The Hidden Costs of Status Quo
Watch our virtual round table of experts who will explore the hidden costs of status quo in manufacturing and procurement. From supply chain collaboration to machine utilization, you will learn how to save your organization millions of dollars.
This is one you won’t want to miss!
Our roundtable experts will share these incredible insights:
- How Dell prevented >$100M in inventory backlog
- How a medical device manufacturer drove 97% machine utilization
- Modern trends in direct procurement
- Why it’s time to transform supplier collaboration
Elie Sayegh of Dell Technologies Tells Us About SourceDay’s Upside
“It is a game changer”
Meet Our Panel
Experienced Supply Chain Manager in planning and procurement throughout the entire lifecycle. In addition, I have experience in Market & Competitor Analytics and Strategy as an internal consultant.
Art of Procurement
Over the past 20-years, Phillip has built, transformed, and led procurement teams that operate as a business within a business. These teams have delivered $100's of millions of dollars of value for their stakeholders - from cost optimization to product and service innovation, employee retention to risk mitigation.
Graham Immerman is VP of Marketing for MachineMetrics, Manufacturing's First Industrial IoT Platform for Machines. Graham has quickly become an authority on digital transformation and the application of IIoT technology for the manufacturing industry.
With over 25 years of enterprise software experience Sarah oversees global marketing for SourceDay, including brand marketing, demand generation, field marketing, partner marketing, events and all digital marketing programs.
Read the Transcript
Sarah: Okay. Super. Well, good morning, everyone. Thank you for joining us. My name is Sarah Moore. I'm CMO at SourceDay. Very excited to explore our topic today, "The Hidden Cost of Status Quo." Apologies for the tongue-in-cheek photo here. I know many of us have been spending an incredible amount of quality time with our children, and if you have ever had the delightful experience of playing hide and seek with a young one, hopefully, this picture gives you a little chuckle because I know I've experienced it. It brought me back a bit.
So, as I said, our topic today is "The Hidden Cost of Status Quo." I thought I would kick off with results from the survey that we sent out earlier this week to all of our registrants. We asked you a handful of questions about your world. So, it's great context because this is what status quo looks like for procurement, IT, and supply chain organizations today. The first question was, how has COVID disrupted your business? I know this seems like a ‘master of the obvious’ question. We wanted to know how much disruption have you experienced. And what we saw was 97% of you said pretty significant disruption, 23% were majorly disrupted, 74% found it to be manageable. And then I have to shout out to our SourceDay customers because the balance there, the remaining 3%, happen to be SourceDay customers, which makes our team really proud and happy to hear that we've helped you through this challenging time.
And then we asked, how do you manage supplier changes today because a lot of that disruption is supply chain disruption. There's obviously other things like work-from-home orders, and those businesses that have had to shutter because they're not essential businesses. But as it relates to supply chain in our topic today, we wanted to know how you manage supplier PO changes, and 70% of you are still doing that through email and phone, which must have made the last few months incredibly challenging for you. And over email and phone, what types of changes are you managing? Almost 80% of you are seeing either move-ins because your businesses are thriving and growing incredibly fast right now to keep up with record demand. Others are obviously having cancellations and move-outs. One of our speakers is going to talk about that today. But we're all in that same boat basically.
And then lastly, a topic that we often hear about sometimes that chaos, that back and forth is triggered because supplier POs go unacknowledged. And so, 48% of you aren't even sure how many of your POs go unacknowledged, and then more than half said a significant percentage. So, this is to set the table for our conversation for most of our audience. This is what status quo looks like. And it's a situation that creates a lot of gravity, but one that's really important for us to challenge and not just because of the times we live in, in the spirit of building healthier sustainable businesses.
So, here are our presenters. As I said, I'm CMO here at SourceDay. I'm joined by Philip Ideson. He is Founder and Managing Director of an awesome publication that we at SourceDay love to follow called "Art of Procurement," lots of incredible content that that team churns out. So, we're thrilled to have his insight and expertise. Then one of our near and dear customers at SourceDay, Dell. We have Elie Sayegh, Senior Manager of Global Program Management. I had to practice that a couple times to get it right. And then lastly, a good friend, Graham Immerman, CMO at MachineMetrics, sister company in the spirit of challenging status quo and helping businesses digitally transform how they work to save more money and make more money. So that's our lineup.
Here's our agenda. We will start with some insight from Phil, then Elie will roll through a case study in supply chain resilience at Dell, and then Graham will share a case study of one of his customers at MachineMetrics. We'll spend the next 30 minutes on those presentations just so our speakers can kind of share their perspective on this topic, and then we'll have a roundtable discussion. And we'll definitely save some time for Q&A. So, a couple of quick housekeeping items before we kick off. There is a chat window that you can start entering your questions throughout the presentation. We'll keep track of them. We also have the questions from people who submitted those via survey. So, we'll definitely get to those questions toward the end. And then as always, we will send recordings of this presentation out later this week.
So, with that, Phil, I hope that you could kick us off. Introduce yourself and then maybe share what about your background caused you to become a change agent in our space.
Philip: Sure. Thank you very much, Sarah. And thank you for everybody as well for joining us today in the session. So, you know, you talked a little bit about what I do or part of what I do today as Managing Director and Founder of Art of Procurement. You know, my background is for better or worse, 100% procurement. You know, I've worked in procurement organizations of many different sizes, both on the direct procurement and the indirect procurement side, all the way really up to head of procurement. And then I've worked on the consultant side, running procurement transformations for a variety of different companies in different industries, which then led me to found Art of Procurement where we do a lot of content. We help people on their transformation journeys, and we really help organizations change the culture of their procurement teams. And, you know, a lot of that is built on the premise of change. Change is something that is really, really important to us as an organization. We're passionate about helping others drive change within their companies and essentially the procurement value proposition. I think the reason for that, you know, for me is probably threefold. I think one is just DNA. You know, change and interest in driving change is something that is interesting to me, you know, and has interested me throughout my career. So my career has naturally gravitated towards roles that have that element to them. I'd say that I'm really passionate about the value that procurement can play within organizations, and you know, not all organizations are frankly at that level.
