00:00:00 Introduction to collaborative supply chain
00:01:37 Collaboration beyond client-vendor relationships
00:03:39 Tactical versus strategic collaboration
00:05:01 Challenges in smooth tactical collaboration
00:06:48 The role of data sharing in collaboration
00:08:08 Benefits of sales and stock data sharing
00:09:59 Market share insights for suppliers
00:11:44 Why data sharing is still rare
00:13:07 IT friction in data sharing
00:15:34 Supplier hesitation in adopting shared data
00:17:10 Lokad’s solution for data sharing at no cost
00:19:43 How Lokad enables seamless data access and scalability
00:22:25 Suppliers’ onboarding and user experience
00:24:20 Maintaining analytics and basic support
00:26:05 Addressing skepticism about its impact
00:27:51 The problem of IT friction in practice
00:29:15 Lokad’s affordability as a game changer
Summary
In a recent LokadTV episode, Conor Doherty and Joannes Vermorel discuss the transformative potential of collaborative supply chains. Vermorel emphasizes that true collaboration transcends basic transactional relationships, requiring strategic synchronization and real-time data sharing across companies. He highlights the challenges posed by traditional IT systems and the reluctance to invest in long-term strategies. Lokad’s innovative platform offers a solution by enabling secure, efficient data sharing, reducing friction and enhancing decision-making. Vermorel argues that while the concept isn’t new, Lokad’s approach makes it practical and affordable, encouraging companies to adopt collaborative practices for more resilient supply chains.
Extended Summary
In the latest episode of LokadTV, Conor Doherty, Director of Communication at Lokad, engages in a thought-provoking discussion with Joannes Vermorel, CEO and Founder of Lokad, about the intricacies and benefits of collaborative supply chains. This conversation delves into the essence of collaboration beyond mere transactional relationships, emphasizing the importance of strategic and tactical cooperation between companies to ensure smooth and efficient supply chain operations.
Joannes Vermorel begins by defining collaborative supply chains as partnerships that transcend the basic client-vendor dynamic. He highlights the necessity for companies to synchronize their efforts, not just within their own organizational silos but across multiple entities involved in the supply chain. This synchronization is crucial for minimizing friction and ensuring that goods and materials flow seamlessly from suppliers to retailers and ultimately to consumers.
Conor Doherty probes further, questioning whether companies already achieve smooth tactical collaboration. Vermorel clarifies that while basic transactional processes like order placements might be in place, true collaboration requires a deeper level of integration and data sharing. He points out that surprises in order volumes or unexpected market changes can disrupt the supply chain, and without fine-grained, real-time data sharing, companies struggle to adapt swiftly.
The conversation then shifts to the pivotal role of data sharing in enhancing collaborative supply chains. Vermorel uses the example of a retailer and its suppliers to illustrate how sharing sales data, stock levels, and market shares can significantly reduce the bullwhip effect and improve decision-making. He notes that while the concept of data sharing has been around for decades, its implementation has been hindered by various frictions, including IT challenges and the reluctance of companies to invest in long-term collaborative strategies.
Doherty raises a critical question: why haven’t companies adopted these practices as the norm despite the clear benefits? Vermorel attributes this to “death by a thousand cuts,” where numerous small obstacles collectively create significant friction. He explains that traditional SQL databases are not designed for selective data sharing, leading to cumbersome workarounds. Additionally, the IT departments of companies often have backlogs, making it difficult to prioritize projects with delayed ROI.
Lokad’s approach to overcoming these challenges is introduced as a game-changer. Vermorel describes a new feature of the Lokad platform that allows clients to securely share slices of their data with chosen partners. This service is provided as a courtesy, eliminating direct costs for both the client and their partners. By leveraging Lokad’s multi-tenant platform, the process becomes lean and efficient, reducing the friction that has historically impeded such initiatives.
Doherty explores the logistics of this implementation, noting that while clients are familiar with Lokad’s platform, their suppliers might not be. Vermorel reassures that the platform is user-friendly, offering web-based access to analytics and raw data without requiring extensive IT integration on the supplier’s side. He emphasizes that the goal is to provide basic descriptive analytics as a courtesy, with more advanced features available through separate arrangements.
