Monolithic supply chains are dead, says Girish Rishi, CEO of JDA Software. Companies must now be bold enough to reinvent themselves and focus on redefining customer segmentation. Chris Middleton reports.
Supply chain software giant JDA recently announced record Q4 results on the back of a strategic shift toward AI, machine learning, and a more consultative, services-based approach. Internet of Business caught up with CEO Girish Rishi in London for a one-to-one chat about supply chain strategy, just over a year into his leadership of the Scottsdale, Arizona-based company.
Internet of Business: You’ve shifted JDA’s focus towards AI and machine learning, just as IBM, Microsoft, Google, Oracle, and Salesforce.com have done within their businesses. How are these technologies and the IoT impacting on customers’ supply chains?
Girish Rishi: “I’ll give you some examples. Weather patterns in the world are dramatic – global warming, hurricanes – and you cannot anticipate them. But what you can do is, as weather data happens – or as social networking data happens with teenagers, let’s say in the fashion sector – you can pick that data up and pivot your supply chain. You can direct mobile containers or fleets, or goods or types of goods, to certain locations to adapt to real-time events.
“Returns processing is another area that customers are working with us on. There are customers who tell us that 40-50 percent of what they sell online is returned. And 20 percent of what they sell in the last three months of the year before Christmas is returned.
“But how can you anticipate what will be returned? And when things get returned, what do you do with them? Currently, they just lie in the back room; it’s lost money and inventory. But now there is tangible and proactive planning that you can achieve with AI and machine learning. These are some of the new use cases that we’re working on with customers.”
A story we’ve covered a lot on Internet of Business is organisations that are using sensors to track the movement of goods all the way from production to retail. How far away are we from widespread adoption of this type of technology, of being able to track everything in the inventory and the supply chain? And what are the obstacles to making that happen?
“I believe those will become mainstream in the next 24 months. I come from some of those technologies – RFID, IoT – and there’s been an abundance of deployments. But the challenge is, it’s isolated in local sites and the decision systems about what you can do with that data have yet to created.
“There’s an announcement we put out with a customer, Academy Sports – and we’re deploying now in about 20 stores with them – where perpetual inventory data is driving sales in the store. Let’s say I’m looking for trousers size 34/30 and I can’t find any. I can go to the store clerk and he can look up real-time inventory and say, ‘It’s not where it’s supposed to be, but we have it in stock’.
“So the opportunity is how can you, in real time through RFID, IoT, and data on pallets, serve your customer’s interests? And if you don’t have that in an online marketplace or a physical store, how can you fulfil that need?”
We’ve been writing about how a number of retailers – Mango and Nieman Marcus among them – have been using digital fitting rooms to upsell products, while linking in with inventory and supply chain management. Customers enjoy these innovations, but if you’re a more traditional or conservative business, or not as advanced as those companies, what advice would you give to strategists? How can companies like JDA help organisations to think about the future?
“You have to go out and understand who your customer really is, with much greater deliberation. And if the answer is broad, mass-based, and not specific, then you need to work on defining your customer segmentation more clearly. Also, what format is your master data in, and how actionable is it? We run into a lot of customers whose datasets are not actionable.
“You have to look at what are the most impactful use cases. I gave you the example of returns, but there may also be seasonality. How do you make sure that the seasonal trending that you’re seeing is incorporated into your designs and into your inventory? These are areas where we can work with customers. How is your planning and your fulfilment aligned?
“But in most companies, planning is one function, and warehouse and transportation management are another. The promise of JDA is we offer intelligent fulfilment, where we take your forecasting data and we thread it into your fulfilment so it’s aligned. It’s a very consultative model.”
Transformation expert Sean Culey believes that the monolithic manufacturing and distribution process is breaking down. Why manufacture a million trainers in China and spend weeks shipping them worldwide when you can make one pair to order locally and deliver them the next day? To what extent do you think that future will happen on a wider scale, beyond the niche examples of Adidas’ Speedfactories? How can companies be bold enough to reinvent their businesses, refocusing on customer need rather than on lowest labour cost?
“I agree with Sean. One monolithic supply chain is not going to work anymore. Monolithic supply chains are dead.
