The Biden Administration recently launched the White House Council on Supply Chain Resilience and announced nearly 30 actions to be taken to strengthen domestic and global supply chain operations. Chirag Modi, Corporate VP of Industry Strategy at Blue Yonder, joins us in this Executive Perspectives episode to discuss the potential impacts of the proposed actions and what they mean for the supply chain industry.
This interview was edited and formatted for clarity.
Tyler Fussner, Managing Editor, Supply Chain Connect
Chirag, thank you for joining us today.
Chirag Modi, Corporate VP of Industry Strategy, Blue Yonder
Well, thanks for having me here, Tyler.
Fussner
And if you could please introduce yourself to our audience.
Modi 0:27
I’m Chirag Modi, from Blue yonder. My role here at Blue Yonder is Industry Strategy and I am the Corporate Vice President covering our supply chain execution portfolio of solutions, which is primarily around warehousing, transportation, port management-related items. And our customers include the who’s who in the industry among manufacturers, retailers and logistics service providers.
Fussner 0:55
Chirag, I’m very excited to speak to you today, especially about the convening of the new White House Council on Supply Chain Resilience, during which the Biden administration announced new actions that are going to be taking place that would help strengthen America’s supply chains, lower costs, secure key sectors. Can you provide us with an overview of what exactly is being promised, and how it is going to impact the supply chain industry?
Modi 1:19
This is a pretty big initiative. If I were to put this into perspective of where we were before versus what it would look like post this announcement and the effort to make things work. If you were to step back for a second… The efficiency aspect, if you will, within the manufacturing supply chain, distribution supply chain: We, as an industry, invested a lot of time and energy into making manufacturing very efficient. Tons and tons of automation, a lot of efficiency gains in there, and a lot of times, of course, outsourcing it to different countries, etc. All of those pieces have gained a lot of efficiency in that chain, which has led to reducing the price for those parts or services which we buy.
However, when you think about warehouses, transportation sector, those sectors tend to be a little bit on the lag, if you will, in terms of automation, and other aspects. The efficiency aspect there is not as high as it would be in a typical manufacturing environment. By doing a mandate, like what the White House is coming out with, it is a recognition that the inflationary measures to reduce some of the inflation numbers, it would make sense to invest a lot more time in supply chain resiliency, as they are calling it (which is a very standard industry term post-COVID). How do you make this better so that the inflation numbers are controlled? How do you make this more efficient by investments from different angles, etc.? Disruptions perspective. This is a pretty big deal, in my view.
Fussner 3:01
Absolutely. Supply chain is in a new spotlight ever since COVID, like you touched on. We've got a lot more attention and the goal seems to be, again, as you said, to obtain that resiliency. Included in the announcement that the White House made, were some proposed actions to support stronger supply chains, access to affordable, reliable energy and critical technology. This included deploying new capabilities to monitor existing and emerging risks, as well as a promise to engage the public and private stakeholders to expand supply chain risk modeling.
My question for you: What exactly are the sorts of technologies that are going to be invested in to achieve these goals?
Modi 3:42
When you think about the way they’re defining risk… During COVID times, we had parts shortages. The buzzword “supply chain” became a dinner table conversation. I’ve been doing work in the supply chain industry for over 20 years, and I will tell you, Tyler, this was the first time my kids actually asked me what I do for a living. My wife is like, “Oh, it looks like you’re in the spotlight here! And in a negative sense!”
A lot of those disruptions led into the conversations about how resilient our supply chain is or isn’t. When you think through all of those pressure points, and the scale at which the problem has resurfaced, everybody looks to technology to solve those issues. Because technology is one tool which can solve a lot of things at scale. Because if you’re using a certain type of technology, and if everybody’s using it, it makes sense to use that as a foundation for it.
The question then is, “What is it that you want to use here?” And there is no single answer here because the answer will vary based on the type of industry or the type of problems you’re solving. For example, one of the items that is in the mandate is around the science and technology aspect of it. And some of the industries the White House has identified—semiconductor being one, which has been in the spotlight for quite a while—there will be more onshoring activities there. And by keeping it close to the consumption point, there is less reliance on other partners. And those partners can be countries, could be manufacturers in different countries, could be shipping containers, could be airline vessels—all of those things. You have less reliance on those pieces because everything is “onshore.”
Let me give you an example of nasal swabs during COVID times. Before the time, there was really not as big of a need for nasal swabs and as for the production for those items, there was only one big supplier in the U.S. And during that time, you would have millions and millions of swabs needed. So, how do you make your supplier base go wide? You're just not relying on one supplier, but you may end up having three, four or five suppliers. This is also part and parcel of “being resilient” – that you’re not relying on just one supplier, but you may end up having a supply base of three, four or five; that if you want to tap into one and that capacity is tapped out, then you have two, three and four to rely on.
