demand planning approach. It wasn’t really a demand driven organization. It was, this is what our capacity is. So we’re going to make this tires and your job in sales and marketing is to go find a home for them, sell them all, do that. We had a lot of really cool, innovative products, but the problem was, um, I think the product management team back in back in Yokohama thought, it’s like Nintendo where you promise a new platform. And it’s great if it sells out because it means it was exciting. It doesn’t work that way in tires.
Jonathon Karelse (15:14):
Um, I got beat up like season after season going in front of customers saying, Hey, want to talk about this exciting new product? And they’re saying like, you’re not even going to be able to supply me with it. So I’m not going to put you on my shelves cause I need to have something there when winter comes so I can sell it to my customers. And I tell them not even lying because I’m not usually buying into this at this point in my career. No, no, no. This time we’ve got it right. This time there’s enough product. So I went through a few iterations of this and it’s not fun. I’ll tell you what supply chain guys, if you haven’t been on the front lines in front of angry customers, it’s a different experience. It is, it is humbling. So after a few years, um, and deciding that listen, I, that the education that I’ve bought while interesting isn’t particularly suited for the specific type of work that I’m now finding myself doing, um, Yokohama agreed to sponsor an MBA.
Jonathon Karelse (16:09):
And I went to MIT Sloan, um, and I thought, you know, they’re gonna, they’re making a considerable investment in me. Let’s, let’s ask their input on what particular business problem they would like solved. And I asked him that, and we were just in the middle of a new product launch and they said, you got figure it out, our supply chain. Um, so I, uh, declared a course concentration at MIT Sloan in value chain management. And, uh, the rest, as they say is history is, um, you know, what I loved about MIT Sloan is it’s, uh, it’s a very technical program. It’s obviously a technical institution, but it’s a technical program. And, um, it, it gave me a lot of tangible tools that I could come back with. And what was really exciting, uh, is actually begin to make a real difference by applying some of these techniques by getting better at forecasting, but getting better at multinational and inventory optimization, we were able to actually begin to delight our customers. And that was exciting.
Scott Luton (17:09):
Love that. All right. So going back, I will go back to your earlier point. You were making about the view of sales within the supply chain community, because I like some of your background, I’ve spent a bunch of time and certainly as an entrepreneur, a lot of time in sales and business development and all those customer facing conversations you were alluding to, I think we do as an industry. I think one of the opportunities we have is to create the stigma that comes with the business development profession within the supply chain industry. I remember being a part of a industry associations are made up of, you know, engineers and supply chain practitioners and operations folks. And while at times I feel kind of, uh, especially in the early days kind of left out because of my skill sets were in different places. So I think there is a, there is a gap there that we need to bridge. And that’s what I’m hearing you say.
Jonathon Karelse (18:10):
I agree. Yeah. I think one of the things that serves some of the members of my team now that have had more diverse backgrounds than strictly supply chain and I mean, don’t get me wrong. There’s, there’s absolutely a value to be being very deep in a particular area. Right. But in particular, when we’re helping organizations implement or troubleshoot an SNOP process, the, this, this look of like understanding someone finally gets me, that we get from salespeople’s faces because they’re so used to getting beat up on by supply chain folks for having like fake forecasts. And what I’d say to supply chain folks is, listen, it, if your sales guys don’t have positive bias, I mean, where are these blue sky plans going to come from? I mean, it’s, it’s pretty easy to, to have flat sales and imperpetuity, and sure it’s easy to plant a plant that way, but I don’t think your shareholders are going to love it very much. I mean, you want your sales guys to be positive. You want that positive bias because between the supply chain and finance, you’ve got enough negativity to go around
Scott Luton (19:16):
Well, and also kind of what you were alluding to that emotional intelligence and, and, and the empathy is a big part of that. Um, just one part, but a big part, um, that is so needed in today in a world, like what we have here in 2020. So I really appreciate you sharing that. We’re going to keep driving. I want to, um, I want to move right along to your organization, North fond management. Let’s talk more about what the company does and then your role as CEO, where do you spend your time?