“We have real world examples of this. Take Michelin. For years, they had one supply chain that fed into all their customer sectors. But now they have four different supply chains for four different types of customers. They realised that they were treating their high-value, high-margin customers the same as they were treating everyone else. So now they have a supply chain that treats high-value customers differently – and their winter customers, for example.
“I’ll give you another example, Bridgestone, another tyre company. They have 300 fulfilment spots in Japan, but just two in Germany. So what’s the reason for that? The answer is that real estate in Japan, in Tokyo, is very different. It’s very small. They have small warehouses and small service centres. And the Japanese user doesn’t schedule tyre changes, they just drive in. So they need rapid-response type fulfilment centres, unlike Germany, or the US, or the UK.
“So you have to adapt to your market, to your customer segmentation. And the monolithic way of approaching it belongs to yesterday. It slows down the velocity of how you can respond.”
So will other countries move closer to the Japanese model of local fulfilment and rapid response?
“No, because they have totally different profile in terms of how customers buy tyres. One monolithic approach across the world doesn’t work. In Germany, they have two stock centres because there is a lot of warehouse space and they can afford to carry more inventory, but you can’t do that in Japan.
“So it all comes down to your understanding of your customer and the culture that you operate in. What’s the most adaptive supply chain that you can construct? And you have to be nimble about it. You need to redesign your factories and warehouses and your supply chains in order to adapt.”
We’ve been hearing a lot about the impact of robotics in manufacturing. To what extent has their impact been overstated? And how does this technology map into the supply chain?
“It’s different answers for different industries. In high tech and semiconductors, you are seeing ‘lights out’ factories with no human beings. But with robotics in the warehouse, we’re very early in the cycle. There’s a lot of experimentation with robots and drones in the warehouse, but it’s early. But over the next two years, we’ll see gradual adoption.
“Also in many markets, labour is cheaper than technology, than robots, so there are other dynamics that play into it. So I think once again you’ll see countries and industries respond very differently. There is very high-skilled, expensive labour, and on the other hand – with repeatable processes like in semiconductor manufacture – you will see great automation and robotics. And beyond robotics, there are other technologies – IoT technologies, sensors, pallet tracking, mobility.”
You say that in some countries, labour is cheaper than robotics. But China is automating faster than any other nation in the world in order to keep its own costs down as its cities and middle classes expand. Meanwhile South Korea is the most automated nation on Earth, in terms of its robot density [the number of robots per 10,000 human employees]. Is the West losing the battle with Asia in terms of making our industries smarter, faster, and more efficient? Are we falling behind countries that are already cheaper in labour terms?
“Where China is investing is an important development for other countries to watch and learn from and invest in. Retraining workers: it will clearly have a social and political impact. We should not be fooled by that; it will have that impact. I think what you will see is labour doing different types of jobs, labour being more flexible.
“We are working with one of the major outlets worldwide where we are putting their workforce on automated tools so that they can be deployed in different locations, and they’re doing different types of work. So you will see an evolution of what a worker does. It’s a complex question, as it goes beyond technology.”
A lot of the press coverage about robotics has been negative and sensationalist, talking about job losses, rather than job creation. How unhelpful is this constant narrative?
“People should be aware that the type of job will change. The last 20 years of history in technology have automated lots of processes – tickets, boarding passes on your cellphone, and so on – and yet GDP is much greater and unemployment rates are lower. So what we have to be conscious about is that societies aren’t static, and they’re dynamic in terms of skill sets and learning and envisioning what these new jobs will be.
“So anytime you’re not dynamic and you’re static about the type of jobs, you’re going to be in trouble. I’m very optimistic that over the next 20 years that with AI, machine learning, and the IoT, the compensation of the workforce, and jobs, are going to grow, but the type of jobs will change.”
Internet of Business says
JDA has set up a Labs division to work with customers on co-innovation projects. This points to a future of companies not only learning from vendors at the cutting edge, but also of tech companies learning from their customers about how to run their industry verticals. These types of partnerships are the way ahead as we move into the connected age.
But as Rishi says, the old, ‘one size fits all’, monolithic approach to business is starting to lose ground. The future is smaller, smarter, more local, and more autonomous. In this fast-emerging world, the companies that are the first to break apart their monolithic processes – an artefact of a focus on cheap labour, rather than on smart labour – will win.
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