Taking the Drop in Surfing and the Supply Chain: A Discussion with Jason Busch and Keith Hartley

Spend Matters Founder and CEO Jason Busch and LevaData CEO Keith Hartley discuss catching waves, why it's the best time for supply chain professionals, and what's ahead for LevaData.

Jason: Given the unprecedented number of supply chain disruptions in the past few years, why do you think a lot of organizations remain hesitant in terms of adopting new technologies which would enable them to work with new sources of supply, source more strategically and design more optimal supply chains? What is the crux of the lack of willingness to completely dive right in? 

Keith: It's a big question, so I'll try to give you a big answer. Change is always difficult. We know that. It takes all kinds of technology, it takes the 3 P’s — people, process, and products — but it really takes a compelling agita to get companies to move. They have to have felt enough pain, or see enough value, to do things differently.

Of course, there's a bad history of projects with companies, especially in manufacturing, that have been around for a long time. There is some fear of going there or starting to do things again and trying to do things differently. Specific to procurement, I'd say, change in procurement really lags other investment areas like traditional supply chain, supply chain planning, warehousing, transportation, and even ERP under the auspices of consolidation and rationalization that has leapfrogged from traditional sourcing projects. And then, of course, you have all the newest wave things around front-office automation sales, CRM, service automation and all the marketing automation technologies that are out there.

So, today's company has a whole host of ways that they can choose to innovate. I would say procurement has had a more conservative approach, because they're held in a lot of ways to an even higher ROI standard.So, because they are procurement people and because they measure everything, their standard for what they buy is higher than so many of the other traditional ERP or front-office sales and service automation projects.

There is this notion that it takes a compelling event to get after the agita that companies see in their organizations, and we've seen a little bit of that with Covid. But, certainly, it's not the only shock that's happened in and around the supply chain. So, I think a lot of these companies are now visiting the baseline assumptions about why they've waited on sourcing projects and prioritize some of these other enterprise software technologies ahead of them.

Jason: A quick follow up to that is just looking at Q1 economic performance, I know of a number of big-name companies which have had job cuts. I know of others in the high-tech supply chain, which generally in procurement supply chains across the board have had pay cuts, so the economy isn't perfect. High-tech and other industries and manufacturing have been impacted.

Given the compelling cost reduction and risk reduction, which go hand in hand with better sourcing, what do you think it will take for some of these organizations to really get over the line to say, “This is the best thing I could be doing right now?” Yes, there is change management and yes, there is some cost to doing it. But if I go back to the whole ratio of ‘for every $1 or $10 in new revenue, in terms of EBITDA impact, if you save $1to $2, it's similar.

Keith: If you really think about it, everyone on the planet accepts that salespeople need a CRM tool to do their job. Everyone on the planet accepts that a CFO or a controller needs an ERP system to do their job. But a procurement professional? a direct material, sourcing professional? There isn’t yet agreement that they need a tool like they own their own version of a CRM or an ERP tool.

Instead, they're held to this higher level of investment, and, under threat, they have to do their job with less, produce more and figure out how to collaborate with other parts of the organization like IT and traditional supply chain planning. It's an unwinnable situation unless they take the first step.

The first step is the hardest. A similar analogy would be like the only way to learn how to surf is to get out there and flop around the first time. Then you get a little bit better every day and a little bit better week after week, month after month. And procurement and direct material sourcing is the same way. There's a fear of getting started, to put one foot on the board and just try.

For me, we have to get over the fact that procurement people are no different from any other team at a company. We need a tool — a robust tool, a data tool — to do our job. Sellers have it. Marketers have it. Finance people have it. Why don’t we expect our procurement team to have one, need it and depend on it as well?

Where we've seen customers have success is when they acknowledge procurement people need a tool. Procurement people don't walk on water. They're not typically professional level surfers. On day one they need to get started and think about aggregating and contextualizing data from a lot of different sources to drive that decision making.

