February 10, 2021

Supply Chain State of the Union

Episode: 14 with Pete Cannistraci, Principal, Deloitte Consulting LLP

It's Season 2! We are joined by Deloitte Consulting LLP for a supply chain state of the union. In this episode, we discuss the economic impact that 2020 had on the industry, as well as warehouse trends and automation that you can expect to see in 2021.

What You’ll Learn

  • Digital tools you can expect to see in 2021
  • Ways to capture data and use that data to make decisions
  • Warehouse automation trends to look out for

Additional Resources

Who You’ll Hear on this Episode:

Pete Cannistraci Pete Cannistraci, Principal, Deloitte Consulting LLP - Pete is a leader within  Deloitte's Technology practice and brings 17+ years of management consulting experience to clients engagements. Pete's primary focus is on helping manufacturing companies define and execute their digital supply chain transformations using Oracle Cloud as the basis for the technology modernization. Pete has managed full suite implementations for global organizations including financials, supply chain, and human capital management products sets in both Oracle Cloud and on-premise packages.

Sarah Sarah Archer, Digital Marketing Coordinator, RF-SMART - Sarah has been a team  member at RF-SMART since 2018. She is the host of this podcast and the YouTube series Q&A. Sarah is currently pursuing her Master's degree in Communication at the University of North Florida.

 

Is accurate inventory a part of your plan this year?

Let's Talk!

 

Sarah Archer:

Hello everyone. Welcome back to the Taking Inventory podcast. This is season two. We made it through season one in 2020. Insurmountable odds in that year of starting a podcast and it being a big success, but we have you guys, our listeners to thank for that. So thank you for tuning in, for subscribing. This is an exciting episode for me. I'm excited because we have a guest from Deloitte on today. We're going to talk a little bit about the supply chain industry. We're going to talk about WMS, mobile data collection. We're going to talk about Deloittes' annual report that they put out. And one thing that we're going to talk about today that we don't normally talk about on this podcast is the economy. It's not normally something we talk about on the supply chain podcast, but we're going to talk about it today because it's very important as you set 2021 goals, as you look to automate, as you look to implement other pieces of warehouse technology, the economy is certainly playing a role in that.

Sarah Archer:

So today we've got a guest, like I said, from Deloitte Pete Cannistraci is here. Deloitte, if you don't know, is a leading global provider of audit and assurance consulting, financial advisory, risk advisory, tax services, et cetera. They have all sorts of services that you can utilize. They operate in more than 150 countries. They've got more than 330,000 employees globally serving four out of five Fortune Global 500 companies, which is very impressive. I cannot believe that they came on our podcast. That's very cool. And so, like I said, Pete is here. He's a principal in Deloitte's Oracle Practice. He's going to speak about trends in supply chain. And Pete, why don't you just tell us a little bit about yourself, your role at Deloitte and let us know, we're talking about kind of supply chain resolutions today. Did you have any new year's resolutions?

Pete Cannistraci:

. I have tons of new year's resolutions. I think it's a great time of the year to just kind of reset, reframe. And especially after 2020, it's something that everybody should sit down and reflect upon. But just a quick intro about myself. I've been with Deloitte for close to 18 years now, and I've been all the time working in Oracle. My role at the firm is really as a leader in the intersection between our Oracle work and our supply chain work. And so I manage that pipeline. I work with clients in the manufacturing industry, and I basically guide them through their digital transformations using Oracle as a tool for their monetization efforts. So you asked me about new year's resolutions?

Sarah Archer:

.

Pete Cannistraci:

My new year's resolution, or new year's resolutions I should say in 2021 is really to focus on health and wellbeing. I think after 2020, re-focusing on that, making sure that I am eating right, exercising right and keeping myself in top physical performance is really what I want to focus on. The best part of this is that at the beginning of the year, it brings a whole bunch of new opportunity. Lots of things to think about both personally and professionally. You had mentioned the economy and I've got a few perspectives that I'd love to share with you on that as they pertain to that topic, a new opportunity.