And I just want to do as much as I can to help drive procurement organizations forward in what they're doing for their business, and that kind of ties into the third element in that I think change in procurement is existential for the profession. And the reason that I say that it sounds like it's hyperbole and, you know, haven't we all been projecting the downfall of procurement for years and years and years, is you have such wonderful technologies now that are becoming available. There's such an investment in procurement technology that is going to render a lot of what procurement folks do as redundant. And so, we have an option. What do we do with that? Do we actually drive forward and look at a different value proposition elevating our value proposition, truly understanding what a business wants from procurement and be the people to drive that change, or do you wait for a technology to be implemented, you know, kind of without your say so, and you're negatively impacted? And I think now is a time where procurement folks really have to drive change so that they are bringing something new to their organization so they're in charge, ultimately in control of that decision and that evolution.
Sarah: Excellent. Thank you.
Philip: So, let's go into, you know, what am I seeing? One of the things that we do, you know, both through my work on the consulting side but also from...you know, we speak to CPOs every week for podcasts and for the content that we put out. And we've obviously stayed close to folks over the last few months as, you know, we're all being challenged in different ways. So, I wanted to share a little bit about what we're seeing. You know, you think back to January 2020, pre-COVID, I think all blissfully unaware of what was coming or most blissfully unaware. And, you know, the challenges for procurement at that point were, "Let's deliver against our annual cost reduction goals," those cost reduction goals, you know, maybe they were 3%, 5%, 7%, you know, different in different organizations, but it was very much business as usual. You know, and along the way, "Let's try and help our organizations identify and develop some innovative suppliers and, you know, just make sure that we keep the doors open from a supply perspective." You know, March everything changed, and we went from that. What I would say is trying to slowly break from the status quo into, "Right. We’ve got a crisis on our hands. What do we do?" And so, procurement really mobilized to help secure supply. There's a lot of adjusting forecasts and purchase orders as the demands on our organizations changed, some negatively. Some other organizations, you know, like we work with retailers, for example, consumer product organizations where demand just went off the charts. So, it's not all from a negative perspective. It was, "How do we keep up with demand?" Finding credible alternative sources quickly, as we started to find constraints in the supply chain, and saving cash, you know, all about cash management.
So where are we now in July? Well, I think we're kind of in this holding pattern where we need to be planning for the unknown because we don't know whether there's going to be a second wave. We don't truly know what the next three months, what the next six months holds for us. Where are there going to be hot spots? Where are we going to be back to business as usual? With that comes, you know, a continuation of de-risking the supply chain, because a lot of organizations are struggling with cash and with...you know, they're looking for ways to save money, and unfortunately, employees is going to be one of the ways to do that. So even though procurement is on the side of being a part of the solution rather than a problem for a lot of companies, we're still going to be asked to do more with less. And then I want to come back to that in the middle, deliver significant expense reduction across the entire business. You know, 3% or 5% savings isn't good enough anymore. You know, we're going to be tasked with sustainable structural cost savings that probably unlike in a lot of organizations what we've seen ever, and in others that you see only at the worst part of the business cycle where you've got to mobilize quickly.
What are all the levers that procurement can pull? I don't intend to go through all of these one at a time, just to say that as a procurement professional, you know, in today's kind of challenge of expense reduction, there's a variety of different tactics that you can use. You know, oftentimes procurement folks are looked at as, "Well, why don't you just go and use some leverage?" And I'll just use a phrase that we always hear, you know, "Go and beat up your suppliers and, you know, get some cash in the bank, and you've done a good job." You know, obviously, there's a lot of very short-term things, and I might touch on that a little bit later that you can do but that damage the long-term viability, you know, sustainability of your supply chain. But those levers typically fall into working with your incumbent supplier, working on demand management. So, you're actually looking at how much you're consuming rather than the cost of what you're consuming, looking specifically from a category or a sub-category. So, what can we do in one particular place that's related just to that particular area of spend that you buy?
There's some more traditional sourcing tactics I talked about before, which is more like leveraging the marketplace. And there's some interesting kind of innovative things that you can do, for example, creative bartering as an example, which, you know, nobody really thinks about from a procurement perspective, but there are things you can do. You know, I once sourced a childcare center, for example, for an organization that had no budget, but they had an empty building. Well, the bartering there is, "We'll give you the building. You give us the childcare and subsidize it." And we can jointly use that as your showcase facility where you can go and give tours to other customers. It doesn't cost us anything. It gives you access to a service you couldn't do. So, there's creative things that you can do as a procurement professional.
Now the Art of Procurement is how do we look at all those different levers and decide what to do? Because doing the wrong thing, one, it can create a lot of tension within your supply chain and lead to a lot of the issues that you're trying to solve for. It can actually increase the total cost because it's really easy as a procurement professional to kind of take that blinkered view. And I hate to kind of say that, but sometimes we do it, of looking at cost only without looking at the bigger picture. And there are just some tactics that aren't appropriate based on the things that you're buying. So that art is to take account of things like, you know, how much negotiating leverage do you have for a particular product that you're buying right now? What does the supply market look like? You know, how actually easy is it to change when you're looking from a direct procurement perspective? You may not actually have the ability to change or there may be a long cycle to change because you've gotta go and get PPAP approval from a customer or regulatory approval. You have to look at what risk is inherent with making a switch, and the bandwidth. The bandwidth both from your supplier perspective and from your internal team perspective. So, it's all about taking all those different factors, looking at essentially the deck of what it is that you're buying to determine which is the right strategy because you're going to be using a different strategy for each tactic. And I know that's something that we're going to talk about in a little while before we go in...you know, I think we're going to share some examples, first of all, because that's where as a procurement team you can really make an impact.
