TECHquila Sunrise Episode 22

Whether investing means venture capital, private equity or stocks. Even if it means selecting the right technology to solve your supply chain challenges. This is the episode for you!

Greg White (00:02):

Hey, if you think you want to invest in supply chain tech, listen to this week’s episode of tequila, sunrise, I will introduce you to the upsides downsides, the opportunities in the dark sides of supply chain tech listen up. [inaudible] it’s time to wake up to tequila, sunrise, where without the aid of tequila, unfortunately, we open your eyes to how tech founders and venture investing ticks focused on supply chain tech every week at this unholy hour of the day. So if you want to know how tech startup growth and investment has done, join me every single week for another blinding tequila, sunrise, Greg white here from supply chain. Now always happy, never satisfied, willing to acknowledge reality, but refusing to be bound by it. My goal is to inform, enlighten and inspire you in your own supply chain tech journey, subscribe to tequila, sunrise on Spotify, Apple podcasts, Google podcasts, or anywhere else you get your podcasts. So you don’t miss a thing.

Greg White (01:35):

It is finally time to talk about my favorite investment topic, the investment in supply chain technology. Hey look, the market is very, very hot. And at the same time, supply chain is cool. Investors are flooding to this space and some of the companies that are getting funded are getting 20 plus valuations on their annual recurring revenue. I’m working with companies who are turning away, cadres of investors, begging to invest at 24 plus multiples. And some companies are getting even higher. Look, this space has been largely unknown prior to COVID few had even heard of it much less. Did they understand it? So this is my primer for investors, for observers, and for analysts awakening to the supply chain craft supply chain is exceedingly complex. Consider this supply chain literally impacts every stage of a product coming into its existence. It’s movement, storage, sale return, repair recycling, or disposal.

Greg White (02:40):

Supply chain literally touches every single physical object in the world. It is impossible to overstate the complexity of a discipline like that. Additionally, there are a lot of pitfalls, many, many potential unknowns, missteps, counterintuitive conditions, and even dark in this industry. And the reason you’re all here, there is of course, enormous, enormous opportunity. There are so many ways that supply chain can be dramatically or even disruptively improved. It’s an incredible space for investment supply chain. Technology is naturally the key and now is the time when the industry is in the forefront of the minds of not only practitioners, but also consumers, world markets, and even politicians. Look, it’s important to understand that supply chain is a very, very simple discipline. Well, until it’s not outstanding, customer experience is always the goal, but it’s difficult to attribute or is it difficult to define what is the definition of customer experience?

Greg White (03:46):

Is it quality is at times at quantity is a condition. Is it price? Is it something else? Or is it a combination of all of those things? Look COVID and the seismic societal disruption in response to the pandemic have brought supply chain practice to the forefront. The craft must acknowledge a new perspective to adapt and evolve. Supply chain professionals must adopt the perspective that supply chain is first that customer experience exercise. The primary goal is to get goods to the customer while mitigating the impact of anything that creates risk. In regard to customer experience that includes threatening fulfillment or cost or quality or brand equity, sales, profit, shareholder value. There are all sorts of economic risks, lost revenue, operating margins, inefficient operations, inefficient market structures, and business models, excessive production and inventory costs and underground economies, environmental and social governance, and therefore corporate identity impact things like ethical sourcing, sustainability, fair trade, and even human rights.

Greg White (04:58):

All of those impact accompanies esteem and therefore the top and bottom line disruption risk and the preemption mitigation or recovery from disruption brought on by supply chain complexities, far-flung supply networks, security, both cyber and physical, whether infrastructure acts of man and nature, plus more all apply risk to the supply chain when industry leaders and practitioners begin first with this customer experience goal in mind and do a few more things. One acknowledge risk management is paramount in meeting that end appropriate goals, models, actions, and results follow. Typically supply chain has been looked at as a cost mitigation exercise or a cost reduction or minimization exercise rather than primarily as a risk management exercise. And this paradigm shift is opportunistic for the industry. The industry has to broaden the understanding of what constitutes risk. This perspective enables the ability to mitigate risk. Like never before it’s not uncommon.