The initiative here is really driven by making us more resilient and utilizing technology to make us resilient, and use that as a way to reduce disruption and or reduce the cost.
Fussner 7:05
It makes sense that there are going to be varied technologies introduced, dependent on the industry, like you’d said. But speaking of buzzwords—Artificial Intelligence. AI. Everyone has been talking about the introduction and integration of AI into their industries. Do you think there’s going to be some investment there? And how do you see that impacting the supply chain?
Modi 7:26
It’s a million-dollar question, Tyler. Is the technology there? Yeah, the technology is evolving very rapidly. When you think about how quickly Apple Mac computer took off back in the 80s, how Windows took off… Technologies these days, they take off much, much faster than that. They take off much faster because the awareness is there. The technology maturity is there. AI, in particular, has been around for some time. But then there are different levels of AI. The most recent buzzword is on generative AI, large language models and all of those pieces. Those pieces—some of it you currently see when you type up your email in Gmail and how Gmail types up few things predicting what you’re about to write. That’s AI. So, some of these things have already been in practice for a while.
When you’re trying to solve a bigger problem, much like what we’re describing here on this podcast right now, those things do take some time. They are going to take some time for building-out; they are going to take some time for adoption; but the opportunity is there. The opportunity is there for AI to take over certain tasks, repetitive tasks, much like how we automated a lot of physical handling of goods with repetitive tasks by robots and conveyors and things like that. You will still have business processes, driven tasks, which AI can do. And that’s really the opportunity we all have within the supply chain space.
And that’s really something which we as Blue Yonder are trying to make as part and parcel of the tools and the solutions which we are developing. One of the tools which we could talk about is supply chain planning. When you start thinking about integrated demand and supply planning for manufacturers, those who have finite manufacturing capacity, how do you decide how many products, what products, what SKUs you’re making and in what economic order quantity and in which of the plants across your two, three, four different plants you may have in your portfolio? Some of those functionalities we have built in already as part and parcel of the solution itself.
But then there are further maturity levels and applications which we are adding in. And we’re calling it cognitive demand planning. Essentially what it is, is it’s looking at forecasts not just from the standpoint of your old demand forecast, but also looking at a bunch of other factors which are tied closely with external variables—such as weather patterns, such as transportation delays, such as labor disruption. And so how do you account for some of that? Utilizing artificial intelligence tools, some machine learning algorithms. Those are the applications which we are building right now. We are just starting to roll some of those things out, primarily for manufacturing customers for now and then next year, we’ll be looking to do the same for retail customers.
Fussner 10:55
That sounds like an exciting period for Blue Yonder, and an exciting time for the supply chain industry in general—introducing these AI-integrated technologies. It’s giving us the opportunity of, where we started the conversation, realizing those efficiencies, realizing those resiliencies that everyone is striving for.
Modi 11:14
That is one of the metrics that all the CSCOs have been tasked with. All of the metrics for CSCOs in the past (chief supply chain officers) have driven around customer service levels, cost, fill rates, you name it—all of those different pieces. But one of the biggest items now, which has been added to their list is, “How resilient is our supply chain? How much can we manage the disruption? How many redundancies do we have?” So that when disruption of a certain nature comes in, whether it’s a hurricane in the south, or whether it’s tornadoes in the central country or a new salmonella outbreak happening and you have to recall certain food items—how do you go through pieces like that? And how resilient are you to take on pieces of this nature or manage through these disruptions? That’s one of the items being added to CSCOs’ plates to measure how effective they have been.
It is a pretty big deal. And that’s also the reason why the White House is getting involved in a more proactive way. When you think through what the administration has done in the last couple of years in particular… We had docks—the ports—strike potentially happening there. That was averted. We had ports not working 24/7. That was kept open on the western ports for us. Earlier this year [2023], we had railroad strikes potentially happening, which was averted. Those were all done in a very reactive way. I think the mandate now is looking at this in a more proactive way. There’s a big difference between what was done up until now versus the new initiative from the White House.
Fussner 13:08
In part of that initiative, they had promised some investments and capabilities to monitor existing and emerging risks. And that’s what we have to have a good handle on to realize that resiliency. My question to you is, what needs to be done? And how do we get to a point where U.S. supply chain operators are able to identify potential vulnerabilities or threats and successfully navigate them?
Modi 13:33
A simple way to look at this is: Every supply chain will have its own bottlenecks. Those bottlenecks, by definition, will all be there. But the question really is, “Are they disruptive enough or is this something you can manage through?” Case in point, the defense industry. There have been numerous articles and research done on a lot of defense contractors, Tier 2 suppliers and to a certain extent even Tier 3 suppliers. A lot of those are mom and pop businesses built over years, but they don’t necessarily have a good succession plan because they are more family-based businesses.
