Transcript: What the Duck?! Episode 5

What the Duck?! Episode 5 Transcript

BEATING AROUND THE BUSCH: Understanding The Political Supply Chain With Jason Busch

Welcome to What the Duck?! A podcast with real experts talking about real issues in direct spend supply chain. And now, here’s your host: SourceDay’s very own supply chain maven, Sarah Scudder. Thanks for joining me for What the Duck?, another supply chain podcast brought to you by SourceDay. I’m your host, Sarah Scudder, and this is the podcast for people working in the direct materials part of the supply chain. Today, I’m going to be joined by Jason Busch, and we’re going to discuss something called political supply chain and its intersections with technology. If you are fascinated by the intersection of policy, technology, and procurement both locally and globally, then this episode is for you. I’m Sarah Scudder on LinkedIn and at sscudder on Twitter. If you are new to the show, make sure to follow this podcast so you don’t miss any of our direct spend supply chain content. Today, I’m excited to be joined by Jason Busch. Jason is the founder of Spend Matters. Spend Matters is a technology research firm. Their customers include procurement and technology buying organizations, solution providers, consultants, and private equity investors. Jason serves as the CEO and co-leads their M&A diligence practice. Jason and his team have done a lot of work with companies in the direct spend space. Welcome to the show, Jason.

Thanks so much, Sarah. It’s great to be talking about a topic that impacts the world, not just bits and bites. So, how did you wind up in supply chain? I don’t think when I was young and in college or grad school, you necessarily set out to do it. I think that’s completely different today, but I happened into it. So, I was going to be a history professor. I dropped out of a PhD program, and I went into management consulting, and I think like a lot of people who go into consulting, they get exposure to procurement and supply chain. Mine happened to be on the tech side, and a lot of it was by choice. I became very interested, kind of as a theorist myself, in negotiation. So, I started studying auctions, and I looked at them in relation to procurement. I started to do some writing on the side around early reverse auction providers and what models they were using, Dutch auctions, Vickrey, different ways of price exploration. And I wrote a piece in Information Week after doing some work in the area, which is an old trade rag, and the founders of a company called FreeMarkets read it. And one of them emailed me, and to this date, he remains a close friend and mentor. So, I got pulled into the tech side after two years of consulting and never looked back and have been fascinated by it on so many levels since then. I think if you’re not on the finance side of a business, but even if you are, I don’t necessarily think there’s a more interesting place to be than procurement, especially on the direct side and supply chain side. And I think today we’re kind of entering a long golden era where policy, tech, so many things are going to intersect. And I would even go so far as to say I think supply chain can save the free world. I’ve been following a lot, and we’ll get more into this, things like looking at the high-tech supply chain in the chip supply chain, and the new bipartisan act that came through Congress. And we’re talking about creating redundancy in the world. We’ll get more into policy in a bit, but I think it’s an incredibly exciting place to be.

So, you have a lot of hobbies. Where do your work and personal interests intersect?

Yeah, so you could call it ADHD, or you could or you could call it being a renaissance person but there’s there’s a lot of things I do outside of work which I think have a lot of relevance for work. Some directly, some some indirectly. 

One is, I’ve been after my fat 20s, as I called them, an athlete for my adult life. And I did it because I didn’t want to get hooked on drugs, I didn’t want to take statins, I didn’t want to take blood pressure meds. I had okay genetics but not the best, and so long before it became more of a trendy thing, I got into tracking metrics, you know, tracking heart rate, tracking HRV as early as I could, and trying different training regimes and diet regimes. So, I think the metric side of longevity science, and you know, I’m not qualified to give any medical advice, but I kind of treat my own body as a lab. I find being data-driven around that is a great corollary for procurement and supply chain. When you go on hunches like I used to be, I was never a great marathoner, but I had some okay times for somebody of my build, yet I was incredibly unhealthy when I was doing that. I was probably literally doing the equivalent of binge drinking by running my long runs way too fast and I couldn’t sleep, literally my heart was all over the place, and I’ve been kind of hacking, hacking my body in various ways with different diets for years. I was a complete vegan for many years, realized that wasn’t quite perfect, so I started adding some fish back in, as one example, and my recoveries are a lot better. And lo and behold, at 47, I have the same medical profiles I have when I was 19. Yeah, when I was 30, you’d probably say this guy was going to die by 65 or 70 of a heart attack or a stroke, despite being into sports. So, I think being data-driven around health longevity science is a great way to get into how we look at procurement and supply chain today. Data sets the foundation. I’ve also been always interested in politics, and not necessarily just like local politics, Democrat, Republican, I’ve been fascinated by foreign policy since I was in high school. I remember probably being one of the first kids in university to like get Foreign Affairs or the Economist. And I think today, having an awareness of what’s going on in the world is so important in procurement. And it’s, I mean, this will sound biased, but I think direct procurement in supply chain and its intersections are what truly transform businesses, versus indirect and services. And I hear people, I’m going to get hate mail for saying that. Indirect can have a huge bearing on things and the talent supply chain is critical, no doubt, right? But when we’re talking about what is going to create the winning companies 10, 20 years from now, it’s looking at the end and supply chain and procurement has a huge role to play in that, huge. When I got started in procurement, supply chain was its own world. It was demand planning and forecasting, we often got it wrong. It wasn’t about supply chain design, it wasn’t about thinking multiple tiers and traceability, but now it’s so many things. And I think it’s really tied into policy. So, I think there’s just a lot of intersections, whether you’re kind of an amateur wonk, whether you’re into data for health, I think we can bring a lot of it into what we do.