Greg White (06:08):

Let me give you a for instance, for industry professionals to believe that efficient economics must come at the expense of customer experience, industry leaders have to recognize these and other risks as operating in concert rather than in conflict with one another. Sure. There are trade-offs, but with the right solutions, the right approaches, the right models, the right processes mitigating, one of these risks need not overshadow or sub-optimize the other, let’s talk a little bit about the supply chain condition. And this will give you some perspective on what the framework is that we’re working in. Hopefully open up some insights towards where the opportunities lie in this industry. So supply chain is in a rediscovery period right now it’s in transition and frankly rediscovering itself formerly the predominant goal was physical movement storage and cost minimization. Now with risk management becoming more understood though, as I said before, still difficult to juxtapose versus acceptable cost.

Greg White (07:16):

The marketplace is in transition. We’ve been prone in the past to swings in strategy. The industry executives are just coming into their own in the executive suite. In fact, they’ve really just received their seat at the table. The industry is confused by so many legacy solutions like ERP and they’re good enough solutions. There’s a predominantly manufacturing mindset, which is assumed to apply to retail distribution, all aspects of supply chain in terms of demand dynamics and economics, there’s transportation complexities. And there’s also intentional obfuscation in terms of inefficient market dynamics and other more nefarious issues. There are just so many players, constituencies, varying goals, limited or absent trust and subsequently relatively little transparency and information sharing the industry is rife with outdated stuff, outdated

Speaker 2 (08:18):

Technologies, outdated ideas, outdated

Greg White (08:20):

Principles, and even outdated, best practices, even academics are far behind the times in most cases as to what is optimal or even possible in supply chain. I have had many, many discussions with academics on this topic. And they’ve said that it’s difficult to keep up and stay ahead of evolutions in industry. And that was before COVID and COVID has been a catalyst for recognizing flaws and opportunities in the supply chain and instigating change in some foundational premises in the supply chain. All of these things create opportunity opportunity for new players, opportunity for new processes, opportunity for new investment in current companies. But truly there are many, many people and companies invested in those best practices. I mentioned most of which are based on obsolete thinking or models from a day

Speaker 3 (09:14):

And the rich and readily available data of today.

Greg White (09:17):

It was really not accessible, defending and perpetuating. These obsolete practices has to date and continues to harm current performance, limit innovation, slow improvements. And the presumption that best practices are gospel is rampant. And it makes it very hard to overcome this myopic thought invites disruption, but at the same time, it can stunt adoption. There’s a lot of old approach tactics out there based on outdated supply chain principles and even industry leaders, associations and educators promote outdated principles because it’s the way it’s always been done. For instance, universally throughout supply chain, we are forecasting the wrong thing in supply chain. We forecast items. We talk about the seasonality of the item, the trend of the item, the patterns of the item, what this items attributes are. But that is really because items are merely a holdover from ancient days when we had no data on customers.

Greg White (10:22):

So we used items as a surrogate for customer demand. I don’t really have time to go deep on this topic, but I’m happy to discuss it. If you want to reach out to me, I’m on LinkedIn, Greg white, or at Gregory S wide on Twitter, Instagram suffice it to say, we need to be forecasting the actions and the influences that consumers have that will cause them to act on these items and purchase them. We talked a bit about this manufacturing bias and presumption. You see so many of the philosophies and strategies and best practices in the industry based on manufacturing, examples to the exclusion of understanding or analyzing retail or distribution practices or examples. And the main reason for that is manufacturers make enormous margins and enormous revenues. And therefore they have the money to pay for consultants. And so the projection on the marketplace is that the manufacturing way of supply chain is the way so that’s changed over the years,

Speaker 3 (11:27):

But that is still a relatively

Greg White (11:29):

Prevalent point of view. And you will see it repeated over and over again. The nomenclature in this industry is another issue. It is not universal, it’s highly nuanced and without standard definition. So let me give you an example, depending on the industry purchasing could mean procurement of direct or indirect materials. It could mean replenishment of finished goods, or it could mean merchandising, the actual sourcing selection and design of products or any combination of those three, depending on the organization. Another example is inventory optimization that can mean economically determining the appropriate inventory levels of company keeps to support demand in their warehouse, or it can mean how inventory is stored in a warehouse to optimize picking, or even how to position storage and fulfillment locations to optimize delivery economics, all three of those distinctly different business problems. You know, we talked a little bit about ERP and legacy technology.