Sarah Archer:

. . Let's go ahead and kind of jump into that supply chain state of the union. I will tell you that I think that your new year's resolutions are much more impressive than mine because mine was to stop impulse buying things on Amazon. And so far I have done a very good job of that, but with the pandemic and working from home, it was very easy to just impulse buy things. So anyways, let's dive into that kind of state of the union. Talk about the economy a little bit and let us know. I know Deloitte has many resources that you guys are able to tap into as you make predictions for this year.

Pete Cannistraci:

. We monitor economic activity really on a weekly basis with our economist Ira Kalish providing an update on what we can expect in 2021. So that's just one of the resources we have from an economic monitoring standpoint. I find it extremely valuable because of the different perspectives that he shares, some of which I'm going to share with you today. In his most recent report he talks about the US economy growing at a decent pace in the fourth quarter of 2020, but really not enough to bring back real GDP to the level that we saw a year earlier. It really appears that the outbreak of the virus in the fourth quarter took a toll. It suppressed consumer spending growth, even though consumer spending did grow judging from your impulse buying. And that consumer spending growth was interesting because that occurred even as consumer income declined.

Pete Cannistraci:

The result of this is really a mixed picture in which some sectors suffered due to the outbreak while others recovered strongly and still the bottom line is that economic activity remained suppressed relative to where we were a year ago. And in order to get over that hump, we need to get to a point where we can say we have suppressed the impact of the virus. And from a hopefulness perspective, that's something that I really think is going to happen this year with rapid vaccine distribution and a lot of the new news that we're hearing on a daily basis on getting those shots into arms.

Pete Cannistraci:

Numbers wise in the fourth quarter, real GDP increased at an annualized rate of 4% from the previous quarter. Keep in mind that this was about two and a half percent below a year earlier, indicating that we haven't yet returned to pre-crisis levels. If I can just take a moment and drill down into manufacturing, I really like to focus on the purchasing managers index. And that's a key measure of manufacturing activity that I look at on a month to month basis. It's been strong and it's registered most recently in January 2021 at just shy of 59%. However, there are still inconsistencies being driven by absenteeism, facility closures for cleaning and stockpiling, really companies are trying to adapt to the new way of working in this new environment. Again, supply chain performance, it's in recovery mode, however, it's still limited in its growth potential. So that's my perspective on the inventory. That's my perspective on the economy.

Sarah Archer:

Certainly there's many things to take away from that. One of the things that we've observed at RF-SMART over the last year, of course, as you mentioned, is there was just this huge uptick in people purchasing, especially online and of course, new patterns in the way that people are buying things, as you mentioned. And so there's definitely more to dig into there and I know that we'll get to that here in a moment. Many of the things that you mentioned are in the Deloitte in your report that you guys have just put out. We're going to drill into that supply chain portion of the report. But for those of you listening, if you'd like to see the whole report, I'll make sure that it is linked for you.

Sarah Archer:

So for the supply chain portion, there are three big predictions in supply chain for 2021. You can expect that you're going to see more digital tools. You're going to expect that you will see more ways to capture data. And then you can expect to see warehouse automation like robots and drones, which if you listen to this podcast you know I love to talk about robots and drones. And so we're going to talk about all three of those today. And we'll start kind of at the top of the list. Pete, the report says that people in supply chain can deploy an array of digital tools. They'll be able to hyper segment customers and capture demand signals from different parts of their value chains. They're going to be able to use this information to make their supply chain more responsive and to be able to meet unique customer needs. And so what are some of the ways that you're seeing customers respond to these needs and then this fluctuation in demand?

Pete Cannistraci:

And it's a really interesting series of responses because a lot of the clients that I work with are responding in different ways and at different paces as well. There are different needs from customers out there in the market. There is an explosion in channels to serve those needs. Companies have accepted kind of an as you wish way of serving them to offset the fluctuations in demand. I mentioned earlier that the supply chain is in recovery mode. In that recovery mode, this way of working, this as you wish way of working increases cost to serve. And that cost to serve is going to rise exponentially as demand grows. So it's really something that my clients need to be careful about how they respond to these fluctuations in demand, especially as things like backlogs, inventory, orders continue to trend upward and show strength.