It's literally as simple as just getting started and acknowledging that direct material sourcing, and sourcing in particular, need some sort of tool to do their job. The tool, by the way, is not Excel, and it's not Google Sheets. It's something that's integrated that can become a language by which sourcing has a seat-at-the-table collaboration with supply chain planning and the other strategic planners in an organization.

Jason:To build on your analogy on surfing, I was surfing a few days ago, and it's been a year, so I got a really big fat board. I was on the beach at Tel Aviv and as I get older, I don't have the best knees. They’re not bad, but not perfect, and don't need replacing. However, the major piece about surfing is just literally that you get your feet on the board; you’ve got to paddle, but you’ve got to stand up, and there's a fear, but I didn't have it until this year, where I'm worried my knees are going to go as I stand up. But then, as soon as you're up, you're fine. It's just kind of this nagging fear, that something is going to happen when I'm in that transition phase from getting pushed to standing.

Keith: It can be scary until you go for it and try it, and you see that your knee will hold out and you can do it. You know there's another analogy with surfing that I have been talking to a lot of executives about.

We at LevaData take some customer data and we show them what is possible in our system. We do that for free. We do that as a way to show the power of our platform in someone's environment. And, when they become customers, it's analogous to the drop in surfing. There's a moment when you catch a wave where it is a split second where you either have to commit and go all in on the wave or you miss it. When you miss it, you can try to stand up or fall. Your knee may give, you may be a half pedal down. But, when you time the drop, and you totally commit and go for it, amazing things can happen as a surfer.

We see this moment with our customers, where oftentimes the value proposition that LevaData offers, this contextualized data framework, it's so overwhelming to sourcing people who have been neglected for so long, I offer to light our system up to them for free, take some of their data, show them the power of it, and when they see the power of their data and their operations in our system, that's the drop. That's the moment of the drop where the light flips on, and they totally commit, or they hesitate and, typically, that doesn't end up well. 

So, I really see this analogous to the way in the journey that prospects are with us now. We're offering these kinds of lessons to get them up on the board and to try to capitalize on this time period that we live in to actually take the drop with LevaData. 

Jason: Shifting subjects for one minute, in certain cases it's easy to point fingers at different situations. Maybe it's not the best strategy to point fingers–we can obviously point the finger at Excel – but do you think that if we consider the broader supply chain disruptions we could say it impacted electronics overall, because it certainly impacted the automotive industry.

Do you think we can blame supply chain disruptions on legacy technology?

Keith: There's a little bit of that. I think that that's justified. I've been in supply chain for over two decades now, and the onset of Covid-19 was a commercial, if you will, for all things supply chain.

It impacted the world in very negative ways, but the awareness of what a supply chain is, and how vital it is, and how to build resilience – pick your adjective to supply chain – is something that I now no longer have to explain to my mother. It's like that kind of awareness around supply chain. So, in that context, what's happened is that supply chain, historically, has been the most underinvested enterprise category of software on the planet.

So, in having had the pleasure of working with some of the largest, most sophisticated supply chains over the last, 20 plus years, many of them are not as robust as we would think. Many of them are underfunded, undervalued and, frankly, understaffed with proper bleeding-edge thinkers and the right amount of budget to have a massive impact on a company. A lot of executives historically have chosen to grow the top line instead of cutting the bottom one or reduce the bottom line.

So, I think Covid sent a shock. And it won't be the last shock. There will be others. There have been geopolitical events; there have been natural disasters and things that have shaken the supply chain. But Covid really stopped the transport of products and goods and ingredients, which are the lifeblood of a manufacturer. So, the ability to move from port to port and truck to truck and plane to truck and truck to factory and factory back to truck and back to the customer through some channel was brought to a halt, and it really highlighted what happens when you don't have a good handle on your supply chain, and that includes things like parts and ingredients which LevaData helps with, but it encompasses the warehousing, the transportation and prediction of supply chain and the ability to plan and predict behavior.