Greg White (12:38):

Look, there is a lot of old tech out there built on outdated principles, much of supply chain tech is built with a close enough for rock and roll approach. This is really the case because for ERP solutions, those we talked about earlier built predominantly for manufacturers and with a simple approach bias, which is fine for companies like manufacturers with double digit net margins, but completely inadequate for retailer distribution, which suffer through low single digit or in some cases no or negative net margins without solutions focused on their precise supply chain issues and environment with so many of these legacy technologies that wealth of available data is groundbreaking, but rarely breaking any ground. There’s so much to be said about many of the technologies from 2010 and prior, but look suffice it to say that those legacy apps are the reason. There is so much opportunity for disruption and innovation in this industry.

Greg White (13:41):

We’ve already seen even before now, arise of the newbies. There’s a lot of tech out there built by people who don’t have supply chain subject matter expertise. And they’re coming into the industry with a naive viewpoint and approach and in a way that’s good, but they often oversimplify what is an unbelievably complex problem. And this really limits their ability to take the product from MVP to market, ready, understand this is a deeply accountable and therefore analytical and doubtful industry and ignoring those and other market dynamics has cratered a good number of companies too often. A disruptor has a preconceived notion of what the market quote unquote needs. This perception is really not unlike disruptors in any other industry, but the complexity of supply chain can quickly destroy delicate credibility. The learning curve in this industry is steep and harsh missing. The target is met with brutal rebuke.

Greg White (14:43):

And even in the case, a company gets a shot at multiple iterations to try and create a meaningful solution. They’re frequently relegated to also ran status in the industry. By the time the product hits the market market research and customer discovery is exceedingly difficult because there are so many constituencies in the supply chain. There is significant network effect, which is great in most cases, but in supply chain, it’s more table stakes than a conduit for adoption or pipeline. And the high switching costs and marketplace inertia means many companies keep their tech for seven to 10 years. Additionally, there are some other fascinating and surprising supply chain technology observations. For instance, AI is not universally applicable to every problem in supply chain, nor is it necessary to address certain aspects of the supply chain. Some aspects of supply chain solution are best resolved by deterministic methods, blockchain, a widely applicable solution in the industry, but not without its gaps.

Greg White (15:53):

And one has to acknowledge that it exposes and undermines intentional market inefficiencies to put it kindly and underground economies that maintain intentional obfuscation to support their revenues. IOT is the key to prediction in so many aspects of supply chain and properly applied replaces legacy forecasting for where items the lesson here is that a healthy dose of moderation is key to efficiency, effectiveness, and success for a technology application. New age tech needs to be augmented with linear rule-based or deterministic methods to be the most effective. Hey, look, there is hope. As I said earlier, this is an amazing opportunity, even with all of the complexities, the pitfalls, the dogma and skepticism, the underpinning of outdated technology trumps the entirety of that. In fact, lack of transparency, paper processes, human intervention, and yes. Spreadsheets, yes. Spreadsheets make for an industry ripe for disruption. So what are those areas and how do you make your way?

Greg White (17:02):

How do you find the right investment? How do you position a company to be most successful in supply chain technology? Look, this is what I have seen. Be very, very successful. It’s the combination of a naive approach of the disruptor along with the guidance of experienced, but yet open-minded industry veterans. This produces the right questions as to why the industry does things a certain way. And those rare few veterans who can see beyond the dogma can guide the disruptors past blind spots and pitfalls that extinguished disruptive dreams. Yes, it’s true. Like in most startups pair your bold, brash and beautiful with a geezer that sees the supply chain, what it could be rather than what it has always been. That’s a critical key component for success for anyone bringing solutions to the marketplace. So what does that mean for supply chain tech investors and what should you do?

