(00:05):
Hello everyone. Welcome to our session, Turning Supply Chain Risk Into a Competitive Advantage with Kion and IFF. I’m Ulf. I’m moderating the session today from Everstream. I have the honor of moderating because I was here, I guess. So it’s going to be all right hopefully for all of us. Everstream is sponsor of this event today in this session. We recently have been very proud to be part of the Magic Quadrant, being a leader in the Magic Quadrant, and not only that, but also being able to score in the critical capabilities out of four, we are number one in three of them, which we are very proud of because we believe that critical capabilities is really showing you what is a solution that you could use right now to really work on critical situations as we often have in risk management. So before we start this session and talk a little bit about Everstream and then also about KION and IFF, I wanted to start introducing our guests and maybe we start with Jakub.
(01:11):
Do you want to quickly introduce yourself? Yeah,
(01:13):
Thank you. My name’s Jakub Watemborski. I’m based in Poland at KION for a couple of years already, responsible for global supplier risk management and also supplier capacity management. And joined KION to pursue the resilience journey with the company.
(01:32):
And what a great journey it has been actually. And Helio, do you want to quickly introduce yourself? Yeah. Good
(01:36):
Afternoon. I’m Helio Serrano. I’ve been with IFF for 26 years. More recently since 2023, leading global supply chain.
(01:46):
Perfect. But before we go into questions and talk about your journeys and the shift you have done within your companies, a quick word from our sponsor, and that would be me and Everstream. So what is Everstream actually doing? A quick background. We’re providing risk intelligence for all around the world. So no matter if it’s a disruption in a flight or shipping delays, globally we will tell you what the problems are and what the impact will be to your supply chain. Important is we not only do that for events like you see here, we also do risk scoring. So tell you the probability of something to happen. And then we not only do that for your active supply chain, so your warehouses, your distribution centers, your plants, your suppliers, but also for the sub-tier supply chain. Making it an end-to-end solution that can help you in planning, logistics, and in procurement.
(02:36):
But the most important focus for us is really contextualizing risk, right? Telling you exactly what is the problem, highly relevant so you can feed it in any system that you want. You can use it in one of the most modern AI systems that you find right now. I mean, what is the most modern one changes essentially daily and monthly, or you put it in any of your operational systems because we really proud ourselves to be operationally sound and that’s how we were born and raised because we were incubated in DHL. So for us, being operational, making it work on a level that you can directly put it in your transport management system, in your supplier relationship management system or wherever, that’s what we care about and we really strive for every single day. Good. But now before we go into some of the questions around your journey, maybe can you quickly give us a short background around your companies and the situations you face right now?
(03:34):
Maybe we start with you.
(03:35):
Yeah. Thank you. So for those that may not be familiar with IFF, IFF is a global leader that operates in fragrances, taste, bio solutions, as well as food ingredients. For you to understand a bit our global reach, one of three prebiotics in the market is from IFF equally to every three yogos is produced with IFF cultures, as well as probably the one that you will remember, one of every five beers is produced with IFF enzymes. We’re operating, I would say supply chain is pretty complex. We have thousands of raw materials sourced globally that jump into our manufacturing sites. We have close to 100 and we produce more than 40,000 different finished products that end today life of all the consumers across the world in all these categories, food, health, as well as perfumes.
(04:42):
Jakub, do you want to continue?
(04:44):
KION Group, that’s a corporate brand for several brands, very famous brands in the material handling industry. We are a supply chain solutions company. We provide forklifts under the brands of Steel and Linda and also automated warehouse solutions under the brand of Dematic. Our footprint is global. We have several plants in Europe, in Asia, in America too. And the key challenge for us is the complexity, complexity of our products that are very much customizable, is build to order business or make to order when it comes to the forklifts. And this complexity is our advantage on the market, but it also creates a challenge for procurement and for supply chain management.
(05:37):
But what wouldn’t we all be without a small challenge to make our lives a little bit more exciting? So we want to talk today about supply chain risk management. And all of you know that supply chain risk management is a project a lot of you are undertaking or have been undertaking recently. And it’s not only about implementing an IT system, which might be actually the easiest part, right? Finding a vendor and working together with them, but it really done well and really to drive value, you need to have a cultural shift in your whole operation of supply chain because you have to go from firefighting mode that everybody’s used to, everybody knows firefighting, we’re all good in saving the shipment last minute into a very proactive mode. And first of all, it will probably, there has been a catalyst for you to start that project, but then also how were you able to drive that transition?