Jonathon Karelse (19:47):
We like to call ourselves a supply chain consultants and what that means has expanded over time. Um, when I co founded the business with my ex partner Sima full in 2011, um, she really focused on, uh, supply side and execution and my, and my focus was SNOP and demand planning. So together we had the core demand and supply, uh, components of supply chain covered. But, you know, you can extend that further up. And since then we have, so we get into strategic sourcing and vendor capabilities, evaluations, demand supply, obviously, uh, inventory optimization and the IO, um, execution, post merger integration. So we, we look at value streams. We look at eliminating redundancies and recently we’ve added, uh, an area that I’m very excited about. And I think we’ll be talking about later, which is risk management and business continuity planning, a really important component of supply chain, especially today what we do is a really focused approach to supply chain.
Jonathon Karelse (20:50):
So, I mean, listen, I wanted to be a theoretical physicist, maybe because of that, I’ve got one on my team. He does our advanced modeling. Uh, he did his thesis being able to model cloud formations. Uh, the guy does math, a lot of it, but what we really value, especially are practitioners who have had boots on the ground and have really been in the shop on the front lines and recognize, you know, the realities of the theoretical are one thing. And then you, you alluded to emotional intelligence. You know, it’s a, it’s a thing we don’t love talking about in supply chain because somehow it doesn’t, I don’t know, it doesn’t seem to a warm and fuzzy. It’s a hundred percent real. And like Laura would tell you or anybody else that’s been doing supply chain and SNOP for a long time. It’s, it’s those pieces that are really the enablers in what we, we should really look at as a cultural change in an organization. It’s not just data. Data is how you identify the problem. Data is how you gauge the outcome. But if you want to get there, it’s really being able to have the credibility, having done it, to relate to people on that level.
Scott Luton (21:58):
So when we think of forecasting and syncing, uh, and, uh, consumer sentiment, would you argue that, of course there’s a ton of data there, but there’s also these elements that are more tied back to emotions and it’s a little tougher to be, to quantify them. Did you subscribe to that where that’s one of the avenues where that ER, can really provide a ton of value?
Jonathon Karelse (22:26):
No, but, but, but I, but I think it’s a great question. I’ll tell you why I say that. I think there are a ton of things that some people are, uh, tempted to call intangibles. Um, I I’m with Fuko, who said, if it exists, it can be quantified. So my position is, yeah, there’s, there’s fuzzy stuff out there. There’s, there’s stuff that we can, uh, we can interpret through EDI, which is Daniel caught him in the Nobel Laureate in 2002, sort of says, these are the things that we equate with our gut or with intuition is really the result of a heuristic process. That’s us just having seen it multiple times before, which in essence means it’s quantifiable. So I think especially now, when a lot of history can no longer be used to predict the future, I mean, up until February historic run rates for great, and then COVID happened and then unprecedented government response to COVID happened and all kinds of stuff now means, okay, if I’m using auto regressive forecasting, I’m in real trouble. So I absolutely agree with you. We have to pivot to other sources and some of those sources, a lot of those sources are human. So there’s an EDI component to being able to validate upfront whether or not this a good source or not. Um, I could talk for a lot more time than we have about where it’s most appropriate to integrate business intelligence or judgment into an overall forecasting framework. But I believe at the end of the day, you shouldn’t be using any input for which you’re incapable or unwilling of, of measuring the effect.
Scott Luton (24:03):
I feel like I’ve just earned a certification to be named, but I really appreciate you. You’re tackling that question for me. Uh, and I’m, uh, I’m going to blatantly steal that quote, if it exists, it can be quantified to attribute that to,
Jonathon Karelse (24:16):
Yeah. I’m only about 60% sure it was Fuko, but it definitely was a French mathematician slash philosopher.