Pete Cannistraci:

So it's an area that is of a particular focus. I'll say that a couple areas that tend to get a lot of discussion from my clients are demand visibility and responsiveness required to support those customer demands. These can be addressed by a dedicated supply chain planning software like Oracle supply team planning cloud, as well as the potential use of a supplier portal where demand schedules can be shared with suppliers and enhanced with things like advance ship notices. My clients are also talking about taking these things to the next level, by implementing control towers to more directly monitor responsiveness, execute needed shifts in the supply chain to meet unique customer requirements and those fluctuations in demand. That control tower is something that allows them to see wing to wing basically the performance of their supply chain and make decisions in near real time as to how to move material, address fluctuations in demand and really start to kind of patternize the way that their customers are asking for product in the market.

Sarah Archer:

And speaking of those fluctuations in demand, we kind of alluded to this earlier, but I think it's kind of worth exploring. In 2020, we saw so many businesses either shift to e-commerce or e-commerce businesses experience a huge boom as people began to buy online as they were staying home. What might a resolution be for companies that really want to go to that next level in 2021 in terms of being able to meet those demands?

Pete Cannistraci:

The online experience most definitely took a front seat in 2020. If you think back at the beginning of 2020 to where we are now and the evolution of that online experience in that short amount of time, leaps and bounds it has moved in that time and it continues to move and evolve in a more and more advantageous or popular way. Companies have quickly pivoted over that time and continue to do so to build that capability, to address constraints in the market because of the pandemic. There are so many new digital experiences with everything from virtual concerts of which some of my colleagues have attended, all the way to this idea of online shopping and offline pickup for some of the big box stores that really needed to develop a digital presence to prop up sales.

Pete Cannistraci:

The quick shift to digital really focused on execution, not personalization. With relief on the horizon, I really think that companies should be thinking about how to invest in personalizing that digital experience and those digital interactions. A couple of ways that they could do that is really by using things like augmented reality to see an item in your home before you buy it, or more broadly and integration of personal preferences into buying behavior like a simple reminder that tells you that when you're near a store that has a piece of clothing or furniture that you'd be considering, perhaps you can have a physical interaction. You can stop in, check it out and make a decision and move on. Really this investment in blending digital and physical experience by using data machine learning, artificial intelligence, should all be top of mind. Smartphone applications with body scanning capabilities for ritual clothing fittings. That's something that I think we'll be seeing in 2021 as well.

Sarah Archer:

That would be cool. And people don't really realize, everything that you just mentioned is supply chain and supply chain touches every part of your business. And so I'm kind of curious Pete, what does supply chain affect and what's next in supply chain?

Pete Cannistraci:

What's so amazing about where we are now is really the pace of innovation. That pace of innovation continues to rapidly accelerate as manufacturers recognize the need to future proof their operations in the face of a changing global supply chain, combined with these new customer buying behaviors that we just spoke about a moment ago. A number of things come to mind when I think about what's next for supply chain in this space, namely, navigating disruption. Manufacturers have tried their hand at navigating that disruption over the past year, and they're getting better at it, hence the notes of recovery that I mentioned earlier. The pandemic taught manufacturers that they need to invest in digital transformation, particularly with visibility as the most critical capability to develop. Visibility and responsiveness I'll add. Really shoring or upgrading foundational technologies to support this rapid innovation cycle and investment in next generation capabilities. Like the ones I mentioned a little bit earlier, and also things like digital twin, blending again, physical and digital as part of the manufacturing process, rather than consumer-facing items like I spoke about earlier.

Pete Cannistraci:

As manufacturers retool their workspaces, things like digital twin are really going to be advantageous in doing that blended experience. The other thing I'll comment on is really just general supply chain resilience. Quickly and more skillfully adapting to the changing market, this idea of a war room is kind of old school, I'll say. The idea of the control tower that I mentioned earlier, monitoring your overall digital supply network, both within and outside the walls of your facility is something that clients will be investing in, in 2021. The last thing I have to say is that, and I mentioned this a little bit earlier, pre-pandemic work arrangements, not coming back. Really developing that hybrid model for production and non production processes is going to be top of mind, including increased reliance on robotics and that broader, Smart Factory topic that I'm sure we're going to get to later on in today's discussion.

