After discussing Kevin’s transition from military to commercial life, the conversation moves to supply chain logistics, where Kevin underscores its evolution from a cost-cutting focus to a competitive weapon for companies. He attributes this shift to technological advancements in inventory management and transportation management post-2000, spurred by the rise of e-commerce and direct-to-consumer shipping.

Kevin emphasizes that modern businesses are exposed directly to end consumers, necessitating efficient supply chains. The conversation touches on balancing efficient balance sheets with customer delight amidst evolving product complexities due to the addition of software to many products that used to be hardware-only.

Richard
Of course. I’d love to start with your far distant career now, I guess, with the army and that transition. So you moved from military life to civilian life, and, perhaps you could start by just sharing what you saw as the biggest difference when you got out the military and you started to move into commercial businesses?

Kevin
At first, it wasn’t as much different as you would think. And I know a lot of people think the military is very hierarchical and structured and you just kinda do what you’re told and the and the commercial business world is not, but that’s not how the military is at all. You know, you have to have good leadership. You have to have the good why. You have to be able to really interact with personalities and be able to build relationships with people. So as I said, it’s not it’s not as different as you’d think. However, There are obviously some differences.

You know, in commercial businesses, the first thing is it’s not life or death. We have to keep reminding ourselves of that in commercial business. This isn’t a life or death endeavor that we’re on.

And and probably secondly, and and more importantly is you’re dealing with so many different people outside the, I’ll call it your contained enterprise. When I was in the army you, especially in the US army anyway, you were pretty much contained within the US army and the other services, but in commercial business, you’re dealing with people all over the world that you may or may not even know or may not even be able to have seen before and you have to build good relationships that way as well. So that’s probably one of the big differences, I would say.

Richard
You know, we’re here to talk about, supply chain logistics. And I think in some ways, the military was always a pioneer in that because of it was a practical matter, right? You’ve got scenarios that are constantly changing and you have to address them with logistics.

Kevin
A hundred percent. They always say an army moves on its stomach, and one of the biggest things that the modern military has brought to the world is logistics. When we went to Saudi Arabia for the first gulf war, there was a commanding general in charge of all the logistics, Gus Pregonis, who wrote a book called Moving Mountains, and he essentially said that we moved was almost the equivalent of the entire state of Rhode Island to Saudi Arabia in the span of three or four months. And I was in Rotterdam in Europe at the time, and we moved the equivalent of an entire division out and in effect, we were still moving it when the war was over. So, that’s how much equipment we were moving.

Richard
It seems like there’s some incredible practical challenges associated with that. And so you move from that into the commercial world and you’ve you’ve been very generous over the last few years in publishing a lot and talking a lot about supply chain. It’s obviously something that’s close to your heart. If you look back now over the period of time since you got involved in this, could you point out some of the big changes that you’ve seen over that time?

Kevin
First thing I would say is that companies have realized that they compete on supply chains, especially retail. They really, really compete on supply chains. Probably when I first joined supply chains and worked in the automotive space a lot, they tended to be seen as a cost that we can cut. Let’s figure out how to cut it, cut it, you know, really get the efficiencies, which I understand, but at some point, and it might have been right after the year 2000 or so, what I started seeing was that people started saying, no, we can actually compete on supply chains. Velocity of product through the supply chain is, in fact, a competitive weapon. Being able to get the best products globally is, in fact, a competitive weapon.

And so people started investing in change, which then led to the investment in technology and all the technological advancements that have come with inventory management and transportation management. You’ve mentioned scenario planning. That’s probably the newest thing we could talk about, the newst thing that forward-looking companies are starting to say, you know, it’s not about a discrete number, but it is about a bunch of what-ifs, and we have to be prepared for the different what-ifs.

Kevin
Absolutely. A hundred percent it changed. And that’s what really got us into this next horizon of planning around scenario planning. You know, over the span of the last, I’ll call it thirty years, we had built up globalization, a globalized supply chain. That interestingly enough, both geopolitically and efficiently from a from a supply chain standpoint really made it almost immaterial where you got the product from. And we hadn’t had any major disruptions. Even when we had, you know, skirmishes in the world, things still flowed pretty well.

But then COVID hit and world trade stopped. And when that stopped, all of a sudden, you realize, wow, this is coming from all over the different, places in the world, which then cause people to say, alright, you know, what are the scenarios that could happen and how do we protect ourselves against those scenarios?

Richard
So there’s a lot of talk now about risk mitigation. But doesn’t risk mitigation come with a price tag? I mean, the traditional form of risk mitigation was inventory, and if we don’t want to go back to an era of exposure to high inventory levels up and down the supply chain, we need to get a lot more sophisticated about balancing risk with customer demand and the balance sheet. We now have three dimensions as as opposed to two.

Kevin
Yeah. I couldn’t agree more, and I went ahead. Or in other words, that’s agility. So you have the risk mitigation for sure. And that’s essentially an insurance policy. You have got to decide how much of an insurance policy you want to buy.

