2022 Supply Chain Predictions with Knut Alicke (Partner, McKinsey)

00:00:02: Hello and welcome to the logistics tribe I'm your host boys felgendreher my guest today is canoe delicate his partner McKinsey.

00:00:13: He space and Mackenzie stood got office and he's leader of the firm's work in manufacturing and supply chain.

00:00:19: He advises clients on a variety of different topics including Supply Chain management digital Supply chains and advanced analytics and supply chain transformations.

00:00:27: Crude is also the author of a highly-regarded book on Supply Chain management.

00:00:31: And as a professor at University of karlsruhe teaching Supply Chain management I asked nude to give us his supply chain predictions for 2022 and the conversation turned into a discussion on a variety of topics including the increased visibility of supply chain is a function.

00:00:45: Labor shortages and mismatches and the role that automation can play container shipping rates lock Tech startups in so much more I'm sure you'll enjoy this.

00:00:53: Knut is a regular listener of the podcast themselves so what a great opportunity to have an on Today Show before we get started a quick thanks to our sponsor gray orange.

00:01:02: Great orange sits at the Forefront of one of the predictions that knud is actually making.

00:01:06: The increasing role of warehouse and fulfillment automation great oranges smart robots and AI enabled automation platform are spreading across warehouses around the world.

00:01:15: So check them out if you have a chance I will leave a link in the show notes and now here comes my conversation with cannot allocate from McKinsey enjoy how include welcome to the logistics tribe thanks for being on the program and sure.

00:01:28: Thanks a lot for having me yeah very much looking forward to this conversation as we're closing out the year 2021,

00:01:36: and I want to engage in some predictions for the year 2022 which is just around the corner and can do it when you when you're looking back you probably made similar predictions last year.

00:01:47: For this year anything that sticks out where you were totally wrong totally off totally Off the Mark anything that sticks out to you

00:01:55: that's a very good question and how I was probably not completely off but then when we

00:02:03: started to also help our clients to fight the crisis.

00:02:08: We expected to see much more nurturing in the short-term

00:02:13: so everyone was talking about regionalization hey Supply chains will be only in the region right and then kind of recently you even had Joe Biden asking in this executive order

00:02:24: to analyze some what what is the what is the exposure so what I thought last year is.

00:02:31: Much more of a topic is that hey we will kind of have companies coming back now what we see this year and talking to our clients we did we did an interesting survey on this topic is that

00:02:45: what they did is basically they increase inventory that is kind of the natural reaction that you have in in fighting a shortage hey

00:02:55: we need to increase inventory with the semiconductors that's not always possible because it's just short so here we have a we have a shift from nearshoring to inventory increase.

00:03:04: Nevertheless I'm still sure that in the next couple of years we will see kind of,

00:03:12: a re-evaluation of the global Footprints and and with this we will have more Regional for Regional Supply chains go

00:03:21: for so in other words your prediction was correct you with just off by the year you just have to postpone it by ear shifted to this year so the coming and let's see let's see when it will happen I'm sure it will happen it did not happen last year

00:03:32: yeah awesome so canoed I am mentioned in my in my short intro before we started this conversation that you're a partner at McKinsey just fill us in a little bit give a little bit more color of what you and particular do at McKinsey in the supply chain area

00:03:44: yes oh indeed I'm a partner and.

00:03:48: Basically I'm a one of these guys who love supply chain right so that's what I did for the last 25 years before it became fashionable by the way before the likes of places exactly and it's interesting that I

00:04:00: that I work before joining McKinsey I worked in a today we call it started up a software company where we did.

00:04:06: Help consumer electronics clients to improve their supply chain performance with with the software

00:04:12: right and this is something where we back then did a lot of the cool stuff that is already that there was possible back then that is done today and we also did for the automotive industry one thing very interesting thing

00:04:25: there was kind of the start of this whole risk and resilience

00:04:28: where they suffered from Supply with of leather leather hides weather for the cover of the in.

00:04:37: Inside of the doors and that was like in 2000 where we set up a system that would cover 70 years of Supply chains.

00:04:45: And with this creative transparency and an early warning system.

00:04:49: Right very interesting very Innovative so this kind of kind of put me into the supply chain and in McKinsey since 2004 helping clients in improving

00:05:01: planning physical flow organization very interested in Old digital topics and since last year.