Scott Luton (24:23):
Love it. Okay. So we’ve talked a little bit about what your company does. One of the phrases that I gathered in doing a little homework was the enabling the value chain success, um, and, and, and enabling is such a powerful word. Uh, and I bet it’s one that you chose very, very deliberately. So, so talk more about that before I move on to your role.
Jonathon Karelse (24:47):
Some people take an approach that, uh, it’s enough to identify a problem and then roadmap the solution. And certainly in some organizations that may be possible, but I know from early engagements with my partner, we would be knocking our heads together afterwards going, you know, they, they brought us in because they said their forecast was broken or they said they had too much inventory. We clearly root caused it like unequivocally, this is your problem. I mean, you have some other secondary and tertiary problems, but this is your burning platform. Do this. They paid us to tell them that they paid us to show them what the solution was. And we find out six months later, they didn’t do it. And, and this happened a lot. And, and what it really, and maybe this is, this would qualify as another one of your Eureka’s. But up until this point, I was very, if you can imagine quantitative in my approach, very linear, very logic driven.
Jonathon Karelse (25:44):
If someone had come to me saying, Hey, this is your problem, and this is how you solve it. I would have evaluated that solution. And if I agreed with it, I would have taken it and run with it. Or what we realized over time is that not everyone thinks the same way. There’s a lot of different ways that people think. Um, and, and this is actually what the big challenge, and this is becoming a theme in our conversation. This is what, one of the big challenges in supply chain transformation is it’s recognizing that diagnostic and, uh, and the subsequent, um, prescription for a solution are, you know, it’s important, but it’s like 40% of the battle. 60% of this change transformation is that cultural enablement and enablement is about understanding your audience, understanding what skill, but what, what language people speak as well. And being able to translate that solution to the organization, with its unique sets of skills and experiences and languages, so that they’re truly able to make use of these, of these insights
Scott Luton (26:45):
And empowered and bought in. And they feel that that’s, that their ownership there, of that solution for them. And that’s it. I’m not sure who said it, it could’ve been a French ma a physicist or mathematician, but, you know, uh, you don’t, you make sure people are part of the change you’re building and that you’re going to deploy. They’re not, you’re not doing the change to the people. And that’s really where my mind goes. I really can appreciate your perspective there because you’re right. There’s so many consultants out there. So many firms out there that do the assessment and then have a nice binder. This is what you need to do. And then it’s the invoices paid and nothing happens. That’s right. And that’s, that’s where the stigma, some of the stigma associated with consultants because hundred percent, you know, there’s not that leadership bandwidth to make it happen because of some of the elements you mentioned. So we love that
Jonathon Karelse (27:39):
Seriously, our responsibility as, as partners to an organization. And I used to in the early days, I don’t say it anymore. Cause I got caught a couple times, but I used to tell people, I mean, I hate, I hate consultants and I hated dealing with them because they came in, they didn’t really know what they were doing. They knew what to say. And they knew what the best practice was. Right. But how to put that into practice is a whole different thing. And a lot of them didn’t know how to do it, but I stopped saying it because I ended up with a client, we ended up, we’re still, they’re still our client. We work with them for a long time. And when I told the chairman that I hated consultancy, told me I should kill myself because I’m one know I could call I’m maybe not going to use that line again.
Scott Luton (28:21):
We all learn all along the way. Right. Um, so as CEO of the organization and co founder, I didn’t pick that up earlier. I should have. Um, so what is your favorite ask? What, where do you spend your time and what’s your favorite thing to do in your role?
Jonathon Karelse (28:36):
Well, uh, where I spend my time now, uh, during COVID is a lot different than it was nine months ago. Uh, used to spend a lot of time on airplanes going to get to clients’ sites, um, and, and doing field work, not a lot of travel anymore, obviously. So, uh, one of the upsides is we find ourselves with a lot more time available to do value added work. Um, but some of that time is being spent now in different places than it did. So my time as CEO is spent between, uh, projects where I’m supporting, uh, our team on, on a client work. Um, I take maybe this, this comes up from, from earlier in my career where I didn’t have a lot of that guidance that I wanted. I take really seriously my role as a mentor. So there’s, there’s a coaching component between me and the senior associates, senior associates, junior associates, analysts, just, um, you know, feedback after engagements, how to improve their approach, talking about what they want to be doing next in their career and how best to do that.