In addressing potential skepticism, Vermorel acknowledges that the concept is not a technological breakthrough but rather a practical solution to longstanding issues. He argues that the affordability and low friction of Lokad’s approach make it feasible for companies to start sharing data now, even if the ROI takes time to materialize. This long-term commitment is essential for partners to trust and adapt their practices accordingly.
The episode concludes with Doherty directing viewers to Lokad’s website for more information on the new functionality, encouraging interested parties to explore how this innovative approach can transform their supply chain collaboration.
In summary, this episode of LokadTV offers a comprehensive exploration of collaborative supply chains, highlighting the critical role of data sharing and the innovative solutions provided by Lokad to overcome traditional obstacles. Vermorel’s insights underscore the importance of long-term commitment and strategic integration, paving the way for more efficient and resilient supply chain operations.
Full Transcript
Conor Doherty: Welcome back to LokadTV. Collaboration is quite simply the backbone of any successful supply chain. Effective data sharing, however, plays a potential key role in this process, at least between companies, for example, retailers and their suppliers. Joannes Vermorel joins me in the studio today to share Lokad’s perspective on this, as well as all of the reasons why it benefits everyone involved. Now, as always, if you like what you hear, subscribe to our YouTube channel and follow us on LinkedIn. And with that, I give you today’s conversation.
Joannes, thank you for joining me in the studio as always. As I mentioned in the introduction, today’s topic is collaborative supply chain. Now, anyone who watched our recent debate on forecast value added will be aware that collaboration was a big part of that. The popular take on collaboration is people being involved in the forecasting process, making manual changes to forecasts. When you talk about collaborative supply chain, what is your definition?
Joannes Vermorel: For me, when we refer to collaborative supply chain, I refer to a sort of collaboration that goes beyond being simply a client and vendor in a simple transaction relationship between companies. We’re talking about something beyond just being a client and a vendor, but looking at companies. I’m not talking about collaboration within the company; that’s a given. People within a company collaborate to various extents with various practices, tools, etc. But within a company, it is very difficult to not do anything collaboratively to some extent. Yes, some companies might enforce silos, but the reality is that unless your company is completely dysfunctional, silos will not be rigidly enforced. The reality, however, is if you have a series of companies that are partnering so that the flow of goods and materials goes through all those companies to serve the market, their collaboration becomes much more difficult because it’s not a given.
There are usually strategic sorts of collaboration where companies adopt shared long-term perspectives. For example, I believe in this market, I am investing in it, and you also believe in the same market, so you do a similar investment on your end so that together we have something that will be very good for the market. That’s very good, but that’s strategic. We are talking about long time horizons, things that will take years to unfold, extremely useful. There is also something much more tactical, which is you have a series of companies that are in touch for a given flow of physical goods. How do you get all those companies to be in complete sync so that everything flows extremely smoothly? I’m not talking about long-term investments; that would be the strategic horizon. I’m talking about something that is literally how do I make sure that when orders are passed, everything is ready, the transporter has the right capacity, the warehouse has the right capacity, the manufacturer has enough raw materials to manufacture what is needed, etc. You have tight coordination to minimize the amount of friction between those companies as they transact.
Conor Doherty: Don’t companies already have smooth tactical collaboration like this?
Joannes Vermorel: Mostly no. Again, what do you mean by smooth? If you mean smooth that it’s possible to pass an order to your suppliers, yes, it already exists. Maybe those companies even have EDI, electronic data interchange, so that the orders are passed electronically. But if it’s purely transactional, then whenever the client does anything surprising, the supplier is going to be surprised. At the strategic level, phone calls can be made to arrange things, but if we’re talking about execution level, we are talking about potentially thousands of SKUs, if not tens of thousands, dozens of locations, if not hundreds, and all of that has to be updated on a daily basis. If we are really looking at fine-grain execution, having a good relationship with a partner is a prerequisite, but it’s clearly not enough. Over the phone or through an email, you’re not going to send the sort of information needed to have very smooth operational execution of the flow.
Conor Doherty: As I mentioned in the introduction, this tees up the central topic for today, which is the idea of data sharing and how key a role that plays in a truly collaborative supply chain. Could you unpack it a little bit using an example? You were talking about companies and their partners, let’s say a retailer and their suppliers. How exactly does data sharing facilitate better collaboration?
Joannes Vermorel: The idea of making the execution of the flow easier, leaner, reducing points of contention, etc., has been floating around for decades. Even when I started Lokad back in 2008, it was already an old idea by that time, more than a decade old. In theory, since pretty much 1995, everything has been in place in terms of software for widespread adoption of collaborative supply chain practices geared around the sharing of data.