And what I want to be really clear on as I say that is everything that we do as procurement has to be in line with what the needs of the business are. It can't be just showing up and saying, "I'm procurement. I'm here to save you some money" because that may not be in line with what the business needs or wants or what its strategy is. So, everything we do has to be fundamentally connected with business objectives, and that connection is something that we often miss. So, with that, you know, a little bit about... Sarah, I don't know if you've got any questions on that, or should we hand back over to Elie?
Sarah: Yeah. I think it will feel more natural we get to a question period if we're all just conversing. So, we'll just roll through these presentations and get to that as soon as we can.
Elie: Thank you. Thank you. So, my name is Elie Sayegh. I'm with Dell Technologies. I am the Senior Manager of Global Program Management and Business Intelligence within Dell Services. So, technology services and parts is where we live. And on the next slide, we'll give you kind of a brief overview of kind of what we're looking like in terms of the footprint for Dell services. So obviously, global organization, you know, 195 million systems supported globally, 160 countries. We have, you know, five global command centers and a whole bunch of next business day parts, dispatch, fulfillment centers. And that view really just kind of just shows you some of the complexity that we have within our supply chain and what we actually need to do in terms of kind of pivoting in a crisis like COVID.
If we jump to the next slide, you'll kind of...I'll take the opportunity to kind of walkthrough I think probably based off of the initial slide that Sarah walked through on status quo kind of where we came from and kind of where we are right now. Where we lived was essentially very similar to where you guys were at where we have lack of visibility, everything was done via spreadsheets, phone calls, following up with suppliers to ensure that we had continuity of supply. There was no unified platform, right? It was really kind of brute strength to get it done. And several years ago, we decided to kind of systemically start to drive it, integrate with our planning software and bring on SourceDay, and what it basically has allowed us to do is systemically intentionally drive visibility, drive, you know, agility being dynamic through the supply chain as part of our normal day-to-day business. And it comes in especially handy in times of crisis like we're in right now.
So, if we jump to the next slide, you'll see...here's kind of a result and at a very high level. Our processes is, you know, relatively consistent where we communicate back with our suppliers via SourceDay on our open POs, right? It's nice. It gives us closed-loop communication. It gives us visibility, audit history, tracking. And what you'll see here in Q1, obviously, we're all aware, we have a spike in cancellations. Now, the cancellations given to us by the suppliers or initiated by suppliers, this was a result of kind of I'd say a partnership. So, when COVID hit, it was right around Chinese New Year's, and as everybody's aware, it started in China. And so, we picked up the phone, we called, and we said, "Hey, listen, suppliers...all of our suppliers, 'We understand capacity is constrained. We understand you guys are closing. Let's work together and let's make sure that the only thing you're really producing is stuff that we truly need. Here's our list. Show us your list, what can you do, what can you not do."' And as a result, you see that spike in Q1. And it's pretty noteworthy because, generally speaking, it's about half of that, you know, and so, again, the benefit of having SourceDay as the middleware that we said between is this...it was relatively seamless to actually manage an increase of double on cancellations.
The next slide you'll also see similar numbers, right? So, again, this is moving out of the quarter, right? So, this is what we had forecasted. Lead times vary depending on where we are in the life cycle of the part. So, further out, gets further to forecast, longer lead times, and as a result of that, we like to have a catch-all system to ensure that if we're going to spend the cash, it's actually going to create value for our customers in that quarter. Again, with COVID hitting, forecast goes through the floor. We need to respond relatively quickly. Again, part of the joint effort with our vendors, a fantastic partnership with our procurement team as well as with our vendors and supply base allowed us to actually pivot and say, "We're going to move out, again, a huge chunk of POs that we normally wouldn't," right? So, quarter over quarter is 16% increase, and year over year is like a 21% increase, right? It's huge. And again, that's all cash preservation, right? And so that allows us to say, "We're going to save the money for another day." Forecast you're down.
And then the last slide is really kind of even a more interesting slide, and it kind of ties into what Philip was saying. So, if you look at what we moved in, this is to protect our customers, it's kind of unchanged, but we know that demand actually fell through the floor. And so what we ended up doing was actually hedging our bets and probably keeping more in quarter than we normally would have despite the fact that, you know, forecasts were down, everything that kind of Philip touched on as far as revamping our forecasts, adjusting the forecast, adjusting the supply line, working with our suppliers to ensure that we were covered, making our dollar stretch where it counted, which is either this quarter, next quarter, the following quarter. And then you can see in Q2 on all those slides, it tended to normalize because, once we got out of Q1...and again, this is Dell Q1, right? So, once we got out of our fiscal Q1, by that point in time, which was around May, June, things had started to settle down for the most part. The reaction time, you know, has been done. Measures were put in place. BCRP plans were followed and executed, and as a result of that, we're now stabilizing kind of back to normal. Again, we are looking to see what's going to happen. It's unknown. I think Dell's ability just in general was enhanced by, you know, the software with SourceDay and obviously the partnership with our suppliers, you know, second to none. It was incredible how quickly it happened. When we look at some of our competitors, you know, reports came back that definitely, our response time was much quicker, and again, that's customer feedback that we got back from the field.
So, overall, the ability to actually see what we're doing and be intentional about it and then be prepared in times of crisis is really kind of where we're at and what we were able to do. Could we have done it without SourceDay? Probably. Would it have been painful? Absolutely, right? You'd have had multiple versions of Excel spreadsheets. You'd have had to get on the phone at night. With SourceDay, it's all seamless, right? You enter it in, it's tracked, and it comes all the way through. Now, the best part about it is we can always revisit it, pull the metrics like you guys are seeing on the screen, and from there, analyze it, improve upon it for next time, and in the event of another crisis, you know, we have our playbook.