Sarah Archer:

So, we've kind of talked about there's this resilience factor, there's this shift almost in the way that we're all doing business. It's almost like COVID-19 kind of cut the cord and we just kind of started doing things differently. And it was amazing to see some of the creativity that people came up with in order to continue their business or to grow their business. One of the things that I know, one of the steps a lot of people took, and we certainly saw this at our Smart last year is implementing some kind of mobile data collection, which is something that Deloitte touches on in this report. And so I'd love to talk a little bit more about that. If you're listening to this, you might be like, well, we've already taken that step. We're already partnering with RF-SMART for mobile data collection. And that's certainly the first step, but Deloitte is predicting that there's going to be even more that you can do with this very large amount of data. And so Pete, can we talk about steps a customer or a client might take to capture these large volumes of data?

Pete Cannistraci:

And I really think that data capture will be a key enabler for every type of change that involves supply chain resilience. Integrated personal experiences between customer and fulfillment, that is all going to be based on the ability to capture data and drive insights from what you've captured to tell you things that you can use to make rapid decisions in a changing environment. So it's going to be a foundational layer as I mentioned to whatever types of changes you're thinking about making in 2021. A focus on re-engineering the ability to capture, store and process that data should be top of mind for clients. Modernizing infrastructure to prepare for things like machine learning, artificial intelligence, really to support more informed and accelerated decision-making.

Pete Cannistraci:

And also we talked about recovery and growth earlier. You need to have a scalable solution when it comes to data, capture, storage and interpretation, because as you grow and as supply chain grows and those demand fluctuations continue to come, you really need to be able to scale up your ability to shift, pivot, and address the needs of the market.

Pete Cannistraci:

And the other idea that I want to talk about is this one of zero latency. We're in an as a service type environment. And the zero latency concept is really top of mind, front and center. I'll give you an example. The ideal response time for click and response is less than 50 milliseconds. Any longer and as a user you're going to have a little bit of frustration and it might cause you to make an uninformed decision because of that latency in your wait time.

Pete Cannistraci:

You should really consider as a client this idea of a cloud data warehouse. Different types of databases, like time series or graph-based databases to support certain required outputs quickly. Concepts like self-healing fault tolerant data architectures. They're also growing in prevalence as clients realize that to maintain your data that you collect, that cost is much higher than it is to simply store it. So you can store volumes and volumes of data, but your ability to keep it clean, have an architecture in place and a governance structure in place that keeps that data usable and easily referenceable and ability to serve and support decision-making, is extremely important for the future.

Sarah Archer:

and certainly a trend that we have seen over the last few years and is not going away is cloud and choosing a cloud partner. You mentioned Oracle SCM Cloud earlier, of course it's one of the enterprise resource planning tools that are Smart partners with. And one of the value of cloud of course, is having that real-time accurate data. I was wondering Pete if you had recommendations because especially with Oracle Cloud and with RF-SMART, there's visibility into all sorts of different metrics and KPIs that people can track. I was wondering if you had any insights into what kind of KPIs people should be measuring, especially for 2021?

Pete Cannistraci:

What I tell my clients all the time is what gets measured is what gets done. So, any sort of implementation or any sort of project that is focused on a defined outcome needs to have built in metrics and measurements, KPIs, that can monitor the output of what capabilities you just implemented. To that end, Deloitte has developed a series of pre-built analytics objects to make that easier for our clients to understand and to monitor those key performance indicators that are commonly requested or that clients should be considering to manage their operations. We usually in the supply chain space focus on six main subject areas that house a bunch of different KPIs. Those six subject areas include procurement performance, predictive spend, demand forecasting, anomaly detection, inventory balances and activity, and then lastly spend and cost savings. With this view of these six different subject areas and the KPIs that fall within them, it provides a good executive type dashboard to see how operationally the business is performing.

Sarah Archer:

And you're right, spend and cost savings is really at the top of everybody's mind, right? That's one of the reasons that you may be looking to implement some kind of data collection system or some of these planning tools is because in the long run, it really does save you money. Do you have any stories that you can tell about a client who is really doing this right, and is able to measure these KPIs?