So you mentioned you were a vegan and added fish back into your diet, do you call yourself a pescatarian?”

“Well, I know it’s like trendy to call yourself like a plant-based diet. I’ve been doing this for close to 10 years, and I would love to be a complete vegan. I think there’s a lot of benefits and I’m kind of randian in my view of the world. I don’t do it, you know, for being selfless. I do it for being selfish and I think we all benefit from that, but for me it led when I was training hard to some negative health consequences and just adding a little bit of animal protein back in in the form of fish has made a huge difference in recoveries and not getting sick as much. 

I think a lot of people are confined being vegan. You know, no issue whatsoever, I think so much as body type and the like, but the other thing I do, it’s really interesting. I fast. I’ve been doing kind of time-restricted eating long before it became a known thing, probably seven years now. So I do intermittent fasting today and I occasionally do longer fast also, but you know that to me looking at the metrics implication of it has been very significant in my life as well and has brought positive consequence. And I actually, I don’t really think there’s a limit to it. I think if you want to do a multi-day fast, for example, I can, you know, look at my lipid profile or other things, getting a test afterwards, and I’m better off for it. But if I were to be strictly vegan and do the number of miles I do, which really isn’t that great, I think you do a lot more than me, but hitting the weight room and flexibility, I just wouldn’t, I just don’t recover as well. So I’ve been a vegetarian for upwards of 25 years, so I have not consumed meat or fish in a very long time, but I’ve never gone fully vegan, and I’m not sure that that would work for me either, so that’s why I was curious.

So, Jason, you talk about something I would say a fair amount just in conversations with people, but also on LinkedIn and some of the content you produce about something called political supply chain. So, I’d like to start off by having you describe what is this phrase that you’ve coined, and why should procurement people care?

Great question. I think the political supply chain is an awareness that what’s going on in the world can make our companies more successful if we react to it and do things about it from a procurement and supply chain standpoint. So, not just saying, “I’m going to look at X region because there’s a concentration of supply, or labor is cheaper, or the quality is better,” but to understand, for example, what is going on right now in Europe with the energy crisis, what is going on in China and Taiwan and the high-tech supply chain concentration, what’s going on with the move to electronic vehicles and lithium production, understanding all these things and being able to bring an educated opinion to it without bias. Right? I think it’s important to be data-driven on all of this and also not necessarily to bring our own opinions. I have my own opinions on a lot of these things, but my opinion for the company I work for now, Spend Matters, is to bring this knowledge to the world and look at tech that can support it. But if I’m working for a manufacturer, I’m working for them because I want them to win, whether I have stock options or not. I want them to have higher enterprise value, serve more customers, and be more successful in the next decade. And to do that in supply chain today, I need awareness of the world. So political supply chain is being aware of what’s going on in the world from a foreign affairs perspective, from an economics perspective, and then being able to do a better job in my function for it, not just to look at data that I might have on quality or performance or look at, for example, near-term delays in shipping or the fact that a container quadrupled in cost in a matter of months or dropped, whatever it is, all that is the here and now. But to have a perspective and be able to bring it to my managers or eventually the boardroom on what’s going on with global chip production, to understand again the bipartisan act I mentioned around literally it’s called the Chips act and everything tied to that and it’s not just a question of giving subsidies to Taiwan semiconductor or intel or others to produce in Ohio 

It’s also creating talent onshore around it, so part of that act is creating funding for Purdue to have a program which educates the next generation of engineers around semiconductor chip production in this country. You know, most people in procurement read the headlines, maybe they get angry at the news or get angry at social at night over some political nit they have, but the knowledge of what’s going on in the world in economics can actually make the function a lot more resilient and can allow you to explore options in designing your supply chain, for example.

So, I’m a buyer, and I go out and I gather all this intel. How does supplier relationship management fit into this?

