00:00:07 Hervé Hillion’s intro and supply chain digitalization experience.
00:01:44 Digitalization lags in supply chain verticals.
00:03:56 Review of IT in food, general merchandise sectors.
00:05:45 Identifying leaders and laggards in each vertical.
00:07:31 Changing approach with new tech, skills, resources.
00:08:00 Tech’s role in transforming business, operating models.
00:09:33 Soft skills’ growing importance in a tech era.
00:11:06 Automation in supply chain, referencing Uniqlo’s case.
00:12:48 Rise of white-collar automation, new needed skills.
00:14:50 Job changes due to automation, role evolution focus.
00:16:02 Automation and AI’s impact on supply chain jobs.
00:17:24 Tech buzzwords, distinguishing fleeting trends vs. enduring tech.
00:18:01 Impact analysis of supply chain tech improvements.
00:21:37 Reflection and prediction on tech’s influence on supply chains.
00:25:18 Closing thoughts.


In the conversation between Joannes Vermorel, founder of Lokad, and Hervé Hillion from SAY Partners, the complexity of modern supply chains was discussed. Vermorel highlighted that sectors like food and general merchandise, which led supply chain innovations, are now struggling with rapid technology evolution. Hillion emphasized that a company’s age or size does not equate to its technological prowess. He also suggested a shift from process-focused to data-driven supply chain management. They concurred on the importance of soft skills in the automation era, as tasks become more automated. Lastly, they explored the potential transformations in supply chains, citing local agriculture as an indicative future trend.

Extended Summary

The discussion opened with host Kieran Chandler introducing his guests, Joannes Vermorel, founder of Lokad, a software company focusing on supply chain optimization, and Hervé Hillion, a founding member of SAY Partners, a supply chain consultancy firm. The focus of the conversation was to explore the implementation of change across supply chains and future structuring of operations.

Hervé Hillion shared his professional journey in supply chain consulting, which spans over 25 years. He recalled founding his first consulting company in the early ’90s, a time when supply chain concepts were not widely known or recognized. After gaining experience in different consulting firms, Hillion launched SAY Partners five years ago. The firm focuses on the digital transformation of supply chains, an area that he identified as increasingly relevant even before it became a mainstream focus.

The discussion then shifted towards the topic of digitalization in supply chains. Vermorel spoke about the progress and challenges across different industry verticals. He cautiously pointed out that some sectors, despite having pioneered various supply chain innovations, were now lagging in their approach. Food and general merchandise were specifically mentioned as sectors falling behind.

Vermorel explained how these sectors, which had led the revolution in mass distribution after the Second World War, replacing traditional, informal, and local supply chains with hypermarkets and supermarkets, are currently struggling. He noted that these sectors initiated their digital transformations early, implementing IT systems, driven by barcodes, and electronic records as early as the ’80s. This put them significantly ahead of other sectors at the time.

However, Vermorel observed that these early adopters are now facing difficulties in keeping pace with the rapid evolution of technology. They are grappling with the layers of technological transformations brought about by the internet, cloud computing, Big Data technologies, and more sophisticated statistical methods falling under machine learning. He suggested that these “traditional verticals” are beginning to seriously lag behind due to their reliance on outdated IT systems.

The conversation kicked off with a reference to Walmart’s acquisition of Jet, a move that combined an aggressive e-commerce retailer with a company operating traditional supply chain systems, some of which are decades old. The panel agreed that such combinations represent a wide spectrum of the current state of supply chain systems. A clear takeaway was that a company’s age or size doesn’t necessarily reflect its technological prowess or adoption.

Hillion emphasized the complexity of categorizing companies based on their supply chain technology. He pointed out that within a single vertical, there could be leaders and laggards due to a variety of factors such as company culture, governance, and overall DNA. He also noted the increasingly digital nature of companies, especially those dealing with omni-channel e-commerce. However, he observed that this digital push is now propagating to more traditional B2B companies and other verticals that have historically been less digitized, such as the chemical and metal industries.