Sarah: I have a couple things specific to this case study before we move on, Elie. I think you should brag a little about when you say response time, you know, 2,200 distribution centers worldwide, your customers are banks, hospitals, governmental institutions. When we're talking service level like, what kind of turnaround time are you guys able to maintain?
Elie: Yeah. So, initially, I think we were up and running with most of our customers within a week or so from the fact that we weren't able to ship anything. And I think the feedback that we got, again, from the field was roughly, you know, three to four weeks for our competitors. So, for us, it's slow because we typically focus on that business day or same day but relative to the situation and other supply chains. I mean, we're fairly proud of what we're able to accomplish again based off our customer feedback, high praises from our customer base, which is what we do. We aim to please. We are here for our customers. That's what we do. And so, yeah, no. And again, it's the entire supply chain, end-to-end, from the planning to the software that sits in the middle of the business intelligence, all the way down to our procurement team. And then obviously our partners. None of that is possible without each one of those things kind of banging on all cylinders.
Sarah: And we've shown percentages here. You know, for obvious reasons, Dell's a public company. We can't show details but just the scale of the spend and the amount of money that's at stake here in terms of inventory, cash management, and as you said, your relationship and the revenue that you're protecting by keeping your customers happy. So, it's significant, right?
Elie: That's huge, absolutely huge. And it's funny because when we started pulling the numbers, started reviewing them, it was pretty massive what we saw. I mean, we know you're always left with the idea that, "We have to work harder. We have to try harder. We have to do more." And when we look at the numbers, it's pretty staggering to see what we actually accomplished, what we actually did, and relatively how seamless it was. Again, systemically, it worked out great, and then the visibility piece on the backend is you can measure it, right? That's the most important thing is actually getting data on your business, analyzing it, and then improving.
Sarah: For sure. So, a few years ago, you bit the bullet, you changed status quo, got out of spreadsheets, phone, email, and as a result, you were able to go back to the business and show tangible significant savings impact that we did before that we can now expose and show in a pretty easy way.
Elie: Yeah. And it's objective, right? In the past, you have this objective, "I always try, but I can't get through. I always ask, but the vendor won't move." And clearly, you can see now what did we initiate, what did the vendor initiate, what was executed, what wasn't executed. All that data's available. And again, going back to the very first slide or second slide, visibility was key and basically seeing and understanding. And again, when you talk about COVID, you know, the pandemic and the crisis, we'll sit there and we'll say, "We've never seen this before. How do we react? What do we do?" And really, I guess the question would be, what do you do in any catastrophe? The answer is, "Let's look at the data. Let's analyze it. Let's see where we're at. Let's make a decision." And essentially, this is really no different, and again, having the system in place to leverage that and that ability makes it incredibly easy.
Sarah: Perfect. Well, thank you so much for sharing that, Elie. I'm now going to hand off to you Graham.
Graham: Thanks, Sarah. I appreciate that and I really appreciate being here. Thanks for inviting me. As always, I love working with you guys in this stuff. Maybe just next slide if that's all right. You know, firstly, my name is Graham Immerman. I'm Head of Marketing at MachineMetrics. I started my career actually during the heart of marketing's early digitization where the advent of the internet and social media changed the way people, systems, and things interacted with one another. You know, now marketing is, you know, 90-plus percent digital, right? You know, my excitement to join the manufacturing space stems from the fact that while manufacturing produces more data perhaps than any other major industry in the world has been notoriously slow to adopt the digital mindset that transforms industries like marketing, agriculture, banking, and healthcare. You know, this operating without data leads to inefficiencies and poor decision making that can affect every component of a manufacturing organizations operation from, to get to downtime to production losses. So, you know, MachineMetrics has started to tackle this problem, and I was inspired to join them on that mission. Before I get to start our case study, just, you know, some context for those of you that may or may not know us. You know, MachineMetrics is manufacturing's industrial IoT platform for machines. MachineMetrics is focused on accelerating industrial digital transformation by providing a flexible and intuitive platform to easily collect and harness data from any piece of manufacturer equipment and then transform that data into powerful actual use cases and apps that can help manufacturers, you know, reduce their costs, you know, reduce their machine downtime, optimize their capacity and their throughput and profitability for factories.
Next slide, please. So, right now, you know, we do have hundreds of manufacturers that have connected thousands of machines to our platform across global factories. You know, these are just a couple of them today. And next slide. Thank you, Sarah. The foundation of any factory digital transformation really begins with the automated capture and transformation of data, right? That's as we're hearing from, you know, our other presenters, right? So, you know, MachineMetrics, we have an edge platform that provides that scalable solution that can be self-installed by our customers especially during these times to easily collect and harness that data from manufacturing equipment, standardize that data, and enable actionability immediately in just a matter of minutes. You know, our cloud platform makes sure all that data is gathered in one place, processed in a central location that you can have access from to enabling analytics and insights from anywhere in the world. You can then leverage our out-of-the-box apps or build your own apps, seamlessly connect that data across your systems or shop floors to integrate machine data digital thread across your digital factory. But enough about me, sped through that. Let's talk a little bit about our customers.
So, during times like these, really, it's never been more essential as we all know, right, to have data at the core of your cost of production and continuous improvement processes. Without data, you don't know where to focus, right? This was really made evident through a case study featuring a global med device manufacturer. You know, as you can see, the current state of things when we started with this customer was, you know, we're seeing diminishing returns, mounting competition, and increasing pressure in the medical device manufacturing market, you know, made it even more important for this manufacturer to deliver the best product possible even faster than ever. So, they were challenged to reduce their costs of production and deliver better faster products, easy, right? Anybody can do that, right? What was the solution, right? If we go to the next slide, you know, we can dive a little bit deeper into how that problem manifested itself.