Jonathon Karelse (29:38):
We also, um, it sounds like I’m speaking out of both sides of my mouth. Uh, I think being a practitioner is super important, but we also want to stay on the leading edge. So a big part of what I do is also, um, research and publication. We were talking earlier about a book I’m working on. We’re always looking at white papers. We really encourage our associates and analysts to also be doing that because we don’t want to stagnate. We know that the state of the art is consistently changing. So experience is important, but also pushing that envelope. It’s important, love that
Scott Luton (30:08):
Easy. It’s easy to stagnate, especially if what you’re doing is working. It’s easy to stay right there. Um, I can appreciate that. Let me one final question about going back to mentoring before we kind of go broader with this next question, but mentoring, do you think we’re doing enough as organizational leaders to mentor and also are we doing it the right way?
Jonathon Karelse (30:28):
I don’t see nearly as much mentoring as I would expect to see. I mean, we work with a lot of different organizations, so we get to know a lot of people, a lot of different industries, a lot of different market caps and even some of the big organizations where you’d expect, you know, they, they have a proclaimed culture of continuous improvement, but that’s not trickling down into the way that they’re coaching and developing and mentoring that next generation of leaders are we doing enough from my perspective, there’s always more we can do. And it doesn’t seem like we’re doing as much as we should. Are we doing it the right way? That’s, that’s the tougher question. I mean, I, I see some great examples of it, um, in some places. And then I see some places where mentoring is kind of wrote it. It’s, it’s a box that a person has to tick, uh, as one of their MBO is for the year. So, you know, they take a couple of coffee meetings with somebody and say, what do you want to do in the future? And, you know, tell them something. Um, I dunno, I think there’s always room for improvement. Agreed.
Scott Luton (31:32):
I love this notion, um, reverse mentoring and whatever different phrases names that were given it, but, you know, we have recently brought on, um, I don’t even like the word intern. So we, we changed with threw that out and we’ll call them
Jonathon Karelse (31:46):
The associates. Okay.
Scott Luton (31:48):
They, it is amazing just how bright these, these undergraduate students are. Uh, and professionals and learning from them has been one of the great rewarding elements for our team in recent weeks. And it really is, is reinforced in my brain just how often I’ve missed the boat to do the same thing earlier in my career. And we’re gonna, we’re going to try to double down on finding new ways of really learning, uh, and making sure it’s a good two way street when it comes to mentoring.
Jonathon Karelse (32:19):
Yeah, that’s a great idea. I mean, it definitely, uh, I, I recognized, I don’t know, halfway through my career that I’m not always the most approachable person in terms of bringing candid feedback. And, uh, it was, it was someone who worked with me who gave me that feedback and I summarily dismissed them at first, but I just spent some time thinking about it and I thought, yeah, there might be something to this actually. Uh, so yeah, you might call it reverse mentoring, but I, I go out of my way and it probably isn’t a perfect process yet. I’m sure I should. I’m sure it isn’t, but I go out of my way to kind of try to solicit that type of feedback. And if not, you know, just, just for me then in a situation where we think we’ve got consensus, especially if the consensus came quickly, I really try to tease out what that, what that opposite view could be like a devil’s advocate, because, you know, and this is the value of diversity on boards.
Jonathon Karelse (33:19):
You know, a lot of people think they’ve got a well functioning board, whatever, where they’re making decisions quickly. And that’s just, that’s just not the case. Decisions should be difficult because you should be tackling multiple different viewpoints. And if you’re making decisions easily, it’s been, it’s been demonstrated through a number of different institutions. There’s an inverse relationship between the quality of the output and how easily you think you’re coming to these, these conclusions. It should be a bit of a struggle. You should have people that push you and challenge you and take a, a different view and, uh, you know, reverse mentoring. I think it’s just another component of that.