A classic example would be a retail chain with a series of important FMCG companies as its suppliers. There is value in sharing the sales data. Every FMCG company should not have access to anything but the sales data of its own products. The data will probably be aggregated per product per week for every single store. This information is already very useful; it gives the FMCG company an angle to avoid most of the bullwhip effects. If you see a big order coming, is it because of an internal management decision by the retail chain or is there really traction in the market? If you can see the sales, you would know the difference.
You can also go further in communicating the stock levels, restricted for every supplier to get its own slice. Finally, it is also possible to communicate market shares. Again, you don’t want to communicate the sales of your competitors. The retail chain, out of courtesy, to keep the playing field fair for all the suppliers that happen to be competitors, would not communicate the sales of your peers. But what you would communicate would be your market shares across product categories, probably per store per week or something like that.
Here it becomes very interesting because for the FMCG companies supplying this retail chain, with this information, they can assess whether a marketing push they are doing is really succeeding at capturing market share. Maybe they can see their sales going up, but if everybody is going up, then it’s a wash. Conversely, you can see that your sales are going down, but the sales of your competitors are going down much faster, in which case it’s a success. If you just look at the simple variations without having access to the market share, the results can be confusing, and you might conclude the opposite of what is true.
The example I just gave is a very old use case. It is typically done by panelists. For large general retail networks, it has been done for decades. But what I observed is that the amount of friction that goes into these sorts of services is very high. If we put aside major retail chains and their FMCG suppliers, those practices of sharing data are very rare. Even when they are present, they come with a massive amount of friction, typically with third parties like panelists who are charging what appears to me as completely extravagant fees to accomplish these basic services.
Conor Doherty: That brings up a key point because we will get into what that looks like under the hood when Lokad does it. You’ve already said, if I go back just a step, that the technological prerequisites to facilitate this kind of service have been around for about 30 years and the benefits were manifestly clear or have been presumably since time immemorial. So then the question becomes, why exactly have people not adopted this as the norm already?
Joannes Vermorel: It’s mostly death by a thousand cuts. In theory, sharing this data would be super easy, barely an inconvenience. But in practice, it is not for plenty of reasons. First, if you just look at the SQL permissions you have on the database, it turns out that it is not adequate to share data directly with one of your suppliers. You cannot say, “I am going to give this supplier access to this table but only those lines.” That’s just an example. So, what can you do? You can make an extraction from this table to another table dedicated to this one supplier. But then if you have 300 suppliers, that means you are going to create 300 tables. It’s not exactly an elegant design. If you have dozens of tables to share, at least in parts, and hundreds of suppliers, that’s going to be very quickly a massive hurdle in a traditional SQL database. Again, nothing impossible, but just tons of friction. You are creating a workload that you don’t want to create in a transactional system. You would need to stage that with a data lake. Even 30 years ago, you could use a relational database as your data lake. You don’t need modern cloud technology to do that, but again, it was friction.
But you’re sharing raw data and your partner may not be immediately equipped with all the plumbing to actually do anything with this data, which means that you share data but then you expect your partners to go into IT projects of their own to merely be able to read this data or just use them in any meaningful sense.
So, a series of small problems. First, I would say the IT friction for whoever wants to share is quite high. It’s not massively high, we’re not talking about upgrading an ERP or something, but the friction can be significant. Then, for every single partner in turn, they need the support of their IT, and usually IT has already years of backlog. So, it’s a problem, and you want to keep all of that running smoothly, reliably, securely for a long period of time. If you have a lot of friction, it’s going to be difficult.
Conor Doherty: Especially for what is essentially asking a favor of your suppliers.
Joannes Vermorel: And you see, suppliers, if you give them access to a slice of data, what are they going to do with that? The answer is, in the very short term, nothing. It might be a frustration, but they might actually wait an entire year before starting to do anything because for them, it’s not a given that you will just maintain this courtesy over time. Most likely, if you engage in such a process, what you can expect in the short term is partners to say that they are very happy and do nothing, and wait until you’ve earned their trust that this collaborative supply chain is not a temporary gimmick. It’s here to stay, and you’re committed to making it work over a long period of time.