Greg White (18:03):

One man’s opinion? It means that you have to recognize and continually acknowledge that you are dealing in the industry. That is the infrastructure, delivering the physical assets of every single other industry you’ve ever invested in. When you acknowledge that truth and the complexity that it implies, you will see why you need expert eyes from the supply chain industry on trends and innovations. You need to seek supply chain visionary perspective on the company’s founders, their presumptions and solutions that you are considering that you need active advisory and guidance for your investments. Once you’ve made them, regardless of the startup pedigree or industry expertise or disruptive vision, it’s too easy. Even with incredible supply chain expertise to fall in line with best practice. In fact, especially if your founders have a disruptive vision, you need rational, but open-minded oversight to synthesize your investments, vision, and catalyze their success.

Greg White (19:13):

You need to ready your mind for a slog street, fighting oppression, dirty tricks and unfair advantages because you will be up against not only and historically laggard marketplace that your investments will work with and against the best of the best and the biggest of the big. And they can get to corporate boardrooms to ask why not this three letter solution. So you need to get your investments in the boardrooms to don’t feel obliged to earn your sales. I can assure you that the ERP is don’t. They have a ton to lose. They’re hanging on for dear life and they know it. So what is the opportunity in this marketplace? And is it worth it? I assume if you’re listening to this, you’ve either done your market analysis or you have the resources to do it, but you at least think that it’s worth it. This is currently a 15 plus billion dollar market that employs over 700 million people worldwide 44 million in the U S alone.

Greg White (20:15):

And there are 1.4 million additional supply chain professionals needed immediately. It’s growing at an 11 to 13%, depending on who you believe, compounded annual growth rate and projected to be nearly 40 billion by 2027. And I’m telling you that’s an understatement. So of course it’s worth it. And this market is going through a transformation, never seen in its history. There is a world in need of change. There is market momentum finally, and a light shined on the most obscure. And yet you became witness industry in the world. The opportunity is now, now if you do it right, all right, that is all you need to know about supply chain tech for this week. Don’t forget to get to supply it chain now.com for more supply chain now, series interviews and events. And now we have two live streams per week. The most popular live show in supply chain. Supply chain buzz is every single Monday at noon Eastern time with Scott Luton and me, or maybe even somebody else. Plus our Thursday live stream to be named later where we will bring you whatever the hell we want. Hey, thanks for spending your valuable time with me and remember acknowledge reality, but never be bound by it.

Greg White serves as Principal & Host at Supply Chain Now. Greg is a founder, CEO, board director and advisor in B2B technology with multiple successful exits. He recently joined Trefoil Advisory as a Partner to further their vision of stronger companies by delivering practical solutions to the highest-stakes challenges. Prior to Trefoil, Greg served as CEO at Curo, a field service management solution most notably used by Amazon to direct their fulfillment center deployment workforce. Greg is most known for founding Blue Ridge Solutions and served as President & CEO for the Gartner Magic Quadrant Leader of cloud-native supply chain applications that balance inventory with customer demand. Greg has also held leadership roles with Servigistics, and E3 Corporation, where he pioneered their cloud supply chain offering in 1998. In addition to his work at Supply Chain Now and Trefoil, rapidly-growing companies leverage Greg as an independent board director and advisor for his experience building disruptive B2B technology and supply chain companies widely recognized as industry leaders. He’s an insightful visionary who helps companies rapidly align vision, team, market, messaging, product, and intellectual property to accelerate value creation. Greg guides founders, investors and leadership teams to create breakthroughs that gain market exposure and momentum, and increase company esteem and valuation. Learn more about Trefoil Advisory: www.trefoiladvisory.com

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