Chandler then asked how companies should approach the challenge of adopting new technology, particularly when it demands new skills and resources. Hillion suggested that technology should not merely be used to improve existing business processes but should be leveraged to transform business and operating models. Specifically, in the realm of supply chain management, he suggested a shift from a process-focused perspective to a data-driven one, proposing the concept of a “data-driven supply chain.”

Hillion also tackled the question of skills in the context of technological evolution. Contrary to common belief, he suggested that the need for technical skills might not necessarily increase. Instead, the demand for “soft skills” might rise, given that technical tasks are increasingly automated. The challenge lies in how people interact with customers, internal teams, and even machines, implying that interpersonal and communication skills could become more vital than technical expertise.

According to Vermorel, many companies have transitioned from supply chains dominated by blue-collar workers to a more balanced distribution of white and blue-collar roles. He predicts that the next stage of automation will involve tasks like replenishment, which will demand new, different skill sets. For example, as tasks such as managing Excel sheets become automated, the value will shift towards soft skills such as negotiation and alignment with suppliers, clients, and other partners.

The conversation turns towards the topic of middle management roles, which Vermorel says have traditionally held some level of political power within organizations. He suggests that as these roles start to be replaced, it may necessitate a different approach to introducing change.

Hervé Hillion joins the conversation, adding that automation is not necessarily about replacing jobs on a one-to-one basis, but rather about shifting the nature of jobs. He expresses optimism about the future, stating that while jobs will change, they won’t necessarily disappear. Hillion emphasizes that the complexity of modern communication channels and the need to manage disruptions that fall outside the scope of what machines can handle will ensure that there is still a role for human input.

He uses the example of customer interaction, which has evolved from fax communication to social media. While some aspects of this can be automated, human involvement remains necessary due to the complexity and time-consuming nature of managing various channels.

Vermorel highlighted the tech sector’s tendency to use buzzwords like ‘AI,’ ‘big data,’ and ‘machine learning,’ which often reflect the shifting trends and the constant need for novelty. However, he stressed that despite the buzzwords, the steady rate of software and tech improvements is real, particularly in supply chain management. He cited examples like RFID and barcodes, which are more efficient and flexible than ever before. Vermorel argued that these incremental improvements often coalesce into significant leaps in technology, such as the transition from traditional machine learning to deep learning.

Hillion, on the other hand, drew lessons from the past to anticipate future trends. He recalled the hype of the internet boom and burst in the early 2000s and noted that many concepts deemed ’new’ today were already in play decades ago. He recognized the power and efficiency of today’s technology, but questioned which innovations would truly transform supply chains. Hillion hypothesized about the potential radical shifts in the supply chain model, citing the development of local agriculture as a possible indication of future trends. He emphasized the unpredictable nature of these changes, suggesting that the future supply chain may differ significantly from the current model.

Full Transcript

Kieran Chandler: Welcome back to Lokad TV. This week, we’re joined in Paris by Hervé Hillion, one of the managing partners of SAY Partners. Hervé has over 20 years of experience in operations consulting and strategic management of complex supply chains. Today, we’re going to be discussing how you would implement change across the supply chain and getting his views on how operations can be structured in the future. Hervé, thanks very much for joining us today. Perhaps a good starting point would be if you could tell us a bit about your background and a bit more about SAY Partners.

Hervé Hillion: Yes, I have been in the supply chain consulting business for almost 25 years now. I started my own consulting company back in the early 90s, at a time when supply chain management was barely known and even the term “supply chain” was not widespread. But I was already involved in the optimization of flows as we said at the time. Through my experience, I’ve worked with different consulting firms, including big ones, and I decided to restart my own consulting company five years ago, SAY Partners, focusing on the digital transformation of supply chain before digitalization became as well-known as it is now.

Kieran Chandler: Joannes, we spoke a bit about digitalization. What are the verticals that you’re already seeing in the supply chain industry that are a bit behind in their approach to the supply chain?