Agility, I think, is key because no one’s going to allow you as a company to incur and pass on incredibly higher costs just in case there’s another COVID. But what they’re going to do is they’re going to expect you to be able to move and be able to shift and and I always talk about the fact that you want to have early warning signals that tell you that something is coming that that will be a major issue. You then have scenario plans and mitigation plans that you’ve already thought deeply through, that you could begin to execute.

What I talked about there is that you’re going to take the body blow, but you’re not going to stop, right? I mean, take what’s going on in the Red Sea. You know a company isn’t going to stop that. And so that’s happening. So you take the body blow but because you have the agility and you’ve done the pre planning, you can come out of it much faster than your competitors and in a better position. And so that is really big versus just saying I’m just going to plow a bunch of inventory in because you know, that’s like buying insurance, but you can’t afford it.

Richard
Yeah, and that’s part of the concept of, as we discussed, scenario planning, right? Being able to find solutions that are set up to handle unexpected events, but the one thing that is expected is that there’s going to be an unexpected event. Right?

Kevin
You’re right. There is going to be an unexpected event. So so the key is, what are your early warning indicators? I call them red flags. What are what red flags are you watching? And you’re watching them go up and down this flagpole. And then all of a sudden, it starts going up and it keeps going up. And at what point does it get when you say, okay, I got to start doing something about this because this is starting to look real.

Richard
So as you can imagine, a lot of your audience that are listening to this come from the customer experience sort of perspective on all of this. And manufacturers in general have been a little slower to get on get in front of this. And I wonder if that stems from historical view that said, you know, the channel handles the customer. We’re, you know, we’re here, we build things, and we run up factories efficiently, which, ten, fifteen years ago, built a stock, planned inventory, put inventory into the field, and then we’re done and dusted. And the the the channel’s going to help manage the customer.
First of all, would you agree with that statement? Secondly, is the channel overrated as a buffer from the customer in your opinion?

Kevin
First, I agree with the first part of it. I mean, I do believe that that’s the case. And when individual stores exist, you know, where they are the dominant channel for those things, and that’s probably true with bigger stores and chain stores around the country too. It does become more of a situation where the product is on a shelf and the consumer’s coming in and getting it if there’s some in stock. If it’s not there, if there’s something wrong with it, the consumer’s looking at the name on the box and then saying, hey, what’s going on with this? So I do believe that that buffer existed, but I also do believe that’s that has changed.

And more and more, the consumer looks at where that product’s coming from. In fact, you even see on some boxes now of different products, especially food products and everything, you can scan the QR code. And now you can even see beyond the manufacturer, you can see back into the channel that supported the manufacturer and see where products are coming from. And that then exposes you to the consumer. And therefore, you’re a manufacturer has to really think about how they’re looked at by that consumer.

Richard
Yeah. And and your name is, as you said, it’s on the box. I mean, when COVID disrupted supply chains, the channel, quickly realized that they were stuck between the consumer and the manufacturer, and they they weren’t always in a rush to defend the manufacturer, right? To some extent, they were they were pretty inclined to say, hey, listen, this is not a problem. And so the consumer becomes very conscious. The fact that at the end of the day, it’s the manufacturer that’s making this work.

Kevin
Yeah, and I think I think there’s an outgrowth of globalization and cities around the world where, more and more, everything is a pull through versus a single point. Everything’s a pull through. And so you have to really build the desire for a consumer to pull your product through the channel. Versus maybe thirty, forty years ago, you could thirty years ago. You could push back and you know, there was only one type of this, and there was only one type of that. And so if it was there, the consumer bought it, and that’s not the case anymore.

Richard
Well, there’s no more margin out there to be able to do that, right? I mean, to some extent, if you had large margins on materials and margins on product, you could afford to have stuff sitting out there because you’ll make it up when you sell it, but margins have collapsed pretty much on every every product.

So when you look forward now and you think about where we’re going to be over the next five to ten years, you you sort of hinted to this with all this scenario planning conversation, but what do you think of the big changes that we’re going to have to embrace if we’re going to get better at this?

Kevin
Well, I’ll talk about scenario planning in just a moment, but I want to I want to tackle what the consumer’s expectations going to be because ultimately at the end of the day, we’re going to have to change at the same pace the consumer demands are changing or faster.

If you if you move any slower than the consumer demand then you’re going to have a problem. So so let’s say that I think there’s been a lot of talk on this. A lot of people have done a lot more research than I have and I do believe that personalization is going to be the big item that we’re going to have to structure, “we” being all manufacturers, all the supply chain. We’re going to have to structure our capabilities around the ability for me to personalize an experience for Richard, personalize an experience for Kevin.

And it’s going to be much more than the prompt. So the product, if you have some unique product that has a pump on it and it’s the only product made in the world, that’s one thing. But most products aren’t that way. There’s other things. So it’s all the items around that product to personalize the experience for the individual. I actually heard two quotes that I that I really have kind of lived by. One was by a gentleman who wrote a wrote a book called, ‘Unreasonable Hospitality’. You know, it’s about the gentleman who built out what eventually got rated as the best restaurant in the world and in New York City. And his comment was their whole model was “one size fits one.” Meaning, they’re going to always personalize it to the individual.