(06:30):
I want to start with you, Helio. How did you really work on this cultural shift going from reactive to proactive?
(06:40):
Yeah. And this is a great question. You can start this journey either from a mandate from board or leadership, or in our case, it was events that highlighted the vulnerabilities on our supply chain. And it was a clear opportunity to step up the game, leveraging analytic platforms like Everestream. And what it is critical there is it cannot be like a top-down initiative. It really needs to be setting up a collaborative frame, the whole organization end-to-end, and bringing clear KPIs what success looks like. And very importantly, those KPIs connect into the goals of the different set of stakeholders. And what really moves the project is how the organization gets energized when they see that they are alleviating the pain, the pain to our customers, but also the internal pain of the organization that need to work extra hours to deal with events. Moving this to proactive, eliminating those silos across the end-to-end is what has been making the difference to us and to our customers.
(07:48):
Great. So Jakub, for you and KION, it started essentially with one event, which then triggered a high level mandate from top to down. So how were you able to take that high level mandate and make it into a reality and changing habits to really incorporate risk?
(08:11):
Yeah. So this changing event is I think like for many companies, it was a COVID pandemic, which impacted KION from two perspective. One was the booming demand for material handling that was driven by e-commerce back then. And on the other hand, we had disrupted supply chains. So this brought the top management decision that we cannot run firefighting, never ending firefighting, but we need to establish an internal solutions teams focused and concentrated on this preventive work. And I mentioned it’s a journey and I think it’s a never-ending journey because it’s changing this mindset of working on the things that are happening now versus being preventive, which means solving some issues that have not materialized yet. It’s a challenge to introduce this internally, but then also to educate suppliers and to work with them so that they also understand the concept and they buy the concept. We have a system that is, I would call it an expert led because my team is responsible for these activities.
(09:30):
But then we offer our support internally for the procurement teams, for the supply chain teams, with the tools, with the capabilities that we have. But then also we make this offer to our suppliers in terms of the partnerships in our supply chain so that we help them to become more resilient. And in that way, we as a company are more resilient at the end of the day.
(09:55):
Yeah. Because you’re always as strong as your weakest link and your supplier might turn out to be the weakest link, even in this up tiers. So let’s talk about the next thing. Right now we talked about culture, which relates to humans, but then the humans also need a guideline, a guiding post essentially to really help them take advantage of what you’re offering in your central function. So let’s talk about processes because a process always helps steering people into the right direction. Jakub, how do you embed risk into your processes?
(10:34):
Yeah. So of course we establish some frameworks that let us have the risk management embedded from the supplier evaluation from the very beginning, be that in audits or for any before awards or any before SOP events as a part of supplier readiness and supplier development processes. And then we also provide ongoing screening for suppliers and for our supplier base when it comes to specific risks. However, this is just the process function. I mentioned this maturity and this education, how people get more familiar with what we do. And the best what we can provide to the organization is the information. What is the value that we need to protect? And by this value, I mean the revenue or the EBIT. This is how we prioritize the suppliers. And on a daily basis, we also evaluate the suppliers by not using the spend or spend is just a very minor factor in our evaluation of supplier importance or dependency, you name it.
(11:48):
But we have also introduced a factor that is called business impact score. And then we evaluate several factors in terms of if the supplier provides critical parts, how many plants are being delivered by the supplier? Do we have an alternative? How easy is to switch to an alternative supplier? And so on and so forth. So this is, I would say, the second part of the things that we do. And then last but not least, there is everything about risk reporting and how we make the organization aware. Here we have also introduced a nice scheme of so-called supplier risk councils when we inform a regular report the risks. This is also empty into the corporate processes of risk management. We are tax for the listed company. So we also are obliged to report the risks, including the risks from the supply chain. So this is quantified, evaluated by my team and reported to the corporate risk management too.
(12:51):
Yeah. Sounds like you have a lot to do every day.
(12:54):
That’s true. That’s
(12:55):
True. Yeah. Good. Perfect. Helio, how do you, having heard what Jakub just said, how do you really leverage risk and stay ahead of supplier risks and capacity risks?
(13:13):
That’s important question. And let me bring it a bit a different angle. For us, it is really about continuity of supply to our customers. We produce and deliver to customers first that later as part of an approach to consumers, unique products that make the difference, decrease the joy to our consumers. So for us, it’s not about a cost dynamic. It’s more about ensuring that we keep a continuity from a supply chain standpoint. And in order to do this, what we have enabled with the Everest Analytics platform is to bring that as part of our central function. And in order to understand, I would say, how to leverage it, we step back and develop a twin supply chain. And that covers from key suppliers, our sites. And this is a live model that with the opportunity to leverage Evereststream, we have the opportunity to identify and get signs about the events that are happening and sharing here data of just one given month.