When we started collecting data from the shop floor, you know, it made it really evident where the problems existed. Firstly, we just found that it wasn't necessarily the machines themselves that were lacking in optimization. It was more so the processes around the machines. You know, we saw that, you know, setups and tools that need to be changed were scattered across the various factory floors, and operators spent hours each time searching for tools needed for certain jobs. You know, they had feed times on lathes that were causing, you know, huge operational deficiencies including downtime and scheduling problems, and really, they had no information on how bad these problems were for any specific time, duration, location, etc. Next slide, please.
Where we came in was collecting that data directly from the machines and from the operators on the shop floor. The solution was really to set up, you know, a new functional tool vending system that were right next to where the operators spend their time, which eliminated what we call tool hunting. Just that alone reduced the time of setup from 14,000 minutes per month to 1,000 minutes.
You know, they also created a new team that was taking the data that we were collecting and driving optimizations and scheduling processes and procedures. You can see on this screenshot here that we are able to measure setup times. So, you know, when a machine goes in the setup, you can gather that data and understand, you know, how long those are taking. We saw, you know, about 50% reduction in setup times across the organization, and we'll get to momentarily where that money came from and what it equals. You know, lathe feeding circles optimized to ensure those grinders always had the needed feed. It's amazing how often machines just sit there without having the materials that they need to actually create parts.
And then finally, and one of the things that I'm sure we'll talk about in our discussion, new training processes, right, to help their organization and their operators be more efficient with their processes. What does that look like in terms of numbers? You know, if you wouldn't mind, go to the next slide please in my last line, and I know we're moving on here. But it was dramatic. In a small portion of this company's machines, you know, across four sites, they have about 20 global locations connected to just 100 machines. They were able to see an increase of about 4.5 million in their capacity within the first year, and that included the 30% increase in OEE across their four plants. I'm sure we're about to get into this in the discussion. But when it comes down to cost reduction, you know, it starts with the data, and if you don't have the data, you have to, you know, implement what you need to in order to be able to identify where those cost reductions have to occur. So, that's all for my little presentation, but I'm excited to dive more into it with our cohorts.
Sarah: Yeah. What an awesome story. So, what I'd like to do now is we'll shift to a couple of questions that we had prepared as the audience is already sharing a ton of them. So, we might shorten our planned time together, gentlemen. I'd like to start with the concept of fighting inertia because the way we've always done things, email, phone, fax is comfortable in a lot of cases. It may be more expensive, but if it's how you've always done things, it's not necessarily clear how much money is being wasted based on the old way of running your production lines, Graham, in your example, or based on the old way of collaborating with your external suppliers, Elie. I think one of the questions that had come in is what types of suppliers are you working with? I think it's important to delineate that these are suppliers that aren't Dell owned. They're external parties. But in both of those cases, you know, you have an organization that spent many years doing things one way, and it's really hard to change that to even have an imagination about what's possible because there's a lot that's at stake. So, I wanted to hear from each of you some catalysts, or the spark, or the moment, or the executive decision, or what was it that can cause an organization to start embracing change, technology, and digital transformation? Elie, if you recall, could you share kind of where it started for you?
Elie: You know, absolutely. I think for us, you know, our journey started several years ago, and really, it was around digital transformation from I think like a strategic executive vision. We as a company knew it was coming, and we wanted to kind of be on the front end of that. As a company, we knew that if we didn't embrace it and push it and drive it, it was going to happen around us, and we were going to get left behind. And there's been countless times in Dell's history when you talk about phones and tablets and just...there's a barrage of examples where, you know, we tried to get there, and we didn't. And I think our leadership team has done a remarkable job in positioning the company to do that and trickle it down all the way throughout the company to drive our North Star. And part of that is digital transformation, and we've embraced that dramatically within the services parts arena, which is where we sit.
And so, we were looking to scale the business. It wasn't even about reducing headcount. It was, "How can we be more efficient? How can we automate, optimize, and transform our entire business and let our people do the exception management, use their brains? Let's give everything we can to a machine and let's manage everything else we can with the folks that we have, which are great folks, and drive the business forward." And so, this is an example of where that footprint and kind of that foundation has really led us to be able to just kind of pivot very quickly and make it happen. Working remote was kind of a non-issue. Responding to the supply chain disruptions, again, was a non-issue. And again, it's because we laid the foundation, you know, two or three years ago when we implemented SourceDay, changed our processes, changed our structure, redefined RNR, broke up the organization, and, again, scaled it, right? And so, I think really it just comes from digital transformation coming down that pipe and being prepared for it.
Sarah: Sure. Graham, in your customer base as you look at the organizations that have made the leap, is there a common thread or a theme for the ones who've decided, "Hey, we're going to try things differently now. We're going to stop doing it the old way?"
Graham: I think there are definitely a number of them. You know, it was interesting. I was in New York City right before this all started at a World Economic Forum, McKinsey workshop. This was the topic, "How do you catalyze digital transformation," right? And, you know, everyone's talking about it, right? How do you do it? You know, it's funny because I believe that one of the most common threads tends to be either have an executive team or an investor that just mandates that there have to be changes, right? That tends to be like the starting point. Someone at the top is like, "Hey, like this has to change," right? But that doesn't necessarily make the change, right? That just tends to be a bit of an instigator.
I think one thing that I really liked that Elie said was, you know, "I always focus on more what catalyzes the change," and it's about communication across the organization, right? If you have kind of like just like a top-down mandate to create change, you know, rarely do you see the results of that happen, and it's even more difficult to manifest when you have, you know, operators, supervisors who are at the plant level that don't understand the value, maybe even think they might lose their jobs, right, and so on and so forth, right? So I think that being able to create educational programs within organizations and actually upskill their workforce has been one of the top catalysts that we've seen to successful digital transformations and also I think is the internal inertia that exists that kind of like goes against, "Well, why would we do it this way, and we've done things another way?" But nothing really speaks louder than results. You know, it's amazing what happens when you're working with a company, and you're able to show them how much money that they were able to save. One of the first things you'll hear at the top is, "Well, why haven't we been doing this the whole time," right? And you kind of laugh.