Scott Luton (33:53):
I love that I can image in my mind as you’re sharing that, uh, it’s like a proverbial 40 chess game as you’re, as you’re approaching decisions and really evaluating everyone’s point of view on the matter. Uh, and also to your point, I love this point you made, if you make that decision too quick, the discussion shouldn’t stop there and how you constantly are looking for that, that blind spot, that, what do we, what are we not thinking about? So love that. So let’s move into let’s, let’s, let’s take our conversation even broader. So there’s no shortage of topics here in global supply chain in the year like this. Um, we talk regularly hear about all the lessons that we’re going to be learning from this and how it’s going to be, you know, years from now, there are still folks can point back to 2020 and certain lessons and business cases and whatnot, but, you know, what’s really, what’s, what’s two or three things that you’re tracking more than others, um, out across global supply chain right now.
Jonathon Karelse (34:55):
Well, listen, both of the things I’m going to give you, I would argue, first of all, I’ve been a big proponent of long before COVID. Um, so to me, it’s, it’s on the one hand, a bit of a vindication, but on the other hand, a bit frustrating that now we’re here, we’re having clients want to talk to us about risk management and business continuity planning, which is one of them and the other being behavioral economics. And I’ll come to the second one in a moment early on in COVID, uh, before it had really hit North America or before it was a significant force in North America, the big topic wa wasn’t, you know, what’s this going to mean for healthcare, but rather well, China’s factories down right now. Plus we’ve got Chinese new year coming up. What’s this going to mean for raw material sourcing?
Jonathon Karelse (35:42):
So I did a few interviews in January and early February from people asking my opinion about what does this mean for the future of supply chain? What does this mean for offshoring? And I was like, you know, first of all, it gets serious. This is not the first offshore interruption we’ve had in the last 20 years. It’s not even the first pandemic we’ve had avian flu. We’ve had swine flu. We had Ebola, we had Zika, we had West Nile. I mean, what any of these things started? They had the potential to become as significant to global pandemic as we have now, but people didn’t react. So the idea that COVID the pandemic is a black Swan, a black Swan, I summarily reject. Now COVID has become a black Swan because of the unprecedented way that we’ve all reacted to it. So no one could’ve planned for that, but the idea that we needed to plan for a pandemic, this isn’t news, this has happened eight times in the last 20 years.
Jonathon Karelse (36:34):
On top of that, you have a couple of tsunamis. You have the port strike in Los Angeles. You have the port strike in, in, in Santiago, Chile, which people in North America don’t talk about. But the economic impact was as big as the, uh, the LA port strike. We’ve got like 30 or 40 major supply chain interruptions in the last 20 years. So the idea that people should now be talking about risk management and business continuity planning to me is an excuse for people who just put it off, because it wasn’t an immediate P and L impact. And I get it. You’ve got competing priorities. You’ve got a limited amount of cash and time risk management is not a sexy topic because you’re not going to see a return on your P and L you only get a return if something bad happens, and it happens less bad to you. But guess what, everybody that put in the effort before COVID is now, I wouldn’t say laughing, but they’re in much better shape than the people that didn’t.