(14:25):
We had like 23,000 events that were potentially happening. Of those 10,000 had certain type of connect with IFF. And remember about a thousand raw materials, 100 plants. So we at the end of the day, because source globally, our network is very global and therefore we have a high level of exposure. So going through these set of 23,000 events with the help of AI, we are able to narrow down to a limited number close to 1,000 that then go into next level of scrutinization and end up in a daily control tower close to 100 in a given month that lead it to actions around 34. And for us, this is making the difference moving from that reactive model that we were highlighting before to this proactive in order to be able to maintain that supply resilience that I was referring to, but as well importantly, cost and cash.
(15:27):
So those are the KPIs that as well are in good shape leveraging this platform.
(15:35):
Perfect. I think this is a very interesting dynamic here because we can see that there are different ways to articulate and realize value with the supply chain risk management program from potential lost sales or customer promise up to looking for savings within the operational supply chain. So there’s a wide variety of things you can do in supply chain risk management in order to really articulate and realize savings. And talking about savings, articulating value, articulating a case for supply chain risk management. For you, I think it’s not like you do an investment into resilience and then everything is fine. You have to always continuously preach about supply chain risk management and why it is so important for the company. I think that’s for everybody and every initiative. So Helio, what would you say are savings? You’ve done this now for I think about a year. What are savings or values you have realized already?
(16:37):
It’s difficult to talk about savings or cost avoidance. But for us, what it is more important is we have been able to maintain a high level of resilience in our supply chain. And what’s been more important is our customers have noticed that. We have now real on-time information. We are able in a very timely manner understand what is going to be the impact to their finished goods that connects to our potential raw materials hitting that potential event. So being able to have that transparent communication in a timely manner that has built trust in our customers. Up to the level that we have many large corporations, large customers that come to us for best practices, get interest in how we do this. And as you can imagine, this goes a long way internally. Our teams are feeling very proud of this journey, but also very importantly, commercial feels that we are in a much better shape versus the situation we were before.
(17:38):
I don’t want to say that we are really having here a competitive advantage, but I can tell you it makes the difference when your customers praise you because you are really doing a good job. And usually that happens in comparison with other potential suppliers they have.
(17:53):
Yeah. Being in sales, I can only agree. Happy customer, happy life.
(17:57):
Yeah. Don’t tell me.
(18:00):
Good. Jakub, maybe over to you. What do you think are some of the biggest hurdles you had to overcome in this journey? But then also how do you maintain resilience in this crazy world we’re living in right now?
(18:16):
Right. So the biggest hurdle is, as I mentioned, bringing this visibility or this awareness that it’s important also to think preventively and to let people understand that being preventive means being reactive ahead of time so that they can act now. So this constant development of this awareness. I remember first time when we reached out to our suppliers with a survey because flood happened, I think that was northern Italy or somewhere. One of the suppliers informed us, yes, we have literally big fish on our desk. And that was their answer to if we are impacted or not. That has changed immensely. And now we really see that our suppliers, our network treat this very seriously and they see the value. But it starts always with the risk visibility. This is for what we use Everstream. And we are able only to ask our suppliers if they’re impacted or not because we have this knowledge that something is happening there.
(19:26):
And oftentimes we have a better knowledge than our suppliers that something happened and they’re not even aware that something is going on in our supplier network or something around them that might impact the operations on something very far away in the Middle East or in Asia that might impact them. So this is the first, let’s say, enabler. And then there are further risk areas that we explore like financial risks and cyber risks for all of these. We have dedicated partners and we link this information also with Everstream. So for instance, for financials, we use Moodies. For Cyber, we security scorecard. We have also established frameworks for our suppliers to provide us the information, be that financial data or information about their cyber security or information security maturity so that we are better aware. And in that way, we also incentivize our suppliers to improve their performance, for instance, when it comes to cyber resilience.
(20:35):
So this is what I mentioned in terms of supporting our supplier network to get better and more mature. Yeah. So never-ending journey, as I mentioned.