So, what happens when a Tier 2 or Tier 3 supplier for a critical component for a Tier 1 supplier to a defense industry goes out of business? How do you backfill that capacity? Up until now, the focus (minus some automotive companies) has primarily been on Tier 1. When you start looking at identifying bottlenecks, Tier 1 may or may not be the bottleneck anymore because much of the focus has been on Tier 1 suppliers. Now you have to start focusing on Tier 2s and Tier 3s. But when you think about the number of suppliers you may end up having for Tier 2s and 3s, the technology to measure that in an automated way—it’s not there fully. The number of computations you need to do in order to make that work for visibility into manufacturing capacity… the number is just massive. Massive. And the power you need in order to track this on an ongoing basis, the cloud capabilities you need for real time data, all of those pieces are just not as mature.
We are trying our level best right now, but we are also limited by the delays, the lag time and data not being available. And it’s not being standardized. We are also plagued by those same issues. Some of the focus areas for this investment here could very well go into funding some more technologies to make it more scalable and faster.
Fussner 16:09
Again, it’s exciting! It’s the problem-solving aspect of everyone seeing what the solution should look like, where we want to get to, but right now these investments will be playing in an open sandbox of trying to understand what technologies are going to work and how we get there.
Modi 16:24
I think at a high level, everyone has an idea what technology they will be focusing on. The question would really be around particular use cases. For example, they have been talking about rare earth metals and building more capacity for rare earth metal mining and processing within the United States and Canada, and U.S. allies. So, that’s an area which has already been identified. The question really is more on the execution aspect of it. But then there are certain other industries, like climate control, where the technology may be there, but it’s probably not as scalable as you and I would like it to be. Or it’s probably not as much in the control of individual companies from a tech perspective and it’s completely relying on a few major players in the market from providing the basic data there.
So, how do you make it more affordable and more scalable so that every billion-dollar-plus enterprise, or half-a-billion-dollar-plus enterprise, can afford to do that work? Because right now, the price point to enter there is not conducive. I think we all have an idea of what tech we will start with, but that tech may or may not be as mature or as scalable, if you will. Making it more scalable and affordable will make things a little bit better for all industries.
Fussner 17:53
Chirag, I have a wider-scoped question for you here. With this initiative announcing near 30 planned actions that are going to be put into place to help strengthen and invest in our domestic supply chain, how does this impact workers? Costs of goods? What do you see as the outcome of such an initiative?
Modi 18:15
I think, like any initiative, we’re not looking at this from [the standpoint of] reducing jobs. The intent here is to improve the quality of existing jobs, as well as scale the problem-solving aspect so that we all can become more efficient. Now, efficiency is a buzzword that a lot of people use in order to say, “Hey, I’m going to cut down the number of jobs.” That’s really not the intent. Based on what I’ve read so far, the intent here is to improve the quality of work we do so that the number of disruptions in the industry go down and we can have better quality of life, quality of work. And some technologies here may not even exist today, which means there is more opportunity to develop newer jobs.
Much like anything else, in AI, that industry is so concentrated right now with fewer players, the intent would be to open it up to more players so that it would make it a little bit better for a lot more to enter it and have more competition on that front.
Fussner 19:28
I think in emerging technologies like this where everyone is seeking solutions oriented with that technology, maybe it’ll expedite some of that.
Modi 19:37
That’s correct. One small example, AI-tech talent base… The last statistics I read was that 75% (or some extremely high number) of top talent in AI resides only within Google. Given the amount of work they do, given the amount of data they’re sitting on, they have been leveraging AI tech for a long, long, long time. And they’ve rolled out a lot of things as well. But how much of the work being done there is scalable for other industries like ours?
Where you and I reside, serving our customers in manufacturing, retail and logistics service providers space, how can you make it more scalable? Because all of them are not going to go straight to Google and ask for some more tech, they’re going to rely on people, companies like ours—Blue Yonder—to make solutions for them which incorporates those technologies. But right now, we’re also relying on developing a lot of things in-house. That also has limited scalability. Some of these programs here are going to actually help us with scaling the tech and making it a little bit more affordable. Now, again, nothing will happen overnight. People will still need to execute on those programs. The money may be there, but somebody will need to drive those programs and hopefully make it better.
Fussner 21:07
I’m sure everyone is looking for something to just plug into their operations and solve these problems for them. But like you said, it’s not something that’s going to happen overnight. It’s going to take some change in your practices and different emphases on what data and how you’re collecting and keeping that data. But there is a finish line in sight. We see where we can get to by incorporating such technologies.
A pivot in the conversation here: Part of the announcement from the Biden administration initiative that was intriguing to me was the promise to help deepen engagement with allies and partners to strengthen global supply chains. Within that was the deepening of international early warning systems to help detect and respond to disruptions. That’s certainly something that we wish we had during the COVID pandemic. Can you speak to how the investments that are going to be made in the domestic supply chain are going to help strengthen our global operations? And is there anything that stakeholders should anticipate with their international dealings in the near future?