Even if we are talking about a collaborative supply chain for the execution, it will take a sizable amount of time for everybody to update their own supply chain practices to take advantage of it. They will not do that until the partners are very confident that this is going to stay, which can take months and maybe even more than a year.
Conor Doherty: Well, you’ve outlined quite a bit there, the death by a thousand cuts—a grim image—but you’ve outlined it again. It’s not necessarily an insurmountable ask; it’s just a series of small, consistent things each one needs to be attended to. My question then is, how does Lokad approach it in a way that bypasses the death by a thousand cuts?
Joannes Vermorel: What we have released, because it has been released more than a month ago, is an addition to the Lokad platform where an existing client of ours can decide to share securely and reliably a slice of their data with a partner of their choosing. This partner will get a Lokad account of their own, and we are providing that as a courtesy for our existing client base.
The bottom line is that Lokad already has a platform, and this is a multi-tenant platform. For us, it was possible to engineer a solution that is extremely lean. The important thing is that if you want this sort of initiative to work, the amount of friction, the amount of overhead both in terms of process, IT, and computing resources, all of that has to be extremely low. Although technology has been around for decades, there is nothing fundamentally difficult about that. In practice, those frictions were almost always way too high, and thus it did not happen. The problem is compounded by the fact that the return on investment is not immediate. If you start doing that, most likely what will happen during the next year is nothing. Your partners would just wait to make sure that you’re really committed to this course of action before truly modifying their practices to take advantage of the information that you provide. So that makes this sort of proposal fairly dicey unless you have an extremely affordable lean approach where that can support the sort of delays.
Conor Doherty: You were talking about cost. If I understood you correctly, and I know that I did, but just to say it out loud, the service that you’re providing—the data sharing functionality—is being provided by our client who already pays us to their partners. Essentially, we’re providing service to the partners of our clients as a courtesy, costing them directly nothing.
Joannes Vermorel: Exactly. That’s a new service that we have released a month ago for collaborative supply chain. It’s a capability of the Lokad platform to take a slice of an existing account and make this slice of data available as a data source into a separate account. We are committed to providing that as a courtesy so that an existing client can take advantage of that at no extra cost, and we don’t charge the partner either, at least for the foreseeable future. The key idea is that for Lokad, my own perspective on these features is to provide more value to the existing clients and not necessarily create an additional revenue stream. I think we are good on that front. When the technology is done right, it is very affordable for Lokad to provide the service.
Conor Doherty: Just to speak momentarily about the logistics of this, is there a tipping point beneath which it’s less effective and above which it’s more effective for a client? For example, if you’re an FMCG client and you have a thousand suppliers, if they were only able to provide 500, so 50% of their suppliers…
Joannes Vermorel: An FMCG will probably not have thousands of suppliers, but maybe 50 as an example.
Conor Doherty: Okay, you mean in terms of numbers of suppliers?
Joannes Vermorel: The architecture of Lokad makes it relatively straightforward. Obviously, if we are talking about suppliers that are below, I don’t know, a million dollars a year, it’s probably not worth going for any kind of data sharing strategy. There is just not enough volume. But beyond that, considering that Lokad is extremely lean, I do not see any kind of friction. The bigger the client happens to be and its partners happen to be, the more value there is in doing these sorts of things.
Conor Doherty: On our end, it’s not an appreciable difference in terms of processing or anything like that, whether it were 50 suppliers versus 200.
Joannes Vermorel: Obviously, the logistics if you have thousands of suppliers, but that would be not from an FMCG company, that would be a very large retail company or potentially a very large manufacturing company. There is a little bit of logistics, but just think of it as not really more than just administrating enterprise accounts with thousands of users. Yes, there is a little bit of clerical operations. You want to make sure that you don’t end up sending data to some unknown parties and you want to keep everything secure. But fundamentally, putting aside the clerical aspect, it is very lightweight.
Conor Doherty: Speaking of logistics, in terms of implementation and adoption, by definition, our clients are already familiar with the Lokad platform because they pay us, they’re our clients. What you’re talking about is providing, as a courtesy, access to the Lokad platform to their suppliers who are not directly clients with us; they are the partners of our clients. In terms of using these, suppliers might not actually have familiarity with the plumbing, so to speak, the software plumbing of Lokad. How is that supposed to work?
