The pandemic has magnified supply chain weaknesses and, for many companies, laid bare the need to modernise. We spoke with Rich Katz, CEO of leading digital supply network Elemica, on the steps companies can take to mitigate disruptions now and in the future.
In our previous interview, you described how Elemica’s products and services offer companies visibility into their supply chains, helping them to cope with flux and to mitigate risks from impending changes in the market. How do you think that Elemica’s offering can help in a situation such as that of the coronavirus pandemic that we are confronting now?
There are two major ways our products and services are helping companies cope right now. The first is that we provide a simple process for digitising the supply chain, helping to automate transaction flows and support “lights out” processing. We make sure all of the right signals are in place, and that all the data is flowing.
As you can imagine, with many people working from home in a more distributed fashion, digitisation has become more critical than ever, because it removes some of the burden and risk from supply chain planning. You can process electronic orders automatically, eliminating many of the manual tasks involved with vendor and inventory management. You can more accurately forecast things like inventory levels, and calculate what goods should be shipped and when they’ll arrive.
Once companies have that digital supply chain foundation, there are countless ways they can leverage all of that data to predict, react, and adapt to any unexpected event – even after coronavirus. That’s the second way our products and services help. We provide the foundation for a much more flexible, much more responsive supply chain.
The ramifications of the present situation are obviously challenging to comprehend, for business as for society as a whole. From your knowledge of supply issues across a range of industries, which sectors or categories of business do you see being most susceptible to factors related to coronavirus?
All sectors are absolutely susceptible, but I think some of the most vulnerable categories are “mission-critical” products, especially those that are sourced overseas. It’s things like pharmaceuticals, personal protective equipment, medical equipment – all of the products that are key to fighting this pandemic.
PPE manufacturers, for example, have seen demand increase a hundredfold. Even though some have been able to ramp up production, they have to deal with shortages in raw materials and even logistical challenges trying to import and export across borders.
Then you have all the other industries that will be affected by the opposite problem: a slowdown. The transportation and travel and leisure industries are really getting hit hard.
We might guess that companies would currently be seeing supply-chain issues stemming from changing demand patterns, restrictions on travel and cross-border trade, and changes in operating procedures dictated by the need to restrict the spread of the virus. What do you see as the main categories of supply-chain issues that companies may be facing in these times?
They’re going to face the standard supply issues but on a much larger scale. They’re going to have suppliers who are not able to meet their demand because plants are shut down. In other instances, suppliers aren’t going to meet demand because they can’t get their materials.
Then there are the companies who are having to divert essential materials to a customer whom authorities deem higher-priority. Or, they may be able to meet demand but have to divert materials to someone else because they’re now required to keep them in the country. A company that has a factory in China, for example, may be asked to sell “mission-critical” outputs to the local city government, leaving its other customers scrambling to find different suppliers.
An even bigger problem is what I would call demand volatility, the fact that companies are going to be seeing massive shifts in demand that they’re not used to. They could experience drops in demand for some types of products, while the demand for other products drastically increases. Maybe the demand for paints will drop, for instance, but the need for something like hand sanitizer is going to go way, way up.
Think about the current shortage of hand sanitizer that’s playing out on the news and on supermarket shelves. Suppliers are not only seeing a huge demand for the hand sanitizer, but they’ll also need more of the bottles and packaging that contain the hand sanitizer. So there’s a disruption that cascades down the supply chain.
Having a network like Elemica’s certainly helps suppliers during these unanticipated disruptions or diversions. The network would allow you to secure alternative sources of demand confidently.
We’ve recently seen panic buying on the high street, in spite of governments’ admonitions against this, with consequent shortages of some everyday items on supermarket shelves. We may surmise that some equivalent activity may be taking place on a business-to-business level, as companies seek to assure themselves of their supplies in uncertain times. Can the digital supply network play a role in, firstly, giving companies the confidence not to engage in this type of behaviour and, secondly, in mitigating the effects of such activity on the rest of us?
While some of this hoarding behaviour is just human nature (which, unfortunately, we can’t do much about), what we can do is help mitigate the situation by providing more confidence. It’s about increasing the visibility into material quantities and supply schedules. By giving a little more predictability, we can offer more peace of mind. Hopefully, when consumers and businesses see that the supply chain is adapting, that “scarcity” mindset that drives people into panic-buying frenzies will be alleviated as well.