(20:48):
Yeah. Luckily, right? Because otherwise it wouldn’t be fun. So we still have a couple of minutes and we already covered culture. We covered processes. We also talked about value. I want to ask maybe one level down now, because you actually talked about this, you’re often more aware about supplier risks than your suppliers are. Is that something Jakub, maybe that you have seen during your journey that people are starting in your supplier base to more think about risks because they know you are aware? Are they trying to get more proactive with telling you that there are issues? Is that something that you already have encountered?
(21:24):
Yes. This I see more and more visible from my internal stakeholders. Also from our suppliers, this is getting more and more common. And this is what we also use to provide the value to the organization that this is a support, additional visibility. We also assist other teams, procurement, supply chain to provide them with some visibility, with some intelligence, with additional analysis on something that has already happened or might happen in the future to let the organization better prepared for that.
(22:03):
Perfect. Helio, if you think back about the journey that you had now on a maybe even personal level, what is it that now makes you excited for supply chain risk management? And where do you maybe see the future of supply chain risk management from your own point of view?
(22:22):
For us really, it has been a journey moving quite a lot from, I would say, reactive, particularly when we talk about supply chain. For a risk management, it starts with product design. We have other elements connected to the manufacturing components. We have multiple layers. When we talk about this supply chain being, I would say that productivity as being, I would say, making the difference to our organization as well. That is, I would say, our first step. We have, I would say, different dimensions we need to continue working. On one hand, you have in the previous slide we’re showing, we have close to 1,500 suppliers that covers 75% of our total sourcing spend. We need to continue building on this. We have different type of layers for what we call natural products, which is very unique materials that are sourced depends on nature and so on.
(23:14):
That’s another level of risk that we are building up as well. But also what’s very important for us is how we connect. At this moment, this is part of what I was showing before about these alerts is part of our operating system. And this happens on a daily basis. Think connects for half an hour. They review the risk and so on. Now, the key aspect here is how we are going to make this with less human touch. We are as well in the process to implement IBP from SAP as integrated planning solution. So how we bring all the pieces together in that end-to-end supply chain orchestration that we are working on. So for us, we are looking at this like one leg that we are bringing in our total supply chain transformation, but how we fully out integrate and as well make it more autonomous, connected to the planning capability and the logistics.
(24:14):
That is where we see those next steps to happen in the next couple of years.
(24:18):
Yeah. We have seen a lot of customers using resilience as the ex factor, the exciting factor in driving IT change and supply chain changes globally. Gartner, number one, and Schneider Electric, which is number one in the Gartner supply chain is one of these examples. So I have a last question for you, Jacob. It’s a very simple one. What does the future of supply chain risk management looks like to you in five years maybe?
(24:47):
In five years from now? Yeah, I think way more will be AI driven than it’s now. And here I mean all these internal processes and when it comes to risk evaluation, I think that will happen. And that will let the risk experts focus on this more value adding activities, which is really going into the specific risk areas, better understanding the situation, and then helping or prompting the systems to help them how to reckon, how to improve. What will not change, I believe, is going to be that risk management has its internal challenge, which is show the value to the organization, show the value of preventing the fire that has never happened. And that’s going to be the challenge because as long as everything runs smoothly, and I think all supply chain experts know that very well, then no one claims and everyone takes it for granted.
(25:58):
If something happens, then in my case, it’s first question to the risk management. Why didn’t we not prevent that? So really showing that we really deliver the return on this investment on the tools and capabilities that the companies establish. This is always a challenge.
(26:24):
When you ask me about the future, I think more crisis will happen. Definitely. This we can take for granted. Maybe even the things that we don’t even think of today. And this is also the challenge for the risk management to get the organization prepared. We cannot predict everything, but at least we can help the organization to get better prepared. If we take an example, Taiwan, the risk from Taiwan? Most likely not. But we can take some preventive actions to be more resilient, to have a longer time to survive when anything happens around that. And if this crisis happens, I think every crisis is an opportunity to take one step further in the risk management area. Also to capture more responsibilities, to do more before another crisis happens. And this I think we will face in the future as well.
(27:33):
Yes. After the crisis is before the crisis. And every crisis is an opportunity. I totally agree. And there’s a great opportunity that all of you can leverage, which is you could visit Everstream at Booth 507 directly after this great session. You can also scan the QR code to directly book a demo online, or you can add both of these fine gentlemen and me on LinkedIn, and we can talk a little bit after the session and talk about risk management, nerd out a little bit, as well as you can go to everstream.ai. This session is nearly finished. I just want to do one last thing and that is thank our speakers for being here. That was really great. Thank you so much, Helio. Thank you so much. Thank you.