Joannes Vermorel: The way it would work is an existing client, obviously we are not going to do anything without having the explicit approval and blessing of the client company who is already using Lokad. It’s not something that happens without their consent. If they show an interest for that, they would say what are the list of suppliers that you want us to support, what are the definition of their slice of data. Every client of Lokad has a point of contact through their appointed supply chain scientist at Lokad. They would probably engage in a dialogue with the supply chain scientist, say here is our list of suppliers that we want to embark on this journey where we want to share data with them for their benefits and ultimately our benefits so that we’ll be better served. They would give us the list of contacts, at least one, maybe several contacts for every supplier, and we would just create a Lokad account for each one of those suppliers.
It’s a web app, so the supplier would just have access to the data plus access to readymade dashboards that present the data in a digestible way. It’s a web app, so fundamentally you have access to reports presenting analytics, and if you want, you also have access to the raw data. If they want to extract the raw data, they would have to export that as Excel spreadsheets or flat files if they want to export it through FTP. The capabilities of the Lokad platform that are intended for direct IT integration, they would already have access to the relevant analytics from a web app so that they don’t need any extra IT plumbing on their side.
Conor Doherty: In terms of maintenance, though, that is still creating additional accounts. So, for example, you’re a client, and Max, who’s behind the camera over there, is my supplier. I have an account, I know how to use it. If my account goes down, I know who to contact—the supply chain scientist in charge of my account. Max is not your client, but he has an account on the Lokad platform. If his account goes haywire…
Joannes Vermorel: Obviously part of our commitment would be to provide basic analytics and maintain those basic analytics. If a partner wants much more fancy analytics and if they want to bring their own to do even more, then it’s a different discussion. Again, the idea is that Lokad—my core motivation for this feature—is just to help Lokad gain market awareness. So, the idea is that we will provide that. Sharing the raw data is very affordable, so we can do that as a piece of courtesy. Having some basic descriptive analytics on top of it is also very affordable, so we can also do that as a courtesy.
If one of those guest companies using a Lokad account is interested and they want bespoke analytics for their case and they even want to bring some of their data to supplement that, etc., that’s a different discussion. That would be typically arranged exactly the same way we discuss with our clients. Then, the question is how much commitment you expect from Lokad for the task you want us to accomplish on your behalf.
Conor Doherty: Okay, well, I only have one final thought, which is to present the perspective of the devil’s advocate. If someone were listening and they were of the opinion that, okay, that sounds cool, but Joannes might be overstating this case. I mean, again, the presentation here is that this is essentially the piece that completes the puzzle of a collaborative supply chain. But in effect, what you’re talking about is folder sharing. Not to be dismissive or reductive, but that is a potential perspective that someone might say, “I already have Dropbox.” Now, to that challenge, what do you say to the person who says that’s not a game changer?
Joannes Vermorel: You see, the thing is that it is not a technological breakthrough. There is nothing remotely sophisticated about what I described. These sorts of things have been feasible for three decades. They were even feasible since the ’80s, but they became fairly accessible in the late ’90s. What I’m saying is that in practice, for the last three decades, the IT friction was sufficient to undermine those initiatives. I’ve talked to many companies who have tried and given up on these sorts of initiatives over the years because the friction was too high.
The problem is that the return on investment will take years to come. Everybody needs to amend their own supply chain practices to take advantage of those new data, but nobody wants to do that until it’s absolutely clear that this thing is there to stay. If you are looking for an ROI overnight, this is not going to happen. Unless you have a solution that is extremely affordable, the reality is that these sorts of things are started and then shut down 12 months down the road because there is not enough return on investment yet and too much IT friction.
My take is that the value is fairly straightforward. It has been identified for decades, but it’s a death by a thousand cuts. We are talking about companies that have a lot of IT backlog, so they don’t have much spare capacity for projects that will have an ROI in years from now. My message is that Lokad can be a game changer because we make it sufficiently affordable so that you can start now. It’s fine if it takes one year or two for you to see the results because the cost will be extremely low for you during this period where your partners would just be waiting to see if you can maintain the same course of action for a long period of time.
Conor Doherty: Right. Well, I should also point out at this moment that we have published about this functionality on our website. The link to that will be available in the description box under this video on YouTube. If it’s on LinkedIn, it will be in the post with this video. I kindly direct any interested viewers to check that for more information. I won’t take any more of your time on this topic. Thank you very much for joining me, and thank you for watching. We’ll see you next time.