Joannes Vermorel: Well, when we talk about verticals, it’s a very wide scope. No matter which vertical you pick, there is diversity, so there are people ahead and people behind. But overall, I would say some of the verticals that were pioneers of modern supply chains are now kind of behind. For example, food and general merchandise are mostly behind. It’s interesting because they were part of the revolution after the Second World War where they invented mass distribution with hypermarkets, supermarkets, replacing individual stores and traditional supply networks that were informal and operated mostly at a local scale. But now, those supply chains have undergone their digital transformation very early, and it’s interesting that many of these companies are still a bit stuck with IT systems that were set up in the 80s. At the time, they were really ahead of the pack because they were using IT systems while the rest of the economy had not. To have a supply chain driven by barcodes with electronic records for pretty much everything in the 80s was really ahead of the rest of the world. Nowadays, with all the transformations that have arisen since the advent of the internet, these traditional verticals are starting to lag behind relatively seriously.

Kieran Chandler: That’s very surprising. With things like food, there are factors like expiry dates to consider. So what you’re saying is that this sort of software was implemented back in the 80s and it’s just sort of become frozen in time because it already worked. Is that what we’re saying?

Joannes Vermorel: That’s kind of what we observe. But when I say food, I mean more like general merchandise, general retailers that are probably a little behind what is currently happening. However, it’s a mix because even traditional retail has its own complexities.

Kieran Chandler: Companies themselves, for example, if we look at Walmart, they have acquired Jet around two years ago. So, they have a mix of an extremely aggressive e-commerce retailer that is probably state of the art in terms of tech, with ancient systems that are, nowadays, I would say, three or even four decades old.

Joannes Vermorel: I would like to add a couple of comments. This is both an important and difficult question. I would make two observations. One is that in terms of verticals, we should be aware and cautious that within a vertical there may be leaders and there may be companies behind the pack for various reasons, such as their DNA, culture, governance, and so on. So we need to be cautious when we only talk about verticals.

My second observation would be that, as was said, companies strictly confronted with omni-channel e-commerce have been pushed to lead and to be more digitized sooner than pure B2B companies. But now we see that the B2C type of ambition in terms of e-commerce, but omni-channel, is spreading rapidly to B2B as well, and upstream in the supply chain. So, you see other verticals where the companies have not been at the top level in terms of digitization, like chemicals or metals, but now they are starting to rush to actually bridge the gap with what you see.

Kieran Chandler: In order to bridge this gap, we’re probably going to introduce some new technology. And how do you approach that change when that new technology requires a new skill set and they’re requiring probably some new resources? Is it something you approach with training or is it something you’d approach more from the side of actually accessing new resources and resourcing?

Hervé Hillion: That’s a very important question. But I would give two answers. First, as I have said a number of times, if you use the technology of today, like smart data, big data, artificial intelligence, just to improve the way you do your business with the current business process, for instance, to have a more frequent KPI, let’s talk about supply chain, I think you miss the point. Because the real challenge is to use the technology to transform your business model and your operating model.

For instance, in supply chain, what will be important is to see your supply chain as a vast array of processes from planning, forecasting, inventory management and so on. And for me, one major challenge is to shift from a process point of view to a data point of view, what I would call a data-driven supply chain, which is really a transformation of the operating model.

So that was my first answer, to say it’s not only a matter of skills, it’s a matter of governance and the way to operate, which is probably the most difficult challenge in terms of change. Then indeed, there is also the question of competencies and skills.

I would be a bit contrarian here in terms of the evolution of skills. What I mean by that is that we won’t necessarily need more and more technical skills. My bet, from what I see, is that what we would need more and more are soft skills. Because the technical skills that will be needed will be automated in a way through the new technology.

But there will be a large need tomorrow for what I would call soft skills. Where today you have people doing some repetitive tasks, surely tomorrow they will be automated. Or even some expertise will be automated. But the way you interact with your customers, internally with the machine, that will be a very different challenge in terms of skill improvement and in terms of training people.