00:05:08: I'm running with that with the colleague from the US I'm basically running our Global let's say

00:05:13: covert supply chain Response Team the Global covid Response Team Supply Chain Response Team yeah how has supply chain as a function inside of McKinsey changed over the years has had gained in importance has it always been

00:05:26: on the radar and an important topic how has that evolved a and Mackenzie it has involved so when I started we were a small group of

00:05:34: enthusiasts and even know it's I would say and it's growing bigger and bigger and bigger because our clients are asking more for that.

00:05:43: So we basically see what our clients need that we also see in McKinsey right and now it's a it's a sizable group of

00:05:52: round about 100 colleagues in Europe we have the same in us and Asia so I would say every.

00:06:01: Every time we have.

00:06:03: Probably some five six hundred people working on supply chain topics which is which is quite interesting in all Industries and all topics.

00:06:12: And two year to your point on increasing importance if you think about the.

00:06:20: Predictions supply chain has always been a bit of a nerdy topic right it was not visible for the board it was okay if it works.

00:06:30: It was not okay if there is some late deliveries if it's too much effort I dance on.

00:06:36: So it was a topic that would not even qualify for making making a board member.

00:06:43: That's now changed since two years significantly right so

00:06:48: we had a multiple clients where we work for to help them in improving their resilience where one for example talked about supply chain in his investor briefings he never talked about this before.

00:07:02: Right and there's now that there's also some analysis that there's much more companies doing exactly this Dimension supply chain as a topic.

00:07:11: And now it's on us right all of us to make sure that we also have the right story right so a lot of.

00:07:19: Supply chain in enthusiasts love to talk about let's say track utilization and song but we need to take it kind of further

00:07:28: and case of B in is what makes the word move right

00:07:31: yeah I'm a little curious about the timeframe when you say well you know about 2 years ago this started to show up investor calls and Executives radar I mean

00:07:39: that coincide with Culvert right so then the question becomes is this something where it's of course if you wouldn't have talked about supply chain and the last two years you would have been completely off the mark but on the other hand you know is this something where you know there's sort of this short memory when all this is all said and done we're going back to normal and it's supply chain Logistics and everything related to that

00:07:58: so if disappears back in the back room never be seen again until the next Crisis what's your prediction there so my prediction is it it's going to stay.

00:08:07: We had and it's interesting if you look back 10 years we have Fukushima.

00:08:12: It was also a major disruption and people would also set up were rooms right so they were talk about resilience hey we need to do something we need to increase our strategic resilience

00:08:22: after 6 to 9 month roughly this is cousin stop

00:08:26: right because the crisis was over the shortage was for solved now we are since 18 month in a crisis

00:08:34: of different aspects right so first pandemic and then we had the semiconductor crisis and so on so it's it's going to stay

00:08:43: because it's now kind of embedded into much more strategic discussions at our clients so before you could see that like 10 years ago it was like Hey short-term intervention solve the issue firefighting.

00:08:55: That's what sometimes also supply chain people love to do but now it's the question can we also redesign our products to be more resilient.

00:09:03: Can we change the way we work with our customers can we do much more demand shaping.

00:09:09: Can we do much more in terms of visibility of our multi-tier supply chain.

00:09:14: And with this it is kind of embedded in the overall resilience of a company and it's also that investors ask for it.

00:09:22: Right so similar I'd like for sustainability we COC also in resilience we see that investors ask for.

00:09:30: Resilience of license so we need to make sure that this is enabled and that's.

00:09:36: Way it will stay yeah I remember in related discussion that probably happened want to say five or six years ago where there was big talk about.

00:09:43: Suddenly Supply Chain management moving into the boardroom with Chief supply chain officer rolls with CSCO rolls there was sort of a big hype for a while but then

00:09:52: then seemed to taper off as something that has really materialized do with this a false start in a false prediction of supply chain moving into the boardroom

00:10:00: we are looking into this topic since since a couple of years and it's right that it was it was a bit of a high.

00:10:09: Also this is going to stay so the most well-known head of supply chain is Tim Cook the CEO of Apple

00:10:16: yeah kind of set up the operations yeah exactly exactly and this is this is something where we see more and more

00:10:25: people being let's say have even even if they're called Co they have a supply chain background and with this they kind of embed supply chain thinking

00:10:35: is it is it the role of the chief Supply to an officer no it's not all right it's the same like 20 years ago you saw a lot of people who were kind of running a warehouse right head of logistics and they found that hey now it's cool we need to be now the head of supply chain.

00:10:49: They have you operating the warehouse.