Sarah: What else are you hiding? What else could we be saving that you haven't told us?
Graham: We will save. So, I think, you know, rapid wins. The companies that are willing to kind of like move quickly and demonstrate that they're able to create rapid value are definitely the ones that create that inertia. The last thing I'll say and said I don't want to take too much time on this. But, you know, I think on the other side, you got...so you kind of got the people, right? You got the organization. I think it really starts at like industries, right? Industries seem to generally change for a few specific reasons, right? You either have new technology that arise that presents better solutions like marketing, right, like the internet, right? People change, right, in a way that presents new problems that require a better solution, which is often enabled by that technology, or the economy, or something in the world changes in a way that necessitates the reinvention of how people and technology deal with their problems. I think today really represents kind of like the ultimate like triangle of all three of those things, right? So, I think in that way that catalyst is very strong.
Sarah: Sure. And so, Philip, you talked about instilling a culture of change. You walked through five different types of levers that organizations can use. Elie shared a story of, you know, Dell has embraced a culture of change to just...because they know it's coming. It's inevitable. So, I wonder as you...the companies that you work with and talk to every day. Are you seeing them gravitate in one direction or another right now?
Philip: To be honest, you know, it is very situational. I actually just want to echo first of all a couple of things Graham said there about kind of that change journey. I see the same things. It's either a burning platform that's created from leadership or it's...if you want to change from within, it's very much more about the pilot programs, small wins, how can you demonstrate paying the after possible for the leadership to look at doing something a little bit different. In terms of what companies are doing right now, you know, when you think about all the different expense reductions. So, let's focus on expense reduction tactics and categories right now that I shared right at the beginning. You know, what I do see organizations do is prioritizing, so looking across all the different opportunities. So, first of all, is ideation. What are the opportunities for us to save money? How complex are those? You know, what's the time to value? Some of those that I put in the bubbles, the questions that you've got to ask that help you determine which is the right approach to take, what you're going to find out is that prioritization is going to show you where the short term opportunities are versus the longer-term ones where, you know, this may be a six month or a nine-month journey because it's about changing specifications or switching our suppliers, or something like that. That's where I see organizations start.
You do your prioritization, you do your wave plan, and then just pick off that wave plan when you start looking at impact versus time to impact. So obviously where those are going to have the biggest impact and the shortest lead time is going to be where most organizations will start to focus but not losing sight of those are going to take longer because it's really easy to focus on the big ones to start with and then just kind of forget everything else when, you know, you kind of pat yourself in the back, and you think you've done a good job and business is getting back to normal, and you leave some of this on the table. So that's really what I see at least leading organizations doing. You know, the ones who perhaps don't have as much of a long-term view of being really knee-jerk, you know, and just kind of going after initiative here, one there, one over there. It's not really joined-up thinking if you will. And those are dangerous because when you're going through this kind of prioritization and then executing on some of your expense reduction strategies, the number one thing that's important is how sustainable is this. It's all well and good finding an initiative that saves you - on paper - a certain amount of money, but if it doesn't really realize or if in three months it's because you've made a change that isn't supported by the rest of the organization, they're just going to find ways to go around it. And, you know, all of a sudden, you have your CFO saying, "Well, you claim that you're going to bring all this cash back into the business or this expense reduction. I don't see it." You lose a lot of credibility. So how sustainable are the changes is really important too.
Sarah: That's a really excellent point. Guys, we have a lot of questions rolling in from the audience. So, I know we had a couple topics planned. We might get to those, but I want to make sure the people who are still with us are getting their questions answered. So, Elie, there are some that are directed your way. I'm coming at you next. And you can probably do a better job explaining what types of suppliers are you...you know, maybe a little bit of a better visual for the audience of like that we're using SourceDay. How is that set up right now? And then there's a couple follow-ons to that.
Elie: Sure. So today, our planning team will execute the order. It flows through SourceDay. It's confirmed by the vendor. If they're good, everybody's good. If they're not good, our buyers that sit on the procurement team will negotiate that, again, all in SourceDay closed loop. So, when everybody agrees, it's done, feeds back to the planning system, and everybody's aligned. So, when there's a change though, whether it's Dell driven or supplier driven, again, it happens in SourceDay. Now, that supply base is the supplier, our ODM, OEM suppliers for our systems, right? So, you know, if you're looking at your laptop right now if it's not a Dell, pretend like it is and pretend like you're under warranty. When that part breaks and it gets dispatched out, and they send you a new hard drive, that comes from one of our next business day facilities that we saw on the map earlier. Those parts were stocked because obviously, we cut a PO or a supplier, and SourceDay captured the back and forth, the transaction there. So, the hard drive suppliers are tied into SourceDay as an example. Our motherboard suppliers, our memory, our mechanicals, our plastics, all those suppliers roughly, I don't know, 160 suppliers, maybe more, are tied into SourceDay, and so they're all on board. They're all set up. They all have accounts. And we have our process that they've been trained on. I don't know. Does that paint a big enough picture?
Sarah: Yeah. Let's talk kind of quickly in that process. There's a lot of skepticism about changing how things are done, right? And one of the biggest sources of skepticism is if you've got external parties like your suppliers that need to participate and be bought into using the new way. You know, we hear all the time our suppliers will never use it. So how many Dell suppliers use SourceDay today?
Elie: There's two that don't, just two out of 160.
Sarah: Only two?