Scott Luton (37:28):
I think that is a very, um, uh, what, what was that phrase you used earlier in the pre show? Yeah, there’s something to that I can’t here exactly how you put it, but, you know, you’re one of the first to really explicitly talk about in all of our, our shows here about how business leaders and certainly supply chain leaders ignored all those previous illnesses that you round off. So I’m very jealous how you’re able to do that. And you know, all of the,
Jonathon Karelse (37:53):
When I wrote a white paper about it a couple months ago,
Scott Luton (37:57):
But all of those should have screamed and shouted at the industry said, Hey, this may never happen, but here’s some smaller cases, you know, what’s your plan, PPE, how are you going to take care of your workers? If X Y
Jonathon Karelse (38:12):
Point I was going to go to, I mean, this is risk management as a core principle of a procurement strategy or sourcing strategy. It’s one thing to go and negotiate the best rate and the best fill rate on componentry bought out finished goods, whatever it might be. But if you want to value it in what happens if your single supplier goes dead and you’ve given no to secondary or tertiary supply, you end up with a PPE situation. And again, this can’t be news to anybody. I mean, I was working in the automotive industry during the tsunami at Sendai. One of our competitors, factories got obliterated. We lost some people, but they lost an entire factory. I mean, we learned from it, it can happen. So we did something about it, but there’s people still today who were caught short. And I mean, I’m sorry, but shame on, on healthcare institutions for not having more than one supplier for PPE. I mean, you gotta think this is a pretty core piece of equipment in your business. You have to at least ask the question at some point, what would happen if I wasn’t able to get this from this person? And a lot of people didn’t ask the question.
Scott Luton (39:20):
Hmm. That’s a great example. Um, so the first big thing you’re tracking is risk management, uh, business continuity planning, and what organizations are doing there, especially now that they’ve been, uh, it’s no longer a warning it’s, we’re in the middle of it. Right? And then you mentioned, uh, behavioral economics, right? So, uh, as you might have to really give me some layman’s terms here, but what, what are you talking about there?
Jonathon Karelse (39:50):
Well, this goes back to a question you asked a little bit earlier around, you know, when you find yourself in a situation where historic models aren’t applicable anymore, historic run rates no longer apply. You know, we have to begin applying, you know, fuzzier types of information, you call it EDI. There’s definitely that, that component of it, I’m looking at this from a more macro view. I’d say that the two main streams of information we can look at when it comes to forecasting are either, um, time series or historic or causal, which is the stuff that we call it judgment. We call it intuition. We call it business intelligence, but there’s been a lot of great discussion over the last decade or longer than that. But especially in the last decade around AI, especially around machine learning and big data. And, and that’s really exciting. This is a really important facet of, of forecasting and supply chain management that we need to explore it.
Jonathon Karelse (40:48):
And there’s a, there’s a ton of applicability for it, but it’s, especially in situations like what we find ourselves now, where historic models no longer apply that the applicability of these types of tools becomes much more limited. So we become a lot more focused on getting on the fly input. The problem is anytime you have a human involved in the process, you’ve got biases and I’m not talking about explicit biases. I’m talking about subconscious biases of many different types and what behavioral economics is. Uh, one of the things I loved about my economics undergrad is it provided a very, uh, very convenient framework through which to view the world. We’d create models that would explain human behavior and predict human behavior. And if you didn’t fit in my model, my model, wasn’t wrong, you were irrational. And this is like an official economics term. If you’re not doing what the model predicts, this is irrational behavior because classical economics rest on the premise that if humans are given two or more choices of varying values, they are going to choose the one that has the greatest determines utility, but let’s just call it value.
Jonathon Karelse (42:01):
That doesn’t necessarily mean monetary value. There’s different ways we can measure utility. But the idea is if I’m given two or three options, I’m going to take the one that has the greatest amount of value. To me, the reality is it hasn’t always happened that way for a variety of reasons. And, uh, Daniel Kahneman, who I mentioned earlier, and as long time collaborator Amos Tversky started looking at in the early seventies already, why don’t humans do stupid things? I mean, why, why are they doing things that just don’t match this value based model of behavior that we’ve got? And the reality is, is both a combination of nurture and nature. So the nature component is we’ve got this chunk of brain up here, um, mice, bigger. That’s why there’s no hair growing on top of it, um, called the prefrontal cortex. And we’re the only animal on the planet that has a prefrontal cortex.