00:10:53: And that did not change right so there was nothing on kind of end-to-end planning and so on and cooperation and so here the title of Chief supply chain officer is nice,

00:11:02: but it's much more than the mindset of the people in the board that this changes towards.

00:11:09: Yeah so in other words that was prediction number one so Supply Chain management has increase in Focus everyone's talking about and it's here to stay so this one is not a false start but this time it's for real

00:11:17: so to speak the major upgrade has occurred and it's not going back we're not going back in time

00:11:22: yes awesome what about next one next next prediction from you so it's quite interesting if you think about the it's a the container rates that's quite work.

00:11:32: So yep and.

00:11:33: If we if just kind of take a look of what happened and then the the prediction the brakes in is as you would expect we will go down it's a but the question is what level will it reach and

00:11:45: I would assume that it probably is something like 50 to 100 percent more than the pre-pandemic freight rates and it's quite interesting if you think about what what what happened right so we had

00:12:00: hmm we had the pandemic everyone was sent home you could not go for holiday so you would spend your money somewhere else at the same time there was.

00:12:10: Money flooded in the US to support people which is good and so these people had the chance to buy a lot of stuff.

00:12:18: Fights on interesting that they've bought stuff and not Services there was different before before it was like always less stuff and more services and now that change.

00:12:27: And this this product had to be and luckily China was coming out of the crisis very fast so they could produce and now they send it over.

00:12:36: To the US very very good and then at the same time we had people not coming back

00:12:43: so truck drivers not coming back warehouse workers not coming back people at the port's not coming back people to operate container vessels not coming back so this kind of all of this effects kind of were topping each other

00:12:57: and then did leads to to this.

00:12:59: Court Port congestion that we have these days which is quite interesting because this we did an analysis to understand hey is there a shortage in terms of vessel capacity.

00:13:10: And it's very interesting that there is no shortage is just wrong balanced.

00:13:16: All right so because if if a container vessel is waiting in front of the port of LA and Long Beach then it cannot kind of go around the world and transport stuff.

00:13:25: So this is something where we see clearly a kind of a mismatch and with this we see container rates significantly increasing.

00:13:34: They will go down again it's interesting to see that now the reaction is hey we need to bring more capacity.

00:13:41: Right and this capacity like an old swings will then lead to an overcapacity and on the other hand it's very interesting to see that.

00:13:51: There is kind of the top five players control something like 65% of the of the volume right of the of the right volume and with this they Now understand how.

00:14:04: How to work right and with this it will not go down to the pre-pandemic price level it will stay at a bit of a higher level.

00:14:12: Which is fine for most shippers right because if you think about the kind of the percentage of Transport cost in their margin right it's.

00:14:22: Relatively low so if we have an increase not of 7 times 10 times 15 times as we see now because this is kind of putting some of the shepherd's out of business.

00:14:30: But if it's a moderate increase.

00:14:33: That is going to be going to be staying yeah you touch on it I think the biggest question and all of this is how the the carriers will react.

00:14:41: And the sense that are they going to build up capacity because it takes many many years to build these large ships and.

00:14:47: Lots of Investments is actually happening are they going to risk having more and over capacity or is there no real incentive to change the situation anytime soon because there.

00:14:57: They're having the time of their lives like what do you what do you mean what do you make of that.

00:15:02: I am so it's the time of their life that's That's too great so probably they are now they have the challenge to kind of where to invest going to be raining so much money.

00:15:12: If you think if you look into the order box of the of the shipbuilding yards then you see that it's increasing right so people are building new ships.

00:15:21: And they will be released the first ships are released this month and next year and the year after they will be worships release,

00:15:30: to to make sure that they can cover the the demand,

00:15:34: right and and they're kind of getting better in kind of managing the capacity right so even if the capacity is kind of a theoretically available.

00:15:45: They are very good in taking out capacity from the.

00:15:48: Okay so so throwing more Hardware at the problem in the form of new ships and nor vessels and to increase capacity is one way to do it.

00:15:56: What I was hoping also to see is more investment on the technology side so that the entire process of executing ocean Freight becomes

00:16:04: more digitized and more fluent and more able to change more quickly I mean I think we all agree that it's sort of there's a lot of room for improvement when it comes to digitalization off the ocean Freight industry do you see

00:16:15: movement in that direction or is it basically just solving the problem with known methods of building more ships that sort of without looking at technology know they so there is clearly also an increase in technology

00:16:29: if you if you look into the startups that work in the in the logistics area in the supply chain area kind of creating what platforms that is something where we clearly see.