A few months ago, I was a little bit frustrated at the existing ecosystem of everything must fit in our world of procurement tech into source to pay or procure to pay. Right, there’s so much there, there’s so much more we can do. But I came up with a concept of alt suites for procurement with a couple of my colleagues.

An alt suite, which we have detailed on Spend Matters and you can find on social, essentially is a suite of capabilities, not a module, that companies are buying to address an issue, which is not just source to pay. It may encompass source to pay, but it has a different side to it, and that to me is critical as we look at emerging areas. One we call assess to monitor, which really is the next-gen version of supplier management or supplier relationship management. So, that’s about identifying the right suppliers, depending on where you are. It’s about assessing and monitoring them, looking at supply chain risks, supplier risks, supply risks, and improving them.

It’s about feedback, and it’s about the cycle of not just single-tier, but that multi-tier supply chain. It’s not just that my suppliers are signing up for, say, a code of conduct that can be important, but it’s what their suppliers are doing. Not just around a simple code, but what are they doing to build resiliency in my supply chain? So when I think of supplier relationship management, I think in the context of this much bigger area, which my colleagues call “assess to monitor.” And I think on a global basis, it’s critical. It can also be really valuable on a local basis. Again, I think it’s important when we work for a company, we are working on behalf of shareholders, and that may be specific to a long-term need. It may be a pivot. If I’m a classic combustion engine producer to EVs over five years or 20 years, but it may also be looking at how do I drive unemployment down where I live? For example, I moved from Chicago to Gary, Indiana, and I don’t have to tell a lot of people that Gary’s gone through booms and busts because of the steel industry. And how we can be aware of tapping assets around us. You know, I’m a firm believer, somebody who loves this country, that we need to ensure a lot of production. We need capacity to do things. And I’ll say that, too, I’ve changed my mind on that. I was guilty as charged of being behind global sourcing entirely. Right? Let’s rush to the lowest cost region. I described that almost like as a teenage fascination of mine when I was younger. But you know, as you get older, having awareness around this. So part of SRM literally is designing a global supply chain which is real, which is resilient. And you know, lo and behold, where we are today, who would have thought, as we emerged from Covid, how important that is to have onshore, on local supply, or to build it if we don’t have it? So when I think of SRM, it’s directly linked to all of this.

Well, it used to be consolidation was everything, so (and again guilty as charged) I’ve been in a space forever. I followed the crylic model, you know, of spend segmentation of, you know, how strategic is the category versus risk and volume and other criteria you can modify the two by two for any criteria, but a two by two will never capture the complexity of the world we live in. And we also need to be aware and to bring in the political supply chain of things like black swans. COVID was a black swan, China’s response to COVID was a black swan in terms of shutting down, you know, trying to shut down its economy around it. Could we have predicted that? As Americans, probably not because our mental model is very different. And the notion of sole source supply, if you viewed the lens from growing up in strategic sourcing, if you were doing 80-10-10 as a split, which is essentially sole source supply because you’re not really developing other suppliers, you can see why that made sense at the time. We got savings, we developed good suppliers, but then the comet strikes, what do we do? So, you know, I think from a resiliency standpoint, we’re moving into an era where having optionality in terms of how we design our supply chain becomes really important. And it may be that I want to serve India and China and work with local suppliers in those markets, but if I’m serving North America, if I’m serving Germany, Austria, it becomes very important I look at how resilient I am. Who could have predicted, you know, I’ll call it the Soviet push into Western Europe which is what’s happening right now. It’s not Soviets, it’s the Russian push, but it’s the same bear as it was. You know, Germany’s supply chain is very much predicated on central and eastern Europe, and now we look at the energy crisis, you know, we look at the risk. I’m married to someone who’s very, you know, aware of politics as well and I wanted to go take holiday this summer in Croatia, but we had to throt and fly through Poland. She’s like, “I’m not flying through Poland right now.

You know, there’s a one percent chance Russia might do something. I don’t want to take that risk. You know, and here we are, five years ago Poland was part of the West, it still is, it’s an amazing place, but we have, you know, again this risk of existential threat, which is not so existential anymore, it’s real. So I think we designed our supply chains around one or two things in the past two decades, and cost was a major one. And concentrating supply with suppliers was one, but now we really need to think more broadly, outside of just the world today. 

We need to scenario plan for how things may go. So there’s a lot of technology in the market, I would say.

Significant innovations have happened in the last three to five years. Where does technology fit into all of this?

I think if tech is not your foundation today, versus just an ability to enhance what you’re doing, you’re probably following the wrong strategy.