Jonathon Karelse (42:51):
Now, interestingly, this part of our brain doesn’t finish developing until our early twenties and, and coincidentally, this is also the part of the brain that allows us to think about the future and allows us to weight the value of future based decisions. So if we’re talking about forecasting kind of an important part of the brain, the problem is by the time you get to your twenties, you’ve been using the rest of your brain already for two decades. So you’re used to making instinct and heuristic based judgments. You’re used to having those snap reactions to things which serve you really well. If there’s a bus coming, you don’t want to stop and consider all your, your, your various options. You want to jump out of the way of, there’s a lion coming up behind you to eat you when you’re a caveman same thing, but there are situations where you want to shut off that, that twitching part of your brain.
Jonathon Karelse (43:38):
That’s, that’s easy to use cause you’ve been using it all along and engage this part of the brain. This is one of the areas that bias comes from because we’re used to using heuristic processes, which is essentially like saying I’ve seen something like this happen before. I think the situation I’m looking at is like that solution. Right? Right. Yeah. Along with that endocrine chronology endocrinological component of decision making, there’s also the, uh, the nurture component of it, the way we’re raised the value systems. We have the cultures we’re raised in the experiences that we encounter. All of these things create biases, which is to say by the time you’re a professional, at whatever point you are in a company you’re carrying with you a bag full of more than a hundred different types of biases. And the reason I think behavioral economics is so exciting is because it allows an insight into not only a, what bias is a person carrying with them, but in, so doing and bringing it out into the open.
Jonathon Karelse (44:40):
Now we can begin to mitigate that. We did some really exciting work with Heineken, uh, with a, uh, recently a large computer manufacturer in the States who I’m not allowed to say the name of because of their legal team. Um, but the town that ran it has some great barbecue. Um, and, and we looked at their, uh, global demand planning teams and evaluated, uh, their biases and heuristics and, and interesting tidbit. Cause I don’t want to go too deep into this question. But for instance, when we looked at examples of, of where their forecasters would, would adjust a statistically driven forecast and the statistically driven forecast was trend neutral and completely stochastic. So there was, there was no pattern. There was no trend. And the computer created a forecast from a completely randomized flat model. They were four times more likely to make an adjustment up than down.
Jonathon Karelse (45:30):
Now, if you think of this rationally, if there’s no trend and there’s no bias in the projection, you should have an equal distribution of adjustments up and down, right. But because humans are hardwired to be more risk averse than reward prone. It takes a lot more to push a forecaster, both because the culture of organizations, but also because of the way we think to adjust down than up, just one of a bunch of really interesting examples that then allow us insights into creating a framework for decision making that allows us, especially in times like COVID to introduce less bias and error into our forecast and hopefully hopefully get closer to delighting our customers.
Scott Luton (46:13):
All right. So I want to ask you one final question before we make sure our audience knows how to connect with you and North fond management. Um, of course you can’t get it through a conversation these days without mentioning, uh, amongst others, artificial intelligence, AI, and I love to see some of the things that we’re seeing groups stood up, uh, to really tackle the subconscious bias that can be found in, in, in some AI algorithms and programming. And I’m not the technologist. She knows a lot more about this than I do, but what’s your quick take? What, what, what do you think, um, either something you’re seeing that we’re doing to battle that, that you really believe in, or, or maybe where are we missing the boat with ensuring that AI has as least amount of bias as possible?
Jonathon Karelse (47:02):
So let me say this. I I’m a firm believer in the application of AI in parts of the process, especially where you have non-value-added activity for humans or, or heuristic processes where I want to go through multiple different iterations of possibilities. A computer is going to do it not only much more quickly than a human can, but if we’re talking about time series forecasting, the right biases built into that, I’ll come to bias as you’re talking about in a moment, but this is where proponents of any methodology of management or demand planning fall down. If they’re only looking at one methodology, there’s a time and a place for AI. And I think the key to ensuring that we don’t inadvertently bake too much bias into a process is understanding what that time and place is and being disciplined about it. There’s places where computers should do the work and, and those are where parts are stable.