00:16:41: A boost a boost in terms of

00:16:44: leveraging the the capacity much more much smarter right and and with this you don't need to solve it with overcapacity that is then utilized only to a certain extent now you can really if you have this capacity available then you also use it

00:16:58: so there is clearly more more to happen these startups.

00:17:05: We did an analysis and that clearly show that there is a lot of there's a lot of venture capital available and we will see some

00:17:14: very interesting startups popping up in the next couple of

00:17:16: of yours yeah that's certainly very encouraging to see startups tackling that issue but what about the carrier's themselves I mean we're just talked about that's a Heyday it's like they report record quarterly earnings and annual earnings would it be smart for them to invest more in technology what do you what would you recommend to them if you were to advise one of the large ocean carriers what would you what would you tell them how to place their bets in terms of Technology

00:17:39: I think that's what I think what happens is that they also invest definitely right so they,

00:17:46: they look into latest technology to make sure that the vessels are more sustainable but then also were utilized so that were that will happen

00:17:54: and and what they also do is they they look into kind of expanding a bit their scope.

00:18:00: Right from kind of a four-day to pour be that's nice but why don't we then go One Step Beyond that we say from customer a or from supplier a.

00:18:10: To customer be right so we kind of have more part of the value chain which helps everyone.

00:18:17: Right because there is a lot of honestly there's a lot still a lot of kind of friction in the in the value chain if you think about

00:18:26: a multi-modal transport and this is something they

00:18:30: they will look into and they will take kind of more ownership yeah but if you take the point of view of the shipper I think they wouldn't 100% agree that it's a good thing if the carriers

00:18:41: want more parts of the of the supply chain of the operations I would say it depends the the shipper the shipper wants to have a reliable and predictable transport from from A to B.

00:18:54: Currently it is like if you think about checking it tracing right so you are going crazy because you need to kind of talk to so many different people.

00:19:02: And you only get an idea of hey now I'm here.

00:19:06: But you want to have a prediction on when are you going to be in my receiving area so the expected time of arrival is what you're what you're interested in.

00:19:14: So now if someone and there is kidney startups that claim to do that but if now the.

00:19:22: The big Shipping Company can provide more information that is helpful.

00:19:27: Do you want to as a shipper one to kind of put all your bets on one of these or do you want to have to clearly that's a discussion that the procurement guys will then

00:19:35: yeah all right that's it that was an interesting discussion around Freight rates and an ocean Freight that's a big topic of this year interesting to see that you're expecting sort of a little bit of a leveling off but not returning

00:19:46: pre covid price level so to speak yeah what's your next production what's the next area you can tackle

00:19:51: so one prediction is it's based on the labor shortage or labor mismatch and this is going into into I would say Warehouse automation.

00:20:05: So what we what we see is that so and you read it also in the Press right so everyone thinks that hey we don't have enough people to drive our trucks or to operate our warehouses.

00:20:17: And this is we did an analysis in the us where we could clearly see that the combination of.

00:20:25: People kind of they receive enough support from the from the government that they do not immediately need to go back to work,

00:20:33: that's not changing in the last couple of months but then there is a lot of people that decided to retire.

00:20:41: To early retire so there is some currently there's a there's a shortage of 4.7 million people and that was compared to before covid and that's quite interesting right because it's a sizable number.

00:20:54: And a lot of these people.

00:20:57: Work as a lot of them will also work in restaurants and so on but a lot of them also work in the logistics area so what you see is you see kind of an increase of.

00:21:07: Okay so.

00:21:09: Hey we are paying more than the way I was across the street but there is still a gap.

00:21:18: But and that is clearly something where the whales automation players a lot of them are in Europe have.

00:21:26: Benefit a lot so this is this is one reason and the other reason is clearly in the pandemic that we saw a lot more online significant increase of online sales and if you think about how

00:21:39: the a typical Warehouse often of an online player is operated you also see quite a sizeable automation technology in there.

00:21:46: So yeah if if you if you think about the the order books of the big players.

00:21:54: They're full right which is good they hire their hire people so they grow like like crazy.

00:22:02: And we had a couple of discussions with clients where they where they plan to.

00:22:08: To either build a new Warehouse automating your Warehouse or automate something that is existing and you get quotes back that say yeah we can help you guys no problem.