It's a long-winded way of saying, I think we're fortunate enough to live in these times where supply chain is at the front of the conversation instead of historically where it's been at the back, and it's been leap frogged by financial consolidation projects around ERP and other more emerging potentially “more exciting technologies” that were funded instead of supply chain. So, I think that's more the reason why there's been a lack of adoption for tools in and around procurement and supply chain.

Jason: So, when we think about supply chain disruptions, there's so many risks.There's war and there’s geopolitics. Even on that subject the slow decline, or maybe rapid decline, eventually of the dollar is one element. But If you think about it, there’s also climate change, pandemic, tariffs, duties, supply shortages, labor, you name it.

If you look back at your time at LevaData in say a future state of 2025, what impact would you want LevaData to have had on helping companies overcome these obstacles in that time? What is LevaData’s legacy in addressing these challenges?

Keith: It's an exciting time to be in procurement and supply chain and an exciting time to be alive, to witness the things we're going through. There's a sort of universal acknowledgment that we need to change some things in the world to make the world a better place, and actually make it just as habitable 100 years from now as it is today.

And so, we're at various stages, different organizations, different governments, different beliefs, or various organizations of how we do well by the plan.

What I'm proud of with LevaData is that we're driving this notion of using data to make better sourcing decisions. We have a framework, and you use that framework to make what I call better decisions. And why that's important is because regulations, regulatory bodies, governmental moods will change and evolve over time.

To make better decisions today means being tapped into diversity, equity and inclusion. It means being tapped into green vendors. It means being tapped into carbon neutral vendors or equitable labor practice countries and vendors.

So that is what's top of mind today, and how you buy and capitalize on that is important and very, very difficult to do without a tool like LevaData that uses data to serve up insights around these vendors.

Now 5 years, 10 years, 50 years from now there could be new regulations, new stipulations, new laws, new beliefs around what is better for the planet. And, as that evolves, this idea of using data to make the best sourcing decision, to make a better sourcing decision is going to continue in an even bigger way than it is today. I think we at LevaData are at the cusp, at the front end of the wave, where it's just starting: the need for a tool like we have to really be a good corporate steward of making the world a better place as a buyer. We're just at the early innings of this. This is going to be a long, long journey for companies and, as governments, regulations and programs evolve and tell us ‘shift to carbon and shift off of carbon and shift to other types of environmental concerns,’ we need to be able to adapt our business practices as procurement profession. I'm really excited about whatLevaData is doing––using really good, contextualized data to make better sourcing decisions. It's how you define the ‘better’ that will evolve overtime, so we have a ‘better’ today, but that will evolve over time.

Jason: The last question; if I think about where LevaData has played up until now, you focused on parts, semi-finished parts, finished parts, components, ingredients. Are there other industries outside of the core you serve today that you think could also be served by what LevaData is doing?

Keith: Yes, this is a question that keeps me up at night, because the world is so wide with what we can use our data aperture for. I really think today our solution view is three-pronged. It gives us everything a modern manufacturer today can need, which is parts, ingredients, like plastic resins, and metals.

So now we have parts. We know more about parts than anyone on the planet. We have ingredients like plastic resins, which means we can do process manufacturing, because process manufacturing is just ingredients and recipes, so we can now do the ingredients. And now we're going into metals and offering that insight up to our customers. There's a tremendous amount of interest from our customer base about metals. Many of these manufacturers have a really big part of their purchase cycle that is core metals. And so, we're doing that now. It opens a lot of different lanes for us. We can go more into process, manufacturing things like pharmaceuticals or chemicals and agricultural chemicals.

That's one way. For me, I don't know where the future lies, but I know that we're going to know more about parts, ingredients, and metals than anybody else. We're going to have more sources of that data and how we bring that to life is almost industry agnostic. If you care about that information, there's not going to be a better source on the planet.