I do think businesses should be setting the example here, in terms of responding ethically to these supply and demand shifts. Many already are. There are PPE manufacturers, for example, that have refused to hike prices, even as demand has skyrocketed. And with the Defense Production Act in place, it’s looking like companies who stockpile certain materials may even find themselves in legal hot water.
We know that the supply-chain visibility offered by Elemica has at its core enabling businesses to react quickly to changing circumstances and, indeed, the coronavirus pandemic came upon us with alarming rapidity. Would you say that, in the current situation, companies have been able to react quickly enough? Is there anything that can be done to improve companies’ ability to respond to such swiftly evolving events?
I think any company would say they wish they could react more quickly. But with a digital supply network and other strategic technologies in place, companies can sense the demand changes sooner. The majority of companies in our space are at least partially digitised. They’ve started to dip their toes in the water, but there’s always a lot further they can go.
A customer using our Elemica Sell products, for example, can see in real time if there are changes to their customers’ demand forecasts. They’ll be informed if their customers had a higher frequency of order changes or order cancellations. We even offer the ability to set up alerts, so that the customer gets immediate notifications of any changes or cancellations, enabling them to react even more quickly.
It’s also a good time for companies to think about expanding their supply chain ecosystems, so they have more options to secure alternative sources of supply or alternative sources of shipment when there’s a disruption. That’s another way our products can help companies respond more quickly, by enabling real-time interactions with a broader supply chain ecosystem.
The focus right now is clearly on addressing the public-health situation. Further down the line, though, when this has been brought under control, it is clear that the world will have to confront serious social, economic and political repercussions, among them a potential major economic recession. Are there any measures that companies can start to take now with regard to supply chains, that will help to prepare them for the post-coronavirus environment? And how can Elemica help?
No one knows what the “new normal” will look like, even after the pandemic blows over. No one can predict the future, but with the right data and technology solutions, companies can make certain predictions. They can forecast demand with a smarter, digitised supply chain network.
Now is the time to put these measures in place.
Even before coronavirus, we were talking about flux and volatility in the modern business world. It’s reasonable to suppose that, in the future, we may face other, equally unexpected changes in circumstances. In your opinion, are there any lessons that we can learn now about how to improve our approach to the management of supply chains in the future, so as best to cope with the unexpected?
Our solution can be scaled to provide even more value to customers as the business landscape evolves. One thing that sets Elemica apart is our machine learning and predictive capabilities.
By incorporating our Elemica See product, for example, customers can predict whether shipments are going to be late, based on past data. With Elemica Pulse, they can see disruptive situations in real time and receive key alerts. We can alert if suppliers are not confirming that they can meet orders, if they are under-confirming, or if they are late-shipping orders. We’re calling attention to any risk in the supply chain using smart predictive algorithms.
And when they do identify risk, our products can help them respond. Using Elemica QuickLink Email Buy, one of our newer products, they can digitise supplier relationships and transactions, laying the foundation for quicker onboarding and a broadened supply chain network.
It’s coming down to being able to focus on sensing what’s happening and acting on it, being able to respond quickly and flexibly. The companies that will best be able to weather volatility will be the ones who put the right foundation and processes in place.
Rich Katz is the Chief Executive Officer of Elemica, a global SaaS-based Supply Chain Network software solution. He joined Elemica in 2009 through a merger with Rubber Network. Prior to becoming CEO, he held various leadership roles at Elemica such as President, Chief Technology Officer, Senior Vice-President of Product Management, and Vice-President of Research and Development.
Rich brings more than 20 years of relevant global industry experience in the Software and IT Services market. He has an extensive background in Enterprise Resource Planning, Supply Chain, Cloud Application Development, and Business-to-Business eCommerce. Rich’s leadership has driven significant sustainable positive impact to the company’s market position; financial results; employee motivation; and shareholder value.
Prior to Elemica, Mr. Katz was the Director of Implementation Services for ATT’s Enterprise’s Ariba Practice (formerly USI) and has held Senior Manager positions in Arthur Andersen’s Advanced Technology and ERP practices. He is a 1990 Electrical Engineer Graduate of Georgia Tech.