00:22:19: In two years three years and four years so there is much more demand than Supply.

00:22:26: And this will continue right so my prediction is that first of all another labor mismatch

00:22:32: will continue right clearly hourly rates will increase with this we can we will level it a bit but there is a kind of a structural issue and and with this,

00:22:43: it's kind of probably the the golden years of whales automation to help to close the gap

00:22:53: and here to be more automated yeah do you feel like we've reached a Tipping Point in the sense that this is what we like the watershed moment where the companies they were short on people to begin with before the pandemic

00:23:04: now saw okay well let's just let's not even try to fully fill the roster with with employees and go fold into automation whether don't even bother increasing the salaries where they don't even bother.

00:23:15: Creating better job experience for the people who work in that warehouse and going all-in on automation or is it to make a statement I think I think it was a mixed picture and so there were there were companies out there,

00:23:29: that's all that hate we need to we need to do something right we cannot meet our hourly time requirement so it was service levels

00:23:37: complex product portfolio we have so we need to do something and then on top of this they had this labor shortage.

00:23:45: And though that hey as we are anyhow investing in automation we can kind of boost this a bit and with this we can we can solve it.

00:23:54: Still there is there is,

00:23:56: a shortage of the remaining labor because you will never have enough 100% automated Warehouse right and this is clearly where these companies probably thought that hey we don't need to think about increasing our.

00:24:08: Our P but they're kind of reconsidering this now and and start to do also offer

00:24:14: of a better jobs yeah on that note with the with more and more automation showing up inside the Fulfillment centers and warehouses and so forth do you see the the qualifications of the roles that are remaining in the White House,

00:24:27: I think going up are they going down are they staying the same in other words what roles is automation currently replacing so to speak that was previously handled by a human is it

00:24:35: the low-cost the high cost the high qualification local location where does it fit so if we if we if we look not only into the warehouse but kind of more also a pee on the supply chain we have we have basically the whole Spectrum.

00:24:47: If we start with a warehouse then if you think about them.

00:24:51: What what you typically assault with automation is kind of moving from A to B kind of retrieving something and picking,

00:25:00: so this is kind of the low qualification jobs these this these people kind of also in an automated system

00:25:09: if you do a pick by voice if you have your terminal so there is kind of a need for increasing the qualification but there is clearly then a lot of other highly qualified people coming up and this is also what often is a knot

00:25:23: done properly in the analysis you have kind of an army of technicians that make sure that the system is working properly.

00:25:31: And these people are kind of Highly Educated mechatronics mechanical engineering electrical engineering people that really really know how the system works.

00:25:41: And in addition and this is something that we also kind of be boosted in the next couple of years the role or the the importance of the.

00:25:51: Of the software system is super super important what we often see is that there is a let's say you have an investment of 150 million euro highly automated system,

00:26:02: it's sometimes shocking how basic the the warehouse control system is

00:26:09: right so it's often it's often kind of really programmed on the spot

00:26:13: but so there is no kind of advanced technology there's no microservices there's nothing so this is something where you can at the same time significantly improve the performance.

00:26:24: Of the warehouse kind of in terms of output in terms of reliability

00:26:28: and also in terms of workforce planning right so that is something that we will see in the future again asking for much more higher qualified

00:26:37: people and now kind of switching over to the to the broader supply chain and if we think you'll hear about order management where we had people kind of keen and stuff.

00:26:48: That is replaced then also by automation it's kind of robotic process automation is something that is around for a couple of years

00:26:55: and will now be more and more used

00:26:58: um to replace so to say this low qualifications up and here again you need to have someone you need to have a technician in place that

00:27:07: that is setting up this the software robot and then also making sure that it's always adapted in configured and improved

00:27:16: lidocaine here you need to have a higher qualified

00:27:20: yeah I'm going back to the situation inside the warehouse and fulfillment centers I think the role of managing such a fulfillment center it will evolve to where it becomes a lot more technical a lot more understanding of the software landscape of the robotics landscape and so forth.

00:27:34: Where is it

00:27:34: the past your job was he's my shelving system I have to get my team ready and going and sort of managed that sort of my role now it's a completely different ballgame and sort of raises the bar on the people that run operations inside the Fulfillment centers as well alright I would fully agree so you are from a from a

00:27:49: classical whales manager who in some cases would would start as a picker right as a forklift driver.

00:27:58: It's perfectly fine because you know your your operations inside out.