Pete Cannistraci:

I can share a recent example that really focuses on the fact that there is so much useful data that comes out of routine supply chain processes. Making it work for you can be extremely, extremely useful. The example that comes to mind is one where Deloitte and RF-SMART collaborated at a large global manufacturer. And this manufacturer, their business was bringing together two different raw materials to create one of their products, one of their key products. As part of the manufacturing process, a significant amount of by-product was created and they wanted to use this after capturing it in different parts of the manufacturing process to create different components. So in the discrete manufacturing part of SCM Cloud, we weren't able to capture byproducts directly out of the box. So what we did is Deloitte and our smart team together to automate the capture of this by-product into inventory.

Pete Cannistraci:

We created a new relationship for the main item and the item master. We defined that relationship as by-product. Upon completion of the work order via an RF-SMART enabled transaction, the relationship was referenced and that relationship created a quantity, via miscellaneous receipt automatically for the by-product in the same amount as the primary item. This was a simple use of already existing data that drove an automated solution for establishing by-product quantity in inventory. It was ready for consumption at a different part of the manufacturing process. That's just one story of how a simple piece of data was used and executed, and then worked into an automation where Deloitte and RF-SMART collaborated for the benefit of a client.

Sarah Archer:

People don't think about automation necessarily in terms of data collection or kind of these workflows that you're referencing. And so that truly can be just a very simple automation that will make your life or your job so much easier. So Pete, one of the things that people when they think about warehouse automation, the thing that they think of is robots and drones and automated picking, and self-driving forklifts and all sorts of crazy futuristic Jetsons style stuff that you can do nowadays. What are your predictions for what we're going to see warehouse automation wise in 2021?

Pete Cannistraci:

And those are things that we have been reading about I would say for years, but in your question, you used a word that I think was interesting, futuristic. I would say it's not futuristic anymore, it's now. And there are so many examples of that type of technology that is accessible today. Not only in the manufacturing space, shop floor, warehouse, but also to consumers. I have a couple of wonderful children that expressed some interest in this. They saw it on TV and they ask questions about it. So I thought that it would be a great idea to get me a drone, or actually them, to get them the drone.

Sarah Archer:

We know who it was for Pete.

Pete Cannistraci:

And I've had the opportunity to see in helping them understand how to use it, just how easy it can be and how useful it can be in that shop floor setting. As far as trends in warehouse automation in 2021 go, I would say that in those organizations that have invested in their digital foundation, I am expecting to see a huge integration of robotics to support that hybrid digital, physical production model that I talked about a little bit earlier. The second trend that I'll highlight is really the use of aerial drones. That's going to become much, much more common. Now what's interesting about that is it's going to be limited by a state-by-state readiness for the capability. There are some states that are more prepared than others on the legality of using aerial drone technology. Just a couple of examples, California, Texas, Kansas, they've all passed drone legislation. So in order to uptake those capabilities in those states, for example, the companies that reside there are going to have an easier time at integrating and using those aerial drones, whether it be to deliver product or do shop floor operations, for example.

Pete Cannistraci:

The last thing I'll say from a warehouse automation perspective in 2021, I'm really expecting to see more usage of vision systems along with artificial intelligence capabilities to enable things like stock counting, monitoring of social distancing, safety protocols, the use of cameras in product inspections, really being able to see such subtle nuances or product features or movements. The use of vision systems is going to be integrated into warehouse automation and the warehouse in general in 2021.

Sarah Archer:

It really goes back to what you were talking about kind of at the beginning of the podcast about this user experience that we're now having of you can buy online, pickup in store, and then really elevating that to the next level with this use of technology. We talk about all the time that good customer experience or a good team that caters to customer service really starts in supply chain. And so definitely these automation trends are a component of that, of being able to regulate and to monitor. I think it was really interesting, the idea of using automation to monitor social distancing or other kinds of safety protocols. As you said before, things changed last year and it's going to keep evolving, we're not going back to the way things were. And so how can we implement technology for that?

Pete Cannistraci:

I would say that adaptation was the name of the game in 2020. And now refinement of that adaptation is really what manufacturers need to be focused on in 2021. The points about social distancing, monitoring safety protocols, figuring out how to manufacture, which has historically been a physical activity, but do it in a digital way. The pandemic has accelerated all. And so for 2021 and beyond, refining that, refining those pivots so that they can be optimized and enhanced in the work in what is our new normal, is going to be extremely, extremely important.