Modi 22:06
Anything and everything we do in this age is driven by data availability and how reliable that data is and how we make it work with the analytics, understanding what that data is. Some of those analytics, we can put it to good use right away utilizing AI and ML algorithms to make it more automated, but with some, there may be some manual intervention needed. So, what the act here talks about is working with partners. Those partners are the ones who are providing some of that data. Whether it’s at a country level, let’s say, Taiwan, for example, for what their capacity is, how much GDP they have, how many transactions to date or the number of years in terms of capacity for doing certain work—all of those pieces, at a country level… all the way down to company-level in each of the tech. Whether it’s semiconductor manufacturing or whether it’s Tier 2 supplier for an automotive company. A majority of that data will go into the tools to make it a lot better for a lot of us to make decisions quickly on that.
That’s one way to address the partner question you had; not just at a company level, but at a country level. This is why the initiative is coming from the White House, because they’re looking at this at a much bigger picture and saying, “Since this is important, we’re going to get involved and make larger trade agreements.” And those things will help us gain access to extra capacity, which we may or may not be able to build ourselves here in the amount of time which we may need. That’s one piece of it.
The other piece is looking at contingencies. If we are not able to do certain things in the event [of disasters]. Certain simulations may be run for certain disasters—natural disasters or an outbreak such as what we saw with COVID. In situations like that, if you were to run a simulation, where are the bottlenecks we have been able to identify? Whether it’s during manufacturing time, whether it’s shipping containers not being available, whether it’s trucks not being available because we don’t have enough drivers… and based on those simulations and bottlenecks, they’re making these investments within the supply chain area. And that’s what [they mean] when you see one of the items they have listed is “quadrennial supply chain review.” This is the first time they’re doing it at a government level like this. Nobody has done this at a higher level, and everybody recognized how important this was after COVID and that’s why [they launched] this top-down initiative. And those reviews will identify those bottlenecks. And those bottlenecks may involve some agreements with the partners, which you alluded to early on. And that’s the reason why it’s important to continue going on with those lines at a much more elevated level.
Fussner 25:18
I think it’s a good opportunity to set the tone, so to speak, and get everyone on the same page of identifying what is important, the bottlenecks that need to be solved, what challenges need to be overcome.
Modi 25:27
That is correct. You can’t solve, you can’t improve on, things which you don’t know. That’s the important part here, to identify. There are probably already some needs identified—they’re not going to launch something without identifying those needs, so there are certainly some ideas there, but while they’re working on those ideas, there may be five other things that we uncover which may need their attention.
Fussner 25:56
Big picture question for you; taking a step back here: What’s in store for the supply chain industry in 2024? I know there’s no crystal ball. I know there’s no way to tell the future. But what do you see on the horizon? Is there anything that supply chain professionals should anticipate or prepare for?
Modi 26:12
So, 2024 may be a little too quick for seeing meaningful changes, material changes, right away. However, you will start seeing some pilots in certain industries where the progress may be much quicker than others. The defense and the semiconductor industries—those are the big areas, I can tell you, where there will be more changes which are more visible.
Are we able to solve the truck driver shortage right away in 2024? I don’t believe that will happen. Those changes do require a generational shift and other training. You’re not going to see material changes in 2024.
Are the real estate prices going to go down on an industrial scale (warehouses, manufacturing plants, etc.)? Potentially. But that’s [based] more on market-driven things than anything else. Supply and demand driven things.
At a higher level, I think the top two industries which they’ve identified—the chips, i.e. the semiconductors—and the defense—you will definitely see some changes there in a positive light in terms of building more resiliency in those sectors.
Fussner 27:27
And say I’m listening to this conversation. I’m part of the domestic supply chain. I need to now incorporate some solutions into my operations. I want to get in with this movement of integrating technology and make sure I’m moving in the right direction. How can I partner with someone like Blue Yonder to make sure that I am operating successfully?
Modi 27:47
We have our process laid down pretty well. We come out and ask you a lot of these questions, much like what the White House is talking about. We have our own processes, which are actually in sync with what they have listed in this act. Understanding the current-state process; figuring out where the bottlenecks are and how do you solve them and how fast you can solve them. So, all your supply-chain-specific needs, we have solutions, which taught through a bunch of different automations and process automations, but also leaving some wiggle room for creativity. We will work with clients in each sector depending on their comfort level. We are able to help them out with automating a lot of processes through our solutions, or only partly automating depending on the change management at that organization. We have already started to work on those pieces with a lot of clients in the supply chain planning space, and next year, we’ll be doing something similar with our warehouse and transportation customers.