00:28:03: And now you kind of have much more technology so you need to know that their technology you need to know the the system's behind that and,

00:28:12: at the same time you need to still have this continuous Improvement mindset right so because systems doesn't mean it's optimal so here you also need to improve you need to make sure that your challenge and with this.

00:28:23: Plus you're dealing with something with technology that's a exponential growth curve that's changing very very quickly gets more powerful very very quickly and.

00:28:32: We're in the past your daily work inside the warehouse hadn't really changed much and now it's it's changed quite a lot because it's sitting on the on the back of Moore's Law and live stuff

00:28:41: shows up gets better gets quicker gets cheaper all of a sudden things are happening in the way house which exactly which is also a very interesting topic in terms of the learning organization

00:28:54: I thought we talked about this since years so Peter Singer didn't even write a book many many years ago.

00:28:59: And this is what we see more and more required that every one of us needs to be curious.

00:29:06: To explore new topics to understand new topics and understand how can we apply this topics in our daily daily work.

00:29:13: If you if kind of talking to two heads of supply chain heads of warehouses or supervisors.

00:29:19: You clearly see a difference where people are really interested kind of to push the boundaries right and really question question question question,

00:29:27: so why didn't you call it the five wise right do you really understand what's going on and this is something.

00:29:34: Kind of qualifies you to be much better in terms of improving the performance of your system,

00:29:40: and someone where you say that how we did it didn't in the same way since 10 years and will continue to do that for the next 20 years that's clearly not the.

00:29:48: Up the game of these days yeah makes sense

00:29:52: all right moving on to the next big prediction of yours what's pick the next one off your list one interesting discussion of our prediction is around the role of inventory if you think about them,

00:30:05: what happened over the last year's as inventory was what were always going down even with Global Supply chains we had less and less inventory.

00:30:14: And in some Industries like the automotive industry that where you can Concepts like just in time just in sequence even right where you have literally if you think about kind of seats or so which is kind of big from a volume perspective.

00:30:28: And it's just impossible to get out stock like one month of seats that you that you had these seeds just in time just in sequence you delivered them

00:30:37: and then there were there were assembled on the assembly line so what happens now is in the crisis.

00:30:45: All industries that that had historically more inventory the better right

00:30:52: and so to give an example the Pharma industry right kind of historically much more inventory because and the reason is very simple the customers of a pharmaceutical company is

00:31:06: it's kind of everyone here and if you think about service level to the customer is basically hey you have your medicine available or not.

00:31:16: And you don't want to have your mats and not available that's why service level in the upper 99 it's kind of common that's why there was a lot of inventory and they managed the crisis much better

00:31:30: because of the safety cushion so to say is it necessary for all Industries no but it will be re-evaluated in terms of.

00:31:39: We see inventory more as kind of the guardian of resilience

00:31:45: as one part there's a lot of other stuff that you need to do but it will be evaluated in a different way

00:31:52: I'm going forward but of course the other side of The Medallion is not of inventory is expensive so the next investor call and the CFO was going to ask,

00:32:00: what do inventory levels are and if you have too much or if you have the wrong stuff inside your inventory have a lot but it's not really leading the season you're in trouble so

00:32:08: you expecting a move back there to I mean those times will come again right where it's not justifiable any longer to have tons and tons of inventory that sitting around there that's just ruining your your balance sheet right

00:32:19: I've fully agree and if um if you let's say just flood your system with inventory that is not very smart

00:32:27: that's all you need to make sure that you have the white inventory at the right location and we still see a lot of companies where it's more like flooding it so fully agree that this this does not help but to our earlier discussion

00:32:39: and we will also see that investors will kind of put more emphasis on resilience.

00:32:44: We will see that forts will understand the importance of supply chain more and more right and one part is.

00:32:51: Fight so this combination

00:32:55: with this combination I'm sure that we will have less push on Just for using imagery we will still have investors that will push and say hey as low as possible Right,

00:33:05: but then it's kind of the task of the of the supply chain guys to also show the implications of hey if we have less inventory we might have a stock out and that stuck out mildly to the left,

00:33:15: bad service level that might to have to Lost sales that means that if we ensure availability we have Top Line growth.

00:33:23: And this is what investors like to see right and not only.

00:33:27: The cash that we have individual yeah I also expect there to be a major push again for technology that lets you have a better visibility in better control of your inventory.

00:33:36: Because that's a probably next question that people will ask is tell me about the inventory levels why do you have that much where is it.