Sarah Archer:

So Pete I'm curious, what kind of investments is Deloitte making in these supply chain trends as we move into 2021?

Pete Cannistraci:

Happy to share that Sarah. So we have a significant investment that really focuses on next generation supply chain. And that is in our Smart Factory at Wichita State University. And what we're doing there is we are bringing to life the digital, physical, and experimental for our clients to experience advanced manufacturing capabilities and methods at the heart of digital transformation. This is a new, one of a kind facility that's going to kickstart client journeys toward better understanding how to integrate existing technologies with new innovations and create dialogue about how to take the first steps into a more sustainable series of investments for our clients.

Pete Cannistraci:

This is actually a 60,000 square foot sustainable space that's going to house state-of-the-art production. And it actually is going to be manufacturing STEM education kits for children. We're collaborating with Wichita State University to upgrade the property to a smart building on a smart grid while exploring additional applications on campus and around Wichita. And the Smart Factory is really aimed at helping to mold the next generation of manufacturing and provide Deloitte and our ecosystem with direct access to experience leading solution architecture.

Pete Cannistraci:

We're making Smart Factory transformations real and readily accessible for clients by creating physical real world space that clients can experience that manufacturing the next generation manufacturing. We're going to be showcasing a set of those capabilities along with integrated solutions like the ones that I mentioned earlier during our discussion. It's going to be extremely helpful for clients to see either virtually via tour or physically via tour, next generation manufacturing capabilities and how they could be integrated into their manufacturing floor, their shop floor, so that they can understand where to make their investments and what the outcome or benefits of those investments would be.

Sarah Archer:

It's one of the coolest things that I've ever heard. And what an investment that you guys are making, not only just in the future of supply chain, but then also this really kind of pay it forward with the manufacturing of the STEM kits. That's very cool.

Pete Cannistraci:

It's a unique aspect of the Smart Factory that is a point of pride for myself and other partners.

Sarah Archer:

Definitely something to be proud of. Pete, I'm curious as we kind of wrap up today, you said it, refinement is the name of the game. And so for 2021, if you were able to give just one piece of advice to those listening for ways that they can continue to adapt, continue to refine their processes, what would that advice be?

Pete Cannistraci:

So much to think about for 2021. If I had to summarize, I'd suggest the following items, and it's going to be more than one piece of advice.

Sarah Archer:

I'll let you have it.

Pete Cannistraci:

There's definitely this idea that cloud should be front and center. The pandemic accelerated the transition to cloud. Cloud is going to be the gateway into the operational and customer facing insights that are going to serve as clients as new competitive advantages as they navigate this dynamic environment and marketplace.

Pete Cannistraci:

The second thing I'll say is that business models are changing and so it's time to transform or change your business model. Operate unconstrained when it comes to your supply chain. Push the envelope in adopting measures of increased visibility, resilience, and responsiveness in your supply chain because the disruptions that we saw in 2020 are only going to continue and intensify as customers evolve. And as those buying behaviors evolve, you really need to be prepared for that. The last thing I'll say is, really take a long versus a short-term view. Focus on building out that core, the digital core, so that you can be in the position to develop and execute on a broader digital strategy. There is so much hope, opportunity, possibility for prosperity in 2021. As a decision maker, you need to go and get it.

Sarah Archer:

I was just thinking, if I was going to take one thing away from what you've said today is that there really is opportunity in 2021. The sky is the limit in terms of what you are able to do technology wise, digitally. Certainly there is so much to take a look at. If you are listening and you're interested in diving a little bit deeper into the report that we mentioned, like I said, it will be linked for you.

Sarah Archer:

I want to give a big thank you to Pete for being here today. A big thank you to our partner, Deloitte. Remember that if you like this podcast and you'd like to subscribe, you can do that on Apple music, Spotify, any place you listen. You can also subscribe on our YouTube channel. And now if you would prefer, you can also get an email sent to you. So check out rfsmart.com/podcast. You can put your email in and we will send you an email with every new episode that updates so you can also subscribe that way. Well, Pete, thank you so much again for being here. I really appreciate your insights and I'm excited for 2021 and what we can expect for the supply chain industry.

Pete Cannistraci:

Thank you very much for having me Sarah. My pleasure.

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