LLamasoft on BBC’s Business Live Inside Track
On 25th September, Razat Gaurav, LLamasoft’s CEO was interviewed on the BBC Business Live’s Inside Track on what LLamasoft is and how the company is designing supply chains for large global brands.
If you are in the UK – you can watch the full interview on BBC iPlayer from 25th September until 25th October 2018, or read the transcript of the conversation below.
Sally Bundock: Now getting products where you want them when you need them is crucial for any business and also for the individual.
Ben Thompson: We do not often think about this, but it is all about the supply chain and someone has got to design that supply chain and this is crucial to any business model.
Sally Bundock: A recent survey of people working in the supply chain management found that 80% believe that the digital supply chain would dominate their business model within the next five years. (Source MHI & Deloitte 2017).
Ben Thompson: 63% said that hiring and retaining a workforce that is actually skilled and knows anything about the supply chain is their biggest obstacle.
Sally Bundock: One company that is working to support business worldwide with their supply chains is LLamasoft, whose clients include the likes of Unilever, Michael Kors, and IKEA.
Ben Thompson: LLamasoft is based in Michigan in the United States and it has doubled its headcount in the last three years. It’s now got nearly 500 people working there. One of them is its boss, Chief Executive, Razat Gaurav. Nice to see you welcome to Business Live.
Let’s be nearly clear from the very beginning, lots of people don’t appreciate supply chain management, I certainly don’t because you just assume you order something it arrives at your house or your workplace. Somebody has thought about this, designed it, put all the processes in place. That is what you guys do. What is it, how do you go about it?
Razat Gaurav: There is a tremendous amount of complexity that happens in the backrooms and the value chain behind that customer fulfillment, that order that you get in your home, in store. It starts with the raw materials, all the way into production and manufacturing, going into the distribution network and ultimately through the transportation network into the retail store or into the consumer’s own home. There is a lot to design in terms of locations, that physical infrastructure, the inventory levels you need to be carrying, what production plants should look like, what your warehousing operation should look like, what your transportation routes should look like so there is a lot to design and plan in order for that product to be there at the right time in the right quantity.
Sally Bundock: And you have been working in their business for something like twenty years, you are a bit of a guru, written books about it, ‘Supply Chain for Dummies’ and you have just started working for LLamasoft, for about five months as the boss. You must have seen radical change, ‘cause we demand things pretty much, we order in the morning and want it by the afternoon. Our expectations have changed also technology has radically changed supply.
Razat Gaurav: I think the biggest thing that has changed is consumer expectation. There have been generational shifts in consumers’ expectations. Obviously, online shopping has become prominent and prevalent, but the background data is more readily available as well and computing horsepower allows us to monetised that data in ways that we couldn’t imagine twenty years ago, or ways we couldn’t imagine five years ago.
Ben Thompson: There is a danger that we tend to look at the Amazon model in all of this, but it is a perfect example of when you get it right it can be very lucrative. I spent some time recently at Amazon’s warehouse down in Essex in the UK, entirely run in many respects by robots, picking things off shelves bringing them back to distribution. All well and good if you are the size of Amazon. How if you are a small firm selling a few things a day, do you improve your supply chain? How can you hope to compete without that sort of budget?
Razat Gaurav: In the supply chain, there is economies of density, there is economies of scale. However, there are third-party providers who are also able to bring that density to you. There are third party logistic companies who we work with, who are able to aggregate networks and operations from multiple small companies and are able to bring that level of sophistication to the table. But not everything has to be about robots. But a lot of it is also about making decisions, smarter decisions about how to allocate inventory, in what distribution centres, in what stores, in what manufacturing plants, how should you be routing the freight, where should you be sourcing from, there is a big theme right now with the trades and tariff topic.
Sally Bundock: Let’s talk about that because among your clients, you’ve got Unilever, Nestle, IKEA, huge global suppliers, distributors, retailers, how are they preparing for this very difficult to predict scenario called Brexit?
Razat Gaurav: It’s been really busy for us because there has been a lot of uncertainty. And where there is uncertainty, you have to play out all different scenarios and so part of what we do with our customers is to help them take their data, their network and create a digital twin, so creating a digital twin of their physical network and then we play out all these digital scenarios. But the reality is, in the absence of clear policy direction whether its trade and tariffs or Brexit, with some of the debate between China and US and Mexico and NAFTA, there is a ton of uncertainty and sometimes these duties and tariffs can account from anywhere from 10%-40% of the cost of it’s get sold, so companies are waiting and watching, playing out different scenarios but they are waiting for making any big capital investments decisions and as a result inventories are creeping up which is not very good for the economy.
Ben Thompson: Razat, really nice to see you. Thanks for explaining all of that. It’s an area that people won’t appreciate. It’s fascinating. Thank you.