00:33:41: Oftentimes the answer is we don't know right for example inventories and motion most companies have no idea.

00:33:47: From the time it sent out from suppliers to when it arrives at the customer that dry for finally getting complete visibility of the inventory and having better control over it allows you to work with lower levels of inventory to begin with

00:33:58: that's right so I also expecting a major push into Technologies allow you to do that right yes definitely and there wasn't there was a saying kind of many many years ago.

00:34:07: You want to you want to replace inventory with information I then this is this is key if you if you know.

00:34:14: So inventory if we step back right inventory is used to make sure that you cover volatility right well activity in demand and volatility and supply.

00:34:23: And there's also some not citing reasons for inventory so if you have this volatility and you can predict it better.

00:34:30: And you you have a volatile demand and your prediction is pretty good you need to have less inventory

00:34:35: same with supplied right nowadays the if you look into the reliability of the container vessel as it went down from kind of 1890s to now in the mid-20s so that means that here you have uncertainty that you need to cover

00:34:50: if this is something that you can predict.

00:34:52: Then you need to have less to tool to cover so more technology used better predictions will clearly help us to reduce inventory and here again very important is not to link everything.

00:35:07: Together what we often see is that even try let's say is managed.

00:35:14: As weeks of Supply right it's very simple everyone understands weeks of flight days of Supply unfortunately is it does not have an element of variability

00:35:24: so here we need to be also a bit more kind of scientific so to say to say hey let's do the proper calculation and then for the management it's perfectly fine to reconvert it into days of Supply or weeks of Supply but let's first understand.

00:35:37: So

00:35:38: Coming back to your 30 question on how you how will technology help it will help a lot because we understand so to say the world better.

00:35:48: And with this we have less uncertainty less uncertainty means less inventory needed to do.

00:35:55: Yeah makes sense next one next one up the list your next prediction what else is there for 2022 that we have to keep an eye on so I think there so maybe maybe two.

00:36:07: To combine two predictions or to file predictions I would expect that we.

00:36:17: We see a much larger need in talent in terms of managing our digital supply chain and we see at the same time.

00:36:25: That that digitization is.

00:36:28: Increasing significantly so we clearly saw that everyone is digitizing digitizing but in the last 18 months there was a boost right it's probably kind of

00:36:37: the equivalent of five years that we saw in the last 18 months now we need to have people to manage this so there is Talent necessary.

00:36:45: And honestly I'm teaching myself at the University but.

00:36:52: Often University teach the stuff that is not used so useful in practice right so him have kind of super complex lot sizing algorithms that no one uses in practice so we need to develop the talent

00:37:03: that's on all of us right to coach our younger colleagues to go to universities to lecture.

00:37:09: To be able to understand supply chain and to use also the digital backbone and this is the second prediction.

00:37:16: That we will see software companies existing software companies that provide solutions for for Supply Chain management and Logistics management.

00:37:26: They they have also a very good time it's like the automation companies in hardware and software we also see border-box I fooled a lot of people are in investing.

00:37:35: And in addition to that we will be as we discussed already we see the startups kind of

00:37:41: popping up and coming up with very interesting Solutions so the future will be kind of much more digital

00:37:48: and we need to have let's say the backbone and we need to have the people to manage this that's probably one of the most encouraging things I've seen over the years is the sort of person now and the sort of talent and people that come in to the new lock Tech startup scene.

00:38:02: So people that previously wouldn't have bothered would have gone into totally different areas into fintech or e-commerce or worked at investment bankers or for the large corporations now.

00:38:12: Flooding into luck Tech startups and creating some really really cool exciting stuff.

00:38:17: And that's true for Germany to you've probably followed the sort of luck Tech scene here in Germany and what's happened there in the last couple of years it's amazing right.

00:38:25: Yes exactly exactly so it feels like this this whole topic of logistics and supply chain is from a little bit of an old-fashioned box moving driving trucks

00:38:35: it's kind of now elevated into a pretty cool place to be.

00:38:40: And a super important place to be to make sure that that the economy works and that we are supplied with the stuff and that we will have our Christmas presents we hopefully ordered on time and not one day before.

00:38:53: And it's much more understood right and this is this is what I find super.

00:38:59: Yeah and when you're teaching at University you talking to students do you get the sense that working in the area of logistics and supply chain has gotten sexier and more interesting over the year so I can understand

00:39:09: if somebody works for sender or Zen cargo or what have you some some cool startup that's developed in something exciting but.