The ability we have to bring different data sets to bear, it could be economic data, you know, it could be local price supply data, in terms of where we’re looking at to make macro decisions around not only strategic supply and design but also tactical day-to-day management. I think if we’re not looking at tech as

our anchor, our foundation, our company is going to fall behind, and that could be basic stuff, I say basic, it’s not so basic, but procure to pay kind of motherhood and apple pie.

You have to do it. Most companies, even top performers, would still say they can do it better. You know, everything from automating ordering, whether it’s direct or Indirect, whether it is a single PO on the indirect side or whether it’s a blanket PO in the automotive business, and we still need to do all of that. But there are all these emerging areas and data sets we can bring in in terms of analysis, in terms of automation. Who would have thought in a recessionary environment, we have labor constraints, and we do. We’ve got massive labor constraints, so can we automate functions that were not previously automated in terms of human touchpoints, or can we remove human touchpoints?

Can we do machine to machine approval 95 percent of cases, but then allow a user not to have to log in

to R3 or HANA to approve something? Can and can they do it on their phone? Can and can they do it in email? Are there different ways to do things which drive not only machine to machine automation but remove humans from touchpoints so they can focus on more strategic things?

So you know, I won’t apologize for tech being front and center, it must be, and I think, you know, and I do believe the best years are ahead of us in terms of the innovations which are coming around tech. You know, I was semi-obsessed with blockchain seven or eight years ago, and then becoming obsessed with it again, even though, I was in a meeting last week with someone on a different subject and we ended up spending 90 minutes on proof cases of blockchain. He’s like, ‘I’m still not a believer.’ I’m like, ‘I need to work harder on this.’ So I think tech will continue to change our lives and procurement in the decades to come.

What would you say to buyers in the direct spend space that are struggling to get budget approved for technology from leadership?

I would go back to the need to build CFO proof models as to why you need to do things, so that comes from putting on a finance mindset I spent a lot of my career in and around M&A, usually as an advisor picking apart technology. Everything in a case for a CFO or a board needs to be based on data, some of that can be hard data around ROI or TCO that doesn’t go away, and that alone can help build a business case, but any CFO worth their salt is going to try and pick apart models for investment, right? What are your assumptions around this data? So, make it bulletproof and be able to unpack it, but then also making the case for reasons which may seem to be a little bit outside the box, right?

Let’s assume, let’s go back 10 years where supply chain risk really wasn’t that big a deal or if it was, it was confined to the chance of having lived through a few recessions of my supplier going bankrupt. Now supply chain risk literally could be a port slow down right coming out of China. In the past six months, we’ve had, you know, literally the port of Shanghai shut down and then we’ve had massive delays in Long Beach for getting goods onshore. We can build models around that, and we also need to think about as we build business cases, not only the ROI for today, but how that could save our, you know, what’s tomorrow. And I find financial executives always responsive to it provided it’s grounded in data in these cases, so don’t just think inside the box.

You have to do that. That’s kind of, you know, the foundation, but think in terms of scenarios. What could impact our business and build cases around that as well for specific tech? If you think it’s a little bit outside the box compared to what is accepted, you know, a lot of this stuff becomes very basic around use cases and RPI and TCO, and that can help make the case again if your data sets are good, if you can stand up to CFO interrogation or controller interrogation in a bigger company. But you know, we can bring this macro view, which is the political supply chain. We can get people to think inside our companies, yeah, we should invest in something which may seem a little bit orthogonal today but tomorrow could cause us to emerge as a winner in our industry because of it.

I’m going to put my buyer hat on again. One of the other things that I know that buyers struggle with constantly because I talk to them weekly about this challenge is the whole movement around supplier adoption. So I’m a buyer, I’ve selected a new software, a new system, but my suppliers are the blocker. What advice or feedback do you want to give to people struggling to get adoption from suppliers for new technology that they want to buy?

You know, some of the most successful business models in this sector have been built on the backs of call centers and services to drive supplier adoption. So there’s been a lot of criticism over the years of fees associated with the Ariba supplier network, yet the Ariba supplier network has driven massive value as well because there’s humans behind it. You know, we could say the same thing on the low end, I say low end, you know, sub 200 million, with the adoption of basic AP solutions, where there’s a services element to offerings to make sure suppliers sign up, whether it’s for basic onboarding and getting the equivalent of KYC and then making sure that somebody signing up is truly the right party, right? There’s a lot of fraud, and you know that still is a major thing today. You know, it would be fun if somebody asked me if I had an extra 10 hours in a week, what would I do? It would be fun to work on a firm that was paid by procurement to perpetrate fraud and expose it on the procurement side because you know, you can have Koopa, Ariba, SAP, the best system, but for various reasons, you can hack those systems because there’s still people involved, and they’re still bad actors on both sides.