Elie: Yeah. Even with Dell, they said no, but the rest actually love it. They don't have to track it on the side. They don't have to use a spreadsheet. It's a huge benefit for them. And again, the arrangement, you know, with SourceDay...I'm going to go ahead and assume that this is an accurate statement. But we pay for SourceDay. Our suppliers don't. They get the free benefit of using it because we do it, and I think that's pretty much the SourceDay model, right? So, all the suppliers, all they have to do is basically follow a new process, and it just involves clicking into a system on the cloud. There is no catch. There's no nothing. They get the benefit of following the new process. They get the data. They get, you know, the close loop communication, the email notifications, everything. Basically, they have a new system. Some suppliers are like, "Well, we already have a system," and that's fine. SourceDay can do an integration with those, right? And so, there's a lot of avenues to manage the change management that happens from onboarding to, you know, a unified system between customer and supplier we'll call it. But honestly, it's pretty amazing, and the feedback from our supply base is pretty impressive. They love it. They want it for all their customers.
Sarah: Sorry. Another question from the audience. So how much of your team is having to be involved in that process of getting, you know, that many hundreds of suppliers probably thousands of users globally, Asia, Europe, worldwide? Can you talk a little bit about what it's like to work with SourceDay for that?
Elie: Oh, yeah, for sure. When we first, you know, onboarded SourceDay, SourceDay is committed to onboarding and training all the suppliers. That's part of the service offering that they do. We have a slightly unique process with Dell. So, we were engaged in that. We had one representative kind of leading the charge on that in conjunction with SourceDay. So, there's some unique workflows that, you know, Dell requires as part of how we manage our, you know, POs and the back and forth. And so that's really where the Dell engagement comes in. But in theory if you follow the out of the box model with SourceDay, like you kind of don't have to do anything. It's all part of the service.
Sarah: Yep. And you're right. It is free. We don't charge the suppliers. It's really important that everybody it's a win-win, and so we stand behind that, and we'll even guarantee it if we need to, to make a prospect comfortable. Okay. Let's talk a little bit more about whether we think, what are the outcomes of living through a global pandemic, is it going to be that organizations hunker down and kind of stick with things for now, and try to ride it out, or do we think that this is going to be a massive catalyst for change and cause organizations who sort of like Elie said, you know, "We know it's coming. It's starting to happen around us. We're just going to bite the bullet and dig in and kind of start changing how we operate to be better positioned to thrive and grow in the new world order?" So, with that, I'd love to start with Elie again, if you don't mind. This is an opinion. None of us have a crystal ball, but what do you think?
Elie: So, I think you're going to have two divergent camps. I think the ones that were looking that way anyways will probably double down and slam on the gas and go. The other camp will say, "I wish I could do that, but I physically can't mobilize and get it done." And I think it goes back to kind of what Graham was talking about, and you know, Philip, to some degree, right? Like I think this has caused kind of an awakening. I think as people, right, look at the toilet paper, and then as professionals with our companies, I think everybody's saying, "Oh, wow, was I really prepared?" This is not even like something that the majority of the population considered. Businesses on the other hand, you know, we have BCRPs, and I think this is now a realization of, were they robust enough or not? And I think it was a good hard look in the mirror to say, "Yeah, we didn't cut the mustard." Or, you know, "It was good, but we could do better," and I think there's going to be an enhanced focus on that. So, I think it's probably going to be 80, 20 like most things in life, right? 20% are going to slam on the gas, and they're going to go, and the 80% are going to sit there and watch and cross their fingers, and hopefully, this doesn't happen again. They'll be better than they were but not as good as they should or could be. Again, my personal opinion, but I'd love to hear what the other guys have to say.
Sarah: Yeah. Philip, you had an example, a story on this topic that you were going to share as well. You have an interesting insight on it.
Philip: Yeah. I talked at the beginning about the fact where are we right now? We're kind of in this holding pattern. My own personal opinion is that as companies are now starting to do 2021 budgeting, that's when it becomes more real about what the impact is of everything that's going on, and until now it's kind of part of that crisis management. I hate to talk about layoffs and things like that, but we want to retain as many staff as we can. We're going to put all the dollars that we've got into retaining as many people as possible. We're going to try not to drive too much change just because it's almost like, one, we want to keep the powder dry and, two, we don't want to...there's already been enough shocks to the system. We don't want to be the cause of more. And, you know, as you're going through that planning cycle I think now when 2021 budgets have been locked out, there's probably a realization of, you know, "We got different priorities, and things have gotta change." And so I expect to see more change coming as of that being a catalyst like 2021 budget planning cycle being a catalyst for change over the next...you know, perhaps not for a couple of months, but when you start looking at end of Q3 beginning of Q4, then going into 2021.
You know, the example that I shared when we all kind of chatted beforehand was a CPO that I was talking to, you know, who was directly in tune with his CEO. And that was an organization that kind of knew they had to make some changes and transformations across the organization. The need wasn't enough of a burning platform where they wanted to just rip everything up and start again. You know, it was very much, "We don't want to upset culture. We want to be really careful about how we plan this," all the stuff that go into a typical transformation. You know, and this basically gave them a reason to go all out with transformation. It's like coronavirus is both a reason but also an excuse to really go more aggressively than what they may already have been. So, you can kind of hide behind, "We have to tear everything up. We have to tear up culture. We have to do all these things we wouldn't ordinarily do in a change journey to make it happen quickly," when they knew they wanted to do it in the first place, but they were taking a more of a softly, softly approach, and coronavirus gives them the air cover to do it more aggressively. And I do think that for...you know, as Elie said about the 20% driving change, I think there's going to be a lot of folks in that bracket that are going to use this as their air cover.
Sarah: Interesting. And, Graham, how about you?
Graham: Yeah. I mean, I totally first of all live by the 80/20 rule. You know, I totally agree with, you know, our two other panelists here. What's really amazing is that...you know, this is a quote that we used in our last webinar that we did but from "Harvard Business Review" that said, you know, "Companies in every industry have the opportunity to come out of this crisis as a winner." I think it's 14% of companies were able to not only increase and accelerate their growth, but increase their profitability during the last four recessions, right? But like 14%, right, you know, closer to that 20%, right? You know, the companies that have the agility maybe even the bankroll, right, to be...and even the wherewithal, the vision to take this opportunity to...you know, instead of... Maybe they've put the breathing mask on themselves, and they say, "All right. How do we reshape and rebuild our business to be both more sustainable and resilient for the future," will be those winners, right?