Jonathon Karelse (48:00):
And the coefficient of variance is pretty low. And we don’t know anything in particular, that’s different about the future than the past. Doesn’t make a lot of sense to have a human touching those parts, but on parts or virtually the entire portfolio. Now that that COVID has changed. The landscape humans have to be involved there. And the only, you’re never going to get rid of all bias. It’s not going to happen. We should drive towards that. That should be a goal, but it’ll never be completely eliminated. And the way that you mitigate it is by measuring it. I’m a, I’m a very strong proponent of measuring everything so that we can have a closed loop process that then comes back, measures the effect and then course correct for necessary.
Scott Luton (48:38):
I love it again, if it exists, it can be quantified and everything must be measured to be managed. So I love a lot of kindred spirits here. Uh, we’re going to have to have you back on, uh, Greg white, who could be part of this conversation. Gosh, y’all two could solve the universal ill, so we’re gonna have to make that connection, but, uh, let’s make sure folks in our listeners know how to connect with you, Jonathan and yours find management. What’s the best way there.
Jonathon Karelse (49:05):
So we’re email@example.com obviously on LinkedIn as well. Um, at Jonathan Carlson or Northland management has a page as well. My last name is spelled K a R E L S E a. And for anyone interested in any of these topics that we haven’t had the time to really, uh, get into deeply enough to fully explore, we’ve got a page of white papers available on behavioral economics, uh, forecast value at any of these topics.
Scott Luton (49:36):
Love it. And you know, we’re big believers in enabling the one-click. So we’ll, we’ll include as many there’s links in the show notes, especially connecting with you and North fond management as best we can. So really have enjoyed this conversation with Jonathan Corel, Suh, CEO of North find management. Thanks so much for your time. And from what I gather the market’s going to be seeing a lot of you between the book and the keynotes and podcasts. You name it. I’m sure there’s lots of folks that would like to spend a little time with you.
Jonathon Karelse (50:03):
Thanks for having me, Scott. It was a pleasure. You bet.
Scott Luton (50:06):
Alright so to our audience, hopefully you enjoyed this as much as I did. I swear. I think I’m leaving here with at least the certification, if not some kind of degree, uh, if you like conversations like this, be sure to check us out at, at now supply chain now.com. That’s right. Radio is gone. We have finally successfully drop radios. So supply chain now dot find us and subscribe wherever you get your podcasts from. Hey challenge. We’re going to challenge our audience. Just like we challenge our own team every single day. Do good give forward, but be the change that’s needed. And on that,
Intro / Outro (50:38):
See you next time here.
Would you rather watch the show in action? Watch as Scott welcomes Jonathon Karelse to Supply Chain Now through our YouTube channel.
Jonathon Karelse is the CEO of NorthFind Management and a global leader in forecasting, operations, predictive analytics and S&OP. He combines extensive experience with the latest best practices to improve supply chain operations, optimally leveraging people, processes and tools. Jonathon is leading the conversation that Behavioral Economics represents the next big idea for decision making and planning in most companies. He believes that by understanding the causes of biases and heuristics in planning, organizations can make rapid improvements in real-world performance. As a frequent contributor to the Institute of Business Forecasting (IBF), APICS, the Association for Supply Chain Management, and the International Institute of Forecasters (IIF), Jonathon tracks trends and directly influences best practices in Demand Planning and Sales and Operations Planning (S&OP). He has been cited for his work on Forecast Value Add (FVA) analysis; the integration of Judgement and Business Intelligence into statistical forecasting; and Conflict Resolution in consensus forecasting. Jonathon is a Director of the Eagle Ridge Hospital Foundation where he is Chair of the Governance and Strategic Action Planning Committees. He is a graduate of the MIT Sloan School of Management, a member of the 2019 Management Excellence cohort at Harvard Business School, and is a member of the Harvard Business Review’s Advisory Council.
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