And then, actually, a customer of ours spoke at one of our events, and she said “personalization is the new luxury.” I absolutely love that line, so I believe that has a lot of implications.

So we could talk for hours on manufacturing and how we do things, those things. I think from a just a pure supply chain and logistics standpoint, I do believe that this getting away from a discrete number, a discrete plan that you put in place, and you put you know, foundations, ten foot down in the ground, and, you know, that’s it. And you’re not going to move for fifty years. Those days are gone.

You have to be agile and and the agility comes with that scenario planning where you’re going to have to be able to move. I mean, today, If you look at the flows of, foreign direct investment, a lot of it’s going into Mexico from a supply chain standpoint, a lot of it’s going into Vietnam from supply chain standpoint, but who’s to say that that’s going to be the answer five years from now? Something could happen. We all know something could happen in both of those areas. You got to be able to move again if need be.

Richard
Yeah. No kidding. And you see the term ‘digital transformation’ brought forward a lot. I think almost it’s the same thing at some level. And when people say digital transformation, they’re they’re looking at it perhaps through a technology lens, but the goal is always the same, right? Technology is there to serve a purpose and business transformation is that purpose. So, wouldn’t you argue that digital transformation is business transformation? We’re talking about the same same thing. We’re just talking about tools we’re using.

Kevin
Yes. The one caveat I’d make is the the danger of of some digital transformations is that we take we already do and automate it. You know, people have called this? They say you pave over a cow path. We we you take a process that isn’t really effective, that isn’t efficient, or quite frankly, maybe even shouldn’t be being done. It’s a process that got put in place ten years ago for a great reason, and then just never died, right? And the reason went away, but the process is still there. And then you digitize it.

And now all of a sudden, you have a process that shouldn’t be being done, but it’s being done on a massive scale and at massive velocity because it’s been digitized. You’ve almost caused even more of a problem. So we like to talk about optimizing business processes first, then digitizing the things that need to be digitized, and quite frankly stopping doing the things that shouldn’t be done anyway.

Richard
That’s a good reminder. I think, concreting the cow path was from Michael Hammer of MIT, which which has to be early nineties. And I think he was writing about, business process re-engineering, which was the term of ours at the time. But point point is that that concept is pretty valid today.

And I think it’s also true when you think about applications of technologies like AI, where the tendency for companies think “We’ve got to use AI” as opposed to thinking, “What’s our business problem?” and then is AI the relevant technology, how could AI be applied to solve the problem? I think if you put the technology first, as you say, the risk is you either concrete the cow path or you just end up just buying technology at the end of the day without direction.

Kevin
Yeah. A hundred percent. I think it would be a neat survey to do to find out how much technology is being utilized at fifty percent or less of its stated capacity. My guess is it’s a lot.

Richard
In the in the old days when you used to sell on premise software, I used to call it shelfware, right, when which we didn’t get used at all, and just sat on the shelf.

So as perhaps a closing closing question here, when when you think about the customer now, and you alluded to this a little bit earlier, they’re becoming more demanding, what else do you see out there from a customer perspective? Did COVID reshape the way customers think about the relationship with vendors, or is this just a long arc that we’re seeing as customers redefine what they want from their vendors?

Kevin
Well, I think I think what COVID did and I think a lot of people have said this, is they really just sped up the development cycle massively. Something that might have taken fifteen years to do took three years to get to. And I think the same is true for the customer and consumer expectations.

I mean, everyone will say this, and I give them credit: Amazon had changed the world in terms of people’s expectations. It might be a Jerry Seinfeld joke where he said “I wish we had never landed on the moon because then people wouldn’t be able to say, well, if we can send a man to the moon, why can’t we do this?”

And I say the same thing about Amazon because, you know, even though things are completely different, big bulky items, all that stuff, and they don’t want to hear what they’re saying. Like, hey, if I can if I can order something at five o’clock tonight and get it tomorrow morning at my house, why can’t you just track your truck? So it’s like you’re always being prepared, which is good.

That’s great because it’s caused us to do things that, you know, us being manufacturers, distributors, and Shaw, it’s causing us to do things and set standards for ourselves that we may not have set before. So the consumer, I think, has sped up those demands, but that’s just nature, though, that was always going to happen. I mean, if you believe that the human condition is always improving, then you have to believe that this is where we were headed.

It’s just we’re getting wealthier, we’re getting a better standard of living. We’re getting all these different things, and this is just part of it. It’s just probably what would it taken fifteen years to do and now took just three or four years to do.

Richard
That’s a that’s a really positive, positive point on which to us to end. An optimistic idea, and the pace being set by the leaders, and we’re now holding a catch up game to some degree, with the best companies in the world, which not a not a bad idea when you think about it. Kevin, absolutely terrific talking to you. We could talk a lot longer on this, but we really appreciate your time. And, thanks for joining us and talking about supply chain, manufacturing, and customers.

Kevin
Thank you for having me. I really appreciate it. It was fun.