Kieran Chandler: Social media, right? There are now numerous different channels to interact and you can’t automate all of them. So Joannes, you mentioned the example of interacting with superiors or clients. More and more, this would be through various different channels. This is becoming time-consuming and it can’t be fully automated, but there’s a definite shift from spending time on Excel spreadsheets and looking at your parameters for inventory management. That’s one major shift. But still, you will need some middle management. Another shift is that automation runs well when things are stable, but we all know that today we’re in a volatile environment where disruptions occur. It’s not true to say that machines and even AI will be able to manage all disruptions. I’m sure there will be a need to manage what’s outside the scope of what machines can do. So that’s why there’ll be shifts in terms of roles and skills, but jobs will still be there.

We’ve mentioned a few buzzwords today, we spoke about AI, deep learning, and there’s a lot of buzzwords around the technology industry. Joannes, how do you differentiate between what’s a buzzword and what’s actually a technology that’s here to stay and worth investing in?

Joannes Vermorel: That’s an interesting point. I’ll start with a digression but will get back to your question. When it comes to buzzwords, you can even use tools like Google Trends to see the statistics on the number of queries on certain keywords. There’s even a law of buzzwords that preserves the mass of queries. If you do the total of cloud computing, AI, big data, machine learning, etc., and look at the total number of queries, it’s relatively flat over the years. It’s just that some buzzwords wax and wane over the years, taking the place of others.

To some degree, this is an artifact of the need for novelty in the B2B press and vendors who need to renew what they sell. So there’s a fashion effect but applied to the tech sector. However, what’s real is that, over the last couple of decades, there has been a very steady rate of improvement in pretty much everything. Software is always improving, and as far as supply chain is concerned, it’s tons of incremental improvements. RFID gets cheaper every year, works better in a noisy environment where you have metal pieces, echo, and whatnot. Barcodes are more flexible than ever, and you can carry more information with two-dimensional barcodes, QR codes, than ever before. The hardware to scan them is also cheaper than ever.

So, it’s a lot of incremental improvements, and then, at some point, these tiny improvements crystallize into something that we then call machine learning. It’s a whole package of improvements presented with a marketing term. The same thing goes for deep learning, which is a collection of around 200 numerical tricks packaged together. The incremental progress is real. The gap that you can have when you jump from something designed with the mindset of the early 2000s to something nowadays can be significant. But the drawback is that because it’s a culmination of small increments, if you were already quite state-of-the-art, it’s not as if you were already doing relatively sophisticated machine learning.

Kieran Chandler: Okay. As we start wrapping things up here, I’ll leave the final word to Hervé. We’re seeing some really interesting, rapid changes due to technology. How should we be approaching these changes and where do you see these changes heading for the next 15 to 20 years?

Hervé Hillion: I don’t have a crystal ball, but we can perhaps draw some lessons from the past, specifically from the internet boom and burst around the year 2000. There was a lot of hype at that time about e-commerce and digitization. What’s fascinating is that, nearly 20 years later, what seems to be new are old stories. For instance, many great ideas about marketplaces and digitization were already in place back then.

When I started my career, I was applying machine learning algorithms to production facilities. So, many of the tools and algorithms existed even then. What’s changed significantly is the efficiency and power of the technology running these algorithms.

To answer your question, we need to distinguish between what has been existing for a number of years and what is new. The existing technologies are very useful for incremental evolution and improvement. We can expect that AI will provide improvements.

What’s more challenging to predict is what will bring about a complete transformation. Which technology will radically transform the supply chain? For instance, we’re constantly trying to improve today’s supply chain and apply all available digital technology. But the constraints remain; we still have suppliers, production sites, distribution centers, and final customers.

Consider the future of food or agriculture. We’re seeing the development of local agriculture, with people growing food in small gardens with automated systems and robots. My point is that the supply chain as we know it today might be very different 20 years from now.

Kieran Chandler: Well, thank you very much for your time today, gentlemen.

Joannes Vermorel and Hervé Hillion: Thank you. We appreciate the invitation.

Kieran Chandler: That’s it for this week. We’ll be back next week with another episode. Until then, thanks for watching.