I think in some ways, it's a little scary for supply chain, right, because many companies across the world don't necessarily have, you know, the eternal resources or the bankroll to survive, right, during these times. I think everybody's finding ways to get there. It's so hard to ask, you know, the company to look introspectively on yourself and how do you change, you know, when you're just... The plane's going down, you're trying to get the mask on, right? It's the time. It is the opportunity I think for manufacturers, right, to persist and insulate themselves from future crises. Automation, remote capabilities, you know, the ability to capture data are the required investments, right? It's never been more evident during this crisis. There's never been, you know, that moment of awe for manufacturers to take a look and say, "Wow, this is it. This is my time." You know, we kind of shape up or shape out.
Sarah: And there's another way of looking at it as well that we like to subscribe to as SourceDay. Our CEO, Tom Kieley, has a saying, "Let's not use COVID as a crutch but as an accelerant," and let’s be aware of everything you just talked about but also see the upside. When Elie kind of walked through the payoff of being in a situation now to have the visibility you need to be more intentional about managing your business with your suppliers to help keep them healthy. So, if they need to cancel orders because they can't keep up, having a really agile way to work through that with them. If you know you're not going to need the parts and you don't necessarily want to burn the cash right now, being able to work through a very deliberate process where everybody knows what is needed so you can move stuff out on the order of tens or hundreds of millions of dollars. So, there's the potential downside, but I think it's also crucial that we think about the upside for the 20% who lean into this. There is a lot to be saved. There's a lot of growth that will happen for those that are ready. And so, I wonder if you guys could comment on that side of things as well.
Graham: As a marketer, I was taught early, it's like unless you're selling insurance don't sell with fear, right? So, you know, the truth is that, you know, fear is not really the way of change, right? In reality, it's the opportunity, right? I think you said that really well, Sarah. Digital transformation has already begun, right? So, this is not, you know, a hard-right U-turn, right? This change has been coming, right, just like working remotely has been coming just like, you know, the end of in-person events and the online event era, right, has been coming for marketers, right? I look at this as more of an accelerant for changes that were already occurring, and I think that, you know, the companies at least have been able to, you know, stick to those guns. You know, I think that those are the ones that seem to use this time really well as an investment in themselves and their employees.
Sarah: Indeed. Indeed. Elie, maybe you could talk a little bit internally this upside comment, what it's felt like to have the results that you shared and be able to share that internally with your team to help kind of underscore this idea of the upside of change.
Elie: Yeah. For sure. So, you know, when looking at kind of the results of what was being able to move due to the consolidated efforts that we've had, leveraging SourceDay to be that communication vessel, it really is kind of a powerful thing, right? Obviously, we track it. We put it forward. We do it every single quarter. We do it as part of our day-to-day workflow. I think the biggest like upside is really it's effortless. It's not this herculean task that, "Oh, wow, we really have to do this," and it's like this push. It really just, "This is part of the process," right? You evaluate it. You throw it in the tool. You get an answer back. You're done. It executes all systemically. It's all driven automatically, right?
Again, in the past, that's not how it worked, right? You've got 42 versions of the same worksheet, and you're emailing it back and forth, and you've got to reevaluate it. And then, oh, made a change, and then there's the second round because you screwed up, you did the wrong spreadsheet and so forth and so on. So, when you look at, you know, the numbers of POs moved, you know, there's huge dollars associated with those. And you think, "Wow, we moved all of that and impacted our bottom line for our business and our quarterly budgets, and it was super easy." It gives you the confidence I think as a business owner to be able to say, "Cool. If I can do this when I want, how I want, and again in collaboration with my suppliers, we're all lockstep, right. Everything's in agreement. It was effortless and we can move the needle on the financials." This poises us to be able to be super dynamic and move as quickly as we can.
Agile is a word that, you know, keeps coming up in these times, to some degree maybe too much, but the reality is that it really is like super agile, and Dell is a massive, massive organization, right? So we've always moved fast especially for our size, but I mean, it's kind of a game-changer where if you have a coordination tool that sits in the middle that views history, you have business intelligence, you got metrics dashboarding, all that, and you can move super-fast, I mean, it is kind of a game-changer. So, then the upside is how do you harness that and do it proactively as opposed to reactively, and now really you are on the forefront of that 20% that we kind of touched on earlier? I mean, honestly, that's where I think it allows for that continuous improvement that I think Philip was talking about earlier to drive that through the entire supply chain, to drive that through your business processes, and to really scale your business and be the B, be the best.
Sarah. Be the best. We have a little saying here at SourceDay, "Be the B, be the best." On cue that was awesome Elie.
Elie: You like that? I figured I'd try to work it in somehow. It kind of came to me at the last second.
Sarah: Yes. Well, that about does it for us today. This has been awesome. Everyone, you know, I look forward to hopefully doing stuff like this with each of you again. Elie, Graham, Philip, thank you.
Elie: Thank you.
Sarah: One of the questions from the audience is, will we be sharing out the slides? Yes, you'll get a recording, and the slides will also be made available to you. There were one or two small questions about sort of the tactical nature of our implementation with Dell. It goes without saying that we are more than happy to answer those questions. So, if for some reason we didn't get to them because we ran out of time today, just know that we'll follow up with those of you individually. There were a ton of survey questions, for example, that we also just didn't have time for. But I loved our conversation and appreciate all of you bringing your individual insights today. It was awesome.
Graham: Thanks for having us, Sarah.
Elie: Thank you.
Sarah: You're welcome. Thank you, gentlemen. Have a great day. Everyone stay safe. Stay healthy. We'll see you again soon.