00:39:17: What about the traditional role inside of Procter & Gamble Fox Wang you name it Logistics supply chain roles they have they

00:39:24: gotten a better wrap have they because they're becoming more

00:39:27: interesting to Talent so Talent is clearly looking for the for the cool startups and the e-commerce companies right because this is some kind of also where we're at the latest and greatest is applied and used.

00:39:37: But also a lot of my students do work in their internship or look for jobs after after completing their masters

00:39:47: they look for kind of the traditional company so to say because there is kind of the impact you can have in these companies to really boost as also

00:39:56: significant right A lot of these companies are not yet where the e-commerce companies are in terms of their Tech backbone.

00:40:02: So the the impact you might have is still still very very high so I would say it's a mixed picture if I look back like 15 years ago it was kind of.

00:40:13: The majority was going into the bigger companies.

00:40:16: But now it's probably 50/50 I'm not sure whether they really also kind of enjoin 50% of them join you Commerce company but at least that that's what they find.

00:40:26: Interesting but it's it's still exciting it was a with with kind of the traditional companies what about you guys at McKinsey I mean you're obviously known for working with.

00:40:36: Lot of multinational blue ship clients large corporations and so forth but have you also gotten involved with Consulting and doing projects and working for small fast rising hot luck Tech startups for example

00:40:49: so it's it's not very well known but it's kind of

00:40:53: McKinsey X MacKenzie's is the is the biggest number of Founders in the startup space so that is not known as in Europe in u.s. I don't know.

00:41:05: So we have kind of a lot of intrapreneurs that kind of leave McKinsey and then start their own company so that's one thing.

00:41:12: And it should also be that it should also be the other way round that people come back to you and not only you leave the door exactly so and they start to come back so Salon do is a good example right so London was brought up by X begins.

00:41:25: Mmm

00:41:27: and and we are we are helping them with clearly you have your network right and so you have we also have a lot of pro bono work that we have your help young entrepreneurs to be successful

00:41:37: and then kind of rowing we also hope we even sometimes take Equity to help them so it's not that we have an incubator right but with our Network and with with our experience

00:41:50: and we clearly have the startup space to grow but I would assume you also clearly

00:41:55: competing for talent so someone it's a really high potential out of out of college out of university for example or couple years in Deadwood have traditionally been a super hot

00:42:04: Target for the Kinsey is now may be thinking about joining the latest startup and as a Founder team probably tough competition for you guys right it is it is so and

00:42:14: if you if you look into McKinsey we clearly also changed a lot over the last last couple of years kind of.

00:42:21: You need to pay attention to what the young teller ones right so much more flexible much more kind of purposeful work.

00:42:29: And honestly there's still a lot of people who then still go to join a start-up it's,

00:42:36: it's not easy luckily we are often ranked as number one so.

00:42:41: The that gives us a bit of a benefit but but you always need to be super flexible agile and.

00:42:48: Yeah you kinda looking for people on your team to expand so anybody's listening and definitely definitely we always look for people we will hire,

00:42:57: many many many in your colleagues next year so yeah he's anyone Islam and by the way it's also interesting that we like when I when I joined

00:43:07: at the age of 36 I was kind of one of the old guys this is now changed completely right so Mackenzie is now hiring clearly people fresh from University but also a lot more experienced people.

00:43:20: And with this we have a much more diverse kind of a 10-year point of view.

00:43:26: Much more diverse group yeah exciting stuff going on any more predictions that we haven't covered yet know there was a lot there already and a lot of predictions combined into some super predictions they all collated and came together anything as we missed,

00:43:38: no I think we did our best predictions and looking forward to then look next year what what really happened at the next two years yeah I'm going to put you on the spot I'm going to have you back on and explain to you what happened why why none of this happened but not other pair exactly.

00:43:53: Fantastic no this was exciting though thank you very much for your insights very much appreciate you coming on to the show fantastic thanks for your time so bad.

00:44:01: Thanks until next time getting me by Death,

00:44:04: but all right that was the logistics try podcast episode on supply chain predictions 2022 with new Dalek from McKinsey if you enjoyed Today's Show please make sure you're subscribed so you don't miss any of the future episodes

00:44:17: 2022 will be a big year for the logistics tribe more to come,

00:44:21: also I included a few interesting links to Publications and articles from McKinsey on the topic of supply chain and to the show notes so check them out if you have a chance I'm bored felgendreher until next time.